Royal Mail: the cost of failure


In The Guardian yesterday, Lord Mandleson raised his head above the parapet and set out why the government needs to go ahead with a partial privatization of Royal Mail.

Mandleson is of course right that reform is needed. As he pointed out: “Royal Mail has a pension deficit larger than that of any FTSE 100 company. This deficit was last valued at £3.4bn, but the pension trustees warned this week that it will now be much larger, and even more unsustainable".

Given that this government was elected on a manifesto commitment to keep Royal Mail in public ownership, this compromise sails close to the wind of Labour breaking its promise. For this reason it is probably proper that they have not gone any further than this. Yet in truth it is a band-aid solution to a more fundamental problem, one in which the founding principles of the UK postal service need to be overhauled.

In the same piece, Lord Mandleson made the statement that: “Nobody would disagree that a universal postal service is more than just a business." Well I for one would. The standard argument against true liberalization of the postal service is that it would be costly for those in remote locations. There is some validity to this argument, but more importantly why shouldn’t people pay for the cost of the service they get? A postal service should never be a right that an individual burdens his fellow man with. Indeed, with the rise of competing technologies to post, such arguments will look increasingly anachronistic.

At present we have a socialistic model for our postal service. As such it costs much more than it could and should. Many of the costs are unseen in the price of a stamp, as governments have subsidized Royal Mail at the cost of billions of pounds to the taxpayer. One cannot expect any party to endorse this position, but as with all collectivist failures, history will prove this side of the argument right.

Recycling authoritarianism


In a brilliant review of a number of recently published books on the politics of climate change, Steven F. Hayward considers the radical and apocalyptic concepts contained within them.

The arguments are similar to the ideas expressed by Vaclav Klaus: that many greens are disguised totalitarians. Of course, many leftist greens are recognizing that the present financial crisis could dismantle the policies that they want put into force. As such, to compete their visions are getting worse.

A large number of radical environmentalists are putting forward arguments for the eradication of the human species. This Malthusian panic scenario often spirals from the simple fact that human breathing has a carbon footprint. The argument follows that the earth would be better off if all humankind stopped breathing, and so we have such books as The World Without Us by Alan Weisman.

The greens are re-emerging as full-scale authoritarians. The good news is that these ideologues are running out of new ideas and are now recycling old ones, the problem is that these recycled ideas are the kind that many had hoped the US and Western Europe had put in their dustbins of history.

Brussels Dispatch: Through the looking glass


If you don’t follow what is going on in Brussels, I envy you. The FT carries an astonishing interview this week with Joaquín Almunia, the Spanish European Commissioner for Monetary Affairs. Sadly, Mr. Almunia’s job title is the nearest we get to monetarism. Here is some dirigiste ‘almunition’ with my comments added:

“I’m convinced that financial regulation will be broader [more pervasive] and stronger [more punitive]. The financial system will be more regulated [more bloated parasites living off fewer wealth creators and more coercion in instructing entrepreneurs in what way they are to create wealth - which will then be confiscated by the State anyway].

This will mean less leverage [Mr. Almunia can perhaps take a look at the Member States’ track record of carrying debt larger than their assets, with their off-balance sheet accounting practices which would be illegal for any commercial enterprise, and redirect his cant in a  more needed direction], less flexibility in the financial system [I honestly have no idea what the man is talking about – unless he is ignorant enough to believe that less responsiveness in the financial markets is a good thing], and less influence for the financial system in the aggregated results of our economy [that’s right – he wants less wealth generation in the economy to come from investment]...

Either we accept that our growth will be lower than in the past because the stimulus [obviously, he’s been reading the New York Times too much, the word he really needed was ‘contribution’] from the financial sector will be smaller, or we find more engines of growth in the non-financial side of the economy. [Oh yes, look at all these engines of growth that we never knew existed just turning over happily in the Retezat hinterland. Good old Romania]. 

Never forget, you pay his salary.

