Posts Tagged ‘growth’

Completing devolution

Friday, October 9th, 2009

Tony Blair’s “Clause 4 moment” was when he amended the Labour Party’s constitution to abolish their formal committment to nationalisation. A similarly significant moment for the Conservative and Unionist Party could be our renaming to just the Conservative Party.

There is just one Conservative MP in a Scottish constituency, out of 59. There are just three Conservative MPs out of the 40 MPs for Welsh constituencies.

Repealing the Union Act would significantly reduce Labour’s majority, significantly increase the forthcoming Conservative majority, and prevent Labour from governing England ever again. It would cause the centre-ground of politics to shift back to the Right.

Furthermore, Scotland, Wales and Northern Ireland have more tax money spent on them than they pay in taxes. England would be better off not having to subsidise them. But Scotland, Wales and Northern Ireland may well end up better off themselves. For example, half of all the money spent in Scotland is spent by the State, and one in four Scots are employed by the State. Independence could be the spur Scotland needs to become vibrant and productive again. It would also create tax competition, which would be beneficial for all. If they wanted, the Scotch could position themselves as a low-tax, low-regulation country and out-compete England.

The Scotch, Welsh and Northern Irish could be given the choice of whether to keep the Queen as monarch. Scotland could keep what’s left of the North Sea oil.

The principle is localism — that decisions should be taken as close as possible to the people they affect. Devolution is localist, but current devolution has not gone far enough, and has created problems like Scottish MPs voting on matters that affect only England. This is wrong. Furthermore, at the moment, the Scottish Parliament can spend money without electoral consequence. True devolution must put tax raising powers in the hands of those who spend the money, in order to make them truly accountable. Taxes should be raised locally. True devolution must give them complete control of their budgets and taxes. It should even give them control of the laws of the area.

And for it to really be effective over the long-term, it must not be reversible. The Westminster Parliament must not merely devolve these powers to the nations. Future Parliaments would always be tempted to overrule national decision-making about various things until, gradually, all decision-making had returned to Westminster. We’d end up back where we started. For localism to work, Westminster must give up the powers completely and irrevocably. Scotland, Wales, Northern Ireland and England must become independent, and the Westminster Parliament should become the English Parliament.

That would be true localism, as if we meant it.

Independence for England would not make us weaker. How could it, when in the absence of the other nations’ draining the taxpayer, we could spend more on our armed forces?

Independence would make England stronger. It would also make Scotland, Wales and Northern Ireland stronger. The Conservative Party should embrace it.

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Posted in Politics by Hugo Hadlow | 8 Comments »

Response to two speakers: Simon Heffer and Lord Blackwell

Saturday, May 17th, 2008

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.

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Posted in Event reviews, Politics by Hugo Hadlow | No Comments »

The European Union

Thursday, January 3rd, 2008

With the recent European Reform Treaty, it is topical to consider the nature of, and the justification for the European Union. The central point to make here is that whatever justification for the EU that is given, it is either false or not worth it. Indeed, the EU is detrimental to the prosperity of many countries in the world.

The primary reason for the creation of a pan-European economic and, subsequently political, organisation was to ensure greater integration, especially between France and Germany, in order to ensure that war would never again divide the continent. In this respect, if the EU has done anything at all to help, it has been entirely successful. However, would anyone argue that there is still work to be done? Are the Gauls and Aryans primed and ready to battle it out for supremacy as soon as the mystical shroud of political federation, as provided by the EU, is lifted? This may seem trite, but there is a serious point: since even before the creation of a European Community, its work has been done. War between France and Germany was not made obsolete by a form of coalition in the 1950s, but by the destruction and inhumanity of World War Two. As such, Europhiles have always sought new and elaborate justifications for the EU, almost all of which are false.

Rather than repeat thousands of other articles on the same subject and list the different justifications propounded in support of the EU only to refute them, I shall look at one function of the EU and the associated argument in favour of its existence. This is to re-distribute wealth through development aid from wealthier European nations to those that are less developed and to open up their trade markets in order to raise their GDP and living standards. One can argue that Britain itself benefited from this very principle when it was the sick man of Europe before the economic reforms of Margaret Thatcher. However, this great benefit of the EU is undermined by the nature of the Union itself, thereby eradicating any intrinsic benefit derived from redistribution. These problems are: global issues, immigration, and centralisation.

