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The EU: Making the going good for getting Out

ROBERT HENDERSON  suggests some ways in which the No side can maximize its chances of winning the referendum on EU membership

Amidst all the confusion and excitement of bringing about a referendum on Britain’s membership of the EU, it is easy to forget that there are considerable risks associated with the vote. The government will almost certainly campaign to stay in, as will the Labour Party, and many institutions, lobby groups, media groups, foreign governments, and influential individuals. Public opinion, although hardening towards leaving, is fickle and cannot be relied upon. A decision to stay in would probably destroy the UKIP, and would also seriously undermine Conservative Eurosceptics. It is therefore essential that we should think about the likely shape of the campaign, and how we who believe in leaving can improve the odds.

The general strategy

A) How to leave

Article 50 of the Lisbon Treaty states

1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.

A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.

5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49. (http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-european-union-and-comments/title-6-final-provisions/137-article-50.html).

It is strongly implied in in  para 3 of  the Article that unilateral withdrawal is possible :

“ The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2”.

However, the clause does not explicitly  give the right of unilateral secession and could be interpreted as merely referring to how any agreement might be scheduled to take effect. The other EU members could adopt this interpretation to thwart the UK leaving without declaring UDI.

The Vienna Convention on the Law of Treaties cites two legitimate  instances where a party wants to withdraw unilaterally from a treaty which does not make any provision for withdrawal : (1) where all parties recognise an informal right to do so or  (2) the situation has changed so substantially  that the obligations of a signatory are radically different from that which was originally agreed to.   The informal right patently does not apply in the case of the EU. As for radical changes to the obligations of a signatory, that would be difficult to sustain. It is true that the organisation (the EU) the UK belongs to now is radically different from that which they originally joined in 1973 (the EEC), but the  UK has signed  new treaties to agree to the new circumstances as they have arisen.  Hence, there would be no radically changed obligations which had not been taken on formally by the UK.

The only precedent  of any sort for withdrawal is Greenland’s  secession  in 1985 from the European Economic Community (EEC).  The was facilitated by the Greenland Treaty. However, it is not  an obviously relevant precedent because Greenlanders retain Danish citizenship for  Greenland has home rule not full independence from Denmark. They are consequently full  EU citizens.  Because Greenland is also one of the  Overseas Countries and Territories of the EU it  is also subject to some EU law and regulations, mainly those relating to the Single Market. .

Even if it is accepted by the other EU members  that there is a unilateral right of secession,  the fact that it  could only  take place legally after two years would give the remainder  of the EU the opportunity to run the UK ragged before the UK left.

As for getting an agreement which would allow the UK to generally re-establish its sovereignty, especially over the control of its borders, this is most improbable.  A  Qualified Majority in the European Council  is required  and even if such a majority is obtained the European Parliament can block the secession. The potential for delay and blackmail by the EU of the UK is considerable.

In any event it is likely is that the EU would  drive a bargain which is greatly to  the UK’s disadvantage because the  Eurofederalists would be terrified of creating a precedent for any other EU member which might wish to radically change their relationship with the EU.  That would make them demand conditions of the UK which were so unappealing it would deter other member states from following suit. There is also  the danger that  the Europhile UK political elite  would take the opportunity to agree to disadvantageous terms for the UK simply to keep the UK attached to the EU in the manner that Norway and Switzerland are attached. The treaty arrangements of  Norway and Switzerland  are routinely portrayed  by supposed  Eurosceptics  as purely trade relationships. They are not. Both countries are firmly within the EU straitjacket. Indeed, the Europhile BBC  ran a story in 2012 entitled Non-EU Norway ‘almost as integrated in union as UK ‘ (http://www.bbc.co.uk/news/world-europe-16594370). As for Switzerland, a glance at their treaty arrangements will show their close EU embrace http://www.europa.admin.ch/themen/00500/index.html?lang=en.  Most importantly they have no control of immigration from the EU . If the UK signed up to the Single Market after formally leaving the EU  we should be in the same boat.

The OUT camp must make it clear that  it would be both damaging and unnecessary for the UK to abide treaty requirement. Even if the UK did not try to sign up to  the Single Market, it would allow the EU to inflict considerable damage on the UK both during the period prior to formally  leaving and afterwards if  the price of leaving with the EU’s agreement was  for  UK to sign up to various obligations – for example, to continue paying a large annual sum to the EU for ten years.

There is also the danger that the stay-in camp could use Article 50 to argue that whether the British people want to be in or out, the cost of leaving would be too heavy because of this treaty requirement.

The Gordian knot of Article 50 can be cut simply by passing an Act of Parliament repealing all the treaties that refer to the EU from the Treaty of Rome onwards. No major UK party could  object to this because all three have, at one time or another,  declared that Parliament remains supreme and can repudiate anything the EU does if it so chooses.

If the stay-in camp argue that would be illegal because of the treaty obligation, the OUT camp should simply emphasise (1) that international law is no law because there is no means of enforcing it within its jurisdiction if a state rejects it and (2) that treaties which do not allow for contracting parties to simply withdraw are profoundly undemocratic because they bind future governments.

The OUT camp should press the major political parties to commit themselves to ignoring Article 50. If a party refuses that can be used against them because it will make them look suspicious.

Before the vote

B) The parties’ plans of action if there is a vote to leave

It is important that all the parties likely to have seats in the Commons after the next election are publicly and relentlessly pressed to give at least a broad outline of what action they would adopt in the event of a vote to leave. Left with a free hand there is a serious danger that whatever British  government is  in charge after a vote to leave would attempt to bind the UK back into the EU by stealth by signing the UK up to agreements such as those the EU has with Norway and Switzerland which mean that they have to (1) pay a fee to the EU annually, (2) adopt the social legislation which comes from the EU and (3) most importantly agree to the four “freedoms” of the EU – the free movement of goods, services, capital and  labour throughout not merely the EU but the wider European Economic Area (EEA).

It is probable that the Westminster parties will all resist this, but that would present them with two problems. First, a refusal to do so would make them seem untrustworthy; second, if one party laid out their position but the others did not, that would potentially give the party which did say what it would do a considerable advantage over the others which did not. If no party puts its plans before the public before the referendum, there should be demands  from those who want the UK to leave the EU that  any new treaties with the EU must be put to a referendum and, if they are rejected, the UK will simply trade with the EU under the WTO rules.

C) Repudiate re-negotiation before the referendum

Supporting the negotiation of a new relationship between the UK and the EU before a referendum is mistaken, because it would seem to many to be giving tacit approval for renegotiation and legitimize the possibility of the UK remaining within the EU. It is also rash, because  the likelihood  of the EU giving nothing is very small. Indeed, they might well give something substantial, because the UK leaving the EU would be a very great blow to the organisation. The UK is the country with the second largest population within the EU with, depending on how it is measured, the second or third largest  economy and the country which pays the second largest contribution to the EU budget. For the EU to lose the UK would not only be a blow in itself, it would also create a very strong precedent for every other EU state, especially the largest ones. If  the UK left and prospered, the temptation would be for other EU states to leave.

