Why Britain could demand asymmetric labour access to the EU – and why it might be best for both sides

Freedom of movement

The disputes over Brexit negotiations have mostly been premised on the idea of reciprocity – or rather, retaliation. If we do not give them rights, they will not give them to us. This has been particularly true when discussion freedom of movement, possibly the single most important driver of Brexit voting in 2016. On the face of it, there seems to be logic in the EU demanding that EU nationals be allowed to freedom of movement into the UK if the UK wants the same thing in return. However this may belie the reality, which is that asymmetric access is perfectly viable and indeed valid.

To give one example of where this makes sense, let us examine Chinese policy with regards Hong Kong. Here, Hong Kong residents have an almost unhindered access to the Mainland and its economy, not only in terms of movement and residency, but also asset ownership including real estate and businesses. Chinese Mainlanders on the other hand face extremely stringent rules on coming to Hong Kong and particularly for settling here. Work visas are required almost exactly as they are of any foreigners. Yet this is essentially just one country with ultimately one government. And yet it suits both sides.

Why? Well there are two main reasons for allow one-way borders. The first is when one area needs skills the other has. This was historically true of Hong Kong and the services it provided to mainland China in terms of capital and skills, although today this is no longer so relevant. In the case of Britain and the EU, there are arguably skills which those across the channel, all things being equal, would prefer to have. Banking and finance might be part of this, but it seems unlikely. Much more relevant is that Britain is far more innovative than the rest of Europe and particularly so compared to the larger countries. In the European Commission’s innovation rankings for instance, Britain comes fifth but well ahead of Germany, as well as France, Italy and Spain. This is something the EU would surely rather not lose: startups and business ideas which could change the world but which need a large market to be tested and improved. For this reason, one-sided migration would be net positive.

European countries ranked by innovation

European innovation

Source: European Innovation Scoreboard 2018 (European Commission)

The second reason is the defensive one and relies on a resource Britain has an abundance of: parochialism. One of the reasons China has no particular fear of opening the border to Hong Kong is that there is very little chance that people will want to cross the border and stay there. Oddly enough, Britain is in the same boat, since Britons have historically been far less likely to move to another European country than many others, especially those of a working age. If we look at northern European migrants to other northern European destinations (in other words, intra-EU migration which strips out the retirement population) Britain figures as one of the least mobile populations behind even France. Only Germany is marginally behind and this is due to its outstanding export economy.

Total intra-Northern European emigrants as a percentage of total population

Intra-European migration

Source: People on the Move (Bruegel Jan 2018)

This reflects only “rich” Europe; if eastern and southern Europe were included the numbers would be even more stark. This peculiarly British parochialism can be seen in everything from the lack of language learning in British schools through to the reluctance of British footballers to move to European leagues which are better for their career. In other words, the British are much more disinclined to move and settle in the EU than the other way around, so that offering asymmetric access will only help business without causing any employment displacement.

This is a classic and enjoyable case of hidden asymmetry, the defining theme of this blog. The simple fact is that just because access is unequal does not mean that it is imbalanced or not beneficial to both sides. Reciprocity may seem “fair” on the face of it but may not actually be relevant – when there are cultural asymmetries as in this case, there is a good case to argue that reciprocity is not needed. Unless indeed retaliation is the core objective.

The hidden costs of parenting – why PPP could become PPPP


Purchasing power parity or “PPP” has for many years been as good a proxy as any for allowing comparability between figures such as different countries’ GDP. China’s economy, for example, has a nominal GDP of just US$12 trillion, compared to America’s US$19.4 trillion. Yet when re-based on PPP, China’s GDP is actually US$23.2, making it the largest in the world. I for one accept that this is a useful indicator of economic strength, in the sense that China as a country is able to mobilise more economic resources than its nominal GDP would strictly suggest, since labour and capital there are cheaper. Likewise, a preferred measure of living standards is that of GDP per capita at PPP, or sometimes (better) average wages at PPP. In this way, some comparability may be afforded which accounts for street food in China appearing so much cheaper than in the West for instance.

Yet a friend of mine recently noted that in a sense, PPP-based comparisons of wages and living standards were very much geared towards the individual. A great leveler, he reckoned (as a relatively new parent complaining about the costs of the endeavor) was the arrival of children into his life. Because whilst in theory a basket of goods for PPP calculation includes items needed for raising children, in reality behavioral differences distort its reality. PPP, he felt, did not reflect the full costs of parenting and its effects seemed most intuitive to a single person. When considering where to live, PPP in his life could and perhaps should be re-adjusted to Parental PPP or “PPPP”.

There are three main buckets to consider in making any such adjustments:

1. Direct additional costs of education
2. Consumption choices
3. Real estate costs

The theory here is as follows: wherever you live in the world, the likelihood is that you will as a parent attempt to make up for the deficiencies of the world around you as best you can, in the interest of your children. This comes out of your own resources, and actually in many countries where life is “cheap”, when it comes to raising children those expenses shoot right up again. For instance, as a single person one may choose to drink tap water; as a parent one begins to invest in water cleansing machinery or bottled water (especially in Asia). Education is an important element too, since although many countries provide free universal education, parents recognize their limitations and will correspondingly pay for tuition and other aid. A surprisingly large selection of countries such China actually see parents effectively paying for education despite it being notionally free – and this is before getting to the issue of boarding schools paid for by expats. Lastly, real estate requirements are different and in some parts of the world rents / price counter-intuitively increase with the size of a property, commanding a premium due to restricted space.

