Comments on: Regulators don’t make bread or give you circuses

By: Stuart Fairney

Stuart Fairney — Sun, 09 Nov 2008 21:56:45 +0000

An interventionist government is the problem, not the solution. Here are four examples.

1. Home ownership for people who could not otherwise afford it was encouraged by the US government which coerced the (admittedly all too willing) banks to make stupid loans (see the CRA along with Fannie and Freddie). This is the source of the sub-prime debacle.
2. Government bail-outs that discouraged firms from accepting tough market solutions like selling assets at pennies in the pound or relying on tried and tested bankruptcy.
3. Government banking guarantees encouraged people to look for the highest deposit rates and not wonder if over-geared, under-capitalised Icelandic banks, six-times the size of their actual government were the absolute best place for their money.
4. Nearly half the economy in the non-productive state sector, which burdens tax payers and employs people in either pointless or actually counter-productive jobs.

GOVERNMENT IS NOT A SOLUTION TO OUR PROBLEMS, GOVERNMENT IS THE PROBLEM.

Until we grasp this we are like the ancient alchemists searching for gold where none can be found. We must massively scale back the size and scope of government. Yet I see almost no sign of this, indeed the trend seems hugely the other way. Indeed, why would political turkeys vote for Christmas? If they do not however, the solution cannot come from parliament as it currently stands.

That should worry all of us, because in the absence of alternative solutions coming from the main parties we may see the likes of Griffin on the one hand and Galloway on the other gaining some kind of foothold. This would be the worst possible outcome.

By: Mark Wadsworth

Mark Wadsworth — Fri, 07 Nov 2008 21:03:52 +0000

Just before this post disappears off the radar … I am delighted to see you mention Minimum Income.

The Citizen’s Income Trust have been promoting the idea of replacing the entire Welfare State and a variety of tax breaks and tax reliefs with a flat rate ‘Citizen’s Income’ (set at approx income support/Pensions Credit levels) combined with a flat rate of tax (set at basic rate of tax plus Employee’s NIC) for some time. Their booklet is here.

By: Bazman

Bazman — Fri, 07 Nov 2008 11:19:47 +0000

Minimum income is an interesting idea to come from a Tory MP. My main sticking point with the Conservatives is the desire to privatise everything without ever explaining how most of the population should pay for these services.

By: mikestallard

mikestallard — Thu, 06 Nov 2008 21:41:52 +0000

The EU is now working on a directive to regulate workers’ hours. This is going before the European Parliament in December. That seems to be the EU contribution to the crisis: limit working hours. I am sure everyone who runs a small business at the moment, when credit is tight, will just love that.
The pictures of the Leader of the Opposition, the Mayor of London and the shadow Chancellor at Oxford in their Bullingdon (?) Club outfits delights the left. I am much more shocked, myself, by the young Mr Brown in his 70s haircut and Mr Darling with his Trotty Beard. Of course these two love Socialism. It is in their genes!
I loved your article above – it made all the right noises. Well written!

By: Alfred T Mahan

Alfred T Mahan — Thu, 06 Nov 2008 17:56:34 +0000

Not entirely on thread, but Acorn 11.59 makes a good point about separation of Executive and Legislature. The British Legislature has been comprehensively captured by the Executive and we no longer have the checks and balances which Walter Bagehot (among many others) identified as so important for a well-functioning government. Apart from a General Election every four years or so we have virtually no means of holding the Executive to account. This is of course why we have corruption, disgraced ministers returning to government despite general revulsion, the enormous growth in patronage, and what Peter Oborne called ‘The Triumph of the Political Class’.

I used to be a traditionalist on the British Constitution, but it’s now so debauched I think we must have a written one with clearly defined limits of the power of each arm of government.

But I’m not holding my breath.

By: Adrian Peirson

Adrian Peirson — Thu, 06 Nov 2008 17:34:09 +0000

Capitalists will always try to create profit, for example by buying up Oil, creating a shortage, then selling off at the higher price, like they did recently.
People have died as a result of the actions of these speculators.
Govt regulation is not the answer, you then end up with the Current situation where Capitalists bribe Govt ministers for favourable laws to allow them to feed off the populace.
Govts Job should not be to interfere beaurocratically, since you then end up in an endless chase, with Capitalists exploiting loopholes and Govt trying to close them off, or not, depending on how much they have been offered not to close them off.
Maybe the way out of this is for Govt to simply allow the free market to do as it wishes, But, where Problems arise, to have open debate and maybe set up alternatives so that the Capitalists have to Compete so reigning in their excesses.
For example setting up an alternative phone company should it appear that that area has been monopolised.

