Why Hayek Matters
The gold content is worth about £5,000. But Friedrich Hayek’s Nobel medal has just sold at Sotheby’s for £1,155,000. That’s not a record, but it is way higher than most Nobel awards achieve when they go under the auctioneer’s hammer. And that says something about the importance of the man himself.
The sale coincided with the 75th anniversary of the publication of The Road To Serfdom, the book which transformed Hayek from a rather dry economist into a controversial—and famous—public intellectual. He wrote it, as his friend Karl Popper wrote The Open Society and its Enemies, as a ‘war book’, not something to be particularly proud of. In Hayek’s case, he said he wrote it out of frustration that he could not do anything to stop the bombs falling in London. All he could do was make an intellectual case against totalitarianism in general and national socialism in particular.
His publisher did a modest print run of 2,000, not expecting any great fireworks from it. But the book became an instant sensation and those copies sold out in weeks. For it challenged the soft ‘democratic’ socialism that prevailed among intellectuals and the commentariat. Hayek explained that, while it is nice to think that we can plan society better than individuals and markets do it, we really lack the knowledge to make such a complex system work. And while the idea of everyone pulling together for common purposes sounds attractive, there will never be agreement on what those purposes actually are. The idea that some universally accepted vision of society will just emerge is fantasy.
Instead, it is rather like a group of people trying to find a restaurant. They are all committed to go out to dinner somewhere nice. But one rejects the first place, another the second, and then so on until they eventually end up at somewhere none of them wanted.
Faced with disagreements about what the social goals should be and how to reach them, Hayek explained that it is no surprise that ‘the worst get on top’. A strong leader with a strong vision suddenly starts to look attractive. But that socialist vision can only be achieved by forcing people to conform to it. And that is an end that nobody really wanted to get to. The decent citizens of Germany would never have voted for Hitler if they could have foreseen what his militarism would lead to.
The typewriter that Hayek wrote all this on has just sold for over £18,000. (I have some letters from Hayek: he was a very bad typist.) His beaten up 1930s desk went for almost as much. And the scattering of items he kept on top of it went for four times that.
And so on. Even a collection of books including my own biography of Hayek and the commemorative photo biography that I edited went well into four figures.
Indeed, I last saw all these things in cardboard boxes when I was working on Hayek: A Commemorative Album. They have all been through my hands. I did not realise the financial value of what I was holding. But the real value is its connection with one of the greatest minds of the 20th Century, and one of the greatest liberal thinkers of all time.
Well, get on with it then Sir James
England will run out of water in as little as a quarter century we’re told. To which the correct answer is, well, get on with it then. We are a rainy isle, or part of a group of them at least. There’s no shortage of the stuff falling from the skies. It’s how we manage what does that matters here.
One of us has extensive experience of living with average annual rainfall about half the UK’s. The place doesn’t run out of water although they’ve had to build a few dams around and about. There’s even enough to irrigate the crops. Another way to look at it is that England gets perhaps 33 inches of rain a year on average. That’s dang near a yard deep over the entire country. We should be able to manage that supply to meet our demand:
England is set to run short of water within 25 years, the chief executive of the Environment Agency has warned.
The country is facing the "jaws of death", Sir James Bevan said, at the point where water demand from the country’s rising population surpasses the falling supply resulting from climate change.
"Around 25 years from now, where those [demand and supply] lines cross is known by some as the 'jaws of death' – the point at which we will not have enough water to supply our needs, unless we take action to change things," Bevan told The Guardian, before a speech today at the Waterwise conference in London.
It comes after it emerged Britain’s water companies are working on new plans to pipe water from the mountains of Wales and the rainy North of England to densely populated regions in the South.
The plans could help to avoid expensive infrastructure investments such as building new reservoirs or desalination plants, which experts say will be needed to keep taps running in the South East.
The answer, obviously enough, being to build a few more pipes, reservoirs and possibly desalination plants.
This is what we have government for isn’t it? To handle these collective problems that can be forseen? Or are we instead going to be told that if we just stop burning coal she’ll be fine? The correct economic answer here being that if no coal is cheaper then let’s do that, if pipes are then that. We’ll even agree to a little redundancy and uncertainty as well. But as even the Stern Review has pointed out at least some adaptation is both going to be necessary and also cheaper than trying to rely entirely upon mitigation.
Reform of the House of Lords
It was on March 19th, 1649, the House of Lords was abolished by Act of Parliament. The Act declared “that the House of Lords is useless and dangerous to the people of England.” It further declared:
“that from henceforth the House of Lords in Parliament shall be and is hereby wholly abolished and taken away; and that the Lords shall not from henceforth meet or sit in the said House called the Lords' House, or in any other house or place whatsoever.”
