Economic Policy


Capitalism and the Big State

There is a very interesting post here from Stumbling and Mumbling about the mutual dependence of big capital and the big state, and by and large he is right. I think he understates the interlocking of big capital and the big state, and the extent to which the modern state is simpky a tool of large corporate interests. He also does not really consider the whole nexus of Eisenhower’s military-industrial-Congressional complex.

In fact, major coroporate interests are now above the nation state. They can effectively be exempt from the criminal law, like BAE Systems. Or avoid the jurisdiction of a nation state almost completely, like Vodafone.

A large state, like large concentrations of capital, produces an excessive concentration of power; to put that another way, both reduce the freedom of individuals. That is why I am not with the corporatist interests who were marching at the weekend, It is also why I am not with the Tories. I retain a quaint belief that the best economic model is one where the workers own the company, at the enterprise level rather than the state level, while natural monopolies and social services are provided directly and simply by the state.

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George Osborne – A Petty Man For A Great Task

The British economy is in dire straits, which look set to result in a permanent downward shift in our comparative position in the world. The five year growth forecasts from the Office for Budget Responsibility forecast that in the best year of the coming half decade, growth will peak at just under the average growth rate for the last two hundred years.

It is therefore worrying that we have a Chancellor who thinks that the appropriate response is a series of petty, peevish party political points. His attack on Gordon Brown for sellng off our gold reserve at a quarter of its current value, was perfectly true but absolutely irrelevant to the budget. And as for

“The principles of good taxation have been set out from Adam Smith to Nigel Lawson”

I can only observe:

“The prinicples of good batting have been set out from W G Grace to Craig Murray”.

The last fortnight has seen a series of disastrous economic statistics, as inflation, unemployment and the budget deficit all returned monthly figures substantially worse than forecast, The forecast budget defict this year is now £149 billion.

The extraordinary thing is, that nobody denies that this appalling financial situation was caused by the collapse of the banking sector. Nor does anyone appear to deny that the collapse of the banking sector was caused by a system which hugely rewarded individuals for short term gains on multiple high risk speculative transactions, in a way which made a “Bubble” inevitable.

While the perpetrators – a whole class of them – took massive rewards for the short term gains of the complex bubble scheme, they did not get punished by its collapse. Rather everybody paid up for them, resulting in there being a gross shortage of money to pay for anything else – hence the recession.

It has been argued that. in running this massive government deficit, we are in fact in the middle of the biggest Keynsian stimulus in history. The problem with that analysis is that, rather than be put into public spending which stimulates the demand, the money from this deficit has been put entirely into the banks, which use it to stimulate the appetite of their senior staff for cocaine.

But other than a token levy amounting to well less than 1% of the money that has been given, nothing whatsoever has been done to address the cause of the malaise, and the over-rewarded class who crashed the whole economy have been left free to crank up the next bubble and immediately to start over-rewarding themselves again. Politicians of all major parties then simply deal with the resulting damage to the economy by palliative measures as if the collapse were an earthquake and tsunami, which we had no choice but to accept will come, and no choice but to realise will come again. Indeed we have just had an entire budget speech which did not even mention the banking collapse as the cause of our troubles. The only mention of the banks was to repeat their own propaganda about freeing them up to enable them to compete on a global basis.

I am in fact entirely in favour of a small state, and am not against budget cuts per se. There are hundreds of thousands of people working for local authorities who are in office jobs which in fact do no good to anybody. Those who deny that local government in the UK is corrupt, overstaffed, overpaid and full of local political placemen, obviously have had very little contact with it. Sadly, the numerous “officers” and “managers” in local government are precisely those who will not get sacked in the spending cut round. The useful people who actually work will be cut instead.

The National Health Service is a prime example of how this government gets the public sector totally wrong. Public services should be delivered by the state simply, efficiently, directly and with the minimum administration. By seeking to introduce market forces into the equation, the simplicity and directness are both removed and the administration increased until it exceeds half of the total cost, as hordes of useless bureaucrats and accountants administer completely artificial market mechanisms and pass miliions of useless invoices and receipts for payment from one bit of government to another bit of government.

