Stop outlawing jobs

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The Trade Union Congress (TUC) is calling for the UK national minimum wage to be increased to £6 an hour from October 2010. In Scotland a government committee suggests the public naming and shaming and an increase in fines for employers who break the minimum wage. While in Jersey the Employment Forum has outlined plans to increase the minimum wage to £6.20. The sound of breaking windows fills the British Isles.

The timing of this is awful - not that there ever is a good time to outlaw jobs - but with unemployment set to continue to rise into next year, those at the margins will of course be adversely affected by restrictions on employer and employee. There is no getting around the fact that minimum wages create unemployment; there are few more obvious truths in economics. Murray Rothbard retorted to those that suggested the minimum wage has no effect on employment to ask why they didn't put it up significantly higher; their lack of response was telling. The marginal level that we live with discriminates against the most vulnerable, forcing them into the disabling clutches of the state.

Pushed as it is by unions, the minimum wage is a mask for special privilege. And as such it was infuriating to hear the ludicrous assertions a couple of months ago on the BBC Radio 4 programme Where did it all go Right? that the national minimum wage has been an unqualified success. To have to listen to Michael Portillo and Boris Johnson turning their backs upon logic in favor of a populist bandwagon was too much. In a time of high unemployment combined with dispendious welfare, to suggest that the national minimum wage is having no effect is fantastical.

It is about time a politician or two stood up for sound economics. Given the state of this nation, perhaps we could do with a British Warren Harding to lead this country. Any idea who could rise to the challenge?

US embargo on Cuba

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The UN general assembly is expected to overwhelmingly condemn the US economic embargo against Cuba today, adding pressure on the Obama administration to abandon its 47-year-old policy.

Since 1960, Americans have been barred from trading with, investing in, or traveling to Cuba. The embargo may have possibly made sense before 1991, when Castro served as the Soviet Union's proxy in the Western Hemisphere, but all that changed with the fall of the Soviet Union. Today, more than a decade after losing billions in economic aid from the Soviets, Cuba is only a poor and dysfunctional nation of 11 million people who pose no threat to America or any other country.

More recently some officials in the Bush administration charged that Castro's government may be supporting terrorists abroad, but the evidence is pretty shaky. It is much more likely that the Bush administration simply wanted the Cuban vote in Florida, than it really believed Cuba was paying the bills of terrorist. As a foreign policy tool, the embargo has aided Castro’s government authority by giving him an excuse for the failures of his socialist programs. He can, and has, railed for hours about the suffering the embargo inflicts on Cubans, even though the damage done by his domestic policies have been far worse. If the embargo were lifted, the Cuban people would be a bit less deprived and the Cuban government would have no one else to blame for the shortages and stagnation that will persist without real social reforms.

If the goal of U.S. policy towards Cuba is to help its people achieve freedom and a better life, the economic embargo has completely failed. The economic effects have made the people of Cuba worse off by denying them low cost food and other goods that could be bought from the United States. Given the current economic situation, lifting the embargo could create just the jump start that the US economy needs. Open markets are the best real way to encourage more personal freedoms and government reform.

Spencer Aland blogs regularly here.

Farewell christmas tree?

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Walking through Oxford Street and looking at this years Christmas decoration is dispiriting. You immediately get the feeling something is missing. The overhead street decoration has no Christmas symbolism anymore; a boring umbrella has replaced the Christmas tree. I kept scratching my head: are there people out there who bother about this stuff?

Well, it seems the PC brigade has struck again. There will be no proper Christmas decoration anymore. I want everybody to be aware that the PC people are now finishing in this erstwhile free country what the Jacobins started and the Nazis took over in the 1930. They were very keen to ban all Christian symbols in public places because they wanted their swastika to be displayed in their place.

These days, we often hear that crosses and other Christian symbols must be tucked away because they might offend the faithful of other denominations, particularly Muslims. And yet I wonder what offends Muslims more: the Christmas trees and Christianity-inspired decorations in our shopping malls, or the politically correct (and often taxpayer-supported) Gay Pride parades which take place in our major cities every year? But I guess that as far as our political elites are concerned, the latter symbolizes multiculturalism, and is therefore acceptable, while the former evokes traditional values, and is not.

It’s a strange world we’re living in.

What do you think of BBC Television?

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Click here to let the BBC Trust know what you think about BBC Television. Don't hold back...

From paedophilia to speeding, bureaucrats need a sense of proportion over the risks

Dr Eamonn Butler argues that the Government is overcautious about the risks not just from paedophiles but from all aspects of modern life.

