Boris’s BOGOF

Boris Johnson’s putative return to the Commons overwhelmed any publicity for his, or rather Gerard Lyons’s, strategic analysis of the UK’s in/out EU options: The Europe Report: A Win-Win Situation, released 6th August.  Four possible outcomes are envisaged: staying in either a largely unreformed EU or one reformed to the UK’s liking.  The two departure options are seen as (a) good EU relations and pro-growth UK reforms and (b) poor EU relations and an inward-looking UK.

Lyons makes the good point that “the UK can only achieve serious reform if it is serious about leaving, and it can only be serious about leaving if it believed that is better than an unreformed EU.”  The title would have you believe both staying in a reformed EU and leaving are “Win Situations” that we can either choose one or use it to achieve the other, i.e. Buy One and Get One Free.

Lyons has produced an important review of the issues facing each sector but, at the end of the day, his conclusions are based on simple assumptions of the economic outcomes from each option.  We do not need 108 pages of report, and 130 pages of appendices, to be told that the two high growth scenarios are more attractive than the two low growth ones.  Furthermore, the conclusion that the two high growth scenarios are economically equivalent is similarly based on heroic assumptions. Lyons’s Panglossian vision of the UK outside the EU and reforming itself begs a great number of questions.  The world is not ordered according to the way we order ourselves: trading with the EU will still be governed by EU regulations, likewise the US.

The paper has a number of failings: in particular it is not specific about the EU and UK reforms that would be needed, still less how they could be achieved and how likely that would be.  For example, the only hope of securing the EU reform the UK seeks is for the UK to show benefit for EU as a whole, not just the UK.  UK proposals to improve the EU market for financial services looks, to the rest of the EU, like UK self interest.  We know that the rest of the EU does not accept the UK arguments because it is outvoted every time.

How would, as Lyons suggests, the UK leave the EU whilst at the same time improving the UK’s EU relationships?  The chilling legal issue is EU Article 50 under which the remaining members decide the terms of the separation with no involvement of the departing member.  Obviously there would be negotiation so that may not be as ugly as it seems.  Trade would continue and we import more from the rest of the EU than we sell them but that is beside the point: could the UK protect its EU exports better than it could reduce its EU imports?  De Gaulle reckoned that the UK needed continental Europe more than vice versa and the 1960s proved him right.

We should welcome this report for its discussion of many of the issues but we cannot rely on its findings.  The City really does need to come up with a plan to protect its future but this is not it.

Roger also trusts the state more than I do

There’s another subject that Roger and I disagree about profoundly.  He trusts the state more than I do.  Whenever he sees anything not going the way he’d like it to go, he calls for state action to “put it right.”  This applies to big things, such as instances of what he calls “market failure,” and it applies to little things such as people consuming foods or drinks he disapproves of.  In both cases he wants the state to stop it.

There are undoubtedly cases of market failure.  Left to themselves, business people would probably, like many of us, go for the easy way out, protecting their market share by monopolies or cartels, rather than by trying to keep their quality up and their prices keen.  Certainly we need laws to stop them doing this.  Where I part company with Roger is that he seems to think of politicians and civil servants as dispassionate guardians of the public good.  I see them as being rather like other people in pursuing their own advantage where they can.  Politicians want to be re-elected, and bureaucrats want to be promoted.  Both will, at times, act in their own interests, just as others do, even in some cases where this is against the public good.

When Roger talks of “society,” he doesn’t use it to refer to communities working together for common purposes, he uses it to mean the state, the political body that has monopoly control of the laws and of the powers to enforce them.  The problem is that when those powers are concentrated, people try to use them to impose their agenda on others.  Because some people drink unwisely, Roger supports minimum alcohol pricing.  Because some people become obese, Roger wants ‘fat taxes’ on sugars and fats.  In these cases he claims to be acting in people’s best interests, but when he votes to ban fox-hunting, it’s simply that he doesn’t want them doing it.

