Bifurcation - in black and white

In logic the fallacy of bifurcation is committed if an either/or situation is presented when in reality there is a range of options. The mistake is made by the denial of those extra choices. Unlike many fallacies which introduce irrelevant material, this one omits relevant material.

It has been committed in strength by the opponents of Winston Marshall, the banjo player of the group Mumford and Sons. He has resigned from the band because of a Twitter storm by woke leftist agitprop people. He favourably commented on a book that exposed Antifa, an extremist hard left group that advocates violence. They called him a fascist and a Nazi, among other abuse. It was too much for him, since 13 of his relatives were murdered in the Nazi Holocaust. He’s quit the band in order to protect his band-mates from abuse, and to be free to express his views without causing difficulties for them.

His abusers were committing the fallacy of bifurcation, sometimes called the fallacy of black and white. It mistakenly supposes there to be only two alternatives when in fact there are several. They said that because he supported an exposé of the extreme left, he must therefore be of the extreme right. Nonsense. He might be a moderate who opposes extremism and violence in general. But there you are. The Woken SS takes anyone who disagrees with them to be a right-wing racist extremist.

The standard line of fanatics is “He that is not with us is against us!” The intent of the fallacy is to force people into being either in favour of their agenda or to admit to being against it. In reality, outside of that black-and-white world, people might support some of their agenda while opposing other parts of it. They might support many of the aims in general, while opposing the hate and fanaticism used to advance them. They might even, who knows, show no interest in it at all, preferring to fill their minds and their time with things more relevant to their own lives.

In 1930s Germany, people faced intimidation and violence if they refrained from giving the straight-arm salute. In modern day USA, people have been bullied, screamed at by mobs, and threatened with violence for declining to give the clenched-fist salute associated with Communism and left-wing fanaticism.

Most bullies regard acquiescence in their bullying as a cue for them to do more of it. When authority figures such as University Vice-Chancellors and Directors of National Institutions surrender to bullying, it encourages the bullies to seek other targets on whom they can enforce their will. A more valid response to the whipped-up hysteria would be to point out that there are vast swathes of life outside the scope of the black-and-white world of the fanatics, and that most of us prefer to live in the complex and colourful world that is, rather than in the narrow and bifurcated world they want it to become.

A Picture of Health

39 Victoria Street 

“Secretary of State, I cannot fully express our pleasure in welcoming you.” 

“It’s good to meet you too, Humphrey.” 

“Your predecessor proved a little difficult to dislodge but we managed it eventually.” 

“So I understand, Humphrey.  I hope you won’t have to resort to such measures in my case.” 

“No, certainly not.  Mrs Johnson has assured us you are a thoroughly good egg, if you will permit such a vulgar expression.” 

“It’s probably best if we start by taking you through the in-tray.  It looks a little full.” 

“It certainly is, Minister.  I probably should not say this but your predecessor was exceedingly fond of press releases and rather less concerned with reality.  We did wonder if he fell on his head while he was training to be a jockey at Newmarket.” 

“Yes, I noticed that too.  Only last week, you banned the advertising of certain foods on TV even though the scientists told you it would only make a microscopic difference, if any, to childhood obesity.” 

“Yes, I know, Minister, but we had to be seen to be doing something.” 

“Am I right that the biggest outstanding item is adult social care and that you have had a ready-to-go plan for that for two years?” 

“You are correct indeed.” 

“May I see the plan?” 

“Ah well, I am not sure that would be wise.  The PM and the Chancellor have taken it over and we do not know how it now looks. Furthermore, because the plan has to be robust enough to survive future changes in government, the PM wants to discuss it with Her Majesty’s Opposition.” 

“I think you are telling me the Chancellor says we cannot afford it.” 

“You may have put your finger on the nub. Minister.” 

“That’s ridiculous.  We’ve been throwing money at everything else, £39 billion on an entirely useless Test and Trace system, for example. And the Scots have introduced their caring for the elderly solution to applause all round.  Why don’t we in England just copy theirs?” 

“We could not afford it.” 

“If the Scots can, why can’t we?” 

“That’s because the English pay for what the Scots want. The Scots have 30% more per capita resources than the English to spend on public services because we give them the extra money.”

