A check on spending

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The Japanese government has issued a stimulus package which will assign every over-18 citizen a 12,000 yen check, which they hope will be spent soon in order to break the 11 month spending fall. Unfortunately, such a measure will not create the stimulus that the government hopes for.  

12,000 yen is equal to roughly £87, so the people of Japan aren’t exactly winning the lottery here. Will this be a major determinant of going on a trip or making a big retail purchase? Probably not. Most likely, it will get people to go out for a nice dinner on a night when they typically wouldn’t have or keep younger people at the bar for a few more hours one weekend, but Japan most likely will not see a major difference in spending. 

For a country that has had a spending slump for the past year they are probably better off cutting taxes rather than giving out a measly stimulus check. At least a tax reduction could have a lasting impact on a consumer’s mindset, even if it is only temporary.

Unfortunately, this will not be the end of tiny stimulus moves by the Japanese government. They plan on pumping 2 trillion yen back into the economy at a gradual rate. Hopefully they'll come up with a better plan, or they will suffer another lost decade.

Blog Review 891

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Will the recession drive Eastern European birth rates even further down? And what effect will that have on long term demographics?

Cultural values and economic development. Yes, respecting the individual does promote prosperity.

Is environmentalism a religion? It certainly has many of the characteristics.

Why do governments like to control education? For the same reason that religions do, it creates acolytes perhaps?

No, seriously, things really have got better since the 1950s.

Understanding Rand: she was writing having seen the Leminists dismantling the capitalist economy.

And finally, couldn't you see this answer coming?

Sir Fred Goodwin and justice

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The ongoing popular witch-hunt of Sir Fred Goodwin over his pension is an interesting case. Principally the events show how weak a grasp that most politicians, journalists and the public at large seem to have over the theory and practice of justice.

Sir Fred Goodwin clearly made mistakes in the running of RBS and he lost his position accordingly. Putting aside the recriminations as to whether or not he should have been sacked, the fact is he wasn’t. As a consequence he is to (and certainly should) receive his £703,000 per year pension.

Gordon Brown argues that he shouldn’t be rewarded for failure, but since when have pensions been performance related? If they were, most civil servants would see little of the final salary pensions they still retire on. But more importantly than this, justice demands that contracts are honoured. The type of kangaroo court that Harriet Harmon has set in motion, based as it is upon a perceived court of public opinion, runs counter to the sanctity of contract.

It is a slippery slope from here. The demand for the head of Goodwin subverts the foundations of true justice in favour of the perverse relative of ‘social justice’, a concept that is firmly and convincingly challenged in an excellent article by the sublime Anthony de Jasay. In the same piece, de Jasay in passing suggests that the only real-world example where the equality of social justice exists is in prison camps. A stark warning of the path this country is currently on.

Apparently Goodwin might leave the country. And why not? If they could, witches on trial in early modern Europe - who were massacred for another perverted vision of justice - would have done much the same thing.

Brussels Dispatch: I know an old lady...

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The Bank of England has started to purchase assets worth up to £100bn (comprised mostly of government gilts); to be followed by a probable later purchase of private sector assets of £50bn (corporate bonds and commercial paper).

This amount represents almost exactly £2,500 thieved from every single person in the UK. On 3 March the chancellor instructed this Asset Purchase Facility to be funded by money that obviously did not previously exist.

As Mervyn King had asked from Alastair Darling in February, the government has resorted to “unconventional unconventional measures” as opposed to the common-or-garden variety of “conventional unconventional measures”. This just goes to show the ‘experts’ have no plan, and how terrifyingly badly Gordon, Alastair and Mervyn have screwed it all up. I don’t think I would be so scared if Nick Leeson, Bernie Madoff and Sir Allen Stanford were running the economy.

For some strange reason, otherwise sane people are suggesting what we need now is a colossal expansion of the monetary base. The truth is that the economy needs an exploded M0 like I need an exploded aorta.

I know the Old Lady who has counterfeited some money; She counterfeited some money to stimulate demand; “Demand had fallen because the banks didn’t lend”; The banks “didn’t lend” because the property boom bust; The property boom bust because it was unsustainable; It was unsustainable because it was driven by cheap credit and artificially low interest rates; Which is where we are again now but even worse than before; I don’t know why the Old Lady keeps doing the same thing; Perhaps she has dementia; I hope she dies

It is long past time to abolish the Bank of England: This Old Lady needs euthanising quickly before she croaks leaving a will bequeathing nothing but hyper-stagflation.

Blog Review 890

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Why is it that people are so scared of free markets?

Guess who just bought the largest CDO ever? Yup, you and me.

It would appear that the Lisbon Treaty allows the death penalty back. No, really.

More on that Scottish Licensing bill.

If we'd taken a liassez faire approach to the problems, wouldn't the current siuation be used as proof that laissez faire doesn't work?

Shockingly, Willem Buiter might not be quite as good a macroeconomist as Willem Buiter thinks Willem Buiter is.

And finally, certainly a woman of strong views here.

The pensions crisis

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If you have not seen it, Dr Eamonn Butler was in The Guardian today discussing the Labour-made pensions crisis. Well worth a look.

Printing money

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Given the news that we are about to start printing money, it is worth reading this recent Think Piece on this Zimbabwean approach to economic policy by Dr Eamonn Butler.

Liberty and democracy

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In 1930 a Labour MP gave his wife and daughter two rail travel vouchers from a pack issued to him (only) for travelling between his constituency and Westminster. The ticket inspector pressed charges and that was the end of the MP’s career.

