Flux Versus Stasis

Parmenides and Heraclitus were two contrasting philosophers who lived at roughly the same time, about 480 BC.  Parmenides took the view that nothing changes.  He claimed that a goddess had shown him the way of truth versus the way of opinion, and he deduced from logical truths about the universe.  The universe, he said, is a single and unchanging entity, it always was, and always will be.

"Nothing comes from nothing," he said.  Observation shows us the illusion of change because all senses belong to the world of opinion, not to that of truth.

Heraclitus, his contemporary, took the exact opposite view.  Whereas some sought permanence amid disorder and uncertainty, Heraclitus embraced change.  Everything is in flux.  "We step and do not step into the same rivers," he said.  We call it the same river but new waters have replaced those we stepped into.

He taught the unity of opposites.  "The way up and the way down are the same."  And the same is true of other opposites, day and night, winter and summer, war and peace. He did not mean that they were identical but that they changed into each other.  Day replaces night, night day.  Everything is constantly changing. You are not the same person you were.  He denied that "a thing is what it is," because things change.

So the pre-Socratic philosophers gave us two takes on the universe, two opposing mindsets.  Parmenides was for permanence, Heraclitus for constant change.  Heraclitus was for flux, Parmenides was for stasis. 

Now we run forward to 2000 years to the year 1494 when Pope Alexander VI divided the recently discovered New World between Spain and Portugal.  It didn't last, largely because he didn't allot any of it to England, the Netherlands, or any other European nations.

I now propose to divide the world as the Pope did.  Putting on my papal zucchetto, I divide the world into the followers of Parmenides and those of Heraclitus.  It is a division between flux and stasis.

The division is between those who seek the stability and predictability of permanence, and those who are ready to embrace change – even to welcome it.

This is far from more conventional divisions into left and right.  Normally we associate conservative temperament with wanting to keep things familiar and comfortable, and resisting change as unsettling as it is unfamiliar.  Yet if we look about us today, at those who yearn for the world of Parmenides, we find some strange alliances.

Trade unions like to keep things as they are.  They resist new technology and new working practices because they threaten jobs.  They want people to remain in familiar employment as far as possible.  The early industrial revolution featured Luddites, and those who threw their wooden shoes (sabots) into the new machines and gave us the words saboteur and sabotage.

Their modern counterparts regard change as threatening.  It puts their standard of living at risk.  So union leaders, conventionally left wing, are at one with retired Tory colonels in their suspicion of change and their aversion to it.

Now look at environmentalists.  Many of them look back to when we all lived more simply and made less impact on the planet.  They urge us to go backwards, to travel less, to produce less, to consume less, to do less.  Many of them are against growth.

At heart they are deeply conservative, the children of Parmenides.  They yearn for a predictable, static world.

Those who want to keep things the same support such things as protection and subsidy for domestic industry.  They want the comfort of traditional goods produced by traditional methods in traditional places.

The admission of cheaper foreign goods threatens that stability and portends upheaval.  So tariffs are urged to protect domestic producers from competition, while subsidies from taxpayers are urged to keep them in business

Those who want things to stay as they are oppose extensions to Sunday trading, just as they opposed it altogether a generation ago.  They deplore more relaxed moral attitudes and the changing nature of the family.  If the followers of Parmenides today could put their motto in three words, it would be "legislate against change."

The followers of Heraclitus, on the other hand, know that change happens.  Nothing stays the same.  Technology changes.  Human ingenuity and inventiveness find new ways of doing things and new things to do.  As a result, practices change and society changes.  And as society changes, attitudes change and our moral judgements change.  The children of Heraclitus know that change brings upset for some, but they also know it brings progress for many.

Human beings have rational minds.  They think, and when they think, it changes things.  They think of ways to make them less vulnerable to fate and fortune.  They try instead to control their circumstances.  Agriculture enables them to store food against leaner times; buildings protect them from the weather.

At every stage humans have sought to improve their lot, to manage things better than their predecessors did.  But improvement means change, and the price of progress is learning to adapt to change, to ride with its flow.

Those who embrace Heraclitus do not try to sustain industries made obsolete by change.  They do not use tariffs and subsidies to keep the world at bay.

They might use the wealth created by change to ease the lot of those adversely affected by it, or to help them adapt to it, but they don't try to stop it.

Human beings constantly think of new ways to achieve their goals.  They test them, and those that succeed gradually spread, transforming society in the process.  It is constant flux, churn, just like the churn in economic activity.