Take a look around you, at what little liberty you still possess, O free market, because this is as good as it gets.

But there is one small sector I am still prepared to invest in – the lamppost industry.  Because when the revolution hits the streets we are going to need a lot of them.  Now a Commissioner for Lamppost and Rope Provision – that would fulfil a useful need…

Has Keynes trumped Adam Smith?

In this think piece, Mark Skousen considers Marxist, Keynesian and Smithian economics, and their comparative importance to contemporary academic and political culture.

The problem today is Keynesian-style policy, the darling of the establishment politicos and media giants:  big government solutions, deficit spending, easy money, bailouts. Keynes has suddenly trumped Adam Smith. And that’s dangerous.

One day last week, I walked into the largest Barnes & Noble bookstore in New York and saw a big display table up front with all kinds of books on John Maynard Keynes and Keynesian economics. One book, The Return of Depression Economics, was written by Paul Krugman, the caustic New York Times columnist who just won the Nobel Prize.

Another book was called The Case for Big Government by Jeff Madrick, the editor of Challenge magazine. I can understand writing a book in support of good, efficient, strong, and productive government, but “big” alone? Most Americans prefer the motto “cheaper and better.”

The biggest surprise at Barnes & Noble was to see my own book, The Big Three in Economics, prominently displayed along side all the Keynesian and Marxist books. It has suddenly become my most successful book.

But mine was the only book there that took a dim view of Keynes and Marx and their solutions to the financial crisis (always more government, more taxes, and more regulations). For my money, Adam Smith and his followers (Ludwig von Mises, Friedrich Hayek, Milton Friedman, Murray Rothbard) deserve to be on top of the Totem Pole of Economics.

Unfortunately, Keynes is all the rage now. The British economist became famous in the 1930s for advocating going off the gold standard, running deficits and bailing out troubled banks with easy money as a way to end the Great Depression.

Today’s politicians, from George Bush to Barack Obama, have suddenly become Keynesians during this financial crisis, spending money they don’t have in a vain effort to right the ship. Even Newsweek has gone so far to say, “We are all socialists now.”  Alan Greenspan, the ex-student of Ayn Rand, now favors nationalization of the big American banks Citibank and Bank of America.

Every investor and gold bug should know the enemy: Keynes, the advocate of big government and the welfare state, and Karl Marx, the radical who advocated outright state socialism and total central control of the means of production.

After World War I, Randolph Bourne observed, “War is the health of the state.” Today he might say, “A financial crisis is the health of the state.”

It looks like modern-day statists are getting their wish. We’re getting big government, good and hard. Adam Smith and Milton Friedman are out of favor, while John Maynard Keynes, the patron saint of bailouts, inflation, and the welfare state, is making a comeback with a vengeance.

The tentacles of the leviathan state are growing by leaps and bounds. In 2009, global governments will be the largest shareholders in commercial banks, reversing 20 years of retreat by the state. The costs of entitlements are exploding upwards, and Congress hasn’t had the courage to address future liabilities. Social Security and Medicare are government-sponsored Ponzi schemes that will make Bernie Madoff’s embezzlement look like a picnic.

The late management guru Peter Drucker said, “Government is better at creating problems than solving them.” In fact, wrote a cynical Ducker, government has gotten bigger, not stronger, and can only do three things well — taxation, inflation, and making war. According to Drucker, the state has become a “swollen monstrosity….Indeed, government is sick — and just at a time when we need a strong, healthy, and vigorous government.” (He said all this in 1969.) If you want to solve problems, he counseled, you must turn to business and the private sector.

But where does one get the straight scoop on Keynes, Marx, and their nemesis, Adam Smith and the followers of free-market capitalism?

I have no apologies for where I stand on the issue. In writing The Big Three, I commissioned a Florida woodcarver, James Sagui, to create “The Totem Pole of Economics.” (The Tolem Pole of Economics is shown on the back cover of the book.) Clearly, my hero is Adam Smith, the author of The Wealth of Nations, published in 1776, a declaration of economic independence.

