A Beginner’s Guide to Liberty

From the Adam Smith Institute, some easy but important Christmas reading, available free online in PDF form:

This short book is an accessible introduction to liberty – one of the key concepts of political and economic thought. It explains why liberty is so important and sets out in clear language the benefits of freeing individuals from big government. The guide consists of ten concise chapters, each focusing on a particular aspect of liberty and written by an expert in the field. The authors show why liberty is essential if people are to lead prosperous and fulfilling lives, and also point to the terrible consequences when politicians and officials get too much power. At a time when our freedom is threatened by a rising tide of government controls, A Beginner’s Guide to Liberty is essential reading

BBC News in a nutshell

In an article on the BBC News website yesterday, Richard Black asked "Why are virtually all climate 'sceptics' men?"

Here's a taste:

There are two distinct views of why climate scepticism exists in the way it does today.

One - promulgated by many sceptics themselves - speaks to a rigorous, analytical deconstruction of a deeply-flawed scientific edifice that is maintained by a self-interested cabal of tax-hungry politicians and careerist scientists.

The other is that climate scepticism has psychological roots; that it stems from a deep-seated inability or unwillingness to accept the overwhelming evidence that humanity has built with coal and lubricated with oil its own handcart whose destination board reads "climate hell".

As one ex-scientist and now climate action advocate put it to me rather caustically a while back: "I've been debating the science with them for years, but recently I realised we shouldn't be talking about the science but about something unpleasant that happened in their childhood".

The rest of the article is made up of similar indignant, condescending, alarmist drivel. Instead of providing proper coverage of the Climategate scandal, and investigating the shocking lack of transparency in climate change research, Black prefers to speculate about the psychological problems of "high income, well-educated, white men" who dare to question the official line.

Yet there is cause for hope: almost all of the comments on the article note Black's bias. You see the same pattern on most BBC articles: hysterical journalism, followed by a reminder from the British public that their common sense and capacity for critical thought have not yet been completely extinguished.

Perhaps a demographic study is indeed warranted, not just of "climate sceptics", but of "BBC sceptics" and "Government sceptics" more generally. Personally, I'm less interested in any male-female split that may exist, and more concerned about a generation gap. I suspect that common sense is not so much diminishing, as dying out.

Losing the Rosetta Stone?

According to the BBC, Egypt's head of antiquities, Dr Zahi Hawass, "will drop a demand for the permanent return of the Rosetta Stone if the British Museum agrees to loan it out".

The British Museum has said it would "consider the loan request".

One thing is certain: if the Stone ever goes to Egypt, there's no chance that it will be returned.

The Violation of Mr Smith

Another excellent article from the Cobden Centre.

Mr Smith works hard, plans carefully, and saves what he can, putting his money into a building society. He pays his credit card bills off each month, and tries to overpay his mortgage when he can.
...
As technology produces things more cheaply, Mr Smith should have been able to reap the rewards – except that things don’t get cheaper for him. Society cheats him when the government opens the spigot of new money, washing this value away as the torrent of new money chases prices higher beyond his reach.

The winners are always those close to the gusher – the banks, financiers and politicians. These are the ones who get to spend the new money first, thus chase prices up before Mr Smith gets any sniff of what is happening.

The Four of Horsemen of the Apocalypse

The Cobden Centre has highlighted an article by Frank Field entitled "The Four of Horsemen of the Apocalypse".

The government has busily been printing money and practically the whole of this funny money has been used to buy government debt.

So those economists employed directly by banks, or those dependent on bank contracts, again mislead when they prattle on about long-term interest rates being held. We simply do not know to what level long-term interest rates will go once the game of printing money stops.
...
It simply isn't possible to increase the money supply by 300% and for there not to be a megadose of hyperinflation built into the system. Inflation is the cruellest of redistributors taking away from those who have saved and penalising most those on low earnings who have limited or non-existent collective bargaining powers.

Inflation's Moral Hazard

An excellent article by Theodore Dalrymple:

But asset inflation — ultimately, the debasement of the currency — as the principal source of wealth corrodes the character of people. It not only undermines the traditional bourgeois virtues but makes them ridiculous and even reverses them. Prudence becomes imprudence, thrift becomes improvidence, sobriety becomes mean-spiritedness, modesty becomes lack of ambition, self-control becomes betrayal of the inner self, patience becomes lack of foresight, steadiness becomes inflexibility: all that was wisdom becomes foolishness. And circumstances force almost everyone to join in the dance.

Except in one circumstance, that is: the possession of a salary and a pension that the government promises, implicitly or explicitly, to index against inflation. This is the situation of public-sector workers and is a pyramid scheme, too, perhaps the biggest of the lot, since events may require the government to renege on its obligations. But meantime, such employment will seem a safe haven, and the temptation will be for government to expand it, with the happy consequence—for itself—of increasing dependence. And dependence, too, undermines character.

