Confessions of a former drugs prohibitionist

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The drug legalization debate plays on my heartstrings. I’ve witnessed family and friends ruin their lives through drugs. Some have died from overdoses, while ‘luckier’ friends have been imprisoned. I’ve watched perfectly intelligent friends lose their character. Believe me when I say that I know what drugs do – especially to family life and cherished friendships.

Accordingly, my position on drugs was familiar: the Peter Hitchens position. I shall not try to paraphrase him – you can read his arguments here. But to summarize, my previous views were that drugs are bad so they should be illegal. The drug industry should have harsh-sentences imposed on them when caught.

A conversation with a Dutch friend reinforced this. He said that “the reason that drug legalization worked in Holland was because if you take drugs, you’re still seen as an idiot” (or worse). The United Kingdom’s culture just isn’t accustomed to stigma or peer-pressure (as a means of enforcing a common law morality) any more.

Yet this flawed thinking pervades our tax system. The reason for punitive tax rates is not ‘revenue maximization’. Evidence shows that punitive tax-rates are counter-productive (creating tax avoidance, emigration and the like). The motivation for measures such as the 50p tax rate is not economic, but moralistic. And yet this fallacy still informs people who are committed capitalists and free-marketeers. Not even Milton Friedman could entirely convince me. What are the logical effects of criminalization?

The legalization of cannabis in particular has proven controversial. Opponents see a thin-end of the wedge. More people trying drugs going on to harder drugs; legalizing one substance making the criminalization of other substances less tenable. Cannabis is the easiest drug to intercept. But what does stopping cannabis do? It compels people to supply and demand harder drugs.

Cannabis suppliers are incentivized to grow more potent marijuana. Cheaper, harder drugs will experience demand booms. The first time I was offered drugs was outside of my school's gates by a drug-dealer offering me cheap cocaine. And there are incentives for even more dangerous innovations. As Friedman says: “Crack cocaine would never have been invented… if cocaine had not been so expensive”. I would echo this argument for crystal meth. With harder drugs and the information failure involved in an illegal market, what guarantees of quality are there?

The foremost effect of criminalizing drugs is to protect the criminal gangs that traffic them. The barriers to entry in the drugs market are high and infinitely risky, whilst policing protects the price of their produce. Gang culture would not be financially viable if artificially inflated prices didn’t protect their profits. Prohibition Era USA banned alcohol, yet easy access remained. When alcohol is consumed in large quantities, people do stupid, unattractive things that we may disapprove of. But is that better or worse than keeping Al Capone in business?

Gang culture disproportionately affects and criminalizes the inhabitants of high-density populations in inner cities. By keeping prices artificially high combined with finite incomes funding an infinite desire to acquire drugs, governments are indirectly causing more crimes to be committed. Again, Friedman calculates that 10,000 additional people were killed in the USA through drug-related homicides and gang-warfare. Is it not a moral problem that government intervention over personal-choices is essentially killing thousands of innocent people?

A reasonable concern remaining is the potential increase in people either trying or becoming addicted to drugs. Rachel has already pointed out that addicts are dealt with by police officers and judges rather than health and rehabilitation services. But I think there’s a wider philosophical point: Addicts make their own individual choices. It is their choice to seek help or reap the consequences of drug-addiction. Why, at everyone else’s expense, should addicts be protected from their own selfishness?

If, as prevailing opinion dictates, over one’s own body the individual is sovereign, then criminalizing a drug addict over a personal choice that doesn’t affect anyone else is immoral and paternalistic. Moreover, why should taxpayers guarantee the costs of intervening in something that they’re not responsible for? Encouraging drug-addicted parasitism, leeching off of the taxpayer is at least as immoral as when the welfare state actively encourages long-term unemployment. Prohibition is at the root of many social evils: we should start looking at the trees to see the forest for what it is.

