Celebrating Europe Day, perhaps
There are two “Europe Days.” The Council of Europe celebrates it on May 5th, but the EU does so on May 9th, the anniversary of the Schumann Declaration of 1950 that paved the way for the European Iron and Steel Community. It was issued by French Foreign Minister, Robert Schumann, and put French and German coal and steel production under a single authority, open to other Western European countries that wished to join.
Schumann was explicit that it was designed to bond France and Germany economically, so that no more wars would break out between them. He wrote, "World peace cannot be safeguarded without the making of creative efforts proportionate to the dangers which threaten it.”
He also said, revealingly, “The pooling of coal and steel production should immediately provide for the setting up of common foundations for economic development as a first step in the federation of Europe.”
Note the words “first step in the federation of Europe.” Right at the start of the process of closer unification of Europe, there were people at the heart of it bent on steering it into a federal union, a United States of Europe. The European Iron and Steel Community morphed into the Common Market, that morphed into the European Economic Community, that segued into just the European Community. And that, after the Lisbon Treaty, became the European Union in 2009.
There is little doubt from recent moves and statements that the European Commission looks to a European unitary tax system, with taxes paid direct to Brussels, European law, a European army, EU embassies and an EU seat on the UN Security Council. This is not what the UK thought it was signing up to when it affirmed its membership of the European Economic Community.
At the time of the 2016 referendum, when people were asked the simple question as to whether we should remain in the EU of leave it, a ‘Remain’ vote was presented as a status quo, versus a ‘Leave’ vote that would take a leap into the unknown. In fact there was no status quo option. A ‘Remain’ vote would have kept the UK into a rapidly evolving juggernaut hurtling towards the “ever closer union” of unitary statehood, and with no means of preventing that.
Parliament delegated the decision on EU membership to the people of Britain, and in the People’s Vote they opted to leave.
It is today unlikely that European unity is the only thing preventing another war between France and Germany, so it is possible to argue that it did the job that lay behind its initial impetus. Thus we might hail its success and celebrate Europe Day on this May 9th, but we will celebrate it from the outside.
If only Aditya Chakrabortty had the first clue of the business world he attempts to write about
Aditya Chakrabortty wants to tell us that it’s Thatcherism which explains why the UK has no equivalent of Huawei. The explanation being that if the old GEC was still around then we would have. This is not quite how it did work out:
Namely, where is Britain’s Huawei? How does one of the world’s most advanced economies end up without any major telecoms equipment maker of its own, and having to buy the vital stuff from a company that enjoys, according to the FBI, strong links with both the Chinese Communist party and the People’s Liberation Army?
Well, the most obvious answer is that the Chinese company is better at producing that equipment. We here have heard of that idea of the division and specialisation of labour along with the trade in production that follows. But there’s more error here:
Perhaps the pinstriped jeering got to Weinstock. Even as he protested “we’re not a company to render excitement”, he too began indulging in the 1980s business culture of “if it moves, buy it”. Between 1988 and 1998, academics found that GEC did no fewer than 79 “major restructuring events”: buying or selling units, or setting up joint ventures. But it was after Weinstock stepped down in 1996 that all hell broke loose. His replacement was an accountant, George Simpson, who had made his name, as the Guardian sniffed, “selling Rover to the Germans”. The new finance director, John Mayo, came from the merchant-banking world detested by Weinstock. Together the two men looked at the giant cash pile salted away by their predecessor – and set about spending it, and then some.
They sold the old businesses and bought shiny new ones; they flogged off dowdy and snapped up exciting. In just one financial year, 1999-2000, they bought no fewer than 15 companies, from America to Australia. Suddenly, GEC – or Marconi, as the rump was rebranded – was beloved by the bankers, who marvelled at the commissions coming their way, and the reporters, who had headlines to write.
Then came the dotcom bust, and the new purchases went south. A company that had been trading at £12.50 a share was now worth only four pence a pop. In the mid-2000s, Marconi’s most vital client, BT, passed it over for a contract that went instead to … Huawei.
Indeed so. But what was it that they were trying to do? Well, the GEC of old didn’t in fact have the technology to build those whizzy new mobile telephone networks. They had System X, the digital exchanges for landlines. A great technology of course. But not one that addressed that new world. The reshuffling of businesses was to drop the older technologies and to create a world beating position in these new ones.
Sure, the execution was, how to be polite about this, less than successful. But the aim was to create a Huawei. The entire Simpson plan was to be market leader in mobile and internet technologies, ones that GEC didn’t have as a result of Weinstock not investing at that leading edge of technology.