Read more

Reflections on the Role of Gold in Investment Practice

In a speech to to the 1st Gold Conference in Zurich, Tony Deden explains his use of gold for capital preservation:

In capital preservation, the problem we face is that we own a fixed amount of money capital – while the central bank produces, at virtually no cost, increasing amounts of the same thing, and in so doing, it reduces the value of what we have saved. On a compounded basis, after only a short period of time, we become impoverished.
...
Over the ensuing years, in the aftermath of the great Greenspan liquidity of the Y2K scam and the momentous money creation that followed 9/11, it became clear that

• (a) the dollar, as a reserve currency would eventually have to be re-examined,
• (b) the financial situation in the US would deteriorate rapidly,
• (c) the gap between mine supply and traditional demand was growing and
• (d) central banks had become large speculators in the gold markets via the leasing mechanism.

It was only appropriate to re-consider my ownership in gold, not merely as an investment, but also as an insurance policy against a monetary collapse, a crisis in the payment system or a geopolitical conflict. I saw gold ownership increasingly as insurance rather than as an investment.
...
I now view gold not merely as insurance, but indeed as cash substitute. More than 45% of our net assets are in precious metals. Holding paper cash subjects me to credit risk, counterparty risk, foreign exchange risk, political and inflation risk. I can avoid most, if not all these, by substituting with gold. It simply means that I trust nominal money less and less.
...
Frankly, we now have two generations of economic agents who are entirely ignorant about the nature of money. We welcome rising prices and see them as wealth even as they are merely the result of inflation. We demand more cash to save the system, instead of allowing those who fail to go bankrupt, so that more efficient competitors can emerge. We have tolerated the Swiss National Bank sale of our gold reserves in exchange for American paper money and promises.

We demand cheaper currency to stay competitive because we do not know the true nature of competitiveness. If cheaper currency is the source of wealth, where has Bangladesh gone wrong? If cheaper money means economic prosperity, why not just print as much as we can and give it out to everyone? We have become fools. The customers know nothing and the advisers know even less. And then we have the idiot economists—the neo-classical, Keynesian variety with solutions to problems they did not even anticipate; solutions that have, in fact, long been discredited. And so we lurch from crisis to crisis—eating our meager capital in the hopes of becoming rich in money. It’s a pity.

Read the full speech.

The changing face of Britain

Oxford, November 2009:

Tyranny of the subservient

20% of people employed in the UK today are employed by the state. Some of these people are honest, competent, and hard working. A subset of them actually succeed in making a net contribution to our society. Unfortunately, we are also saddled with billions of pounds worth of bureaucrats who are at best useless, and more often actively destructive. They not only squander our money, but frustrate both the productive private sector and the good elements of the public sector.

It is impossible in practice to separate the wheat from the chaff, for we would need to rely on the chaff to identify the wheat. The only hope seems to be a large-scale cull, which would send the incompetent to the dole, and the competent into more productive private-sector employment.

Unfortunately, public sector workers and others who benefit from a bloated government would turn out in force to oppose any party that made specific commitments for large-scale cuts. Each additional public sector worker adds a negligible amount to our tax bill, but for the worker the job is vitally important. The lion runs for its dinner, but the elephant is running for its life.

So we find that mainstream politicians seek to appease the private sector with tough talk about fighting bureaucracy, but they are never specific, and the rhetoric is quietly betrayed. The state gets larger and larger.

In a speech on 12 January 1995, Gordon Brown said

The biggest question ... is why our constitution is over-centralised, over-secretive and over-bureaucratic and why there is not more openness and accountability ... The real alternative is a bonfire of the quangos and greater democracy

The bonfire never came. Instead, New Labour has presided over a staggering expansion of government spending. Even before the bailout of the banks, David Craig estimates that government spending increased by 55% — a total outlay of £1 trillion more than if spending had been kept at 1997 levels. This money has not bought a commensurate improvement in public services, but it has accustomed an ever larger portion of the population to state dependence.

According to the Office for National Statistics

Public sector employment fell every year between 1991 and 1998, reducing by 816,000 in total. Between June 1998 and June 2005 public sector employment rose by 680,000 to stand at 5,846,000,13.2 per cent higher than in June 1998 [1]

If the trend continues, we will find ourselves beyond a point of no return. It is not inconceivable that a majority of the population could depend for their livelihood on the state. The revenue-generating minority would then be powerless to stop their continued exploitation.

Of course, our first-past-the-post electoral system means that those dependent on the state need not even form a majority. After all, the past three Labour governments have led us ever more quickly down the road to ruin with the consent of less than half of the population (43.2% in 1997; 40.7% in 2001; 35.3% in 2005).

It would seem that our only hope lies in the dishonesty of our politicians: that one day a leader will come along who cuts the size and cost of government much more radically than the electorate were led to suspect.