Squaring the circle of sexual harassment

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Actor Jeremy Irons has come under fire following comments he made to the Radio Times lamenting the rise of legal cases involving claims of sexual harassment. He argued that legislation, and the resulting claim culture, has "gone too far" and that most people are "robust" enough to deal with flirtatious forms of mere "communication." Without looking too much at Mr Irons' reputation, and risk being swayed either by his roguish personality or seemingly questionable attitudes towards women, it could, perhaps, be argued that Irons actually has a point.

Sexual harassment legislation has been accused of being both unnecessary and a potential violation of our right to free speech. Instances of sexual harassment, particularly verbal ones, often boil down to individual interpretations of offence, a matter which government cannot legitimately legislate on.

Walter Block in Defending the Undefendable (PDF) sets out the argument that entrepreneurial self interest effectively persuades employers to discourage offensive action of any kind. Employees need to attract both female customers as well as female employees to remain competitive. Providing a safe and comfortable working environment is just good business. Whilst this element of competition does not ensure the absence of sexual harassment, it is a seemingly superior preventative option than blunt governmental intervention.

Further to this, through harassment laws the government suppresses speech and behaviour it deems harmful and potentially offensive opening a Pandora's Box of what is offensive or not. The government cannot assume all women will shrug off the forms of "communication" Irons defends. It therefore assumes that all women could, and potentially should, be offended by any level of suggestive behaviour. By imposing liability upon employers, harassment law incentivises employers to restrict their employees' civil liberties in order to cover their own backs, an infringement that is unlikely to be challenged within hierarchical companies.

Irons' comment that "any woman worth her salt" can deal with a "man putting his hand on (her) bottom" may be a step too far, but his arguments concerning the rise of legal cases involving sexual harassment claims in the workplace can be justified. State involvement in the public interactions of individuals runs a huge risk of infringing upon civil liberties and, at best, can be seen as a poorer method of discouraging offensive behaviour in the workplace. Left to employers' devices, incidents of sexual harassment can be better avoided as they seek to provide the best working conditions to attract the best workers possible.

Mitt Romney's "shocking admission"

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Funny how the simplest truism can start an almighty ruckus. Last week, Mitt Romney made the obvious comment while on a swing through Iowa on his campaign for the Republican Party’s presidential nomination that “corporations are people”. Hecklers disagreed and Romney replied “Of course, they are. Everything corporations earn ultimately goes to the people. Where do you think it goes?”

The exchange prompted a formal attack by the Democratic National Committee Chairwoman Debbie Wasserman Schultz who described the comment as a “shocking admission.” An ABC News commentator called it an “accidental one-liner.” The Week’s website called it a “gaffe.”

Shocking? Admission? A gaffe? What’s so shocking about the obvious and is it really an admission of some dark conspiratorial secret? Let’s take a closer look at what a corporation or any other business is to see how many “people” are involved.

First of all, there’s the “people” who are the customers of the actual product or service that a business makes: an iPhone, a holiday tour, a tank of petrol or supermarket shelves groaning with life’s necessities.

Second, there’s the “people” working for the business – the employees. They do it for the money, for the fun, for the camaraderie, for the challenge or for simply an excuse to get out of the house.

Third, there’s the “people” supplying all the needs of the corporation: the security, the caterers, the accountants, the advertisers, etc, etc, etc.

Fourth, there’s the “people” who own shares in the business, seeking dividends from profitably selling products to those other “people” called customers. These shareholders are a varied bunch of “people” – pension savers and pensioners, trust funds, charities, and, yes, professional investors and speculators who’ll take the dividends and invest them somewhere else that makes things that other “people” will want to buy.

Fifth, there’s the government, a rather large collection of “people”. In the UK, that’s Her Majesty on down to the local town council’s part-time receptionist not to mention the government as representative of the “people” at large. From payroll tax to VAT to corporation tax to royalties to business rates to bonus taxes, that’s a lot money going to the “people” called the government.
Take all those “people” away from a business and there’s not much left.

To his credit, Mr Romney was unrepentant and rebutted his critics with the reiteration that “Businesses are people. What do they think they are? Little men from Mars?” Indeed, but maybe his critics are.

