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"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice" - Adam Smith

The one short straw

Written by Philip Salter | Saturday 11 October 2008

The BBC reports that a thorough review of the NHS in England by the National Audit Office has found "little evidence" that patient’s complaints improved services. In fact, most don’t even bother to kick up a fuss because they don’t think it will make any difference, while those that do find the whole process a bureaucratic mess.

A spokesman for the Patients Association said: “Despite the army of people involved, the NHS is light years away from a genuine complaints service. It lacks compassion, is bureaucratic beyond belief and takes far too long. This is not a "service", it is a sham.'

In response to the report, a spokesman for the Department of Health has stated that: "From next year, we are simplifying the system. Greater emphasis is to be placed on working with the complainant to resolve cases satisfactorily at a local level. We are also requiring NHS organisations and local authorities to publicise the complaints procedure and encourage people to use it. In addition, local organisations will publish information on the number of complaints received and how they have been dealt with."

However, this response fails to address the underlying problem the report highlights. Although the process of complaining is arduous, the real problem is that apathy reigns supreme; patients rightly fail to see how such a vast inefficient bureaucracy can even hope to offer a decent service. As such, what point is there in complaining?

With most people taxed beyond the means of paying for private healthcare, patients are unable to take their custom elsewhere, surely the most common reaction to bad service in the private sector. Foundation Hospitals have failed to address this core problem. Instead, people should be free to divert their money – which the government currently wastes on the NHS – into privately provided healthcare. This would empower many more people to enjoy the undoubted benefits the private system, currently only enjoyed by the very wealthy.

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The Onion rings true

Written by Junksmith | Thursday 28 May 2009

If they could, they probably would.

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The optimum size of government

Written by Philip Salter | Monday 02 February 2009

Richard W. Rahn, senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth, has an interesting article in the Washington Times on the optimum size of government. 

Rahn explains that economists from the Institute for Market Economics in Bulgaria have determined new estimates of the optimum size of government. They conclude that its optimal size is less than 25 percent of GDP.

Rahn claims that: “Rather than increasing the size of government, the empirical evidence shows that sharply reducing taxes, regulations, and government spending down to at least 25 percent of GDP would do the most to spur economic growth and create more jobs over the long run". As the excellent Peter Schiff has also argued, reducing its size is the one thing that governments can do to lessen the impact of the financial crisis.

There are of course problems with just looking at GDP as an indicator of the impact of government upon the economy. Through various regulations, the government has so many other ways to lesson the economic competitiveness of the people. Just take a look India before and after Manmohan Singh rightly threw much of License Raj in the intellectual dustbin of history. It is strange that while developing countries are continuing to unburden themselves of regulation with such profound effects on the lives of people, the UK and other more developed countries are heading in quite the opposite direction.

Frankly, 25 percent of GDP does not go far enough for me. This would take us back to pre-WWII levels; instead, we should be aiming to return to pre-WWI levels of less than 15 percent. However, given that UK public spending is over 40 percent of GDP, 25 percent would be a very welcome step.

There are more than pragmatic reasons to believe in small governments, but economic analysis such as this should be enough to convince individuals on the fence, though not many politicians I suspect.

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The organic roots of oaks and free markets

Written by Stephen MacLean | Friday 07 September 2012

‘David Cameron will announce tomorrow that the oak tree has been dropped and the torch of freedom will once again be the Conservative party logo.’  So wrote Benedict Brogan for a tongue-in-cheek Telegraph blog.  Brogan’s mirthful explanation for this ‘back to the future’ change?

The move is being promoted by Downing Street as a “decisive” switch that demonstrates the urgency with which the Prime Minister is advancing the cause of free enterprise and a more robust grip on the economy.

Hold on, Mr Cameron, good news!  The cause of free enterprise can still be championed by the Tory party’s venerable cultural symbol.  As a traditionalist, for example, you will appreciate these inspiring lyrics from ‘Heart of Oak’ to rouse your industrious compatriots:

’Tis to honour we call you, as freemen not slaves, / For who are so free as the sons of the waves?

Fortunately, too, free market economics is synonymous with the organic principles of generation and growth which should be at the heart of conservatism, modernised or otherwise.  For in The Wealth of Nations, Adam Smith praised the ability of entrepreneurs to struggle and triumph against adversity:

The uniform, constant, and uninterrupted effort of every man to better his condition, the principle from which publick and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration.  Like the unknown principle of animal life, it frequently restores health and vigour to the constitution, in spite, not only of the disease, but of the absurd prescriptions of the doctor (II.iii.31).

In his 1974 Nobel Prize lecture, Friedrich von Hayek denoted this undirected, up-from-below phenomenon as ‘spontaneous order’:

...in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority.  Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims.  We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based—a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed. [emphasis added].

Hayek’s discomfort with the ‘power to coerce other men’—whether for good or ill—and what Smith called ‘the extravagance of government’ and ‘the greatest errors of administration’, is another reason why a return to the Tory torch (factual or otherwise) may be a bad omen, especially if it were meant to signal, in Brogan’s mirthful rendition, ‘a more robust grip on the economy.’