[1] Trends in public sector employment. Labour Market Trends, vol 113, no 12, pp 477-488.ISSN: 1361-4819.
The document notes that June 2005 levels were "still below the levels seen in 1991". I haven't been able to find data for before 1991, but it would be interesting to see. Improvements in information technology should mean that ever fewer administrators are required to manage public services. It is truly worrying that we seem to be heading in the other direction.

Lisbon Treaty ratified: what happens now?

The best thing the Conservatives could do, after coming to power, would be to unilaterally withdraw Britain from the EU, refusing any claims for financial compensation. The EU we now find ourselves in is not the EU that we joined, and at no stage along the way has the public been given a choice about the freedom we have surrendered. Successive governments have quietly but steadily devolved power to Brussels, reneging on their promises, and neglecting their duty to protect British interests.

Only outside the EU does Britain stand a chance of reversing the tide of bureaucracy and quangocracy, giving power back to the people. Once out of the EU, we would have a clean slate to decide what sort of relationship this country wants with Europe. The most we ever signed up for was free trade.

Withdrawal would not go unpunished — the EU would make an example of Britain, and impose harsh duties on British products — but we would survive, and a truly free Britain would easily out-compete a continent burdened by bureaucracy and regulation. We should not forget that even in our current over-managed state, Britain, unlike Ireland, has long made a net contribution to EU coffers.

Unfortunately, it is vanishingly unlikely that our next government will withdraw from the EU. The Conservatives won't do it, and the parties that would do it are unelectable. In the worst-case scenario, UKIP and the BNP will succeed in sapping enough votes away from the Conservatives that Labour stays in power.

The best we can hope for is what James Bartholomew has proposed:

Now that the Lisbon Treaty has been ratified, the referendum that should be offered would ask three questions:

1. Do you wish the British government to withdraw from the European Union?

2. If Britain remains in the European Union, do you wish there to be a referendum on any future European Union treaty?

3. If Britain remains in the European Union, do you wish the British government to negotiate a reduction in the control of the European Union over British government?

Economic stimulus across the pond

The US government has applied the same Keynesian stimulus principles as the UK, but on a larger scale. "Cash for clunkers" is the American version of our car scrappage scheme. The New York Times asked four economists Did the Stimulus Work?

Jeffrey Miron was sceptical:

Much discussion of the recession presumes it will end only because government comes to the rescue.

In fact, the U.S. economy recovered from significant recessions before 1914, when monetary and fiscal policy had not even been invented. Economies can and do recover on their own, and intervention might make things worse by generating uncertainty and distorting the economy’s allocation of resources.

A further caveat is that two elements of the fiscal stimulus — cash-for-clunkers and the $8,000 tax credit for first-time home buyers — probably shifted significant activity from the fourth quarter and beyond to the third quarter because consumers knew these provisions would expire soon. Thus the stimulus plausibly shifted the timing of economic activity without necessarily improving the long-term path.

Russell Roberts expressed similar concerns:

Everyone seems sure that at least the “cash for clunkers” program was a good thing. A Reuters article, for example, said: “The program, which ended in August, contributed to a jump in consumer spending in the third quarter and helped to pull the economy out of its worst recession since the 1930s.”

But there is no way of knowing whether this is correct. Yes, it was good for consumer spending. On cars. But part of its impact was to encourage consumers to buy cars instead of other things, and to buy cars today rather than cars tomorrow. Its impact on employment was probably minimal.

I think the Keynesian narrative is right about one thing — consumers lack confidence. The crucial question is whether a large increase in government spending financed with borrowed money that swells the deficit to $1.4 trillion is good for confidence or bad for it. No one knows the answer

Miron concluded:

The case for additional stimulus is weak. If further stimulus occurs, it should focus on changes in policy that make sense independent of the recession. This means reductions in tax rates rather than increases in expenditure. Repeal of the corporate income tax would be ideal.

Mises, Salamanca, 2009

The Cobden Centre reports from the Ludwig von Mises Institute's Supporters Summit 2009:

We heard this morning how the Salamancan friars were liberals, believers in freedom, who advocated:

• Free markets and free enterprise
• Low taxes and a small state
• Free movement of people and products
• The rule of law and the equality of all before the law
• Individual liberty
• Separation of the powers of the state
• Democracy within limits set to protect minorities and individual rights
• Justice: the defence of life, liberty and property

The Salamancans promoted subjective value and argued that an abundance of money makes it worthless. As early as 1544, they argued from legal principle for 100% reserves on demand deposits with depositors paying for safekeeping services.

In other lectures, we learned:

• How recent Nobel Laureate Oliver E. Williamson has opened the way to a capital theory in neoclassical economics which could converge on Austrian-School theory through his “asset specificity”.
• How timely is Adam Smith’s Wealth of Nations, a systematic treatise which, despite its limitations, could still refute today’s flawed policies.
• Some lessons from a career in modern banking: how bank failures occur and what history has to teach us.
• What Federal Reserve Chairman Ben Bernanke could learn from Juan de Mariana’s 17th century treatise De Monetae Mutatione: stop inflating the money supply.