Roger is happy to give the state more power, confident it will be used appropriately, whereas I rather suspect that whenever the state gains extra powers, it will use them for whatever purpose it wants.  Surveillance powers granted to thwart terrorists will probably end up being used to prosecute people for not sorting their garbage into the right bins.  In short, Roger sees the state as a means of making people live as he thinks they should, whereas I see it as a source of power waiting to be abused by anyone who can grab control of its levers.

Clement Attlee’s Lesson

Biteback Publishing have published a new biography of Clement Atlee.  Authored by Michael Jago, it explores what motivated Atlee and drove him to become one of the most influential of Labour Party leaders.

Atlee had a remarkable record in putting through his programme.  In 6 years he achieved major structural reform of Britain’s economy and society.  He is thus to be admired dispassionately as an effective Prime Minister.  What he also did was to teach us all an important lesson:  Socialism doesn’t work.  While other European nations were renewing themselves after the destruction and exhaustion of a world war, Britain wallowed in nationalization and allowed its industries to stagnate and decay under state ownership and control.  He left a country impoverished, heading down a slope that left it diminished, impoverished and ineffective.  Only in 1979 did Britain begin to shake off his influence, change direction, and once again climb back to prosperity and significance.  Atlee left a legacy that lasted, it is true, but it was a legacy that left his country ruined for decades.

It was an important lesson, though, and one we learned again just 25 years ago when the Communist empire collapsed and left exposed not just the terror that had sustained it, but the squalor it had concealed for so long.  Socialism doesn’t work and never has done because it goes against the grain of human nature and the desire of peoples to make free decisions that can improve their lives and better the lives of others in the process.

We can only hope that people will not only read the new book about Atlee, but that they will also remember the lesson and the years of suffering that it took to learn it.

Did you know that the public health campaigners are complete loons?

Well, if you didn’t know that the public health campaigners are complete loons then perhaps this will help to persuade you. The European Union is taking the next step in reforming the entirely absurd sugar regime, making it marginally less awful. The public health wallahs are shouting that this might make sugar cheaper, to the point where everyone will explode from eating too much of it.

No, really:

Controversial agricultural reforms by the European Union could cause sugar levels in food and drink to rise, experts have warned.

Campaigners said it was “perverse” that the EU was planning to lift sugar production quotas at a time when health authorities are advising people to reduce their consumption of the ingredient.

Under the current system production of sugar within the EU is restricted to 13.3 million tonnes a year. However the quota is due to be scrapped in 2017 as part of a series of reforms to the Common Agricultural Policy.

The move is expected to make sugar cheaper for food and drink manufacturers, prompting fears it will encourage them to use rising levels of the ingredient. Dr Aseem Malhotra, science director of Action on Sugar, a campaign group, said it would be “disastrous” for public health.

Oh dear.

They’ve really not understood what’s going on here at all.

In the nightmare world of EU agricultural policies the abolition of quota does not mean that prices are going to fall. For what actually happens is that if you grow sugar beet then there’s two prices which you can sell that deformed mangelwurzel to the processor at. One, a guaranteed one, much higher than a free market price, is only available if you have quota to go with your sugar beet. The other price is very much lower than a free market price and almost no one ever tries to grow beet without quota as a result.

The important point about the abolition of quota is not that it abolishes quota. It is that if there is no quota then beet with or without quota cannot gain that guaranteed price. Thus the price on offer to Europe’s sugar beet growers is going to fall: all other things being equal we’ll thus have less beet being grown. And thus less sugar being taken into storage and then subsidised by the EU when it is later dumped on the food manufacturers.

The abolition of quota will lead to less sugar being produced. And the public health campaigners are arguing against the abolition of quota to stop less sugar being produced.

Go figure.

Where next for capitalism?

Writing for the BBC today, Madsen outlines his ideas about what capitalism should do to renew itself:

What capitalism should now do is to free itself from these rent-seeking perversions and spread its benefits as widely as possible.

It should act against anti-competitive practices to give people instead the power of free choices between competing goods and services. It should spread ownership of capital and investment as widely as possible through such things as personal pensions and individual savings accounts.

Read the whole thing.