ja_mageia

Let's abolish the Arts Council. There's something repugnant about a state agency that dishes out taxpayers' money for arts projects. It somehow makes me think of the appalling art that was condoned and encouraged by the governments of Soviet Russia, or Nazi Germany, or Maoist China (the image of 'Revolutionary Ballet', danced with rifles and machine guns, will stay with me for the rest of my days). Give the government a monopoly or near-monopoly of arts funding, and you're going to get art that appeals to bureaucrats. It might be really dull, or really 'challenging', but it will be the bureaucrats' choice, not the public's choice.

It's no surprise that art, literature, music, architecture as well as science and technology have flourished in capitalist societies rather than in socialist ones. Capitalist societies have had the wealth to look beyond subsistence to art and culture. They have given people the freedom to explore new approaches in the arts and sciences too. Even Russia's greatest buildings, and its greatest music, were created for private families and firms, not for soviet planning boards.

The freedom that is allowed in capitalist societies produces the freedom and elbow room that artists need. If your arts are funded and dominated by the state, you have only one place to go for support and sponsorship. If the officials like what you do and your face fits, you might get support. If not, you won't. In the capitalist society it is quite different. There are no end of people around with crazy ideas about art just like you, and wealth enough to back them. If you want to try out your ideas, all you have to do is to find one or two of those people, and you are in business. While the state system is exclusive, the capitalist system lets diversity flourish.

Of course, if we closed down the Arts Council – actually, I think it's more a matter of when – people say that there would be a funding gap, that private philanthropy would be insufficient to step into the breach, and that the nation's production of good art would fall.

In the first place, this begs the question of what the optimum quantity of arts production is, of course. Perhaps, with less public subsidy, production would fall, but perhaps the loss would bother nobody except a few artists. I do not know. The state can no more identify and plan the right quantity of painting or theatre or sculpture than it can identify and plan how many 50mm brass screws the nation needs. That is why we leave these things to the free market to deliver.

But even if we accept that the nation does indeed need and want greater output from the arts sectors, how best to encourage philanthropy to bring that on? Here I think we need reform of the charitable sector. Gordon Brown's gift aid was a revolution in charitable funding: no longer did they have to get subscribers to fill out complicated covenant forms before they could get tax relief. One simple form was perfectly sufficient. But the United States does it better, by making the tax benefit automatic, and giving it to the donor. The result is that people in all walks of life give willingly, and give much more, to charitable causes. They somehow think that they are cheating the tax collectors out of some money if they do. As a motivator for arts funding, I can think of none better.

To the joy of many NHS trusts, Labour's cap on revenues from paying patients is to be lifted. The potentially huge revenues for hospitals will enable them to reinvest profits in free NHS services as well as boosting the provision of private healthcare in the UK. Hospitals such as Moorfields, with ventures in Dubai, and the Royal Marsden, with a much higher cap due to historical anomaly, will be well placed to expand their revenues. Manchester Christie hospital is even eagerly looking forward to the trebling of its income over the next decade, and the construction of a new £14m cancer centre as a result of the policy change.

You'll be surprised to learn that I gathered this great news from The Guardian. Naturally, the paper also gave voice to some ridiculous objections:

What's to stop US healthcare companies coming over here to poach patients. Or GPs sending patients to India for cheap operations? Or English hospitals raiding Scotland for sick people?" said Alan Maynard, professor of health economics at the University of York.

The answer to these questions is, of course, "nothing, and why not?". If Scotland has sick people, then why should they be denied better treatment, irrespective of its source? Scottish patients are not some kind of 'turf' to be jealously guarded much like a suburban gang defends its patch - that kind of mentality entrenched in regulation or law simply leads to Scots receiving poor healthcare for the peace of mind of inadequate NHS trusts.