Testing times for the banks

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Media coverage over the last few days has been dominated by London riots and the various economic woes embracing the western world, ranging from Standard and Poor’s downgrading of the US’ sovereign debt to the ongoing crisis within Euroland. Fortunately, the UK is one step removed from the latter crisis, although future growth projections are being reined back as the Euro fights for its existence. 

However, the plunging stock markets of the last few days have given the Treasury a real headache, particularly in respect of the Government’s 84% stake in Royal Bank of Scotland (RBS) and its 41% holding in Lloyds. Shares in both banks have dived, with few predicting any short-term recovery. The likelihood, too, that Santander UK’s Initial Public Offer - of c20% of its stock – will be pushed back into 2012 does not inspire confidence either. Indeed, some experts are talking of almost a decade before the Government can divest itself completely of its banks’ stakes.

Earlier this year, based on share prices then prevailing, the ASI document Privatisation Re-visited placed a combined c£57 billion value on these two stakes, after deducting a 10% discount. The comparable figure currently is c£30 billion, thereby indicating a decline of over 45% within just a few months. Hence, the Government is sitting on a monumental notional loss – RBS’s current share price is c25p compared with the Government’s entry price of 50p: the Lloyds figures are 32p and 74p respectively.

To a certain extent, a weak share price may help both banks, as well as Barclays, to fight off efforts to compel separation between retail and ‘casino’ banking: HSBC is in a different financial league so can take a laid back view of the Banking Commission’s recommendations next month. 

Very testing times for the banks. It will be immensely challenging both to boost the value of the Government’s stakes - and to create a competitive banking market.

The tragedy of drug prohibition

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The sudden (yet not entirely unexpected) death of singer Amy Winehouse last month adds fuel to the fire of debate regarding the Government's treatment of drugs and drug-taking. The media focus on and wide public knowledge of celebrities indulging in drug use only serves to remind us that anti-drug laws have had little to no moderating effecting on people's behaviour. Away from the seemingly untouchable lives of the rich and famous the criminalisation of drugs appears only to worsen the social realities of drug users and has offered little in the way of practical help.

This failure isn't going unnoticed either. Liberal Democrat Party members are expected to back a motion to legalise cannabis and decriminalise drug use at their party conference in Birmingham next month. The motion, quite rightly, states that there is "increasing evidence that the UK's drug policy is not only ineffective and not cost effective but actually harmful, impacting particularly severely on the poor and marginalised."

Prohibition means that police, rather than medical professionals, are put in charge of dealing with drug users, be they recreational or habitual. As a result users are punished not treated, costing the government an estimated £2.6 billion a year (according to action group Addaction) in "criminal procedural costs" alone, and marking even occasional users with criminal records that damage their employability and consequentially tarnish the UK economy. Whilst drug offences may be seemingly part and parcel of the music industry the social and economical cost to us mere humans is enormous.

Since Amy's death her father, Mitch Winehouse, has met with the Commons Home Affairs Committee to highlight the gaps in addiction services offered by the NHS. While this is an issue that certainly needs addressing it seems the government are unwilling to look at the crux of the escalating problem. Decriminalisation would free the government from the massive economic burden of trying and imprisoning users as well as undermine the culture of crime that the drug trade perpetuates.

So, while some may see Winehouse's death as a wake up call for the Government to pursue a more aggressive tact with drug users and pushers, instead her demise should be seen as another nail in the coffin of the government's drug prohibition policies. Yes, rehabilitation methods need to be greater pursued, but this seems like an uphill battle whilst drug users are still condemned by the Government and society as morally-corrupted criminals.

What really caused the London lootings?

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As is inevitable, partisan politics has tried to impose simplistic narratives on the phenomenon of nation-wide looting and arson, to the detriment of finding a solution to the real, root causes of the malaise eating at British society. Those on the statist 'left' appear to blame a variety of socio-economic factors, such as unemployment, inequality, and relative poverty. Those on the statist 'right' instead view the problem as nothing but the breakdown of public order, with opportunists clambering into the holes left by the perceived lack of authority and discipline on the streets, in the schools, and in the home. Both views of course hold a grain of truth, but there are other underlying factors that have largely been conveniently ignored.

