America’s Chief Magistrate and the Spirit of ’76
The year 1776 was a revolutionary milestone for individual liberty, with the publication of Adam Smith’s The Wealth of Nations setting forth the path of economic freedom and a Declaration proclaimed by thirteen American colonies ringing the tocsin for political independence.
But a solemn spectre of ’76 hung over the United States this November as Americans voted for representatives and senators in Congress and a Chief Magistrate to occupy the White House — for the promise of economic and political liberty has turned dark.
The spirit of ’76 was animated by the desire for personal freedom, both in our relations with others and in our transactions with them. Adam Smith wrote against the mercantilist system which thwarted innovation and entrepreneurship, while the Declaration of Independence affirmed that ‘all men are created equal’ and ‘endowed ... with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness’; that we establish governments to protect these rights, said governments ‘deriving their just powers from the consent of the governed’.
The man who won't win the election tonight, but did win my heart
Tonight, we’ll find out whether Americans have voted to give Barack Obama four more years in the White House or to give Mitt Romney a go. All signs point to Obama, though apparently a surprise Romney win isn’t impossible. If I’m completely honest, I doubt if it would make a difference either way.
The real shame is that by far the best candidate in the race hasn’t had a shot since the word go. Indeed, Gary Johnson, a two-time former governor of New Mexico, is probably the best candidate to run for President in many decades. (I like Ron Paul too, but running for the party nomination doesn’t count – he only ran for president in 1988.)
What’s remarkable is the contrast between the mainstream candidates and Johnson – where they have tussled over ludicrous non-issues like funding for PBS (0.01% of the Federal budget) and state funding of birth control (which costs about $10 a month), Johnson has made issues like immigration, the war on drugs, and spending cuts (the trillions of dollars of cuts needed to balance the budget, not the billions that the two mainstream candidates play with) major planks of his candidacy.
Partially because of this, he probably won’t do very well. His campaign is hoping for 5% of the national vote but, to my untrained eye, that seems far-fetched. But I think libertarians in Britain and the US still have a lot to learn from Johnson, particularly the attention he’s (rightly) given to immigration and drugs policy.
In the US and the UK, immigration would be a profoundly positive injection of new talent and productive workers to ailing economies, and would in all likelihood create more jobs for native workers too.
Libertarian objections to the drug war are often misunderstood by non-libertarians. In the US, the problem is that drug prohibition destroys the lives of millions of people who have harmed nobody else, and has had such a disproportionate effect on black people that it seems certain to be one of the biggest causes of poverty and social breakdown in black communities. It’s not just because libertarians want to get high: these laws are destroying innocent people's lives.
And Johnson has resisted the temptation to focus on small-fry economic reforms, advocating a full-blown reimagining of the state and its relationship with the people. One Bloomberg blogger's condemnation of Johnson's economics (cutting state spending and banning bank bailouts) is, inadvertantly, a wonderful endorsement of the man. With enemies like this, who needs friends?
Johnson, it seems to me, has a joined-up view of what the state does to us. He sees ‘social’ issues like immigration and the drug war as being central to the harm that the state inflicts on society and the economy, and is not willing to ignore them in order to focus solely on ‘economic issues’ like marginal tax rates, and so on.
He’s also an optimistic, sunny guy. (Maybe you have to be to run on the Libertarian Party ticket.) And his time as Governor of New Mexico proves that a libertarian can govern in a way that doesn't send the electorate running for the hills. (Update: In the comments, Tommy gives a nice example of this: "He vetoed 200 of 424 bills in his first six months in office – a national record of 47% of all legislation – and used the line-item veto on most remaining bills. In office, Johnson fulfilled his campaign promise to reduce the 10% annual growth of the state budget. In his first budget, Johnson proposed a wide range of tax cuts, including a repeal of the prescription drug tax, a $47 million income tax cut, and a 6 cents per gallon gasoline tax cut.")
He won’t win tonight, and his campaign hasn’t had the media breakthrough that he hoped. But libertarians and classical liberals have taken note. If he inspires a new approach by them, then maybe Gary Johnson, the libertarian who talks about surprising things in a surprising way, will have a much bigger legacy than anyone ever expected.
