Blogroll: Adam Smith Institute

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War criminals brought to justice

Wed, 20/11/2019 - 12:01

It used to be the case that tyrants could torture and murder their own subjects, and those they conquered, with impunity. That all changed on November 20th, 1945, when the War Crimes Tribunal began its hearings at Nuremberg, following the end of World War II.

The military tribunals were held by the Allies under international law, in order to put on trial 24 of the leading Nazi political and military leaders who had planned or participated in mass murders and other war crimes. They marked a major advance in international law because they put on trial people who had committed acts that were not illegal in their own countries at the time, but were deemed to be crimes against humanity.

Many of those most guilty of such crimes could not be tried because they were already dead. Hitler had shot Eva Braun and then himself. Goebbels and his wife had poisoned their six children before killing themselves. Himmler, although captured, had swallowed cyanide concealed in a false tooth when he was about to have his mouth examined. Bormann was tried in absentia because they did not realize he was already dead.

Amongst those who were tried, the most prominent was Goering, who was convicted and sentenced, but escaped the hangman’s noose by taking cyanide in his cell on the eve of his execution. Of the 24, 12 were sentenced to death, and 10 were hanged on October 16th, 1946. The two not hanged were Bormann and Goering, both already dead.

The Nuremberg trials were the first to mention genocide, “the extermination of racial and national groups, against the civilian populations of certain occupied territories in order to destroy particular races and classes of people” (count three, war crimes). They led in the years that followed to the establishment of an international jurisprudence for crimes against humanity and war crimes. The outcome was the creation of the International Criminal Court, the international tribunal that operates in The Hague, with jurisdiction to prosecute individuals for such crimes.

The legacy of the Nuremberg Tribunal is that those who inflict crimes against humanity can be brought to justice. The knowledge that this could happen might restrain some people from committing acts of barbarism they might otherwise hope to perpetrate with impunity. The knowledge that those who do these things can later have justice meted out to them affords the world some satisfaction that humanity is no longer prepared to tolerate the mass cruelty and savagery that it once had no recourse to deal with. It is another sign that we are less passive about violence, and that “The Better Angels of our Nature” have made another advance towards a more civilized life.

Categories: Current Affairs

We disagree entirely with Berkeley Group's Tony Pidgely over land hoarding and planning uplift

Wed, 20/11/2019 - 07:01

This is entirely the wrong solution:

One of Britain’s top housebuilders has backed radical reform of property laws to reverse the decline of home ownership by ending the hoarding of land and triggering a new wave of development.

Tony Pidgley, the founder of Berkeley Group, said landowners and developers should be forced to share “planning uplift” with local authorities.

The move would upend the residential construction industry but Mr Pidgley said the system is “in dire need of reform” to meet demand for hundreds of thousands of new homes.

“We need a central body that buys land, awards planning permission, then passes on the returns to the local community,” he said. “The whole of society should capture that value – it’s about decency.”

This makes no sense to us at all. The aim should be that there’s no planning uplift, not that the gain is shared communally.

Start back at the beginning. We have an artificial restriction upon who may build what, where. That restriction leads to there being value in having the permission to build something, somewhere. The value comes purely and solely from that restriction.

The result of this is that people have to pay very much more to live somewhere than they would without that set of artificial and entirely human, bureaucratically, created restrictions. We wish it to be cheaper for people to live somewhere. Thus we should be killing off the price rise caused by the restriction by killing off the restriction.

Shuffling around who gains that value created by the artificiality of the system doesn’t change that people have to pay more to live somewhere. That is, communal planning gain doesn’t solve our actual problem. Reorganising the system so that we issue more planning permissions, their value thus declining, would solve our problem.

Thus the answer is to issue more planning permissions until there is no planning gain at all. Or, as we’ve noted a certain number of times before, blow up the Town and Country Planning Act 1947 and successors.

Arguing about who should get a slice of the pie when there shouldn’t be a pie to be shared at all isn’t dealing with the root problem here. Why don’t we actually try to solve the thing instead of shuffling it?


Categories: Current Affairs

Lincoln’s words at Gettysburg

Tue, 19/11/2019 - 12:01

On November 19th, 1863, US President Abraham Lincoln delivered at Gettysburg in Pennsylvania a speech of 271 words that has resonated through the culture of the United States and of the liberal democracies throughout the world. It was the famous Gettysburg Address, delivered at the dedication of the Soldier’s National Cemetery, four and a half months after the victory there of the Union army over that of the Confederacy.

Edward Everett, a former senator, governor of Massachusetts, and president of Harvard, and regarded at the time as America’s best orator, delivered a two-hour oration before Lincoln's short remarks. Everett’s speech was fine, but was eclipsed by the brief eloquence of Lincoln’s short address.

Lincoln had travelled by train with some of his cabinet and staff. His assistant secretary, John Hay, noted that Lincoln looked pale, haggard, and unwell. It was a correct observation, for Lincoln was later diagnosed with a mild case of smallpox.

Contrary to myth, the speech was not written on the back of an envelope, or put together in moments. It was carefully crafted and corrected, and touched the bases of what the Union soldiers had been fighting for - the preservation of that Union and the values that were embedded in its birth.

“Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.”

America had been established as a counterblast to the autocracies and tyrannies of Europe. It was to be a nation governed by its people, and although many of those founding fathers and early presidents were slave owners, it was now fighting a costly civil war to assert its commitment to universal liberty and equality before the law for all Americans. People had died in this cause, and Americans were being reassured that their sacrifice had been worthwhile, and was honoured accordingly.

“…we here highly resolve that these dead shall not have died in vain—that this nation, under God, shall have a new birth of freedom—and that government of the people, by the people, for the people, shall not perish from the earth.”

