Ten reasons why the Left should like the ASI, 3: Trade with poor countries

3. The ASI enthusiastically supports giving goods from developing countries unrestricted access to developed world markets.  The Left should appreciate our stance in firmly and publicly supporting the one thing that can make people in poorer countries wealthier.

Some campaign for more aid, but the ASI's line is that trade is more important.  Humanitarian aid is fine, and we should give generously to support victims of natural disasters, to help provide clean water, and to fund health programmes.  We do not, however, support development aid that is designed to boost state investment in industry or state direction of emerging economies.  Every country that has gone from poor to rich has done it through trade, and none has done it without trade.

Some of those who piously call for more development aid also support the tariffs and subsidies by which some developed countries prevent poorer countries from selling their goods in rich world markets.  We express our support for nations struggling to become wealthier with a three-word mantra: "Buy their stuff."  When others were wearing wristbands that said "Make Poverty History," we produced and distributed thousands that proclaimed "I buy goods from poorer countries."  The former expressed a hope that other people would do something, but ours declared something the wearer was actually doing to bring about change.

When we buy goods from developing countries, we become wealthier by having cash left over after buying their lower-priced produce.  They become richer from the money we pay for their goods.  It is a win-win process that is rapidly lifting most parts of the world above subsistence poverty.

Ten reasons why the Left should like the ASI, 2: Support for debt relief

2. The ASI supported debt relief for third world countries.  The Left should appreciate the removal of the debt-servicing burden from the citizens of poorer countries that this would bring.

Many of the churches joined a 'Jubilee' campaign at the turn of the Millennium, calling for much of the debt owed by poorer countries to rich ones to be cancelled.  Even before then the ASI had called for the same, pointing out that in many cases the loans had been ill-advised, given to dictators for dubious projects, and that much of the money had been spent by them on arms and self-aggrandizement.  Now sometimes long after many of those dictators had gone, the burden of servicing those debts fell upon people struggling at subsistence level.  The ASI even featured on Bono's website for its stance on this issue.

The ASI took the position that this was a one-off, a move to right previous errors, and certainly not a co-ordinated policy to cover future loans.  It urged tighter controls and conditions over the issue of subsequent loans to make sure that these errors were not repeated.  To the charge that a Jubilee debt amnesty would encourage reckless borrowing in future, the ASI replied that poor countries must not assume that they could count on this happening at the turn of every future millennium.

Let's have a United States of Britain

The UK should become a federation of states, hugely increasing the power of local compared to central government, thus allowing the individual more control over his life. Also, it would allow more differentiation across the country, meaning a variety of policies could be tested in all areas of the public sector. The most successful could then be imitated, meaning progress for the nation as a whole.

I envisage a division of the country by region, such as the South-West, the East Midlands, and so on. Wales, Northern Ireland and Scotland would each be a state, as could the Channel Islands and the Isle of Man. Territories further overseas might also become states, or they could retain their current status. States should have independence similar to Swiss cantons, with their own government and parliament.

Such a rearrangement of the country would, of course, be a huge change. But that is not an argument against it. Indeed, we could use the opportunity to at least debate some fundamental questions concerning the structure of the state: for example, the power of the monarchy, and the lack of a codified constitution. A more plausible objection is that local governments already have sufficient powers. But they have limited power over taxes - “England’s local government finance system is one of the most centralised in the world” – and laws.

Most of local governments' funding comes from central government grants, This means that councils have less incentive to spend responsibly, as they don't have to answer to the people they get most of their funding from – the nation's taxpayers. Thus, councils often spend money unnecessarily as the tax year nears its end, to ensure they don't have their budget cut for the next year. If local councillors had to face, on a daily basis, the source of most of their income, they would be more inclined to spend it wisely.

Local control over laws would be another important aspect of such a change. If the population of one region wants to legalise drugs, why should it be held back by the rest of the country? As a state, London, say, could go ahead with some drug legalisation. Then, if and when its policies proved successful, other states which had doubted drug legalisation's benefits could follow.

Ten reasons why the Left should like the ASI, 1: Raising the tax threshold

There are many reasons why most Adam Smith Institute initiatives do not find favour with the Left.  We favour a spontaneous society rather than one planned centrally according to a preconceived idea of what it should be like.  They favour equality where we seek opportunities for everyone.  Many on the Left think in terms of class struggle, where the advancement of one class can only take place at the expense of another.  We do not think in class terms, but treat people as individuals, seeking opportunities for advancement for everyone.  Despite these major differences in outlook, there are some reasons why the Left should approve of some of the positions and policies of the ASI.  Here is the first of ten of them.

1.  The ASI has long advocated raising the minimum threshold for income tax to the level of the minimum wage.  The Left should approve of the way this would raise the take-home pay of low earners.