If the EU offered  a big carrot such as the abolition of benefits  for migrants to the UK  from the rest of the EU until they had lived in Britain for ten years, that could  seriously  undermine the resolve of those wanting the UK to leave the EU because it would dovetail with British fears of mass immigration from the EU and the mainstream media representation of the immigration  problem as being essentially a welfare problem. The Europhiles would then be able to represent the immigration threat as no longer a threat as they bleated their  mantra “the only immigrants will be those who are working and paying their taxes”.  That would be difficult for any mainstream British politician or party to counter because they have all be peddling the line of welcoming “hard working immigrants” for years.

But even if negotiation produced nothing of substance, as happened with Harold Wilson’s “renegotiation” of 1975, it would be a mistake to imagine that it would not influence the referendum result. The electorate is divided between the resolute come outs, the resolute stay-ins and the wavering middle. A claim by the stay-in campaigners that something had been conceded by the EU, however  insignificant, would provide the waverers with an excuse to vote to stay in because they could convince themselves they were voting for change. If the EU were to offer nothing, waverers might see this as evidence that the EU was too powerful to oppose.

Those who want the UK to leave should unambiguously put the case for no renegotiation. Dismiss anything Cameron (or any other PM) brings back from the EU by way of altered terms as being irrelevant because the EU has a long record of agreeing things with  the UK and then finding ways of sabotaging what was agreed. In addition, a future British government may agree to alter any terms offered at the time of the referendum. The classic example of this changing of agreed terms happening in the past is Tony Blair’s giving up of a substantial amount of the Thatcher rebate in return for a promised reform of the Common Agricultural Policy (CAP), a promise which was never met. That episode produced my all-time favourite amongst Blair’s penchant for lying. Two days before he went to the EU meeting at which he  gave away a substantial part of the rebate he declared during Prime Minister’s Questions that the rebate was “non-negotiable – period”.

It is difficult to envisage any British prime minister not trying to  negotiate with the EU before a referendum, but it might just  happen if whoever is in power when the referendum is announced were to be told privately by the  major EU players that nothing will be given and the prime minister of the day concludes it would be best to pretend that a decision had been made not to negotiate rather than risk the humiliation of getting nothing, perhaps not even a pretence of negotiation before nothing is given. Why would the EU do this? They might calculate that it would be a gamble worth taking to send a British PM away with nothing, whilst hoping the referendum vote would be to stay in because then the power of the UK to resist further integration would be shot.

If the EU offers nothing, the OUT camp should welcome the fact and stress to the public that if the referendum is to stay in,  the EU could force any federalist measure through because not only would any British government be much weakened in its opposition to more federalism, the UK political class as a whole would more than willing to go along with it because of their ideological commitment to the EU.

D) After the vote

Ideally the government which deals with the EU after a vote to leave will have committed themselves to a plan of action before the referendum vote.  However, as described above, it is quite possible that this will not happen because  the UK’s overwhelmingly Europhile political class will try to re-entangle the UK with the EU. To prevent them doing so there should be a concerted campaign after the vote to ensure that the British public understands what is being done on their behalf with a demand for a further referendum to agree any new treaty.

The terms of the debate

It is essential that the Europhiles are not allowed to make the debate revolve around economics. If they do it will effectively stifle meaningful debate. As anyone who has ever tried to present economic ideas to an audience of the general public will know it is a soul-destroying experience. Take the question of how much of UK trade is with the EU. The debate will begin with the stay-in camp saying something like 45% of UK trade is with the EU. Those wanting to leave the EU will respond by saying it is probably less than 40% because of the Rotterdam/Antwerp effect. They will then be forced to explain what the Rotterdam/Amsterdam effect is. That is the point where the general public’s concentration is lost and the debate ends up proving nothing to most of the audience.

But although nothing is proved to the general audience by detailed economic argument, the audience will remember  certain phrases which have considerable  traction. In amongst the serious debating on the issue of trade there will be phrases such as three million jobs in Britain rely on the EU and dire threats about how the EU will simply not buy British goods and services any more. This is nonsense, but fear is not rational, and many of those who vote will enter the voting chamber with fear of losing their jobs  in their heads regardless of what the OUT camp says if the debate is predominantly about economics. Shift the debate away from economics and the fear-inducing phrases will be heard less often.

National sovereignty

How should those wanting to leave the EU shift the focus of debate? They should put the matter which is really at the core of the UK’s  relationship with the EU  – national sovereignty – at the front of the  OUT camp’s referendum campaign. Campaign under a slogan such as Are we to be masters in our own house?

Making national sovereignty the primary campaigning issue has the great advantage of  it being something that anyone can understand because it is both a simple concept and speaks directly to the natural tribal instincts of  human beings.   Being a simple concept readily  and naturally understood,   it is a far more potent debating tool than arguments attempting to refute the economic  arguments  beloved of the stay-in camp.  The fact that the natural tribal instincts have been suppressed for so long in the UK will increase its potency because most people will feel a sense of release when it begins to be catered for in public debate.

The appeal to national sovereignty has a further advantage. Those who support the EU are unused to debating on that ground. That is because uncritical support for the EU has long been the position of both the British mainstream political class as a class and of the mass media. That has meant that the contrary voice – that which wishes Britain to be independent – has been largely unheard in public debate for thirty years or more. Where it has been heard, the response of the pro-EU majority has not been rational argument but abuse, ranging from patronising dismissal of a wish for sovereignty as an outmoded nationalism to accusations that national sovereignty amounts to xenophobia or even racism. These tactics – of excluding those who want to leave the EU from public debate and abuse substituted for argument – will no longer be available to the  pro EU lobby.


The most threatening and energising subject relating to the EU for the general public is immigration. The public are right to identify this as the most important aspect of our membership of the EU because immigration touches every important part of British life: jobs, housing, education, welfare, healthcare, transport, free expression  and crime besides radically changing the nature of parts of  the UK which now have large populations of immigrants and their descendants.

The public rhetoric of mainstream politicians and the media is changing fast as they begin to realise both what an electoral liability a de facto open door immigration policy is, as the effects of mass immigration become ever more glaring. The argument is shifting from the economic to the cultural.  For example, here is the Daily Telegraph in a leader of 25 March:

“The fact is that, for many in Britain (especially those outside the middle classes), it is not just a matter of jobs being taken or public services being stretched, but of changes in the very character of communities. Those changes may not necessarily be for the worse: as the Prime Minister says, Britain’s culture has long been enriched by the contributions of new arrivals. But as long as ministers treat immigration as a matter of profit and loss, rather than the cause of often wrenching social change, they will never be able fully to address the grievances it causes.” (http://www.telegraph.co.uk/comment/telegraph-view/9952717/Immigration-and-the-limits-of-the-possible.html)

This new frankness in public debate means that the OUT camp can use the immigration argument freely, provided they keep the language within the confines of formal politeness. The subject will naturally dovetail with the emphasis on national sovereignty because the most important aspect of sovereignty is the ability to control the borders of the territory of a state.  Judged by their increasing willingness to talk publicly about immigration, it is probable that the mainstream UK parties will be content to go along with  ever more frank discussion about immigration.