The Upper House was later replaced by a new body to have 40 – 70 members nominated by the Lord Protector, Oliver Cromwell. He was some ‘protector,’ in that at one stage he closed down the Lower House as well. Telling them, “You are no Parliament,” he brought in soldiers to drag the Speaker from his chair and shut the place down. He described the mace, the symbol of Parliamentary power, as “a fool’s bauble,” and ordered it taken away.
The abolition of the Lords did not obtain the consent of either Lords or the King and so it was not recognized as a valid law when King Charles II was returned at the Restoration. Parliament, with a hypocrisy it has not lost, later erected a statue outside of the only man who ever closed it down.
Many observers say that the current House of Lords is unwieldy. When 45 peers were added in the 2015 Dissolution Honours, its eligible members numbered 826. This compares with the US Senate of 100, France’s 348 senators, Australia’s 76, and India’s 250. It even exceeds North Korea’s 687, though it is smaller than the 2,987 of the Chinese National People's Congress.
A problem arose with the 1999 reform, which was supposed to be an interim measure. It reduced the hereditary element to 92, with each vacancy now filled by an election by the remaining 91. Life peers, making up the remainder, are a mixed bag. For every Lord Winston, the fertility studies expert who brings vast knowledge and insight to the Upper Chamber, there are less deserving ex-cabinet members like Lord Deben who contribute little or nothing. There are numbers of Labour peers who were “pushed upstairs” as MPs to vacate safe Parliamentary seats wanted by aspiring Labour apparatchiks. The quality is patchy, to say the least.
Some urge an elected Upper House, but this is resisted by the Commons because it would give the Lords the sense of a mandate with which to oppose and overturn the will of the Commons. A wholly appointed House is thought to offer too much power to the Prime Minister, while an ‘independent’ quango to recommend such appointments would be prone to political capture. The Upper House continues to survive in its present ‘temporary’ form because no-one can agree on what might improve it.
One reform might be to convey lordships to some, with only the honour and title, and without the right to sit and legislate. That could be reserved for a smaller number who would be appointed with a scrutiny and revision brief that is the essential and useful function of the House. But abolition would be a mistake, taking away some of the restraint that curbs the excessive use of power by the Lower House.
Venezuela Campaign: Denial of the individual led to collective collapse
Living in Venezuela today is like being part of a bad Mad Max movie. Armed motorcycle gangs in the pay of the Maduro regime roam the streets and attack pro-democracy demonstrators. There is no electricity for much of the time, and, just like in Mad Max, water is a precious commodity. People hoard it at home in plastic bottles and some are forced to refill from sewage canals.
Looting is widespread due to the shortage of food. 350 businesses in the state of Zulia alone have been looted in recent days, incurring losses of over $50m. Many shops remain closed, exacerbating the shortages. Over 40 people have died in hospital over the last week as a result of the continual blackouts.
People are being picked up off the street by motorcycle gangs, known as collectivos. Many innocent people have been interned without trial, and some even killed on the spot. 32 journalists have been illegally detained this year, just for trying to tell the truth. Police arrested one journalist for reporting on the electricity crisis. For good measure, they also looted his flat of all valuables.
How did Venezuela get to this point? The warning signs were there early on but were ignored by many, who trumpeted Chavez and his policies. The Government under Chavez did not respect individual rights and regarded the state as being above the law. The Inter-American Court of Human Rights (IACHR), an autonomous body of the Organisation of American States, found the Chavez regime guilty of severe human rights abuses on 13 occasions up to 2011. In each case, the regime refused to comply with the court’s sentences.
Examining a few cases reveals very clearly the nature of the state that Chavez created:
In 2009 a judge, Maria Afiuni, decided to release on bail a citizen who had been held in pre-trial detention for more than the legally permissible period of two years. After announcing her decision, she herself was arrested without a warrant by the police. They were under orders from DISP, the state political intelligence agency. Chavez himself gave a broadcast denouncing the judge the following day, saying:
“I demand harsh treatment of this judge; I have said so to the President of the Supreme Court and I say to the National Assembly; there has to be a law, because a judge who frees a bandit is much worse than the bandit himself….I demand 30 years in prison.”
The judge was jailed, as was her lawyer, because, in the words of the Attorney General, “he sought to avoid the conviction” of his client. Judge Afiuni was released on parole in 2013 because of ill-health. She subsequently revealed that she had been sexually abused and tortured by guards and officials of the Ministry of Justice. This is not an isolated case. Several other judges were removed by Chavez for political reasons. Human rights groups accused him of creating a climate of fear so all judges would follow political instructions. That is how we have reached the situation we have today.
