Those ever longer working hours

You'll recall how were all worked like slaves by The Man? Capitalism holding our noses to the grindstone, how working hours are getting ever longer?

Well, no, not really:

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I can't see that increase in working hours either. So we've one parp in the face of those who keep telling us that we're getting this work/life balance thing wrong. But we can go further too. Market or paid working hours are only part of the work that we do. We all also do unpaid working hours inside the home, so called household production. The cooking, the cleaning, general maintenance and so on. And hours spent on these activities have been falling even faster than those paid working hours.

The net result of all of this is that we are enjoying ever more leisure time: yes, including even commuting and everything, we're getting more leisure than any of the previous generations.

Which is of course just as it should be. As we're generally getting richer (OK, last couple of years apart) then we're choosing to take some of that greater wealth in more leisure, not just chasing after ever more money for shiny gewgaws. Our work/life balance is indeed changing: and it's us doing the deciding about how it shall change which is of course what annoys the people who think they should be telling us what to do. 

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Another take on libertarians and localism

Henry Hill is a worthy winner of our 2011 Young Writer on Liberty Award, and I’ve enjoyed reading his three victorious blog posts. But I have to respectfully disagree with his take on ‘Libertarians and localism’.

Certainly, I understand Henry’s point: that since libertarianism dictates only a very small role for government – consisting solely of a ‘legal framework for the defence of rights and property’ – it doesn’t make much sense to have local governments as well as a central one. Under the libertarian ethic, you don’t really want ‘government to be different to suit local wishes’. You just want it to guarantee peace, property and liberty, and then stay out of the way.

But I think Henry misses a couple of important counter-arguments. Firstly, given that the modern status quo is hardly minarchist in nature, doesn’t local government serve a useful purpose? For starters, it would be much easier for libertarians to win control of, or influence over, a local government than a national one. It may also be far easier – practically speaking – to trial libertarian policies at the local level than the national one. The upshot of both these points is the same: given our starting point, decentralized government gives us a better chance of putting libertarian (or at least more libertarian) policies into practice in the real world. To that extent, I’d say the more decentralization of power the better.

Secondly, even if we were living in a libertarian world, there would remain a good argument for having lots of small, competing libertarian governments, rather than a few big ones. The reason is that geographically smaller governments are much easier to escape from than big ones. This ‘exit option’ provides powerful protection for individual freedom – if your government starts to interfere too much, you can just up sticks and move to the jurisdiction of another one. It’s worth remembering too that socialism wasn’t the only political evil of the 20th Century – nationalism had a disastrous influence as well.

Ultimately, then, I’m rather a fan of decentralization. In the real world, I think it provides a good way of advancing the libertarian cause a step at a time. In my libertarian utopia, it provides insurance against governments once again growing too big and powerful. So whichever way you cut it, I say libertarians should be localists.

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The CIB Film Festival

The video above is a very good entry by the Taxpayers' Alliance in the Campaign for an Independent Britain's Film Festival. The CIB have put together a competition for videos making a point – seriously or humourously – against the EU. Fittingly, they seem to allow entries from across Europe: it always cheers me up to remember that there are people in every country in the EU who are also trying to get out. In the Rebecca Black era (don't ask), it's a great idea that we need to see more of.

Competition between governments is a good thing, and like Adam Smith's conspiring tradesmen, whenever our leaders meet together it's likely that they're conspiring against the rest of us. And for what it's worth, I doubt the EU can survive the current crisis in any significant form.

Some of that is to be mourned. Free trade and free movement of people are great things, and if the EU makes it harder for British politicians to throw up barriers to those things, that's a big point in the EU's favour. But I'm not convinced that that's what's really going on. Sure, I can move to Spain without much hassle, but for someone outside the EU to come in is a lot tougher. The same goes for trade – free trade within Europe is fine, but that's not what's going to matter in the 21st Century if it means cutting ourselves off from China, India and the rest of the globe. Open borders with Europe are great, but not if it means we have to cut ourselves off from everywhere else. After all, there's a whole world out there.

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A slight correction on US poverty levels

Tom links up to a post with this graph about US poverty levels.

