Kaletsky on Private Equity

These facts in Kaletsky's piece utterly undermine Hutton's, already weak, case against private equity:

"It is not good enough merely to quote statistics about the broadly positive effects of private equity deals on profits, productivity and even jobs — impressive though these are. The most extensive study of what happens when private equity companies take over businesses has been conducted by the Centre for Private Equity Research at Nottingham University. The research shows not only that investors in these deals over ten years on average made profits 22 per cent above the market index, even after paying the seemingly exorbitant fees of the merchant bankers and lawyers. More surprisingly it shows that employment, after dipping by an average of 5 per cent in the first year after a buyout, rose by 21 per cent after four years; also that productivity almost doubled in this period, that product innovation increased and that companies showed evidence of more entrepreneurship. Most surprisingly of all, the Nottingham study — financed in part by City institutions — “found higher levels of employment, employee empowerment, and wages” after these deals."

This article should also make Chris Dillow think again as it would appear that public limited companies are unfashionable thanks to regulation rather than any inherent inefficiency. My explanation, and one that is clearly credible to a certain extent, is that with the ability to privately pool large sums of capital, it is possible to avoid the free rider problem associated with public ownership. However, if Kaletsky's, also plausible, explanation holds then Dillow's case, based on identifying a possible inefficiency of the traditional capitalist ownership structure, is critically weakened:

"The answer is actually quite clear, but it has never been heard from either the detractors or defenders of the private equity business. The real origin of what trade unionists regard as this industry’s excess profits is not the lack of regulation of private equity. It is the overregulation of pension funds, public companies and other investment institutions.

Trade unionists and old Labour politicians will never make — nor even understand — this argument. For them, demanding extra regulation to control the likes of Damon Buffini, the head of Permira, is the automatic response."

The Carnival of Cinema

A new Carnival of Cinema is up with lots of great posts including one of mine.

Civilization and Game Theory

This article in the Weekly Standard (via the American Scene) makes the important point that generalising from Grand Theft Auto to ‘computer games are bad for the young’ does not allow room for Civilization, 'a video game version of a classical education'.

When I first studied game theory it struck me that Civilization is probably the most complex (in terms of number of potential strategies) artificial challenge mankind has ever set itself. The number of possible strategies in chess is truly staggering, more than all the molecules in the universe, but for Civilization, with so many choices as described in the article, the number has to be higher. I doubt there's a game with more going on and, in that regard, Civilization has to be considered something of a cultural high watermark. It would also be interesting to see how players respond to a game they are unable to truly think through due to its complexity (just as in chess where players and computers can only think so many moves ahead); how do people guess their way towards effective or ineffective strategies?

It might be particularly interesting because it seems far more plausible that the sentimentality which must infest real life decisions will be mirrored in the imitation of real political choices that is Civilization than in the abstract game that is chess. There's a PhD in that one I think...

Gordon Brown and the Military

It is sickeningly negligent and irresponsible to ask so much of the British military while funding it so poorly. This article for the New Republic (requires registration) details how bad things have gotten:

"Historians assessing the Blair years will wonder how the prime minister's remarkable appetite for sending British squaddies into action overseas could be matched by his ministry's striking disinclination to furnish them with the tools they need. A 1998 Strategic Defense Review concluded that Britain required the capability to conduct two medium-sized operations and a small peacekeeping operation simultaneously. Over the past decade, however, Blair has sent British forces into action in Bosnia, Kosovo, Sierra Leone, Afghanistan, and Iraq, while simultaneously reducing the army, navy and air force's manpower and operational capability. A 2004 "rebalancing" of defense priorities actually reduced the number of infantry battalions--the boots on the ground needed for peacekeeping or counterinsurgency operations--from 40 to 36. With the prospect that as many as 9,000 British troops may be deployed to Afghanistan this year, the 100,000 strong British army simply cannot indefinitely maintain a similarly sized force in Iraq on top of its other, albeit smaller, commitments around the globe.