Unemployment could well be a significant factor. The areas initially hit seem to bear a strong correlation to areas of high youth unemployment. However, this explanation, along with cries of inequality and poverty, is both insulting to the hard-working and law-abiding poor, and offers little answer as to why the kids are having fun rather than expressing anger and frustration at the system. Gleeful malice rather than anger at the system is not the sign of the young person with limited opportunities. It also fails to explain why the looters are attacking their own localities, sometimes without aiming to steal anything, merely to destroy: to loosely paraphrase Brendan O'Neill, they are more than happy to "s— on their neighbours' doorsteps".

The 'break-down of authority' narrative seeks to answer these questions. It sees marriage-less families, communities without cohesion, and a general lack of discipline or punishment within the system. This may well be true, but it seems to focus on these symptoms to the neglect of their underlying causes. After all, why do some immigrant and religious groups maintain their cohesion in the face of public disorder, like the Sikhs and Turks did, and others do not? It also fails to account for the constant complaint of the young looters that they do not receive 'respect', and are too oppressed by authority.

So what is the true explanation? The underlying causes all seem to point to a dangerous mixture of a centralised and impersonal welfare state, along with a surveillance state that seeks to control in small yet demeaning ways. The latter would account for the perceived discrimination and oppression, a major complaint having been the police's use of stop-and-search powers. The former would account for high unemployment by promoting welfare dependency; but most crucially the sense of entitlement and 'rights' that accompanies it. It would account for the breakdown of marriage through distorted incentives, the atomised communities and the resultant lack of social feedback loops that the statist 'right' like to call 'discipline'.

By receiving their benefit from some faceless entity, there is no obligation to justify it to those who pay for it, no punishment when they waste it, and no obligation to stay an integral part of the family or community that cares. Self-reliance and the interdependent relationship with local, family and social communities has been gradually yet drastically replaced with individualised reliance on a single, faceless entity. The misplaced sense of entitlement then seems the natural result of a youth spent only as an unconditional receiver. It is like getting water from a tap in a lone room rather than from a shared lake: the tap-user is then more than happy to defile that lake for whatever reason, having been brought up free of the immediate and damning social consequences. It then falls to the law to punish instead. Once that law is challenged, there is then no social element left to prevent wanton vandalism and theft - this appears to be what has just happened, with the hollowness of social constraints laid bare for all to see.

Identifying the role of the impersonal welfare-surveillance state offers the most comprehensive explanation of the looting. It takes into account the socio-economic concerns of unemployment and welfare dependency, but points out that the cultural element caused by the erosion of basic respect for others, for communities and society must be taken into account too, along with the pervasiveness of the state's presence in everyday life. If we want to solve this problem in the long term, we need to concentrate on the cause, not on the symptoms. Perhaps welfare needs to be more local and personal, rooted in the communities that pay for it; perhaps welfare needs to stop trapping people in dependency. Perhaps we should move to take the state out of welfare altogether and allow the personal, caring and communal element to thrive. Whatever the policy, solutions must be found to the right problems, not those that are simply politically convenient.

Anton Howes is Director of the Liberty League.

Stop this authoritarian knee-jerk

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At times when unrest is widespread, civil liberties tend to be neglected. If the primary function of the state is to protect its citizens from attack, then basic liberty is most at stake when there is no security of persons or property. But what measures should be resorted to in order to keep the peace? The knee-jerk authoritarians immediately latched onto the ideas of using rubber bullets, bringing in the army, and even imposing curfews. It may well be that all three of these measures could have returned order in the short term, but at what cost?

Fortunately, all three proposals proved unnecessary when the police were finally deployed in full force: London has seen minimal violence since Tuesday, and the spread to the West Midlands and Manchester seems to have been contained. At the same time, communities had a chance to recover and organise themselves, with resident patrols most noticeably in Enfield, and touching scenes of Sikh and Muslim solidarity as they pledged to guard each others' neighbourhoods in Birmingham.

