This is entirely logical

Traditionally we here in Britain have not had a wildly intrusive government. It’s one of the things which keeps alive that flame in some that a wildly intrusive government might be useful or effective - a lack of lived experience of what actually happens with one.

Downing Street’s scientific advisers feared people might intentionally seek to contract coronavirus and that a black market in fake test results could emerge if employers allowed workers to return only when they had a positive antibody test.

The Scientific Advisory Group for Emergencies, known as Sage, was warned last month by its behavioural psychology subgroup that the widespread introduction of antibody tests could lead to a range of potentially dangerous and even criminal “negative behavioural responses” if not handled well.

How it is handled is less important than they might think. For we will absolutely, without any doubt at all, guarantee that if a chitty is necessary to earn a living then there will be a black market in the tests that lead to issuance of that permission. Plus a black market in those working without one, forgery of the pieces of paper themselves and so on. Along with all the associated corruption of the body politic that accompanies such systems.

We say this not because we are particularly gloomy about human nature, nor even because we want to laud some natural instinct to be free of pettifogging regulation. The insistence comes from simple observation of what people do in the face of such incentives. Among us we’ve experience of living in a number of different countries under different legal systems. Britain is, in daily life, remarkably uncorrupt and law abiding by the standards of the world around us. Largely because we’ve so rarely had a system in which it pays to be corrupt.

In any system where “Your papers please” is an important interaction in life then there will be a black market in those papers. This is not a prediction it is a fact.

Nothing is ever as permanent as a temporary government scheme — this must not be true after COVID19

When the Eiffel Tower was erected in 1889, it was expected to last for 20 years. So far, it has lasted for 131 years and counting. The London Eye, opened in the year 2000, had planning permission for 5 years, and it’s still there. Temporary things sometimes last. 

Where in this world can you find something that does that, something that endures through the changing times and the swings of fortune? Look no further than a temporary government programme. Although established to deal with short-term emergencies, they develop a life of their own, one that struggles to survive into perpetuity.

Nowhere is this more true than of temporary taxes. These are often levied by government to provide the funds for a short-term emergency, but they provide such a useful source of revenue that subsequent governments are reluctant to forgo them, long after the emergency is over.

Income Tax was introduced in 1799 by Prime Minister William Pitt as a temporary measure to fund the war against Napoleon. It still survives 221 years later, and although it was introduced at only 6d in the pound, or two-and-a-half percent, it now features a top UK rate of 45 percent. 

Bismarck introduced a tax on champagne to fund the construction of Germany’s Grand Sea Fleet. The remains of that fleet now decay on the ocean’s floor, but Germany still taxes champagne. It is a good working rule of thumb that taxes brought in for a specific purpose will eventually be used to fund the general expenses of government.

The same is true of other temporary programmes. The bureaucrats who staff the new agencies find subtle ways to sustain them when their original use is gone. They redefine the problem to make it endure. When poverty is largely solved, they redefine it as a percentage of median income, to make it true that “the poor ye shall always have with you,” along with the agencies and staff that deal with it.

Sometimes they extend the scope of their agency, to give it other matters to attend to, ones that will necessitate keeping its personnel in their jobs. Sometimes they change its purpose entirely, ostensibly to confront the problems of changing times, but in reality, to keep themselves in gainful employment. This is probably why Milton Friedman observed that there is nothing so permanent as a temporary government programme. 

All of this is pertinent to what will happen after the pandemic crisis is over. Those in government and its bureaucracy will press for ways to keep in being the new bodies set up to handle it, and to retain the powers acquired to mitigate it. The agencies and the powers must be retained, they will say, to be ready to deal with similar emergencies in the future. 

No. Those who favour freedom should ensure that both the agencies and the new powers are done away with when the emergency is gone. If they are needed in future, they can be enacted in future, just as they were this time. They should not be retained in the interim at great cost to taxpayers and to their personal liberties. Temporary must not become permanent. 

In ancient Rome, the slave in the chariot was there to remind the triumphal general beside him that all glory is fleeting. The same is not true, alas, of temporary government programmes and powers.

As we've been saying all these years

Our insistence has long been that the best way to reduce poverty is to buy things made by poor people in poor countries. Many have told us we’re wrong, this is just economic colonialism, the expansion of global capitalism into a new imperialist phase, exploitation and, well, any other word salad that can be thrown together for a Guardian column.

Now we’re told that the absence of our purchases is causing problems:

According to UN estimates, half a billion people, or 8% of the world’s population, could be pushed into destitution by the year’s end, largely due to the pandemic. The fight against poverty would be set back 30 years.