So the critique fails at a certain level. And yet it gets worse than this again, for it fails at another more basic level. Note again this:
sold the old businesses
What they did was some shuffling within the corporate envelope. Much of the old GEC - suitably tempered by the passing of the decades - still exists within Siemens for example, and that’s not the only home of those operating businesses. What didn’t happen is, as Chakrabortty is implying, that all those centres of excellence, or whatever we might want to call them, disappeared, got closed down, thrown on the scrapheap. It’s just that a different set of capitalists - these days, just a different series of pension funds - own and manage them.
That we buy in telecoms from China and export Range Rovers to China isn’t a problem - this is called trade and it’s wealth enhancing. To blame this on GEC’s failure is an exotic argument, given that the failure was an attempt to build that very modern telecoms powerhouse that would have changed those terms of trade. And finally, corporate reshuffling is just that, a change of ownership, not a ceasing of the existence of the operating units.
All of which it would be useful for a journalist to know if they were to attempt to analyse why Britain is - or isn’t - buying from Huawei.
Happy birthday, F A Hayek
F A Hayek, born on May 8th, 1899, was one of the major intellectual influences of the 20th Century. He was a leading proponent of the Austrian School of Economics, of its empirical, rather than its deductive, wing. For his academic work he was awarded the 1974 Nobel Prize in Economics, jointly with Gunnar Myrdal.
Hayek led the resurgence of classical liberalism after World War II, founding the Mont Pelerin Society in 1947 in company that included figures such as Milton Friedman and Karl Popper, in order to combat intellectually the collectivist and socialist mentality that was then so dominant. Several of Hayek’s works became best sellers outside of academe, including “The Road to Serfdom” in 1944 and “The Constitution of Liberty” in 1960.
He emphasized the limits to what people could know, claiming that societies which generate naturally contain more knowledge and wisdom than any that are dreamed up by intellectuals. He regarded the price system as part of a spontaneous order, rather like that of a language, and something created by human beings, but not designed by them. This was the notion of a “spontaneous order,” superior to a centrally planned order because it contained the inputs of millions, and had knowledge dispersed throughout it. It reacted faster than any system that needed to collect information in order to react to changing events. The spontaneous system did this naturally.
Hayek, as much as anyone, deserves credit for the spread of neoliberal and free trade ideas, and for the rise of opposition to central planning and controls. When Antony Fisher asked Hayek how he might help the cause, Hayek suggested he eschew politics and disseminate ideas instead. In response Fisher founded the Institute of Economic Affairs. Hayek was also a good friend to the Adam Smith Institute, serving as Chairman of its Academic Advisory Board. On his twice-yearly visits to meetings of the British Academy, of which he was a Fellow, he would visit the ASI and spend an afternoon in our company discussing ideas.
He received many honours in his lifetime. He was appointed a Companion of Honour in 1984 for "services to the study of economics,” and was awarded the Presidential Medal of Freedom in 1991 from President George H. Bush. His more lasting legacy is on thought, and it continues still, and will do so long into the future. He died in 1992, at the age of 92, having lived just long enough to see the Berlin Wall come down and the totalitarian socialist regimes of the Iron Curtain replaced by liberal and relatively free market societies instead.
Digital markets: more Victorian than you thought
In 2015 the EU embarked on a landmark project to create a frictionless free market for digital services in the mould of the European Economic Area. The scheme, christened the Digital Single Market, is hoped to be complete by 2020 and may contribute up to €415 billion per annum of economic growth, as well as increased competition and a shift in focus for the Single Market to embrace the digital future of the European economy.
As Britain leaves the bloc, however, it is faced with the chance to return to its free-trade roots at a global, rather than a regional, level. The rationale behind the Digital Single Market may prove a key catalyst for this, as well as an opportunity to embrace free trade principles without the heavy taxpayer-funded bureaucracy that dominates the European approach.
Culture is one of the greatest exports of modern-day Britain. Organisations like the British Council and Commonwealth have a global presence and provide worldwide access to British values and heritage. The economic benefits of this appear to be substantial: a recent report estimated that when two countries are Commonwealth members, cultural links like the English language and parliamentary democracy can boost FDI by 10% and trade by twice that.
Many Commonwealth countries are far more dynamic than those in the EU; economic expansion in states like India has led to the dominance of the tech sector. Such rapid modernisation has already been practiced in some former Soviet states like Estonia, jumping from a near-agrarian economy to a technological one, boosting its economic significance. The competitive advantages of Commonwealth states are evident in places like Bangalore, where economic liberalisation has led to a competitive dominance with an English-speaking workforce operating at a fraction of Western costs.