But imagine the authoritarians had had their way. The use of rubber bullets or water cannon could have caused an escalation of violence, suddenly focusing attention on attacking and targeting authority itself rather than the sporadic and spontaneous opportunism we have seen so far. Likewise, the use of the army would have been a huge admittance of systemic police failure, causing us to seriously re-examine the use and necessity of the police force as we know it. This may have been a good thing if institutional change were needed, but calling it into question at a time of crisis could only have caused further uncertainty.

The use of curfews would have been a severe restriction of the freedoms of all citizens, adversely affecting everyone instead of targeting and deterring criminals. It is astounding that it was considered seriously at all, even without all of the additional impracticalities of enforcement and exemption for special cases. Lastly, it is also worth remembering the old adage that there is nothing so permanent as a temporary state policy: you curtail civil liberties for immediate security at the peril of never regaining them. The lesson from this week was that the restoration of order merely required better enforcement of existing procedures, rather than the accrual of extra state power at the expense of our liberty.

Anton Howes is Director of the Liberty League.

Ending the regional divide

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On Wednesday the Bank of England published its quarterly inflation report. The Bank was as optimistic as usual, blaming the present high figure on special factors, such as the high cost of food and energy imports thanks to the spectacular fall in sterling. But the report actually goes much deeper than that, looking at output, costs, and prosperity in the UK. That is a mixed picture at the best of times, but when you have economic turmoil in operation, as now, the picture throughout the country is even more confused.

If nobody is borrowing because they are unsure about the future, that is bad news for the financial sector, and for housing and construction. So that's a blow to the South East. But then a low pound makes things easier for our manufacturing exporters, who are concentrated in the Midlands, Wales, Yorkshire/Humberside and the North East. By those standards, the South should be in decline and the North should be booming.

But they're not. The North-South income gap has been widening for the last two decades, and got even wider during the recession. It seems unlikely to narrow much anytime soon. The government is desperately throwing £1bn of regional funding at the disparity ­ but that's hardly enough to make any difference, and in any case, these kinds of structural funds are generally so bureaucratic that real local businesspeople and entrepreneurs steer clear of them, wishing they could just have the money in tax cuts instead. And then there is the new enterprise zones policy ­ I am all in favour of deregulating anywhere we can, but these zones take time to establish, and even so, do they just entice investment from where it wants to go ­ but only until the incentives stop? You can't make capital and enterprise go where it doesn't want to, when it would be better employed in another place.

Much of China's growth has been down to forcibly shipping people off the unproductive land into the far more productive cities. In the UK the most thriving city continues to be London. That is where the UK's principal service industries are based, of which the biggest is the financial sector. It is simply the most logical place for industries, like international services, that are highly mobile ­ well served by good communications, trains and airports, close to continental Europe, well educated and, ­let's
face it, warmer and sunnier than, say, Manchester or Newcastle.

What stops London and the South East from booming even more is of course planning restrictions, which stop it spreading both outward and upward. And that in turn prevents people from migrating from North to South ­believing that they simply could not afford the housing costs. Arguably, if you want to make people in the North better off, you should let them migrate South by easing the planning rules and making property in the South East more affordable. That won't go down well in the Home Counties, but it's true.

The ECB fiddles while Europe burns

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For a situation deriving from a multiplicity of complex causes – the expropriation of monetary policy from national governments, the consequences of the credit crunch, the ill advised bailouts of banks and nations, the accumulation of debt during an economic boom, etc – the Eurozone crisis has a remarkably simple solution: allow the weaker, debt-laden economies to escape the monetary union, regain control of their monetary policy and devalue their way back into the marketplace.

