Columbus changed the world
Schoolchildren in Britain learn the rhyme, “In fourteen hundred and ninety-two, Columbus sailed the ocean blue,” and it was in fact on August 3rd, 1492, that Christopher Columbus set sail from Palos de la Frontera in Spain with his three ships, the Pinta, the Niña, and the Santa Maria. Supported by Isabella of Spain, his total crew numbered 90 sailors. He knew the world was round, so that by sailing West he could reach the Eastern lands of India and China, and capitalize by trading in their valuable goods, notably spices. The world was bigger than he thought, though, with two giant continents between him and his goal.
He thus discovered the New World and changed history forever. He thought he’d reached India when he made landfall in the Bahamas, and called the natives there “Indians.” The contact of the Old World with the New World, which began that day 527 years ago was to change both profoundly. From the New World came commodities, including gold and silver, tobacco and cheap food. From the Old World came people, crossing the ocean to live a new life on a faraway continent.
That day marked the beginning of a process that would lead to the establishment of many countries on the continents newly-discovered by the Europeans. The United States, Canada and the Latin-American countries have contributed much to the economies and cultures of the world since then, though the impact on the native populations and their cultures was to a large extent catastrophic. New diseases were among the less fortunate trades between the two worlds.
Neither Columbus, his crew or his backers could possibly have imagined that the New World they had landed on would one day be the home of a continental super-power with worldwide influence. The US adopted Britain’s Industrial Revolution and applied American know-how to it to develop new technologies that would impact on the lives of every person on the planet.
It developed the military prowess that would save Europe from tyranny in two world wars and the Cold War. Significantly, though, it also developed a new form of constitutional government that would restrain any excessive ambitions among its own rulers. The nations of Latin America, mostly ruled by a series of military dictators, have lacked the political stability of their Northern neighbours, and have had a more chequered history.
Now the US is following in the footsteps of Christopher Columbus by embarking on the exploration of yet another new domain, not that of another continent, but that of the wider universe. It has already put people on another world, and is about to do so again. Some commentators have suggested that, while the 20th Century was that of America, the 21st Century will be that of China. This seems unlikely, given the creativity and resourcefulness of free peoples. Unless the US is seized by some collective madness and ruins itself with socialism, as others have sadly done, the odds suggest that in the 21st Century the most influential, the most creative, and the most prosperous power will be the United States.
Those ships that sailed with Columbus certainly started something. There is a life-size copy of the Santa Maria in Madeira, one that makes tourist voyages around the islands. Seeing how tiny it looks, one appreciates how brave those intrepid explorers were to set out in such ships upon vast and unknown oceans.
The future of freeports
In 1983, 36 years ago, Dr Eamonn Butler and Dr Madsen Pirie, founders of the Adam Smith Institute, wrote Free Ports. 3 years later, Dr Butler co-authored Free Ports Experiment. In 1981, the ASI had proposed freeports for the UK – and six were established – but their chances of great success were scuppered from both sides by the EU and HM Treasury. The European Union steadfastly refused to ease any of their choking regulations – and the UK Treasury, similarly, refused to ease VAT or tariffs. According to Dr Madsen Pirie in the Spectator today, ‘the freeports were effectively just reduced to being bonded warehouses, where goods could be stored, and only be taxed when they left.’
The Adam Smith Institute has long been clear that this isn’t what freeports should be about. Freeports could, and should, be hi-tech, high enterprise hubs for the British economy, springboards for regional and global competition through free trade, and gateways to local employment and prosperity.
Freeports aren’t a new concept – they rose to prominence in post-Renaissance Italy – and they aren’t a complex idea. As Dr Butler explains in his piece for the Telegraph today: ‘take a bit of land near a port or airport and treat it as if it were a foreign country as far as import/export trade is concerned. So, people can fly or ship in goods from abroad, store, consolidate, process, assemble, package or label them in the freeport, and fly or ship them out again. All this with no import tariffs, no VAT or any other taxes, and no paperwork when the goods leave. All plain and simple for the importers and exporters, and a nice generator of jobs, enterprise and investment for the local community.’