Moreover, although overall defense spending has kept pace with inflation during the Blair years, the Treasury has insisted that the military do much more with, in real terms, much less. Since September 11 defense spending as a percentage of GDP has actually declined--from 2.5 percent to less than 2.4 percent. That's half as much as it was in 1984 and lower than at any point since the early 1930s. France and Germany, to name but two examples, spend a higher proportion of GDP on defense without the additional expense or strain of actually committing large numbers of troops to overseas adventures.

The effects on the military are clear and, to British eyes, shocking. Nearly one third of the Royal Navy is already confined to port to save money, and First Sea Lord Jonathan Band has warned recently that unless further proposed cuts to the surface and submarine fleets are averted, "We could turn into the Belgian navy." Although the government approved the construction of two urgently needed aircraft carriers as far back as 1998, no orders have yet been placed, fuelling suspicions that the Treasury is unprepared to pay for the new ships. As the Daily Telegraph noted, dryly "If you want to practise gunboat diplomacy, it helps to have some gunboats." As it is, the active duty navy is smaller than the French navy for the first time since Trafalgar.

For its part, the army is struggling to meet its targets for recruitment and, crucially, retainment, and many infantry battalions remain nearly 10 percent under-strength. Though public sector employees such as nurses, doctors, and teachers have received generous pay settlements during the Blair years, the armed forces have been granted no such bounty. According to the Ministry of Defense's own estimates, nearly 50 percent of the accommodation for single soldiers is deemed "unacceptable." It's little surprise fewer squaddies are prepared to re-enlist."

The man responsible is clearly Gordon Brown. His decisions at the Treasury have been the ones which have made this problem so acute. Failing to properly provide for a military being asked to do a huge amount for our foreign policy is an abject failure of judgement on Brown’s part. That, despite this, he is still the likely Labour choice for Prime Minister demonstrates how unserious that party’s approach to foreign policy is.

Kagan and a new conservatism

I’ve been thinking about the Kagan piece which I posted about last night and it might be helpful to put it into some context.

The closest one can really come to a definition of conservatism itself is the Burkean respect for inherited institutions and wisdom:

"We are afraid to put men to live and trade each on his own private stock of reason, because we suspect that this stock in each man is small, and that the individuals would do better to avail themselves of the general bank and capital of nations and ages."

However, this necessarily means that the detail of conservatism must be defined anew by each generation as there will be a different set of old truths under attack that the right will need to defend; some may also be abandoned as no longer worth of defence, ideally after a process of incremental change. Defending capitalism, and its productive potential, was a focus in the past century but certainly not for conservatives such as Disraeli in the nineteenth century who viewed it with a vague suspicion. Equally, few conservatives are now interested in supporting limited sufferage.

Islamism is a threat to the West but has limited appeal beyond its ‘heartland’ in the Muslim community. The ideological threat to the established order which is being identified as crucial in this century is transnational progressivism, which threatens liberal democracy. At the moment the intellectual right is therefore doing two things:

Firstly, it is trying to wake itself up to the threat. In this regard the various articles describing the Tranzi ideology and its likely progress serve as equivalents to Hayek’s The Road to Serfdom; they sound the alarm.

Kagan’s article is different in that it instead begins the conservative intellectual celebration of the institution under threat. Though using the example of the classical history of Athens the real subject is the modern world and the call for leadership is a call for conservatives to turn to the task of intellectually defending the liberal democratic nation state. Most of the rest of the article attends to this task: describing the more esoteric benefits of liberal democracy and why individual citizens should support it. Kagan’s piece is therefore the equivalent to W. W. Rostow’s Stages of Economic Growth; it even shares Rostow’s presentation as a guide for developing states.

Read O'Sullivan’s article (which I cited here) and you’ll get a good idea of how this new struggle could be just as important as the Cold War in determining the future path of the West. I think there is a good case that conservatives have been sleepwalking for some time basking in the glow of victory over Communism and fretting, in books like the End of History, that there just weren’t any decent challenges anymore. Now we're waking up.