It works better in practice than legislation does.  If a thermometer shows the room is too cold, it is possible to inform the government and have them send someone round to turn on the heater, but it's faster and more efficient to let a thermostat do that automatically.  That's what a market does – it responds to continual changes, and it responds and adapts to their stimuli.  It's like a thermostat.  Markets are a way of living with change – indeed of using change.

We can divide societies into ones that seek stasis and ones that embrace flux.  Static societies try to sustain traditional practices, sometimes relying on tradition itself and strong social sanctions against deviation from accepted norms.  Often the force of law is used to compel compliance with conventional norms, with prosecution and punishment of those who behave differently.  

Societies based on strong religious norms tend to fall into this category, with divine punishment in the afterlife threatened against those who fail to comply with social norms of this life.  Isolated societies also tend to be more static.  Without contact with other cultures or comparison with them, their ways of doing things are seen as the way of doing things, and alternatives are seen as repugnant, failing to comply with what is decent. 

People in such societies tend to live much as their parents did, with a measured rhythm of life that is repeated in each generation.  There is a psychological pattern, too, in that they do not tend to brim with inquiring minds or intellectual curiosity.  They tend to be as culturally static as they are socially.  Most people know their place and keep to it.

Societies that embrace flux are turbulent.  Changes come thick and fast and undermine stability.  Their citizens compare themselves firstly with other societies they are in contact with, and for some brave minds, with imagined societies.  There is greater social mobility, with people seeking to improve their lot in life, and to pass more on to their children than they started with themselves.  They seek improvement, which necessarily means change.  They set targets and seek to attain them.  They experiment and innovate.  People live lives that are dramatically different from the lives lived by their parents, and incomprehensibly different from those lived by their grandparents.   Their lives are characterized by progress.

The story of humankind can be told as the story of progress – by no means constant, by no means linear, but the story of progress nonetheless.  It took only 12,000 years for us to come out of our caves and plant our footprints on the moon – that's not even a tlck of the astronomical clock.

Everything changes and we either live with that or we resist it.  So now my papal division of the world has divided it between the followers of Parmenides and those of Heraclitus, between those who think things can be constant and those who think that change is the only constant.

Societies that seek stasis limit freedom.  They restrain the right to innovate, to experiment, because this threatens stability.  Societies that embrace flux tend also to embrace freedom – freedom to differ, freedom to change. 

I would like to quote from a movie to illustrate that division.  The movie is "Things to Come," made in 1936 by Alexander Korda and with a screenplay by H G Wells. I do recommend you to see the movie but I certainly recommend you to see the ending.  The closing scene takes place on the balcony of an observatory looking up at the night sky.  They have just sent a capsule carrying people to voyage around the moon.  Cabal's deputy challenges him.

"Oh God, is there never to be any age of happiness?  Is there never to be any rest?

Rest enough for the individual man.  Too much and too soon, and we call it death. But for man no rest and no ending. He must go on. Conquest beyond conquest.  First this little planet with its winds and waves. And then all the laws of mind and matter that restrain him. Then the planets about him. And at last out across immensity to the stars.  And when he has conquered all the deeps of space and all the mysteries of time – still, he will be beginning.

But we're such little creatures.  Poor humanity's so fragile, so weak. Little animals.

Little animals? If we're no more than animals, then we must snatch each little scrap of happiness, and live and suffer and pass, mattering no more than all the animals do or have done.  Is it this, or that.  All the universe or nothing!  Which shall it be?"

Let's Keep the EU Renegotiation Simple

Subsidiarity

Perhaps it is only since Tony Blair gave away so much of John Major’s negotiation of the Maastricht Treaty signed in 1992, that we have realised what a good deal that was and how lucky David Cameron will be, if he can win most of it back.  As it is, his shopping list remains secret but it is most likely too long.  He wants to come back with as many goodies as he can get to justify a “yes” campaign so the longer the list, the more successes can be shown.

That may not be wise: sometimes the rifle is more effective than the shotgun.  This note argues that what we most want is not a ragbag of trifles but the implementation of just one thing: the “subsidiarity”[1] agreed in the Maastricht and confirmed in the Lisbon (2009) Treaties[2].  In other words, returning sovereignty to all member states for those things that really do not need EU uniformity. 

Lord Garel-Jones was the UK Europe Minister during the Maastrict negotiations. In an important speech to the International Institute for Strategic Studies on July15th, he said that the subsidiarity agreement achieved in the Maastricht Treaty was thereafter obstructed by Brussels.  The Lisbon Treaty had a further shot at transferring responsibility for all save that which really had to be EU-wide back to member states. A complex system of “yellow cards” was introduced under which if enough chambers of national parliaments voted to make the issue in question subsidiary, then it should be left with member states, not Brussels.  See the Appendix to this paper for a full explanation.