Despite the simple nature of freeports policy – and the limited cost to the public purse – government has insisted on getting them wrong in the past. The sites rolled out when the Adam Smith Institute first championed the idea were chosen by the government for political reasons, not for sound business ones. Freeports should have regulations which are as simple as possible – and tax codes to match. Freeports should be treated as foreign territory in many ways – and managed through an independent port operator – not a meddling government.
If done right, freeports can be a huge win for post-Brexit Britain. We can increase the capacity of our ports, develop strategic assets needed to be a serious global player on trade, and boost jobs and British products at the same time. As Dr Pirie said today: ‘Liz Truss, as the new International Trade Secretary should be bold. We should support her fight for real freeports, ones that can draw business, wealth and jobs to some of the UK’s ports, located in areas that have not kept pace with its economic expansion, and which could be regenerated with a such a boost. Low taxes and low regulation mixed with high-tech and tall global ambition — a recipe for success.’
Freeports are one of those policies which can make one really excited for the future – if they’re rolled out in the right way. Since 1981, the Adam Smith Institute has led the calls for freeports policy – and there’s now a wealth of evidence from around the world that shows we’re right. If done properly, freeports can be serious assets to an economy – we look forward to continuing to make the case for them.
As sure as death and taxes, and then death taxes
No taxes are popular with those who pay them, but on August 2nd, 1894, one of the most unpopular taxes of all saw its debut when Inheritance Tax in its modern form was introduced. There had been predecessors, including the 1796 legacy tax introduced to fund the Napoleonic wars. By 1857 its scope was extended to estates of over £20 in theory, but was rarely levied in practice on those under £1500.
Its name has changed several times over the years - legacy duty, probate duty, estate duty, death duty, capital transfer tax, inheritance tax - but it became a tax on the value of land bequeathed, and has since morphed into a tax on the value of the assets that people bequeath to their heirs when they die. There are allowances and exemptions, including gifts made while still alive, provided the donor does not die until at least seven years later.
It makes a relatively small (as taxes go) contribution to Treasury funds. The £1bn it yielded in 1993 had risen to £4bn by 2008 as property prices climbed ever higher, but the Financial Crisis of 2008 cut it back to £2.4bn, but it’s been rising again. It is levied at 40% on estates above £325,000 (with some exemptions). For most people it represents a tax on the value of their home when they leave it to their children.
It is unpopular because it taxes again money that has already been taxed. Apart from wealth a person inherits, money they earn from salary and investments is money that have paid tax on as it was earned. Now when they die the taxman is going to grab a large slice. Parents want to give their children a good start, and want to pass on to them what they have made.
It is a destructive tax because it breaks up the capital pools that could otherwise fund start-ups. People tend to die when their children are in their 40s and 50s, just about the time when they might leave the comfort of a salaried job and venture into entrepreneurial activity. The monies left by their parents could help fund this, but the Treasury takes a big chunk of it and uses most of it for transfer payments.
It is destructive because it leads to misdirected efforts. People divert their assets into ways that avoid the death tax instead of into activities that might boost the economy. They put it off-shore, or into trusts, because they don’t regard it as a just or fair tax, and do whatever they can to avoid paying it.
It’s one merit is that it probably kicked out Gordon Brown. He was all set to hold an election to win popular backing for his premiership, but when George Osborne announced at a Tory conference his intent to raise the Inheritance Tax threshold to £1m, Brown panicked when he saw how popular it was, and backed off from an election he might have won.
There is, of course, debate about whether people should have an “unfair” advantage by being left money by rich parents. There is a similar “unfair” advantage by having educated, intelligent or caring parents, rather than spendthrift, abusive ones. It is human nature that people want to care for their children and do the best for them. People who might add more value to the economy and to people’s lives are deterred from doing so by the knowledge that much of their work would be for the Treasury rather than for their children.
It is a bad and counter-productive tax that almost certainly has a negative yield, given the economic disincentives it imposes. Several economists have estimated that it has lost money in each of the 125 years of its existence. It is time to ensure that the death tax itself is made dead and stays dead.
