The Rotten State of Britain

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Will Hutton's The State We're In famously shredded the record of the Thatcher-Major governments. Now Eamonn Butler shows how – after a decade of Tony Blair and Gordon Brown – the state of Britain has become very much worse than it ought to be.
 
Corporate publishers rejected Butler's picture of Britain as too cataclysmic and not worth publishing. But now, as the country slides into its worst recession in 70 years, his book The Rotten State of Britain (Gibson Square Books) shows for the first time exactly why Britain is in a worse state than any of the major world economies, how its democracy has been undermined by stealth, and why today's politicians are incapable of finding honest solutions to the problems that they themselves have created.
 
As an economist and Westminster insider, Dr Butler initially thought New Labour seemed purposeful and businesslike.  They promised a new, open kind of government to repair Britain. Two years later, though, he had become completely disillusioned. New Labour’s words were not backed up by deeds. From his vantage point at the Adam Smith Institute, he started to gather the material that is the basis of this deeply-researched book.
 
Gordon Brown's obsessive focus on central targets, and his party's willingness to subvert the apparatus of the state for its own party advantage perverted the state over the course of a decade. By stealth a new form of centralized and authoritarian government has been created that is the worst in Britain’s recent history.
 
Dr Butler scrutinises all aspects of our society and examines the political system, the sleaze, the justice system, the draconian powers the police and public officials have been given under the New Labour government, the surveillance and nanny state, public service bureaucracy and spending, the economy and how we need checks and balances to restrain our political leaders and the unelected advisors who actually control our lives. 

If you would like to come to the ASI launch party of The Rotten State of Britain, held at the ASI's offices (23 Great Smith Street, London, SW1P 3BL) on the 3rd March (6-8pm), please email andrew@old.adamsmith.org to be put on the guest list.

It does not work

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We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong . . . somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. . . . I say after eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot.

Henry Morganthau (Roosevelt’s Treasury secretary)

H/T Mona Caren, NRO

Blog Review 882

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On self sufficiency in food: bye bye Wales.

Bad enough to be tortured for reading a satire: but one by Barbara Ehrenreich?

This campaign against home education seems to be driven by fear that children will not be "educated" by the State rather than anything else.

No, reviving Northern Rock is not a good idea.

Contrary to received wisdom, most do not regret having had children.

Don't forget that there's a lot more going on in the economy than just the "crisis". Rising productivity, for example.

And finally, where the tax money goes: saving Mr. Harman the cost of flowers for Mrs. Dromey.

An alternative to regulation

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Some interesting themes were bubbling under the surface at a seminar organized by the Centre for the Study of Regulated Industries in Westminster this week. The group was a mixture of regulators, government officials and academics, plus me as the lone representative of competition. As you'd expect, there was much quoting of Adam Smith's famous remark about businesspeople never getting together without the talk turning to some new price-fixing conspiracy against the public. If only people would read on – in the next paragraphs, Smith explains that it is regulation that causes businesspeople to behave in this way. Only through the powers of the regulators can they actually make price-fixing stick.

But one underlying theme I picked up was that everyone's finding government intervening more and more in regulation. For example, utility prices are no longer left to some RPI-X formula. Politicians are demanding that prices should be 'fair' - that pre-payment meter customers, say, should pay the same as those who pay by direct debit. Of course, that ignores the commercial basics like cost (direct debits are far, far cheaper to administer). But it's typical of how politicians want to interfere and push the market to follow their agenda, until in the end they have completely destroyed the market.

And of course, ministers are rarely in a post for more than a couple of years, so they have to produce scores of such initiatives just to appear dynamic and so promote their careers. So their interventions come one on top of another until the whole structure becomes very complicated – a world away from RPI-X. And that's the second theme I found coming through, even from these stalwarts of regulation: perhaps it's time to reconsider our regulation system afresh, to find something new without 25 years' worth of barnacles on it.

May I suggest, as an alternative, competition?