As Smith cautioned, ‘What is the species of domestick industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him.’  If a decision must be made in favour of either the individual or the State, the presumption must always be made for the wisdom of individual entrepreneurs.

The stateman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it (IV.ii.10).

So, oak or torch, modernised or traditional, the Conservative party must always stand for individual initiative in economic endeavours, cognisant of the government’s circumscribed role in supporting such entrepreneurship.  And that’s no laughing matter.

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The pacman expenses game

Written by Junksmith | Thursday 17 December 2009

Kirkbride, Martin or Blears?

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The pain in Spain

Written by Tim Worstall | Saturday 29 June 2013

Yes, yes, I know that this Keynesian explanation for everything is all the rage at present. If only we artificially pumped up demand then everything would be just tootsie and fruit loops once again. However, hard as it may be for some to understand there really are structural problems in economies as well. For example, Scott Sumner tells us about Spain:

Note that during the depression of the early 1990s (when Spain still had its own currency) their unemployment rate rose from 16% to 24%. I don’t recall if they devalued during that cycle, but they certainly had the ability to devalue. And of course what’s striking about that period is not so much that Spain’s unemployment rate rose by 8 percentage points, but rather that it only fell to 16% at the peak of the previous boom! To say Spain has structural problems with its labor market would be an understatement.

We can see the evidence right there: even in boom times the Spanish unemployment rate was uncomfortably high.

And it isn't just Spain either: most of Southern Europe (which, in this formulation, includes France) is suffering from the same problem and we see a little bit of it here in hte UK. Simply the ever increasing regulation and thus rigidity of the economy means that the "natural" rate of unemployment keeps rising. Ratchet by ratchet with each turn of the business cycle wheel.

This isn't a problem that can be solved by Keynesian means: this is one that calls for reform of the supply side of the economy. All of which is really just a prelude to one of my favourite points about said economy and its structure. Yes, there are most certainly cycles in it and it could well be that certain actions will help smooth out the swings in such cycles. But that isn't the end of the job at all: it's also necessary to look hard at the underlying structure and to see whether there are, perhaps as a result of our smoothing exercises, structural problems that also need resolution.

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The paradox of paternalism

Written by Dr Eamonn Butler | Sunday 05 June 2011

Two stories from the UK point up some troubling choices. First, the government wants shops to stop selling 'inappropriate' clothes to pre-teens. It's worried about the 'sexualisation' of young girls. Second, there are calls for a 'proper watershed' on TV following some very sexy talent-show routines.

I believe in personal freedom, and think that people should be able to buy whatever clothes they like, for themselves or their family, and watch whatever TV they want at any time they choose. But while I believe that mature minds can handle freedom, I am not so sure that child minds can. Human beings have a protracted childhood in which we learn from adults how best to choose and to conduct ourselves. It is long and difficult process, and we don't always get it right.

So there is a case for some protections on children. We might decriminalise drugs (another story in the news), for example, but would we really want to allow children to buy drugs, or even for them to see drugs being traded? Again, I would like to see prostitution decriminalised, but would I like to see brothels next door to schools? No, not really. And as for TV – well, parents know how hard it is to keep a constant eye on what kids are watching, so a watershed is quite a popular idea.

That's paternalist, but children need a bit of paternalism. But paternalism is best delivered within families, and by self-control in the media, rather than from governments and regulators. If politicians are worried about the sexualisation of our children, they should perhaps first reflect on how the state has intruded into the family, and undermined family culture and responsibility. Then butt out and let ordinary decent people decide what is best for their own children.

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The paradox of regulation

Written by Vuk Vukovic | Tuesday 08 November 2011

Information in the economy is widely dispersed among a huge amount of consumers and businesses, which possess local information that enables them to set prices and determine quantities of goods and services to be bought and sold. The market price, aggregating billions of choices and decisions every single day, is the best way to express real value. No central regulatory body can do a better job, simply because they cannot physically posses all the necessary information.

The same line of reasoning is applied in the financial market. The complex matrix of information and market participants is somewhat smaller in the financial market and rather global (as the decisions and financial products are run globally) but they are far more complex than regular goods and services and are thus far more difficult to control and have oversight on. Even if the regulators fully understand the complex derivatives and quadrupled securitized loans they cannot process how market participants will react and sometimes cannot even see the obvious consequences of their own actions.

The current financial crisis is the best example of this. By steering banks into buying MBSs (Mortgage Backed Securities), they were creating an artificial demand for these securities and henceforth an artificial demand for more mortgages which led banks into lowering their lending standards in order to create more and more AAA-rated MBSs.

The regulators need to understand the consequences their actions may incur on those being regulated, and should be able to anticipate their reactions, but have failed to do so repeatedly. They will fail again, as their desire for finding new safe assets may end up creating another asset bubble. There were some suggestions that new safe assets should be debt of businesses backed up by government guarantees (in order to have an AAA rating) and re-packaged into new types of securities.