Freedom to breed; freedom to starve

BBC News this morning had a segment dedicated to the most recent Ethiopian food crisis. It showed a poor farmer, whose crops had failed, unsure how he would feed his eight children.

I suppose the footage of his large family was meant to boost compassion for his plight, but for me it had the opposite effect. If he had two children, or one, he would have a much easier time providing for them. If he had none, he would have only himself and his wife to provide for (and freed from the burden of childcare, she would be better able to provide for herself).

I'm sure most 'liberal' people in the UK would defend the farmer's right to have as many children as he likes ... but balk at the suggestion that their fate should be left in his hands.

I don't want his children to suffer. It is not their fault that they have a selfish, irresponsible father. And perhaps he is just behaving the way his ancestors have always behaved. But if we are determined to intervene, we must give more than emergency aid. Indeed, by ensuring that his eight children survive, without addressing the fundamental problems, we are contributing to overpopulation, and increasing suffering in the long term. If Ethiopians breed beyond the replacement rate, the number of children facing starvation will increase exponentially.

If we are not to make the problem worse, any emergency aid must be accompanied by education and tools. Education about farming practices, and tools for irrigation. Education about family planning, and access to contraception.

Of course, as is too often the case, it seems that government action has contributed to this crisis. As Martin Plaut, the BBC's Africa analyst notes

There is no doubt poor and erratic rains have hit the Ethiopian harvest. But large parts of the country have not been hit by drought. So why the current crisis?

It is in part the result of policies designed to keep farmers on the land, which belongs to the state and cannot be sold. So farms are passed down the generations, divided and sub-divided. Many are so small and the land so overworked that it could not provide for the families that work it even with normal rainfall.

It's unlikely that liberalisation of government policy, on its own, would be enough to avoid poverty and famine, but it seems clear that their current legislation is making matters worse.

Education, education, education: Nanny knows best

There are those here in the UK who think we don't take compulsory education far enough. They propose increasing the school leaving age from 16 to 18:

According to an article on BBC News,

Steve Sinnott, leader of the National Union of Teachers said that the move was "inevitable".

"We cannot afford to neglect those young people who currently leave school at 16 unprepared for the rigour and demands of life in the 21st Century."

According to the Boston Globe, similar proposals are being made across the pond:

Massachusetts students would be required to stay in school until age 18 ... , part of a broader effort to halve the state’s high school dropout rate.

This drew comment from Jeffrey Miron:

This is a terrible idea.

The best path for many 16-17 year olds is not high school but vocational tech, apprenticehip, or even a minimum wage job. Additional schooling is good for some 16-17 year olds; that does not mean it is good for everyone.

A higher dropout age will in any case do little to keep students in school; many already drop out before legally permitted because enforcement is lax, and the resources to enforce an even higher age would be substantial. Those resources are better employed serving the students who want to be in school.

Students forced to stay in school, moreover, especially at ages 16-17, can be disruptive or even dangerous to other students.

The right policy change, therefore, is to lower the dropout age, or even eliminate it. Raising it to 18 will waste resources and reduce school quality for those who want to learn.

I couldn't put it better.

Education isn't a once-in-a-lifetime opportunity. People who leave school at 16 are free to return to study later in life, when they actually want to learn. Until they are ready, no good can come from trying to force them.

Boom, bust, and micromanagement

The Register picked up yesterday's story about the FSA's proposals to ban self-cert mortgages, highlighting the impact this would have on independent IT contractors.

Other measures, designed to protect borrowers, include ensuring firms do not "profit" from people in arrears.

“The FSA needs to ensure that firms only lend to people who can afford to pay the money back. The reforms that we have announced today will ensure that the mortgage market works better for consumers and that it is sustainable for firms,” the organisation said.

The debate was taken up on Tim Worstall's blog:

"It is only because the governments bailed out the banks that they feel the need or the ability to interfere with basic market decisions like this. What’s next? They’re only allowed to lend to public sector workers?"

Quite. More to the point, as another poster noted,

"Imagine banks with idiotic lending policies had been allowed to fail, rather than being propped up with taxpayers money – would a lesson have been learned? as it is, what lesson have the banks learned now?"

It went like this:

• UK government policies ensured low interest rates, and an inflated money supply
• US government policies encouraged lending to those who could not afford to pay
• House prices sky-rocketed
  
• Knowledge of past bailouts encouraged reckless behaviour on the part of banks considered 'too big to fail'
• The absence of a 100% reserve requirement, and the lack of clear separation between investment banking and retail banking, endangered millions of innocent savers
  
• Inevitably, the vast edifice of dodgy credit came tumbling down, with massive collateral damage to the rest of the economy
• The government stepped in, using inconceivable sums of taxpayer's money to support reckless banks
• The government now wants to micromanage the lending decisions of all banks

What we really need is a fundamental overhaul of our monetary and financial system, and an end to government meddling.