The economic argument must be kept simple

It will not be possible to avoid  economic arguments entirely. The OUT camp should concentrate on repeating these two facts:

The disadvantageous balance of payments deficit the UK has with the EU

The amount the UK pays to the EU

Those are the most solid economic figures relating to the EU. There is some fuzziness around the edges of the balance of payments deficit because of the question of where all the imports end up (whether in the EU or outside the EU through re-exporting), while the amount the EU receives is solid but it has to be broken down into the money which returns to the UK and the amount retained by Brussels. Nonetheless these are the most certain  figures and the least susceptible to obfuscation by the stay-in side.

The best way of presenting the money paid to the EU is simply to say that outside the EU we can decide how all of it is spent in this country and to illustrate what the money saved by not paying it to the EU would pay for.

It will also be necessary to address the question of protectionist measures the EU might take against the UK if the  vote was to leave. It is improbable that the EU would place heavy protectionist barriers on UK exports because:

1. The massive balance of payment deficit between the UK and the rest of the EU, which is massively in the EU’s favour.

2.  Although the rest of the EU dwarfs the UK economy, much UK trade with the EU is heavily concentrated in certain regions of the EU. The effect of protectionist barriers would  bear very heavily on these places.

3. There are strategically and economically important joint projects of which the UK is a major part, like Airbus and the Joint-Strike Fighter.

4. The Republic of Ireland would be a massive bargaining chip for  the UK to play. If the UK left and the EU rump attempted to impose sanctions against Britain this would cripple the RoI because so much of their trade is with the UK. The EU would be forced to subsidise the RoI massively if protectionist barriers against the UK were imposed. The EU could not exempt the RoI from the sanctions because that would leave the EU open to British exports being funnelled through the Republic.

5. The EU would be bound by the World Trade Organisation’s restrictions on protectionist measures.

The economic issues which are not worth pursuing in detail are those relating to how much the EU costs Britain in terms of EU-inspired legislation. It may well be that these load billions a year of extra costs  onto the UK  but they are not certain or easily evaluated costs, not least because we cannot in the nature of things know what burdens an independent UK would impose off its own bat.

Getting into detailed discussions about such things will simply play into the hands of  the stay-in camp because it will eat up the time and space available to those promoting the OUT cause.

Other issues

Apart from the economic questions, the stay-in camp will use these reasons for staying in:

That the EU has prevented war in Western Europe since 1945. This can be simply refuted by pointing out that the EU was not formed until  twelve years after WW2; that until 1973 the EU consisted of only six countries, three of them small,  and  of only nine countries until the 1980s. Consequently it would be reasonable to look for other reasons for  the lack of war. The two causes of the peace in Western Europe have been the NATO alliance and the invention of nuclear weapons which make the price of war extraordinarily high.

That nation states such as the UK are too small to carry any real diplomatic weight in modern world. That begs the question of whether it is an advantageous thing to carry such weight – it can get a country into disastrous foreign entanglements such as Iraq and Afghanistan – but even assuming it is advantageous, many much smaller countries than the UK survive very nicely, making their own bilateral agreements with other states large and small. It is also worth remembering that the UK has such levers as a permanent seat on the UN Security  Council (which allows the UK to veto any proposed move by the UN) and considerable influence in institutions such as the IMF and World Bank.

ROBERT HENDERSON is a London-based freelance writer


Originally published in the Quarterly Review

Published in http://www.quarterly-review.org/?p=1737

Margaret Thatcher and the cult of personality

Robert Henderson

Two Cults

Margaret Thatcher was the subject of a cult of personality. This was not the result of calculated  propaganda, but simply the creation of her extraordinary personality. Because the cult of personality developed not in a totalitarian state but a country where public opposition was possible, there were two cults of personality attached to her in a relationship which mimicked the matter/antimatter duality. These were the Thatcherite religious believers fulfilling the role of matter and the Thatcher-hating Left  acting as the antimatter.

Both the matter and the antimatter Thatcher cults were  potent.  The religious believers  bowed down before the great god MARKET (and Thatcher was his prophet) and, when things  went wrong,  did what all religious believers do until they lose their faith, denied reality by simply pretending something had not happened or by giving a calamity some  absurd spin to ”prove” the god had not failed.

For the Thatcher-hating Left she was the personification of the Devil and consequently credited with all manner of evil,  but, as is the way with personifications of the Devil, never portrayed as anything but powerful, a being possessed of a political juju (doubtless ensconced in her handbag) which could wreak any degree of havoc  with all that the Left held dear is if she so chose.   Like all those who believe in evil spirits the Thatcher-hating Left ascribed every act of ill fortune to her.

The attitude of both bands of cult followers was essentially superstitious, attributing powers to the woman which she did not, and often could not,  have.  The religious Thatcherites imagined she could  speak the spells which would miraculously convert Britain from a  country making silly old fashioned things such as steel, ships and cars and mining coal to a country stuffed to the gunnels with entrepreneurs creating new non-unionised service industries; the Left saw her as a witch practising black magic to contaminate and transmogrify the world they knew.

Because the Thatcherite religious believers  and her leftist haters  could not and still cannot see past the woman’s   gigantic political personality,  they made and continue to make the same mistake, namely, seeing the two cult figures as the reality while ignoring  her actual policies and their outcomes.

The reality of Thatcher

The reality of Thatcher is that objectively she achieved little if any of her wishes. It is a bitter irony for the woman (and Thatcherites generally)  that her policies were of a nature which  undermined the  ends  she espoused.  Perhaps the prime example is Thatcher’s  avowed wish to see a strong and wealthy Britain  whilst creating through her  commitment to laissez faire economics the very circumstances that would weaken the country. Under her economic regimen and its lingering aftermath ever since Britain  has become ever less self-sufficient in strategically important economic activity such as the production of  food and energy  and vast swathes of British business were  either bought up by foreigners or ceased to operate from Britain because of offshoring and the absence of government action to protect our own economy.   She simply did not understand that you could not have laissez  faire in both the domestic and international economic sphere and have a strong nation state.   Had Thatcher  known any economic history she would have realised that, but even without such knowledge  common prudence should have told her that a country which is dependent on others for necessary goods and services is a weak country.  Moreover, one of her claimed tutelary heroes Adam Smith readily understood there are things which are either strategically important such as armaments or social goods which are  never going to be supplied universally by private enterprise such as roads.  Thatcher never gave any indication of realising that Smith was not the unrelenting free marketer of her imagination.