“Yes, I know about all that.  Don’t forget I was Chancellor until Dominic Cummings decided I wasn’t. Joel Barnett, Finance Secretary and also a qualified accountant, devised the formula back in 1978. We’ve had no qualified accountants in the Cabinet since, so no one has been able to work out how to change it.” 

“Very interesting, Minister, but it is funded by Robert Jenrick at the Ministry of Housing and neither of you can do anything about it either.  You might be able to do something about the NHS, though.” 

“Don’t tell me that is beyond help too.” 

“Far from it.  It is the best nourished part of the state: the NHS percent of GDP has shot up since 2000 and that is before the pandemic. However, you are not responsible for NHS England either because it is a non-departmental public body.”

“So I’m the Secretary of State for Health and Social Care but I’m responsible for neither health nor social care.” 

“Yes.  I regret to say that is correct. There is, however, one thing I might suggest: you might persuade Sir Simon Stevens to rescind his resignation.  It may be too late but now that Hapless, I mean Mr Hancock, has gone, he may change his mind. Lady Harding has been lobbying for the job and that is scaring everyone.  Mr Hancock is her greatest admirer, maybe because they both trained as jockeys.” 

“I agree that Simon is excellent and we will miss him.  So, that apart, there’s not much I can do?  My predecessor was always going on about working night and day.” 

“That may be because we have one of the greatest numbers, 29, of arm’s length bodies of any government department and yet Mr Hancock added two to their number. Three of the 29 do come under your authority; they mostly deal with public health.  We need to talk about that later. 11 are non-departmental public bodies which are not really accountable to anyone although Mr Hancock thought they answered to him – except when he needed someone to blame, of course.” 

“Humphrey, you are being unkind.  Matt would never have stooped so low.” 

“If you say so, Minister.  To continue - seven are advisory.  They do no harm as nobody bothers about what they have to say. Then there are eight others which we cannot categorise. One of those is the Morecambe Bay Investigation which finished its work four years ago but we have not had a chance to close it down. Another is NHS Improvement which we also need to discuss later.” 

“Everyone knows the pandemic showed Public Health England to be absolutely useless.  We cheered when, last August, Matt announced he was closing it down.  Then it transpired it would transmogrify into the National Institute for Health Protection, Office for Health Promotion and Health Security Agency.  Now that Chris Whitty, who has charge of the first two, and Jenny Harries, in charge of the third, are TV stars, Matt had to give them some public presence, I suppose, but might it be that you’ve replaced one disaster by three?”  

“Minister, Chris Whitty got to the heart of it when he said ‘Preventing ill health and supporting our communities to live healthy lives is very important.’ Nobel prize stuff that. Meanwhile, Dr Harries explained ‘her ambition to boost public recognition for the vast amount of work that goes into protecting people’s health.’”

“Did I hear that right, Humphrey? She doesn’t want to improve our health, just get us to think they are working hard? All this reminds me of when George Osborne became Chancellor of the Exchequer and announced that the Financial Services Authority was useless (correct) and would therefore be closed.  He then panicked and replaced it with the Financial Conduct Authority (equally useless) and the Prudential Regulatory Board which returned the Bank of England to doing what it did in the first place.” 

“You have to give the civil service marks for consistency, Minister.” 

“You were going to tell me about NHS Improvement?” 

“NHS Improvement is another non-departmental public body, responsible for NHS England's independent trusts and the providers of NHS-funded care.” 

“Humphrey, you are pulling my leg. If the NHS can’t do that because trusts and providers are independent, how can NHS Improvement do it?  And why do we need it anyway?” 

“Well, NHS Improvement is now both part of NHS England and not part of it.  They each have a Board.  Lord Prior and Lady Harding, who else, chair NHS England and NHS Improvement respectively. And Amanda Pritchard, the deputy CEO of NHS England is CEO of NHS Improvement.” 

“No wonder Simon Stevens is pushing off.  This is a madhouse. I will just announce I am concentrating on ending the pandemic.  No one can argue with that.  One last thing, Humphrey.  Please tell everyone to stop using my private email address.” 

“Certainly, Minister. Good luck!”

Homelessness isn't really about housing

As we’ve noted over the years we’re generally not told the entire and whole truth about homelessness. The usual numbers we see - say, claims that 130,000 families were made homeless in a year - are in fact the numbers of people rehoused. That is, the number of people not-homeless as a result of the existence of the welfare state.