For over a decade the ASI has urged that the income tax threshold should be raised.  The ASI advocated a threshold of £12,500 when the actual threshold was less than half that figure.  Its case was partly a moral one, in that low paid people find it hard enough as it is to get by, without having the taxman take some of their meagre cash.  The ASI points out that someone on the minimum wage for a normal working week will earn about that figure, which also happens to be roughly half the average wage.

The ASI's case is logical, too, in that it seems absurd to set a minimum wage and then take money from those who earn it.  In some cases this leaves people with too little to manage so they become eligible for benefits.  Much simpler not to take it in the first place.  The coalition agreement contained a pledge to raise the threshold to £10,000 over this parliament, a clause that came from the Liberal-Democrats, not from the Conservatives.  All credit to George Osborne, therefore, for bringing that target forward a year.

Those who campaign for a "living wage" should note that the Minimum Wage minus tax is almost spot on the 'living wage,' with one big difference.  Instead of requiring firms to pay staff at above market levels, cutting the number of jobs, the ASI policy of linking the threshold to minimum wage has the Treasury footing the difference, without the job losses a 'living wage' would entail.

Curbs on migration are curbs on our freedom

Recently, Kier Martland produced an article in The Libertarian attacking Sam Bowman's take on immigration, suggesting an alternative libertarian view on the issue – using Hoppe to back up the position. I think this view is entirely mistaken. Indeed, Anthony Gregory and Walter Block take apart Hoppe's position here and Block again here.

The position taken by Hoppe is that nobody should be able to make a claim on the state without 100% consent from those paying for it, including for goods such as roads. The issue is that the state does exist, so long as there is government we should seek to ensure a policy of least damage done. By having high costs or even bans to hire migrants, the state would be taking away people's right to freely associate and make contracts. Further, by increasing the cost of labour, and doing other such damage to the economy as described in Bowman's article, restrictions on immigration do damage to the taxpayer. Hoppe's “second best” position simply doesn't hold true.

If one group in society objects to immigration, that does not mean migration is wrong because they pay a small percentage of the cost (even though, again, immigrants are a net positive for the tax collector). Indeed, the same argument would hold true for economic nationalists or greens who wished for only local goods to be sold in the economy. By importing foreign products, one would be initiating trespass on the roads by transporting goods unwanted by third parties. The same could be said of any good transported that an individual disapproved of, whether alcohol, meat products or any other “vice”. Similarly, Christian Scientists or others who disapprove of modern medicine might insist that taxpayer roads not be used for transporting any related materials. The position is ridiculous, you cannot support absolute rights to reject immigration whilst not supporting the same absolute right to reject other goods and services people might disapprove of.

By suggesting an increase in government control of migration, both Martland and Hoppe are going the wrong way on this issue – it is not about defending the taxpayer. Increasing the scope of the state, and the cost to taxation in policing it, as the Hoppeans propose, is damaging. What about those who pay taxes that DO want immigrants to use government services such as roads? Are their rights lesser than those who are for government restriction? Even if the costs and size of government are larger to be more restrictive? Should they be forced to fund border forces in this way? The Hoppean position on immigration is illogical; you do not reduce the scope of the state by increasing it and the number of tasks it undertakes. We should be looking at ways to limit the damage and cost of government now, and not sit in ivory towers trying to fudge a philosophical position that takes away the right of free association.

A breathtakingly silly piece of journalism

The Guardian has published many silly pieces in its time, as have other papers, but today it published a piece by Lynsey Hanley that must rank as one of the most breathtakingly silly of all time. The article claims that raising the income tax threshold to £10,000 patronizes the low-paid. Moreover it "disenfranchises 3 million people":

More fundamentally, it suggests that people on low wages are effectively earning pin money, not "proper" money that requires being taxed, and therefore that the low-waged aren't full citizens. The article goes on to say that if people don't pay towards public resources, they lose their perceived entitlement to them.

Where to start? First of all, low-paid people pay a great deal in taxation, especially in VAT, and many of them pay taxes on alcohol, tobacco and petrol, plus dozens of other unseen taxes. The £10,000 threshold only exempts them from income tax, which is quite reasonable when you realize it is below the minimum wage. If people are not earning the minimum, it makes no sense to take some of their money away from them. They still pay the other taxes. Secondly, if paying no income tax makes you lose your "perceived entitlement" to public resources, doesn't paying less tax than someone else give you less entitlement to them?

Lynsey Hanley claims that "a fundamental component of citizenship, however, is paying towards the ongoing work of building and maintaining resources for everyone to use." In her disoriented world people on pensions, or disabled people supported by the state would not appear to be full citizens. I disagree.