Mark Carney's right - of course capitalism is the cure for climate change
It seems absurd that anyone even needs to make this point:
Challenged in an interview by the Channel 4 News presenter Jon Snow over whether capitalism itself was fuelling the climate emergency, Carney gave a strident defence of the economic system predicated on private ownership and growth but said companies that ignored climate change would “go bankrupt without question”.
“Capitalism is part of the solution and part of what we need to do,” he said in the interview broadcast on Wednesday.
Taking the existence of the problem as being true, the solution is of course to change peoples’ behaviour. That means changing the incentives they face - and then watching as they scramble to make money out of those changed incentives. One obvious point being that those who don’t change their behaviour will, as The Governor says, go bust.
This isn’t a new point of course which is why it’s so absurd it has to be made. The original analyses of that warming future tell us, directly, that capitalism is the cure. The IPCC’s models are all built upon the insistence that it is. Globalised capitalism - neoliberalism that is - without fossil fuels produces a vastly richer and not warmer world. Any and every variation that is not globalised capitalism is worse in outcomes.
As absolutely every economist opining on the point has insisted - get the incentives, the price system, right and leave that lust for gilt and pelf to do the rest. You know, just like we’ve solved every other problem this past 250 years.
Columbus reached Venezuela
On his third voyage, Christopher Columbus became the first European to reach the mainland of South America, when he landed in what is now Venezuela on August 1st, 1498. Artifacts from the area show that native peoples had previously co-existed with and hunted the megafauna that lived there. The pre-Columbian peoples seem to have been peaceful village-dwelling hunters and farmers, who made textiles and ceramics.
Alonso de Ojeda, who led the second Spanish expedition, thought the gulf resembled Venice, and gave it the name Venezuela, meaning “little Venice.” Parts of it were colonized by the Spanish from 1502, and by the Germans from 1528. A prosperous economy developed, raising livestock and later growing cacao beans, and developed trade with the nearby British and French islands as well as with Spain. The mining of gold and silver was a significant factor, though El Dorado, the legendary city of gold, was never discovered.
Independence from Spain was achieved in 1821 when the country became part of the Republic of Gran Colombia, achieving the status of an independent country in 1830. But long before then Caracas had status as a cultural centre, with a university teaching Latin, medicine, engineering and the humanities.
Oil was discovered in 1922, in vast quantities. Venezuela has the world’s largest reserves and although it was governed by a series of military dictators, the country prospered. High oil prices from the 1950s to the 1980s helped it to become the most prosperous in South America. In terms of wealth per capita, in 1950 Venezuela was the world’s 4th wealthiest nation.
I visited the place twice in the 1980s, and was impressed by its vitality, and by both the energy and courtesy of its talented peoples. Caracas seems to have a moderate climate tempered partly by its altitude, and partly by a fortunate geography that brings cooling breezes. It is very sad to see the country brought so low, largely because of incompetent and corrupt government.
Chavez and Maduro used the oil revenues to buy political support instead of investing in diversification. The oil industry was run into the ground when nationalization replaced its skilled workers with government cronies who milked it to buy private jets and lavish properties abroad. Oil output is now down to a third of what it was, and fuel is imported. By 2013 the so-called “Misery Index” ranked Venezuela top, and it came 180th out of 185 among the worst places for doing business.
Inflation has topped 1 million percent per annum, and price caps have led to shortages of milk, flour and toilet paper. There is widespread malnourishment, and hospitals cannot perform operations through lack of supplies and drugs. Whereas Venezuela was once a magnet for immigration, it is estimated that 4m have fled the country in 20 years. Socialism has ruined the country, as it has everywhere it has been tried.
One cause for optimism is the resilience of the people. Just as inept and ideological government can bankrupt a country in short order, so can market economics lift it again to prosperity. As Adam Smith said,
“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.”
Venezuela has had none of those, but there is a high chance that when its corrupt thugs are swept to oblivion, it will rapidly regain the prosperity its people deserve.
It's a fairly bald appeal for government spending, isn't it?