Leaving the EU and the UKIP

Jackart, DK and the Nameless One are in a fight over the UKIP again. DK's response contains the same logical problem I've noted before. This sentence is a good example: "For fuck's sake, even the offer of an unloaded refendum would be good enough for me (and even for the majority of UKIP, I would imagine)." This assumes that the Conservative party's policy comes down from on high and that members should passively take or leave the opinions of the parliamentary party.

Parties are coalitions of people with broadly similar approaches to politics. The actual challenge for someone with a view outside the political mainstream (the position we share on climate change is another example) is, in the end, to find the party whose approach to politics is most compatible with their own and then try to convince them of the merits of their position. Once that party is convinced it can attempt to seek a parliamentary majority on that basis. If you do not like the leadership's position on the European Union then convince the membership and, at the next leadership election, you can get the kind of leaders you want.

As such, the only reason to leave the Conservative party is if you think its members aren't those who will be easiest to convince of your position (they're easily the most Eurosceptic portion of the population so that seems unlikely) or if you think your cause is hopeless but would rather be screaming at the wind than be dirtied by the compromise of contact with the Conservatives. If you can't convince the Conservative membership you're never going to be able to convince the public at large and the problem is in the case rather than the party.

Look at it this way: There are opportunity costs to the UKIP. Imagine if all the money, effort and people committed to the UKIP were, instead, within the Conservative party arguing and voting for change in its European policy. You wouldn't piss off loyal Tories by associating Euroscepticism with undermining right-wing electoral chances. What talent and funding UKIP possesses might be spent convincing people rather than on the paraphenalia of running a party. Eurosceptics wouldn't take the risk of strengthening the hand of the real europhiles in the Labour and Liberal Democrat parties.

Every time a Eurosceptic leaves the Tories and joins the UKIP they remove themselves from the debate within the Conservative party. They replace their voice and vote with a threat, to hurt Conservative election prospects, but there is no evidence that this is a threat which the party responds to in the way UKIP would like. Instead it creates a defensiveness that may be what came across to DK, in Oliver Letwin's speech, as arrogance. The best Conservative response electorally to the 'UKIP threat', so long as they are not convinced by its arguments, isn't to appease but to crush the smaller party. As such, the threat will continue to fail to have the effect you are looking for and the challenge remains to convince the Conservative party of the merits of leaving the EU.

I do not want to leave the EU but do have some positions on which the leadership does not represent my views; the proper response to climate change is one. On those issues I am doing all I can to change the minds of the public and fellow Conservatives. Setting up a new party would not be an effective means to that end.

Periclean Athens

Superb, high-minded, article by Kagan for the AEI arguing that the Athenian example provides crucial lessons in the qualities needed for the foundation of a successful democracy. The entire piece is so worth reading that I'm going to avoid citing any particular section. However, I would add that its lessons aren't just important to new democracies but essential to continuing the stability of the Western democratic states as well.

The section discussing the Greek understanding of mortality and the imperative that created for glory is very interesting. This sense of glory, enshrined in the story of Tellus, is, perhaps, what I was getting at but failing to define, as Gracchi was right to note in the comments, in my discussion of pre-birth insurance and why I find the Rawlsian position small minded.

Do take a read.

FreeBornJohn

This is a good blog and well worth keeping an eye on; he spots some interesting stories. Peter links, in my post below, to an article he has written highlighting just how insane the printing union was. Bill Bryson's description of his time there is equally amazing. These people were literally telling their employers how many they needed to employ and at what rates and huge numbers were just not doing any work at all.

He has another, brilliant post, here about the sheer weakness in the performance of green investments. When people tell you that it's worth Britain investing in green technologies as it will make a positive return show them that post. Maybe the market is wrong but historically it has been a far better predictor of the returns to investment than government.

Democratic Whores!

Apparently Hillary is going to spend a day as a nurse in order to attempt to secure the backing of the important Service Employees International Union. How... juvenile.

Our approach to union politics is so much more grown up. The unions don't need to be reassured by Hazel Blears dressing up as a nurse, civil servant or tube driver. Instead, they content themselves with complete financial domination of the Labour party.