By: DBC Reed

DBC Reed — Thu, 06 Nov 2008 14:32:26 +0000

This blog is certainly living up to its very favorable billing by the Guardian p.17 yesterday as being “unafraid to be unfashionable”!
There are surely problems with the free market which can hardly be as democratic as the voting system where everybody is on an equal footing, unlike the economic system.
Irrespective of that basic issue, the freedom of the market leads to the crowding out of discretionary spending by the necessities of life making the whole thing dysfunctional.Henry George and before him the Physiocrats pointed out the fundamental problem that spending on keeping a roof over one’s head could rise to absorb a disproportionate part of one’s income.In George’s own stamping ground,San Francisco, 30% of people now spend more than more than half their income on housing.Add in utilities , the car needed to reach the place and shops, medical insurance and saving for the kids’education and there is n’t much left to support any other goods and services.
It would be much better for capitalism in general, if Georgite controls were put into place to stop land rising in value and certain services such as health and education were subsidised to stop them swelling in the proportion they take of average incomes.
It is all very well restricting government borrowing but as the money has to be provided other ways, making the people shoulder the displaced burden, for instance by lumbering students with loans not grants, means the problem does n’t disappear but falls on the weakest. (Less able to afford it than the Gov. anyway).And then the students laden with university-debt and possibly a mortgage can’t afford much of anything else.
All this privatisation and free market fundamentalism is putting capitalism out of business by not producing more goods but increasing the price of things people can’t do without.Negative capitalism ,is what it has become.

Reply: Yes it would be unfair without the safety net – that’s why we need to give benefits.

By: Lola

Lola — Thu, 06 Nov 2008 12:51:30 +0000

Way to go Mr R! Now get into power and enact the necessary legislation to repeal all the anti freedom stuff of the last 11 years.

Thing is, all the lefties use the short form ‘capitalism’ to describe what we have. And they use it with bile.

But we don’t have ‘capitalism’. We have (or would like to have) ‘Anglo Saxon Libertarian Democratic Free Market Judeo Christian Capitalism with Thrift, Responsibility and Compassion all subject to English Common and Commercial Law’ – well that’s as near as I can get pro tem, but it is a work in progress. What we have now, after 11 years of another bungling and deceitful experiment on us, is ‘bureaucratic capitalism’.

I have commented on Ian Dales blog that Mr Cameron needs a simple mesage. Maybe this is it?

By: Rose

Rose — Thu, 06 Nov 2008 12:28:15 +0000

Anyone who takes a look at local government in its present bloated state, and how badly it delivers its “services”, should be reminded of what departure from the market ends up with: a huge bureaucracy which can’t even manage its own employees, let alone everyone else’s affairs, and settles for lower and lower standards in every deaprtment because its taxpayers have nowhere else to go and there is no danger to its staff of redundancy. The charade of local democracy and accountability makes no impact on the careers and gold-plated pensions of those tiers of council officers, most of whom will live in comfort outside the slums they preside over, while the front-line workers are ever more diminished and demoralised.

By: Acorn

Acorn — Thu, 06 Nov 2008 10:59:39 +0000

Excellent piece John. Please can I direct Redwoodians to this FT article; “Globalisation is not our enemy”. Particularly the comment from Stephen King.

http://blogs.ft.com/wolfforum/2008/10/globalisation-is-not-our-enemy/#comment-34037 .

Regarding your earlier post; The Mail has a full front page picture of the US president elect and the new first lady. How I wish we could, one day, have a similar picture of our directly elected prime minister. Would it be a face we currently recognise; who would he/she personally appoint to his cabinet. He would not be limited by having to appoint from a small bunch of his party’s amateur MPs.

Numerous commentators have said that the UK has an elected dictatorship and parliament does not, can not, hold it to account; either on primary or secondary legislation.

Separating the Executive from the Legislature, could be the starter that makes politics and politicians popular again. Can you imagine MPs having to think for themselves; do deals across the chamber; creating properly thought out and engineered Bills; that do what the consensus says they should do. Such that most Bills get passed just by the speaker saying, “I think the ayes have it”.

By: wonderfulforhisage

wonderfulforhisage — Thu, 06 Nov 2008 08:53:41 +0000

Mr Redwood, in passing you allude to the difference between a minimum wage and a minimum income. Do you mean by minimum income some form of tax credit (dread words) that would be applied to a sub standard wage? I don’t understand the principle of minimum income. Would it mean that the Government would in effect top up the hourly rate of lowly paid jobs to some minimum? If that were the case wouldn’t employers pay 1p an hour and allow the Government to top this up to, say, the current minimum wage.

One of the market distortions that I haven’t seen mentioned by any commentators is the artificial $/Yuan rate of exchange. I’m no economist but would expect that this has distorted the markets enormously and I could imagine might have provided indirectly the funds for the bankers to splash about so recklessly in sub prime mortgages etc.

I’d be interested in your comments on the above two points.

Reply: Minimum income means benefit top up,as we have.
Yes the Chinese currency is too low and we need to put more pressure on the Chinese for further revaluation, as it is not a free market rate