Thatcher’s  failures in making policy to  achieve her ends were legion. She  destroyed much of British heavy industry in the belief that those made unemployed would rapidly be re-employed in private sector jobs. The new jobs did not materialise and she was reduced to presiding over massive and long lasting unemployment  which she funded with North Sea oil and gas tax revenue and the receipts from privatisation, whilst fiddling the unemployment figures shamelessly. She sold off state owned  services  (which belonged to the community as a whole not to the government)  in the belief that service would  be improved . It was  not. Instead vital services such as the railways and the provision of energy and water became ever more expensive whilst providing poorer service and less employment. She introduced so-called private business methods into the NHS and higher education in the belief that they would become more efficient. The result was massive increases in  bureaucracy and an ever climbing  cost of  both the  NHS and higher education and a substitution of the pursuit of  money for the public service ethos because money was attached to individual patients and students. She introduced the Community Charge or “Poll Tax” in the belief that it would be fairer than the old domestic rates. The result was widespread unfairness because it took no account of an individual’s means  and  provoked the nearest thing to a national movement dedicated to the non-payment of taxes known in modern times.  She raged against  EU interference in British affairs but signed up Britain to the Single European Act (SEA)  in the belief that it would create a genuine single market within the EEC.  It  did not create such a market and merely presented the EEC with an open goal for ever more audacious sovereignty grabs.  A supposed opponent of further mass immigration, her signing of the SEA also opened the door to free movement within the EU, a situation worsened by her strategy of dramatically widening the EEC.  She signed Britain up to the  She embraced “Care in the Community” for the mentally ill or disabled on the grounds that it was more humane than keeping  such people in long-stay institutions. The result was thousands of people left to largely fend for themselves in the outside world who were quite incapable of doing so. She sold off great swathes of social housing (which belonged to the community as a whole not to government) to tenants in the belief that this would result in a “property owning democracy” whilst more or less ending the building of new  social housing.  The eventual result was the growing housing emergency we have today. She instigated the disastrous “light touch”  regulation of the financial services  industry by abolishing credit controls and  failing to meaningfully regulate the  industry meaningfully after “Big Bang”  in 1986  which  effectively de-regulated the London Stock Exchange to bring in a brave new world of free trading (http://www.telegraph.co.uk/finance/financialcrisis/8850654/Was-the-Big-Bang-good-for-the-City-of-London-and-Britain.html)  with the dire results with which we are now living.

Even in the few areas where she was ultimately successful such as the Falkland’s War she was at best negligent in ignoring warnings from the Foreign Office of a growing threat to the Falklands  in the months leading up to the invasion and even after the expeditionary force had been dispatched  she agreed to a US organised plan which would have not offered the Islanders either self determination of or any meaningful security (http://www.telegraph.co.uk/news/politics/margaret-thatcher/10008116/Margaret-Thatcher-how-she-took-on-the-men-and-won.html).

There were also acts of omission and collusion with policies with which she supposedly fundamentally  disagreed.  Most importantly, Thatcher failed utterly to carry her strong views against further mass immigration into her period in office. Not only that but, as already mentioned,  she made things much worse on that front by signing up to the Single European Act. She agreed to the institutionalisation of political correctness in public life, especially in the Civil Service, schools and universities. In addition, she allowed the “progressive” educational establishment to destroy a first rate  school examination system  by swopping the certificate of Secondary Education (CSE) and O(rdinary) Levels  for the dangerous absurdity of the General Certificate of Education (GCSE), an exam   supposedly for all 16 year olds but which was in reality two exams masquerading as one.  Despite the fact that Tory support rested heavily on the countryside  she allowed the de-regulation of rural bus services to occur  which reduced them so  severely that to live in countryside meant owning and driving a vehicle or at least having access to someone who did.  To make matter worse, this was done in tandem with a wilful neglect of the then nationalised railways.

The protests after her death were unsurprising

Just based on her economic disasters the uproar surrounding her death is unsurprising.  In the space of a few years she raised the unemployment  pay claimant count from 1.4 million when she took office in 1979 to 3.2 million by 1986 (http://www.economicshelp.org/macroeconomics/unemployment/measuring_unemployment.html) That bald figure is startling enough but the reality  is ten times worse. She  must have known her policies would result in mass unemployment,  at least in the short term, when she removed the financial support of taxpayers from nationalised industries or sold them off in the belief that private business would be able to do the job more efficiently with  much smaller workforces.   Further, as these industries were concentrated in areas where they were by far the dominant employer she should  have realised that structural unemployment would be created  in many parts of the country.  To imagine, as she did, that new jobs would rapidly sprout in the areas showed  a  shocking lack of understanding of economic history which has no example of such a thing happening on the scale required in 1980s Britain.

What is certain is the fact that she had no doubt about the destructive possibilities of laissez faire economics, viz:

“Adam Smith’s ‘invisible hand’ is not above sudden, disturbing, movements. Since its inception, capitalism has known slumps and recessions, bubble and froth; no one has yet dis-invented the business cycle, and probably no one will; and what Schumpeter famously called the ‘gales of creative destruction’ still roar mightily from time to time. To lament these things is ultimately to lament the bracing blast of freedom itself.” — Margaret Thatcher, Statecraft P. 462

A politician of conviction?

The idea that merely having convictions is praiseworthy is a rum one. Hitler, Stalin and Mao had convictions. But even  if the  quality of a person’s convictions is ignored, this is one of the most mystifying of myths attached to Thatcher.  The reality was she frequently changed her position on the most important issues she faced or adopted methods which went against her avowed policies when she had created a mess, most notably with the massive rise in unemployment resulting from her slash and burn approach to the British economy which greatly  increased the benefits bill for many years and left people unemployed for years, in many cases for decades.

The most significant publicly  admitted changes of policy  were on immigration, the Europe and global warming.  Before the 1979 election she had spoken of the need to control immigration  because the country was in danger of being “swamped”:

‘If we went on as we are then by the end of the century there would be four million people of the new Commonwealth or Pakistan here. Now, that is an awful lot and I think it means that people are really rather afraid that this country might be rather swamped by people with a different culture.’

She went on to say, ‘The British character has done so much for democracy, for law and done so much throughout the world that if there is any fear that it might be swamped people are going to react and be rather hostile to those coming in.’

 ‘If you want good race relations, you have got to allay peoples’ fears on numbers. […] We do have to hold out the clear prospect of an end to immigration…’ (http://www.runnymedetrust.org/histories/race-equality/59/margaret-thatcher-claims-britons-fear-being-swamped.html)

Once in office she did nothing despite still feeling strongly about the subject in private  (http://www.telegraph.co.uk/news/politics/margaret-thatcher/6906503/Margaret-Thatcher-complained-about-Asian-immigration-to-Britain.html).

On Europe she went through the following metamorphosis:

–          1975 she campaigned and voted for Britain to remain within the European Economic Community (EEC – the EU was only formed  by  the Maastricht Treaty in 1993).

–          By 1980 she was convinced that the EEC was not  acting in Britain interests.