Hazel Blears' article for the Guardian is utterly shameless. Unions are a group entirely dependent upon the exceptional privilege of legal protection from being fired or sued for breach of contract when they don't turn up for work, they have been the direct recipients of taxpayer's money under a Labour government, historically their excesses have done huge damage to the UK economy; they are the sort of interest group whose influence on our democracy we should be really careful of. Hazel Blears is actually boasting that they have a 'hotline' to the Labour government. Disgusting.

CF Diary Piece

I have a post up on CF Diary about the task of creating a Conservative Future that encourages thoughtful young Conservatives. Well worth a read, if I do say so myself.

This actually relates quite nicely to a recent post. Gracchi has graciously named me in his meme post as writing a blog that makes him think. I've been trying to work up a response to this for a few days and there are some candidates but I'm not sure I could make it to five from the British blogosphere, particularly without repeating from Gracchi's list. Look at the analysis links in my blogroll and you'll see a preponderance of Americans.

If British conservatives want to stick to what they do best now, quick rebuttals of idiotic lefties in the mainstream media, they will still fulfill a desperately useful function and I'm not going to tell people what to do with their own free time. However, I think that an analytical focus in the blogs will increase as the medium matures, as I set out in a post for the BUCF. There are quite a few Conservative blogs which are clearly capable of analytical thinking and it seems to me that, in the medium term, this will come to be how they distinguish themselves from each other as the fairly limited supply of blogging "scoops" is not enough to go around. Blogs which think a little deeper are, I believe, the future.

Reality and Cinema

I went to see my, rather overdue, first Iranian film today. It was Kimia at the Barbican as part of their War in Iranian Cinema series (on for a few more days). It set me thinking about films and how real I want them to be. If this analysis is not novel then I apologise, this is not my field of expertise and I can’t offer more than ardent, thinking amateurism but hopefully it might be of some value. Lee Siegel’s defence of Eyes Wide Shut (which I disliked when I first saw it and need to watch again) touches upon similar ideas.

Kimia is a good film with human characters and a compelling central dilemma. That dilemma is the heart of the film and the director does a good job of building the story of a man who has lost almost everything and yet, in order to do the right thing, has to give up all he has left.

Its treatment of the war itself portrays the Iraqis as something of an inhuman event rather than as people but that is probably their place in this kind of story. I’m not aware of a nuanced telling of the Iran-Iraq war and it is understandable that it is, perhaps, too soon to talk in an even handed manner about an event so destructive to both sides.

The acting is good although at times I felt a little left out and distracted by the clumsy translation job which left me having to work to ignore the dissonance between amusing translation error and screen heartache. It made me grateful for the superb job the people behind labels like Tartan, Hong Kong Legends and Premier Asia do in bringing East Asian cinema to our screens.

However, the biggest reason the film was one I liked rather than really loved was a more fundamental disagreement with the stylistic choice; one I understand has been made by Iranian cinema in general. The hyper-realistic, documentary-like style of film making is one that is loved by large parts of the critical community but seems dry and less emotionally powerful to me. This is also the reason why I found Force of Evil, which I watched recently on Gracchi’s recommendation, interesting but distant.

I quite like film making to be beyond reality. This doesn’t mean I need fantasy in the traditional sense but I do need a film to do something for me beyond presenting a well acted and written story. I watch films because they can bring me something which, through not being real, can highlight some emotion or moral that reality struggles to illustrate clearly.

This does not mean that I want my films to be simplifications of reality. Some of my very favourite films are those like Children of Men or Crash which depict nuanced human natures and problems which cannot be reduced to simple matters of right and wrong. However, they do so through an implausible change to physical reality or through a style which tells a story broader than any human could really perceive respectively. Their departures from realism allow truths to be shown in a new light and appear to us as something remarkable.

This does not mean that I want my films to be sugar coated. Korean cinema is, to my mind, the most exciting national cinema around but is frequently absolutely gruesome. However, the horror is not used just as a worthy reminder of horrible events or, at least in my mind, as a source of rough entertainment, but to give immediacy to the moral choices made by characters and to ensure that it is understood, clear as day, that when they take a hard path its rockiness is clear.