An angry start to the day

Amidst the fluff (today it was meerkats), there's just enough 'real news' on BBC Breakfast to get one's blood pressure up:

• There are proposals to make banks liable "if they lend to people who can't afford to pay them back"
• We are asked: "should attacking someone for being fat be seen as a hate crime?"
• It is apparently already illegal to replace striking workers
• We learn that "the BBC could face legal action over British National Party leader Nick Griffin's appearance on Question Time"

If I manage to find more substantive commentary on these issues, I'll post updates, and perhaps some follow-up posts. If not, take this as a sample of Britain in 2009.

UPDATES:
Caveat Lender
BBC News reports that "self-certification mortgages will be banned under the proposals with lenders required to verify borrowers' incomes."

It apparently does not occur to the FSA that if irresponsible banks were allowed to fail, shareholders might hold them to account.

Fat and Proud
Tonight's edition of the BBC's Inside Out programme will apparently include a segment dedicated to 'fat and proud' London mum Kathryn Szrodecki, who "travels to San Francisco to see how fat people there have successfully fought for more civil rights, and asks whether Boris Johnson might follow their lead and protect the capital's fat people".

According to a related article on the BBC News website, campaigners want "so-called "fat-ism" to be made illegal on the same grounds as race, age and religious discrimination."

It is apparently not enough to have laws against violence; special punishment must be reserved for those who 'hate'. And it is seemingly inconceivable that companies who employ those best suited to the job would have a competitive advantage over those who hire based on ill-founded prejudices.

Postal Monopoly
Another article on BBC News provides further information on the proposal by TNT, "the UK's largest private mail firm", to ensure our post gets delivered. Only passing mention is given to the fact that strikes are encouraged and exacerbated by current UK law, which prevents the replacement of striking workers:

TNT has been lobbying the government to allow it to deploy its postal workers on the streets if the stoppage goes ahead

"We need the market and regulatory barriers moving before we can put orange postmen on the street," said Nick Wells, chief executive of TNT Mail UK.

"We have an alternative potentially for the future but not for the moment. Royal Mail has a de facto monopoly on the final mile delivery." ...

Employing extra people to do the work of staff who are on strike is illegal under employment law.

Some ideas are too dangerous for Question Time
Finally, there is an article considering whether the British National Party should be allowed to appear on Question Time:

A BBC spokesman said: "Our understanding is that, if there was an election tomorrow, the BNP would be able to stand.

"Our audiences, and the electorate, will make up their own minds about the different policies offered by elected politicians."

But while their colleague Jack Straw is prepared to tackle the BNP in open debate, New Labour stalwarts Peter Hain and Alan Johnson don't want to run the risk of viewers coming to the wrong conclusion.

Awaiting "The Death of Politics"

A friend pointed me at an article by Karl Hess entitled The Death of Politics, originally published in Playboy 40 years ago.

Hess lived in a different world: it was only 7 years after the Cuban Missile Crisis, and war was raging in Vietnam. Many of the issues he covers — segregation, race riots, the threat of communism, the draft — may seem distant to the modern reader. Other issues — drugs, poverty, censorship, war, and the relationship between Big Government and Big Business — are at least as relevant today as they were then.

And then, as now, libertarianism was marginalised and misunderstood, despised by both ends of the political spectrum:

Libertarianism is rejected by the modern Left — which preaches individualism but practices collectivism. Capitalism is rejected by the modern Right — which preaches enterprise but practices protectionism.

But what is libertarianism? Is it as naive and immoral a philosophy as the mainstream would have us believe? Hess defines it thus:

Libertarianism is the view that each man is the absolute owner of his life, to use and dispose of as he sees fit: that all man's social actions should be voluntary: and that respect for every other man's similar and equal ownership of life and, by extension, the property and fruits of that life is the ethical basis of a humane and open society. In this view, the only — repeat, only — function of law or government is to provide the sort of self-defense against violence that an individual, if he were powerful enough, would provide for himself....

This notion will appeal to many people who recognise that technological progress, not government intervention, is the source of our current prosperity and the key to our future happiness [1].

But how small a government can we get away with? Is the Rule of Law and defence of our borders sufficient? How far should governments go to preempt crime and war? Can libertarianism work in practice? Can it work today?

Hess was optimistic:

A laissez-faire world would liberate men. And it is in that sort of liberation that the most profound revolution of all may be just beginning to stir. It will not happen overnight, just as the lamps of rationalism were not quickly lighted and have not yet burned brightly. But it will happen — because it must happen.