The entire text of the speech is engraved into the South wall of the Lincoln Memorial in Washington DC. It has been quoted and alluded to many times, but rarely more powerfully than when Martin Luther King delivered his “I have a dream” standing on the steps in front of the Lincoln Memorial.

People in several countries in the world today are demonstrating in the streets, some fighting, some dying, and they do so in the cause that Lincoln so eloquently expressed on that November day - government by the people instead of by those with the power to oppress.

Categories: Current Affairs

How can the NHS be running out of heroin?

Tue, 19/11/2019 - 07:01

Jeremy Corbyn tells us all that he’d never allow a free trade agreement with the United States because this would mean the NHS would have to pay more for drugs:

There is a plot against our NHS. Boris Johnson is engaged in a cover-up of secret talks for a sell-out American trade deal that would drive up the cost of medicines and lead to runaway privatisation of our health service.

US corporations want to force up the price we pay for drugs, which could drain £500m a week from the NHS. And they demand the green light for full access to Britain’s public health system for private profit.

Our public services are not bargaining chips to be traded in secret deals. I pledge a Labour government will exclude the NHS, medicines and public services from any trade deals – and make that binding in law.

We have to admit that we can’t quite see the mechanism here. Freer trade means a reduction in the barriers to people offering us their production. As buyers that means we get offered more sources of supply. Quite how more people being able to offer us their goods increases prices we can’t quite see.

But then perhaps the NHS should be paying more for drugs anyway?

The NHS is running short of dozens of lifesaving medicines including treatments for cancer, heart conditions and epilepsy, the Guardian has learned.

An internal 24-page document circulated to some doctors last Friday from the medicine supply team at the Department of Health and Social Care (DHSC), headed “commercial-sensitive”, listed many drugs currently hit by shortages at the NHS.

As we all know - at least should - the NHS negotiates down the prices it pays for drugs from whatever source. And one of the things about offering prices lower than other people for your purchasing is that at times people will find better places, other people to sell to. A shortage is in fact evidence that the price being offered is too low.

Which brings us to this, one of the drugs in that short supply:

Diamorphine: “insufficient stock to cover full forecasted demand in both primary and secondary care”.

Diamorphine is heroin. It’s nothing else either. And a regular complaint about that drug is that there are copious stocks in every city, town, village and hamlet in the country.

The market, paying whatever is the market price - even through that cost of illegality - provides enough heroin to float us all off into feeling no pain at all. The NHS manages, at that very same time, to have a shortage of the same stuff. You know, perhaps there’s something wrong with the price the NHS is paying? It’s too low perhaps?

Categories: Current Affairs

Political diplomats

Mon, 18/11/2019 - 12:01

You might think that the term "political diplomat" is an oxymoron, but it is not one in the United States. Ambassadors representing that country are often chosen, not on the basis of any diplomatic experience or skills, but because they are friends and supporters of the current President. Joseph Kennedy, who died 50 years ago on November 18th, 1969, was such an appointee, representing President Roosevelt and US interests in Britain in the run-up to the Second World War, and during its early stages.

His qualifications for this highly important post were that he was an investor and businessman who had supported and contributed to the Democratic Party, and helped to bring Roman Catholic voters onside, as a high-profile Catholic himself.  He was also very rich. He made a fortune in the 1920s bull market, often by what today would be called illegal insider trading. Famously he decided to quit the market in 1929, deciding it was over-extended when a shoe-shine boy gave him investment tips.

His wealth vastly increased when he invested in property during the Great Depression. He also invested in the newly-emergent movie industry in Hollywood. Allegations that he profited from bootlegging during Prohibition were never substantiated. President Roosevelt rewarded his massive financial backing and fundraising by making him Chairman of the new Securities and Exchange Commission, then Chairman of the US Maritime Commission.

In 1938 Joseph Kennedy was appointed US ambassador to the UK, and he hoped to succeed Roosevelt as President in 1940. However, he supported appeasement, and tried to arrange meetings with Hitler. He opposed the US giving military and economic aid to Britain. He sent back reports saying Britain was finished, and was looked down on for his defeatism. When the Royal Family and the government stayed in London during the blitz, Kennedy retreated to the countryside, prompting a Foreign Office official to say, “I thought my daffodils were yellow until I met Joe Kennedy."

Joe Kennedy wanted to be the first Catholic President, but it was not to be. Roosevelt stood again in 1940, and Kennedy’s influence declined. He resigned as ambassador. British MP Josiah Wedgwood described him as “a rich man, untrained in diplomacy, unlearned in history and politics, who is a great publicity seeker.” He was also thoroughly unpleasant, virulently anti-Semitic, saying of the Jews that “as a race they stink. They spoil everything they touch.” When he learned of Nazi assaults on Jews. Kennedy’s comment was, "Well, they brought it on themselves."

His wealth brought him political alliances, and it was alleged that he bought the Presidency for his son, JFK, by paying the notoriously corrupt Democratic Chicago machine to rig the votes in Illinois. Of the three sons who went into politics, two were assassinated and the third was disgraced when he crashed a car off a bridge and was too concerned to set up a false alibi that he left a girl to drown in the back.

There was nothing remotely diplomatic about the former ambassador. On the contrary he was a fixer and a crook, but he had money and used it to buy political favours. UK ambassadors are usually those who have worked their way through the Foreign Office and shown or learned the diplomatic niceties. Occasionally political appointments happen, but they are rare. On the whole, the UK system works. It is more low-key and more mannered. It doesn’t always appoint urbane and skilful diplomats, but it never appoints charlatans.