–          By 1986 she had  signed the Single European Act giving the EEC immense powers to interfere  with Britain’s sovereignty.

–          In the late 1980s she adopted the policy of enlarging the EEC which meant that a vast new swathe of workers from poor countries would be allowed free movement within the  EEC.  The effects of this also allowed the federalists to press for things such as Qualified Majority Voting on the grounds that the EEC/EU had become too unwieldy to operate under the original  rules and to generally press forward with the creation of a United States of Europe.

–          In 1990  she took the UK into the Exchange Rate Mechanism (ERM)  despite being opposed to a single currency to which the ERM was a stepping stone with the pound effectively shadowing the Deutschmark.

The idea that Thatcher only realised what the EEC was after taking office in 1979 is simple nonsense. Thatcher’s speech to the  Conservative Group for Europe at the start of the Wilson referendum on the EEC clearly shows her viewing the EEC as far more than a  simple free trading area, viz:

That vision of Europe took a leap into reality on the 1st of January 1972 when, [ Edward Heath] Mr. Chairman, due to your endeavours, enthusiasm and dedication Britain joined the European Community.

 * The Community gives us peace and security in a free society, a peace and security denied to the past two generations.

 * The Community gives us access to secure sources of food supplies. This is vital to us, a country which has to import half of what we need.

* The Community does more trade and gives more aid than any group in the world.

* The Community gives us the opportunity to represent the Commonwealth in Europe. The Commonwealth want us to stay in and has said so. The Community wants us.

 Conservatives must give a clear lead and play a vigorous part in the campaign to keep Britain in Europe to honour the treaties which you, sir, signed in Britain’s name.

 We must do this, even though we dislike referenda. We must support the [ Harold Wilson] Prime Minister in this, even though we fight the Government on other issues.

 We must play our full part in ensuring that Conservative supporters say “Yes to Europe”. (http://www.margaretthatcher.org/document/102675).

In any case, the Treaty of Rome left no room to believe it was merely a free trade organisation.  No one could read that and be in any doubt  that the intention was to create a United State of Europe. Thatcher, the supposed obsessive  who was a stickler  mastering a subject,   should have read it before the referendum.

As for global warming, she started the ball rolling whilst in office and then reversed her position in her autobiography published in 2003. Here she is speaking to the  UN general assembly, in November 1989:

“What we are now doing to the world … is new in the experience of the Earth. It is mankind and his activities that are changing the environment of our planet in damaging and dangerous ways. The result is that change in future is likely to be more fundamental and more widespread than anything we have known hitherto. Change to the sea around us, change to the atmosphere above, leading in turn to change in the world’s climate, which could alter the way we live in the most fundamental way of all.

“The environmental challenge that confronts the whole world demands an equivalent response from the whole world. Every country will be affected and no one can opt out. Those countries who are industrialised must contribute more to help those who are not.” (http://www.guardian.co.uk/environment/blog/2013/apr/09/margaret-thatcher-green-hero)

By  the time she had published her political work Statecraft in 2003 she was thinking along these lines:

“The doomsters’ favourite subject today is climate change. This has a number of attractions for them. First, the science is extremely obscure so they cannot easily be proved wrong. Second, we all have ideas about the weather: traditionally, the English on first acquaintance talk of little else.

“Third, since clearly no plan to alter climate could be considered on anything but a global scale, it provides a marvellous excuse for worldwide, supra-national socialism. All this suggests a degree of calculation. Yet perhaps that is to miss half the point. Rather, as it was said of Hamlet that there was method in his madness, so one feels that in the case of some of the gloomier alarmists there is a large amount of madness in their method.” (http://www.masterresource.org/2013/04/thatcher-alarmist-to-skeptic/).

There were other issues where her public position was at odds with her actions, for example, the troubles in Northern Ireland and the rule of law. Thatcher claimed that there would never be a surrender to  IRA terrorism.  Yet after she narrowly escaped death in the Brighton Grand Hotel bombing in 1984 (12 October)  the Anglo-Irish agreement was signed little over a year later in November 1985 giving the Republic of Ireland government  a say in what happened in Northern Ireland and committing the British Government to accepting the principle of a united Ireland if a majority were in favour. (http://news.bbc.co.uk/onthisday/hi/dates/stories/november/15/newsid_2539000/2539849.stm). There was no obvious reason for such a change of heart beyond the fear generated in Thatcher by the bombing of the Grand Hotel.

As for the rule of law, far from respecting it as she claimed, she laid the basis for the ever increasing authoritarianism of the British state by permitting the police to act unlawfully during the miners’ strike by stopping miners and their supporters from travelling across the country and turning a blind eye to any police excesses as they clashed with the miners and their supporters.

A politician of conviction? Only if you define  someone as such who runs from one position to another while vigorously embracing each  successive position regardless of its  contradiction of a previous  advocated policy or set of ideas.

Nor was she someone who would take responsibility for her actions. When she found her policies were a disaster she either claimed she had been badly advised or cheated (for example, the Single Market, global warming) or attempted to ignore the mess she had created  (for example, enduring mass employment and ) by misrepresenting it, or in the case of unemployment, using North Sea oil  tax revenues,  the privatisation receipts and blatant manipulation of the unemployment statistics to paper over the unemployment cracks.

Why did Thatcher get things so horribly wrong? 

Why did Thatcher get things so horribly wrong?  Her behaviour  strongly suggested that she was seriously lacking  psychological and sociological insight. This meant she constantly made horrendous mistakes such as trusting the EU over the single market and imagining in truly infantile fashion that millions of jobs shed from heavy industry and coal mining would be rapidly replaced by “modern” jobs in the service and light industry sectors.  Her record in choosing people to support or employ was also dismal.

Far from being a free thinker her cast of mind  made her the ready captive of an ideology:

“…as Leader of the Opposition MT once cut short a presentation by a leftish member of the Conservative Research Department by fetching out a copy of The Constitution of Liberty from her bag and slamming it down on the table, declaring “this is what we believe”. (http://www.margaretthatcher.org/archive/Hayek.asp).

It is dangerous to trust anyone who is  susceptible to ideological capture for the simple reason that all ideologies, whether sacred or profane, are inadequate descriptions of and guides to reality.    This means that ideologues constantly have to try to fit reality within the ideology rather than having  reality driving their choices.  Those which include economics are particularly dangerous because their reach is so vast.

Ideologies are the prime example of Richard Dawkins’ memes, mental viruses which capture the individual and direct their thought and behaviour.  Those who are captured by them by them give up their mental autonomy.  That speaks either of a character trait such as that of requiring a source of authority for choices or a  weakness of intellect which seeks ideological  algorithms  developed by others to answer political  questions because the person’s capacity to answer the questions by rational pragmatic examination based on their own knowledge and intelligence  is inadequate.

