Well, yes Polly, let us learn from the past then

Polly Toynbee tells us that things are terrible - they are - and that something must be done. We’re not so sure about that, great fans as we are of the Reaganesque “Don’t just do something, stand there!”

However, there is at least some truth in this:

Young people face a jobless future – unless ministers learn from the past

Polly Toynbee

Polly then goes on to insist that government must train everyone, create jobs and subsidise jobs. As the Blair administration did which is her choice of the past from which to take a lesson.

This does, of course, run into the problem of train in what, jobs doing what, subsidise which jobs? The idea that people good at kissing babies - which is still how politicians gain power despite the social distancing rules - know where the labour of the nation should be directed is not one that passes, unlike dry and smiling babies, the smell test. Entertaining though Boris undoubtedly is, fervent and ambitious though many of his colleagues are, the thought that they know how many plumbers the nation needs doesn’t pass intellectual muster.

Thus, if support there must be then we should hark back to an earlier age, that of the Youth Training Scheme, or maybe that little further back to YOPpers. Yes, lots of mush about training and employment but the stand out feature was that it was possible to design your own path. Which many did, taking the subsidy, possibly paltry as it was, to start up on their own. Even, just to explore possibilities for a time - to self-educate about the world.

That is, to misuse a phrase, to allow the skills, enthusiasm and energy of the young to fructify among the populace, rather than being directed and thus stultified by government.

Or, as we often say, if subsidy is needed then subsidise people, not things. Sure, learn lessons from the past - but do try to pick the ones that worked Polly.

A question, given all this talk of wealth taxation

Given that the government has just spent everything everyone has and more much talk about new sources of taxation in the future. We ourselves would suggest that given everything has been spent already that we cut future expenditure to make the sums balance. That doesn’t satisfy those who would have more and yet more done centrally and by force rather than by that fructification in the pockets of the populace thing.

One of those suggestions is wealth taxation. At which point a basic observation about tax itself. We should always prefer that largely similar things are taxed in largely the same manner. This significantly reduces the distortion caused by the taxation. This rule goes into abeyance when the distortion is the thing desired by the taxation - Pigou Taxes for example. But as a general rule, income should be taxed as income, wealth - if wealth is to be taxed at all, something we deny - as wealth, consumption as consumption and so on.

Which is where we’re certain that any wealth taxation plans are going to fail the economic test. For it isn’t, is it, going to be true that the capital value of the public servant’s pension pot is going to be taxed at the same rate as private pensions savings. Nor will either be taxed at the rate of the equity in a small commercial building or buy to let property.

How do we know this? Because they’re not taxed equally now. The limitation on the size of the pension pot bites much more deeply into that private, funded, pension that it does the public sector one as a result of the casuistic method of calculating the capital value of that public sector pension. And recent changes have indeed meant that property income is taxed more highly than many other forms.

As above we’re against taxing wealth and we’re also against increasing the general level of taxation - it’s already at an historic high as a percentage of GDP. But whether or not we get our way here is one thing. That whatever the new taxation system is must be a level playing field is an absolute. And that’s exactly the thing we don’t imagine will happen.

Actually, we’re really pretty certain that if public sector pensions had to carry the taxation of any other form of wealth then wealth taxation wouldn’t happen. Which is another reason for insisting upon that level playing field of course.

But our question. Why shouldn’t those public sector pensions be taxed like other forms of wealth?

Raghuram Rajan's 'The Third Pillar'

While the monotony of life under lockdown continues, Raguram Rajan’s latest book, the 400 page ‘The Third Pillar’ will be guaranteed to keep you occupied for at least a while. 

The book is largely an attempt at finding solutions to the political agitation and despair from stagnant and left behind communities that have been drawn to populists on both the left and the right in recent years. More than this though, he argues that reinvigorating communities is not simply a matter of paying a small price to help bring about political stability, but that a healthy ‘third pillar’ prevents imbalances and indeeds makes the other two pillars: the market and the state, perform better as well. 

He begins by giving his explanation of how the state and the market grew out of the medieval feudal system which was focused around the village and manor. Commerce and finance grew alongside a centralised state that relied upon money for funding armies rather than a reliance upon feudal retainers. Further on he argues that under capitalism, community action such as the Progressive and Populist movement in the USA helped prevent the collaboration between big corporations and government through measures such as anti-trust laws, thus helping to protect the other pillars of the democratic nation-state and competitive markets. 