Categories: Current Affairs

An amusement about Labour's nationalisation of the country's broadband system

Mon, 18/11/2019 - 07:01

Leave aside everything else being said about Labour’s surprise announcement that, given election victory, they’d nationalise the country’s broadband system. Then offer the service, over fibreoptic cabling, for free, to every household. Think just on the one point to follow:

Only 8% of the UK has access to ultra-fast broadband. McDonnell said: “The development of our new technology infrastructure has been held back as a result of the failures of government to invest, and BT itself obviously can’t marshal the resources government can, and that’s why we’re intervening.”

We’re just about to take the next step in mobile telecoms technology, to 5G. This is rolling out in 20 UK cities so far. One of the advantages of this 5G being that it’s possible to use it for the “last mile” for a broadband internet link.

That is, it is no longer necessary to put fibre to every household in the nation.

Which is precisely the point at which we’re promised government action to put fibre to every household in the nation.

If nothing else this election promise is an excellent example of why we shouldn’t use politics and government as a method of organising technological advance, no?

Categories: Current Affairs

Global trading

Sun, 17/11/2019 - 12:01

The Suez Canal opened on November 17th, 1869, and it was on the same date 44 years later, in 1913 that the first ship sailed into the Panama Canal. The Suez Canal connected the Indian Ocean to the North Atlantic via the Mediterranean, and the Panama Canal joined the Atlantic to the Pacific. The Suez Canal eliminated the need for ships to round the Southern tip of Africa, and the Panama Canal cut the need to pass the stormy seas off the Southern tip of South America.

Both were stupendous engineering projects, and both facilitated global trade, making freight and passenger transit times both shorter and safer. Both were early pioneers of measures to speed up worldwide trade, and both lowered not only the time it took to convey goods internationally, but also the cost of doing so,

The construction of the Suez Canal was easier, but the Panama Canal required a vast system of locks to allow for the different sea levels of the two oceans. The French engineer, Ferdinand de Lesseps, who built the Suez Canal, was thwarted by the challenge of the Panama project, and saw his construction firm go broke, and have the undertaking later taken over by the United States.

Both canals have enjoyed a chequered political history, since they represented strategic choke points that different powers sought to control. They represent a determination to make the world smaller, and to make travel easier. Since their construction, this drive has continued with projects such as the Channel Tunnel joining Britain and France, and the Oresund Bridge connecting Sweden and Denmark. Later still came the $20 billion Hong Kong-Zhuhai-Macau Bridge, the world's longest sea-crossing bridge.

Perhaps the ultimate will be a link across the Bering Strait, establishing a land link between the United States and Russia, most likely built as a combination of a bridge and a tunnel. The point of these endeavours is that surface links, either by sea or land, make for much less costly transport than air transport provides. They also enable pre-packaged containers to be loaded onto different vehicles without goods needing to be off-loaded and reloaded at various stages of their journey.

Ventures such as these represent projects of international co-operation, as well as means of facilitating transport. They call to mind the view, attributed to Claude-Frederic Bastiat, that when goods cross frontiers, armies rarely follow. Nations that trade with each other grow used to negotiating with each other and tend to settle disputes peaceably, by agreement or by legal settlements.

A globalized world, trading across frontiers, and aided by the shortcuts that bold engineering projects can make possible, is more likely to be a peaceful world. It is also guaranteed to be a richer world, creating the wealth that international specialization and exchange makes possible. We thus have every reason to applaud and thank the bold engineering pioneers who made the world smaller, who made it closer, and who helped to make it richer.

Categories: Current Affairs

A distinct failure of logic - why must utilities be publicly owned?

Sun, 17/11/2019 - 07:01

There is that PJ O’Rourke comment to consider, that if you think health care is expensive now wait ‘till you see how much it costs when it’s free:

Labour’s plans to renationalise part of BT to offer free broadband to all has sparked warnings that the plan would suffocate competition, bankrupt rivals and cost as much as £100bn.

Jeremy Corbyn said on Friday at Labour's policy launch that the party would buy Openreach, the network infrastructure arm of BT, from shareholders.

“What was once a luxury is now an essential utility. That’s why full fibre broadband must be a public service,” the Labour leader said.

Offering free broadband would save households £30 per month on average, Mr Corbyn said.

The contention that a government behemoth will cost each household less than £30 a month seems dubious, at best, to us.

But it’s the free to households that looks to be the deeper economic problem. Bandwidth is a scarce resource. Access to it has to be controlled in some manner. The best way of rationing any scarce resource is through the price of it.

After all, we don’t want everyone to be Hillary and running their own servers at home, that’s going to overpower the network - make it vastly more expensive that is - in no time at all.

There’s also that problem of an essential utility. Why must that be a public service? After all, if something is truly essential for a civilised life why would we turn over provision of it to the more inefficient method of doing so, bureaucratic control?

Categories: Current Affairs

Oswald Mosley - a wasted life

Sat, 16/11/2019 - 12:01

On November 16th, 1896, Sir Oswald Mosley was born. The title was inherited, not awarded, via a baronetcy. He saw service in the First World War, and was elected as MP for Harrow in his early 20s, serving there from 1918-24, initially as a Conservative, then as an Independent. He subsequently joined the Labour Party and became MP at a Smethwick by-election in 1926.

He served in the Labour Government of 1929-31, and was regarded as a possible future prime minister. He was described as “strikingly handsome,” “probably the best orator in England,” and “with great personal magnetism.”

However, he resigned from the government because he didn’t think it was doing enough on unemployment. He founded ‘The New Party,’ admiring what was being achieved in Europe by Mussolini and Hitler. The party became the British Union of Fascists, and aped its continental counterparts by having black-shirted thugs to commit street violence against opponents.

