Liberal Vision

Are we turning German? (or, The rise of the dual word)

The lexicon of government neologisms is a heavy and depressing tome. Indeed, politicians and bureaucrats have a remarkable capacity to speak differently from everybody else.

Remember Tony Blair’s ‘sentences’ without verbs? Or the verbisation (sic.) of nouns (the latter not unique to government, as anybody who has ever partied will attest)? When did encouraging and rewarding become “incentivisation”?

The latest fad seems to be in conflating words, creating one word where two would do. A couple of years ago the new anti-smoking legislation led to the creation of “Smokefree” zones.

Today I learn that TfL is to urge London’s motorcyclists to get ‘BikeSafe‘ while being invited to a ‘Smartmoves‘ conference.

The Local Government Association sought to discourage around 200 examples of local government jargon last year, but they seem to be fighting a losing battle against the forces of ‘newspeak‘.

Roy Jenkins: You’re too liberal!

Over the weekend I watch the first episode of the BBC’s series on the Great Offices of State, which focussed on The Home Office. At one point they had footage of Roy Jenkins visiting the wreckage of the Birmingham pub bombings. As he walked past the angry crowds, a voice (or it may have been two voices) shouted out “Bring back hanging!” “Your’re too liberal!”

At the time I just chuckled a bit. “You’re too liberal” isn’t a common critique in the UK, where (unlike the United States) liberalism is not conflated with socialism, and people tend to be practical rather than philosophical.

Indeed, for my mind, Roy Jenkins wasn’t liberal enough, in that it was his and our tragedy that he reached the zenith of his political career at around the time that the Liberal Paty was in its nadir.

Yet this morning I was suddenly struck by something that I had overlooked at the time. The woman who was accusing Jenkins of being too liberal was doing so in the context of the Birmingham bombings. Those same Birmingham bombings that led to the wrongful conviction of six people.

Too liberal? Thank heavens Roy Jenkins was liberal. Thank heavens he was Home Secretary after the abolishion of capital punishment, and so was not faced with the onerous duty of overseeing the execution of six men. Thank heavens that we didn’t determine, 17 years too late, that we - too - had killed the innocent.

In fact it wasn’t Jenkins who abolished capital punishment, but James Callaghan. Still, it seems like a very long time since we have been confronted with the prospect of a Home Secreaty who could in any way, shape or form be call liberal.

What’s wrong with a Bill of Rights?

Power 2010, a campaign to reform the UK constitution, is inviting people to vote on five reforms to which they will ask parliamentary candidates to sign up before the coming General Election. There are some excellent ideas, some not so good and some deeply flawed.

Among them is a suggestion that on face value should be welcomed. Over at the Adam Smith Institute’s blog I examine the call for a UK Bill of Rights. As I note, “a Bill of Rights that set out the freedoms that people should enjoy as citizens (not subjects!) of the United Kingdom – bringing together both ancient liberties and new ones – would be a good thing… However, as is so common when talking about ‘Rights’, the authors of this proposal go on to conflate two very different issues, and in doing so they undermine their case…”

To find out where they have gone wrong, read the full article.

[Please also leave any comments there rather than below: why have two conversations when we can have one?]

Niall Ferguson on the economic crisis

“Though superficially this crisis seems like a defeat for Smith, Hayek, and Friedman, and a victory for Marx, Keynes, and Polanyi, that might well turn out to be wrong. Far from having been caused by unregulated free markets, this crisis may have been caused by distortions of the market from ill-advised government actions: explicit and implicit guarantees to supersized banks, inappropriate empowerment of rating agencies, disastrously loose monetary policy, bad regulation of big insurers, systematic encouragement of reckless mortgage lending — not to mention distortions of currency markets by central bank intervention.”

- Niall Ferguson,  ”Dead Men Walking“, Foreign Policy. 

Keynesians, Neo-liberals and the Government’s economic recovery train wreck

The government’s economic recovery policy consisted of two tracks: “fiscal stimulus” and “quantitative easing.” The former was discredited decades ago, but now the latter, too, appears to be failing, despite it being the tool-of-choice of the neo-liberal consensus that dominated macro-economics since the 1980s.

My latest article at the IEA blog spells out why.

Lord Layard on the cause of long-term unemployment

Here is Labour peer and happiness economist Lord Layard on the cause of long-term unemployment in Europe:

Europe has a notorious unemployment problem. But if you break down unemployment into short-term (under a year) and long-term, you find that short-term unemployment is almost the same in Europe as in the U.S. – around 4% of the workforce. But in Europe there are another 4% who have been out of work for over a year, compared with almost none in the United States. The most obvious explanation for this is that in the U.S. unemployment benefits run out after 6 months, while in most of Europe they continue for many years or indefinitely.

Hat tip to the Tim Worstall at the Adam Smith Institute.

The BBC helps us understand fascism

While the Have Your Say section of the BBC website can be even more of a lightning rod for the foamy-mouthed opinions than most bulletin boards, today’s article on, and discussion of, the meaning of fascism is an outstanding exception.

