Our Word is Our Weapon

Tragedy of the Commons, anyone?

A policeman stands seething at a congested, choking intersection in Manchester, trying vainly to bring a little order to the chaos that has brought the centre of England’s second city to a standstill over the past few weeks. A stream of buses, many old and belching out thick fumes, clogs a key arterial road. By accident or, quite possibly, by design, they hem in the city’s modern trams, which were meant to speed commuters and shoppers through the surrounding conurbation.

“This is madness,” sighs the policeman, waving a book of parking tickets. “Half these vehicles aren’t fit for the road, and most of them seem to be empty. Where’s the sense in that? The owners should be hauled in and warned about their conduct. It’s time to take tougher action.”

For the past few weeks, the authorities have been trying to get tougher by occasionally issuing stationary buses with parking tickets in an effort to reduce the constant snarl-ups. In the latest manifestation of the city’s “bus wars” - in which a small operator has been competing for passengers on two of the busiest routes - up to 30 vehicles have been trying to cram into the same stops, causing lengthy tailbacks. Passengers using the tram system, known as Metrolink, have been stuck for up to an hour. Some frustrated travellers have simply abandoned buses on the outskirts and walked to the centre.

The lessons here seem pretty obvious. Space on the roads is a finite resource (and space at bus stops even more so), public transport needs co-ordination, and the bus de-regulation pushed through by the visionary morons in the Thatcher government was a big mistake. When transport authorities encourage a free-for-all in the name of competition, private operators cherry-pick the best routes, total passenger numbers fall, and congestion gets worse. Contrast that to London, where the opposite approach was taken:

Apart from London, bus use has declined dramatically in the UK since services were deregulated 20 years ago, opening the way for competition between operators. As a result, old buses that should be consigned to the scrap heap are sometimes given a lick of paint and returned to busy routes. This has created a chaotic free-for-all, with an increasing number of buses chasing fewer passengers. The irony is that the vehicles meant to relieve congestion by providing an alternative to cars are creating more snarl-ups.

Services in the capital are now franchised by Transport for London. It sets strict standards to ensure that they are frequent and serve all areas, not just the most lucrative routes. Buses must also conform to a strict safety regime and have good access for wheelchairs. A Manchester-style free-for-all would be illegal. Not surprisingly, this lopsided regime, favouring the capital, has had a dramatic impact on travel patterns. Since deregulation, fares in the main conurbations, for instance, have risen by 86% in real terms, while the number of people travelling has fallen by half. In London, the reverse has happened: bus use is up by 55%, while fares have risen by just 36%.

And remember that all this cutting services while jacking up fares is hard work, so it’s only fair that the private bus operators should also get hefty public subsidies - to the tune of £30m a year in Manchester alone. What a great deal!

I really like the sound of Joseph Stiglitz’s new book (Making Globalization Work), at least from the description of his recent World Bank talk on it by Christine at PSDblog:

The theme was the ways in which globalization has contributed to rising inequality, both across and within countries, and what to do about it. Rather than a rising tide to lift all boats, globalization is better described as “a riptide that can destroy lots of small, unprepared boats” … I’ll just pull out a few of his comments:

* The global intellectual property regime is a matter of life and death for developing countries. Negotiators of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) “signed the death warrants for thousands of people in Sub-Saharan Africa”, by denying them access to lifesaving medicines. The current US-imposed regime is bad for US science, but even worse for the global practice of science and innovation. The book describes his suggested alternative to TRIPS, a global prize fund to compensate researchers based on the importance of the drugs they develop. Malaria will presumably rank higher than male pattern baldness. A competitive market would then become the distribution system.

* Water is indeed flowing uphill, as we watch money flow from poor to rich countries. We observe a proliferation of countries with overbearing debt problems, not just one or two profligate spenders. Despite sophisticated derivative markets, developing countries still bear a disproportionate share of global risk.

* Globalization does not benefit all of us, even if politicians don’t mind giving that impression. It is true that the welfare gains from globalization mean that the minority of winners receive more than enough surplus to compensate the majority of losers. Instead of watching this happen, however, we see globalization used as an excuse to remove social protections, from those who are already on the losing end.

* Domestic policy decisions are driven by efficiency and equity considerations, but international policy is not about fairness. (This drawn from his time as chairman of Council of Economic Advisers.) In trade policy, US negotiators always go for the best deal for the US (actually for campaign contributors, he added). The Uruguay round actually made the poorest countries worse off (in absolute, not relative terms), because of asymmetries in trade agreements, particularly in agriculture.

* On global efficiency grounds, policy makers would promote labor mobility, more than capital mobility. Even more so on equity grounds. But this isn’t what we see happening.

* We’ve seen generally disappointing results for those countries that have tried to follow the West’s advice on how to manage the economy. Latin America paid the most attention, and its growth has been about half of what it was before it started listening to Western experts. India and China are exceptional - they have not experienced a financial crisis in the last 3 decades - and it’s probably because they didn’t follow the standard wisdom.