How good was  Thatcher’s mind? She  is frequently  represented by her adherents as ferociously intelligent.  This view  will not stand up to examination.  She read chemistry at Oxford but only achieved a second class honours degree (http://womenshistory.about.com/od/thatchermargaret/a/Margaret-Thatcher.htm).  Oxford at the time did not divide the second class degree into  upper and lower second classes  and had a fourth class honours division instead.  The old Oxford second  is generally taken to be the rough equivalent of an upper second.  That raises questions over her intellect.  Chemistry at degree level in the 1940s had not become heavily mathematized  as it now is.  Diligence would get a student a long way. This   quality Thatcher  reputedly  had in spades. If she did, the fact that she only took a second suggests that she was not very intellectually gifted. That is particularly the case when it is remembered that she went up to Oxford during wartime when competition for places was severely reduced because so many of the potential male students went into the forces rather than to university. A beta plus mind at best.

What people probably mistook for intelligence was her avid seeking and retention of data. But it is one thing to learn facts or arguments parrot fashion, quite another to mould them into a coherent intellectual whole.  Based on her frequent renunciation of previous positions, it is reasonable to assume that she simply did not have the intellectual wherewithal to put the data she took on board to any useful purpose. She certainly never  gave no indication that she ever saw the bigger picture.

There were also the question of her how fitted she was by experience to fill the role she played, that of the hard-core economic libertarian forever seeking ways of making people take responsibility for their lives both socially and in their work.  When I look at the present Tory front bench I have a similar feeling to that  which I experience when thinking of the Nazi leadership.  The Nazis had a rather noticeable lack of Aryan types amongst them: the present Tory front bench is remarkably short on people who have been entrepreneurs or indeed of people who have any great  experience of work outside the narrow confines of politics.

Margaret Thatcher was a forerunner  in this respect. She graduated from Oxford in 1947.  For the next four years she worked for various private companies as a research chemist. At the age of 26 she married a millionaire. He funded Thatcher’s career change from chemist to barrister. She took the bar exams in 1953 and practised (specialising in taxation) until 1961, the last two years of the period occurring after she was elected to the Commons in 1959.  After that it was all politics.

Thatcher’s experience of the real world of work is at best four years as a research chemist and eight years as a barrister.  However,  being married to a millionaire at the age of 26 rather dulls the idea of her living a normal working life.  The truth is she made her way not as a self-made woman but by the traditional route  for female advancement of marrying a rich man.

There was no need for Thatcherism

The really angering thing about Thatcher’s time in No 10 is that she could have done what she was elected to do, tame the unions, without engaging in the deliberate wholesale destruction and alienation of much of Britain’s heavy and extractive industry and the placing in private hands of the public utilities, especially those of gas, electricity and water.   This was because Thatcher had the great good fortune to arrive as Prime Minister just as North Sea oil and gas was coming on-stream in large quantities.  Those revenues alone would have provided any government with a very large safety net to finance temporary difficulties caused by serious confrontations with the larger trade unions.   She also enjoyed  the very large receipts from the big privatisations such as gas, electricity and BT.  No British government has ever had such a sustained revenue windfall as hers.

There was absolutely no economic need to destroy so much of British industry or place much of the state-owned  organisations  into private hands.  Continental countries such as Germany and Italy retained their shipbuilding; France,  Germany and Italy retained a native mass production car industry.  Germany still has a substantial coal mining industry. Privatisation proceeded at very different speeds throughout Europe.  That no other large industrialised  country followed Thatcherite policies  with anything like the speed or fervour of Britain  yet  survived and frequently out competed Britain economically  demonstrates that Thatcher’s policies were not a necessity but simply an ideological choice.

Her government could have spent the 1980s taming the unions sufficiently to prevent the excesses of the 1970s.  It is true that the very high level of unemployment  of the 1980s was an aid to this, but it was probably not the main rod which largely broke the Trade Unions’ back.  Home ownership had been rising steadily throughout the twentieth century and by the time Thatcher came to power in 1979 not far short of 60%. The highest it reached even after Right To Buy was only 69% – the idea that it was Thatcher who made it possible for the working man and woman to own their homes for the first time is another myth about her(http://www.telegraph.co.uk/finance/personalfinance/houseprices/10005586/Home-ownership-falls-for-first-time-in-a-century.html).  .

The fact that so many people were owner occupiers with mortgages  meant that they were much less willing than they had been to strike at the drop of a hat because they feared losing their home.  Even those who were not owner occupiers had much more to lose in terms of general comfort, security and prospects of greater opportunity for their children than had been the case before, say, 1939.  To take just one example, children from poor families had a greater opportunity than ever to enter  higher education. This growing reluctance to come  out whenever the union called for  strike  was why the National Union of Miners’ leader Arthur Scargill was not willing to hold a ballot of all  his members before calling a strike. He feared such a ballot would be lost.

The combination of this increasing  reluctance to strike amongst union members together with the legal restrictions on unions such as no secondary picketing and severe penalties for strikes called with a formal ballot would have been enough to end the anarchy which prevailed in the 1970s.

Apart from the social and economic upheaval of the Thatcher years, she can also be blamed for a continuation of the damage she caused both in the long term structural unemployment but also in the fact that she subverted  the Labour Party so that it adopted most of what was damaging from the Thatcher period, most particularly in the adoption of her devotion to laissez faire economics and in Labour’s all too ready acceptance of the EU  elite’s desire for comprehensive political and economic union.

The 1980s could have been so very different.  The revenue from North Sea Oil could have been put into a sovereign wealth fund which  by now would be worth hundreds of billions.  If  the Single European Act had not been signed the movement towards a  federal EU would have been halted in its tracks  (national vetoes applied to this area of decision making  at the time). If Thatcher had not argued for an ever wider EEC the poorer nations from the East would not have joined and the immigration threat they carry would not exist.  Indeed,   Britain could have left the EU entirely because the Tory Eurosceptics could have allied with Labour under Michael Foot or even Neal Kinnock. New social housing could have been built with the proceeds of Right to Buy thus obviating to a large degree the shortage of housing now.  If the nationalised industries had been sustained there would have been no serious structural unemployment.  Had proper attention been paid to the strategic importance of  essential economic areas such a food and energy self-sufficiency we should not be so dangerously reliant on foreigners for such things today.  Most importantly, if  that had been the general thrust of politics in the 1980s it is doubtful in the extreme that Blair and NuLabour would ever have arisen.

The tragedy of Margaret Thatcher is that she had a sense of patriotism and probably genuinely thought she was doing the best for her country at the time she implemented or advocated policies (her honesty when policies went wrong was  another matter).  The problem was that her judgement  and understanding was all too often hideously wrong or defective. She so often provided comforting rhetoric, especially on Europe and immigration,  but she never delivered the goods. The fact that she was such an overpowering political figure made things worse because it meant she could steamroller her cabinet on most issues at most times. It is difficult to think of another politician  in the past three centuries who wrought so much damage on Britain.

Housing: to the haves shall be given….