This can be viewed either way of course, how terrible that so many need such saving, or phew, isn’t it good that they were so saved? What it isn’t though is a proof that homelessness isn’t being addressed.

Then there’s the other part of the problem:

Ela Sozeri felt hopeful when she was sent to a privately owned hostel in Birmingham, where support staff promised to help get her life back on track. She dreams of one day setting up her own craft business but has been held back by mental health problems and spells of homelessness. Yet her stay soon turned into a terrifying ordeal, which left her and her boyfriend cowering in their rooms in fear.

“When they showed us around, they told us we would get daily contact and support. But we actually didn’t get any [proper support],” she said. “We’ve only had problems here because the other tenants were heroin and crack users. We’re here because of emotional difficulties and having nowhere to live – not for drugs or anything like that.”

Sozeri and her boyfriend were targeted by another couple after they made complaints about prostitution and drug taking in the hostel,

That’s all a problem, entirely so. It’s also not a problem about housing. It’s a problem about drugs, or booze, or mental health.

Which is largely where we are overall about homelessness. There are those sleeping rough, 4,000 to 5,000 on any one night, perhaps 8,000 over the course of a year. There are those at risk, the 130,000, who do get rehoused. But the problem of that rough sleeping, of that last edge of the larger problem, isn’t in fact a problem about housing at all. The existence of more houses wouldn’t solve it - it’s not therefore a problem about houses.

Unlike the US the UK’s remnant homelessness problem is one about addictions and mental health problems, not things solved by buildings.

Steve Horwitz

The death has occurred of the economist Steve Horwitz. He died of cancer at the very young age of 57. He has left a big footprint on the world of neoliberal thought, describing himself as “an Austrian economist and a bleeding-heart libertarian.” The latter term, sometimes called neoclassical liberalism, stresses the compatibility of free markets and civil liberties with concern for the poorest and disadvantaged in society.

He was a distinguished scholar, awarded the Julian L Simon Memorial Award and the Prometheus Award for the Promotion of Economic Literacy. He studied under James Buchanan and others at George Mason University before teaching at St Lawrence University and then Ball University.

He contributed to monetary and macroeconomic theory from an Austrian perspective, and published several widely-acclaimed works on the subject. One of his noted studies was how markets and private institutions such as Walmart and the Red Cross responded to disasters such as Hurricane Katrina.

Dr Horwitz was widely praised for his analysis of the 2008 Financial Crisis, and spoke to an ASI meeting on the subject. He was an engaging and compelling speaker and an effective communicator. He asked our audience how they might explain it if 4,000 car crashes had occurred while he was speaking. It could have happened, he said, if all the traffic lights in London had been stuck on green, and went on to explain that in the run-up to the Crisis, all the financial traffic lights had been stuck on green. People borrowed and invested recklessly because money was made artificially cheap. It was a telling illustration.

He wrote regular columns for the Institute for Humane Studies and the Foundation for Economic Education, and was a Senior Affiliated Scholar of the Mercatus Center at George Mason University. He also wrote op-ed pieces for newspapers and appeared on radio and TV shows.

Today we mourn the passing of an insightful thinker and an articulate and passionate communicator. His legacy will long outlast his too-short life.

What, exactly, is wrong with asset stripping?

We’re told that Morrisons being taken over by private equity would be a very bad idea. This could be true and might not be, it’s not something we have an opinion upon, whether collective or individual. It’s the specific objection that The Observer has which puzzles us:

The profit motive above all else is another. It encourages asset stripping,

Err, yes?

We live in a universe of scarce resources. It’s also true that not all human needs are entirely met and the desires that are as yet unsated stretch off into the far distance. We thus desire to be economic with our use of resources in the achievement of any one task. This then freeing those assets to be used to at least attempt to sate some other need or desire.

If some organisation - and it is any organisation, whether public or private, capitalist or socialist, market or non-market - has more of those scarce resources than is necessary to meet the task it performs then we’re not just interested in, we positively lust after, those assets being stripped from it and tasked with meeting some other need or desire.

The profit motive is the incentive to so strip, move, those assets. Given that this is the process by which society as a whole becomes richer why is it an objection?

What, exactly, is wrong with asset stripping?

And the corner store's out of vegan chocolate too

We’re deeply puzzled by the purported connection being claimed here:

The labour force in the UK and elsewhere is in crisis. Wealth inequality is staggering and getting worse by the minute. In January, researchers at the Resolution Foundation thinktank published a report showing that almost a quarter of all household wealth in the UK is held by the richest 1% of the population.

