The spread of a flat tax

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The ASI's briefing paper, A Flat Tax for the UK—A Practical Reality by Richard Teather, has been cited in Taiwan, leading them to conclude that "the government should evaluate the adoption of a flat tax system to simplify the tax system and to promote tax equity". A Flat Tax for the UK has had an impact on the policy debate in Australia, Greece, Slovenia, as well in the  IMF. Perhaps it is time the UK follows suit.

Quote of the week

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The old adage “Everyone’s a capitalist on the way up and a socialist on the way down" is kicking in. The thing is, if you’re a socialist on the way down, you were never really a capitalist on the way up. Capitalism requires putting your own capital at risk. What we do have is a grand adhocracy where “government," a.k.a. Barack Obama, Timothy Geithner, Nancy Pelosi, and a dozen others, will figure everything out as they go. Businesses will rise or fall based on their skill at kissing up to the government. And as sure as shinola, when government fails again, we’ll be told that only government can save us.

Jonah Goldberg, NRO

Blog Review 873

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Tsk, what, me, worry? For as we're told, even wasting money, even corruption, is a stimulus, right?

Well, how about that. Lower prices bring out the buyers.

But do higher prices bring out competent politicians? And if they do, won't higher pay bring out the competent bankers?

We could do with a few competent politicians, of course.

How embarrassing, a book on gifted traders includes one running a Ponzi scheme.

Might it be possible for those in charge of protecting civil liberties to actually be able to recognise a civil liberty? Is that too much to ask for?

And finally, boring sport "brought to life" by boring geekery. Or some such.

The Phibbs List

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Hammersmith and Fulham councillor Harry Phibbs has come up with a list of ways to cut the council tax without cutting key services. At first I thought it was one of these 'top ten' lists. Then as I read down, it seemed like it was turning into a 'top twenty'. Then a 'top fifty', perhaps. But no, Harry has come up with no less than a hundred ways to save local taxpayers' money.

Freezing recruitment – which Hammersmith and Fulham has done – is an obvious first choice. Scrapping political advisers, press officers, and the council newspaper. Not to mention arts subsidies, fair trade coordinators, management consultants and diversity officers. Get children out of care homes and into adoption, sell assets and shop around for insurance and other essentials. Turn down the thermostats in council buildings, And go for tap water at meetings, instead of expensive bottled water: that alone saved Hammersmith and Fulham a whopping £36,000!

With such simple economies saving such huge sums, perhaps all councils should adopt the Phibbs List. After all, the rest of us are having to cut back, so why should local government be any different?

Eamonn Butler's new book, The Rotten State of Britain is published in March.

Debt-for-equity swap

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A creeping socialism, an encroaching bureaucracy and an alarmingly brazen protectionism are re-emerging, paralleled by the rapid erosion of our civil liberties and an increasing public appetite for a vengeful and often ill-informed “conventional wisdom" about the economic crisis.

The proponents of free-market capitalism and all who hold freedom dear now face a tumultuous period of reckoning. The significant gains made for liberalism over the past centuries must not be undone in the heat of the moment by the over-hasty actions of panicked politicians, clearly out of their depth.

Liberals and free-market capitalists are being derided by our opponents as having no plan, no agenda for reform to rival the rapid nationalisations, the promises of an age of responsible regulation, and the cringingly huge bank re-capitalisations.

Yet this could not be further from the truth. There are a number of sensible policies, ones that need not involve nationalisations, taxpayer guarantees, or “bad banks", and that need not threaten the savings of depositors, or load future generations with the heavy burden of debt and higher taxes.

Perhaps the most exciting measure proposed is the Debt-for-Equity Swap – the mechanism by which toxic assets are simply written off, with debts owed by the bank exchanged for equity so that the bank’s good assets can broadly cover their debts. This simple measure leaves depositors unscathed; it could strip the entire system of incredibly complex yet risky assets, and without a penny of taxpayers’ money being involved. The losers would have been the existing shareholders, who would see their shares become worthless as they increased in number – but this sort of deserved loss is already the natural price of failure in a free-market economy.

By ignoring such measures, we risk falling into the dangerous fallacy of only looking at the limited options that governments have already laid out for us, despite the fact that government is the least imaginative, least creative institution known to mankind.

Anton Howes is leader of the Social Liberalist Party.

DIY dentistry

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We all know that healthcare provision in the UK is a tangled mess. The massive influence and control that the government has over the NHS and its resources has created a huge gulf between the service and its patients. Politicians no longer see patients as humans, but as numbers within quotas and costs on balance sheets.
 
When politicians make decisions, they can often forget the real impacts that this will have on lives. This latest survey by Which? found that 8% of people had tried DIY dentistry. Of those 8%, one in four had tried to remove a tooth using pliers, 12% had tried by tying a piece of string to a door and 19% had tried to pop an ulcer with a pin (These results are painful to read!). Surely the provision of state healthcare cannot have become so bad in the UK that we are resorting back to Victorian standards?
 
As I have blogged in the past the system for allocating dental healthcare under the NHS is too confusing, bureaucratic and inefficient for both the dentists and the patients. I thought universal healthcare meant that anybody would be treated anywhere if they were in need of medical attention. This type of botched healthcare system simply cannot work and will continue to fail as long as there is continuing top-down political interference.