Watford Borough Council’s decision to ban parents from the playground in case they are paedophiles are another case of the Bully State gone mad. We’ve seen it in the past week with the Independent Safeguarding Authority (whose .gov web address shows it to be anything but independent), telling piano teachers and others that they ought to get CRB checks, or parents might ask why not.

So now we are living in a Britain where all adults are presumed to be paedophiles unless they can prove themselves otherwise. It’s the precautionary principle gone mad. If you can’t prove something safe, you have to treat it as dangerous. That thinking also gave us the EU’s Reach directive, which prescribed in-depth tests on “hazardous chemicals” – such as salt – before they could be licensed for our use.

Why do bureaucrats act like this? Because there is no upside for them. A business person will take a risk because the chance of failure is balanced by the chance of making a fortune. Civil servants aren’t rewarded with fortunes when their decisions go right, but they are sidelined or barred from promotion when they go wrong. So they focus on stopping the downside, not boosting the upside.

That is why we are being softened up for a 20mph speed limit in towns, particularly near schools. Yes, pedestrians are much less likely to be killed at this speed than 30mph. But today we have a third of the child road deaths that we had in 1922, when the national speed limit was 20mph. Why? Because parents warn their kids about traffic. They remove their kids from the risk. What the bureaucrats want to do is to remove the risk from the kids.

But we take risks for a reason. There are benefits too. With a 0mph limit you could eliminate road accidents entirely. But at huge cost to the community.

Why does Network Rail spend billions on train safety systems? Because train crashes are spectacular news, while car crashes aren’t. In 2007 about 24 people were killed on the railways, including pedestrians at level crossings. Nearly 3,000 died on the roads, but that’s less obvious.

Seat belts are another celebrated case. Strapped into their cars (which are advertised for their safety), drivers feel safe. So they drive more riskily, and more pedestrians are killed and injured. We’d be better installing a huge spike in the middle of each steering wheel. Accidents would plummet.

We take risks for a reason. Life would be impossible without it. The idea of a risk-free world is futile. And unless we – parents, children, drivers, and everyone – are exposed to risk, we will never learn to cope with it.

Published on Telegraph.co.uk here.

We need more private schools, not less

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Can the Conservatives learn from Sweden's school voucher system?

Another blow for the left this week as the University College Debating Society threw out a motion calling for the abolition of private education. Camden LibDem candidate Jo Shaw and I, opposing the motion, expected to be defeated, but at the end of the debate our calm and precise arguments gave us a 2:1 majority.

Not that the argument is difficult. Scrapping private education would place a huge additional burden on the state – leaving it with larger class sizes, or leaving taxpayers with higher taxes – all to fund the education of wealthier kids who the rest of us aren't paying for right now. And why do it? Frankly we should be growing more independent schools, because they perform better. It's not just that they get brighter kids with more motivated parents. Or that they charge more than the state spends. The fact is that they make their budgets work harder. Pound for pound spent, private-school kids get more face time with their teachers than state school kids, as our report A Class Act showed. No wonder they perform better.

Sure, you have to be well off to send your kids to a private school: rich enough to pay taxes to support the state sector, and then pay for your private schooling. What I would like to do instead is make private schooling affordable for everyone – as they do in Sweden, or in Denmark. Sweden introduced a voucher system in the mid-1990s. It means that if parents take their children from a municipal school and move them to an independent school, that school gets the same money from the government that it would have spent on their state education. No fees, no top-ups, not even extra charges for sports kit are allowed. So all at once, the whole population of Sweden can exercise a choice. And around 1000 new independent schools have sprung up, bringing in new ideas and much more customer focus. Even the municipal schools have had to sharpen their act in the face of this new competition.

The Tories have seen the merit of this system. I hope they will be brave enough to let voucher schools go their own way and allow customers, not civil servants, to say how they want their schools run. For instance, we don't need a massive state curriculum, administered by thousands of bureaucrats – parents know whether or not a school is doing a good job, and if it isn't, they will move and take their voucher funding to another. In fact, we wouldn't need much of Ofsted's lumbering regulation at all. Let schools run themselves, and give parents the financial power to make their own choice. That would revolutionize UK education. for the better

Dr Butler's book The Rotten State of Britain is now in paperback.

More Stern words

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Lord Stern, author of the eponymous report on the economics of climate change mitigation, brings the zeal of the converted to this contentious debate. An interview with him is given a two-page spread in yesterday's  Times together with a front page story encouraging us all to turn vegetarian to save the planet. He claimed on the Today programme that such a headline was unfortunate and that it did not represent the main thrust of his interview. Nevertheless, it was said, and the contribution of farming to emissions of so-called greenhouse gases is likely to become a matter for high-profile debate following whatever fudge emerges from the climate change summit in Copenhagen in December.