A fun game to play
Harry Teasley* spent his life confronting the behaviors of bureaucrats and defined a list of rules covering their modus operandi. You can see these rules operating in government departments, corporations and with politicians themselves. Using these rules, examine bureaucratic behavior and see if the underlying rules and behavior are driving the situation.
The Rules:
Harry Teasley's Rules of Bureaucratic Behavior:
Rule #1: Maintain the problem at all costs! The problem is the basis of power, perks, privileges, and security.
Rule #2: Use crisis and perceived crisis to increase your power and control.
Rule 2a. Force 11th-hour decisions, threaten the loss of options and opportunities, and limit the opposition's opportunity to review and critique.
Rule #3: If there are not enough crises, manufacture them, even from nature, where none exist.
Rule #4: Control the flow and release of information while feigning openness.
Rule 4a: Deny, delay, obfuscate, spin, and lie.
Rule #5: Maximize public-relations exposure by creating a cover story that appeals to the universal need to help people.
Rule #6: Create vested support groups by distributing concentrated benefits and/or entitlements to these special interests, while distributing the costs broadly to one's political opponents.
Rule #7: Demonize the truth tellers who have the temerity to say, "The emperor has no clothes."
Rule 7a: Accuse the truth teller of one's own defects, deficiencies, crimes, and misdemeanors.
Look at this example with the rules placed in brackets next to the relevant comment:
In mid September European Commission President Jose Manuel Barroso called for the European Union to be turned into a 'federation of nation states' (2, 5), a vision he said would require an overhaul of the Lisbon Treaty.
Mr Barroso also set out plans for a single supervisory mechanism for all banks in the eurozone. He called the plans a "quantum leap... the stepping stone to the banking union".
The European Central Bank would get much greater powers of oversight and regulation of Europe's 6,000 banks under the plan. Mr Barroso said eurozone countries should not rely on bailouts from the ECB, saying the bank "cannot and will not finance governments" (1, 2, 4, 5).
"But when monetary policy channels are not working properly, the Commission believes that it is within the mandate of the ECB to take the necessary actions - for instance, in the secondary markets of sovereign debt," he added (6).
Chris Morris BBC News, Strasbourg writes “this was a very federalist speech. Mr Barroso made it clear that the creation of a single banking supervisor, and moves towards full banking union, are just a first step. He wants the EU to become a federation of nation states.
No-one will be forced to come in, he said, but the speed should not be dictated by the slowest or the most reluctant. Before the next European elections in 2014, the European
Commission intends to put forward explicit ideas on how to change EU treaties to reflect moves towards closer political union (2, 4).
There will be huge arguments ahead - there are big differences within the Eurozone about the pace of political change. But countries like the UK, which don't want to take part in any further integration, are going to have to work out how best to protect their interests as other EU member states pool more of their sovereignty.
"If Greece banishes all doubt about its commitment to reform, but also if all the other countries banish all doubts about their determination to keep Greece in the euro area, we can do it," he said to applause from MEPs (2A).
Mr Barroso said he was not calling for a "superstate", but rather "a democratic federation of nation states that can tackle our common problems, through the sharing of sovereignty" (4, 4A).
Harry Teasley’s Rules of Bureaucratic Behavior show in this announcement how rules 1, 2, 2A, 4, 4A, 5 and 6 are being used to slowly push the EU bureaucratic agenda. Since this is a major announcement by a major player, many of the behaviors have been engaged.
The Game
Play ‘spot the rule(s)’.
See which rules are being invoked any time a politician or bureaucrat announces something or a report is released.
At a meeting? Observe whether rules are being used by individuals at the meeting. If it’s happening in your business, you know your business has a problem.
Watching television or reading a newspaper? Look for comments used to perpetuate the behavior.
Keep a set of rules on hand as a ready reckoner!
And finally, have hours of free fun playing this simple but tragic game.
Try spotting the rules in this YouTube video where MEP Nigel Farage names EU bureaucratic behaviors.