This largely and rightly discredited him, although it was the outbreak of the Second World War that saw his support evaporate, since the fascists were now the enemy. Mosely himself was interned in 1940 on the orders of Winston Churchill under regulation 18B, and was not released until 1943, and even then placed under house arrest.

After the war he attempted to return to politics several times, but was by now a marginal and discredited figure who had no impact on events. He went to live in Paris, and finally died just outside it at Orsay, at the age of 84, having achieved nothing of consequence since he was 35.

He is an example of an immense talent, fatally flawed by poor judgement. Looking at history’s ‘what ifs,’ had he not resigned he would almost certainly have held high office, perhaps even rising to become Prime Minister. As it turned out, though, he provides an example of those who, had they known where the road would lead, would never have set their first foot upon it. In wanting efficiency to address social problems, he ended up embracing evil.

In a more sinister ‘what if,’ had Hitler succeeded with his Operation Sea-Lion and conquered Britain, Sir Oswald Mosley might well have emerged as his puppet Prime Minister, as Vidkun Quisling did in Norway. Like Quisling, he might have engaged in, or acquiesced in, war crimes, including the murder of Jews and political opponents. Had Nazi Germany been ultimately defeated by the combined might of the USA and the USSR, Mosley might, like Quisling, have met his day of reckoning by facing a firing squad.

It never happened. His was a wasted life.

Categories: Current Affairs

Labour's broadband plans - there's a reason we don't do tax hypothecation

Sat, 16/11/2019 - 07:01

It can be somewhat depressing to continue to make the same point for a decade and more but that’s where we find ourselves with this latest little plan from the Labour Party. Hypothecation of tax revenue is simply a bad idea. But they’re trying it again:

A Labour government would nationalise Britain’s broadband network and offer free internet access to every household and business in the country, the party will say today.

That idea contains its own foolishness of course. We are not, to put this mildly, in a state of technological certainty over broadband. It’s still a developing technology that is. We’d rather like to have market competition therefore, the one thing that any nationalisation and free provision is going to kill stone dead.

We do all, after all, recall how wondrous the GPO was at extending coverage and advancing technology back in those pre-privatisation days?

But more than that there’s this:

Mr McDonnell told The Times that a new Labour government would make a priority of establishing the new state-owned entity, British Broadband.

The running costs, estimated at £230 million a year, would be funded from a new tax on multinational companies. They would be charged a percentage of their profits, according to a calculation of what proportion of the assets, staff and turnover was located in Britain, he said.

Hypothecation is the idea that this tax, raised on this activity over here, will be spent upon this, different and unrelated, activity over there. It’s an idea that is more than just foolish. For what is the connection between the profits of companies and the costs of broadband?

Say we have a horrible recession - apply your own odds of that with McDonnell in office - and thus corporate profits drop substantially. Does that mean we wish to spend less on broadband? Say that the glory days of the 1970s return and the profits made in the economy fall below even the costs of depreciation, as they did. Does that mean we wish to spend nothing on broadband?

Equally, say that the Indian subsidiary of a company that also trades in the UK - this tax is to be on global profits allocated proportionately to Britain - profits from that swiftly growing economy. Why does this mean that we in Britain should righteously put more of our own GDP into building broadband?

Which is the problem with hypothecation. Whatever the formula used there simply is no connection, whatsoever, between the amount that can or should be raised in tax over here and what should, or could, be spent on this other activity over there. Which is why it has been, for centuries now, a basic rule of fiscal policy that we don’t do hypothecation of taxes. We don’t even reserve national insurance to pay for the welfare state it is meant to fund.

Yes, of course the nationalisation of broadband is a bad idea, it’s election season. But the method of paying for it is even worse.

Categories: Current Affairs

Is Neoliberalism Dead?

Fri, 15/11/2019 - 15:31

Paul ’yes I'm an activist but I'm actually a journalist’ Mason has been cropping up on the news and Twitter more than ever. He's been answering the call for a gentler politics with "we're coming for you Boris Johnson. Ready or f***ing not". The message he's been shouting for a while now is that neoliberalism is broken, in collapse, in crisis or similar variants. He articulated this at interminable length in his 2015 book Postcapitalism: A guide to our future. It is a funny book which manages to marry a criticism of communist central planning with a desire to nationalise the financial sector. The main thing however is that Mason misconstrues Neoliberalism with the current status quo. He will be surprised that many of the things he complains about are also being criticised by many neoliberals, although with obvious disagreement on how to fix the problems.

He starts in typical fashion with the financial crisis. He is largely correct when he describes how the Fed’s monetary policy was significant to the crisis.  He writes that "from 1987 until 2000, under Greenspan's leadership, the Fed met every downturn with a rate cut" (P. 12). He claims that this is due to “the second basic reflex of neoliberalism: the assumption that all crises were solvable” when in reality, this was the bad implementation of neo-classical economics. Even new Keynesians such as Paul Krugman defended it at the time. Mason’s claim that "Neoliberalism as an ideology fell apart" with Greenspan's admission “I found a flaw” is false. Neoliberals, like us at ASI, recognise negative role of low interest rates for the economic cycle and that "cheap money being used to fix a crisis caused by cheap money" is not a good idea. Neoliberals are critical of cheap money and warped incentives (Eamonn's primer on Austrian economics has some good stuff in this area). 

Mason also criticises much of the changes in financial regulation which he attributes to Neoliberalism. For example, he describes the method of weighting assets introduced in Basel II as “an open invitation to game the system” (p.11). Such regulations can create warped incentives that in fact increase systemic risk. Our fellow Kevin Dowd has consistently criticised how current capital requirements and stress testing create bad incentives for banks. The patching over of the industry since has been met with criticism by many neoliberals. If anything, the crisis has allowed neoliberals to identify certain areas where the state went wrong and allow itself to distance itself more from the status quo. 