In his interview, Stern calls for President Obama and other political leaders to attend this conference to ensure agreement is reached. There is little chance of this. The last time the President went to the Danish capital his presence did nothing for Chicago's bid to host the 2016 Olympics and the chances of a similar outcome are high, especially as the US will take no steps on climate change legislation until the top priority of healthcare reform is settled. It is far more likely that he will address the issue when he receives the Nobel Peace Prize in Oslo, following his ill-advised acceptance of this dubious honour.

In the Today interview, Lord Stern claimed that climate change 'deniers' were a small and declining group. Like many statements about climate change, this was put forward on the basis of no evidence. There are signs that the public is becoming increasingly sceptical (hence the government's decision to run the bedtime story propaganda ads on TV). This mood is only likely to strengthen if meat eating, energy and driving all become more expensive. And politicians are surely aware that unpopular policies do not lead to re-election.

Martin Livermore is the director of The Scientific Alliance.

Regulating hedge funds

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Businesses could be driven out of Europe because of hedge fund regulation, the European Central Bank (ECB) warns. The ECB reacts to the intentions from the European Commission to regulate hedge funds as the only region in the world. ECB is concerned that regulating funds in the EU but not anywhere else will give the funds incentives to go “country shopping" in order find the best place to be (with the least regulation). The paradoxical part of this argument is that funds can do this already... and many have decided that being in Europe is the best place to be, so why ruin a good thing?

The proposal from the European Commission covers all kinds of funds financing everything from creative entrepreneurs to big business. Driving these funds out of the European region and into the arms of more competitive countries will set back the European industry costing both wealth and jobs.

If the EU really was comitted to supporting productivity, research and innovation, eurocrats should maybe consider ways of easing administrative burdens for those driving progress and prosperity instead of finding ways of turning them away.

Hazlitt on aid

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Government-to-government foreign aid promotes statism, centralized planning, socialism, dependence, pauperization, inefficiency, and waste. It prolongs the poverty it is designed to cure. Voluntary private investment in private enterprise, on the other hand, promotes capitalism, production, independence, and self-reliance.

Henry Hazlitt

Osborne's plan to limit bank bonuses

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George Osborne's plan to limit bankers' bonuses...won't improve life for borrowers.

UK Shadow Chancellor George Osborne proposes limiting bankers' bonuses as a way of making more lending available to cash-starved businesses. He thinks that anything up to £10bn could be freed for lending if larger bonuses were paid in shares, rather than in cash. And it might focus bankers on long-term business improvement, rather than short-term deal-fixing.

I doubt it. In the first place, banks already pay their larger bonuses in shares, precisely because it keeps staff motivated and hooked into the business long term. We already have the most restrictive remuneration regulations in the world, and if people can't get paid what and how they want here, they can zip off to Switzerland, Asia or the Middle East no sweat. It's a very mobile market. Furthermore, if the banks pay in shares, who does that hit? Well, you and me, the taxpayers who are supposed to own the shares in these deadbeat high street banks. Frankly, I'd not like my shareholding watered down any further, thank you.

I'm afraid this plan looks like electioneering again. If there is one lot that people hate more than politicians, it's bankers, so they are easy targets. And yes, the bankers have paid themselves far too much, no question. But politicians should be explaining why, not just joining in the bear-baiting. They can't, of course, because they are complicit. When the Fed and the Bank of England were flooding the world with cash right up to 2007, business was never so good. Not surprisingly, everything you did succeeded, there was so much money around. So the banks paid silly bonuses in order to motivate people to do deals. When the music stopped, a lot of those deals turned out to be unsustainable, but the banks had been acting perfectly rationally, going after the money that the politicians were printing.

Another reason why bankers overpaid themselves is because there is far too little competition in banking. And the reason for that is that banks have to carry so many brain-dead bureaucrats. Regulation is a huge burden which stops new people entering the sector, and induces existing players to merge in order to spread the regulatory compliance cost. And the lack of competition is not helped by the likes of Gordon Brown forcing banks like Lloyds and HBOS to merge. We should actually be splitting banks up, not merging them – George O is right on that, at least.

People don't understand that bonuses are how up-and-down businesses (like banks) keep their wage overheads down. When things boom, you pay spectacularly. When they don't, you rein in – although with contracts in place, that might take a year or two. Frankly, with business in the state it is, I do not think that next year's bonuses will be anything like those of the past. So why not let the market do its job?

And as for all those folk starved of lending funds...well, it's not just that the banks are repairing the balance sheets. It's also that people right now are scared to borrow any more because they don't know what the future holds. Would all that bonus cash go into lending, then? As I say, I doubt it.

Dr Butler's book The Rotten State of Britain is now in paperback.