Robert Henderson

The central plank of the 2013  UK Budget  – boosting house building and sales activity –  was both morally disgraceful and criminally reckless. The Government proposes to underwrite mortgages to the tune of 20%  of the value for both first time buyers and those with properties who are trying to move up the housing ladder and from 1st April 2013, even more recklessly,  to provide loans of 20%  of the value of  new build properties up to the  value of £600,000  for three years from April 2014.   The loans will be interest free for five years after which  an annual fee of 1.75% will be levied on the government loan, with the fee rising  annually by the retail prices index (RPI) inflation plus  1%. The loan can be paid off at any time up to and including the time when it is sold. ( http://www.hm-treasury.gov.uk/10012.htm ). The amount taxpayers will risk on the underwritten mortgages is  estimated  to be  £12bn  with the full value of the mortgages underwritten  totalling  £130bn,  while £3.5bn of taxpayers’ money will be committed to the loans.

This policy is morally disgraceful because it is yet again favouring the haves over the have-nots . It is  made doubly offensive because  it is being done at a time when the Coalition Government’s attitude towards those in social housing  is increasingly shrill  with a constant portrayal of those in social housing as being parasites on the taxpayer because they do not pay the market rent for their properties while owner occupiers  pay their way.

The reality is rather different. Social housing tenants have long received far less subsidy than owner occupiers who have been granted  massive benefits by governments since at least 1969 when Roy Jenkins introduced Mortgage Interest Relief At Source (MIRAS).  MIRAS lasted until 2000 when it was ended by Gordon Brown.  In addition to MIRAS   owner occupiers receive  or have received these benefits:

1. Right-to-Buy (RTB). The gains from RTB both from a considerably reduced purchase price (way below the market value)  and the huge rise in property values in the period 1980 to 2008.  The rules to qualify were tightened and the discounts offered were gradually reduced in the period,  but have been boosted again by the Coalition Government which announced a discount of up to £100,000 in the Budget (http://www.standard.co.uk/news/politics/budget-2013-100000-off-righttobuy-a-london-home-8540690.html).

2. Private residence tax relief. No capital gains tax is paid on a property used as a private residence when it is sold.

3. No inheritance tax (IT)  is paid on a private property when it is inherited by a spouse who is resident in this country. Regardless of who are the beneficiaries, no IT is paid on a property if it forms part of an estate worth less than the inheritance tax exemption limit (£325,000 in 2012-13). No IT is paid on a private property if the private property has been gifted to someone else more than 7 years before the death of the person making the gift.

4.  Housing benefit for the interest paid on a mortgage.  This could be received by  someone unemployed or employed,  but with an income so low they qualified for housing benefit.

5. A surprisingly large number of taxpayer funded schemes  providing substantial grants, especially for energy saving improvements (http://www.freegive.co.uk/grants.htm).

6. The lax credit policies  from the mid-1980s onwards which allowed mortgage providers to grossly inflate property  prices before the 2008 crash by granting no deposit mortgages and even mortgages up to 125% of the purchase price.  In addition, “light touch” regulation of the banks and their ilk greatly increased the money supply which also inflated  property prices. Finally,  prices were inflated further by  the permitting of  massive  immigration during  the years of the Blair  and Brown Governments which added some three million to the UK population.

7.  Since the crash of 2008 successive British governments have offered massive  direct and indirect aid to those with mortgages. The direct aid has been  such things as mortgage  payment  holidays (http://www.guardian.co.uk/politics/2008/dec/04/brown-mortgage-interest-break-repossessions),  and indirect protection, for example,  keeping Bank Rate at microscopically low levels.

Whilst all this has been going on social housing has become ever scarcer as several million social housing properties have been sold off under RTB (http://www.politics.co.uk/reference/right-to-buy) and the provision of new social housing since the mid-1980s has been meagre in the extreme.

Criminal recklessness

Morally obnoxious as the policy may be, the fact that it is criminally reckless is even more worrying.  The almost certain short term effect of this taxpayer funded largesse is that house prices will rise because there will be more money chasing scarce housing.  This will make purchase even with the helping taxpayer hand more and more difficult, especially for first time buyers who will be tempted to pay over the odds because the terms look so easy and the participating mortgage lenders will be willing to lend more in the secure knowledge that the taxpayer will either cover a substantial minority of them mortgage or provide a buffer against future negative equity because of the  significant amount of equity resented by the taxpayer funded loan.  Suppose a house is purchased for £500,000. The purchaser pays a 5% deposit and the taxpayer makes this up to a  25% deposit with a 20% equity loan to the purchaser.  This leaves the private mortgage provider to find  £375,000. Provided the property can be sold for  £375,000 the mortgage provider will lose nothing.  If it is sold for just £375,000,   25% of the original purchase price (the total deposit) will be lost. The taxpayer would lose £100,000.

The intentions of the Government – to boost house building, enable first time buyers to get on the housing ladder and loosen up the property market generally – are likely to be undermined further because  it appears Britons buying second homes and foreigners will be able to access the taxpayer funded privileges (http://www.telegraph.co.uk/news/politics/9947031/Wealthy-homeowners-could-use-state-backed-loans-to-buy-second-homes.html and http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9952998/Foreigners-can-qualify-for-state-subsidised-mortgages.html)

The danger in the longer term is that the housing market will tank as the Irish and Spanish ones have done  and property  prices halve.  This is a significant  possibility,  because  apart from the general economic turmoil in the EU,  UK interest rates will have to rise substantially sooner or later  and this alone will suppress the market dramatically as very large numbers cannot meet their mortgage payments.   If  property prices do collapse it  will leave the taxpayer taking a severe  financial hit. Osborne is effectively betting the national farm on a recovery in the housing market.

What housing policy should the Government be pursuing?

I suggest this:

1. Use  the money they have earmarked for the underwriting of risk and the 15% deposits in new build properties up £600,000 to engage on a massive social housing building programme.

2. Put a tax on land held by property developers with planning permission while they refuse to build on the land as per the planning permission.

3. Ban Buy-to-let mortgages.

4. Introduce rent controls on private landlords. If rents were frozen for a number of years this should not impact too seriously on most private landlords, the majority of whom will either own their properties or have small mortgages on them . Even those with large mortgages should be able to survive in the low interest environment which looks as though it will continue to several years at least.  If they can pay the mortgage now they should be able to keep in paying it until interest rates rise significantly. By that time

All of those policies could be done whilst we remain within the EU. If we left the EU it would be possible to:

5. Deny all social housing to foreigners.

6. Ban foreigners from purchasing residential property.

7. Put an end to further mass immigration.

These policies will greatly increase the supply of housing in the medium term if not sooner . If even 1-4 were implemented  this would do a great deal to bring the cost of housing to a level where  those on the average wage could  afford to rent in most areas and

Governments bear the responsibility

For thirty years or more British Governments have been almost entirely responsible for the truly dismaying rise in the cost of property  both to buy and to rent  through a failure to ensure enough housing both private and social was built, by removing rent controls,  ending credit controls on mortgages,  failing to control mortgage  lending generally  and, most dramatically, by allowing mass immigration to add between three and four million people to the population in the past 15 years.