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The thought is that since the war on poverty began there's been no decrease in poverty: thus the war on poverty doesn't reduce poverty, perhaps it even confirms it?

There's certainly the possibility of welfare dependency however, US poverty line statistics are such a mess that that's perhaps not the best explanation possible. What has really changed since the mid 1970s is that we've changed the way we measure the effects of trying to alleviate poverty.

Unlike the rest of the world the US does not measure poverty after all the things we try to do to alleviate it. UK poverty statistics, for example, give us the number of people still in poverty after we've given them money, cheap housing, tax credits and all the rest. US poverty statistics however used to do this but no longer do.

The reason is that the US numbers include the market incomes of the poor plus the direct cash transfers they get as welfare. They do not include Section 8 (our housing benefit), Medicaid, Food Stamps nor the EITC (tax credits to us). The EITC for example costs $80 billion a year, raises 5 million above the poverty line on its own (just the Federal one, most States have one as well on top) but none of the effect of that is in that graph.

When did the EITC start? In the mid-1970s. When did all the move from straight cash welfare, which is included in those poverty figures, to goods and services in kind, which are not included, begin? In the early 1970s: exactly when we see poverty flatlining.

It all sounds a bit odd, I agree, but there is a real answer to the question "How come the US spends hundreds of billions a year on alleviating poverty and doesn't seem to alleviate much poverty?". The answer is that no one is counting the poverty alleviated by spending hundreds of billions of dollars a year.

Strange but true.

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Chief economist of Deutsche Bank: I'm an Austrian

The Chief Economist of Deutsche Bank Group, Thomas Mayer, has announced that he is “an Austrian in economics”. In a new paper released today by Deutsche Bank Research, based on a speech he gave this week, Mayer says that the Austrian theory of the business cycle describes what we are living through pretty well:

– Failure of the liquidationists to overcome the Great Depression of the early 1930s prepared the ground for an era of interventionist economic policies. Modern macroeconomics and finance nourished the belief that we can successfully plan for the future. But the present crisis teaches us that we live in a world of Knightian uncertainty, where the ―unknown unknowns dominate and our plans for the future are regularly thwarted by unforeseen and unforeseeable events. . . .

— …First and foremost, firms should have the incentives to follow sound business practices. The best incentive is to make failure possible. Hence, we need resolution regimes for financial firms.

— In a world where people have imperfect foresight and do not always behave rationally, and markets are not always efficient, we need to accept that economic policy cannot fine-tune the cycle.

— For us economists, the lesson from recent events should be to rely less on the development of theories by ―deduction (like in natural sciences) and to apply more induction(like in social and historical sciences). Failure to study history makes us repeat the mistakes of the past.

Mayer goes on to outline and argue for the mainstream Hayekian narrative of the last decade. Low interest rates inflated a bubble and knocked the whole economy out of kilter. Where non-Austrians misconstrue Hayek is in thinking that he is only focused on the bubble itself – they rightly point out that the housing sector itself wasn’t big enough to create our current stagnation. But Hayek’s genius was in recognising that the entire economy is interconnected, and credit distortions in one sector can disjoint the rest. If you imagine a tower of blocks, taking one block away (or changing its shape) can knock all the others down if it’s in the wrong place, even if it’s relatively small. Similarly, credit distortions affect the whole economy because everything is so interlinked.

Anyway, read the whole Mayer piece. We can add him to the Hayek Club.

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Chief economist of Deutsche Bank: I'm an Austrian

The Chief Economist of Deutsche Bank Group, Thomas Mayer, has announced that he is “an Austrian in economics”. In a new paper released today by Deutsche Bank Research, based on a speech he gave this week, Mayer says that the Austrian theory of the business cycle describes what we are living through pretty well:

– Failure of the liquidationists to overcome the Great Depression of the early 1930s prepared the ground for an era of interventionist economic policies. Modern macroeconomics and finance nourished the belief that we can successfully plan for the future. But the present crisis teaches us that we live in a world of Knightian uncertainty, where the ―unknown unknowns dominate and our plans for the future are regularly thwarted by unforeseen and unforeseeable events. . . .

— …First and foremost, firms should have the incentives to follow sound business practices. The best incentive is to make failure possible. Hence, we need resolution regimes for financial firms.