* Harry Teasley is retired only as a professional business executive. He is otherwise engaged constantly in thinking, writing pithy letters to the editor, and supporting liberty through his time, advice and philanthropy. It was people like him that I’m convinced Jefferson had in mind when he urged, “Enlighten the people generally, and tyranny and oppressions of body and mind will vanish like evil spirits at the dawn of day.”
Michael Heseltine's report: the good, the bad and the unlikely
In his report today, former UK Deputy Prime Minister Lord Heseltine makes 89 recommendations aimed at stimulating growth in the regions. Some of them are good. Most of them are bad. And some of them will never happen.
Some are even a mixture of all three. One of Heseltine's key aims, for example, is to move £49bn from central government to the regions to help local leaders and businesses. Well, yes, there should be more devolution of decision-making and spending to grassroots levels. Local people know better what is needed than do distant civil servants. Will it happen? I cannot see the big Whitehall departments parting with that sort of cash without a long fight that eventually wears out the other side. And would transferring that money do any good anyway? Probably not: it would just go on the sort of top-down grandiose projects and boards and committees that Heseltine is demanding.
Lord Heseltine says that 'growth funds' should be allocated through the new £1bn Local Enterprise Partnerships that are being set up in England. Growth funds? You tax businesses, then give them the money back and call it a growth fund? Is it not better to leave the money in the pockets of businesses and their customers, so that they can decide how to spend and invest it? Their judgement is likely to be far more tailored to the local circumstances than any official's – or even any committee made up of local officials and local businesspeople who happen to have time on their hands.
Lord Heseltine wants to see greater priority given to infrastructure projects like airports, rail and motorways. Well quite, we need more airport capacity: but the decisions are always political, and it can take decades to get such projects through the planning process, never mind build them. It's our planning system that's at fault, and which needs to be opened up to business-creating development, not just the priorities of the politicians. Even then, are politicians' priorities the right ones? Look at the billions we are wasting on HS2. Governments, and Lord Heseltine, like grandiose projects, even if their benefits do not cover their costs.
Another plan is to increase investment funds by, basically, telling pension funds how to allocate their investment funds. If you want to get people saving, a much surer way is to raise interest rates and make it worth people's while. Of course we do not do that because it would cause problems for overstretched homeowners and overstretched businesses. Some economists would argue that neither have really felt the pain that is needed to get out of our present problems. The capital misallocations of the boom years need to be liquidated and put to better use, but that won't happen as long as it is possible to keep going because of artificially low interest rates. First things first, Lord H.
The proposed public interest test for foreign companies wanting to buy UK businesses is hugely dangerous. One could see politicians blocking takeovers just because they might play badly in the media, especially if jobs or domestic businesses were threatened. One of the UK's assets as a place to do business is precisely that it is so open and so international. We need to preserve that, not open ourselves up to nationalist protectionism.
Tax credits for R&D? Research and Development sound like good things, but many firms just do not need them. No one-size-fits-all policy like that can steer resources to where they are best used. Business people can make their own decisions about whether to invest in these things or not.
So how do we stimulate growth in the regions?
Planning: yes, that has to be reformed, particularly so that major infrastructure projects become viable again. Education: it is already being reformed, and I think a much less monopolistic education system will contribute massively to future growth. But these things are long-term.
I would start by lower, simpler taxes. Particularly on business. If every small business took on one extra person, there would be no unemployment in this country (except maybe for the Business Department, who could all be sent home). It is not just the cost but the complexity of things like National Insurance and PAYE, not to mention VAT and the rest, that discourages people from hiring. I would also have a real assault on workplace regulation. The idea of workers getting a stake in their business by giving up certain protections seems promising. But why don't we just exempt all small businesses from many of the rules? The huge boost to employment that this would generate is real worker protection.
Ed Miliband and Disraeli: paternalism and interventionism
Ed Miliband seems to have appropriated Disraeli's famous slogan about 'one nation' government. Whether this is merely a meaningless catchphrase, an attempt to out-manoeuvre Cameron or has any real policy implications remains to be seen. Having raised the issue, it is interesting and instructive to reflect on nineteenth century government as well as what the phrase might imply for modern politics.