Rajan attributes the ability for grassroots activism as one of the community pillars’ main advantages. 

Additionally, there are also significant economic benefits of strong communities. One example given is cattle rangers in Shasta county California. Often cattle will wander onto neighboring ranches, with the owners taking weeks to pick it up while the neighbours incur the cost of feeding the animal. However, no monetary recompense is made and if any other damage is done it is preferable to fix it yourself than give ‘cold hard cash.’ More complex unwritten codes such as these, reliant upon community trust, are remarkably more efficient than legal transactions.

Yet Rajan remarks how fragile this spontaneous order can be from influences of the market pillar but more often than not, crowding out by the state pillar. The example given, Edward Banfield’s study of a poor village in Southern Italy in the 1950s, is a brilliant case in point. Most decisions of public services, from schools to ‘even buying an ashtray’, were taken far away in the larger regional town or provincial capital. Lack of local decision making drained any community democratic spirit. Furthermore: “the state, despite being recognizably apathetic, distant, and nonfunctional itself, nevertheless dampened initiative in Montegrano. The faint hope that the government will dig a latrine, pave a road, or discipline school teachers can prevent the local population from doing so.” The result is apathy or even mistrust towards neighbours as a result of the hardship and the little incentive for collective action.  

The policy proposals Rajan gives is mainly devolution of decision making downwards. However, this does not necessarily mean a shift of powers from central government to local government. With local authorities covering populations of many hundreds of thousands with unelected bureaucrats of their own, it is important to remember the community is not the same as local government. For example, devolving decision making in education would be better going to teachers and governors than the local authority. 

This however may be where technology and innovation could help play a part. Not only have studies shown that technology helps existing communities and decreases the time of integration, but maybe increased transparency and new apps that allow time-strapped people to engage more with local government could wrest control of it away from idle grievance-mongers.  

Rajan sees declining communities resulting in many looking towards the imagined community and an exclusionary nationalism. To counter this he proposes ‘inclusive localism’ where he proposes a civic nationalism with giving more power to communities. Meanwhile, the market and the state can serve to undermine isolationist tendencies in communities, making them more inclusive by allowing movement of people and goods while the state can prevent zoning (building restrictions) that help contribute to areas of homogenous affluence and locking entrants out.  

Although written before the Covid-19 crisis, Rajan’s work is especially useful in the age of Corona. The virus has seen a revival in community volunteering and activism through local associations and groups of households. It would be a huge loss to society if these groups were crowded out by the dead overreaching hand of the state during reconstruction. Shifting too many responsibilities from communities to local and central governments will only ensure that this resurgent community spirit is once again replaced by individual apathy.

Will this actually be worth it?

The price of avoiding a disease may or may not be worth the benefit of doing so. As with this idea about airlines:

Air passengers could face four-hour waits to board planes, inflated ticket prices and a dramatically reduced schedule in the future, analysts have said.

The increased ticket prices would be because of this strange - given that everyone will be breathing the same recycled air - idea that the middle seat of any row might not be used. Even, some insisting that load factors should only be 20% or so of all seats.

As to the 4 hour waits, there are some 120 million passenger movements concerning UK people each year, about a billion for Europeans as a whole. Current realistic timings are about 90 minutes - so, that’s 2.30 extra for each of those passengers.

Time has a value, the most obvious value to apply being minimum wage. Which, we’re told often enough, is going to be perhaps £10 an hour soon enough. So, ASI calculator (back of fag packet, 1, pencil, 1). That’s £3 billion a year just from this one, single, measure to avoid a further irruption of Covid-19. Or, given that it only works if everyone does it, £25 billion odd a year for Europe.

And this will save how many lives?

This being before we get to the real costs, that people rather like flying off on their hols which is why they do so. An enjoyment which is to be denied them.

We do not say that this specific cost is such as to mean we should all revert entirely to normal and damn the disease. Nor even to say that this would be the straw that breaks that camel’s back. It is though to say that whatever methods are used to try to curtail any future spread are going to have costs like the above. Those costs being cumulative, each restriction adding to the expense of the one before.