— In a world where people have imperfect foresight and do not always behave rationally, and markets are not always efficient, we need to accept that economic policy cannot fine-tune the cycle.

— For us economists, the lesson from recent events should be to rely less on the development of theories by ―deduction (like in natural sciences) and to apply more induction(like in social and historical sciences). Failure to study history makes us repeat the mistakes of the past.

Mayer goes on to outline and argue for the mainstream Hayekian narrative of the last decade. Low interest rates inflated a bubble and knocked the whole economy out of kilter. Where non-Austrians misconstrue Hayek is in thinking that he is only focused on the bubble itself – they rightly point out that the housing sector itself wasn’t big enough to create our current stagnation. But Hayek’s genius was in recognising that the entire economy is interconnected, and credit distortions in one sector can disjoint the rest. If you imagine a tower of blocks, taking one block away (or changing its shape) can knock all the others down if it’s in the wrong place, even if it’s relatively small. Similarly, credit distortions affect the whole economy because everything is so interlinked.

Anyway, read the whole Mayer piece. We can add him to the Hayek Club.

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Devolving to freedom? Libertarians and localism

On the whole, in what I consider to be a baffling divergence from best tenets of the ideology, most libertarians I have met support devolution and the right to secede. This fetish for the local mistakes group sovereignty for individual liberty, and can most clearly be seen as an influence on libertarian thinking in the United States, where Ron Paul and others cite states’ rights and independence as their cure to the ‘imperialism of central government’.

I disagree completely with this approach. Local government has to possess coercive powers to force those subject to it to obey its edicts, and in my view no libertarian system of government actually leaves room for local government on any level.

Why should it? A libertarian government is at its core a legal framework for the defence of right and property. It is my belief that libertarians should aspire for all people to possess equal negative liberty, and equal levels of liberty can only be ensured by a centralised libertarian administration. The justification for local government is that it allows government to be different to suit local wishes – but under a libertarian system people do not have the right to coerce their neighbours, whose freedoms are protected, and the only outcome possible is differing levels of freedom across different areas.

Given that the proper defence of freedom and property is undertaken by the central, minarchist libertarian state, there remains no area in which a libertarian local government could properly legislate. Any action undertaken by a local government could only impinge upon liberty more than is necessary, and is thus an un-libertarian action.

The waters are muddied further by the problem of demarcating the areas and groups granted such autonomy. For example, if Wales voted to secede from the United Kingdom, why should inhabitants of Wales who voted against that policy be forced out of the UK? The legitimacy of ‘Wales’ as an entity might not be something they subscribe to, and no libertarian state should allow people to lay claim to others against their individual will on the basis of group identity.

It might seem counter-intuitive, but libertarians should be centralisers. Both nationalists and localists are enemies of universal liberty, which must surely be our ideal. A patchwork of petty tyrannies informed by local ballot is not libertarian in the slightest.

Henry Hill is the winner of the 2011 Young Writer on Liberty Award. He blogs at http://dilettante11.blogspot.com/.

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It's the bureaucracy, stupid!

More essential reading from Detlev Schlichter:

I tell you what is wrong with the global economy: the global bureaucracy. That is what is wrong. Decades of rising taxation, increasing regulation, and persistent redistribution have fundamentally and structurally weakened the major economies of the world. Underneath the glittering razzmatazz of modern technology lies a society that has been sapped of its capitalist juices. For decades we have been eating into our capital stock.

To make matters worse, this persistent structural decline has been masked and indeed furthered by another evil the bureaucracy has bestowed on us: a constantly expanding supply of fiat money, astutely channelled through the banks and wider financial industry. For decades this has helped project an illusion of savings availability while it has simultaneously weakened the all-important propensity to save and to create lasting capital. A constantly expanding money supply, artificially low rates and cheap credit have encouraged borrowing, leverage and debt-accumulation on a gigantic scale, and have fed various asset bubbles, which in turn have further enhanced the illusion of wealth while diverting resources away from where they could have generated real prosperity. At the same time, a new generation has been raised on the belief that wealth comes from consumption, not saving and production, and that you can vote for it.

Detlev's book Paper Money Collapse is now available from Amazon.co.uk.