The argument in favour of government doing things is that if all the clever people are taken into government and given the societal pot to spend then things will be better. Those of us who have met politicians and bureaucrats will want to ponder the intellectual firepower gathered of course. But even then it never does quite seem to work out that way. This is why:
Invest billions to restore pride in overlooked communities after Brexit and reap 'electoral dividends', Joseph Rowntree Foundation tells Boris
Spend lots and lots of other peoples’ money on this group over here and they’ll vote for you!
Investing billions to "restore pride" in deprived communities after Brexit could reap "electoral dividends" for Boris Johnson's government, a left of centre thinktank says today.
The Joseph Rowntree Foundation said Labour and the Tories "need to focus on winning over low-income voters" in disadvantaged areas if they are going to form the next government".
Take money from one section of the population, give it to another, you’ll thereby buy the votes of the recipients of the cash.
Well, yes, obviously. But it is a usefully naked example of why this government thing doesn’t quite work out. The spending of the societal pot turns out not to be based upon efficiency, or even equity, grounds, but on how many votes can be bought with the least hissing of the geese.
We have long, here in Britain, made outright bribery for votes a crime. So much so that a candidate, in an election period, cannot stand a round of drinks on the basis that this might be purchasing support. It is also a long standing part of the Common Law that conspiracy to is equal to the act itself. Given that the JRF is nakedly suggesting the diversion of tax money to purchase votes, well, anyone think there’s a case there? Sadly, we don’t either, but perhaps there should be a case there.
CANZUK — A bright future getting closer
140 years ago today, a man called Charles Tilston Bright achieved something remarkable. In the midst of the nineteenth-century age of innovation, he successfully laid a telegraph cable between Britain and South Africa, eliminating an eight-thousand mile journey and at a stroke making the world a notably smaller place. The world has changed since 1879, but the philosophy of connection, facilitating near-instant global collaboration and exchange, is an idea that still burns brightly today. Indeed, in this day and age we have more opportunities than ever before to bring formerly distant partners close to home.
Britain has always been an outward-looking nation, and this is something that the new government appears to recognise in its proposals for post-Brexit foreign engagement. There has never been a better time to rebuild the trade bridges with our Commonwealth allies that have necessarily suffered during our membership of the European Union, and the political will is there to bring a CANZUK trade arrangement to fruition.
The strong cultural ties Britain has with Australia, New Zealand and Canada belie the very real potential of creating a liberalised trade bloc. The main points of CANZUK centre on free trade in goods and services alongside visa-free labour in the style of the highly successful Trans-Tasman Travel Arrangement.
A security partnership is also heavily advocated, and even here Australia and New Zealand have expressed a desire for a stronger British presence in the South Pacific, with the Australian Defence Minister pressing an initiative to combine the two countries’ defence forces on operations. The new British Home Secretary’s first act was to host a meeting of the 5 Eyes powers (the CANZUK states plus the USA) on cybersecurity.
Across the CANZUK zone, leaders favouring closer integration with the UK are either in power or look set to take it. In Canada, a recent poll suggested that a majority of voters favoured the Conservatives over Trudeau’s incumbent government. Conservative leader Andrew Scheer has repeatedly expressed interest in a closer relationship, and last year the party membership voted to adopt CANZUK as policy with an overwhelming 800 votes to 8.
New Zealand’s Jacinda Ardern has also written of a need to take ‘trade and investment relations to the next level’, emphasising the deep shared identity of New Zealand and the UK.
As for Australia, Scott Morrison has been quick to speak personally to Boris Johnson of a desire to quickly sign off a comprehensive trade deal, pledging to be ‘one of the first cabs off the rank’ once the UK leaves the European Union. Informal bilaterals and consultations have been ongoing for around two years and arrangements are said to be at an advanced stage, alongside a strong desire to do business which has been reinvigorated by the change of government in London.