Others have proposed to do the same with eurozone peripheral sovereign debt – have highly solvent nations pull the debt into securities, back them up the usual way and sell them on the market, thereby creating new, huge, safe bonds and resolve the sovereign debt crisis in one blow. Some banks have already started to issue covered bonds (debt made up of high quality mortgages and loans) backed up by collateral and secured by bank’s other assets in the event of bankruptcy. No matter what the new safe assets look like, by exaggerating their use and forcing banks to recapitalize with these assets can only lead to another asset price boom, higher debt burdens (as these safe securities are in fact debt-tied securities) and consequently another recession.

As far as the impact on the current recovery, an increase of bank capital-asset ratios, even if announced at a future date (in the Basel III case this is 2019), due to negative future expectations, will work towards the decrease of lending, unprofitable business lines for banks that will drive costs for bank customers, and finally shift the businesses to seek support on high investment projects with the so-called “shadow banking system” – hedge funds, money market funds, SIVs, and investment funds. Furthermore, even if we disregard expectations of future contraction by the banks which may lead them to contract today, the European Commission (EC) plans to institute the 9% capital standard as soon as possible to prevent financial contagion from a Greek default, making the reaction on the lending market immediate.

The paradox of the regulatory oversight body arises in the following – by striving to make the system stable, they end up increasing the systemic risk and fuelling artificial demand that can lead to an asset bubble. By creating incentives to invest in certain types of assets, the regulators send false signals about the demand for these assets and hence distort its prices. The effects of their actions are usually counterproductive and the reason this is so is because they think they posses enough data and information to control the market economy and the behaviour of market participants.

Never was this possible before and has always proved to have disastrous consequences, since the market will always have more information than a few individuals, defined by the term asymmetry of information. The regulators call upon the asymmetry of information in their desire to overcome it, but they paradoxically become its victims.

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The pathetic nature of British politics

Written by Steve Bettison | Wednesday 10 June 2009

westminster_at_nightThe irony of ironies was delivered over the weekend, sixty five years after the brave men and women of the Allied armies successfully breached the Atlantic Wall to fight national socialism, the UK decided the time was right to send national socialists to represent them in the European Parliament. The two regions, Yorkshire & Humber, and the North West, were those that 'successfully' elected MEPs from the British National Party despite the party actually losing voters in these two regions. (In Yorkshire & Humber their vote fell by 5.1% and in the North West by 2.1%). They were of course supported via a substantial drop in core Labour voters who decided that their non-appearance in the booths would show the party leadership in Westminster exactly what they thought of them.

The whole political system is to blame for this debacle. The destruction that has been wrought throughout the latter part of the 20th century by Westminster and Strasbourg/Brussels has allowed for the BNP to establish a firm foothold on the political ladder. The creation of the nationalized industries, the centralization of power firstly in Westminster and then to a lesser extent in the European parliament, the stripping of power at the local level and the end to oppositional politics has meant that the rise of smaller parties was inevitable. This has lead to apathetic voters who wish to protest at how they feel forgotten by those they traditionally vote for and also to political minorities across the whole spectrum choosing to vote for seemingly extreme/single issue political organizations.

The rise of groups such as UKIP, BNP, Plaid Cymru, SNP and the Greens is merely reflective of how out of touch Westminster and the parties have become. The fault for the election of the BNP lies squarely with the Conservatives, Labour and the Lib Dems. Voters may not fully understand what/who they vote for but they will vote for someone who listens to them. That is all the BNP did in this campaign. In these enlightened times it is difficult to believe that there are nearly 3 million racists in Great Britain, as this Channel 4 survey shows .

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The PC wall

Written by Dr Fred Hansen | Wednesday 02 December 2009

Diversity has advanced quickly through many Western institutions creating dysfunctional bodies. This is the focus of an excellent article on the disastrous consequences of implementing diversity in a security sensitive environment entitled Diversity: An Ideology.

The ideology of diversity is simply social Darwinism - the term being a mindless transplant from the ‘biological diversity’ of life on our planet – as if humans were no different from other living creatures. Diversity: An Ideology gives an account of the security failure within the US army with regard to the terrorist psychiatrist Major Nidal Mali Hassan of the Fort Hood massacre. This very well documented narrative shows how diversity has conquered crucial US security institutions.

After Bill Clinton’s introduction in 1994 of the Gender Integration of Basic Training program to encourage female recruits, gender “discrimination" was implemented and complaints ensued. An independent commission was set up to investigate the cases. It concluded strict separation of genders in housing and basic training just as the Marines had been doing all along. However these recommendations were rejected. As a result quotas along the lines of diversity were even increased in face increased.

The English professor Bruce Fleming of the US Naval Academy found that

21 percent of the 2001 and 2002 classes were admitted on a “minority" basis, had SAT scores 200 to 300 points below the Academy’s average, and were evaluated “on a separate track" from non-minority students.

The joint policy of encouraging diversity and the ban on racial profiling have pretty much pervaded and nearly corrupted the American security system. For instance, in April 13 2004 the Attorney General testified before the 9/11 Commission that, “the single greatest structural cause of September 11th was the wall“ in the Justice Department that separated intelligence cases from criminal cases in order to prevent race, gender, and ethnicity from being used in national-security investigations".

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