Who owns the wealth isn’t an issue for the labour force. The wealth, the capital, gets the capital share of the economy. Which is roughly stable around the long term average of 20%-ish of the economy. The workforce, the labour, gets the labour share. Which has indeed fallen a little because the subsidies to production and taxes upon consumption bit has risen a bit over recent decades.

If one person was getting all of that capital share or the pensions of everyone were getting it - or even the State took it all - then that’s an issue with the distribution of the capital share of the economy but it’s nothing to do with the position of labour. What matters for labour is the change in the labour - and or capital, subsidies and tax - share of the economy.

This complaint about wealth concentration and trying to connect it to the labour market is as with complaining that England loses at football and, wouldn’t you know it, the corner store is out of vegan chocolate again. There’s simply no connection there at all other than the desire to cobble together enough things to have a whinge about.

Not that we agree that the wealth is so concentrated. For absolutely every measure of that distribution entirely ignores - deliberately - all the things that are done through government to lessen the inequality. But even so the complaint itself is silly.

Not that we do party political of course

The idea of a progressive alliance in British politics is rearing its head again. We’re old enough to recall the last two times Neal Lawson insisted this was the true path forward and we’re still insistent that it faces the same problems it did then.

We start with the “why” of an alliance. The driving reason is political. The critical alliance is not one of parties or voters, but minds and then actions. The societal challenges we face – of climate, culture, care, technology, ageing and inequality – simply can no longer be met by any single party.

It’s possible to be cynical about politics and note that a political party exists to give each would be Fat Controller a platform from which to direct the lives of others. Given the plethora of would be controllers we’re going to end up with many parties.

Once we put aside such refreshing realism it’s also possible to diagnose another problem here. It might even be true that these are all problems that need to be dealt with. We don’t agree and we certainly don’t agree that politics is the way to deal with many of them even if they are problems that need solving. The idea that politics should determine culture is horrific for example.

But this other problem. Even among those who do agree that all of these are problems, problems that need to be solved by political means, there are many different solutions being offered. Each party offering a rather different set of solutions. Which is rather the point, isn’t it?

To argue that there should be just the one party - or alliance - is to be making the “something must be done” argument. But the crucial part is “What is it the something should be done?” rather than the usual error of “This is something so do this”.

What, exactly, is it that the combined progressives of the country would do once they gain power by combining? Given that there are at least as many different answers as there are current parties the combination doesn’t really solve that important question, does it?

How do we just get the regulations we need?

Back in February, the Prime Minister asked three senior MPs, Sir Iain Duncan Smith, Theresa Villers and George Freeman to “identify and develop proposals across a range of areas that will drive innovation and competitiveness, reduce barriers to start-ups and scale-ups, create opportunities for innovation to make the most of cutting-edge technologies, and support growth and dynamism right across the UK economy.” In other words, the brief was to recommend how the UK economy could be grown. Their June 130 page report opens with a letter to the Prime Minister starting “You asked us to look at ways to refresh the UK’s approach to regulation now that we have left the EU, and to seek out opportunities to take advantage of our new-found regulatory freedom, to support innovation and growth.”  One might argue they got off on the wrong foot, but I think the Taskforce was absolutely right. Innovation and growth result from making new things happen whereas regulation is all about stopping new things happening. Government needs to encourage the former but engage in the latter.  That is where the Taskforce was right to focus. 

Of the report’s 94 recommendations, 73 percent concerned regulation. Since regulation stunts innovation and growth, government should minimise it. Madsen Pirie has reminded us of three ways to do that. Sunset clauses automatically remove regulations after they have served their purpose of, like braces for teeth, straightening out business malpractice. Secondly, government can insist departments find two old regulations to cancel for every one they bring in.  The first recommendation of the Taskforce is “Reimpose the ‘one in, two out’ regulatory duty on all government departments.” Quite right too but it used to be one in, three out until discipline, or memories, lapsed. Thirdly, some review committees, like the 1989 Committee for Competitiveness in the US, can challenge proposed regulations and reject those that bring more burden than benefit.   