Patients are not there to be poached, they are there to be provided for, making their own decisions as to where they want to go. If US companies can entice patients, then the NHS must be underperforming and may well up its act to prevent patients from being lost. Likewise, if Indian operations are cheaper, and patients choose to go along with them, what's the problem? Essentially, Professor Maynard dislikes the idea of supply attempting to meet demand - his comments display an alarming belief in health protectionism, favouring public health providers to the direct detriment of patients. Health economics? Please.

It's time the government got out of the banking business. Britain's biggest banks are about to report profits of £8.4bn – not bad for a sector that was supposedly on the brink of collapse a couple of years ago – but Chancellor George Osborne has told them he's not pleased. He wants them to be lending more to Britain's struggling businesses, not stacking up profits. It's a view that goes down well in the newspapers. But it's wrong, and it shows why politicians shouldn't run businesses.

It wasn't long ago that the politicians were telling the banks they were lending too much. Taking too many risks. Giving companies and householders loans that they might be unable to repay. They told the banks they had to 'strengthen their balance sheets' – that is, start making some money and put in in their vaults so that they wouldn't need another bailout if things turned bad again. But now, as soon as they start making a profit, the rhetoric screeches into a u-turn. You just can't expect people to run a business when you are pushing them in contradictory directions.

Banks are in the same line of work as every other business, which is to make money for their shareholders. This is exactly what they are doing, and since the government is the biggest shareholder in UK banks, you would think our politicians might be pleased. In fact, £8.4bn is not so huge a profit for a sector that has assets of £2,500bn, but it's a sign that the banks are indeed getting stronger, which is why RBS's share price has bounced back 70% this year and shares in Lloyd's are up nearly 37%. Having picked up the stock at fire-sale prices, politicians and taxpayers should be laughing all the way to the bank.

I recognise that the biggest problems for UK businesses right now are a lack of confidence, and the difficulty of getting loans out of their bankers. At interest rates of nearly zero, the demand for loans should be meteoric, but customers are still not bullish about things. And at interest rates of nearly zero, the banks know they can't make much money for their shareholders by issuing new loans. So we are stuck here for a while, which is why the politicians want to bully the banks into lending.

More lending might revive business, but is that a good thing right now? Company liquidations are their lowest in thirty years. In the ordinary run of things, lots more businesses would be going bust; but they have been kept alive by a huge transfusion of the Bank of England's quantitatively-eased cash. But this hair of the dog is simply staving off the hangover, and maybe making it worse. The Bank must actually be relieved that the banks haven't been lending out all this new money to their customers (most has, of course, ended up in the pockets of Britain's debt-ridden government). If they had, businesses would have been busily investing and expending to meet demand that isn't there, and inflation would really be something to worry about. When the banks start lending, the Bank of England is going to have to pull back all of its expansionary largess in very short order. No central banker likes to do that – they prefer to have a constant boom. Hope springs eternal in the breast of politicians and monetary authorities, but (read your Hayek and your Mises) every boom built on fake money inevitably ends in a destructive bust. Perhaps it's time we got the politicians out of the central banking business too.

Dr Eamonn Butler is author of Ludwig von Mises – A Primer.

Vote on guardian.co.uk here.

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 I was on both Sky and BBC News last week talking about Work and Pensions Secretary Iain Duncan Smith's proposals on welfare reform. I basically advanced three main arguments, all in favour of the most radical of Duncan Smith's reform options - replacing the entire benefits and tax credits system with a single, 'universal credit' that would be withdrawn at a flat taper rate as a person's income increased.

The first was that the current system is a nightmare, that it is complex, bureaucratic and riddled with perverse incentives that mean it often makes more sense for a person to be on welfare than in work. No one would ever has designed such a system intentionally - it is just the result of one political initiative being piled on top of another, until you're left with a Byzantine mess that makes no sense whatsoever. Given that the current system is so bad, Duncan Smith is absolutely right to want to tear it up and start again. That fits entirely with the  zero base, 're-booting government' ethos that the ASI's has been promoting ahead of the Comprehensive Spending Review. 