The download forming the Appendix is the Brussels party line that these transfers of powers are taking place. Needless to say, in reality, Brussels has continued to obstruct the return of any issue to member states in defiance of the Maastricht and Lisbon Treaties.

Most of the reforms the UK are seeking would be met by implementation of subsidiarity, e.g. lightening regulation on SMEs, welfare for cross-boarder workers, social matters and employment rules. If the subsidiarity agreement is honoured, by the Commission and all member states, almost all else falls into place. 

To take one simple issue: why do hairdressing salons need to be regulated by both Brussels and Whitehall?  A further tranche of hairdressing regulation appears to be on the way from the Commission.  Of course, hairdressing salons should protect the health and safety of its customers and employees but that is a generic requirement for all businesses.  In such a competitive and traditional market, with no cross-border trade, why should any further regulation be needed at all, still less both nationally and from Brussels?  Why should we care if hairdressing regulations are the same in Naples and Sunderland?

The EU official view of subsidiarity

Nowhere is the EU hypocrisy in claiming one belief and practising the opposite more obvious than for subsidiarity, except perhaps deregulation.

The EU claims that subsidiarity is one of the three guiding principle of the EU: “In all cases, the EU may only intervene if it is able to act more effectively than Member States.”

Yet its own presentation of the topic looks a little different: “The general aim of the principle of subsidiarity is to guarantee a degree of independence for a lower authority in relation to a higher body or for a local authority in relation to central government. It therefore involves the sharing of powers between several levels of authority, a principle which forms the institutional basis for federal States.”[3] Note the EU’s assumption of superiority and federal government.  And, importantly, subsidiarity has to be justified, not the reverse.

The three levels of authority are EU exclusively, shared and subsidiary.[4]

“The areas over which the EU assumes exclusive competence are:

• the Common Commercial policy 

• the Common Agricultural policy

• Fisheries policy

• Transport policy

• Competition rules

• Rules governing the free movement of goods, persons, services and capital."

The list of “shared competences”, i.e. the EU and/or member states’ areas of legislative responsibility, is exceedingly long and the list of areas for subsidiarity does not exist at all. In practice Brussels casts its net, sometimes with the tacit support of member state civil servants over anything it cares to regulate.

Thus whilst the Treaties and Brussels pay lip service to subsidiarity, it is simply not implemented.

Implementing subsidiarity

Lord Garel-Jones suggested that the yellow cards requiring subsidiarity should be replaced by red cards with no opportunity for Brussels to frustrate the process.  With the majority of EU members, however, now in the Eurozone and calling the shots, enough votes for red cards would be very hard to achieve.  Member states cannot achieve them now for yellow cards.

What needs to happen now it that all the areas of shared competence be apportioned either to the EU’s “exclusive competence” or be deemed subsidiary and left to member states, starting with hairdressing.  Furthermore, the areas of exclusive competence need to be more tightly defined.  One such, transport policy, could be interpreted to mean that only Brussels can make decisions concerned the new UK HS2 train line.   All apart from those tightly defined competences should be deemed subsidiary.

The main problem with the status quo is that the Commission only has to assert its opinion that it should be an EU matter and the Court of Justice of the European Union will automatically back it up, as happened to Germany in 1997.[5]

It would always be possible to add sectors to the uniformity (“exclusive competence”) list at a later date but that should require the “double lock”, i.e. majorities of both the Eurozone and non-Eurozone members.

Recovering subsidiarity would go a long way to satisfying the UK’s wishlist.  Of course the UK would like more, notably protection for financial services, control over employment law and reform of the Common Agricultural Policy which has been so often promised and equally often reneged upon.  With luck, David Cameron can achieve some of that but the brutal truth is that if the UK cannot find at least 14 other member states to agree, it is not going to happen.

Locking in agreement on subsidiarity

Treaty change is not going to happen until 2020 at the earliest, because major EU intergovernmental meetings take at least four years to set up.[6]Brussels may hope the current UK government will be gone by then and be replaced by something more pliable.  Given the EU’s history of disregarding democracy and steaming on regardless, the UK should insist on some form of binding short term agreements to last until a new treaty ratifies them.  One to one treaties between the UK and each other member state provide an answer and are legitimate within existing EU rules provided they are compatible with EU Treaties.  Since subsidiarity is very much enshrined in the Maastricht and Lisbon Treaties it would be hard for the ECR to rule against bilateral agreements implementing it.

