Response to two speakers: Simon Heffer and Lord Blackwell
Simon Heffer visited CUCA in Lent, resulting in the most attended and best talk of the term. He spoke of the creation of a “client state”, where the Labour Party massively increased the number of tax-funded state jobs in order to increase their voter base. People working in the state sector tend to vote Labour, so Labour’s strategy was clear: make more of them. This is massively costly, but seems to work.
Heffer’s solution is that the Conservative Party should not bother seeking these votes, because they will not vote Conservative anyway. Heffer is a critic of Cameron’s rebranding and apparent change of focus of the party, though has recently said he might consider voting Conservative. (He probably will.) He suggests that Cameron should not adopt policies to try to please everyone including these voters, but should focus on their traditional voter base.
In an article since, “Labour is malignant, not incompetent” (Telegraph, 2nd April 2008), he sees this strategy repeated by Labour with immigration. The Lords Economic Affairs Committee report on “The Economic Impact of Immigration” showed quite clearly that net immigration is not beneficial to the country. This has been obvious for years. The figures show that net immigration does not increase GDP more than it increases population, so has no effect on GDP per person and therefore general well-being. Government responses to this resort to obvious double-speak.
Heffer believes, as do I, that the government has known full well that net immigration is not beneficial, but has pursued it because it knows that immigrants tend to vote Labour. It has put electoral success above the country when it knows they are opposites.
Heffer calls for a radical cut in the amount of money spent by the government, which currently spends over £600 billion per year. Government spending has increased by 50% in real terms while Labour have been in power over the last ten years. As Lord Blackwell pointed out in his talk, the amount of stuff the government needs to provide doesn’t increase every year, so government spending should remain constant. Indeed, this means it should reduce as a percentage of GDP. If the government was spending the same as it was ten years ago, we could have abolished income tax.
Heffer demands tax cuts mostly to save money and free the economy to grow, but he echoes the calls of Sean Gabb for tax cuts to cut the funding to the ruling class - those who draw money and status from the state.
Lord Norman Blackwell visited CUCA yesterday, speaking and taking questions in the Union Dining Room, and then over dinner at Strada. Like me, he is very keen on policy: he worked on policy for Margaret Thatcher and John Major.
He started by talking about how radical some old policies seemed at the time, and how he believes others which seem radical now will be considered common sense in the future. For example, the Post Office used to run the telephone network in this country. As one might expect from a monopoly, the service was shoddy and expensive. If you wanted a telephone, you had to be put on a waiting list, and an engineer had to come to your home and fit one into the wall. You could only buy telephones manufactured by the state, which were very expensive.
People thought that the telecommunications couldn’t be provided by private companies. Now that it is, we know that of course they can.
Later, Lord Blackwell himself presented a report to British Telecom trying to convince them that it was safe for people to have telephone sockets, rather than a telephone hard-wired into the wall. Now, the idea that telephone sockets are dangerous is ludicrous. Then, it seemed radical.
Of course, there is an element of natural monopoly in landline telecomms. It does seem there needs to be some involvement by the state. But it should be as small as possible. As Hayek said, the state needs to create a legal framework in which competition can function. This should be designed to encourage as much competition as possible. Just because a market can’t function without the state, that doesn’t mean the sector should be run entirely by the state.
In the UK, British Telecom runs the lines (and even this is changing), but other companies can run calls on top of them. Much like Network Rail running the train tracks, but other companies running the trains. This is much better than BT doing everything, without having to compete and therefore having no incentive to provide a good, cheap product.
The same thing has been done with broadband internet. Can you imagine what our internet would be like if the government still had complete control of telecomms? Atrocious! Things would never have improved so rapidly.
We probably wouldn’t even know what we were missing out on. In Cuba, the state has to stop its subjects from finding out about the standard of living in other countries, so that they don’t know what they’re missing (toasters). What are we missing at the moment that we don’t know we’re missing? We’ll only find back if we stop the state slowing us down.
