Telegraph.co.uk: Competition in postal delivery is the solution

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Written by Dr Madsen Pirie

Customers must be offered an alternative to the service which has been constantly interrupted by unofficial action, and which now threatens them with a total stoppage.

The impending mail strike makes it clear how near-monopoly services seem to breed dinosaur unions. The ability to shut down a service ups the ante for the unions. In services where there is a competitive market, customers can turn to other suppliers. Lord Mandelson rightly points out that a mail strike now will turn customers to alternative communications technologies, customers who will probably not return.

Some will turn to other mail deliverers, rather than other technologies, but the problem here is that the Royal Mail does the end delivery, the so-called 'last mile.' Other firms such as the Dutch-owned TNT, use Royal Mail postmen and women for the final delivery through letterboxes. This means that the Communication Workers Union (CWU) has the power to shut down the service totally, giving it a massive industrial muscle it has shown itself quite prepared to use.

One reason why this state of affairs has continued is that the Post Office is uniquely exempt from paying VAT on its services, as its would-be competitors have to. This means that a rival has to be 15 percent (and soon 20 percent) more efficient to compete effectively. Most markets are won or lost on much smaller percentage margins than that. TNT has a case pending before the European Court protesting the unfairness and calling for a level playing field. Until then, though, it is effectively priced out.

The strike is about modernization, as postal services have to streamline to take on the challenge of electronic communication. The government and management know that more efficient and automated practices must come if mail delivery is to survive.

It would be a good move now for the VAT rule to be changed, putting a level playing field into place for postal services. This would give firms like TNT the chance to set up end delivery and keep the mail services running despite the CWU shutdown. This would give the customers an alternative to the service which has been constantly interrupted by unofficial action, and which now threatens them with a total stoppage.

The CWU has been intransigent and antiquated because it has the power to be so. If alternative delivery systems were in place for customers to turn to, the union would soon change its behaviour. The time has come for government to rescue its citizens from the grip of an over-mighty union by opening up the field to firms which can compete on an equal basis.

Published on Telegraph.co.uk here.

The New York Times: Biofuels Push Britain Toward Wheat Imports

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Written by Pete Browne

Commenting at his blog, Madsen Pirie, the president of the Adam Smith Institute, Britain’s leading free-market economic and social think tank, said:

Of all the insanities committed in the name of green politics, one of the most insane is the production of biofuels from food crops. In pursuit of increased proportion of energy from renewable sources, governments have realized that wind and solar power cannot make sufficiently large contributions. They have therefore turned to biofuels, a move that hugely delights their farming lobbies.

Published in The New York Times here.

guardian.co.uk: Postal strike is an act of desperation

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Written by Peter Lazenby

"And what about the little old lady who wants to post her Christmas cards?"

The question was put to me by a Sky TV News interviewer as I engaged in a live spat with Dr Madsen Pirie, co-founder and president of the Adam Smith Institute, the rightwing thinktank that pioneered privatisation of our formerly publiclyowned industries and promotes the free market.

Published on guardian.co.uk here.

WSJ: Just Don't Call it Thatcherism

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Old Teaser

A 2008 report by Nigel Hawkins of the Adam Smith Institute offers a hint of what could go, including the Royal Mail, British Waterways and (our favorite) BBC Worldwide.

Published in the WSJ here.

Britain's financial crisis was 100% home grown, says leading Tory

Tuesday, 6 October 2009

One year on from the part-nationalizations of Lloyds-HBOS and RBS, a new report by leading Tory John Redwood MP has pinned the blame for the financial crisis squarely on the government and the Bank of England.
 
In Credit Crunch: The Anatomy of a Crisis, published today by the Adam Smith Institute, Redwood attacks the notion that the UK economy was well run, and that its problems were imported from the US. He blames bad monetary policy from the Bank of England, bad regulation from the Financial Services Authority, and bad fiscal policy and crisis management by the British government for the severity of the crash. Britain's crisis may have had much in common with America's, Redwood says, but it was very much home grown.

Britain's fake boom
The report traces the roots of the banking crisis to the "false boom" of 2001-2007. A boom fuelled by ultra low interest rates, lax credit controls, and an explosion of lending, rather than real, sustainable growth. These economic conditions encouraged banks, like Northern Rock, to pursue an aggressive growth strategy based on selling securitized mortgages and borrowing short-term from the money markets to finance new lending. As well as driving a house price bubble, this approach sowed the seeds of later disaster.
 