Over a single century, serious corruption in Westminster has moved from virtually unheard of to routine; “the virtually unheard of" bit now refers to disciplinary action. The same goes for abuse of power – recent examples include Jack Straw’s refusal to release records of how the Iraq war came about (it would “damage democracy") and Harriet Harman’s reaction to Fred the Shred’s pension (“it might be enforceable in a court of law but it’s not enforceable in the court of public opinion and that is where the Government steps in"). It’s not that many years since our Harriet was a NCCL activist!  (Shades of her colleague Patricia Hewitt, who actually wrote a book called Abuse of Power, more recently stooping to calling for “heat maps" linking potential hospital closures to non-Labour constituencies.)

This decline coincides (but not coincidentally) with the rise of total taxation over the last century or so from about 5% of GDP to about 50%.

The motivations for a Parliamentary career have changed radically, from a strong wish to do good to exercising power for its own sake and the corruption of the system for personal gain. This fits precisely Hayek’s explanation of “why the worst get on top" .*

But we ain’t seen nothing yet. My knowledge of history isn’t exhaustive, but I suggest we’d be hard-put to find a democracy that lasted as much as 500 years. Of course there is room for doubt about what a democracy actually is, which is one reason why Churchill’s famous remark “Democracy is the worst form of government except for all those others that have been tried" is little more than a sound bite.

An unlimited democracy in which all decisions can be settled by a majority vote is essentially the same as two wolves and a lamb voting on what to have for lunch. A “representative" democracy is potentially even worse, with government itself taking all decisions in an elective dictatorship, such as those of Hitler and Mussolini. Modern Britain is getting ever closer to this position.

What is needed above all else is a constitution, listing all the areas which are off limits for either government or majorities to settle (such limits, both personal and economic, being based in particular on the bulwark of private property in its widest sense).

Not one of the original constitutional documents of the USA (Declaration of Independence, Constitution, Bill of Rights) mentioned the word democracy.  These documents are themselves bulwarks, but over a period of time “representative" government dismantles them or disobeys them without fear of retribution.

The politicos are always referring to “democracy" alongside others “good" phrases, like “peace" and “economic growth", whereas in fact neither is available under untrammelled democracy.

If history is anything to go by, the picture is bleak indeed.

* See Chapter 20 of The Constitution of Liberty, Routledge,1960

The left and liberty

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At a session entitled ‘The Left and Liberty’ at the Convention on Modern Liberty, the ancient enemies of freedom, in the form of quasi socialists and big government social democrats represented by the Fabians, Compass, Soundings and others, hopelessly attempted to attach the term of liberty to their cause.

Looking back at history, it is groups such as these which have been highly responsible for the anti freedom intellectual movement, the elimination of freedom around the world, and huge suffering caused by the inevitable failure of their utopian revolutions. Well intended philosophies led to actual ruin.

I chuckled to myself in the audience as they spewed deluded analysis, countless unsupported fallacies, straw men, and deceitful misinterpretations bordering on lies. To me it seemed as if they thought we lived in “unfettered markets", with practically no intervention of regulation in any sector. Anyone who believes otherwise is by definition a “market fundamentalist".

The positive model they used to champion ‘liberty’ is inherently unsound. Government would be permitted to force an individual to become ‘more free’ by locking him up in chains. The state can force people to carry out specific actions rather than choose. The state supposedly knows what is best for the individual, and thus people should desire the state’s choice and must follow it, whether or not they actually desire that route at all. With this must come extreme coercion.

Additionally, they emphasise relative incapacity to carry out an action as constituting a lack of freedom: I may wish to drink tea at the Ritz, but “I am not able to" due to my financial position thus I supposedly lack the liberty to drink tea. This is an invalid form of analysis, as I am still free to choose how to prioritise the use of my resources.

This fundamental confusion between the liberty to choose as you wish and the ability to implement these choices is not new. As Helvetius clarifies, “The free man is the man who is not in irons, nor imprisoned in a gaol, nor terrorized like a slave by the fear of punishment... it is not lack of freedom not to fly like an eagle or swim like a whale."

Opening up peer reviews

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In a short interview with Patrick J. Michaels (Senior Fellow in Environmental Studies at the Cato Institute) an interesting idea came up that could go some way to improving the way science is discussed and understood in this country. His suggestion is that along with the article, the peer reviews of articles should be available to the public at large.

When studying MSc International Relations at LSE, I attended meetings with fellow students to review articles for the Millennium Journal of International Studies. This process made clear the central problem of leaving the review process behind closed doors, as much of the peer reviews would vary widely on their judgement of the original article. After much discussion, we voted on its fate. If it was to be published, all dissent was neatly swept under the carpet.

If, as Patrick J. Michaels argues, peer reviews were made available with each article, interested parties would be able to dig a little deeper and quicker behind the facts than they do at present. They could be published on the internet as it has proven to be ideally suited to questioning the veracity of scientific claims.

With peer reviews to draw upon, another source would be added with which to question shaky science (such as the many predictions around the field of global warming). The anonymity afforded by this process will also be a counterweight to the fear to speak out publicly against the establishment, whether for fear of damaged reputation, career or financial position.

Although such a move would be unlikely to stop many of  the scientific stories that grab the major media headlines, it would certainly be a welcome step towards greater openess and honesty. Of course, this step should be entirely at the discretion of each publisher, though if one moves, others will surely follow.