In 2007 the regime refused to renew the licence of Radio Caracas Television, which was hostile to Chavez. Before this, the station’s journalists had been physically intimidated, and some were even wounded by gunfire. Following the closure of RCTV the state seized its broadcasting equipment without any legal process or compensation. As an example of Chavez’s policy of ‘expropriating’ private property, this was just one of very many cases. The Venezuelan think-tank CEDICE has identified over 3,300 state violations of property rights. The violations include seizures of companies, hotels, social clubs and residential buildings, as well as land invasions and forced acquisitions of many properties. During this process, the Chavez family itself has expanded its own holdings. Chavez’s daughter Maria is now a multi-billionaire.
In 2004 Uson Ramirez, a former finance minister and general who had fallen out with Chavez, was arrested after he made remarks about an alleged “flamethrower” incident. Ramirez was responding to a news article that claimed soldiers were using flamethrowers as a form of punishment, and as many as eight had been burned in this way. Ramirez said that if a flamethrower had been used it would be ‘very serious,’ and for this he was jailed for five years.
From the very beginning Chavez ignored individual rights and created a gangster state, intimidating all to bend to his will or suffer the consequences. Internationally, far too many tolerated or ignored this brutality. Some even applauded his regime. Such state oppression of individual rights naturally leads to the economic and social breakdown we see today. Only by tackling breaches of rights when they first occur can countries hope to avoid the Venezuelan path.
More information on the Venezuela Campaign can be found on their website.
Individualism and The Prisoner
Patrick McGoohan was born on March 19th, 1928. Although he starred in many films and TV series, he will forever be remembered for his 1967-1968 iconic TV series, “The Prisoner.” His character, named only “Number Six,” spends each episode of the series attempting to escape from a mysterious island village in which he is detained after being kidnapped.
The series became a hallmark for individualism, in that his interrogators try to find out why he resigned from his previous job as a spy, but are resisted and rebuffed at every turn. He tells them, “I will not be pushed, filed, stamped, indexed, briefed, debriefed, or numbered! My life is my own!” And at the start of every episode, when he asks “Who is Number One?” (the mysterious head of the Village), he is told, “You are Number Six.” His reply, “I am not a number! I am a free man!” is always met with mocking laughter.
The series was surreal, featuring pastel colours and overlaid with sixties countercultural themes. It was actually filmed in Portmeirion, a miniature Italianate village in North Wales, and managed to combine spy fiction with science fiction in a toy-town setting. Its libertarian theme, of someone standing up to and outsmarting powerful authority, gave it a cult status among those who favour a high measure of personal liberty.
In one episode when he is asked, “Oh, Number Six, have you no values?” he replies curtly, “Different values,” emphasizing a determination to live by his own choices. McGoohan not only took the lead role, but was co-creator and co-producer of the series, and made it a parable for the individual versus the collective and conformity. In the utterly surreal final episode, when he finally breaks out of the Village, bringing about its destruction in the process, he emerges from a cave to find a signpost that indicates he is not far from London. The allegory of the Village standing in for psychological imprisonment is plain.
The Prisoner became a libertarian classic, and the logo of the Village, a penny-farthing bicycle that appeared in the closing credits, was used as a symbol when the ASI founded its group, The Next Generation. In honour of the cult status of “The Prisoner,” I occasionally wear a black blazer edged with white ribbon, like the one McGoohan wore in every episode of the series. And I have stayed in Portmeirion, and walked among the buildings that were the backdrop to its events.
A significant problem with politically run organisations - they're politically run
Embedded in that idea of a democratically run economy that’s so popular over on the left is the idea that it should be politics and voting which determine how organisations are run. The problem with this should be obvious, it’ll be politics and voting determining how organisations are run. Given who ends up in politics, how that whole system works, this is unlikely to prove efficient:
Rail leaders will this week call for a new independent watchdog that will allow Chris Grayling, the Transport Secretary, to take a back seat from meddling with the country’s beleaguered train network.
Paul Plummer, chief executive of the Rail Delivery Group (RDG), the trade body that represents operators and tracks and station owner Network Rail, will urge Keith Williams, who is conducting the biggest review of the railways since privatisation, to set up an “arms-length body” that will prevent the railways from being used as a “political football”.
As we can see the desire here is to remove those train sets from being run on that day to day basis by that politics and voting stuff. It’s not particularly Chris Grayllng at issue here, it’s that a large and complex organisation is not going to react well to being buffeted by the whims and manias of daily politics. Thus the need to remove it from such control.