Greece, Ireland and Portugal – despite the insistence of European ‘leaders’ that such bailouts wouldn’t be necessary – have been bailed out to the tune of €300billion. The European Taxpayers’ exposure to Greece is €106billion. Ireland’s bailout has cost €90billion and Portugal’s €78billion. Cyprus’ bond yields maturing in 2014 are trading at 10.18%, with a debt rating descending through the junk statuses (from CC to CCC) – presumably they’re next.

The initial reaction of the European Central Bank (along with the Bank of England and the Federal Reserve) was increasing money supply through quantitative easing (QE). The prolonged policy (in conjunction with low interest rates) caused the development of an addiction to cheap money and inflation. As a result of QE, the ECB resembled the mint of a Western Roman Usurper, or that of a Third Century Roman Emperor, hopelessly debasing coinage to avoid the inevitable.

The latest policy, which is a forerunner to the European Financial Stability Fund (EFSF), sees the European Central Bank buying up bonds to prevent the crisis metastasising and spreading to Spain and Italy. The short-term consequences have been to decrease the current bond yields of each country (Italy’s bonds are trading at 5.58% – down 0.58 & Spain’s bonds are trading at 5.58% as well, down 0.68). It is little more than a temporary reprieve however, from the risks posed by two nations that between them possess €6.3trillion of public and private debt.

The most immediate concern therefore is not Cypriot exposure to Greek financial turmoil, but French exposure to Spanish and Italian debt (€472bn of Italian debt and €175bn of Spanish debt). What is the European Central Bank doing? Nothing, really, except to delay the inevitable. It can artificially inflate bond yields for a while – maybe – but the idea that the ECB can intervene in Italy’s €1.8tn (120%GDP) public debt bond market is, as Peter Oborne has commented, a joke. The EFSF – even if successful – will require an extra €2tn.

Fitch, Standard & Poor’s and Moody’s don’t evaluate central banks (such is the unprecedented, ultra vires nature of ECB intervention) but if they did; the European Central Bank would be beyond junk status, with a vastly overvalued portfolio and questionable accounting methods. To whom is this body accountable? What will the eventual cost be for this truly Faustian debt? Europe needs leadership. Once again, all we get is panem et circenses.

It's time to stop trying to defy gravity

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Yesterday's Dow rally notwithstanding, financial markets have finally realised that politicians can't defy gravity for ever. Somehow, the authorities have managed to keep growth booming for twenty years. Now we are realising that they only did it by creating a fake boom on the back of cheap credit, inflation, and paper money. After every crisis – the 1985 Savings & Loan collapse, the 1987 stock market crash, the 1998 Russian default, and all the rest – they just threw money at the problem. With TARP, quantitative easing and the Eurozone bail-outs, the politicians seemed to have saved us from disaster on an even bigger scale. We expected another Great Depression, and it never happened. Britain's Lord Young was even saying that we'd 'never had it so good'.

Sadly, all that money which the authorities were throwing at economic crises was fake money, created on their printing presses and computer spreadsheets. It fuelled a twenty-year growth in government and encouraged people to take out loans, start and expand businesses, buy bigger houses and go on a spending spree like the world had never seen.

But you can't actually defy gravity, or economic reality, for ever. Just as you need larger and larger doses of a drug to get the same hit, so you need larger and larger doses of fake money to keep the boom going. Eventually, when you realise you can't afford that any more, the boomtime euphoria falters and withdrawal symptoms start.

And here is the hard news: just as the withdrawal process is better for the addict's body than being dependent on drugs, so is the downturn better for the economy than continuing to fake a boom. It is just as inevitable – and just as painful. During the boom years, we invested and spent on things that just don't make sense in normal times. So our resources are simply in the wrong place, producing the wrong stuff. We will simply have to write off a lot of that investment, which means factories and shops closing, and people losing their jobs. Some resources – like people and land – we will be able to use to build businesses that are better suited for today. Much else, we will just have to scrap. It is a painful business, but in the long run it will be good for us. The longer we try to put off the inevitable, the worse it becomes.

At last, the markets seem to be recognising this reality. It will be nasty, and the downturn will be deep. But frankly, it is better to live in the real world than a fake one.