Through the EU, we deal only with the problems on our small continent. In contrast, it is beyond our Eurocentric world that the majority of unacceptable crises can be found. Of course, one can argue that the EU can function as an effective aid organisation to the world. However, this is not possible when the EU implements protectionist economic sanctions. The EU is an oppressive economic bloc, limiting free trade (as well as the scope for fair trade) in order to maintain its economic dominance at the expense of developing world economies. For example, every year the EU destroys tonnes of food in order to keep prices high. Moreover, market competition from outside the EU is restricted. It is only through trade (be it free, fair or otherwise) that individual producers and countries can hope to gain the wealth necessary to prosper.

What is more, when we look at the free movement of people within Europe, we see that aid within the EU is similarly undermined. This is because immigration within the EU removes the population needed for economic growth from the countries that seek development. Those in favour of immigration in Britain tend to point to the (supposed) vast economic benefit migrants bring to our shores. However, paradoxically, are we not being selfish when we call for more immigrants? This is because it impedes growth in the countries these people are leaving. Instead, we privilege our own prosperity above that of other people in the world. As such, those left behind are also left behind in terms of living standards and the opportunity in order to improve their quality of life compared with those living in Britain.

The centralised and authoritarian nature of the EU also undermines the development aid given to less economically developed member states. This is because the terms of this aid is dictated by the western European countries that dominate the EU through majority voting. In this way, the historical and cultural development of the country receiving aid is neglected, and, effectively, suppressed. As such, the benefit of that development aid is undermined. For example, a policy that suits the British economy, dominated by the private sector, may not be suitably implemented on the continent where the social economy is more prevalent. The best initiatives have to take the historical and cultural milieu of a nation into account. This cannot be achieved at a pan-European level.

In conclusion, the European Union’s aim to help development in less economically developed member states is admirable and justifiable. However, the framework within which it is conducted does not work. First, it undermines global development through economic restrictions. Second, development within the EU is undermined by free immigration. And third, derived from its centralised and authoritarian nature, the terms of aid to other countries is dictated by the major European powers, which may not suit the historical and cultural development of the recipient country. As such, one may wonder whether this noble aim of the EU is worth it considering the adverse consequences.

Of course, there are many other arguments in favour of the EU. Examples include better trade between European countries, regulatory consistency, and a political power to counteract the hegemony of the United States of America. However, these arguments seem to suffer from the same problem as that given above: they fail to justify the creation of an additional and cripplingly expensive layer of bureaucracy, whose aims are undermined by its very nature. However, that is for another article to discuss.

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Posted in Politics by James Arthur Sharpe | No Comments »

Modern Myths

Monday, November 5th, 2007

I would like to start a new “internet meme”. The topic today is “Modern Myths”. What popular myths do you know? What things do many people take for granted, but are actually false?

1. Full employment/zero unemployment is achievable.
It isn’t. The market never clears instantly, so there will always be a natural rate of unemployment. Of course we should aim to reduce unemployment as much as possible, but I recently found out that some people believed zero unemployment was achievable.

2. Growth is possible without job losses.
It isn’t. There is nothing bad about people losing jobs (except for them, in the short run), because ultimately they can do other things, the economy becomes more efficient, more wealth is produced and everyone is better off.
But I used to think that of course it would be better if growth could be achieved without job losses.
I read recently a very simple argument that growth is not even possible without job losses. For growth to occur, labour has to become more productive. Therefore, a company will be able to do the same work with fewer people. Therefore, job losses.

3. Genetically modified food is bad. “Natural” means good.
I do not quite understand the opposition to genetically modified food. For some reason, people think that “natural” or “organic” means good and “artificial” means bad. Of course there is no link: there are plenty of natural poisons, and natural foods which are bad for you. There are plenty of foods with added chemicals which are fine. Perhaps it is because people do not understand that all food, whether “natural” or “unnatural”, is made of chemicals, which can be isolated and are identical whether grown naturally or synthesised in a lab.
People campaign against GM food trials on the grounds that it could escape and grow in the wild (“contamination”). But this begging the question: it is not contamination unless the food is bad in the first place. Why would it be? Genomes, whether natural or altered in a lab, are fundamentally the same. What is the problem?

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Posted in Politics by Hugo Hadlow | 2 Comments »