Blame the Bank of England
The Monetary Policy Committee of the Bank of England must take a major share of the blame for the crash. Redwood explains that having first kept interest rates too low for too long, it then raised them too far and too fast in 2007. They starved the money markets of cash and triggered the first phase of the financial crisis, as Bradford & Bingley, Alliance & Leicester and HBOS had to be bailed out, and Northern Rock, ultimately, nationalized. Incredibly, Redwood points out, in the year that followed the run on Northern Rock, the Bank of England acted as though nothing serious had happened, keeping interest rates relatively high when they should have been cutting them.

The government got it wrong
The report argues that the worst policy mistake of the crisis was the government's. In autumn 2008, just as world markets were showing serious signs of strain, they suddenly decided to insist that the banks hold more cash and capital than they had required during the boom years. As Redwood points out:

"That was the worst possible moment to make such a request, and the worst possible thing to do when markets needed reassurance from the authorities that the banks would survive. As soon as the regulators' demands became public, confidence in the major financial institutions was undermined, and RBS and Lloyds-HBOS were forced into semi-nationalization, at huge taxpayer risk."

Reforming Britain's banks
The result of this disastrous intervention, Redwood says, is that Britain has been left with a banking sector with too few competitors and too many weak balance sheets. He argues that the prime task facing the next government will be to remodel the state owned banks, splitting them up into smaller institutions to encourage domestic competition, and return them to the private sector as soon as possible. The report also suggests that banking regulation should be returned to the Bank of England, who would in future focus on the 'big picture' and set counter-cyclical cash and capital reserve requirements for the banks.

Click here to read the report.

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Telegraph.co.uk: The Archbishop of Canterbury caricatures consumers and fires at token targets

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Old Teaser

Written by Dr Madsen Pirie

Most people are not like Rowan Williams' caricature of consumers who find no room for life's finer experiences

The Archbishop of Canterbury has urged families to get in touch with "the natural rhythms of the seasons," and have "a sense of connectedness to natural processes." Instead of a consumerism which "treats each person as essentially a hole that you have to keep stuffing things into," he urges "a life that is balanced, that is at home with its material and human environment." These are fine sentiments, in that most of us would want balanced lives rather than unbalanced ones, and most of us would rather be at ease with the world than at odds with it.

The good bishop moves onto more controversial territory, however, when he mentions specifics, in that he seems to have bought the entire agenda of "token environmentalism". This is where green lobbyists pick out token targets to vilify, regardless of the actual degree to which they affect things.

So-called "food miles" provide one example. Dr Williams urges us to grow food in our gardens and on allotments rather than importing foodstuffs from places like Kenya. Many of the foods we import could indeed be grown at home, but with much more energy use than is required in warmer countries. Kenya, for example, is effectively exporting sunshine with its food crops.

Furthermore, many foodstuffs are more expensive to grow locally, so we would be banning cheaper foods from poor countries that are desperate to sell us them, simply to tick off token environmental boxes.

Dr Williams also appears to have taken on board the notion that air travel should be avoided to save the planet, and tried to make his own last year flight-free. In fact flying makes a much smaller contribution than do ocean or surface transport. It just makes an easier target for the tokenists. Budget airlines, which they denounce, in fact fly greener by using newer aircraft with engines that use less fuel, and by flying with fuller passenger loads.

Even the bishop's notion of consumers as holes to stuff things into is a caricature. We all have our values and our priorities, and we express these in terms of the things we spend time and money on. The time spent working for the school bazaar cannot be spent on reading or listening to opera. The money we spend on music cannot also be spent on clothes.

Every action is a trade-off against the things we could have done instead. Of course we look down on people driven by a crass materialism which finds no room for life's finer experiences, but most people are not like that. They express themselves through their choices, in lives that do indeed balance aesthetic and sensitive experiences with material comforts.

Published on Telegraph.co.uk here.

Telegraph.co.uk: Privatisation is no way to sustain Britain's runaway spending

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Old Teaser

Written by Dr Madsen Pirie

The Government's asset sales will provide a year of bounty but doesn't address the British state's excessive spending.

First there was "borrowing our way out of debt" which raised the eyebrows of sober-minded accountants. Then there was "printing our way out of debt," as quantitative easing magically created money out of nowhere. Now the latest round is "selling our way out of debt," as the Prime Minister announces the sale of £16bn worth of state-owned assets.

First will come the Tote, the Thames Dartford Crossing, the Channel Tunnel rail link, and student loans. The sale of the state's 33 percent stake in Urenco, the uranium enrichment company, will follow. There are good and bad features of the sale. The good point is that most, if not all, of these will sit happily in private ownership. It has never been clear why the state should be involved in race-course gambling, while transport crossings and loan agencies are often handled elsewhere by private firms.

The disappointing feature is that these are all to be done by private sales. The sale to a single private buyer is the easiest and quickest to implement, but does least to secure public support or to secure improvements to the industry or service.