He also posits that the idea that high neoliberal growth is only available by generating 'unsustainable distortions' (p.22) and that "Neoliberalism can only exist because certain key countries do not practice it" and instead pursue "neo-mercantilism" (p.20). He does not explain that it is specifically 'neo-liberalism' which is causing these trade imbalances.

Raghuram Rajan, the ex governor of India's central bank, argued in his book Faultlines how many countries such as Japan and Germany sought export-led growth strategies that the UK and USA politically could not refuse. The role of demander of last resort meant that their populations could enjoy the increased living standards through foreign exports, a position they felt pressured into by democratic will. Fears that America will devalue its currency (a proposal discussed by presidential hopefuls on both sides), and also the threat of increased protectionism, could likely mean a new consensus is met whereby countries with large current account surpluses allow their currencies to depreciate. Furthermore, for certain countries such as China to maintain a large trade surplus they will have to suppress the middle and upper classes that now depend on western goods with the latter being the key supporters of the party. Thus it is pretty unconvincing, firstly that growth relies upon these trade imbalances and secondly that they will not balance. 

The other big issue that is raised (less so in the book but more so recently) is the issue of rentier capitalism. In reality, rentier capitalism seems to be less prevalent than ever before. Furthermore, the amount earned in dividends from capital has fallen as a percentage value of that capital. Mason even admits this describing how the “ratio of share prices to earnings...which had meandered between 10x and 25x since the year 1870, now spiked to 35x and 45x earnings.” 

It could be argued that rentier capitalism is more reliant on overinflated asset prices from quantitative easing (QE). But once again, don’t confuse neoliberalism with the status quo. Milton Friedman suggested an alternative to QE in the form of helicopter money which would see new money going towards public services. 

The dominance of the Silicon Valley billionaires in the rich lists also shows how the haute-bourgeoisie have earned their money from innovation.  They are being rewarded for the creation of new products and even sectors rather than living off the interest of capital. Furthermore, if they do not remain innovative then creative destruction will result in them going the same way as Kodak,  Blockbuster or even Thomas Cook. The real rent seekers are those who benefit from regulation from which they can hide behind. 

But it is no surprise that Mason cannot see this. It is pretty hard to see anything if your head is buried in Marx and his 'metaphysical' Labour Theory of Value rather than contemplate other models that more accurately describe the world. 

He will be surprised that many of the things he complains about are also being criticised by many neoliberals, although with obvious disagreement on how to fix the problems.  Neoliberalism isn't broken or struggling to come up with new ideas. Here at the ASI we are striving ever harder to pursue freer markets, freer people and greater prosperity for all.



Categories: Current Affairs

Nye Bevan fathered the National Health Service

Fri, 15/11/2019 - 12:01

Aneurin Bevan was born on November 15th, 1897. As Health Minister in the 1945 postwar Atlee Labour government, he was instrumental in founding and shaping Britain’s National Health Service.

He was born in Tredegar, a Welsh town where 90% of the population relied on the coal mines for their income. He left school at 13 and worked as a miner in his teens, involving himself in union politics. At the age of 32 he was elected as MOP for Ebbw Vale, a safe Labour seat. He was a firebrand, overcoming a boyhood stammer to become an eloquent orator, and made passionate speeches against Lloyd George and Winston Churchill. He was expelled from the Labour Party at one stage for sharing platforms and publications with the Communist Party.

He was highly critical of Churchill’s wartime government, saying he would have preferred a class war to a world war. He said of the 1945 postwar election:

“We enter this campaign at this general election, not merely to get rid of the Tory majority. We want the complete political extinction of the Tory Party, and twenty-five years of Labour Government."

When Labour won, he was appointed Minister of Health and set about creating a totally tax-funded healthcare system. He faced opponents within his own party and from the medical profession, and had to make concessions such as allowing doctors to keep their private practices. He famously said that to get the deal through, "I stuffed their mouths with gold." The Act was passed in 1946, nationalizing over 2,500 hospitals within the UK.

Following the party’s defeat in 1951, Bevan’s influence declined, though he led a group of hard-left MPs called ‘Bevanites.’ He was beaten by Hugh Gaitskell for the Labour leadership when Atlee quit, though he later served briefly as deputy leader. He remained controversial, saying:

“No attempts at ethical or social seduction, can eradicate from my heart a deep burning hatred for the Tory Party that inflicted those bitter experiences on me. So far as I am concerned they are lower than vermin.”

The Tories responded by forming ‘vermin clubs’ and proudly wearing furry vermin badges. His colleague, Herbert Morrison, said the speech “had done much more to make the Tories work and vote than Conservative Central Office could have done.” It was reckoned to have cost Labour more than two million votes.

Bevan was part of a government that was ruinous for Britain. Central planning and nationalization simply didn’t work, whatever socialist theory might say. No other country has copied Britain’s National Health Service, which still faces crises every year. Bevan’s legacy is thus one of failure. It might have been well-intentioned failure, but it was ideologically driven rather than experienced based. History shows us that when you ignore the real world in order to construct fantasy worlds, that real world has a habit of coming back to clobber you.

Categories: Current Affairs

But we've already got something that scares capitalism - markets

Fri, 15/11/2019 - 07:01

Aditya Chakrabortty is once again showing the perils of getting your economics reporting from a modern history graduate. The contention is that the existence of communism - OK, socialism attempting to build communism - led to capitalism being ameliorated. Given the absence of a socialism that works we need something else to scare capitalism.