There are more draconian methods. Perhaps the best example is the major deregulatory activity in New Zealand during the 1980s. Their then new government was frustrated by civil service obstruction of piecemeal deregulation and opted instead for deregulation en bloc giving the civil servants 12 months to rescue such regulations as were deemed essential. Proceeding one department at a time, the cull was easily managed despite the Sir Humphreys saying it was not. [1]

Sunset clauses are not included by the Taskforce. 20 years ago, Francis Chittenden and I, on behalf of the British Chambers of Commerce, persuaded the Cabinet Office that sunset clauses would be good and they promoted them to departments.  Very few have been adopted, mostly for coronavirus, terrorism and emergencies legislation, typically requiring a review after two years. The reason is simple: civil servants love to regulate like professional singers love to sing.  It is what they do. They cannot envisage their precious new regulations fading into the twilight even though, once the habits of the regulated have been reformed, the regulatory job has been done. Sunset clauses should be the rule, not the exception. 

There are four areas of possible concern with the report: Statutory Instruments (SIs), very few individual regulations are singled out for repeal, regulators and regulatory committees.  

Regulation through secondary legislation (SIs) needs to be distinguished from the rules set by regulators because they need quite different reforms. One of the best suggestions in the report is to have Select Committees monitor the regulations arising from their corresponding departments.  

Parliament has always had the power to scrutinise regulations using three committees: The Joint Committee on Statutory Instruments, The Select Committee on Statutory Instruments (Commons) and The Secondary Legislation Scrutiny Committee (Lords).  There were about 3,000 SIs p.a. from 1990 to 2015 but since then the numbers halved until the pandemic when 457 Coronavirus-related SIs appeared. The three committees must find scrutinising all these SIs immensely boring, not least because few of them will relate to their normal fields of interest. The SI procedure is immensely complicated but falls into two procedures: affirmative and negative. The scrutiny committees cannot reject or revise anything; the most they can do is to have a SI debate in the main chamber of the house. The last time that happened was 1978 in the case of the affirmative process and 1979 for the negative.  SIs are simply being rubber-stamped and that is a waste of everyone’s time. 

What should happen is that all SIs which are not genuine national regulations, e.g. road closures, should be devolved to local authorities and the remainder should go only, as the Taskforce report suggests, to the relevant Select Committees. They at least should be interested in the topics. Select Committees should have the power to refer SIs back to the originating departments if they have been insufficiently justified in the Impact Assessments. 

Secondly it would have been good to have more than the seven regulations recommended for repeal (5.3, 6.1, 6.2, 6.3, 10.5, 13.10, 17.3), VI-1 forms for wine imports for example.  There must be hundreds, if not thousands. The report makes many calls for regulatory frameworks to be up-dated.  Whilst no one would argue with that, perhaps a more focused approach might have been considered.   

Thirdly, regulators should be reduced in number, not increased. Rather than add two more for hydrogen and digital health (recommendations 9.6 and 12.1), why not abolish all government regulators save the admirable Competition and Markets Authority which is needed to keep watch overall? 

We all know markets need discipline to keep them honest.  Professional organisations do that without government help and so do some commercial sectors, advertising for example. Though the roots are earlier, regulators are relatively new: they were created by Margaret Thatcher’s privatisation of phone communications (Oftel) in 1984.Regulators were seen to be needed to transition state monopolies into competitive markets. When competition was achieved, regulators were supposed to emulate Cheshire cats.  Well of course, they found new ways of being useful to government departments, such as taking the blame for the 2020 A level confusion. Regulators are supposedly independent of their departments and their terms of reference and performance metrics are far from clear. It seems they can do what they like and make up the rules as they go along. The Taskforce recommendation to strengthen the Select Committees’ involvement would be enhanced by making regulators accountable to them. That should include plans, with dates, to phase themselves out.  

Fourthly, there may be a little confusion over three other regulatory committees: the Better Regulation Executive (BRE), the Regulatory Reform Committee and The Regulatory Policy Committee. 

The Better Regulation Executive (BRE) is not mentioned in the report but, apparently, it “leads the regulatory reform agenda across government.” Its annual report shows the additional net business burden from regulation versus the business impact target.  In 2019/20 that amounted to £5.7bn. of which regulators contributed £5.6bn“Under the Small Business, Enterprise and Employment Act 2015, a new government must set a target for the economic impact on business of qualifying regulatory provisions made during the course of the Parliament. This is the business impact target (BIT). The Enterprise Act 2016 brought the actions of regulators into the government’s deregulation target.” The government has been too busy of late to set these targets so the BRE has to assume they are zero – not that it matters.  