It is notable that Disraeli coined the phrase in 1844 as the 1840s were a decade which represents the high-water mark of Classical Liberal values in Britain and perhaps throughout the world - contemporary American and French had similar Classical Liberal features. That decade saw the repeal of the Corn Laws and Navigation Acts and the apparent defeat of mercantilism and economic nationalism in the UK. It saw the triumph of the Manchester school led by Richard Cobden and John Bright. It is worth remembering that these great strides for liberty were inspired by, amongst others, Adam Smith in the late eighteenth century.
Similar movements towards freedom were being made in the social sphere with, for instance, the abolition of slavery and Catholic emancipation. Fiscal retrenchment was the hallmark of mid-nineteenth century government, with great strides being made to pay down the national debt. How striking a contrast to today's politicians who fail to eliminate the public deficit and . Although Peel re-introduced the income tax in 1842, he and many other politicians were opposed to its use and aimed at its elimination. Peel's government also introduced the Bank Charter Act (1844) - a high-minded but ultimately misguided attempt to create stable, gold-backed currency. It is notable that both parties - Whigs and moderate Tories - were broadly sympathetic to these policies.
The most famous political slogan of that era is 'peace, retrenchment (cuts in government spending) and reform' - something which our modern politicians would do well to emulate. We cannot characterise the mid-nineteenth century as a period of true laissez faire as there was still a great deal of government intervention and whilst government spending was low, it is important to recognise that government was still very activist. There was much government intervention in social life via the Poor Laws and the education system. Nevertheless, the tone of times was towards liberty and equalitarianism (i.e. equality under the laws and the absence of discrimination by government) in general.
The 'one nation' position is one of paternalism and limited egalitarianism. Disraeli used the phrase as a political slogan in a bid to win the support of the new voters enfranchised in the 1867 Reform Act - an Act which created far more voters than its more famous predecessor. In this he was doubtless successful; instead of being destroyed by Reform the Tories successfully adapted. The Whig Party, in Britain (unlike the US) the party of small government and free trade was, by contrast, was consumed by the Liberals. The Tories shifted their position to appeal to the new voters and sought to portray Whiggism as heartless individualism.
The following era saw a gradual shift in political positions of which Disraeli's slogan is a signifier. Whilst Disraeli himself was a showman and a populist, his 'philosophy' such as it is represents an opposition to Manchester values, much as does Bismarck's. Gladstone's Liberals represented a more fiscally conservative, Whiggish position. The 1860s-1880s period should be recognised as witnessing the 'Strange Death of Whig England', the causes of which are contentious but bear a good deal of historical study.
Again, both parties in this period turned to a more interventionist style of government, albeit in a limited fashion. In the sphere of political thought, the 'New Liberals' emerged led by Green and Hobhouse. Herbert Spencer in The Man Versus the State (1884) categorised this shift as the 'New Toryism', a return of paternalist values blended to varying degrees with the contemporary collectivist ideas of socialism, imperialism and nationalism. By 1894 it was possible for the Chancellor WV Harcourt to announce that 'we are all socialists now' as he introduced death duties.
With Gladstone's death the Liberals emerged more strongly as the party of social democracy although the Conservatives, as they became, gradually adopted a more moderate version of this position. This point should not be too greatly over-stated, however; prior to 1914 government spending remained small by contemporary standards, there was little deficit spending and the currency was stable.
This gallop through history leaves much detail out, of course, but it should remind us of one or two very salient points. Ed Miliband is quite within his rights to adopt Disraeli's concept as his own as they both represent paternalism and interventionism. It is worrying, however, that both Miliband and Cameron laud Disraeli whereas very few politicians would adopt a Gladstonian much less a Cobdenite position (including the mis-named Liberal Democrats). It is interesting to observe how political parties tend to adopt slightly moderated versions of essentially the same position and actual ideological divides are rare.