But 40 years on, it's hard to see a path to Hess's utopia. Indeed, we seem to be heading in the other direction. Is this the will of the people? I confess that I am aware of no nation, past or present, that has conducted itself on truly libertarian lines. Should we infer that we are too savage to peacefully coexist without the iron fist of a monarch, or the guiding hand of a liberal elite. Are we too reluctant to think for ourselves; too eager to be led? Or have we been held back for centuries by those in power? Will future historians look back on the Libertarian Revolution, as we look back on the Scientific Revolution, and wonder how a transformation with such power to enrich the lives of billions was frustrated for so long?

Hess doesn't have all the answers, but he does provide a compelling case for the libertarian ethic, and a damning indictment of the political status quo.

Politics: the power of an elite exercised in the name of the masses

One of the first observations of Hess's article is that the traditional political parties, despite their differences, have more in common with each other than they do with libertarianism:

Political parties and politicians today — all parties and all politicians — question only the forms through which they will express their common belief in controlling the lives of others. Power, particularly majoritarian or collective power (i.e., the power of an elite exercised in the name of the masses), is the god of the modern liberal.

Can we live without this elite?

...the most vital question today about politics — not in politics — is the same sort of question that is plaguing Christianity. Superficially, the Christian question seems simply what kind of religion should be chosen. But basically, the question is whether any irrational or mystical forces are supportable, as a way to order society, in a world increasingly able and ready to be rational. The political version of the question may be stated this way: Will men continue to submit to rule by politics, which has always meant the power of some men over other men, or are we ready to go it alone socially, in communities of voluntarism, in a world more economic and cultural than political, just as so many now are prepared to go it alone metaphysically in a world more of reason than religion?

State Capitalism

Contrary to the mainstream view, ours is not a capitalist society — at least, not a pure one. A bewildering blend of subsidies and regulations distort the free market, ostensibly for 'the greater good', but more often to the benefit of special interests. In particular, those special interests with enough money to hire lobbyists.

This problem is not new. As Hess put it,

Big business supports a form of state capitalism in which government and big business act as partners ...

The Left's attack on corporate capitalism is, when examined, an attack on economic forms possible only in collusion between authoritarian government and bureaucratized, nonentrepreneurial business.

He cited the television networks as an example:

The big businessmen who operate the major broadcast networks are not known for suggesting, as a laissez-faire concept would insist, that competition for channels and audiences be wide open and unregulated. As a consequence, of course, the networks get all the government control that they deserve, accepting it in good cheer because, even if censored, they are also protected from competition.

It is notable, also, that one of the most fierce denunciations of pay TV (which, under capitalism, should be a conceptual commonplace) came not from the Daily Worker but from the Reader's Digest, that supposed bastion of conservatism.

In fact, Hess claimed,

Television networks are fantastically advantaged by FCC licensing, which prevents upstarts from entering a field where big old-timers have been established.
...
The auto industry receives the biggest subsidy of all through the highway program on which it prospers, but for which it surely does not pay a fair share. Airlines are subsidized and so protected that newcomers can't even try to compete.

Even in agriculture, it is large and established farmers who get the big subsidies — not small ones who might want to compete.

The American farm lobby is so powerful that few mainstream politicians dare ignore it. Hess recalls his time as speechwriter for the maverick presidential candidate Barry Goldwater:

... there was a moment, at a conference to determine the campaign's "farm strategy," when a respected and very conservative senator arose to say, "Barry, you've got to make it clear that you believe that the American farmer has a right to a decent living."

Senator Goldwater replied, with the tact for which he is renowned, "But he doesn't have a right to it. Neither do I. We just have a right to try for it." And that was the end of that.

Of course, lobbying is not a peculiarly American problem. It will arise wherever there is a concentration of politicians with too much power and too little accountability. Already, Brussels is proving a match for Washington in this regard.

While many people are politically aware enough to recognise the cosy relationship between Big Business and Big Government, most will nevertheless assert that only the latter can protect us from the former. Hess disputed this:

Monopoly is a case in point. To suppose that anyone needs government protection from the creation of monopolies is to accept two suppositions: that monopoly is the natural direction of unregulated enterprise, and that technology is static. Neither, of course, is true. The great concentrations of economic power, which are called monopolies today, did not grow despite government's antimonopolistic zeal. They grew, largely, because of government policies, such as those making it more profitable for small businesses to sell out to big companies rather than fight the tax code alone. Additionally, Federal fiscal and credit policies and Federal subsidies and contracts have all provided substantially more assistance to big and established companies than to smaller, potentially competitive ones.

A State that Cannot Compel

Libertarians yearn for a state that cannot, beyond any possibility of amendment, confer any advantage on anyone; a state that cannot compel anything, but simply prevents the use of violence, in place of other exchanges, in relations between individuals or groups. Such a state would have as its sole purpose (probably supported exclusively by use taxes or fees) the maintenance of a system to adjudicate disputes (courts), to protect citizens against violence (police), to maintain some form of currency for ease of commerce, and, as long as it might be needed because of the existence of national borders and differences, to maintain a defense force. Meanwhile, libertarians should also work to end the whole concept of the nation-state itself.