In her world "Tax cuts are always a sop, no matter who you're giving them to." Again, I beg to differ. When the state takes less of our money it isn't "giving" us anything, certainly not a sop, because the money does not belong to the state. She wants the poor to pay taxes to make them full citizens. "To tax only the rich, or the better off, is madness. It's disenfranchisement by any other name," she says. No it isn't. It is taking money to support public resources from those who can afford it rather than from those who cannot. The rich should pay the taxes for the same reason that gangster Willie Sutton robbed banks, "because that's where the money is." I like it when we succeed, by lowering top tax rates, in having the rich contribute a greater share of total taxation. That's what should happen.

I wonder how many of the low-paid would agree with her that they should be paying more income tax? I suspect you could count them all on the one finger they would use to indicate their opinion.

Preventing town-dwellers owning second homes in the countryside

Sir Andrew Motion, head of the Campaign to Protect Rural England, has called for taxes that will put countryside second homes beyond the reach of all except the very rich.  His motivation is very clearly expressed.  These second homes are:

"… very often lived in by people who scoot down in their cars, see their smart friends, don't join in the life of the community and don't feed into it.  They're townies in the countryside, they make sure they're back in London in time to catch the 10 o'clock news on Sunday night."

Clearly Sir Andrew does not like these people or their lifestyle choices, and does not want them in the countryside of rural England.  The total number of people with 'weekend second homes' is put at over 165,000.  Of the 25 million homes in Britain this represents less than 1 percent of the total.  A somewhat larger number own a second home, but let it out for income instead of using it themselves.

Small though the number is, it clearly represents a problem for Sir Andrew, who does not like what these townies are doing.  For the townies themselves this is not a problem, since they are making the choice to live in this way, and enjoying that choice.  Sir Andrew and his CPRE think it quite legitimate to use the power of the law to prevent others making choices that they themselves disapprove of. 

As times change, so do lifestyles.  Affluence and mobility have given some people the option to enjoy the countryside at weekends or during holidays, and Sir Andrew and his friends want this stopped.  They think it reasonable to use the law to make the world the way they would prefer it to be, rather than the way others prefer it to be.  He doesn't want second homes to be illegal, just "very expensive."  

This calls to mind the CPRE's ongoing campaign to prevent more housing in the countryside, keeping its pleasures confined to those who already enjoy living there.  Sir Andrew and the CPRE should investigate whether it might be a lot cheaper simply to use barbed wire to keep townies out of the countryside.  After all, similar measures have been used before in other countries.

Why you really don't want capital controls even in extremis

There are, to a useful level of accuracy, two forms of capital controls. The first is the type we're seeing in Cyprus today, limited and supposedly shot term controls in order to stave off imminent disaster. Even the OECD and the IMF tend to say that these are OK in the right circumstances. The second sort of capital controls comes from the grottier end of the  fascist economic spectrum. Capital, in some manner, belongs to the country not the individual so it's just fine for the country to deny the individual the right to send it where they wish.

The problem with this distinction is that the former tend to end up transforming into the latter:

The authorities said at the time the controls would be temporary and limited in scope – lasting a few weeks or, at worst, a month or two. Half a decade later, the capital controls are still in place and getting more and more restrictive. This was the second time Iceland had implemented `temporary’ capital controls.

The first time it did so, in the 1930s, led to the controls being in place until 1993. This is in line with the historical evidence; once capital controls are imposed, they are really hard to abolish, and a temporary arrangement usually ends up being permanent.

The reason is that when a country implements capital controls, it signals the authorities have lost control over the economy, needing to employ desperate measures. That is does not exactly build confidence, so anybody with money will seek to abandon the sinking ship as quickly as they can, persisting in that desire until things look better. While the controls last, however, it is unlikely that things will look better because the abolition of the controls can become a necessary condition for improving economic conditions. This is why the official pronunciations on the duration and the scope of the capital controls in Iceland were always too optimistic.

If you look around the UK at present you will see the usual suspects quite slavering over the new consensus that the short term controls are OK. For exactly this reason: they know that short will become long. It even popped up in the Green New Deal from NEF and other economic ignorants. The idea was that if British capital could be stopped from leaving Britain then there would be more capital to invest in their lunatic plans. This doesn't really work for:

The Icelandic capital controls have proven to be highly damaging for its economy; investment has collapsed and is just about the lowest in Europe at 14.4% of GDP in 2013, compared to the EU average of 18%. The reason is that foreign direct investment almost completely dried up...

It most definitely wouldn't work in the British situation. You may have noticed that we're running a trade deficit. We have been since, ooh, the early 80s I think? What often gets missed is that if you're running a trade deficit then you are, by definition, running a capital account surplus. That is, more foreigners have been investing in Britain than Britons have been investing in foreign. This is simply an identity, it's not an arguable point.

So, institute capital controls in order to increase the amount of capital available for investment and.....suddenly Britain has less capital as Johnny Foreigner no longer sends his capital here for people to enjoy.