My second point was that the key aspect of welfare reform was to make sure that work always paid, that people were always better off working more rather than working less. Getting people back to work, I argued, is the only way we can sustainably reduce welfare spending in the long run. As it is, the welfare bill is just going to keep rising - so again, Duncan Smith is right to be radical.

My third point was that of the various options outlined in the government's consultation document, the single 'universal credit' was by far the most appealing. There are several reasons for this: firstly, having a single credit with a single rate of withdrawal is the best way to ensure that perverse incentives are, as far as possible, removed from the benefits system. A lot of the problems at the moment come from the complex interaction of various different programmes - having only one will make things much easier. Moreover, having a single credit also allows for the greatest short-term savings to be made in terms of reduced bureaucracy and administration, and less fraud, abuse and error. That makes the up-front costs of setting up a new system more palatable.

All in all, the government's consultation document is very promising: if the right choices are made, Iain Duncan Smith's proposals could have a hugely beneficial, transformative effect on the welfare system.

Our latest report, Global Player or Subsidy Junkie? Decision time for the BBC, argues that the TV Licence Fee should be abolished, and that the BBC should instead become a subscription service. The report's author, media expert and former BBC producer David Graham, explained some of the thinking behind his proposals in an article for the Sunday Times yesterday.

The report makes a number of points against the Licence Fee, arguing that it criminalises poor people, that it forces people to pay for genuinely “free” services funded by advertising, that it obliges the BBC to replicate a crude commercial model based on mass-audience advertising, and that universal broadband and the Internet make a “licence” to broadcast obsolete. 

However, the report actually focuses on a more positive argument, suggesting that the BBC is a hugely important British institution that should be working harder for the country. At the moment, the BBC invests heavily in opinion management and capturing UK regulators. Instead, it should look outwards towards the international media market, exporting prime time content to other countries (particularly in the EU) and competing for the first time with the major US studios. Rather than just exploiting the exclusive benefits of public subsidy, it should be contributing substantially to the national economy. The report argues that shifting to a voluntary subscription model is the best way to make this happen. It would also allow the public, for the first time, the chance to make its own choices, as well as making the BBC more responsive to consumer demands and interests.

As David Graham put it, "Continuing with the current funding model means justified hostility from the rest of the industry, contraction and decline for the BBC. The new Government seems ready to rethink fundamentals. I hope this paper will help to encourage a serious debate, at a critical time, about a very important British institution.“

Tom Clougherty added: "The status quo will not be an option for the BBC for much longer. The licence fee is already an anachronism, and opposition will grow as technological advances and changing viewing preferences make it even more outdated. But most of the reforms on the agenda at the moment – like scaling back the BBC or sharing licence fee revenues with other broadcasters – risk stifling the potential of the British media. Our proposals, as well as addressing the unfairness of the current system, would set British broadcasters free to make a significant contribution to economic growth."

Click here to download copy of the report.

I've long (and vociferously) been an advocate of the legalisation of drugs. Not just because it's your or my right to ingest as we wish to but because there's a large market out there currently untaxed: one which if taxed would mean we could reduce taxes on things like incomes.

However, I might have to change my mind on that latter:

Gangsters, drug dealers and money launderers appear to be playing their part in helping shore up the financial stability of the euro zone.

That's thanks to their demand, according to European authorities, for high-denomination euro bank notes, in particular the €200 and €500 bills. The European Central Bank issues these notes for a hefty profit that is welcome at a time when its response to the financial crisis has called its financial strength into question.

The point here is seignorage: the ECB takes a few pennies worth of paper and ink and people will pay 500 euros for it. This is, as the phrase itself says, rather profitable, as profitable as simply printing money. The amounts being made are quite large, between 50 and 80 billion a year.

Those profits themselves thus boost the capital of the ECB itself and so underwrite the loans that have been made to stricken banks. The financial system is thus being saved by cocaine dealers looking for ways to hide and transport their profits. So perhaps the taxation reasons to legalise drugs are no longer valid?