Views on a ‘no deal’ Brexit are understandably divided, as such a move inevitably produces uncertainty for the UK’s short-term trade arrangements. As the old proverb states, however, necessity is the mother of invention, and a sharp exit from the EU could be exploited by the UK to unite widespread political goodwill and broker a CANZUK deal. Importantly it’s not just economically sensible but it’s popular too. In the latest poll, conducted last year, 62 to 82 per cent of CANZUK citizens were in favour of free travel between states. We can make a popular deal between diverse and modern economies as well as achieve for post-Brexit Britain an immigration and trade Shangri-La of free and open access.
Global Britain in doing so would steer away from a course of ever closer union on the continent and again towards the long tradition of a global future and so reap the rewards of Charles Tilston Bright’s achievement.
Peter Wollweber was the winner of the 18-21 category in the ASI's 'Young Writer on Liberty' competition and is a student reading History at the University of St Andrews.
Should the UK grant amnesty to undocumented migrants?
Between our imminent departure from the EU and the installation of Prime Minister Boris Johnson, it is understandable why the topic of Brexit has gripped the attention of the political commentariat more than usual lately.
Unfortunately, this frenzy has meant that some of Boris’ encouraging noises on the topic of immigration policy have been largely overlooked.
On Boris’s first day in Number 10, whilst journalists were poring over the intricacies of his Brexit posturing, it was made clear that the new PM ’wasn’t interested in the numbers game’ when it came to migration: in effect scrapping the dreadful net migration target introduced by David Cameron, and taken up with zeal by Theresa May, in one fell swoop.
Additionally, and more controversially, he also put his weight firmly behind the Government looking into the ‘advantages and disadvantages’ of granting amnesty to undocumented migrants currently living in Britain – in effect giving them legal status.
In explaining his position, Boris cited the Windrush fiasco as a case in point for why a theoretical commitment to the ‘mass expulsion’ of hard working and decent people, who have built their lives in Britain and never committed a crime, is legally ‘anomalous’ and must be investigated.
Whilst an amnesty on undocumented migrants has been dubbed a ‘non starter’ by Alp Mehmet — chairman of Migration Watch — due to his belief that it would be ‘costly’ and ‘encourage future illegality’, it seems wrong to dismiss amnesty out of hand in this way without considering the evidence impartially.
Indeed, when one does assess the effects of a migrant amnesty by looking at the published research, it seems that the best evidence we have tells us that Alp’s fears are irrational and unreflective of reality.
For example, a paper studying the impact of amnesties of this kind in Spain during the 1990s/2000s found that as the total share of legal migrants went up, so too did migrant wages and their prospects for employment. This is a clear sign that amnesties help assimilate migrants into the economy, making their work more productive and valuable. Further, granting legal status would induct undocumented migrants into the formal structures of the economy, making their work liable for taxes, benefiting the public finances.
Far from being ‘costly’ then, the evidence is clear that amnesties help plug migrants into formal economic structures, fostering labour productivity and enabling the collection of tax revenues.
Alp’s claim that an amnesty would ‘encourage future illegality’ also does not stand up to scrutiny. A recent study has shown that acquiring legal status can make migrants up to two-thirds less likely to commit a crime and 50% less likely to reoffend — a trend likely explained by legal status expanding migrant eligibility for economic opportunities that do not involve criminal behaviour, thereby loosening the grip that the black market has on their labour.
Furthermore, despite fears, there is also little evidence that amnesties cause more illegal migration through a ‘pull factor’. A large study that looked into the effect of the 1986 Immigration Reform and Control Act in the U.S. – a piece of legislation which granted migration amnesty to over 2.7 million people – found that the overall level of undocumented migration initially fell, with the trend then returning to pre-amnesty levels thereafter. Whilst the reason for this initial decrease is unclear, what we can be sure about is that there is no merit to claims that amnesties would cause more illegal immigration.
As the research shows then, in contradiction to the claims made by Migrant Watch, an amnesty for undocumented migrants would discourage criminal behaviour and generate more money for the public purse. This means safer streets, better funding for public services, and a healthier economy, with no evidence that any of this will cause a surge in undocumented migration after the fact.
The economic advantages are overwhelming, and one can only hope Boris sticks to his word, conducts an inquiry, and pushes on with enacting the necessary changes.