These agreements should start from the Dutch government's new philosophy of "Europe where necessary. National where possible" (see here). The bilateral treaties should commit both parties to insist upon:

1. The revised list of EU exclusive competences
2. All other matters being deemed subsidiary
3. Revision the rules for the ECJ so that they follow these agreements and not the whims of Brussels.

Leaving the EU Parliament and Commission out in the cold would do them no harm at all.

Reasons for all member states to implement subsidiarity

1. The principle was agreed in the Maastricht Treaty and remains “the general principle of European law”. Implementation has been frustrated by the Commission.

2. This benefits all member states and is not special pleading for the UK.
3. There is a good reason in 2016 for EU members to agree to this which did not exist in 1991: nationalist parties are gaining strength and unless nationalists are given some red meat, the EU will fall apart.  As well as Greece, look at France (National Front), the “Alternative for Germany” party, Spain (Podemos), the Danish People’s Party, the “Finns Party” and UKIP.
4. Brussels should be shamed by exposing the gap between their rhetoric and reality.
5. It would be a major step towards less regulation.  With full implementation of subsidiarity, each sector would be regulation either by the EU or each member state but not both.
6. Less regulation and more freedom for member states to develop their economic advantages (e.g. financial services) will increase the competitiveness of the EU as a whole.
7. While consolidating the implementation protocols into a future treaty would be helpful, treaty change is not essential.  The principle has already been established and binding inter-governmental agreements (bi-lateral treaties), which are allowed by the Amsterdam Treaty, would suffice.

Conclusion

Brussels, on past form, cannot be trusted.  Any positive outcomes from the renegotiation need to be watertight and legally binding.

Now we need legal authority to be apportioned either exclusively to the EU and more tightly defined or all other matters be deemed subsidiary and left to member states. Shared responsibilities to be abolished.

Pending a new treaty, intergovernmental (bilateral) agreements should set those agreements in stone.

_____

[1] The concept was invented by the Roman Catholic church to allow some degree of devolution and reached Brussels via the German word “Subsidiaritāt”

[2] Article 5(3) of the Lisbon Treaty: “Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level.”

[3] THE PRINCIPLE OF SUBSIDIARITY, p2, Fact Sheets on the European Union – 2015.

[4] For definition and allocation of competences see also http://ec.europa.eu/citizens-initiative/public/competences/faq 

[5] Germany claimed that the Directive on Deposit Guarantee Schemes was not compatible with the principle of subsidiarity

[6] Meetings to make minor treaty changes can be much quicker especially if Germany approves.

____

Appendix - Yellow Cards

“EU law-making is undergoing a profound change in an oddly-shaped annex to the European Parliament building in Brussels. Here, officials working on behalf of 28 national parliaments are helping their members flag up draft EU laws that may fail to respect ‘subsidiarity’. That is the idea that the Union should act only when strictly necessary, and that the national governments should act where possible. The 2009 Lisbon treaty gave national parliaments the right to police subsidiarity through the creation of a so-called 'yellow card' system. This allows a third or more of them, acting together, to vet and temporarily block draft laws proposed by the European Commission. (For legislation in the sensitive area of justice and home affairs, the threshold is only a quarter.) Each parliament has two votes, or one per chamber for the 13 member-states that have bicameral systems. Each chamber that votes for a yellow card provides a 'reasoned opinion' why the EU law in question is an unwarranted trespass on their sovereignty. A yellow card requires 19 reasoned opinions (14 for a piece of justice legislation). The Commission can get around a yellow card by giving clearer justifications for its actions and proposing the law again, perhaps with some changes or caveats added. But if it does, half the national parliaments can still block the second attempt, rather than just a third the first time around. This is the unwieldy 'orange card' (29 reasoned opinions). At this point, if either a majority of governments or MEPs agrees that the orange card is justified, then the legislation is defeated outright.

National parliaments have yellow-carded new legislation only twice. The first occasion was last year when they rejected the adoption of common EU rules on the right to strike (known as 'Monti II'). But last month, parliaments in Britain, Cyprus, Hungary, Ireland, Malta, the Netherlands, Slovenia, Sweden, Romania, as well as the French and Czech senates, rejected a proposal by the European Commission to create an EU prosecution office. (See here for a fuller analysis of the stakes in the European public prosecutor debate.) National parliamentarians' deliberate blocking of a project that has a distinctly federalist flavour marks their arrival as serious players in how the Union is governed. Why?