So a comprehensive, scientific adjustment to PPP would require a sophisticated model which includes all these factors. To test it though, I instead looked at a simplistic account using only one factor that I could readily find, HSBC’s analysis of how much parents pay for their children’s education in several countries:

Cost of parenting
Source: HSBC – The Value of Education report 2017

Using this data as a rough proxy for all-in childcare costs (imperfect, but it is all I have to hand) I then readjusted the standard PPP index as provided by the OECD. The assumption I have made is that one-third of a parent’s income is used on children, a figure broadly in-line with statistics also published by the OECD. Thus I left two-thirds of income adjusted on the official OECD PPP basis, whilst the remaining one-third I have adjusted using a new index created by comparing total childcare spend. The results look like this:

Value of 30000

Basic and clumsy though this analysis is, it shows some interesting trends. First, as my friend suspected, the “real” living costs for a parent in places like China and India may be in fact higher than initially assumed, due to a surprisingly high need for private spend. But even more notable is how much value is added by the welfare societies of France and the UK, where the median family does not spend anything like as much for education particularly at the tertiary level. Median wages go a lot further in Europe and Canada than in the US under this system – and indeed US$30,000 almost matches the value of US$30,000 in China. The same kind of logic no doubt applies to issues such as universal healthcare. Assuming my calculations are even remotely accurate, life is fundamentally as cheap in Europe as it is in China, whilst life in the US remains the most expensive.

This methodology is very preliminary, full of assumptions and no doubt lacking. I would be happy to hear opinions on how best to improve it. However the basic theory is strong, namely that PPP may have a simple underlying flaw due to not accounting for changes in life cycle; in some cases PPP probably needs to become PPPP to be meaningful for public policy and for investment purposes alike. Essentially, single life remains localised whilst parenthood is becoming globalised. Since parenting costs are only going to increase as we go forward, the issue becomes particularly prominent. PPPP could be the future.


For those keen to see the underlying data, below is the table of calculations:

PPPP table

How all politics really works – in one simple chart

Introducing the General Theory of Government 

The events of 2016 were curious because of their dichotomy: on the one hand, they were such a shock to the political classes, on the other hand they were also entirely predictable. Yet the commentariat both then and since appeared to miss (or simply forget) the most basic and obvious premise of how all politics works: namely that the ruler has to offer the ruled a mixture of both material and psychological well-being. The desire for identity is as legitimate a concern as any amount of wealth, and any government that fails to provide one or the other over a long period of time will suffer the occasional revolt. Understanding this explains Brexit, Trump and any other examples one might care to mention.

I do not claim this to be revolutionary, but given its lack of profile and given the impending elections in the US which will doubtless cause another round of soul-searching, I think it is useful to visualize this concept in a simple, easy to comprehend model. With no further ado therefore, all politics can be represented in this single chart:

General Theory - basic model

The Wealth-Identity Trade-off Model

It should be easy to see where I am going with this. Into the x-axis goes all those things which politicians want to focus on: taxes, welfare spending, the cost of living. Into the y-axis are all those things politicians seem not to think exist anymore such as ethnicity, religion and language. And, in a democracy at least, any government which consistently offers too little of one or other of these parameters, will find themselves cast out. We have for perhaps too long been living in a world where the governing classes have not only mistaken how to deliver W (Sanders, &c), but completely ignored i (Trump, Farage &c). Political parties across the spectrum have spent the last few decades obsessing over the x-axis whilst assuming that the y-axis will tend to itself. Rectifying this will be, as I have alluded to before, the dominant theme of the next two decades at least in the West.

I would hope this is all intuitive enough not to need vast amounts of explanation, but in a series of posts I intend to outline the basic premise of the General Theory and specifically its core idea, the Wealth-Identity Trade-off Model (WITM™). I will go on to examine how and when a society ceases to function properly; what a society really comprises within the model (“Median Man”, or “MM“); and lastly look at some applied examples in the world today and perhaps yesterday.

What I am proposing is not in itself, I think novel; however like all good things I believe this theory synthesizes simple, intuitive ideas which have at best not been expressed before in such a manner, or perhaps may not have been coherently identified. To anyone who disagrees with this, or who have contrary opinions, I look forward to hearing them. Additionally, since these are blog posts which may one day find their way into a book, I will not footnote everything in detail. However I trust that enough is articulated to allow the reader to comprehend what I intend.

The Kavanaugh debacle

Let me humbly offer my view on what has happened here on Kavanaugh. It’s only a theory but I am pretty convinced of it.

The GOP went for a pretty extreme originalist in picking Kavanaugh (see the positioning below). Unlike Gorsuch, he is far from unimpeachable as a jurist; unlike Amy Barrett, his backstory is not popular. He is a party hack who’s real scandal is not this sexual one but rather his role in the Bush administration in 2003, for which any half competent opposition could have hung him out to dry. Therefore, he was not an easy win for the GOP.

Why then did they do this? I think because they saw the midterms coming and decided on a gamble of enormous proportions: put up a controversial figure and dare the Democrats to vote him down. If he somehow got through, they got their man in (and not just a conservative judge like Gorsuch, but an actual partisan); if he failed or the process was dragged out, it would be the catalyst needed for their midterm turnout which was threatening to be flat.

What they did not count on was the ensuing sexual scandal, which whilst allowing the Democrats to get all excited was not obviously a partisan consolidating issue. The Democrats had a real chance to derail Kavanaugh’s nomination without suffering a backlash. However, the other thing the GOP did not factor in was the total incompetence of the Democrats in taking this easy path rather than the correct path to blocking him.

The Democrats have consequently managed a thing of genius – treading the only narrow, delicate path they could to somehow come out of the Kavanaugh debacle even worse than the Republicans (various recent polls show a closing of the generic congressional voting polls and in Trump’s own approvals, despite the fact that Trump has almost nothing to do with any of this). The GOP had to make another gamble in the end: namely that they, even as a stupid party, were still not the stupidest party in the room. The Democrats managed that honour, and the Republicans’ last gasp gamble seems to have worked.

Extraordinary from all sides.