Many of the 1980s privatisations (now called by the mellower name of "asset sales") featured public offerings with discounted shares available to workers so they could become part-owners of the new enterprise. Significantly, the Government has already tried a private sale of the Tote, but was rebuffed by the European Court as representing poor value for the public. It would have been bolder (and better) to involve employees and the public in the new round of sales.

Secondly, it is by no means clear that the proposed sales will actually be used to reduce the Britain's huge debt burden. It is quite legitimate to use capital sales to reduce capital debt, and the sales would deserve support if that were the case. But this looks like the Government's way of postponing reality until after the election.

Britain has to cut its spending, and that will involve some hard and unpleasant decisions. Asset sales are a one-off. They might be used to fund spending programmes but only for one year. Crucially, that one year will see a general election, and the suspicion arises that the sales revenue will be used to continue with spending that really should be cut until after the election.

The Government has not come up with realistic proposals to cut spending to what can be afforded. Nor has anyone else, to be fair. The budget deficit (£220 billion this year) means that debt is increasing. Asset sales are not, and should not be, a way to sustain high spending; they should be a means of reducing debt.

Published on Telegraph.co.uk here.

Telegraph.co.uk: How David Cameron can reverse Labour's unjustified attacks on civil liberties

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Written by Madsen Pirie

A judicial review of Britain's liberties would give the Conservatives a programme of reforms and help David Cameron establish his pro-liberty credentials, says Madsen Pirie.

Over the last few years, many traditional liberties which protected our way of life have been removed or compromised by the Government's initiatives. In the name of taking more effective action against terrorists, drug dealers or paedophiles, customs and practices that shielded the citizen from arbitrary abuse by authority have been over-ridden or subverted.

We used to enjoy the protection of habeas corpus, and no detention without trial. We used to have the right to remain silent without it counting against us, or be forced to testify against ourselves. We could demand trial by jury, and once acquitted, need not face the ordeal of a retrial. We enjoyed the presumption of innocence, and could not be punished or have our property seized without conviction in a fair trial.

All of those liberties and many more have been eroded or abolished in a flurry of government and official zeal to crack down on possible law-breakers. Almost every day we read of incidents in which people are bullied or harried by police, not for criminal activity, but basically for doing things the authorities dislike. It will be difficult to regain ground lost for liberty, given a now-entrenched official culture unsympathetic to it.

It is fanciful to suppose that a consolidated repeal bill could be passed to reverse at a stroke all of the illiberal measures of recent years. There is, however, an effective measure that an incoming government could take. David Cameron should announce his intention to establish a year-long judicial review into the state of British liberties. Presided over by a senior and respected judge, the review body would hear evidence in public concerning the degree to which traditional liberties have been eroded.

Crucially, the review body would be empowered to make recommendations at the end of its enquiry, recommendations of measures to restore and entrench the freedoms needed to protect citizens from abuse at the hands of an arbitrary and oppressive authority. While the Conservative Government would not be compelled to implement its findings, there would be a moral pressure on it to do so. Through its year-long inquiry, the review body would raise awareness of liberty issues, and publicize the degree to which it has been lost or threatened. A culture of liberty would gradually supplant the illiberal culture that currently prevails. It would be difficult for government to resist its recommendations.

The announcement now of such a review would enable Mr Cameron to establish the pro-liberty credentials of himself and his party. It would not impose any great costs, nor commit his government to any specific pledges. What it would do it establish a momentum of liberty, and secure carefully thought-out and well-drafted proposals to restore our freedoms to their respected place at the heart of British law and tradition.

Dr Madsen Pirie is President of the Adam Smith Institute and author of the newly-published '101 Great Philosophers'.

Published on telegraph.co.uk here.

Scotland on Sunday: On her majesty's postal service...

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Written by Kristy Dorsey

Others, however, are not convinced there is much substance behind the rhetoric. Tom Clougherty, executive director of the Adam Smith Institute, was at last week's Labour conference. He points out that there is no way to significantly expand the Post Office's financial activities without substantially increasing its subsidy from the government, money the Exchequer simply doesn't have at this point in time.

"This looks like a crowd-pleasing announcement that can bring a cheer at the party conference, and that's about it," Clougherty says.

Published in Scotland on Sunday here.

The Times: Dylan signs the subterranean Citigroup blues

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Written by Martin Waller.

A new phrase has entered the economic lexicon — “fiscal alcoholic". It emanated from the Hungarian central bank and has been introduced into the UK by Eamonn Butler, of the Adam Smith Institute. It is defined as “someone who knows that they should be giving up their reckless spending and borrowing habit, but is addicted to it." “My name is Gordon, and I am . . ."

Published in The Times here.