First, because the Commission has so far treated a yellow card as a virtual veto. In 2012, EU officials withdrew Monti II, albeit while insisting that the legislation did not fall foul of the subsidiarity principle. European Commissioners have even amended draft legislation pre-emptively, such as the 2012 directive on public procurement and another (the IORP directive) on pensions, just to ward off a likely yellow card from national parliaments.

Second, most national parliaments have long had their own offices in Brussels. But the existence of the yellow card regime since 2009 has made this network of offices – cooped up in their shared corridor – more coherent by giving it a common purpose. These officials are getting better at using the brief two-month period allowed for assessing draft legislation to connect the debates in their home parliaments to each other, and to the EU's legislative process. So it is likely that yellow cards will become more frequent in future.

Third, the yellow card scheme is making national parliamentarians more assertive on EU issues. Apparent attempts by Commission officials to pressure wavering parliaments over their EU prosecutor proposal only served to turn more chambers against the idea. And now, one national parliament, or even a single chamber, has a powerful means to signal that they do not fully agree with their own government's European policy. For example, France's government, and its National Assembly, supports the creation of the proposed EU prosecutor. The French Senate clearly has a different take. (The powers of such chambers over EU business could become pivotal if a member-state has a minority government.)

Hence the yellow card innovation is encouraging governments to be more careful about consulting national parliamentarians first – including the frequently ignored upper chambers – before striking deals in Brussels. It may even make the lines of democratic accountability within individual member-states stronger than they were before the Lisbon treaty. And the scheme should demonstrate to eurosceptics in Britain and elsewhere that the checks on EU executive power provided for under the Lisbon treaty are far better than they would perhaps like to believe.

The spectacle of national parliaments acting in concert to limit EU action is aptly symbolic at a time when euroscepticism is rising to unprecedented levels across the Union. But it is more likely that the yellow card system will act as a safety valve for such pressures, rather than a US-style filibuster for those who would like to stymie the EU altogether. Governments could also make a minor, surgical change to the treaties to expand the procedure so that it can be more constructive. For example, new rules could allow a third of national parliaments to request the Commission to bring forward new laws and a half of them could ask for useless or out-of-date legislation to be repealed. Furthermore, eight weeks is only a heartbeat in European politics. The amount of time available for parliaments to consider the Commission's draft proposals should be extended to twelve weeks. (These ideas were recently proposed in a major CER report.)

Twenty years ago, Jacques Delors, then president of the European Commission, jokingly offered a €200,000 prize for a clear definition of what 'subsidiarity', a concept drawn from Catholic theology, actually meant. Lord Mackenzie-Stuart, a former British president of the European Court of Justice, later termed it mere “gobbledygook”. But the actual answer is neither theological nor legalistic. It is being eked out politically, on a case-by-case basis, as some 40 parliamentary chambers across Europe slowly learn how to form alliances, determine what their shared interests are, and – when warranted – take action vis-à-vis Brussels."

Heraclitus v. Parmenides – Flux v. Stasis

I gave the opening lecture at Freedom Week at Sidney Sussex College in Cambridge last week.  My theme was "Flux versus Stasis," and I contrasted the views of Parmenides and Heraclitus, two of the Presocratic philosophers.  Parmenides took the view that nothing changes in reality; only our senses convey the appearance of change.  Heraclitus, by contrast, thought that everything changes all the time, and that "we step and do not step into the same river," for new waters flow ever about us.

I divided the world between those who seek permanence (the stasis of Parmenides) and those who embrace change (the flux of Heraclitus).  Those who prefer stasis resist change and innovation, and try to keep society following traditional practices, using social pressures and, if necessary, the force of law to sustain conventional norms.  They include people who resist technological change and the changes it brings to employment, as well as those who urge subsidies and tariffs to sustain domestic markets against foreign competitors.

Those who accept that change happens and try to adapt to its flux follow Heraclitus.  Their societies allow experiment and innovation, even knowing that some will be upset by the disturbance they bring to traditional ways.  They allow markets to pulse and flow, reacting to inputs, and adapting to and coping with those changes.  

Stasis societies value order and tend to entrust government to maintain their status quo.  Flux societies value new ideas and look for progress toward their citizens' goals.  It is the flux societies, the ones ready to embrace change and develop its positive aspects, which are most friendly to liberty and the right of people to pursue self-referring goals unimpeded by arbitrary restrictions imposed by others.

The full text of my lecture can be seen here.