In reality, all three major parties are offering greater or lesser degrees of managerialism. On a more hopeful note, it is also clear that ideas take a long time to become embodied as the prevailing doctrine. The ideas of Smith's generation took 40-50 years or more to become reality. It is our duty, therefore, to generate the ideas and methods to free ourselves from the welfare and regulatory state so that our grandchildren may benefit.
An accountable monarchy?
It will be interesting to see how the decision to order government to publish confidential letters between Prince Charles and seven Whitehall departments under freedom of information law pans out. A blanket ban on all royal correspondence being disclosed in this way was imposed last year following pressure from the royal family meaning that this will be the last time such information will be publicly available. The monarchy and the Cabinet Office are also fighting the demand by the courts for Whitehall to publish guidance on when to consult the Queen or Prince on changes to the law that may affect their private interests. The secrecy surrounding royal involvement in political affairs does nothing to help a commonly held public perception that they are undeserving of their tax-funded benefits and power.
Let me start by saying that I have nothing against having a monarchy in this country. The burden on the taxpayer is minimal compared with the US Department of State and in return they placate a widespread desire for traditionalism and serve to promote relations both at home and abroad in a way that short-term, partisan politicians could not hope to replicate. Similarly, I have nothing against royal involvement in politics, which is in general a very passive role, but only on the condition that whatever involvement they do have is made public. The monarchy is heralded as being an essential part of limited government, holding back the self-interest of politicians from a non-partisan and impartial perspective. This does beg the question as to why their opinions are such closely guarded secrets. The protective veil over communication regarding policy rightly serves to generate a mistrust of the royal family and fuels the fires of anti-royalists who claim that they are an outdated relic, extravagantly funded by the taxpayer with no right to meddle in public affairs. This will only be ignited further if it is revealed that the Prince has been a significant influence within Whitehall. In order for the monarchy to be legitimised in the eyes of the people, they cannot conceal their influence on issues that are in the public interest.
One could counter by saying that being only two individuals representing the monarchy, the Queen’s and the Prince’s views will necessarily be constricted to a few areas of interest, making it impossible for them to be impartial. To protect limited government therefore, their views would have to kept secret. Yet, a democratic government must be accountable for its actions and this includes the head of state. If they are truly above politics, they should only get involved in order to protect the public from political corruption and damaging, election-seeking policies.
At the other end of the spectrum, it can be argued that the royals are not qualified to get involved in politics at all. The Queen has a wealth of experience, being the longest serving Head of State in the world, but there are some who would argue that she is nonetheless in a position of inherited power. Frank Gardner’s comments on the BBC that the Queen had told him she ‘couldn’t understand why [there was no way to arrest Abu Hamza]- surely there was some law that he had broken’ reveals an emotional reaction as opposed to logical neutrality. Similarly, Prince Charles’ dislike of certain forms of architecture has lead him to intervene in a number of planning developments he has found distasteful, and has lobbied on issues such as the ‘perceived evils of genetically modified crops’ and foxhunting. This is fine and the royals have just as much right to voice their opinion as everyone else, but in return for their inflated influence above the rest of us, they must also be held accountable for their views.
The unique nature of an unelected head of state within a democratic system means that the royal family cannot hope to maintain their legitimacy without disclosing their political correspondence or details of their veto power within the legal process. They are in a privileged position of having the capacity to influence policy in a much more direct way than the electorate and in return should accept that their impartiality must remain accountable.
Zero base tempts Labour
Three years ago I published a book entitled "Zero Base Policy," proposing that the UK needs to examine not just how institutions and practices might be improved, but what their purpose is, and what policies might achieve that purpose. I wrote:
Government usually continues to do what it has previously done, even in areas where the current policy has visibly failed to succeed. Sometimes there is tinkering, with government promising "a fresh approach," but in reality offering little more than minor adjustments at the margins. There ought to be a "zero base policy," under which government would ask in each area what it was trying to achieve, what would count as success, and what policies might conceivably help to achieve that success.
I went through areas such as education, health, the police, drugs, civil liberties and taxation, asking the fundamental question and suggesting policy avenues that could lead to more success than current ones.