Post-Brexit Britain could benefit from free trade policies suited to the increasing digitalization of the world. If the future is digital, why engage in the lengthy and often burdensome negotiations required to set up a bureaucratic trade bloc? Alternatives like the Commonwealth could lend themselves remarkably well to a unified digital economy without barriers, providing effortless wealth flow around the world and a powerful incentive for developing economies to deregulate their tech sectors. Digital free trade is a concept that seems purpose-built for a global Britain, and provides an opportunity to marry its roots of Victorian laissez-faire economics with a modern-day annihilation of distance.
Peter Wollweber is the winner of the 18-21 category in the ASI's 'Young Writer on Liberty' competition.
How free trade can kickstart a GM food revolution
The first genetically modified food was approved for release in 1984. It was known as the Flavr Savr Tomato and had been engineered to have a longer shelf life by inserting an antisense gene to delay ripening. Despite its failure, GM foods have come a long way over the past 35 years, continually bringing new and more sophisticated benefits. Whether it be their greater nutritional content or medical benefits, it is evident that they are becoming increasingly prevalent in today’s society. However, following Brexit, technological advancements in GM foods may stall, due to various limits of trade agreements. Nevertheless, it is certainly possible for free market policy reforms to help rectify this complication.
UK International Trade Secretary, Liam Fox, has made it clear that he wishes to strike deals with pro-GM foods nations: Brazil, Argentina and the US. In order to continually accelerate the technological progress in developing GM foods, it is imperative that we strike such free-trade agreements. Low tariff barriers caused by such an agreement will help increase the trade of GM foods exponentially while providing a greater investment incentive for firms developing GM foods. Moreover, domestic firms developing GM foods will face competition from abroad, and therefore be incentivised to cut costs and increase efficiency.
Furthermore, monopolies competing at a global level, such as Bayer, a German multinational pharmaceutical company, will be stripped of their market power. A free trade deal would encourage new firms to enter the global market, increasing competition and further incentivising them to innovate. Moreover, by advocating a free-trade agreement, technology can cross over borders more freely, which can effectively help accelerate improvements in technology involved in developing GM foods. In addition, by adopting a free-trade agreement, firms developing GM foods can specialize, allowing them to benefit from economies of scale and lower average costs, which can be crucial due to the high fixed costs typically associated with the development of GM foods.
Unfortunately, in the case of manufacturing a free-trade agreement, it is often much easier said than done. However, if nations are wise enough to notice the vast benefits associated with such an agreement, it would most certainly help stimulate the development of genetically modified foods in the future.
Prerak Goel is the winner of the under 18s category in the ASI's 'Young Writer on Liberty' competition.
Humans take care of those things that are worth money and don't those that aren't
There is a great misunderstanding out there over the value of things. For we humans - this is just the way that we are, not a moral reflection - take care of those things that we value and we don’t take care of those things we don’t. This should be obvious of course - to take care of something is a demonstration of valuing it.
This demand to allow the international trading of ivory therefore makes great sense:
African nations home to more than half the world’s population of elephants on Monday called for an end to the ban on sales of ivory.
Delegates from six countries attended a summit in Botswana this week where they discussed how to persuade the world to lift the 30-year-old ban imposed by the Convention on International Trade in Endangered Species, CITES.
The attendees, which included heads of state from Botswana, Zambia, Zimbabwe and Namibia, stressed they want to be able to sell huge stockpiles of ivory to boost funds for conservation and anti-poaching.
Mokweetsi Masisi, the president of Botswana, said on his arrival at Kusane that the summit's theme was: "Towards a common vision for the management of our elephants."
Animals that humans value persist out there in the environment. There’re many more cattle out there than a purely wild world would have because we like to eat cattle. They are of value to us so we ensure they exist. Elephants producing value for humans will continue to exist. Those that don’t, well, they won’t, will they?
We can indeed say that the simple existence of elephants out there is of value to us. That warm glow we get when viewing a National Geographic documentary. But it’s equally obvious, given what is happening to those herds that such a valuation isn’t enough. For we don’t in fact cough up enough money to ensure their survival. Thus something more must be done to allow the capture of that value which will ensure that survival.
To say that we ought to value elephants without making billiard balls of them is fine - nothing wrong with a bit of moral exhortation. But management of the world needs to depend upon the facts about us, not the better angels we aren’t.