But if this is then necessary then the main argument for nationalisation itself then fails, doesn’t it? Politics should directly control such vital infrastructure services goes that argument. But then we’ve got to insulate that vital infrastructure from politics. So, there’s no argument for the political control, is there?
Might as well go for the efficiency of private ownership within general regulation then.
Or, as we could and should put it, the major argument against politics and politicians running things is how politics and politicians run things.
The Paris Commune of 1871
The Paris Commune began on March 18th, 1871, but lasted barely two months. Although widely hailed on the Left as an uprising based on class struggle against bourgeois masters, there were more complex issue behind it. After its defeat in the Franco-Prussian War, the population of Paris was dismayed when rural France elected an assembly with a royalist majority, and feared it might restore the monarchy. Furthermore, the mood in the capital was tense after the long siege. The National Guard, composed of citizens who had fought in the siege, greatly outnumbered the regular army, though it lacked the latter’s discipline and fire-power.
When Adolphe Thiers, head of the provisional national government, tried to disarm the Paris National Guard, violent resistance broke out, two generals were killed by the mob, and the city fell into the rebels’ hands. All regular troops and government offices were withdrawn to Versailles. Elections held a week later resulted in a Commune government of Paris. It contained several different revolutionary factions, including Jacobins of the 1793 Revolutionary tradition, Proudhonists, and Blanquistes, who favoured organized, secret conspiracy to overthrow the established order by violence. The Commune’s programme called for limits on working hours and other revolutionary goals. Divisions between the factions thwarted any coherent reform programme, and prevented the establishment of an effective fighting force.
Other Communes set up briefly in Lyon, Marseille, Saint-Étienne and Toulouse, were quickly suppressed, leaving Thiers free to prepare his move against the Paris Commune. When his spies reported that one section was undefended, he ordered government troops to enter. During the “Bloody Week” that ensued, the revolutionary defenders set up numerous barricades in the streets and burned many buildings. The regular troops bypassed many barricades by knocking through internal walls in the houses that lined the streets. In retaliation the revolutionaries executed the Archbishop of Paris among other establishment figures.
After a week of violence, the Commune was suppressed. Perhaps 20,000 insurgents died, along with about 750 regular troops. In the aftermath of the Commune, the government cracked down ruthlessly, and arrested about 38,000 people. More than 7,000 were deported, but some escaped to voluntary exile.
Karl Marx, from his exile in England, declared March 18, 1871 “the dawn of the great social revolution which will liberate mankind from the regime of classes forever,” interpreting the Commune in terms of class struggle, as he interpreted everything else. In reality, while it could just about have spread into the bloody nightmare of the Revolution of 1789, it didn’t. This time the authorities held their nerve and suppressed it.
Why restaurant owners obsess about seemingly minor changes in the minimum wage
On the one side we’ve the people complaining that restaurants don’t pay great wages. Often enough not “living” wages. But, but, they’re big businesses with decent cashflows. They charge, £10, £30, just for a meal that can be cooked at home for pennies! Of course they can afford to pay decent wages!
On the other side we’ve those who understand the realities of the business. Margins are tight, there’s a great deal of competition - much the same statement of course - and profits rare. Thus wage levels are obsessed over.
A little data here. Sure, it’s about Washington DC but London won’t be much different:
CP: Some D.C. restaurants are celebrating their 25th and 30th anniversaries. Is there hope for restaurants opening in 2019 to have that kind of lifespan?
MG: It’s rare. One percent of openings last that long. I think a 15-year run is something to be damn proud of. I would love if any of my clients or people I know in the business have a good 10 years with a five-year option.
That’s success.
CP: What are some of the most common financial missteps new restaurants make that can get them into trouble quickly?
MG: The main reason businesses close quickly is because they undercapitalized. They thought they could open a restaurant for $1 million, but they end up spending $1.1 million. The business didn’t take off at the beginning. Now they have all these creditors coming after them. The construction guy didn’t get his final payment. The architect didn’t get his final payment. Everyone’s getting nervous. You’re scraping every dollar that comes in. There are a lot of businesses that can’t weather that. That’s the reason a restaurant turns in three years or less.
That’s the average experience. To try and fail within three years.
Now does it make sense why restaurants obsess about wage levels? Care deeply about 30% of their costs?