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Criticisms of Vickers

A new Adam Smith Institute briefing paper, out today, argues that:

  • The Vickers report is a botched opportunity. It will not solve the errors of the past.
  • The Independent Commision on Banking's (ICB) proposals will pile new levels of regulation when the problem was that former regulations were either poorly conceived, imperfectly enforced or went unheeded.
  • The ICB proposals run the risk of institutionalising moral hazard by entrenching the expectation of bailouts.
  • The ICB proposals also fail to get to grips with the systemic risk inherent in the deficiencies in international capital regulation.
  • Ring-fencing should not have been be the ICB's priority. Instead the report should have concentrated on competition, transparency, and resolution regimes.
  • Ring-fencing fails to address the problems in the banking system. In fact, the systemic risk in 2007 and 2008 stemmed from banks which would have complied with most of the report's ring-fencing criteria.
  • Ring-fencing bank operations won't achieve the separation of risk the ICB claims. Difficulties in a non ring-fenced subsidiary would depress the stock price of the parent company and thus the scope to recapitalise the tier-one capital of the ring-fenced bank.
  • The ICB's presentation of the history of why the banks failed is self-serving. It does not take into account the role policymakers had in encouraging regional banks to take on aggressive funding policies. It also includes irrelevant examples such as Lehman Brothers.  Vickers’ narrative ought to be robustly challenged (see p4 of the report).
  • The UK banking system is oligopolistic. The implicit protection mandated by ring-fencing would be a further force against competition. The retail banking monopoly would be best addressed with a firm “no bailout” policy and, where necessary, anti-cartel regulation.
  • We also need to introduce a culture of transparency on top of the macro-prudential reporting proposed by Vickers – with principles-based disclosure and regulation replacing the former regime of compliance by process-oriented box ticking.
  • The report should have gone further in designing a resolution regime for the orderly winding-up of failed banks

Miles Saltiel, the author of the report and a fellow of the Adam Smith Institute, said:
 
“The Independent Commission on Banking’s final report has its priorities all wrong. Vickers’ central proposal – ring-fencing – addresses a problem the UK banks did not have during the crisis, and largely fails to deal with the real problems now and then. A stronger focus on competition and transparency would make many of the proposed reforms unnecessary.”
 
Tom Clougherty, executive director of the Adam Smith Institute, added:
 
“Vickers should have focused on getting rid of the government guarantees that encourage reckless behaviour, while also coming up with a credible plan for winding up failed banks. Only a clear “no bailout” policy will encourage more responsible banking and increase competition in the sector.”

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Is tax avoidance the new fashion trend?

modelRecently, there’s been criticism of companies such as Topshop and Vodafone for the practice of tax avoidance – minimising tax liability within the law; in other words, companies being based abroad but continuing their business in the country. An analogy can be made with companies shopping around to find the best deal or place to set up their operations.

Arguments have been put forward by groups such as UK Uncut, suggesting that tax avoidance is unfair for those facing public sector cuts in Britain. It is felt that, in this period of austerity, the rich and not the poor should be bearing the brunt of the deficit reduction programme – most potently indicated by the protest sit-in at Fortnum and Mason. But is clamping down on tax avoidance the only coice we have? No.

It seems that tax avoidance is a symptom of the problem of high corporation tax rates – 26% in the UK compared to Ireland’s 12.5% rate. This has lead to lower levels of unemployment and higher rates of GDP growth in Ireland thanks to many new businesses establishing themselves there. The Irish economy is now exporting strongly and this will help them to recover quickly from the effects of the recent recession.

The libertarian response to this issue should be helping companies find the best bargain – that is reducing the corporation tax rate which is certain to make Britain a more competitive place to do business. Furthermore, this response is more likely to help those less well off as real growth and employment benefits all, rather than resorting to ‘penny pinching’ the pockets of a few businessmen.

The solution is not to clamp down on tax avoidance but to make Britain a more competitive place to trade. Reducing the rate of corporation tax means that companies won’t have to go to drastic measures of basing their businesses abroad. It’s a simple method that offers prosperity for all and will continue to drive the best of British business.

Karishma Puri won third place in the 2011 Young Writer on Liberty Awards.

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