Or perhaps, more importantly, now that we've worked out how to make gazillions legally from the drug trade we should work out how to make further such gazillions? The real advantage of the 200 and 500 euro notes is that you can get a lot more value into a smaller, lighter, load than by using US dollars, the largest general issue of which is the $100 bill. $1 million in USD weighs 22 lbs while in euros about 4 lbs. Much, much easier for money smugglers that is.

So, why don't we create the 1,000 euro bill? This would make serious inroads into the US illict market and thus undermine the US Treasury's seignorage while boosting the ECB's. We get a slice of the US drug trade and just think of the CO2 savings by reducing the weight of bank notes that need to be transported back to Latin America!

Winners all round really....and aren't we supposed to be harnessing Mammon and markets in order to save Gaia anyway?

 The Coalition government should be lauded for Friday’s announcement of a plan to permit people to exercise control over inordinate council tax hikes that have increasingly squeezed the budgets of English households across the country. Local Government Secretary Eric Pickles announced his intention to allow people to decide through a referendum process whether to accept or reject council tax increases that exceed the rate of inflation. This is expected to be in place by March of 2012. Under the current system, Whitehall decides when an increase is “excessive” and must be capped. The move is positive for two reasons: it will likely arrest the dramatic increase in such taxes, and will allow people to better control their local governments.

First, the growth of council taxes, which has been unacceptably high, will at long last be controlled by the measure. Council taxes in England have nearly doubled over the last decade; the average council tax per dwelling in the country has increased from £656 in 2000 to nearly £1,200 today. Last year, the Telegraph reported that the increase in council taxes over the preceding decade outpaced inflation by a factor of four. That the referenda, which can be costly to administer, will be funded by the councils themselves will provide significant incentive for councils to make difficult budgetary decisions instead of irresponsibly raising taxes and further burdening families.

Second, the measure puts people back in control of their local governments. The central government is ill suited to make determinations about tax rates in local communities. Whitehall does not have sufficient knowledge of local concerns and cannot make appropriate determinations about which tax increases are “excessive” and which are acceptable. Such control belongs to the people, who know their communities much more intimately than bureaucrats in Westminster. Local government needs to be checked in some fashion, and it is only logical that such a check should come from the people most affected by its decisions.

The recent announcement is a heartening indication that the Coalition government has faith in the ability of communities to manage their own affairs. The referendum plan is a step in the right direction that further empowers the people, and simultaneously forces governments to make the crucial tradeoffs that English families must make everyday.

Earlier this year, the “horrific” idea that professorships should not be granted for a lifetime raised more than a few eyebrows in Denmark. The proposal, raised a few months ago by a Danish politician, suggests that after an initial ten-year contract, individual professors should successfully complete an evaluation process every five years in order to maintain their position as a professor. The proposition was designed to ensure that only the most qualified professors would assume the leadership of an academic institute. Unfortunately, I have not heard much of the proposal since it was first introduced, but the idea is nevertheless appealing in many ways.

Making a professor subject to such an evaluation would empower students as well as taxpayers, who are the primary source of funding of a professor’s salary, and would ensure that professors who once excelled at their work when first hired but no longer contribute to their subject do not prevent brighter and more energetic candidates from rising through the ranks of the academy. Such evaluations would allow professors who neglect their duties to be kindly removed from public budget.

I find the idea of an evaluation to be an excellent one, though I would argue that there exists an even more transparent and efficient way of handling the issue than an administrative appraisal. Though the proposal did not specify how such an evaluation process would proceed, I believe that taking both the professor’s research and student evaluations into account would be the fairest way of appraising a professor’s performance. Instead of proceeding with a conventional regulatory structure to supervise professors, which inevitably leads to more people in the public sector, student evaluations could be published on university websites. As most academics are quite keen on advertising their academic performance, the publication of student evaluations would not only fill a missing gap in this information, but would also provide prospective students with better information on where they can obtain an education best suited for their needs and goals. Instead of further regulation, the dissemination of information about “customer satisfaction” would aid prospective students and educational institutions, and would decrease professors’ insulation from market forces.