The task of politics today is to scare the capitalists as much as communism did

In more detail:

The very presence of a powerful rival ideology frightened capitalists into sharing their returns with workers and the rest of the society, in higher wages, more welfare spending and greater public investment. By sending tanks into Prague in 1968, Leonid Brezhnev may have crushed the dream of “socialism with a human face”; but he and other Soviet general secretaries forced capitalism to become less inhumane. Conversely, the collapse of communism between 1989 and 1991 has left capitalism unchallenged and untempered – and increasingly unviable. The challenge of our time, whether in the UK’s general election or next year’s US presidential contest, is to build a political movement that can restrain a system spinning madly out of control.

What’s missing here is that we’ve already got the very thing to scare the bejabbers out of the capitalists - markets and their competition.

As William Nordhaus noted (here) it is competition which leads to 97% or so of the value created by entrepreneurs going to consumers, not entrepreneurs. As Karl Marx noted it is competition among capitalists for the profits to be made by employing labour which raises wages.

We’re perfectly willing to agree with the first contention, that we desire something to ameliorate capitalism. We do insist though that people have a little look around the world so they can understand that we’ve already got it. Markets.

Categories: Current Affairs

The makings of Americans

Thu, 14/11/2019 - 12:01

The historian Frederick Jackson Turner was born on November 14th, 1861. At the age of 32 he published one of the most seminal papers of American history, “The Significance of the Frontier in American History.” It argued that the country’s Westward expansion had produced a culture and identity that was distinctive and different from that of Europe and the East coast.

Dealing with the challenges and hazards of the frontier, those of taming the wilderness, produced a new breed of American, one characterized by a rugged readiness to cope. It produced, said Turner, the can-do spirit that characterized the American spirit. As each generation of pioneers moved Westward, they relinquished the baggage of European culture and its ideas and institutions, and developed new practices shaped by their new environment. The frontier produced the characteristics recognized as distinctively American, the spirit of initiative, of informality, of a vibrant democracy, and even of crudeness and violence.

Turner’s frontier thesis was hugely influential. It has come in for a share of criticism, of course, but there is a strong feeling that persists that he had put his finger on something significant. Later historian have traced the development of political innovations such as the ballot initiative and the recall petition as ones that arose in the West as the frontier moved across the continent. It is the American West, not the East, that has given rise to the cultural and character differences that separate Americans from Europeans.

It is significant that in the wills left by American settlers, the lists of the books in their libraries are roughly 90 percent about self-help and improvement. Even today, the New York Times best seller list of non-fiction works feature far more self-help and improvement books that their European counterparts. “How to Win Friends and Influence People,” and “How I made $1 million in real estate,” are typical.

Since there is no longer a frontier there to be tamed, or a wilderness to be faced, some commentators have suggested that the character-forming influences they represented have gone, and that Americans will gradually become less “American.” Others have suggested that if humans do set off to explore and settle other planets, then space will represent a new frontier to be faced with courage and resolution. Science fiction writers have long clambered aboard this bandwagon. “Space - the final frontier,” is a theme common to many of them.

Some would argue that a settled and more civilized life is preferable to the rough ruggedness of a frontier culture, but there is a case for suggesting that humans as a species solve problems, and there will always be a need for the problem-solving mentality because humanity will always face problems. Frederick Jackson Turner was undoubtedly in the latter group.

Categories: Current Affairs

We're already seeing the effects of minimum wage rises

Thu, 14/11/2019 - 07:01

That, at some point, high minimum wages cause job losses is both obvious and generally held to be true. The question, always, is when? And the truth of the matter is that we’re already seeing those losses at current levels of the UK minimum wage:

Young people and part time workers are bearing the brunt of the UK jobs slowdown,

The minimum wage is, obviously, enough, most bringing upon those with low wages. Who get lower wages than others? The young and part timers. So, who would we see losing out from a minimum wage that is “too high”? The young and part time workers.

From the ONS:

The number of part-time workers fell by 164,000 to 8.54 million in Quarter 3 2019, while the number of full-time workers increased by 106,000 to 24.21 million.

It’s not the same people either:

The decline in part-time workers was driven by women (down 106,000 in the quarter) and the increase in full-time employment by men (up by 93,000 in the quarter).

Thus, if we’re seeing the young and part time losing out to the older and full time then what might we conclude? That the minimum wage is already too high.

Categories: Current Affairs

Death and Taxes

Wed, 13/11/2019 - 12:01

It was on November 13th, 1789, that Benjamin Franklin wrote in a letter to Jean-Baptiste Leroy a phrase that has reverberated ever since:

“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”

The thought had been expressed by two earlier writers. Daniel Defoe in “The Political History of the Devil” (1726) had said “Things as certain as death and taxes, can be more firmly believ’d,” and even earlier in Christopher Bullock’s “The Cobbler of Preston” (1716) appears the line, “Tis impossible to be sure of any thing but Death and Taxes.”

However, time and chance have awarded the honour of authorship to Franklin, and there is no suggestion that he plagiarized those who expressed the sentiment earlier. It reverberates because everyone thinks it encapsulates two truths. Everybody dies. It might not always be true in future, but it has been thus far. It is also true that the essential services of government have to be financed, and it has nearly always been the case that this has been achieved by levies on some of those for whom these services are provided.

Adam Smith proposed four canons of taxation. First was equity, meaning that it should be levied on people proportionate to their ability to pay. Second was certainty, in that it should be fixed and known in advance. Third was that it should be charged at a time when it is convenient to pay it, and fourth was that it should not be over-costly to collect compared with its yield.