Cuts are a good thing. The cuts of this coalition are worse than useless. They have to be part of a fundamental restructuring of our economy, which ties financial transactions to actual payments for real goods and services, rather than speculation on the future value of goods and services. Most importanly, redistribution of capital to the workers in companies needs to be initiated. I favour economic competition, but capitalism as currently consitituted brings an escalating concentration of capital and consequent concentration of political power, and a quite unacceptable leap in the wealth gap between rich and poor.

Instead we have from Osborne a little adjustment here and there and the odd snide partisan quip. I have noticed an interesting phenomenon about Osborne. Every time he takes a measure to benefit the wealthy, his hair parting grows wider, and it is threatening now to take over the whole top of his head. His one big idea was that it is time to take the “historic step” of merging Income Tax and National Insurance. Actually that is precisely a hundred years overdue, ever since Lloyd George, with that twinkle in his dark eye. quipped “The secret is, there is no fund”. But then it turned out that Osborne’s “Historic step” was to launch a consultation over several years into the possibility of doing this.

An irrelevant budget from an irrelevant man in what increasingly seems an irrelevant government.

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Human Rights in the USA

The Obama administration has, rightly, been paying at least lip service to the primary of international law in the limitation of military action in Libya to conform with the provisions of SCR 1973.

Here is a still more fundamental piece of international law – the Universal Declaration of Human Rights, adopted by the General Assembly of the United Nations in 1948. It is in itself a high point of human achievement, and it is worth reading from time to time. Consider this in particular:

Article 23.
(1) Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.
(2) Everyone, without any discrimination, has the right to equal pay for equal work.
(3) Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.
(4) Everyone has the right to form and to join trade unions for the protection of his interests.

In directly contravenng Clause 4 of Article 23, the government of Wisconsin is not only attacking its own workforce, it is attacking the very essence of human dignity and the achievement of ordinary people in obtaining a right to it. There is no doubt that in the second half of the twentieth century labour unions grew into over-centralised, undemocratic and corrupt institutions. Those evils can be regulated away. But removing the right of individual workers to combine to negotiate the price of thier labour is a much greater evil.

It was possible for liberals to believe – I believed it – thirty years ago that capitalism as a system naturally ameliorates and moves everybody towards the middle class, reducing extremes of wealth and poverty as capitalism matured. But since then, the gap between the very wealthy and the ordinary working man has increased exponentially. Those providing financial and other middleman servies are disproportionately rewarded, and those who labour to manufacture or provide physical services are increasingly impoverished, abused and unprotected. The public services are one of the few areas where rapacious neo-liberal practices of exploiting, abusing and discarding labour still met any, though reducing, resistance. The propaganda against human rights in Wisconsin has, as as one of its more evil elements, an appeal to those already abased, to drag down those who can to some extent be portrayed as having to some extent escaped.

But it would be quite wrong to portray this attack as led just by the Republicans. Obama has notably refused to do anything to counter the wave of hatred towards employees, organised and financed by corporate America. Obama himself is notably failing in his duty to live up to the following paragraph of the Universal Declaration of Human Rights:

Now, Therefore THE GENERAL ASSEMBLY proclaims THIS UNIVERSAL DECLARATION OF HUMAN RIGHTS as a common standard of achievement for all peoples and all nations, to the end that every individual and every organ of society, keeping this Declaration constantly in mind, shall strive by teaching and education to promote respect for these rights and freedoms and by progressive measures, national and international, to secure their universal and effective recognition and observance, both among the peoples of Member States themselves and among the peoples of territories under their jurisdiction.

The degrading treatment of suspected whistleblower Bradley Manning is a further example of US contempt for human rights – as is what happens to those who seek to protest about it. I was struck to see this picture of my friend Dan Ellsberg flash up on Sky News.

A couple of weeks ago, while this blog was down for remont, another of my friends, Ray McGovern, was arrested for the new crime of wearing a Veterans for Peace T shirt at a Hillary Clinton meeting. She was talking at the time, with no apparent sense of irony, about the right to protest in the Middle East. Just before the camera cuts to Ray, you can see her smirk as she sees him manhandled.

The next time I share a platform with Ray and Dan, I shall feel that they have been paying their dues for freedom more than I. But I have an excuse for not getting arrested. I have been most of the time in Ghana, which respects human rights, whereas they are in the United States, which does not.