It is very refreshing to see front-benchers from the Labour Opposition starting to endorse this radical approach. First Stella Creasy, and now Ian Murray have given interviews in which the 'Zero Base' approach has featured prominently.
This is excellent news, and it is just what opposition parties should be doing - using their time out of government to look with fresh eyes at the nation's problems and come up with radical solutions. All too often governments ask "What is being done and how can we tweak it to improve it?" A more fundamental question is "What should government be doing, and what policies might enable it to do that successfully?"
Britain faces serious problems, and it is plain to impartial observers that in some areas policy has simply not worked. The fresh approach of 'zero base' promises new and radical solutions, and its endorsement by some on the Labour front bench is to be welcomed.
Mitchell and the decline in politics
The new Chief Whip of Britain's Conservative Party, and former Police Minister, Andrew Mitchell MP, had something of an altercation the other day with the police at the gates of Downing Street. The Chief Whip, of course, has an official home in Downing Street, so he probably knows the cops there pretty well. There he was on his bike, trying to leave, but the police wouldn't open the main gate for him. Their job is security, and they like to keep our politicians nice and safe, so they suggested he use a side gate instead. At which point, unfortunately, he lost it, and let off a stream of abuse against the officers.
Shocking, you must agree. But what is even more shocking is how this story seems to have occupied the headlines and the lead slots on the TV and radio news for the last day and a bit. Various opposition MPs and police trade union leaders say the Chief Whip should resign. Commentators have been asking government ministers whether they are not shocked too and whether they agree he should resign. Were Parliament in session, various members would probably be tabling motions even as you read this.
It is a small example of the decline of our politics, and indeed our laws. Police officers are well used to being on the receiving end of ripe remarks, as are most workers who have to deal with customers and the general public, particularly if those customers and members of the public are in a rush or frustrated about something. Police who work in the Palace of Westminster say they are well used to the rudeness of MPs. It's a high-pressure job, and MPs are – well, let's say confident about their own importance. The sensible reaction is to ask the person to exercise some restraint, and then forget it. We all have these moments of frustration. But here, there are two differences.
First, politics dominates our lives, thanks to the 24-hour news schedule and the proliferation of print, broadcast and online media. Indeed, there is a self-promoting relationship between politics and the media. The media need juicy sensational news, the politicians need headlines, so each provides what the other wants. As a result, on almost every issue or indiscretion, no matter how petty, we get too many sensational claims, counter-claims, demands for resignations, expressions of outrage, and other posturing by self-promoting politicians. And too many media strories which take the reactions too seriously and as a result just magnify molehills as if they were mountains.
The second problem is more subtle. Our legislators have been so anxious to protect us from genuine abuse – racism, for example – that they have attempted to restrain us beyond our human nature. People do, on occasion, lose their temper. There is a difference, though, between incidents that should be settled with an apology and incidents that constitute a breach of the peace, or threaten violence. But politicians have drawn our laws, and are continuing to draw them, to reflect their notion of an ideal society, not a real one. They don't want us to smoke, or drink much, or eat fatty foods, or swear, or give other people a mouthful on occasion. These are 'unacceptable'. Well, being rude to other folk certainly is 'unacceptable' in a moral sense. But should there be a law against it? And if everyone who ever did it had to resign the job, how many of us would be in work at all? Laws and attitudes need to realise that the human beings they deal with are not perfect.
Democracy must restrain the mob against the minority
More e-petitions will get written responses form the government, the Commons leader Andrew Lansley has announced. Any petition signed by more than 10,000 people, he says, will have a government response published alongside it. Well fine, for all the difference that is going to make.
There are three dozen petitions around that would qualify for such an official response, ranging from the culling of birds of prey to granting a pardon for Enigma codebreaker Alan Turing. But there are also a few joke ones, or perhaps barbed ones, like the petition calling for Mrs Thatcher's state funeral (when it happens) to be privatized. Very droll. But is it the sort of thing that parliamentarians should be racking its brains to respond to?