People have suggested other canons, of which I think simplicity has much going for it, and I myself would add that no tax should be levied whose damage to the economy is disproportionate to its yield.

Franklin was right about death and taxes, but he had them in the wrong order. Taxes nearly always come before death, with the exception of Inheritance Tax, sometimes called the death tax, which comes after death, not before it. Many oppose the death tax because it is almost always levied on funds that have already been taxed. Avoidance of double taxation is desirable, but it is by no means always followed. Earnings on which income tax has been paid are usually taxed again when they are spent, either on VAT, or on alcohol or tobacco duty, or on insurance or airline flights.

Corporation tax is charged on the earnings of companies before profits are distributed to investors, then those dividends are taxed again on the recipients as income tax. The rule to be aimed at is that the state should receive its cut once.

Other ways of financing government have been tried, but they usually put costs indirectly onto individuals. The sale of monopolies by Stuart monarchs was unpopular because it put up the prices of things such as salt and soap. More recently, the auctioning of bandwidth to raise revenue has made calls and content more expensive for consumers.

One of the strangest taxes has been the National Lottery. It is very largely paid by poor people, and much of it is spent on the pleasures of rich people who patronize operas and art galleries. And it is entirely voluntary. Yet of all taxes it is probably the least unpopular.

Categories: Current Affairs

To make our ritual living wage point to John Sentamu

Wed, 13/11/2019 - 07:01

We’ve spent more than a decade making this one same point each year. If we wish the poor to have more money we should stop taxing their incomes. Some people, like John Sentamu, still haven’t grasped this simple point:

Today, the Living Wage Foundation announced that the living wage has increased to £9.30 an hour UK-wide and £10.75 in London, to reflect higher living costs in the capital. If the living wage were paid, that would be hundreds of pounds a month back in the lowest-paid workers’ pockets.

Employers are bound by law to pay a notional minimum wage, but that’s not the same as the living wage. The living wage takes into account actual expenditure. Enlightened employers know this and I’m pleased to say there are now almost 6,000 accredited living wage employers that have chosen to pay all their workers a decent day’s pay for a decent day’s work. These companies also report significant business benefits, with higher levels of morale and lower levels of absenteeism.

It is well over a decade since we first pointed this out. Sure, the numbers change each year but the underlying basics don’t.

Assuming a 37.5 hour week that “real living wage” is £348.75 a week. Upon which employee national insurance, at 12% above the threshold, will be paid of £21.93. Income tax of 20% is charged on the amount over £12,500. This takes £2,267.36 off that £18,135 annual income.

Someone paid the “national living wage” gets £16,009.50 for the same hours.

As we’ve been pointing out if you insist that it is just and righteous that the working poor get more then the correct answer is to raise the income tax and national insurance allowances.thresholds to whatever it is that you’re defining as the minimum righteous and just wage.

If we didn’t tax the national living wage then those working poor would be gaining more income than if all were paid the real living wage. Because we’d not be charging the cost of government to those poor.

Which is why we’ve been arguing for more than this past decade that whatever the minimum wage should be that should also be starting point for taxation being levied. We even had some effect on this point. The current £12,500 allowance for income tax is a direct result of our making this case back when the minimum wage was that amount per year.

For, as all too few understand, we’re pro-poor around here. So, if you want to increase the incomes of the working poor then stop taxing them so damn much.

Categories: Current Affairs

1989 and the march to integration

Tue, 12/11/2019 - 15:52

The fall of the Berlin Wall in November 1989 was a victory for liberal values over socialist ones. As the Institute of Economic Affairs’ Kristian Niemietz points out, East Germany was a huge socialist experiment. Western socialists argued that Russia, being largely rural and backward, was never a promising ground for socialism, which explained why its brand of socialism seemed so far from the ideal. East Germany, however, despite the wartime damage, was an industrial state with technological know-how and an educated middle class—a much better proving-ground.

During the Cold War it was very hard to see what was actually going on behind the Wall. Western experts pointed out that the official statistics emerging from the East could not be trusted. Despite ‘record grain harvests’ there were still famines (often because the distribution system was so hopeless that what grain there was simply rotted in the field). And if we believed Romania’s year-on-year tractor production figures, they would have had to have started with negative tractor production. When the Wall fell, the dire and dismal nature of life behind it became all too apparent.

The ripping down of the Iron Curtain revealed something else too. It showed just how strong the national affiliations that the Second World War had disrupted. Germans rushed to reunite; while Czechoslovakia and Yugoslavia, countries created by forcing others together, started to fragment again. This mostly happened peacefully: no force was necessary, again illustrating the strength of national ties and the fragility of coerced confederation. 

The French, under President Mitterand, were alarmed at the speed of the changes, especially Germany’s rush to reunify. And the economic strain of millions of East Germans heading West was a problem for Germany too. To defuse matters, Kohl agreed to an inter-governmental conference on European currency integration, and then on deeper political integration. By 1993 the Treaty of the European Union propelled member states towards the EMU, common foreign and security policy, cooperation in justice. The requirement for unanimity on such measures gave way to Qualified Majority Voting, with opt-outs for those, like Denmark, who could not keep up. The ‘project’ of ever closer union thus took a huge leap forward.

There was pressure to expand the union as well as deepen it. France and other member states were doubtful about admitting a group of economically backward Eastern countries. But those countries looked to the West, not to Russia, for their salvation and were in general internationalist, even siding with Britain and America in conflicts. The UK, for its part, wanted to bring in the Eastern countries, and others like Malta and Cyprus, as a way of diluting the planned political and monetary union that it felt no part of (the UK also worried that it would end up bankrolling many of the resulting policies). There was a moral case, too, for supporting near neighbours, many of whom, like the Baltics, were very European in character even after forty years of Soviet socialism.