So telecommunications is one area where those advocating privatisation have been proved right. So are railways. Alex Singleton of the Globalisation Institute addressed CUCA at the Gin & Tonic party at the beginning of term, and he pointed out that by every objective measure, the railways have been improving since Conservative privatisation - the turning point.
Lord Blackwell suggested that healthcare and education are next to be privatised. People don’t know what they’re missing. They don’t know how good things could be.
However, Lord Blackwell didn’t suggest that “privatising” healthcare meant abolishing tax-funded (“free”) healthcare. Abolishing state-run schools doesn’t mean abolishing free education.
He suggested a voucher system. Consider education. The system would require very little change. Instead of being told what school you must go to, you could choose. Instead of only the state being able to set up state-funded schools, anyone could. That’s all.
He suggested not using the word “vouchers”, for two reasons. One, he thought it was as tainted as “privatisation” for many voters. Two, people didn’t know they wanted it, even though they wanted its consequences. If you offer people “choice” in your manifesto, they say “We don’t want a choice of schools. We don’t want to send our child to the next village. We just want to send our child to the local school, and we want it to be good.”
Choice (i.e. competition) doesn’t even need to be exercised to have beneficial effects. You don’t have to take your business from the local pub and drive to the next town. It’s just the fact that you could that means your local pub has to make an effort.
Similarly, if you go to a bad school and a good new one starts up, things won’t just be improved if everyone moves to the good school and the bad school shuts down. In most cases this won’t even be necessary. All that is necessary is that you can move. That is enough to give the old school some incentive to improve.
A similar scheme could be implemented for healthcare.
He suggested rolling out education vouchers in poor areas first. Even though this would mean richer areas wouldn’t get the benefits so quickly, it would demonstrate that the measures were to improve education in poor areas the most. This might help get voters used to them.
“Privatisation” seems radical in the UK at the moment, but it won’t when people see the consequences. We just need to look at the success of the Swedish implementation of vouchers.
People like to claim that there is something special about education and healthcare: that they are “public services” rather than products like any other. This is wrong. They are products like any other. People said the same about telephones.
Lord Blackwell used much libertarian rhetoric, and seemed to consider himself a libertarian. I’m not sure whether I’m a libertarian or not, though I have very strong libertarian sympathies.
I think vouchers are a good idea. But they’re not a libertarian idea. Vouchers roll back the state by allowing the state to pay for, but not run, education and health. They do mean that the state bureaucracy is smaller even if taxes stay the same. But libertarians would not even have taxes to pay for education or healthcare.
It may be that complete abolition of the welfare state is better for the country, especially in the long run. As Andrew Perraut says, “if markets are as massively productive as we libertarians believe and compounding returns to growth in the long term are taken into account, you could probably justify no more than very basic safety nets, for fear of distorting the economy and dramatically lowering everyone’s goods in the future.” But the safety net could include healthcare and education.
In any case, vouchers are better than the current system, and we need them fast.
My commitment to reducing the size of the state is Perraut’s: any taxation reduces economic growth. Some taxation is necessary, but the optimum amount is far lower than it is at present.
Lord Blackwell’s seems to be for a different reason. Statism cows people. It reduces the striving, self-reliant ethic. If people have a problem, it encourages them to expect the state to solve it, rather than solve it themselves. This attitude reduces economic growth because it discourages innovation.
He ended on a quotation that Lady Thatcher looked up while they were working on a speech. It is one of the closing sentences from John Stuart Mill’s “On Liberty”:
“a state which dwarfs its men, in order that they may be more docile instruments in its hands, even for beneficial purposes, will find that with small men, no great thing can really be accomplished.”
Postscript.
Afterwards, over dinner, he talked about the historical consequences of global cooling, including the halt of the expansion of the Roman Empire. This would be an excellent way to write an article aiming to change people’s minds about global warming. The scientific evidence that global warming will stop, rather than being catastropic, is clear. We haven’t had any for over ten years. So take this for granted! Treat global cooling as inevitable, and write an article about its historical consequences and how we must prepare to meet them again.
Tags: economics, education, growth, libertarianism, NHS, statism, wealth, welfare state