Liberal Vision

Niall Ferguson on fiscal stimulus

In yesterday’s Financial Times, the historian Niall Ferguson writes:

[W]hat we are witnessing today has less to do with the 1930s than with the 1940s: it is world war finance without the war.

But the differences are immense. First, the US financed its huge wartime deficits from domestic savings, via the sale of war bonds. Second, wartime economies were essentially closed, so there was no leakage of fiscal stimulus. Third, war economies worked at maximum capacity; all kinds of controls had to be imposed on the private sector to prevent inflation.

Today’s war-like deficits are being run at a time when the US is heavily reliant on foreign lenders, not least its rising strategic rival China (which holds 11 per cent of US Treasuries in public hands); at a time when economies are open, so American stimulus can end up benefiting Chinese exporters; and at a time when there is much under-utilised capacity, so that deflation is a bigger threat than inflation.

Are there precedents for such a combination? Certainly. Long before Keynes was even born, weak governments in countries from Argentina to Venezuela used to experiment with large peace-time deficits to see if there were ways of avoiding hard choices. The experiments invariably ended in one of two ways. Either the foreign lenders got fleeced through default, or the domestic lenders got fleeced through inflation. When economies were growing sluggishly, that could be slow in coming. But there invariably came a point when money creation by the central bank triggered an upsurge in inflationary expectations…

Also in the article, he notes (almost in passing) that:

In an influential paper published earlier this year, Carmen Reinhart and Kenneth Rogoff warned that debt burdens of more than 90 per cent of GDP tend to result in lower growth and higher inflation.

If memory serves, the Labour budget earlier this year referred to a then-current national debt of c.£800 billion, rising to £1,400 billion by 2014. That is likely to be roughly equal to GDP even if we recover and grow quite well over the next few years.

Daily Mash turns on Vince

For those who haven’t seen it:

GRADUATES WHO EARN MORE TO BE TAXED FOR TURNING UP TO LECTURES

Has Vince lost his golden touch?

Hat-tip: Philip Stevens on Twitter (http://twitter.com/Philip_stevens)

Burkan Nationalism

The fallout from France’s recent decision to ban people wearing the burka in public epitomises the irreconcilable divide between conservative (with a small c) and liberal ideology. Those truly committed to a liberal agenda should oppose calls for the government to further dictate what we can and can’t wear in public.

Firstly, this isn’t a debate about religion, security or multiculturalism. It’s about individual liberties. Many Conservatives opposed the smoking and hunting bans on precisely these grounds. They seem to have forgotten these noble principles when it comes to this issue.

But civil liberties don’t just extend to principles you agree with- they must be universal. As a lifelong non-smoker (and no fan of fox hunting) I will still defend the rights of others to do this. As I would defend a Muslim’s (or anyone else’s) right to wear whatever he, or she feels fit in public.

Which brings us on to the crux of the debate: the reasons for implementing such a ban. Very few commentators are taking the security concerns issue seriously; after all there are no calls to outlaw oversized hats or sun glasses in public. Private property, of course, is a different issue and the question of appropriate attire should be left to the discretion of proprietors.

In France, part of the justification was the threat to “Frenchness”. Which is fine–so long as you are not one of the anti-French that their all-knowing bureaucrats decide constitutes a threat to national identity. Neither is popular opinion a reasonable justification. The role of government is to protect everybody’s rights- not just those of the groups large enough to make themselves heard. The fact that this will only affect 2,000 French residents is as irrelevant as Mugabe arguing that only a small handful of white farmers will suffer as a result of his “popular” land re-distribution schemes.

The justification championed by Mr Sarkozy (and Andre Gerin– which is a good indication that it’s a truly terrible idea!) is that the burka represents a symbol of oppression of Muslim women: “The burka is not a sign of religion, it is a sign of subservience,” Sarkozy informed parliamentarians. Agreed- It most probably is. I, like many others, am not duped by the media focus on “happy-burka-wearers” into believing that there isn’t a deeper social issue at stake here. But since when has prohibition been the best way of approaching such egregious issues? Does anyone really think that banning black eyes in public will prevent domestic violence? If those pertaining to champion Muslim’s women’s rights are sincere in their virtues they should be looking much deeper than at outlawing a visual representation of that oppression.

Unlike some of the more vitriolic lefties I don’t see those calling for a ban as racist, ignorant or anti-Muslim. But I do see them as conservative. And it serves as a timely reminder that the ugly “nimby” side of conservatism will always be at odds with those committed to a liberal society.

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Vince

Continuing the theme of serial delusion, the big debate on university finance within the Liberal Democrats now appears to be between those who want to bleed everyone and those who just want to bleed success. This against the status quo of making people who use a service, and can afford it, pay for it.

I wrote last month criticising the uncapped graduate tax proposal in detail. It’s a daft scheme. Who in their right mind would volunteer to pay a potentially unlimited liability for a degree? The long-term consequences would be to incentivise mediocrity.

Like the mansion tax the sage of Twickenham has proposed another complex tax evasion plan, and one, like the mansion tax that we hope stands no chance of becoming policy.