Adam Smith, the 18th century philosopher, is on top of the Totem Pole for his advocacy of a revolutionary new doctrine which he called a “system of natural liberty,” what we might call laissez faire or free-market capitalism. He used the “invisible hand” to symbolized how the private actions of individual entrepreneurs would lead to the public good.

Today’s advocates of Smithian economics have real solutions to the crisis, as I’ve outlined in previous HUMAN EVENTS columns:  suspend “mark to market” accounting rules, make the Bush tax cuts permanent, slash the corporate tax rate, and mostly importantly “do no harm.” Also, it wouldn’t hurt to take a look at the Canadian banking system, ranked #1 in the world in soundness (US is #40) for its conservative reserve requirements and nationwide branching. (Not a single Canadian bank has failed in either the Great Depression or now.)

Keynes is ranked below Adam Smith, because he supported big government and the welfare state as a way to stabilize the crisis-prone capitalist economy, the “middle ground” between laissez faire and totalitarian socialism. But as we have seen, Keynesian activism has led to much mischief in the world today, and countries that have adopted his bureaucratic, regulated mindset have witnessed “slow growth” and “stagflation” style economies.

And Marx is the “low man” on the Totem Pole. His radical solution, government ownership and control of the production, distribution and consumption of goods and services, would be, as Hayek says, “the road to serfdom.”

Adam Smith and his “system of natural liberty” have come under attack many times by his arch enemies, the Marxists and Keynesians. But Smithian economics has nine lives, and has always managed a comeback. With your help, Adam Smith will return.

Click here for a copy of The Big Three in Economics.

Blog Review 883


You know this huge housing bust in the US? Well, it's not actually nationwide: but all of the remedies are. Some mismatch there, no?

The art of politics is sometimes said to be not letting the right hand know what the left hand is doing. But when left and right are doing mutually exclusive, advocating entirely opposite, things, this might not in fact be all that good an idea.

Is it really a surprise that the more self-confident among us become entrepreneurs? And that the more self-confident in general a society, the more entrepreneurs it has?

Jean Baptiste Say or John Maynard Keynes?

Or perhaps it's all a monetary phenomenon?

What's the real background to this postal dispute?

And finally, explaining British success in radio astronomy.

Ingrained contempt


Over at the ToryDiary on ConservativeHome Tim Montgomerie discusses the predictive powers of William Hague and how he was insightful in seeing the demise of the support for New Labour. William Hague back in 1999 spoke of how support for New Labour would go through certain stages:

"For when I spoke to you in this hall two years ago I said that New Labour would bring first fascination, then admiration, then disillusionment and finally contempt. At that stage the admiration was running high; now the disillusionment is beginning; and mark my words, they are not so far away from contempt."

That was a whole decade ago, and while it has taken time for the contempt to spread, it has finally reached the surface and can now be seen boiling over. Even in the heartland of assured areas of support, e.g. Comments on an article by Gordon Brown, and in the latest polling showing the Prime Minister is an even bigger hindrance. There should be no surprise at politicians being held in contempt, the surprise is in that it ever went away.

The Conservatives between 1992 and 1997 were firmly believed to be incompetent in all that they did, and when we review the reign of Gordon Brown in the future we will no doubt look back comparably. We should always hold politicians in contempt after all it is an exact reflection on how they act. They continually see themselves as being able to operate above the law. Should any of us attempt to do so, by withholding our own property from their clutches, or speaking our minds, then we have to bear the consequences as they legitimately use violence against us. The politician who is humble to us is a rarity, if not an extinct species. Perhaps one day we shall find a way to recreate them, maybe through the institution of a Bill of Rights to protect us. Until then contempt should be our natural emotion when our eyes fall upon a politician.

The Rotten State of Britain


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 to be put on the guest list.

It does not work

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