Under a privatized system the market would distribute medical services much more efficiently. Providers would be able to respond to the demands of patients in terms of quality and availability of care, rather than being forced to give a one-size-fits-all botched service. The state of British healthcare is embarrassing. We should be world leaders with a system to be proud of.

 

Patri Freeman: The Seasteading Institute

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As we lurch from one government induced disaster to the next, many of us dream of leaving it all behind and establishing our own countries with smaller governments and more freedom for the individual. Patri Friedman, grandson of the late Milton and son of David Friedman has recently established an organization,The Seasteading Institute, to do just that.

The Seasteading Institute is looking into the development of new countries on the sea. Out of the reach of established governments, new laws will develop incrementally, with a step-by-step process of moving from a single seastead to a city seastead and onto forming of a nation.

There are few frontiers left to explore as all land has claims made upon it by governments. There are many who live on boats and ships but no one has yet to develop a nation at sea. (And no, Sealand doesn’t count, as it’s not been recognised nor is it in international waters.)

To find out more about this fresh and innovative approach to how we can reappraise societal and governmental formation, come along to the ASI at the end of March and hear from Patri himself. The Adam Smith Institute is hosting an Evening Seminar, March 31 2009, 6.30pm to 8.30pm where he will discuss seasteading and all that it encompasses. To find out more click here and if you would like to attend please email events@old.adamsmith.org. We hope to see you there! No pirates allowed.
 

Blog Review 872

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Strange though it may sound, "the best interests of the child" is a principle in direct conflict with the principle of "justice". And we do need to decide which we hold higher.

If the head of Liberty will not speak out for liberty, who will?

No, no, you men out there, buck up. Valentine's Day is indeed rational.

More things economics can tell you: why BDSM clubs are full of munts.

In contrast, things that economists actually agree upon.

And some things that economists do not agree upon.

And finally, well, this story is going to run and run. Bernie Madoff and Bernie Cornfeld?

HBOS, Lloyds and the S&L crisis

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The £10bn loss at Halifax Bank of Scotland – one of the UK's retail banks most affected by sub-prime mortgage debt – shows the folly of government policy once again. HBOS and Lloyds had been contemplating a merger for some time. They both thought it would be nice to become Britain's biggest bank group. But government anti-monopoly legislation stood in the way. The credit crunch gave them the perfect excuse to push ahead, and get the government to suspend its own rules. With banks dropping like flies, they argued, we need to be big to survive. Gordon Brown delightedly waived through the merger.

Now HBOS's losses have caused the new group's shares to plummet. The disaster could drag Lloyds – which used to be in a more robust position – into full-scale public ownership too.

It all reminds me so much of the mid-80s Savings and Loan crisis in the United States. For a number of reasons – including the fact that Congress had forced them to give mortgages to people who couldn't repay them – the Savings and Loan sector got into deep difficulties. There were collapses all round. So the Federal government encouraged them to merge, on the same principle that size saves. What it did, of course, was to create lenders that were 'too big to fail' – in other words, lenders who would have to be bailed out by taxpayers when they inevitably did fail. Not surprisingly, the US financial sector then went from bad to worse.

Ours is doing the same. We need smaller banks, not larger. Then if one goes down it's a business tragedy, but not a financial disaster. Instead, Gordon Brown's heavyweight regulation has forced the banks to merge and grow, because only the largest can actually afford the armies of regulatory compliance officers that banks need these days. So now we have mega-banks which the government simply has to prop up, because letting them fail would rupture the whole economy. Governments never learn.

Eamonn Butler's new book, The Rotten State of Britain is published in March.

Babies and bathwater

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Yes, yes, we all know, we're told it endlessly. These terrible neoliberals (that would be people like us then) have brought the world to its knees. The banks are bust, no one can get a loan, globalisation is impoverishing billions and we're going to have to tear up the entire economic order and ....well, do what?

Perhaps actually we might take the advice given to Brian and try looking at the bright side of life? For there is in fact one (and no it doesn't involve a suicide squad nor whistling).

The other, more numerous, group consists of those who are middle-class by the standards of the developing world but not the rich one. Some time in the past year or two, for the first time in history, they became a majority of the developing world’s population: their share of the total rose from one-third in 1990 to 49% in 2005. Call it the developing middle class.

Something really has changed in the world. Add these newly middle class people in the developing world to those of us in the rich and for the first time we can say that the majority of the human species are no longer in poverty. That's what globalisation has wrought. Yes, it may not seem like it when surveying the rubble of a share portfolio heavy on banks but the old Smithian manner of wealth creation, the division of labour, specialisation and the trade of the resultant production has brought us to this pretty point. We've just, over the last few decades, had the largest reduction in poverty ever. Not just since we tried this or that trick, or Keynes, or Hayek, Friedman, Jevons or Smith himself wrote a book or formulated a theory, but since a few of our inquisitive forefathers came down out of the trees.

That's really a baby that we don't want to throw out with the bathwater. Changes at the margins perhaps, more, less or different regulation fine, but this liberal capitalism thing it has one attribute that sets it apart from every other economic system we've ever tried. It's the only one that has led to a consistent and sustained rise in the standard of living of the average Joe and Joanna. Worth persevering with it then until all, not just the majority, are free from the tyranny of destitution, don't you think?