Para 95 of the Taskforce report suggests “that the remit of the Regulatory Reform Committee is expanded to enable the committee to potentially scrutinise any regulatory reform proposal across government, including a requirement that the relevant Minister provide an Explanatory Memorandum16 (EM) on the proposal for the committee to assess.” Unfortunately, that committee now resembles a dead parrot: “The Regulatory Reform Committee ceased to exist on 20 May 2021. The Committee is no longer operating.”That is rather a shame as the report mentions it nine times and recommendation 1.9 reads: “Give the Regulatory Reform Committee a remit to scrutinise all regulators and regulatory reform proposals. Bolster its resources, including with seconded experts, to carry out this expanded function.” 

Under these circumstances, the Regulatory Policy Committee (RPC) might take a more important role than the report indicates. This is an independent body made up of non-civil servant experts and the British Chambers of Commerce (BCC). At the March meeting, Dr Marshall (CEO of BCC) described the RPC as a “bulwark against poor and overly politicised regulation” but then went on to complain of lack of discipline, thoughtfulness and joined-up thinking that could have been said 20 years ago. One does not get the impression that the RPC makes much impact on hard-pressed civil servants, even if they have heard of it.  On the other hand, the BRE and the RPC need each other and should probably be merged, given more teeth to reject the unjustified ones and report to the Business, Energy and Industrial Strategy Committee. As the report recommends, the unit might need beefing up to some extent. 

Where does all this leave us? The Taskforce report has some issues but it is a valuable and important document.  Perhaps it adds complication rather than the simplification this area needs but it is a major stepping stone and provides a long list of matters that need consideration.    

[1] David Osborne and Peter Plastrik (1998), Banishing Bureaucracy, Chapter 4, Plume (Penguin) Middlesex, 75-90.  

New millionaires

Credit Suisse has just issued its Global Wealth Report, which showed that 5.2 million people became dollar millionaires in 2020, despite the economic damage caused by responses to the pandemic. In 2020, more than 1% of adults worldwide became millionaires for the first time, taking the world total to 56.1 million people. Total global wealth, which took a hit at the start of the pandemic, had recovered by the end of the year to record an increase of 7.4%. Nannette Hechler-Fayd'herbe, chief investment officer at Credit Suisse, said:

"There is no denying that actions taken by governments and central banks to organize massive income transfer programmes to support the individuals and businesses most adversely affected by the pandemic, and by lowering interest rates, have successfully averted a full scale global crisis."

Since the year 2000, the worldwide number of people with fairly modest assets of between $10,000 and $100,000 has more than tripled from 507 million to 1.7 billion.

It should be noted that the Credit Suisse estimates include non-investable assets such as the value of owner-occupied homes, and are therefore higher than comparable surveys that do not. Undoubtedly a large part of the increase in global wealth has come from low interest rates. Government and banks have pumped out money, and the ultra-low interest rates have pushed people out along the risk curve into assets such as stocks and property as they seek to make some worthwhile returns.

Will it last? The answer is that probably a proportion of it will. When interest rates rise and make bonds more attractive, the pressure will ease on asset prices, and they may dip in response. But some of the gains will stick.

Is it a good thing? It undoubtedly is. When people have more assets behind them, they have funds to back new business start-ups, and the collateral to borrow for new ventures. These are the major source of future wealth-creation and future jobs. And a wealthier world is one better able to survive external shocks than a poorer one.

Is there a limit to it? The optimists, who include myself, say that there is not. A large part of humanity now lives at many times the living standard of their predecessors of 250 years ago. We used to set the international poverty line at a dollar a day minimum. Currently we set it at $1.90 a day, and there is no reason why it should not continue to rise. Future generations could easily live at many times the living standards of current ones.

To be a dollar millionaire is no longer to be in the top 1% of the world’s richest. And as economies make up the slack of the pandemic downturn, the number of them will increase further.

Can the world support such wealth? Yes, it can. There will be pressure on resources, so we’ll invent new ones. And we can make the environment cleaner using ingenuity rather than reverting to poverty. These are problems, and solving problems is something people are rather good at.

So, let us welcome the new millionaires and hope to welcome many more of them in the future.