It is interesting how, thirty years on from 1989, the political structure of Europe is still shaped by the events in Berlin. The EU remains firmly integrationist—an integration that the UK (mostly) continues to struggle against. National identities have restored themselves back from the artificial boundaries drawn up by the Allied powers, and nationalism has become stronger in many places. The case against socialism still has to be made, over and over, just as it always had. After all, anyone under 40 is unlikely to remember the Berlin Wall and the horrors behind it—socialism holds no terror for them—while the socialists over 40, who should know better, continue to blame other factors for the failure of their ideology, whether in Russia, East Germany, or now in Venezuela. The world is better without the obscenity that was the Berlin Wall; but the world’s liberals still have a vast job to do.

Categories: Current Affairs

Voting for Norway's king

Tue, 12/11/2019 - 12:01

On November 12th, 1905 (continued into November 13th), a referendum was held in Norway to decide whether the country should invite a foreign prince to become its king, or should become a republic. The background was that the Storting, the 169-member supreme legislature of Norway, had approved a dissolution of the union with Sweden. King Oscar II of Sweden renounced his position as monarch of Norway, and refused to allow a Swedish prince to become King of Norway.

The Storting asked Prince Carl, the second son of Denmark's Crown Prince, if he would assume the Norwegian throne. The prince accepted on condition that a referendum be first held to assure him that a majority of the population wanted this. He was a good choice, widely liked and, as a Scandinavian, would mesh with Norway's culture and understand its language. Furthermore, he already had a two-year-old son, Alexander, to continue the succession.

The November 12th referendum put one simple question to the people of Norway:

“Do you agree with the Storting's authorization to the government to invite Prince Carl of Denmark to become King of Norway?”

There was a large turnout of 75.3%, with 78.9% voting in favour, and 21.1% against. Parliament therefore chose Prince Carl to be King, and its Speaker sent him a telegram to make the formal offer. The prince accepted and moved with his family to Oslo. He immediately took the name Haakon, and gave his son the name Olav, to link the new royal family to the Norwegian kings of old. In June of the following year the coronation took place in Nidaros Cathedral in Trondheim.

It was a wise move on Norway's part. Looking at the various systems of government in different parts of the world, it seems to be the constitutional monarchies that provide the best guarantees of civil liberties. They tend to have an independent judiciary, a free press, free speech and access to legal redress. On the whole they respect property rights and uphold the rule of law.  

The monarch is usually head of the armed forces, the judiciary, and sometimes the church, thereby denying these positions to ambitious people who might otherwise exercise the power these posts could entail. The justification for an hereditary monarchy is that it works in practice, and is nearly always very popular with the people. It gives countries a non-factional head of state, rather than someone from a political party. It gives countries a symbol of their national identity that is non-divisive, an institution around which the whole nation can unite, regardless of differing political views.

To a revolutionary motivated by a desire to have society conform to some rational plan, a constitutional monarchy seems archaic and messy, a throwback to the Middle Ages and earlier. In practice, though, the constitutional monarchies have evolved to keep pace with the developing views of their peoples, and given them a firm anchor of national identity to support them in changing and sometimes turbulent times. The institution has lasted because it has staying power, and the Norwegians were wise to vote for it.

Categories: Current Affairs

Yet economic freedom is different from political freedom

Tue, 12/11/2019 - 07:01

The Guardian hosts something of a moan about the two reports which attempt to measure economic freedom around the world.

Two of the “freest economies” in the world are on fire. According to indexes of “economic freedom” published annually separately by two conservative thinktanks – the Heritage Foundation and the Fraser Institute – Hong Kong has been number one in the rankings for more than 20 years. Chile is ranked first in Latin America by both indexes, which also place it above Germany and Sweden in the global league table.

....

The rage may be better explained by other rankings: Chile places in the top 25 for economic freedom – and also for income inequality. If Hong Kong were a country, it would be in the world’s top 10 most unequal. Observers often use the word neoliberalism to describe the policies behind this inequality. The term can seem vague, but the ideas behind the economic freedom index help to bring it into focus.

All rankings hold visions of utopia within them. The ideal world described by these indexes is one where property rights and security of contract are the highest values, inflation is the chief enemy of liberty, capital flight is a human right and democratic elections may work actively against the maintenance of economic freedom.

Well, yes, in a manner. Economic freedom and political such don’t map over each other exactly. They are measurements of different things - height and width are not always correlated either.

The underlying complaint is really that such indices argue against voting to take everything off one group and give it to the other - you know, that democratic control of the economy.

Except that’s not what they do argue in the slightest. Looking at the Fraser and Heritage indices gives us a quite different conclusion. It’s true that Chile and Hong Kong are up there in the top 20. But then so are Sweden, Norway, Denmark, Iceland and Finland. The Scandinavian social democracies are up there that is.

It is possible to have that greater equality if that’s what you want. But it matters how you do it. None of the countries that attempt to have detailed government management of the economy make it into the upper reaches of that listing. Places which run with that free market capitalism do. The equality bit then being achieved by taxing that system.

We aren’t that worried by equality or inequality. We also argue that whatever inequality exists today is simply not of any comparable form to that of yesteryear. But if you are worried about it the lesson to draw here is that achieving the equality is a bolt on extra to an efficient and free economy. It’s not something to be achieved by trying to limit or direct that initial creation of human wealth.

In fact, when one burrows down into those numbers the finding is that the Scandis are rather more free market and capitalist than we are - they tax more too.

The whine here is the complaint that the indices show that the directed economy doesn’t work. Which is actually a useful thing to point out as it doesn’t.

Categories: Current Affairs

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