We really don't want to let them reimpose capital controls you know. It's not just the vileness that accompanied them, the having to ask permission before taking more than £25 out of the country and all that. It's that capital contols would be hugely damaging to the economy of the country. Because, just for those who are in the Green New Deal and thus too stupid to notice, we import capital in Britain. And if we have capital controls then we cannot do that, can we?

Trade increases female education levels

As you all well know we tend to like trade around here. For it was indeed Adam Smith who pointed out that it was the division and specialisation of labour followed by the resultant trade in production that made everyone richer. That said trade is currently leading to the greatest reduction in poverty in the history of our species is also true as globalisation roars on.

However, an intriguing little piece of research shows that trade also increases female education.

The intensification of international exchange throughout Europe came with a progress of mercantile science and practices, which forced merchants to acquire considerable skills in arithmetic, bookkeeping, reading, and writing. In merchant communities women played a special role, since they were often in charge of business operations, especially during their men’s year-lasting travels: therefore, women needed to be literate. Accordingly they received more (and better) education, both formally and informally, as documented by a vast historical literature on abacus schools open to girls and on female epistolary writing. The fact that commerce, contrary to other occupations, did not require physical strength reinforced this pattern.

What the authors are doing is tracking how Italian areas which were plugged into the trading routes and system in medieval times had, and continued to have, greater education rates (and for longer) than those which were not. The effects lasted centuries too.

What interests me here though is not quite just being able to say that trade leads to the desirable outcome of greater female education. There's a rather deeper point. It's a standard mantra of development economics these days that female education is one of the vital things that leads to development. Certainly, those places which educate more girls (and have a smaller gender gap in education) do perform better on all of the usual measures of human advancement. But the thing is I'm not quite sure that this mantra is correct. I think it might be putting the cart before the horse.

I don't doubt that greater female education can lead to greater growth mind. I'm just positing that it's the growth that leads to the greater female education. For two reasons.

1) The aim of this life is to have grandchildren. That's true whether you think biblically or in a Darwinian manner. When there are very high child mortality rates then many children are required to ensure grandchildren. Thus in a poor society much of a woman's life will be spent in pregnancy and child rearing.

2) A poor society is, almost by definition, one that works on human muscle power. It is inevitable that men in general have more of this than women.

If we put the two together we can see (OK, posit) that a richer society will have lower child mortality and also will be less reliant upon human muscle. Thus the incentive to educate girls will rise. They will not need to be wombs on legs in order to ensure grandchildren and also the value of their (educated or not) labour will rise relative to that of men as other forms of energy enter the society.

This is nothing at all to do with whether we should have gender equality in anything at all. Of course we should, 'uman beans are 'uman beans and we've all the same rights. Rather, this is about how to trigger this desirable outcome. And I have a very strong suspicion indeed that the greater education and rights of women come as a result of the beginnings of economic growth, not produce it. Yes, I'm sure there's a feedback going on as well. But the logical policy outcome of this would be that we concentrate less on "gender issues" in development and more on development itself as the gender stuff will largely solve itself given the incentives that development produces. Women's labour becomes more valuable as development proceeds leading to greater education of that potentially more valuable labour.

Hurrah and trebles all round of course. But get the development going first.

Set Sunday free

Easter in Britain is one of the busiest shopping days of the year, with garden centres and DIY stores in particular full of people stimulated by the spring weather – well, when we are not having an Arctic spell – to bring a bit of a new look into their homes and gardens.

But larger stores, like those same garden centres and DIY stores, will be able to open only six hours on Easter Sunday – like every Sunday. Convenience stores can stay open longer, but retail premises larger than 280 square metres are allowed only six hours.

That alone should make us question the Sunday trading hours. It is a completely arbitrary number: why not 250 or 300 or 350 square metres? Laws should apply to everyone, or to nobody.

Since limited Sunday trading was introduced, Sunday has become an important shopping day. It gives families in particular a little more time at the weekend for those large purchases that they want to make together. It used to be hard to do that and get in the weekend food shopping at the same time. It has actually made things more relaxed.

Remember too that other important shopping days often fall on a Sunday – Christmas Eve and Boxing Day, for example. Retailers right now could really use the boost of a proper day's trading at these times, especially those who are  losing trade to online alternatives.

The Sunday trading laws were relaxed for the Olympics and the world did not come to an end. Subject to reasonable planning restrictions to prevent local nuisance, we should relax them entirely. Why should the government decide whether people can and cannot shop, or can and cannot open for business?

The law states that employees can refuse to work on a Sunday without fear of retribution. That should really apply to other days too – not everyone has Sunday as their religious day of rest. And of course, nobody has to shop, or open their shop, on Sunday if they do not want to. Why should those who do not want to be able to force the rest of us to comply with their choices?