How does social media affect our happiness?
Social media has allegedly become the new menace facing young people in the digital era; Ofcom's 'Children and Parents: Media Use and Attitudes Report' points out that 23% of 8-11 year olds have a social media profile, a figure rising to 74% amongst those aged 12-15. A seemingly constant stream of media reports highlight the apparent dangers that social media brings about in relation to life satisfaction; with the government's 'Online Harm' White Paper suggesting new policies such as establishing a ‘duty of care’ to make social media companies take more responsibility for the safety and wellbeing of their users, evidencing the general concern that surrounds this issue.
However, a new paper published yesterday casts doubt on the idea that social media has a detrimental effect on the life satisfaction of teenagers. It offers compelling evidence that efforts to curb teen’s screen time are unlikely to make a significant impact on their wellbeing. The paper – authored by Amy Orben, Tobias Dienlinc and Andrew K. Przybylski – argues that most links between social media and life satisfaction are ‘trivial’ when best statistical practises are followed. In essence, the extent to which your son or daughter chats to their friends on Facebook accounts for less than 1% of their wellbeing, with 99.75% of satisfaction over the course of a year being dependant on other factors such as friendship, family life and school.
By analysing responses of 12,672 10-to-15 year olds from a nationally representative dataset, where respondents were asked one question regarding levels of social media usage and gave a further six statements to assess life satisfaction, the authors were able to distinguish between ‘within-person effects’ (tracking an individual and what affects them over time) and ‘between person effects’ (comparing different people at the same point). This methodology goes some way in explaining the insights the conclusion reached, combined with the large dataset. It allowed them to determine whether social media does genuinely reduce life satisfaction amongst users with greater screen time, or whether this assumption regarding the direction of causation was misplaced and adolescents with an already lower life satisfaction simply use more social media. Their conclusions were clear, stating:
‘The relations linking social media use and life satisfaction are, therefore, more nuanced than previously assumed: They are inconsistent, possibly contingent on gender, and vary substantively depending on how the data are analysed. Most effects are tiny— arguably trivial; where best statistical practices are followed, they are not statistically significant in more than half of models.’
With a growing concern surrounding the operation and role of social media platforms in our society, it is clear that limiting screen time or misguided legislation surrounding social media usage should be resisted. Not only is it a clear restriction on liberty, but as the paper proves it will do little to improve the life satisfaction of teenagers who currently use social media. Having said that, it is clear that further work needs to be done, and as the report highlights, it is crucial that social media companies work hand in hand with the scientific community, providing more data with higher levels of granularity to continue to assess the effects of social media on our lives.
David Hume still influences our thinking
A remarkable man came into this world on May 7th, 1711. David Hume was a contemporary and friend of Adam Smith. They would meet together in Edinburgh taverns to discuss their ideas with each other. In the Adam Smith Institute we have the Tassie medallion plaques of each of them next to each other.
We speak of “David Hume the Philosopher,” but in his day he was known as David Hume the Historian.” When he published “A Treatise of Human Nature,” he said of it that “it fell dead-born from the press.” However, his massive 6-volume “History of England” was an instant best-seller and established his fame.
Hume was a thoroughgoing empiricist, maintaining that impressions come to us via the five senses, and that our ideas are derived from them. He was very much concerned with the world of our observation, and preferred natural explanations of things rather than supernatural ones. He argued that it is only habit or instinct that makes us suppose things will be seen to behave as they have done previously, failing to find any causal thread that connects past events to future ones. This is his famous “problem of induction,” solved by Sir Karl Popper in the 20th Century. Popper’s solution is that we conjecture about the future in a leap of the imagination, and then test our theories by real-world experiments.
When we maintain that the free markets and choices of neoliberalism have proved their worth in practice by the observed results they have achieved, there is Hume as well as Smith inspiring that approach. It is what happens in practice that matters. And when we point out that socialism was tested to destruction in the 20th Century, we are referring to the disastrous results it engendered every time. Things have to be grounded and tested in the observed world, not in the fanciful reasonings of theorists.
Hume’s concern with this world rather than any next world set him at odds with the established religion of his day, putting him at risk of severe punishment. As it was, his unorthodoxy caused him to be denied promotion and preferment. He was not one to mince words, as the concluding paragraph of his “Enquiry Concerning Human Understanding” makes clear.