Hunting Foxes... Because You Like It

Last week, a new vote on whether the Hunting Act, the scorn of politics in the early 2000s, should be amended, was thrown out of the window. There was none of the anger that had filled the 400,000 protestors outside of Parliament Square in 2004, nor the 700 hours of debate that had occupied the Commons. Only a smug look from Nicola Sturgeon, as she realised she had outsmarted David Cameron.

Amending and repealing the Hunting Act has long been on the agenda for the Conservatives. Before the 2010 election, there were murmurings that, were a Conservative majority to take power, repeal of the ban on fox hunting with dogs would be looked at.

So let’s look at fox hunting with dogs. The Countryside Alliance declares the Hunting Act ‘bad for the rural economy, bad for rural communities, bad for animal welfare and a waste of police resources’. It is true that reports of malpractice on foxhunts and police prevention take up time and resources. Very few convictions for those hunting with dogs have ever been brought about, despite the amount of evidence which animal rights groups present. ‘Bad for animal welfare’ is somewhat difficult to comprehend, but if they mean that it is bad for animal welfare that poultry might be killed by a fox, before they are killed by the slaughterhouse, perhaps this is an understandable argument. Bad for the rural economy and rural communities is a dubious case to make. Many hunts have seen their numbers grow since the ban. The Burns Report, which examined hunting before the Hunting Act was introduced, registered 178 hunts in 2000; there are now 176. However, although there are fewer hunts, the number of participants has dramatically risen. 20,591 people were subscribed for foxhunts in 2000; around 45,000 now take part regularly in hunts. The demand for foxhunting has certainly not diminished.

Most interesting of all is to examine how hunting affects fox numbers. Perhaps the most reiterated reason which hunting enthusiasts enjoy promoting is that hunting is a form of culling – that without hunting, foxes would be ravaging farming communities. Realistically, fox hunting causes very little impact to fox numbers and likely increases them if anything. Fox numbers are determined by competition. Foxes will move into territories where they find it easier to find food and face less competition from other foxes. This means that there is a constant movement of foxes which cannot be stopped by hunting. Moreover, studies have shown that the more foxes killed in a winter cull, the more that are born in litters come springtime. The greatest regulator of the fox population are the foxes'  social factors themselves: social groups of foxes will defend their territory from other fox groups on a nationwide level. Other factors involve food availability and disease, but these tend to be local issues with little impact.

Fox hunting has very little to do with the actual real numbers of foxes killed. Those who participate should not try to convince both others and themselves that they are a necessity to the protection of farming. It remains their liberty to hunt, but it is for the purpose of their enjoyment, not conservation.

This article was written by Benjamin Jackson, a Research Associate at the Adam Smith Institute. Benjamin is half-way through his Classics degree at the University of Edinburgh.

To put minds at rest: Australia is not going to be the new Greece

Sadly, some seem not to have grasped the specific problem that is powering the Greek nightmare. Given this failure to understand the underlying cause, we get predictions like this:

Commodities crash could turn Australia into a new Greece

In more detail:

The respected Australian economist Stephen Koukoulas recently wrote of the dangers that escalating levels of foreign debt could present for future generations. Could a prolonged period of depressed commodity prices even turn Australia into Asia’s version of Greece, with China being its banker of last resort instead of the European Union.

No, simply no.

It's true that the Lucky Country has been very lucky, being the major commodity supplier into China as that nation actually built a nation. And that growth is slowing, the prices of those commodities are falling and so the terms of trade that Oz faces are deteriorating. But this will not, cannot, turn that country into another basket case like Greece.

For Australia has its own currency: the one thing that Greece does not have an which is causing that economic grief.

So, imagine that commodities, the major exports, do decline in price, and stay down in price. Yes, Australia as a whole is thus somewhat poorer. And it's likely that Australian wages relative to the rest of the world will therefore need to decline. Greece had to do this by making sure that 50% of young people, 25% of all people, were thrown out of work so that wages would indeed decline. Both Keynes and Friedman were adamant on this point, that nominal wages are sticky downwards and when those two agree you'd better pay attention. Australia, of course, does not need to do that. They can, as Friedman pointed out was the sensible way to do this, depreciate the currency instead. Relative wages change but no one has to be thrown on the scrapheap to achieve it. Indeed, as the value of those export commodities declines the currency will fall quite naturally, causing our price change without any action at all.

That is, Australia simply will not be the new Greece because Australia has its own currency. As Greece, obviously, does not.

Keynesian infrastructure spending might not be the answer you know

This story of the Don Quijote airport in Spain is instructive about one of the delusions of our times.