Petitions, like referendums, are a tricky constitutional issue. Yes, we want the public to be expressing their views strongly, and as Daniel Hannan and Douglas Carswell say in their excellent book The Plan and other articles on opening up our system of government, it is right that Parliament should debate things that the public feel are important, rather than just things that the party leaderships think important. It makes our MPs recognise, once again, who they work for – not who doles them out ministerial jobs. So yes, peitions getting lots of signatures deserve some response and those with overwhelming support should be debated.
But we should not conclude from this that we should be governed by petitions. Nor even referendums.
Our representative system is a system of balances, albeit a rather creaky one. That is why we have two chambers of Parliament – so no dominant majority in the House of Commons can get its way. Not all the time, at least. As James Buchanan and Gordon Tullock showed in The Calculus of Consent, to impose your will on the public, all you need to do is to win 51% of the votes in 51% of the constituencies. So that's about a quarter of the population. Actually it is less, because only about half the population will probably vote anyway. So if there is just one chamber of Parliament, it is possible for quite small majorities to dominate the agenda. That is why we have such absurdly high tax on businesses and on people who earn a lot by creating jobs and prosperity. There are simply fewer of them than the majority, who enjoy the benefits of the taxation. Splitting the power with a second chamber, and indeed the Supreme Court, reduces that risk of the minority being exploited by the majority. Well, it reduces it a bit.
As Buchanan and Tullock suggested, and as I recounted in my recent book Public Choice – A Primer, we need strong constitutional arrangements to prevent this kind of exploitation. The US constitution managed to contain it for quite a time, but now it is hardly up to the job. As government has grown, the benefits of controlling the government – the amount you can loot from exploiting the minority – has grown too. So controlling governments has become big business. Ask any lobbyist. We need, in fact, surprisingly strong constitutional arrangements if we are to prevent the tyranny of the majority.
Am I in favour of democracy? Of course I am, but like the market economy, democracy only works if it is constrained by a set of rules. You need a fire basket to contain the fire. Without the rules of honesty, contract and private property, the market will soon descent into crony capitalism, with governments dishing out favours to their friends. Without constitutional rules to prevent minorities being exploited by majorities, democracy will turn into mere majoritarian populism, or into rotating elected dictatorships. Some people say this has already happened.
Predistribution is an old trick for an old dog
Ed Miliband’s new big idea is that wealth redistribution takes place too late. One has to be poor first to get government hand-outs of richer people’s taxes. How much better it would if no one was poor and then redistribution, and all the bureaucracy that goes with it, could be consigned to history. We would all rejoice if benefits could be cut without further impoverishing the poor. He uses Sweden as an example of a predistributive country.
As Neil O’Brien points out in his excellent article in Saturday’s Telegraph, Britain does have one of the highest levels of income inequality, seventh out of 34 OECD countries and that surely fuels the widespread discontent. Note the booing of George Osborne at the Olympics.
Unfortunately, Sweden is not a good example of a ‘predistributive’ country. Income tax only looks low because national (social) insurance is four times as high as the UK’s. The Nordic countries public expenditure is far higher, maybe 50% higher, than the UK’s share of GDP. They have grown accustomed to being high tax/high public spending economies. In other words, the hand-outs are given in different ways.
Two factors contribute to the inequality in the UK: housing costs and unemployment. They compound each other because housing costs are highest where there is most employment. Governments have tried to move employment to where it has most needed but moving the BBC to Salford and civil servants to Newcastle is not the answer. The employers most easily moved from the south east contribute nothing to the economy and it would be better to employ fewer civil servants than rehouse them elsewhere.
Inequalities will be reduced when, and only when, employees create more wealth than they earn. Sweden and Denmark, for example, achieve high personal incomes due to free markets and relative economic strength. Any government that tries to micro-manage its economy achieves precisely the opposite, especially if it tries to raise incomes when there is no productivity to pay for it. Older readers will recall the futility of government attempts, in the late 1960s, to direct prices and incomes. At the same time, the trades unions were doing their best to destroy such industry as we had.
Today we have Ed Miliband demanding higher personal incomes unsupported by national wealth creation and trades unions backing that up with calls for strike action. Welcome back, Old Labour.