At some point we do have to ask - how poor do we want to be? Our own answer being, as yet, no more than a sneaking suspicion that the answer is richer than the planners currently musing on those restrictions are likely to allow us to be.

This is not a good advertisement for international cooperation and governance

From one of those UN bods:

The unaffordability of housing has plagued renters the world over, with countless households living month to month. Rents have soared as institutional investors eat up more and more stock.

How does an insurance company - say - buying up housing to then rent out increase rents? In fact, if rental housing becomes an institutional investment then this will increase the supply of rental housing. An increase in supply leading to a reduction in rents, no?

We also gain an insight into the proposed solutions:

Regulate housing costs so they are commensurate with household income.

“Regulate” here means, of course, “keep low”. Which will reduce the supply of rental housing in a manner which institutional investment does not.

We here are always more than a little suspicious of this international governance stuff. We tend to think it’s the home of those too absurd even for domestic politics and there’s little here to make us change that view. Still, there is that useful confirmation of a basic truth, the best argument against government is watching what government does.

Not a benefit of sex work legalisation we'd thought of but still....

We’re in favour of the legalisation of sex work simply because we’re in favour of the legalisation of near all activities of consenting adults. We’re really very sure that this is what liberty means, that consenting adults, where there’s no third party harm, getting on with things as they wish to is that freedom we’re all supposed to be aspiring to.

There are side effects of course, not all of them things we’d thought of:

The week before New Zealand went into full lockdown on 26 March, Lana*, 28, had taken a break from work at the high-end Wellington brothel where, since September, she had made around NZ$2,200 a month seeing two or three clients a week.

On 23 March, her university announced courses would move online. The following day she decided to stay with her parents in Auckland, and applied for New Zealand’s emergency wage subsidy for all workers whose earnings have fallen by at least 30% due to coronavirus.

Just two days later the money – a lump sum of NZ$4,200 covering 12 weeks of lost part-time earnings – was in her account. Full-time workers, who average more than 20 hours a week, get a lump sum of $7,029.

“The form only took about three minutes to fill out and I didn’t need to disclose that I am a sex worker,” Lana said. “I only needed to disclose that I am self-employed.”

Those who pay the relevant taxes - or perhaps, when we talk of social security taxation, the correct insurance premiums - in the good times should indeed be due the payouts in the bad. Legalisation of the profession means that both those taxes are due and paid and also that the societal safety net is there too.

We still stick with our very basic analysis, if adults wish to do this then why shouldn’t they? But there are, as we say, additional points we’ve not before noted.

F A Hayek was in fact a Conservative

This year marks the 60th anniversary of the publication, by Chicago University Press, of F A Hayek’s “Constitution of Liberty.” It remains a classic defence of personal liberty as that which makes civilization and progress possible. Hayek says that the legitimate role of government is to protect that freedom by laws that apply to all, including itself. 

At the end of that book is an essay, “Appendix: Why I am Not a Conservative,” in which he asserts that he seeks liberty, rather than the preservation of any current state of society. If society is not liberal, he supports changing it to make it so, rather than opposing changes, which is what he takes Conservatism to stand for. He uses ‘liberal’ in the way people outside of America do, to mean supportive of freedom.

Hayek was writing in the late 1950s, when some of the limitations on liberty that had been necessary to win the Second World War had not been fully removed, and when parties in the UK had accepted the ‘postwar consensus’ of a mixed, largely centrally-directed economy. Hayek did not want to conserve such societies, but to transform them into more liberal ones. 

In 1987, the Adam Smith Institute published the book, “Hayek - on the Fabric of Human Society,” a tribute work containing essays on Hayek by many distinguished scholars. My own essay at the end of the book was somewhat bravely entitled, “Appendix: Why F A Hayek is a Conservative.” 

I put the case that there is a small “c” conservatism that denotes an aversion to change, and the desire to hold on to familiar things and ways for the comfort and security they bring. There is also a large “C” Conservatism that denotes a political tradition rather than a character trait. 

That political tradition does not oppose all change, but is against attempts to impose deliberate change to remake society into a preconceived order. Instead it wants such change as takes place to be spontaneous and organic, the product of people interacting, and perhaps reacting to changing circumstances. It opposes utopian attempts to make society correspond with one dreamed-up in theory, as opposed to one that develops naturally in practice. 