In sum, whilst our news feeds may be saturated for the foreseeable future with hot takes on Boris and his Brexit negotiations, we should not lose sight of the important economic and social benefits that an amnesty for undocumented migrants would bring. Boris has given us some encouraging signs so far: let us hope he can act courageously and follow his rhetoric through to action.
Charlie Richards is a current MPhil candidate in Politics at the University of Oxford. He tweets at @charlie_rchds.
Milton Friedman, Nobel Laureate
Milton Friedman, the US economist, was born on July 31st, 1912. He was awarded the 1976 Nobel Prize in Economic Sciences for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy. In addition to being one of the century’s most influential economists, he was also the best known. He popularized economics. In addition to his 300+ op-eds for Newsweek magazine, he also published in the New York Times. He was a tireless advocate for free markets and free trade. His book “Capitalism and Freedom” (1962) was a best seller. He supported a range of free market ideas, including floating currencies, education vouchers, negative income tax and the abolition of many licences, including those for doctors.
He vigorously opposed conscription (the draft), favouring a volunteer army instead. “You want an army of mercenaries?” demanded General Westmorland. “And you want an army of slaves?” Friedman shot back before a Congressional hearing.
With his wife, Rose Friedman, he co-authored “Free to Choose” (1980), another best seller, this time accompanied by a PBS documentary TV series that drew a mass audience. To academic economists he is best known for advocating monetarism as an alternative to Keynesianism. Famously he said that “Inflation is always and everywhere a monetary phenomenon.” Keynesians has supposed that inflation and unemployment traded off against each other (the Phillips Curve), and that inflation could boost employment, especially in a downturn. Friedman’s “Studies in the Quantity Theory of Money” (1956) stated that in the long term, once people became used to it, this ceased to hold. In the 1970s the Phillips Curve went vertical as rising inflation combined with rising unemployment (stagflation), and most academic opinion was won over to Friedman’s view.
His “Monetary History of the United States, 1867–1960,” co-authored with Anna Schwarz, made the case that the Great Depression of the 1930s was brought about by the Federal Reserve’s credit tightening in response to the stock market crash. This proved very influential with governments, and led them to ease credit, instead of tightening it, in response to the Financial Crisis of 2007-2008. Many people believe this prevented the emergence of another 1930s-style depression.
His view was that the best policy was to aim at an increase in the money supply that coincided as far as possible with the long-term growth rate, perhaps approximating to about 2 percent per annum. He thought this might sustainably achieve steady expansion of the economy. His influence on present-day government thinking can still be seen around the world.
He was one of the founder members of the Mont Pelerin Society, and graced nearly all of its meetings with his infectious smile and bubbling good humour. He was a good friend of the Adam Smith Institute, especially helpful in its early days, speaking at our meetings and lending his name to our activities. When I applied to read a master’s degree at Cambridge University, he sent them a hand-written note recommending me.
Economics got to this spectrum idea 150 years ago of course
As The Guardian notes a current fashion is to insist that things exist upon spectrums:
Coined by Isaac Newton in 1672 to describe refractions of light, today referencing a “spectrum” is almost always shorthand for acknowledging a metaphorical range of nuances.
While the word is most commonly used in relation to autism spectrum disorder, political ideologies and gender expression, there’s really no end to things that have been described as falling on a spectrum, from perfectionism, to homelessness, to social media use.
The observation is correct of course. No one with any experience of either boarding schools or prisons is going to insist that male sexuality is entirely fixed and invariate - incentives matter. The spectrum from male to Aspie to compiler programmer is much joked about in computing circles.
But of course this is just the change that happened in economics in the 1870s, the marginalist revolution. Things are not solely one thing nor the other, action happens at the margins as behaviours bleed into each other. That is, economics got there 150 years before the rather more woke social sciences.
To continue the amusement there is that little point that precisely those who do insist - rightly - upon much human behaviour being on a spectrum are those who - wrongly - try to reject neo-classical economics. You know, the very form of correct economics which encapsulates the very same point. But then intellectual consistency among the woke isn’t something we generally observe, is it?