The Rotten State of Britain by Eamonn Butler (Gibson Square Books) is published in March.

A compromise on the minimum wage

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Assailed by ignorance of sound economic theory and socialism's addiction to government interference, free-market capitalism is seeking to preserve its hard-won legacy. It is only by melding the ideology of the free-market to the public's most prominent worries and concerns that it can regain the initiative and ultimately defeat these threats.

The abolition or reduction of the minimum wage for example, despite being popular with businesses, is often unpopular or even unthinkable for those workers being made redundant, or those living involuntarily off unemployment benefits, even though it is beneficial to them. If free-market capitalism is to survive the ravages of the emerging "conventional wisdom" that it is a failed system, it is imperative that we forge this connection, establishing the minimum wage as an enemy of the unemployed, young workers, and those on low incomes - the very people whom it claims to defend.

It is opposition from Trade Unions along with an unthinking popular consensus that stands in the way. However, this need not be the case. Why not keep the minimum wage, but allow workers to offer their labour for a lower rate if it means they will keep their job? Businesses would then still be unable to harm workers' interests by imposing lower wages on them. It would be an opt-out scheme that can only be initiated by employees or job applicants. This would allow employment to be negotiated in the market between free and consenting adults, but with the safeguard in place that preempts any counter-arguments over exploitation from the entrenched interests of the Unions.

If a liberal free-market ideology is to endure, it must both offer this example and others to further its agenda, both by acceptable compromise, and by melding its policies with those of the vast majority of the public and especially the most dispossessed in society. Free-market capitalism has the means to claim the moral high ground over socialism at a time when it most needs to. It is now a matter of whether it succeeds in doing so or not.

Anton Howes is leader of the Social Liberalist Party.

Genetic profiling while you wait

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Well, not quite, but according to a piece in The Times scientists at Oxford Nanopore have developed a new technique which could bring the cost of individual profiling down to $1,000 or less. Knowledge of our individual genetic defects and health risks would, of course, be a mixed blessing. On one hand, medical interventions - and even, before too long, replacement of faulty genes - could not only increase average lifespans but also improve the quality of life for many. On the other hand, there may be little benefit in the knowledge that you have a serious health risk for which there is as yet no cure, and the inner hypondriac in many of us needs little encouragement to flourish.

The point is that the first human genome sequence was published in 2001, at an estimated cost of $4 billion. The rate of technological advance since then has been staggering. It even puts the continual rapid advances in IT in the shade. Technologies such as this come seemingly from nowhere but can soon have a pervasive influence on our lives. The instant availability of information and communications on the move which we now take for granted was the stuff of science fiction only a generation ago. The next generation may also take for granted the availability of personalised preventive healthcare and marvel at the primitive nature of medicine in the noughties.

All this makes a nonsense of the fashionable concept of sustainability, which assumes that what we do today we simply do more of tomorrow. Progess isn't smooth; society is subject to a series of disruptive developments which are unpredictable and change our assumptions about resource use overnight. Rather than routinely predicting catastrophe, we should have more faith in the human race's innovative capacity and adaptability.

Guest author Martin Livermore is the Director of The Scientific Alliance

 

Blog Review 881

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As it is said, a damning indictment of our education system: "The Finns or Dutch would find it incomprehensible that a mother’s dying wish is for her children to avoid the state education system."

Stress testing the banking system right now would not be all that good an idea.

Is this the worst since the Great Depression, well, no, there are a number of qualifications. But that there are qualifications to the qualifications is less reassuring.

The politicians' responses aren't helping, of course.

Thankfully, we don't in fact have a CEO of UK PLC....if we did, this would be his speech.

An interesting nugget revealing the changes in relative prices over the years.

And finally, if we didn't have football, what would they do?

Political banking

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Back in October, the UK government bailed out the banks to the tune of £37 billion, taking equity stakes in exchange. But they were desperate to distance themselves from their 'Old Labour' reputation. This wasn't an old-style nationalization, they said. Politicians shouldn't be trying to run banks, even if they owned large chunks of them.