In contrast,

The reactionary tendencies of both liberals and conservatives today show clearly in their willingness to cede, to the state or the community, power far beyond the protection of liberty against violence. For differing purposes, both see the state as an instrument not protecting man's freedom but either instructing or restricting how that freedom is to be used.

The liberals would seek to compel social integration. Hess maintained that this is not only immoral, but also impossible:

Racism has been supported in this country not despite of, but thanks to, governmental power and politics. Reverse racism — thinking that government is competent to force people to integrate, just as it once forced them to segregate — is just as political and just as disastrous. It has not worked. Its product has been hatred rather than brotherhood. Brotherhood could never be a political product. It is purely personal.

The conservatives, meanwhile, seek to impose tradition and preempt unrest:

Conservatives today continue to revere the state as an instrument of chastisement even as they reject it as an instrument of beneficence. The conservative who wants a federally authorized prayer in the classroom is the same conservative who objects to federally authorized textbooks in the same room.

...

For many conservatives, the bad dream that haunts their lives and their political position (which many sum up as "law and order" these days) is one of riot. To my knowledge, there is no limit that conservatives would place upon the power of the state to suppress riots.

Even in a laissez-faire society, of course, the right to self-defense would have to be assumed, and a place for self-defense on a community basis could easily be imagined. But community self-defense would always be exclusively defensive. Conservatives betray an easy willingness to believe that the state should also initiate certain offensive actions, in order to preclude trouble later on.

A principal weapon of those who would seek to preempt unrest is censorship. Some ideas, the authorities claim, are simply too dangerous to be heard. Hess and Goldwater rejected this view:

In 1964, Barry Goldwater alienated Southern conservatives in droves when, in answer to a regionally hot question about whether Communists should be permitted to speak on state-university campuses, Goldwater said, flatly and simply, "Of course they should."

At the height of the Cold War, it was Communists, not Islamists, that preoccupied the political establishment. As Niall Ferguson has noted, "the Cold War was anything but cold". The US undertook overt and covert action in every corner of the globe in an effort to stop the spread of Communism, often with tragic consequences for the local inhabitants. Hess favoured non-aggression, and vigorously opposed conscription:

...given a nation that not enough citizens can be attracted to defend voluntarily, you probably also have a nation that, by definition, isn't really worth defending. ... If our freedom is so fragile that it must be continuously protected by giving it up, then we are in deep trouble.

But what of the 'need', so familiar to residents of Nanny State Britain, to protect citizens from themselves?

In a laissez-faire society, there could exist no public institution with the power to forcefully protect people from themselves. From other people (criminals), yes. From one's own self, no. Marijuana is a plant, a crop. People who smoke it do not do so under the compulsion either of physiological addiction or of institutional power. They do so voluntarily. They find a person who has volunteered to grow it. They agree on a price. One sells; the other buys. One acquires new capital; the other acquires a euphoric experience that, he decides, was worth allocating some of his own resources to obtain.

Incidentally, it is easy to imagine that, if drugs were left to economics and culture instead of politics, medical researchers would shortly discover a way to provide the salable and wanted effects of drugs without the incapacitation of addiction. In this as in similar matters — such as the unregulated competition from which it is felt people need protection — technology rather than politics might offer far better answers.

Despite its dubious moral basis, and its obvious ineffectiveness, the governments of the western world continue their policy of prohibition, and vigorously pursue their War on Drugs. As Jamie Whyte has noted, "it is not concern for our welfare that explains the illegality of drug use. It is bigotry".

Such gratuitous restriction of personal freedom is all the more wicked for the fact that it is funded by the taxpayer. The government confiscates our wealth, and uses it to oppress us.

Politics, throughout time, has been an institutionalized denial of man's ability to survive through the exclusive employment of all his own powers for his own welfare. And politics, throughout time, has existed solely through the resources that it has been able to plunder from the creative and productive people whom it has, in the name of many causes and moralities, denied the exclusive employment of all their own powers for their own welfare.

At its limits, the libertarian ideal will no doubt face practical problems of its own. But it will be a long time before we need to worry that our government is too small, and our people too free.


[1] Even in the current financial crisis, most people in the western world continue to live in relative comfort. That we do not see mass starvation and homelessness, despite gross mismanagement of the economy by government, is a testament to the industrial and agricultural progress we've made since the Great Depression. Big Government may yet succeed in ruining us, but the private sector has thus far provided an impressive buffer.

Libertarianism: 'freedom to' vs 'freedom from'

bella gerens highlights the crucial distinction between positive and negative freedoms:

The truth is that advocates of freedom are found all over the political spectrum, but the only true libertarians are the ones who advocate it at all times in all circumstances, from the bedroom to the wallet – who believe that ‘freedom from’ is the only state of being consistent with the dignity and majesty of humankind.