Finally, this does not mean that I do not like films to directly address contemporary political questions. Dr. Strangelove is, in my opinion, the best film ever (although Children of Men makes me rethink this every time I watch it) and was a nuclear holocaust comedy at the height of the Cold War. I love it despite being in favour of maintaining a nuclear deterrent and therefore, I suspect, disagreeing with the film’s makers; I think that the right conclusion to take is that MAD’s limitations needed to be kept in mind rather than the doctrine of deterrence be abandoned. However, all sides of the debate should appreciate that the fantastic plot of the film allows us to think about the problems of nuclear deterrence in a new way. Everyone can see political reality if they care to look but an inspired film’s artifice can allow us to see that reality with new eyes.

The best looking films are fantastic. The most beautiful film ever is Kubrick’s spectacular Barry Lyndon, an unfortunate omission from any list of the best costume films, which isn’t strictly speaking fantastic but becomes so through so thoroughly recreating a lost world of the aristocracy. That film makes it pretty clear that the movie Kubrick was planning about Napoleon was an unparalleled loss to cinema. Other candidates for most beautiful film ever, Zhang Yimou or Sam Mendes’ creations spring to mind, tend to be works of visual imagination.

There is a place for realistic cinema, some stories just need to be told plain and unvarnished, but I do not think it stands up as a doctrine for film making in general. Film is truly great and at its best as a medium when it is able to transcend the reality of our everyday senses and touch something deeper in our emotional or moral fabric.

Principle, Opportunism and the Italian Right

I've been thinking a lot over the last few days, as the crisis has been ongoing, about what our appraisal should be of the Italian right's behaviour in the dispute in Italy over Prodi's foreign policy. Prodi lost a vote on maintaining Italy's presence in Afghanistan as some of his own coalition abstained in the senate and the right voted against en masse. He was then forced to resign although it appears he will attempt to form a new majority.

Now, I find it highly unlikely that the Italian right actually wants to leave Afghanistan. Afghanistan is dissimilar to Iraq in some crucial ways and has broader, bi-partisan support across the Western alliance. Italian involvement there was begun by the Italian right under Berlusconi's leadership. While Italian foreign policy as a whole under Prodi might have flaws sticking with Afghanistan, particularly now, is an important enough issue to be treated independently. As such, this article by John Hooper is somewhat misleading as the majority of those who voted against the Afghan involvement are not motivated by a dislike of that involvement and other relations with the US; although that connection may be upsetting a portion of the population and certainly changed the votes of radical members of the left-wing coalition.

Was the right wing vote unprincipled?

In terms of the issue at hand it certainly looks that way. They are taking political advantage from voting against an initiative that they believe to be right. This is a very definite sacrifice of principle to narrow partisan advantage.

However, it is unlikely this will result in the troops actually being withdrawn. Were Prodi to actually fall the right could get itself elected and have both involvement in Afghanistan and an improvement across other policy which is a positive net result for principle. With Prodi surviving the likely outcome is a weakening of his position, and ability to do further harm, combined with a passing of the original measure to keep troops in Afghanistan.

Why is it that I'm still disconcerted? Why do I have a vague feeling that principle on each individual issue should be preferred to sacrifices for a general maximisation of principle across different issues?

Perhaps it is that the right is, to a certain extent, punishing Prodi for his willingness to take on the radical left in the name of sensible policy. Prodi is suffering for being taking the right-wing side of a debate and it seems immoral to me that the right should take advantage of that. Even if he is, in general, a Prime Minister few right-wingers would want much to do with his principled stand on this issue should be celebrated. After all, the right should have an interest in facing the best possible enemies. Blair's shifting the Labour party right may have hurt Conservative electoral prospects but undoubtedly shifted the political centre towards our beliefs by validating them. By punishing Prodi for being sensible on Afghanistan, the Italian right give prominence and credibility to the worst strains of the Left.