Spain's "ghost airport" - that cost hundreds of millions of euros to build and which became a notorious symbol of the excess of the country's bonanza years has been sold to a group of British and Asian investors for just €10,000 (£7,000). Ciudad Real airport airport, in the central Castilla-La Mancha region, has been closed since 2012, despite opening only four years prior to closure. The regional authorities raised an estimated €1billion in private investment to build it. They had hoped it would draw millions of visitors each year to Ciudad Real and the surrounding area, which is known as the home of Miguel de Cervantes’s fictional knight Don Quixote. But the airport itself soon became seen as a quixotic venture, drawing just 33,000 travellers in 2010.

This is of course a symbol of the investment excess in Spain in the boom years rather than of government infrastructure spending in a slump to boost the economy. But it faces exactly the same problem as all other such spending. Whether it is being done to boost the level of demand in the economy or not it is still necessary for the thing itself being built to add value. An airport (and this is not the only one in Spain) that no one wants to use is just a very expensive piece of tarmac with no other actual value. This thus makes all poorer.

Which produces a problem for those who would use infrastructure spending to boost the economy in recession. If the project itself would add value then it should be built, recession or no. And if it doesn't add value then it shouldn't be built, recession or no. There is no room left for the argument that it should be built because recession.

The Financial Misconduct Authority

I never expected to feel sorry for Martin Wheatley who, last week, resigned his position as Chief Executive of the Financial Conduct Authority, but I do. George Osborne gave him a non-job and Wheatley tried to make the most of it, thereby alienating too many people. The history of this is simple. A few months before the 2010 election, George Osborne, then Shadow Chancellor, announced that he would abolish the Financial Services Authority which had grown massively to 3,500 people, too many of them lawyers, who wasted everyone’s time with “compliance”, achieved nothing and signally failed to anticipate, still less prevent, the 2008 financial crisis. Their defence that this was all outside their control, being US driven, was nonsense. The Canadian financial sector is far closer to Wall Street than London is, and, by traditional banking properly supervised, the Canadians slid by gracefully.

Although Osborne was right to axe the FSA, he, being new to the game, failed to recognise the problem created by not explaining what would follow and how supervision would be maintained. FSA executives did not wait to pass “go” and accepted the lucrative offers coming their way. The City does not like uncertainty and panic ensured.

To bring calm, Osborne then announced that no one should fear for their jobs as he would replace, going one better than Hydra, the FSA with three new quangos: The Prudential Regulation Authority, The Financial Conduct Authority and the Money Advice Service. In addition we had the Financial Ombudsman Service and The Financial Services Compensation Scheme (both established by Gordon Brown in 2001). By the PRA becoming part of the Bank of England, the BoE regained its traditional City supervisory role. The Governor’s June encyclical, the Fair and Effective Markets Review, promotes that wider Bank responsibility.

Wheatley’s problem was that we never needed the FCA in the first place (see “Do we need the FCA?” (May 2015)  and “FCA should be 'terminated at birth’, suggests think tank” (October 2012)). The work for which the FCA took credit was largely conducted by consultants who could have been commissioned by any one. The rest of their “make work” could be done, if it is necessary at all, by the Financial Ombudsman Service, which also needs reform, the PRA and the competition authorities roosting in the myriad branches of the Business Interference and Skills department. It would be easier to reform the Financial Ombudsman Service if they had full responsibility for the job they are supposed to do.

Osborne, faced by dealing with the wrong man in the wrong job, has once again made the wrong decision. The FCA should have been axed, not poor Mr Wheatley. The question now is whether HMT has learnt anything from this experience. One fears not.

It's important to work out what parking meters are for

Before abolishing parking meters and charging for parking it's important to work out why we did this in the first place. It's an example of Chesterton's Fence: before you remove the obstacle you need to work out why it was placed there in the first place. Only then can you work out whether the reason is now obsolete, to that the fence is defunct. And the original point of parking meters wasn't to charge people for parking, nor to ration spaces by price, not at all:

Shoppers in small-town high streets should be allowed to park free, a minister has indicated, as figures show that councils are raising more money than ever from motorists. Marcus Jones, who was made high streets minister in David Cameron’s post-election reshuffle, suggested that small town centres could become “parking meter-free zones” in an effort to save shops from closure. The Government is growing increasingly concerned that punitive parking costs and fines are deterring shoppers from using their local high streets.

The original reason for parking meters was to increase the number of people using the area.

