Blog Review 874

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When markets rumble a mistake in a market, this isn't a failçure of markets, this is markets working like they're supposed to do.

Financial services are not the be all and end all of the UK economy: and most certainly not all of the growth in it.

Banks have the right of set-off. Some want them not to use it: hang on, aren't we trying to nurse the banks back to health?

Democrats, the poor, Republicans and the religious....and professional politicians.

Was the iPhone simply too good?

Diplomatic blogging like you've not seen it before.

And finally, the world put to rights. Had to happen eventually, didn't it?

Culpability Brown

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One clear fact shines through the bluster: Brown is to blame. He told us that Britain's financial problems were "caused in America," as if their sub-prime crisis were wholly responsible for our own troubles. He told us that he had "cut borrowing," whereas in reality he increased it to record levels and just lied about it, shifting off-stage the liabilities for private/public partnerships, the commitment to Network Rail, the unfunded public sector pensions, and pledges to Northern Rock, amongst others.

He told us that he had "reduced taxation," though of course he increased it, just using stealth taxes to keep much of it out of sight. Britain used to attract businesses, now increasing numbers are being driven abroad by our tax regime.

He told us that "Britain is best placed" to weather the recession because of the healthy state of our economy and our public finances. In fact we are worst placed, according to the IMF and virtually everyone outside of Number Ten.

Brown bears a heavy responsibility. The inadequate and incompetent FSA is his baby, and he appointed the wrong people to it as well. It failed utterly to foresee to warn, and to restrain, as the Bank of England used to do when it had the task of supervision.

Brown inherited a thriving economy and frittered it away on a recklessly massive expansion of the public sector. When Britain should have been storing up assets for leaner times, Brown was spending as if there were no tomorrow. Tomorrow has arrived, and Brown bears the blame for the mess it has brought. He is Culpability Brown, and cannot escape the blame this time.

The bankruptcy of Brown's Britain

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In Bankrupt Britain, a report published by ConservativeHome, Malcolm Offord highlights some very uncomfortable truths about the UK's financial situation.

For instance:

If we assume that in 2009-10, UK GDP falls by 5% overall in real terms, we think that “business as usual" levels of public spending and taxation would lead to national debt (on the Maastricht definition) rising to around 105% of GDP by 2012 and continuing to rise thereafter to 156% of GDP by 2020.

As a result of which, Offord argues, public spending will need to be cut by £100bn if we are to restore any kind of sanity to the public finances. Though I don't agree with everything in the paper – the tax rises on top-earners that Offord supports would bring in little revenue and hamper economic recovery – it is well worth reading in full. Just don't expect it to bring a smile to your face.

On the subject of cutting spending, however, £100bn might not be quite such an outlandish target as people expect. According to the figures in this paper on public sector efficiency by two ECB economists for the Fraser Institute, the UK could get the same public sector output with 16 percent less public spending. If we could make the British public sector as efficient as the American, Luxembourgian, Japanese, or Australian ones, we could save almost £96bn a year without cutting any services. That's certainly something to think about.

It's even worse than we thought...

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According to a recent piece on the BBC website "The severity of global warming over the next century will be much worse than previously believed, a leading climate scientist has warned." In this case, Professor Chris Field has told the American National Academy of Sciences meeting that, since greenhouse gas emissions have been rising more rapidly than expected (a statement which in itself deserves to be questioned), the predicted 1.1 to 6.4 degree Celsius average temperature rise over the next century is likely to be a serious underestimate.

And Prof Fields is not alone in his predictions of catastrophe. James Lovelock, proposer of the Gaia theory and catastrophist-in-chief, no longer talks of global warming, but global heating. He believes mankind's malign influence has gone too far to be reversible, that investment in renewable energy generation is a waste of time (I wouldn't disagree with that) and that remnants of the human race will only survive in polar regions and a few favoured islands such as the UK and New Zealand.

The only problem is that the doom-mongering is all based on the unproven hypothesis that anthropogenic emissions of carbon dioxide are having a dominant effect on climate. However, in the past ten years, there has been no rise in average temperatures and no evidence (other than the output of flawed computer models) to suggest that mainstream climate science is right. It is equally plausible that the quiet period of solar activity which started recently (as shown by a dearth of sunspots) will be lead to a cooling of the climate, as has always been the case in the past. Adam Smith himself noted the increased price of wheat in times of low sunspot numbers.

Time will tell, but in the meantime expect more scary headlines based on selective use of evidence by scientists convinced their theory is right.

Guest author Martin Livermore is the Director of The Scientific Alliance

The spread of a flat tax

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The ASI's briefing paper, A Flat Tax for the UK—A Practical Reality by Richard Teather, has been cited in Taiwan, leading them to conclude that "the government should evaluate the adoption of a flat tax system to simplify the tax system and to promote tax equity". A Flat Tax for the UK has had an impact on the policy debate in Australia, Greece, Slovenia, as well in the  IMF. Perhaps it is time the UK follows suit.