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The Left’s Irrational Addiction to High Public Spending

There is no correlation between high public spending and social and economic equality.

I favour much greater redistribution of both income and capital than allowed by the current political consensus in the UK. But I also favour much greater cuts in public spending – perhaps four times greater, over a decade – than Osborne just delivered. The two are not incompatible.

Under New Labour there was a massive step change in levels of public spending and in the percentage of GDP comprised of state activity. Did social equality improve? No. The wealth gap between the wealthiest and the poorest yawned wider and wider. Even in the public sector itself, the gap between richest and poorest grew until it is now seriously proposed, with a straight face, that the situation be redressed so that the highest paid executive in a public organisation should only (!) be paid twenty times more than the lowest paid employee.

Blairism should have shattered forever the notion that very high levels of public spending are the answer to social inequality. But it is a notion to which the left is addicted.

I favour redistribution because Sir Fred Goodwin, Wayne Rooney and Tony Blair area perfect reductio ad absurdumof the notion that a system that rewards the ability to grab money in a laissez faire manner has desirable results. The Duke of Westminster does the same for accumulated capital. I also truly hate the pvoerty in which so many good people are trapped. But the notion that Britain’s vastly over-inflated bureaucracies address this problem is tenuous, to say the least.

I also believe that it is not coincidental that New Labour’s huge physical increase in the state coincided with a massive erosion of civil liberty.

So I view those protesting against cuts in public spending as well-motivated but trapped in a historical accumulation of palliative devices which each attracted a massive superstructire of self-interested providers and administrators.

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Why the NHS Budget Should Be Cut

I just went to see my doctor for a renewal of my omeprazole prescription. For ten years I have been taking 80mg per day, for hiatus hernia. That is two packets of 7 x 40mg per week.

The doctor called up the prescription on her screen and it showed £15.50 per packet charge to her practice. She asked whether I had tried a cheaper alternative. The answer was yes, without success. So I went to collect a month’s supply – eight packets at a cost to the NHS of £124 less my £7.20 contribution.

Yet this is a generic, not a branded, medicine. When in Ghana I buy precisely the same medicine, by precisely the same manufacturer – Dr Reddy of India – in precisely the same packaging, for the equivalent of £2.80 per packet. It is genuine – believe me, with this unpleasant condition you would know very quickly if it was not genuine.

So why is the NHS practice paying £15.50 for a packet of medicine available individually at retail price for £2.80 internationally?

At the international retail price my medicine costs £291.20 per year. The NHS pays £1,612 per year.

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Civil Service Redundancies

I am entirely in favour of civil service redundancies, and even more of local authority redundancies. We have a crazy economy, heavily dependent on vastly over-rewarded people who perform useless financial casino services for much of the world. The taxation this brings in goes to fund many more people who fill in forms all day relating to government targets.

The number of people who actually make anything is miniscule. The entire economy is not sustainable.

I suggested how to cut the foreign office here:

http://www.craigmurray.org.uk/archives/2010/06/for_william_hag.html

and gave more general views on cuts here:

http://www.craigmurray.org.uk/archives/2010/06/budget_day.html#comments

I support redundancies. But I do not support the attempts – started by New Labour – to cut civil service redundancy terms for existing employees. Civil servants entered into employment with a contract with their employees. New Labour lost two court cases in their efforts to unilaterally revoke the contractual redundancy rights of civil servants. The notion that the government may now pass primary legislation to give itself the right to change redundancy temrs of existing employees is contrary to natural justice. Private sector employers cannot unilaterally change employment contracts of existing staff. Nor should the public sector.

Redundancies are an initial cost which must be found, but lead to long term savings. As I have argued in relation to the FCO in particular, sales of government property should be used to help meet the redundancy costs. The MOD has vast tracts of land and a great many buildings which could be sold. Chevening, Dorneywood, Windsor Castle and Osborne House would bring a few quid. If you can enact primary legislation to cut civil service redundancy pay, you can enact primary legislation to allow you to sell those. I would nationalise the estate of the Duke of Westminster too, then sell it off. That would meet a lot of the redundancy costs.

I have no objection to changing conditions of employment – including on redundancy and pensions – for new employees, within reason. The impact on recruitment and retention must be carefully weighed. But to abrogate existing employees’ contracts is plain wrong.

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