If parking is entirely free then some goodly number of people will use it all day and possibly every day. This takes up those scarce parking spaces. So, if you want to increase the number of people that pass through an area you want people to have free parking but only for some limited period of time. Then they will move on and others will be able to use the space to visit the area.

Thus, if your intention is to increase the human traffic through an area like a local High Street the answer is not to have free parking at all. It's to have free parking for some limited period of time. On the order of free for an hour, no return within an hour, those sorts of restrictions, rather than "park here all day for free". All of the parking meters and ticket machines needed are already in place. Just program them to issue the first hour's ticket for free.

From the Rockefeller Lancet report

Only a minor little point but symptomatic of how people really don't quite get the basics sometimes. The Lancet has teamed up with the Rockefeller foundation bods to tell us all that we'd better have global environmental socialism real soon now or Aieee! We're All Gonna Die! We think we've been told this before really.

They talk about the joys of the circular economy and seem to miss rather an important point about it:

Several essential steps need to be taken to transform the economy to support planetary health. These steps include the reduction of waste through the production of products that are more durable and require lower quantities of materials and less energy to manufacture than those that are being produced at present; the incentivisation of recycling, re-use, and repair; and the substitution of hazardous materials with safer alternatives. These changes will necessitate innovations in design and manufacture that capitalise on the potential restorative powers of natural systems combined with strategies to reduce overall demand for resources that greatly damage the environment during the course of their extraction, production, use, or disposal—leading ultimately to the circular economy (panel 1; figure 19).11 Importantly, such a transformation could also bring benefits to health and wellbeing if occupational health standards are adhered to, including through reduced amounts of air, water, and soil pollution; increased employment opportunities; and changes in diet and physical activity.

It's that "increased employment opportunities". That's a synonym for "everyone has to work harder". And that's really not a development that we're happy about having. For the aim and point of this having an economy thing is that we minimise the amount of human labour that has to be performed thus maximising the amount of human leisure that can be enjoyed. The basic problem here being of course that all too many people don't realise that jobs, employment, these are not benefits of a plan, they are costs of one.

Yes, it's only one small point taken from a large and long report. But it is symptomatic of their lack of knowledge about how economics works. That lost more people are going to have to work reprocessing our rubbish is not a good part of their plan, it is a cost of their plan.

Housing the Homeless

Homelessness in the UK is on the rise. 2014 figures show that 2,744 people slept rough on any one night in England, a 55 per cent rise on 2010. In London, there has been a rise of 16 per cent in a single year. Homelessness is a result of poverty and creates a downward spiral that is difficult to escape from. It is clear that it is an issue that needs to be tackled, particularly given the rising figures. The current policy on homelessness from the government centres on preventing long-term rough sleeping on the streets. The ‘No Second Night Out’ scheme has been successful in achieving this aim: its introduction led to 75 per cent of rough sleepers not spending a second night on the streets. An admirable success - but largely superficial.  It does not account for the ‘hidden homeless’, those who live in hostels, nor is it a lasting solution to homelessness. It is extremely difficult to build a life around inconsistent housing.

The root problem of homelessness is not achieved by taking people off the streets into temporary housing. It is only solved by people having places to live. And the current crisis in UK housing is not helping this. The severe lack of affordable housing is forcing people onto the streets and into homelessness. In 2013-2014, only 140,000 houses were built for the demand of 250,000, hardly enough to cover those who can afford to buy them, let alone those who live on the streets. Moreover, the cut to housing benefit announced in the July budget will not be conducive to preventing homelessness, instead, making it more difficult to combat it.

When examining the most successful solutions to homelessness, offering effective housing solutions is the best way. Preventative measures have been lauded, but these do not help those who are recurrently homeless. Schemes in America and Canada offering long-term housing have been hugely successful in turning around homelessness figures. Utah has dramatically reduced their homeless problem through their Housing First program that offers housing to homeless people with no strings attached. When given a stable home, rather than inconsistent halfway housing, people were able to effectively build their lives. Similar projects in cities across Canada have brought the same results, showing that it is also more cost effective to offer housing rather than pay for the upkeep of the homeless in temporary accommodation, particularly when we included costs accrued indirectly - such as healthcare.

But these solutions seem unlikely to be as effective in the UK while housing is at such a premium and remains as expensive.  Until then, the government will have to rely on preventative measures as its most effective solution until it can solve the real problem of housing.

This article was written by Benjamin Jackson, a Research Associate at the Adam Smith Institute. Benjamin is half-way through his Classics degree at the University of Edinburgh.