I said at the time that this self-restraint would last about three months, and I wasn't far out. Originally it instructed Northern Rock, the first bank it bailed out, to scale down its lending and get its books back into balance. Now it's forcing it to surge back into the lending market by offering loans up to 90% of the value of properties. The rest of the market has pulled back from such generosity, having found that when things turned nasty, a lot of people with 90% mortgages couldn't repay them. These days, you're lucky to get a loan of 75% of your home's value, and 60% is much more common.

But that makes it harder for people, particularly first-time buyers, to get into the property market, and inevitably it pushes down the price of houses – which in turn makes homeowners feel poorer, which in turn depresses the economy.

So having told the banks to strengthen their books, the government is now telling them to lend again at the levels which caused the mess in the first place. And it's doing that simply for immediate political reasons, not long-term commercial or economic sense. It's a stark reminder that politicians are not the best people to run businesses.

The Rotten State of Britain by Eamonn Butler (Gibson Square Books) is published in March.

Our dear leader speaks

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The government has launched a new website called Real help now, to inform the British public on what is being done to combat the recession. Gordon Brown has even written one section himself. Here's my summary:

I am Gordon Brown, the prime minister, and I'm here to lie to you explain why the economy is in such a state.

Basically, it's not my fault.

The evil capitalists in America started it by lending money to people who couldn't afford the repayments. This had nothing to do with my dear friend and fellow financial genius Alan Greenspan (we abolished boom and bust, you know) keeping interest rates so low for so long, or my comrades in the US Congress who gave government backing to many of these loans through Fannie Mae and Freddie Mac. It also had nothing to do with the Clinton administration legislating that all banks had to lend sub-prime if they wanted the government to let them get on with their business. That had nothing to do with it at all.

You see, the only reason why global markets failed is that they were not regulated as I, Gordon Brown, have argued for many, many years they should be. Look at how wonderful the FSA has been at dealing with domestic problems in the UK. Just imagine if I had been allowed to set up an FSA for the whole world! What I'm saying is that if I were in charge, none of this would be happening. Oh, hang on...

Anyway, enough dwelling on the past: I have a plan for the future. Basically, even though our public debt is already two trillion pounds excluding public sector pension and private finance initiative liabilities, I'm going to save the world by spending loads of other people's money. And if I can't get hold of enough, I'll just print the stuff like they do in Zimbabwe, and give it a fancy name like quantitative easing.

Just to recap: None of this is my fault. I am going to save the world.

Take a slow train to nowhere

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altThe usual course of innovation and technology is an upwardly direction, or forward, or more simply: a natural course of progress and improvement. Unless of course you are dealing with something that has had over 165 years of government involvement in which case it has a tendency to remain the same: poor. And the latest government announcement on new trains for two of Britain’s principal railway lines proves this point.

The East Coast Main Line is currently operating trains that have been in service for nearly 20 years and can travel at 125 mph, the Great Western Main Line is operating trains that have been in service for nearly 30 years and can travel at 125mph. The government has announced that Hitachi are to supply trains for an order worth £7.5bn; trains that can travel at a top speed of 125mph. There’s progress for you, government style.

Combine this with the Conservative’s rail transport plans and you can see that in a decades time we’ll be enthusiastically discussing how Britain’s rail network is the envy of the world; in a similar vein to how the NHS was lauded over. Politicians will never learn that it is their meddling that inhibits and destroys. If the Conservatives want a comprehensive plan for allowing railways to compete, they should abolish the Department of Transport, Network Rail, the ORR and complete the sale of the rail network into private hands.

If transport companies wish to run rail services then they should run them in their entirety, track, carriage, station and especially ticket pricing. The governing establishment needs to stand aside and allow the railways to expand or contract naturally and perhaps then we can see innovation begin to flow. Until then rail customers will remain firmly shunted into a siding.