The crisis could produce famines of “biblical proportions”, with the number of people facing hunger almost doubling to more than 250 million, the World Food Programme (WFP) said. Shortfalls in donor funding and food aid meant 30 million people could die within a matter of months, it added.

Vanishing demand, collapsed distribution chains, and disrupted export markets are pushing people to the brink, affecting groups as diverse as Ethiopian and Kenyan flower producers, Sri Lankan tea-growers, and Bangladeshi garment workers whose contracts have reportedly been cancelled by UK supermarkets.

We should do that rare thing, take a Guardian column seriously. The absence of those purchases is causing poverty. It must therefore be true that the purchases, when they were happening, reduced poverty.

We were right all those years, the way to reduce poverty is to buy things made by poor people in poor countries. This also gives us our policy template for the future. Abolish all restrictions - tariffs, quotas, simply declare unilateral free trade - on purchasing from said poor. In that manner we will maximise our own ability to purchase things made by poor people in poor countries and thus reduce poverty.

We do want to reduce poverty, don’t we? Therefore we must have free trade.

Diverse systems work better than centralised ones

Back in 1948, Lou Weitzman, a young reporter in Arizona, witnessed a house fire. It was in a rural area, which had no fire department to help. So he bought a fire engine and went door to door asking people to subscribe to a new fire service. His company, Rural Metro, is still fighting fires today.

Indeed, Weitzeman provided a better and cheaper service than the city did. While city firefighters mostly sat in the fire station playing cards, he used people with regular jobs, who could be called out instantly to assist. And instead of having a few large trucks located in the busy centre of town, he used lots of smaller, nimbler ones, that could be parked around the whole area and provide that vital first response much quicker.

One lesson for pandemic planning is that, it’s pointless to preserve huge capacity for rare events. Just make sure that you can pull down that capacity when they happen. By having a volunteer service of former healthcare workers, for example. Or agreements with companies that in emergencies they will switch their production to whatever equipment is required.

The second lesson is that diverse systems work better than centralised ones. Germany, with a much more localised healthcare system, managed the crisis better than we have.

Testing, too, only took off when Public Health England stood out of the way and private labs stepped in.

So that’s the third lesson: don’t let bureaucratic control stand in the way of people who can help.

A fundamental misunderstanding about how politics interacts with money

Over in the US - and undoubtedly soon to be repeated here - a call for the trillions being splashed around by government to be used to fundamentally reshape the economy not just to dig said economy out of its current hole:

In this role, the NIA will act directly inside financial markets as a lender, guarantor, venture capitalist, and investment manager. It will combine modern financial engineering with the federal government’s unique scale advantages to boost supply of urgently needed public goods and services: clean energy, high-speed rail and broadband networks, affordable housing, tech startup incubators, and so on. This will create well-paying jobs, increase productivity, reduce inequality, and strengthen communities across America. Importantly, it will do so in partnership with private institutional investors—pension funds, insurance companies, university endowments, etc.—to whom it will offer an attractive opportunity to invest in “safe” assets with higher yields. In this model of public-private partnership, the public leads and private capital follows.

To prevent this partnership from being abused and corrupted by political incumbents and powerful private interests, it will be critical to subject the NIA to multiple layers of public oversight and accountability. Its organizational structure will need to guarantee sufficient insulation from political meddling…

The thought that such political control of investment might be useful strikes us as markedly naive. We are sure that idea died in 1989. But it’s that last insistence that betrays a fundamental misunderstanding. More political oversight does not reduce such abuse and corruption, it provides multiple levels for such influence to be brought to bear. It’s only if one can tell the entire political system to shut up and go away that political incumbents will not - not cannot but will not - divert such funding to their own interests.

Of course, we cannot have the allocation of billions or trillions of the public money without the political process being involved. Therefore we cannot have such allocation of the billions or trillions of public money into investments.

By the way, this isn’t because all in politics are greedy scumbags bent on lifting from the public purse. It’s that the political allocation of trillions will draw greedy scumbags to politics to gain a share of that allocation. It is no more possible to stop this than to stop the wasps finding the jam on a picnic - the only solutions are no jam, or no picnic.

It’s the Willie Sutton lesson in politics. Why wouldn’t the flimflam artists be attracted to where the money is?

Wouldn't it be nice if we could have everything? In the meantime, priorities matter

Wouldn’t it be nice if we could have everything? If we had an infinite amount of money, we could apply it to solving all of our problems simultaneously. We could allocate resources to tackling pollution, AIDS, malaria, biodiversity, gender and racial inequality, transgender discrimination and lack of access to education. Even with that short list, we’d be less than ten percent of the way down the roster of things people want to be solved.