‘Freedom from’ is the most important part of that ideology. Freedom from coercion. Freedom from interference. Freedom from oppression.

‘Freedom to’ is where the misunderstandings enter. People on the right think libertarians are advocating freedom to burgle, rob, rape, murder – because they read ‘freedom’ to mean ‘freedom to do whatever you please.’

People on the left think libertarians are advocating exploitation, pollution, callousness, and the primacy of making (and keeping) money above all else – because they read ‘freedom’ to mean ‘freedom to do whatever you please.’

Happy days are here again?

Writing for the Cobden Centre, Equity Strategist Ewen Stewart warns that despite signs of recovery in the FTSE and the housing market, the UK economy remains fundamentally weak:

"This country that has been living considerably beyond its means for a very long time. Artificial efforts to prop this up, through printing money or inappropriately low interest rates, at best are a short term delaying tactic and at worst risk stoking a loss of confidence and ultimately inflation."

In summary:

• Government spending has increased dramatically, "from £364bn in 2001 to £583.3bn in 2007/8", diverting resources "from the productive private sector ... to the less productive state sector"


• This increased spending was funded by tax receipts that were "greatly boosted by the growth in 'the City' and real estate prices"


• "The population, banks and the Government forgot that these ever increasing tax receipts ... were cyclical"


• Throughout the boom, GDP was inflated by "one-off factors" such as immigration from Eastern Europe


• Despite the booming economy, the National Debt sky-rocketed, "from £311bn in fiscal year 2000/01 to a staggering £806bn today or from around £20,000 per family of 4 to £53,000"


• Servicing this debt is not cheap: "debt repayment will rise from £31m in 2008/9 to around £70bn in 2013/14 or more than twice the current defence budget"


• Despite attempts at spending cuts, "the total accumulated State debt will within 5 years be likely around, on a best case scenario, £2,300bn or over £150,000 a family of 4"


• Faced with artificially low interest rates, consumers stopped saving, and took on debt: "the savings ratio has traditionally been in a range of between 8-12% ... since 1997 it has fallen and even went negative in late 2007"


• In the short term, Quantitative Easing (printing money) "allows the Government to maintain ... its highly imprudent spending policies"


• In the longer term, QE presents "a substantial risk to the further depreciation of sterling"

Time to emigrate? Though I love this country, I'm thinking about it. My decision rests on two questions:

• who will win the next election?


• will they have the courage and far-sightedness to radically reduce spending, overhaul the financial system, and introduce Sound Money?

Stewart asserts that "it is critical that we re-create a sustainable, lower leverage, small state entrepreneurial economy", and provides some specific recommendations:

1. "the deficit must be controlled with massive cut backs"


2. "an end to QE"


3. "much more prudential control over bank lending"


4. "encourage saving to re-build wealth in the future"

He concludes:

While my modest proposals above will result in short term austerity they will help provide the building blocks for longer term renewal and greater sustainable growth.

The current policy won’t. It is short term, imprudent and misunderstands the nature of true wealth creation.

I wholeheartedly recommend the full article.

The Welfare State We're In

Most people want to live in a country where all people enjoy the following basic necessities:

• clean water
• nutritious food
• suitable clothing
  
• a warm, dry, safe place to sleep
  

The direct provision of these necessities to those who are unable to provide for themselves should be straightforward and relatively inexpensive. The recipients of this charity should be immensely grateful, and the donors should sleep more soundly, knowing the tremendous gift they have bestowed upon their less fortunate compatriots.

But somehow, over the course of the 20th century, and the first decade of the 21st, the British welfare system has grown into a faceless, unaccountable behemoth, which squanders £100 billion of taxpayer's money every year [1]. Efficiency is low; fraud is rife. Recipients feel entitled to the subsidy they receive; donors feel extorted. 4.8 million people of working age live in a house where nobody works!

We must find a better way.

I understand that James Bartholomew has some ideas. I look forward to reading his book: The Welfare State We're In.


[1] As always, figures vary. David Martin, author of Benefit simplification: How, and why, it must be done, arrives at £155.9 billion.

My Journey to Austrianism via the City

A speech by James Tyler to the Adam Smith Institute Next Generation Group, 6th October 2009:

"I had opened the door to Austrian economics. A discipline grounded in logic, human action and inevitable consequences of bureaucratic fiddling in free markets.

I discovered that we had been in this mess time and time again, and it always seemed to have the same set of circumstances surrounding it.

Every bubble, boom, bust and crisis had its origins in the extension of too much artificially created credit."

Read more at the Cobden Centre

Exactly the wrong shade of pink

And for all the richest and most successful merchants, life inevitably became rather dull and niggly, and they began to imagine that this was therefore the fault of the worlds they'd settled on - none of them was entirely satisfactory: either the climate wasn't quite right in the later part of the afternoon, or the day was half an hour too long, or the sea was exactly the wrong shade of pink.

-- the Hitchhiker’s Guide to the Galaxy