Quote of the week

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The old adage “Everyone’s a capitalist on the way up and a socialist on the way down" is kicking in. The thing is, if you’re a socialist on the way down, you were never really a capitalist on the way up. Capitalism requires putting your own capital at risk. What we do have is a grand adhocracy where “government," a.k.a. Barack Obama, Timothy Geithner, Nancy Pelosi, and a dozen others, will figure everything out as they go. Businesses will rise or fall based on their skill at kissing up to the government. And as sure as shinola, when government fails again, we’ll be told that only government can save us.

Jonah Goldberg, NRO

Blog Review 873

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Tsk, what, me, worry? For as we're told, even wasting money, even corruption, is a stimulus, right?

Well, how about that. Lower prices bring out the buyers.

But do higher prices bring out competent politicians? And if they do, won't higher pay bring out the competent bankers?

We could do with a few competent politicians, of course.

How embarrassing, a book on gifted traders includes one running a Ponzi scheme.

Might it be possible for those in charge of protecting civil liberties to actually be able to recognise a civil liberty? Is that too much to ask for?

And finally, boring sport "brought to life" by boring geekery. Or some such.

The Phibbs List

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Hammersmith and Fulham councillor Harry Phibbs has come up with a list of ways to cut the council tax without cutting key services. At first I thought it was one of these 'top ten' lists. Then as I read down, it seemed like it was turning into a 'top twenty'. Then a 'top fifty', perhaps. But no, Harry has come up with no less than a hundred ways to save local taxpayers' money.

Freezing recruitment – which Hammersmith and Fulham has done – is an obvious first choice. Scrapping political advisers, press officers, and the council newspaper. Not to mention arts subsidies, fair trade coordinators, management consultants and diversity officers. Get children out of care homes and into adoption, sell assets and shop around for insurance and other essentials. Turn down the thermostats in council buildings, And go for tap water at meetings, instead of expensive bottled water: that alone saved Hammersmith and Fulham a whopping £36,000!

With such simple economies saving such huge sums, perhaps all councils should adopt the Phibbs List. After all, the rest of us are having to cut back, so why should local government be any different?

Eamonn Butler's new book, The Rotten State of Britain is published in March.

Debt-for-equity swap

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A creeping socialism, an encroaching bureaucracy and an alarmingly brazen protectionism are re-emerging, paralleled by the rapid erosion of our civil liberties and an increasing public appetite for a vengeful and often ill-informed “conventional wisdom" about the economic crisis.

The proponents of free-market capitalism and all who hold freedom dear now face a tumultuous period of reckoning. The significant gains made for liberalism over the past centuries must not be undone in the heat of the moment by the over-hasty actions of panicked politicians, clearly out of their depth.

Liberals and free-market capitalists are being derided by our opponents as having no plan, no agenda for reform to rival the rapid nationalisations, the promises of an age of responsible regulation, and the cringingly huge bank re-capitalisations.

Yet this could not be further from the truth. There are a number of sensible policies, ones that need not involve nationalisations, taxpayer guarantees, or “bad banks", and that need not threaten the savings of depositors, or load future generations with the heavy burden of debt and higher taxes.

Perhaps the most exciting measure proposed is the Debt-for-Equity Swap – the mechanism by which toxic assets are simply written off, with debts owed by the bank exchanged for equity so that the bank’s good assets can broadly cover their debts. This simple measure leaves depositors unscathed; it could strip the entire system of incredibly complex yet risky assets, and without a penny of taxpayers’ money being involved. The losers would have been the existing shareholders, who would see their shares become worthless as they increased in number – but this sort of deserved loss is already the natural price of failure in a free-market economy.

By ignoring such measures, we risk falling into the dangerous fallacy of only looking at the limited options that governments have already laid out for us, despite the fact that government is the least imaginative, least creative institution known to mankind.

Anton Howes is leader of the Social Liberalist Party.

DIY dentistry

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We all know that healthcare provision in the UK is a tangled mess. The massive influence and control that the government has over the NHS and its resources has created a huge gulf between the service and its patients. Politicians no longer see patients as humans, but as numbers within quotas and costs on balance sheets.
 
When politicians make decisions, they can often forget the real impacts that this will have on lives. This latest survey by Which? found that 8% of people had tried DIY dentistry. Of those 8%, one in four had tried to remove a tooth using pliers, 12% had tried by tying a piece of string to a door and 19% had tried to pop an ulcer with a pin (These results are painful to read!). Surely the provision of state healthcare cannot have become so bad in the UK that we are resorting back to Victorian standards?
 
As I have blogged in the past the system for allocating dental healthcare under the NHS is too confusing, bureaucratic and inefficient for both the dentists and the patients. I thought universal healthcare meant that anybody would be treated anywhere if they were in need of medical attention. This type of botched healthcare system simply cannot work and will continue to fail as long as there is continuing top-down political interference.

Under a privatized system the market would distribute medical services much more efficiently. Providers would be able to respond to the demands of patients in terms of quality and availability of care, rather than being forced to give a one-size-fits-all botched service. The state of British healthcare is embarrassing. We should be world leaders with a system to be proud of.