Bjørn Lomborg’s Copenhagen Consensus assembled 60 teams of economists, together with NGOs and acknowledged UN and private sector experts, to research the pressing problems for humankind that might be targeted. They identified a list of the 22 “core issues,” including those already mentioned, plus issues such as global warming, clean water, infant mortality, population growth and poverty.

It’s a daunting list, but it can be tackled systematically. We do what we can, and put most of our energy into those that are the most urgent, and those that can make the biggest impact. 

At a UN meeting addressed by Lomborg, he handed each delegate cards depicting the listed problems, and asked them to arrange the cards in order of importance. Many delegates were flummoxed. One remarked, “but these are all important and worthwhile issues.” Nonetheless, Lomborg asked them to put what they saw as the most important ones on the top of their pile, with the others below them in order of significance.

They were learning about “opportunity cost,” the idea that resources spent on one thing cannot also be allocated to others, and that in life we have to prioritize. Since we lack infinite resources, we have to decide where to put them. Malaria, for example, kills up to 3 million persons per year, many of them young children. It has killed more people than all of the wars of human history, including the two World Wars. Many people would say that the effort to overcome and eliminate it should rank higher than that of providing more transgender toilets. 

Many would say that providing clean water worldwide, and eliminating the diseases spread by contaminated water, would save and enhance more lives that would an intensified campaign against money laundering and illicit financial flows. They might all be “important and worthwhile issues,” but without infinite resources we have to ask which ones are more important and more worthwhile. 

I’ve used the Lomborg technique in my own lectures, handing out cards and asking students to prioritize. Some of them, for the first time in their lives, have to decide just how important some issues are, compared with ones they might rate more pressing, and needing more urgent and more immediate attention.

This approach is set to become more vital in the face of the worldwide economic shrinkage that the current pandemic will produce, at least in the short term. We have to ask ourselves, given fewer resources, which programmes and initiatives might be put on hold while we concentrate our more limited funds on the issues that matter more? Because we can’t do everything, we have to concentrate on the things that will make the biggest positive impact on people’s lives. It’s not that complicated.

So when do we start cutting government spending then?

Only a small little thing to be sure but an interesting example. Apparently working class writers don’t get a fair shake of the stick when trying to gain access to publishing opportunities. This likely to come as something of a surprise to both Rod Liddle and Julie Birchill. The answer to this - whether it be true or not - is that all must be taxed more in order to subsidise the production of more writing by working class people.

New public and private investment to support new publishing ventures outside of London, which will be bring publishing closer to broader audiences and generate more entry points to the industry for talent throughout the UK

Increased investment in regional writing development agencies, resulting in improved talent pipelines; fairer, more equitable talent development practices; and improved access to professional support and networks.

These insistences prompting a little bit of research. We didn’t know that there was a network of regional literature development agencies. A couple of million a year spent on the national coordinating bit:

Principal funding sources

The principal funding sources for the charity are currently by way of grant income from Arts Council England East, University of East Anglia, Norwich City Council and Norfolk County Council

The sort of spending subsidised? The SE arm had a conference on using the Writers and Artists Yearbook.

How to Get Published - a writers' conference in partnership with Bloomsbury's Writers & Artist Yearbook, the second of what has now become an annual conference for emerging writers in our region took place in Bristol in December. A third conference is planned for 2019/20.

An annual subscription to that database currently costs £25 and we’ve absolutely no doubt that some sort of bulk deal could be achieved by libraries thereby obviating the need for a conference on the issue.

It’s even possible that all of this is to be classed as a “nice to have” even if our own opinion is that the network exists to provide a living to those who tried writing and couldn’t hack it. Hack here in its proper English sense, turning out competent pieces that people wished to buy on time and on subject.

However, we’d also like to point out what current times entail. Reasonable estimates are that GDP could fall as much as 25% over this coronavirus period. That doesn’t mean just 25% less of “the economy” or that the rich will be hardest hit - although both are true. What it actually means is that we’ve got 25% less of everything for that’s what GDP is, the total value added in the entire economy. It doesn’t matter what we say about the Bank of England just printing more money 25% less of everything is still 25% less of everything.

We’re going to need to have 25% less government too that is. There being no point to salami slicing every budget by 25%, instead we’ve got to go through all of this with a fine toothed comb and kill off the 25% of government we shouldn’t be having in the first place. Regional literature development agencies being a useful litmus test. If they continue to exist as publicly funded bodies - what private economic actors decide to do with their money is up to them - then those who spend our money aren’t being serious.

Do note that we’re all in favour of regional literacy development promoters but we’ve another name for those, schools, and the task there is to ensure they do manage to encourage literacy along with that ‘rithmetic and so on.

It’s time to have a proper overhaul of what we’re taxed to provide. Overhaul in the sense of identifying those things which we shouldn’t be. Then killing them.

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.