Environmental regulations can sometimes do more harm than good

Contrary to popular perceptions, all around the world, environmental conditions have improved dramatically in recent decades. There is less air pollution and more widespread access to clean water than ever before. Anyone who wants to learn more about this astounding progress should read Stephen Pinker’s Enlightenment Now and Hans Rosling’s Factfulness. These environmental performance gains are largely due to the global spread of economic freedom, because – as numerous studies show – environmental standards are far better in economically free countries than in unfree ones.

Of course, sensible environmental regulations have contributed to these gains. Even the most enthusiastic proponents of capitalism, champions of the free market such as Friedrich August von Hayek and Milton Friedman, have always argued that governments should define the rules of the game – the legal framework – for the economy. But, and this is usually forgotten, it is often the case that rather than achieving their well-intentioned goals, environmental regulations often lead to the exact opposite. 

The world’s dumbest energy policy

For a prime example of how the road to hell is paved with good intentions, you need look no further than Germany’s environmental and energy policies. In the 1970s and 1980s, German environmentalists had one main aim: to consign nuclear energy to the history books. When a coalition of Social Democrats and Greens formed a government in 1998, they didn’t waste much time in putting together a plan to phase out nuclear energy and, in 2000, concluded an agreement to that effect with the various operating companies. In 2002, the German Atomic Energy Act was amended to incorporate the terms of this contract. In 2010, Angela Merkel’s government decided to extend the operating lives of the country’s nuclear power plants, although this decision was revised in 2011 in the wake of Japan’s Fukushima disaster. The last German nuclear power plant is scheduled to go offline in 2022. 

However, this decision to phase out nuclear power is one of the main reasons why Germany, despite extensive efforts in other areas, is no better off in the fight against climate change. In fact, the country now emits more CO2 than it would if nuclear power was still part of the national energy mix. France, for example, while doing no better than Germany on a range of other environmental performance measures, increased the share of nuclear power in the nation’s energy supply to 70% at the same time as Germany was progressively shutting down its nuclear power plants. Today, Germany ranks 10th in Yale University’s 2021 Environmental Performance Index (EPI) and France ranks much higher, in 5th place. The difference in the two countries’ overall EPI rankings must be due to nuclear energy, because in the EPI’s more specific Climate Protection Index 2021, Germany ranks a lowly 14th, in contrast to France in 4th.

In the most diplomatic terms, Yale University’s researchers explain that “some analysts” believe that Germany’s nuclear phase-out is hurting the country’s progress on reducing CO2 emissions. Less diplomatically, but more accurately, the Wall Street Journal in 2019 accused Germany of having the world’s dumbest energy policy. 

In seeking to justify the phase-out of nuclear power, much has been made of the potential dangers associated with nuclear energy. The problem with this scaremongering is that the risks have been exaggerated beyond measure. Tens of thousands of coal miners around the world have died in underground mines, but only a small fraction of that number have died in accidents involving nuclear power plants. Again and again, opponents of nuclear energy have created the impression, either explicitly or by being deliberately vague, that 20,000 people died in the reactor accident in Fukushima in 2011. The number 20,000 is correct, but the victims died as a result of the tsunami, not because they were exposed to radiation. The fact that the latest generation of nuclear power plants are safer than earlier plants is hardly ever raised in public discourse – most people have no idea about the improvements that have been made in recent years.

Populism and ideology

Nevertheless, it was in response to the Fukushima disaster that Angela Merkel’s government, in a lightning move, decided to shut down Germany’s nuclear power plants much earlier than originally agreed. And yet it was not the accident itself (which did not even cause Japan to turn its back on nuclear power), but the fact that there were elections in the German state of Baden-Württemberg roughly two weeks afterwards that led to Angela Merkel’s swift policy shift. In the heated pre-election atmosphere, Merkel wanted to rob the Greens of one of their key election issues. But even that did not work and the Greens attracted a record number of votes and, for the first time in German politics, a German state elected a Green politician as minister president.

This example shows that government intervention in the economy, even when environmental protection is given as a motive, is often not driven by rational environmental considerations, but by populism and ideology. This does not mean that governments should never introduce regulations to protect the environment, but it does prove that economic freedom serves much better overall to protect our environment than top-down dirigisme. 

Rainer Zitelmann is the author of The Power of Capitalism.