What the political tradition of Conservatism seeks to conserve is not any given state of society, but rather the process by which society changes. It seeks to conserve a process, not an outcome. Crucially, I pointed out that Conservatives seek not only to preserve that spontaneity, but to restore it if it has been lost. This brings Margaret Thatcher into their ranks. She managed to restore a degree of spontaneity that had been lost by decades of state controls and central direction. 

She was once confronted by an interviewer with Hayek’s claim that he was not a Conservative, and replied that she thought he’d approve of what she was doing. He did indeed, and had dinner with her twice a year when he came for meetings of the British Academy. He approved of the fact that she had restored a large measure of spontaneity, and in doing so had extended opportunities for people to exercise freedom and creativity that were previously denied. 

In the properly understood meaning of the political tradition: F A Hayek was indeed a Conservative. 

Central planning failed but liberalism succeeded during this pandemic

Liberal democracies have many virtues. They are tolerant, relatively equal, and very good at producing prosperity.

But, say many, they cannot deal with crises, like wars or natural disasters. For that, you need communal effort, a single plan, and strong central leadership. 

When the virus began to hit, ministers boasted that the UK would fare better than most because of our national healthcare system, which could plan a total response, guided by experts.

They were wrong. While the National Health Service had modelled a pandemic four years ago, they had done little to prepare for it. NHS purchasers didn’t have enough PPE for their staff. Public Health England dismally failed to create enough tests. Three quarters of a million people volunteered to help, but weeks later, many still complained that no work had been assigned to them.

Following public outrage, Public Health England at last returned the phone calls of idle and frustrated private labs, enabling thousands more tests to be produced. Engineering companies eventually got through the bureaucracy to produce innovative new ventilators. And after more delays, distillers were allowed to turn their skills to producing hand sanitizer.

In short, individuals and businesses came up with new ways to solve the crisis, while the central planners failed—and actually stifled that response. Command and control does not help you through a crisis. What helps you through is freedom and diversity.

We can hope at least, we can hope

The Guardian tells us that:

The public’s confidence in the government’s ability to handle the coronavirus crisis has fallen sharply in the past fortnight, with less than half of voters now having faith in decisions made by ministers, according to the latest Opinium poll for the Observer.

Given the performance so far this is not, perhaps, all that much of a surprise. The Guardian, of course, thinks that this is a bad thing. We think that it could well presage a cause for celebration. With perhaps a slight edit:

The public’s confidence in the government’s ability to handle….has fallen.

Our insistence being that government is not very good at doing things. There are, certainly, things that must be done. There are also things that government is capable of doing. Finally, there are things which only government can do. We insist that government should restrict itself to doing only those things which are all three, things which must be done, which only government can do and which government is also capable of doing. Even then we don’t think they’ll be done well as current events are showing us. Government, that is, is in our view something to be used as a last resort, when all else fails.

Having watched government attempting to do something the general view of the population is thus turning - and least we can hope it is - to our own view. Given that government isn’t very good at doing things we should be employing government to do fewer things.

After all, the finest argument in favour of minarchy is watching the State trying to do something.

Why the police got it so wrong on enforcing COVID19 social distancing rules

Too late now, but I think I understand why ministers and the police got into such trouble about social distancing.

Police, as you recall, hassled people sunbathing in the park, rebuked a man for sitting in his own front garden, and lectured us not to buy ‘non-essential’ items — whatever that means.

Meanwhile the Health Secretary, to say exactly how long people could drive in order to take exercise, bizarrely suggested an arbitrary ‘five minutes’.

What’s happened is that over the last 40 years, the British legal system has been overlaid with Continental law. 

Here, the test of an action was whether or not it was ‘reasonable’. The law accepted that life was complex, and left judges to decide each specific case. 

The Continental tradition, by contrast, specifies precise rules that apply in all cases.

Hence those journalists pressing ministers to say exactly what the rules are, ministers struggling to make up new rules on the hoof, and police enforcing things to the letter, not the spirit.

While the Great British public just wants to do what is reasonable. 

Let’s remember that as we unwind the lockdown. Don’t smother businesses with detailed opening rules. Just set the goals and leave people to do what is reasonable in their own unique circumstances.