The article is fairly well informed and interesting, while the commentators (of which yours truly is currently no. 6 – “Tom, London”) have been particularly well informed, measured and interesting. The last time I checked, nobody was ranting about the BNP (topical but, in this context, only tangentially relevant) and nobody had started calling anybody else names. And, in a truly shocking turn of events, Godwin’s law has hardly applied at all!

Having had my say on the general meaning of “Fascism”, I thought I would let Ludwig von Mises deal with the specific meaning: the Italian context. In the 1947 Epilogue to his seminal 1922 work Socialism, he wrote:

The programme of the Fascists, as drafted in 1919, was vehemently anti-capitalistic… When the Fascists came to power, they had forgotten those points of their programme which referred to the liberty of thought and the press and the right of assembly. In this respect they were conscientious disciples of Bukharin and Lenin…

Fascist economic policy did not—at the beginning—essentially differ from those of all other Western nations. It was a policy of interventionism. As the years went on, it more and more approached the Nazi pattern of socialism. When Italy, after the defeat of France, entered the second World War, its economy was by and large already shaped according to the Nazi pattern. The main difference was that the Fascists were less efficient and even more corrupt than the Nazis….

Fascism was not, as its advocates boasted, an original product of the Italian mind. It began with a split in the ranks of Marxian socialism, which certainly was an imported doctrine. Its economic programme was borrowed from German non-Marxian socialism and its aggressiveness was likewise copied from Germans, the All-deutsche or Pan-German forerunners of the Nazis. Its conduct of government affairs was a replica of Lenin’s dictatorship. Corporativism, its much advertised ideological adornment, was of British origin. The only home-grown ingredient of Fascism was the theatrical style of its processions, shows and festivals…

It may happen that Fascism will be resurrected under a new label and with new slogans and symbols. But if this happens, the consequences will be detrimental. For Fascism is not as the Fascists trumpeted a “new way to life,” it is a rather old way towards destruction and death.

The rule of law takes another beating

Political commentators too freely use expressions such as “totalitarian”, “undemocratic” and “tyranny”. But I struggle to avoid applying them to the Government’s latest assault on liberal principles.

HM Revenue and Customs has reissued its code of practice to give sweeping powers to HMRC officials to investigate those legally avoiding tax, including giving officials discretionary powers to interpret what parliament might have intended had they legislated on the matter.

According to the Code of Practice:

Avoidance is not defined in the Taxation Acts…One definition is ‘a situation where less tax is paid than Parliament intended, or more tax would have been paid, if Parliament turned its mind to the specific issue in question’. At a practical level the problem is then essentially one of deciding what Parliament would have intended and identifying who should be asked to decide this.

Inspectors need to have in simple terms a working concept of ‘avoidance’ in order to properly identify cases which can be worked…The starting point should be that one would normally expect taxpayers to pay tax on their income or profits…It is reasonable to assume that where a commercial transaction is carried out in a particularly convoluted way, then avoidance is afoot.

The extent to which this undermines the principles of Democracy and the Rule of Law cannot be underestimated.

Democracy first. Laws are made by parliament. It is true that parliament (all too) often delegates responsibility to ministers to create Secondary Legislation, but this still requires a legal process. The government cannot change the law through a administrative fiat (though Labour has often neglected this fact, as they did when they tried to abolish the office of Lord Chancellor as part of a cabinet reshuffle). Granting officials the power not just to interpret the law (the role of the judiciary) but also to create law based on an assessment of “what Parliament would have intended” is completely and utterly undemocratic.

Now the Rule of Law (a principle of liberty probably more fundamental even than Democracy itself). Laws do not exist to justify punishing bad people. They exist to prevent errant behaviour. They do this by signalling to us in advance what behaviour is acceptable and what is not. Pursuing people for crimes that are not yet on the statute book completely undermines the fundamental principles of the law. If one does not know what financial arrangements are legitimate, one cannot hope to do what is acceptable to the authorities.

The analogy I often use is with traffic laws. If the law says that the national speed limit is 70mph, it is perfectly legitimate to drive at 69.5mph on the motorway. If the traffic police were instructed to arrest and prosecute people for driving “at a speed faster than Parliament would have mandated, if Parliament turned its mind to the specific issue in question”, we’d all end up being banned from driving!

Labour members, of course, will barely notice and care less about any of this. The Labour party has never had much use for the Rule of Law. If the Tories kick up a fuss, they will be accused of protecting the rich, even if they argue from the point of principle.

Sadly, however, the animosity that many (including too many Lib Dems) feel for those who make legitimate but convoluted arrangements to avoid paying tax means that this is unlikely to cause uproar among Liberal Democrats, either. Vince Cable is a constant enemy of avoidance. However, I would hope that even those Liberal Democrats who want to crack down on tax avoidance would agree that this must be carried out in accordance with the Rule of Law, enacted by democratic legislation.

Putting aside for a moment the (emotively overlooked) distinction between avoidance and evasion, liberals of all parties should stand up to oppose what is surely slide towards totalitarian tyranny.