Good things from St Patrick’s land
St Patrick’s Day is celebrated on March 17th, the traditional date of his death. Since he is the patron saint of Ireland, people celebrate the country as well as the man. Some of the revelry borders on the kitsch, with giant green felt hats emblazoned with Guinness logos, and celebrations of leprechauns, Ireland’s “little people.” I was once in Chicago on the day, and saw the city’s fountains turned bright green, and the bars serving green beer (which looked wrong).
Patrick himself, after he was kidnapped from Britain in the 5th Century aged 16, and made to work as a slave in Ireland, later returned to bring Christianity to the island, it is claimed. He is supposed to have driven the snakes out of Ireland, but there is no evidence that there ever were any, and the story may be a coded reference to driving out the Druids who practised the ancient Celtic religion.
There are many good things to celebrate about Ireland, apart from its rain, but two in particular stand out. One is the tax exemption on creative artists, introduced by Charles Haughey in 1969. Originally it exempted income earned by Irish writers, composers, visual artists, and sculptors altogether from income tax, but the canny Irish Treasury thought it was costing too much in revenue foregone, and it now only exempts up to €50,000.
The scheme has encouraged several high-profile people in the "creative industries" to settle in Ireland, while also nurturing home-grown talent. Anne McCaffrey and Harry Harrison, famous SF writers, became Irish to take advantage of it, and part of its legacy is the large population of immigrant artists the scheme has persuaded to become Irish residents. Would-be claimants have to apply for it, and gain exemption if the Revenue deems their work to be original and creative, and recognized as having cultural or artistic merit. It has boosted Ireland’s reputation on the world’s cultural map.
Another reason to celebrate the Emerald Isle is its attitude to Corporate taxation. Its headline rate of 12.5% on trading income is among the lowest for developed countries, and encourages foreign firms such as Google to locate there. It is central to Ireland’s economy, with foreign firms paying 80% of Irish corporate tax, employing 25% of the Irish labour force, and creating 57% of Irish non-farm value addition.
The headline rate understates the value to foreign firms that locate there. Multinationals pay an effective tax rate of under 4% on global profits "shifted" to Ireland, via Ireland's global network of bilateral tax treaties. Ireland has a complex set of Irish base erosion and profit shifting ("BEPS") tools that enable firms to achieve these lower rates by moving their profits through Ireland.
Furthermore, because these schemes favour intellectual property rather than physical goods, almost all foreign multinationals in Ireland are from the industries with substantial IP, namely technology and life sciences. This puts Ireland at the forefront of modern technology. The EU resents and resists Ireland’s policy, however, and is bringing forward a plan to end national vetoes on tax policy.
In the meantime, though, we have two reasons to celebrate Ireland, and both involve the attraction of low taxes. One draws in cultural talent, and the other brings in international business. So here’s wishing a happy St Patrick’s Day to our neighbours and to the world at large.
Why is this heartbreaking?
The Telegraph tells us that:
Kingfishers, otters and swans are being forced to dodge plastic in Britain's rivers, the first images from a nationwide river survey have shown.
The University of Exeter and Greenpeace are currently testing river water at 13 sites nationwide and analysing plastics found there.
Images taken during sampling show otters swimming alongside plastic bottles, voles eating plastic, and plastic in the nests of swans, moorhens and coots.
The headline telling us:
Heartbeaking images show otters and kingfishers living alongside plastic in British rivers
Why is this heartbreaking?
One advantage of maturity in years - but not too much of course, given the effect upon memory - is that ability to recall what we used to worry about. Which was that Britain’s waterways were so polluted that we didn’t have any wildlife. The 1950’s Thames was dead water, not a living thing above the size of E. Coli in it below about Teddington or so. Rivers of London is even a novel using this as its basic underlying conceit. Now we’ve got salmon in there. One of the things about Tarka The Otter was the complaint that such magnificent - if often vicious hunters - creatures would be no more than decomposing corpses soon enough.
OK, we’ve got the wildlife back and it has to dodge plastic. And?
The point being that sure, we’re using more plastic than we used to. These past few decades have indeed seen a significant rise in our use, our release as waste into that environment. They’ve also seen a massive diminution of all the other wastes we used to splay about. The net result - net note - is better. Why is this heartbreaking?
It’s even possible that we’d like there not to be the plastic out there as well. But as we consider what we’re going to do about that we must indeed recall that the current solution is vastly better than the one we had before we all started using plastics. Maybe it’s all just a coincidence, maybe it’s a correlation and there’s no causality to it. But whether or not that’s true is the thing we’ve got to consider.
It’s at least possible that our plastic use, along with it littering the waterways, is why we’ve actually had the swans, the coots, the otters, back. And if that’s true then what should we do then?
Again, not to say that is true. Only that that’s the question to consider.