"When we run over libraries, persuaded of these principles, what havoc must we make? If we take in our hand any volume; of divinity or school metaphysics, for instance; let us ask, Does it contain any abstract reasoning concerning quantity or number? No. Does it contain any experimental reasoning concerning matter of fact and existence? No. Commit it then to the flames: for it can contain nothing but sophistry and illusion.”
Technology in the driving seat: how competition can end car accidents
Driverless cars seem to be, if you’ll pardon the pun, rather a stop-start issue. It’s evident to most people with an interest in the sector that a driverless world is eminently possible, and might serve to combat the 94% of accidents caused by human error. But various obstacles still lie in the way of this technology, not least the drag factor on commercial viability provided by the fact that at present, consumers simply prefer to drive.
To make self-driving cars a commercial possibility, therefore, the impetus must come from manufacturers. Tax breaks birthed the diesel car, and by the same method manufacturers may be more inclined to develop technologies that integrate driverless car systems under the same algorithms, more or less eliminating the concept of a car crash altogether.
Theoretically, car crashes stem from minor differences in interpretation. Whilst one driver, for instance, might see bad weather as a deterrent from driving, a more confident individual would not. In extreme cases this would mean different calculations of risk, leading to fatalities. Driverless cars alone are not the answer to this, as each algorithm developed will have its own ‘interpretation’ of the minute judgements made every second by an autonomous vehicle which may conflict with cars driven under different algorithms, or indeed the evolutionary algorithms which form human responses. However, further liberalising the market would lead to dominance of the algorithm system proven to be the best combination of safety and efficiency that human passengers seek. Less need for healthcare and policing infrastructure that limits the damage caused by dangerous driving could even mean lower tax burdens on the ex-drivers themselves.
Currently, such a scheme would hit the buffers due to a natural tendency of drivers to trust their own judgement over inorganic algorithms, hence the need for tax incentives at this early stage. But times are changing in this respect. Yuval Noah Harari argued in 2015 that the world will soon experience a shift away from the innate faith in human judgement towards ‘dataism’: faith in data processing, with the socially instilled knowledge that advanced digital algorithms are better at making contextual judgements than our own minds. Such a progression would negate the moral opposition that currently deters manufacturers from focusing on driverless vehicles, and may yet usher in a world where the power of the market spells the end of dangerous driving.
Peter Wollweber is the winner of the 18-21 category in the ASI's 'Young Writer on Liberty' competition.
Bionic prosthetics need not cost an arm and a leg
The year was 1982, when Robert Campbell, of the UK, was diagnosed with muscular cancer and doctors were contrived to amputate his arm. However, fortunately, 11 years on Robert was bestowed with the world’s first fully-functioning bionic arm – a marvel, designed by a team of five bio-engineers in Edinburgh. Bionic prosthetics such as Robert’s have the ability to unlock a vast amount of potential in anyone suffering from a lost limb. Yet over a quarter of a century on with over 2 million amputees in the US alone, only a few thousand have been recipients of this gift. Why? Perhaps, in order to tackle such a complication, it would be prudent to implement effective free market policy reforms.
The single most decisive factor preventing millions from benefiting from the use of bionic prosthetics is the colossal price tag attached with each prosthetic. For instance, a bionic arm fitted to go up to the shoulder, can cost an immense $60,000: over $5,000 more than that of the median household income in the US. This enormous price is primarily driven by the cost of innovation and R&D involved in developing such a sophisticated piece of technology. However, by advocating the deregulation of financial markets, this can induce greater competition between financial institutions, while precipitating positive spillovers for firms developing bionic prosthetics. These positive spillovers would come in the form of lower interest rates, as banks begin to compete on the cost of loans, effectively encouraging firms to undertake more investment, enabling the acceleration of R&D in bionic prosthetics, and the eventual long-term reduction of the price of such prosthetics.
Crucially, the lack of skilled engineers also presents a pivotal threat to the lack of bionic prosthetics in circulation. However, by adopting more liberal immigration policies, the free movement of labour can enable firms to fill skills shortages and meet consumer demand. This free movement of labour can also help supply skilled engineers to new firms wishing to enter the market, further expediting the pace of R&D in bionic prosthetics. Furthermore, by allowing more diversity in the workforce, it is more likely that greater innovation is generated, which in the long-run, can help introduce more efficient and cheaper bionic prosthetics.
Widespread availability of cheap bionic prosthetics is an inevitable part of the future, so why not advocate such policies to help make this vision a reality sooner rather than later?
Prerak Goel is the winner of the under 18s category in the ASI's 'Young Writer on Liberty' competition.