Vince Cable’s moral compass

It is said that you can judge a person by the company they keep. In that case, Vince Cable’s halo has slipped a bit.

His decision to give his support to Compass in its campaign for a High Pay Commission to curb “excessive” pay is bad politically, economically and morally.

Compass is an avowedly socialist campaign group, the primary focus of which is the Labour Party. It is a partisan body that has for some time sought to make Labour even more interventionist, statist and illiberal. Vince Cable should not be giving it intellectual succour.

In addition, the very idea that the government should impose maximum wages upon individuals should be anathema to him both as a liberal and as an economist.

I have written an article on the Institute of Economic Affairs blog explaining some reasons why maximum wage legislation is a bad idea. On the one hand, “There is no reason, functionally or morally, why a person should not enjoy any amount of wealth”. On the other, free economies have a far better reputation for wealth creation, poverty alleviation and even wealth distribution than interventionist ones. So maximum wage legislation is unfair both on an individual and a community-wide basis.

On top of this, Vince’s reason for supporting the High Pay Commission is flawed. In his words “There is no justification for massive pay and bonus awards in financial institutions, the most important of which are guaranteed or owned or have been rescued by the tax payer. Transparency and tax are important but a High Pay Commission looking at both equity and economic aspects is a welcome suggestion too.”

Firstly, the justification for “massive pay and bonus awards in financial institutions” is the same as it always was: it is necessary to attract the best talent. That the industry spectacularly failed in 2007 does not mean that there is no need to chase talent in 2009. What was wrong with the bonus culture in 2007 (and before, and indeed since) was not the size of the bonuses but the behaviour for which they were being paid. Had Compass proposed a Short-Term Gain Bonus Commission they might be on to something, but that is not what they are proposing. In attacking the size of the bonus rather than the behaviour they are rewarding, Compass is off the mark.

It is also not true that “the most important” financial institutions “are guaranteed or owned or have been rescued by the tax payer”, unless he is referring to the Bank of England’s lender of last resort function, which is centuries old and has been exercised without the need for maximum wage legislation for all that time. Only some financial institutions are actually owned by the taxpayer; Barclays and HSBC did not require a bailout and should not be subject to interference. Indeed, Lloyds TSB would be in a far better state had the government not effectively strong-armed it into merging with the bankrupt HBOS.

Of course, the government should not have a stake in the banks. Even if a bailout was necessary it should be reversed as soon as possible. But while the government does own shares in the banks it has a duty to taxpayers to get the best return on its investment. This will require the best talent available in the industry, which means that state-owned banks will need to compete with the rest of the sector by offering pay and bonuses commensurate with market rates. In fact, one cannot escape the feeling that the idea of limiting pay in the private sector is just a means of keeping down the costs to state-owned industries; a case of government being forced to intervene further to address the consequences of its past interventions.

His final point is the one I have discussed at in my IEA blog posting. The “equity and economic aspects” of government intervention are far more harmful to the poor than are the effects of leaving people alone. Free societies are not only fairer than less free ones, with the poorest owning a larger proportion of the nation’s wealth than in more interventionist economies, but they also create more wealth, so that the poor enjoy vastly more absolute wealth in free economies than in command economies.

Maximum wage legislation is a bad idea. It is also a bad idea for the Liberal Democrat’s shadow chancellor to support the socialist wing of the Labour party.

Americans without health insurance: young, rich and foreign

Everybody is shocked by the fact that over 15% of Americans do not have health insurance.  In a system that supposedly relies on private insurance as the only door to healthcare, that more than one in seven is uninsured is a disgrace.  Right?

But who are these uninsured? The poor? The old? American citizens? Don’t you believe it.

Hat-tip to Steve Bettison over at the Adam Smith Institute blog for analysing the US Census Bureau’s Income, Poverty and Health Insurance statistics.

Of the 45,667,000 people in the United States of America that do not have private health insurance:

• 9,737,000 are not US citizens. In addition,
• 32,118,000 live in households with an annual income of over $25,000, of whom
• 17,503,000 live in households with an annual income of over $50,000, of whom
• 9,115,000 live in households with an annual income of over $75,000.
• Only 686,000 are over the age of 65.
• 18,320,000 are aged between 18 and 35.

It is important to note that those six groups are not exclusive, of course.  It is possible to fall into five of the six categories.  But that still means that the number of poor old Americans who lack healthcare is significantly less than is often suggested.

Now I am not suggesting that foreigners do not deserve healthcare, but it does slightly cloud the picture of poor Americans being denied healthcare.  Neither am I suggesting that it is easy to find the money for health insurance from a household income of $25,000 a year, though it is not easy for taxpayers on low incomes in the UK to afford healthcare either.  It is the case that young people are notoriously bad at choosing to insure themselves and prepare for their futures.

The point is that the oft-cited raw figures about the uninsured in America mask a very heterogeneous group, many of whom are well able to afford insurance, and many more of whom are making rational choices not to.  Whatever the arguments for and against various healthcare systems in the US, it is worth bearing these facts in mind.