To understand exactly how inflated housing costs have become compare property prices today with what they were in 1955.  Then the average residential property price was around £2,000. Uprated for inflation the average price of properties today would be around £40,000.  (https://livinginamadhouse.wordpress.com/2010/10/24/the-vicious-poison-in-the-british-economy-is-the-outlandish-cost-of-housing/). Makes you think.  If that was the case now,  even those on half  of the average national wage (half of the present average  wage  would be about £13,000 ) would be able to purchase a property of some sort.

Public and private confusion (and, yes, there is an alternative)

I wrote Public and Private Confusion in 2006, before the credit crisis, before even Northern Rock was saved by the taxpayer. NuLabbour’s mania for privatising anything in sight was in full spate, mostly, because the Tories had privatized all of the great state industries,  through contracting out public services piecemeal and the greatly expanded use of private money in public projects to build things such as new schools and hospitals using the Public Private Partnerships (PPP) and the Private Finance Initiative (PFI). Public spending was still burgeoning , although anyone who looked closely at the still continuing fool’s paradise which was Gordon Brown’s boom could see that NuLabour’s public spending was seriously out of control as they looked at the deficits Labour had been running since 2002 – https://livinginamadhouse.wordpress.com/2011/10/02/labour-re-writes-the-past-their-economic-management/ . But the British public did not know the half of it when it came to the government debt being built up, because the frighteningly large PPP and PFI obligations were  still largely hidden as they were mostly off the government books Enron-style.

The latest quantification of PFI liabilities alone is £300 billion (http://www.guardian.co.uk/politics/2012/jul/05/pfi-cost-300bn) and that could well be an under estimate because of many of the contracts have renegotiation clauses at certain points and the PFI contractors,  or those who have bought PFI contracts as they are sold on by the original supplier,  hold the taxpayer over a barrel because the state no longer has the capacity to either undertake the work itself.  Even where a re-negotiation clause does not exist or does exist but the point is years away, it is a common PFI practice for contractors to threaten to walk away from a contract unless their terms are improved. There are also the costs arising where contractors do walk away from a contract and the state has to step in or pay another contractor even more inflated prices for the work.

The most troubling result of PFI costs is hospital trusts unable to fund themselves adequately because of the ludicrous amounts they have to pay for PFI work (http://www.dailymail.co.uk/debate/article-2165011/PFI-Cancel-contracts-MPs-signed-dock.html), but there is another major problem: the inability of PFI contractors to undertake work efficiently or, as we have seen with the G4S fiasco and their inability to provide security for the Olympics. So lax were their recruitment methods their chief executive could not say if all those recruited could speak English fluently  or even at all (http://www.telegraph.co.uk/sport/olympics/news/9399841/Olympics-I-dont-know-if-guards-speak-English-says-G4S-chief.html).

Despite a change of government, PFI contracts are still being signed in large numbers by the Coalition (http://www.hm-treasury.gov.uk/press_22_11.htm). More and more public core services which the vast majority of Britons would think naturally belong in public hands such as police support and large scale security operations are being taken from the public sector and given to private contractors. In addition, strategic assets such as the Government’s stake in stake in nuclear power giant Urenco continue to be sold off (http://www.telegraph.co.uk/finance/newsbysector/energy/8817089/Taxpayers-3bn-windfall-as-Urenco-nears-10bn-sale.html). In short, nothing but nothing, including even the armed forces, can be considered safe from the mania for turning public service into private business. The situation is substantially worse now than it was in 2006  in terms of the PFI debt being run up, the privatisation of essential public services by stealth (especially the NHS) and the intention to sell off  what remains of substantial public assets, most notably the Royal Mail,  in the medium term.

The purpose of Public and Private Confusion was and is to examine what needs to remain in public hands, what should be brought back into public hands, how public service might be improved and the effects of privatisation in all its guises.

Robert Henderson 23 July 2012


Public and Private Confusion

(And, yes, there is an alternative)

Robert Henderson 2006


1. Introduction

2. What are governments for?

3. Why do we need public provision?

4. Public provision is a good deal

5. The moral value of general provision

6. Why should those who can pay for themselves pay for others?

7. What things should be public?

8. What should be provided directly by the state?

9. What should be provided indirectly by the state?

10. The railways – a classic public service

11. Safety

12. Public and private efficiency

13. What do we mean by efficiency?

14. Private enterprise providing public service

15. Public service inefficiencies and politicians

16. Other public service inefficiencies

17. What should public service workers be paid?

18. The right to strike

19. The ability of private companies to manage public services

20. Private money in public projects – “Buy now, pay later”

21. The London Underground – PPP in action

22. Capita

23. The morality of privatisation

24. Our general experience of privatisation to date

25. Private money in public service = a democratic deficit

26. When private becomes public by default

27. Corruption in public service

28. The behaviour of private companies

29. Charities

30. Does the market produce greater choice generally?

31. How government takes on obligations

32. Making personal private provision – the problems of investing

33. Supporting old age

34. The housing crisis

35. Social housing

36. Education ?

37. Healthcare

38. The Post Office and Royal Mail

39. How do we pay for better public services?

40. Does social provision corrupt?

41. Why is public provision being repudiated?

42. The nation state – the only vehicle for democracy

43. The future of public provision

44. Conclusion

1. Introduction

I was provoked into writing Public and Private Confusion both by the Blair Government’s manic dismantling of directly provided public services and increasing signs that political support for public services however provided is waning.

Those with a public voice who oppose such developments all too often wail and gnash their teeth and say how unfair and immoral it is but fail to provide detailed arguments against those who have swallowed the propaganda of private is always best. They lament privatisation and the increasing introduction of private money and

companies into public services, yet defend their position solely by moral exhortation and displays of emotion, as though to merely be on the side of direct public provision, any public provision, is argument enough.

How did we reach this state of affairs? The four decades after 1945 seemed to have made substantial public provision part of the national furniture. Even the Thatcher years did not seriously suggest that it would be generally undermined. The privatisation of the nationalised industries were one thing for Thatcher; services such

as the NHS and the Post Office quite another. Her government was driven by the batty idea of introducing entirely inappropriate private enterprise practices such as the NHS “internal market” into public service, but there was through her long period in office no reason to fear that fundamental services like the NHS and Post Office would be privatised. Indeed, Thatcher said that the privatisation of the Post Office would be “a privatisation too far.”

The consequence was that the supporters of public provision became smug. They assumed that the core elements of public provision were inviolate and consequently not in need of defending. Most damagingly, at the political level they failed to prevent both the Labour and Tory Parties from being firmly captured by those determined to introduce the supposed panacea of the disciplines of the market into public life. By the time Blair came to power in 1997 the supporters of direct public provision in politics and the media found themselves marginalised.

Since 1997 it has become increasingly clear that direct public provision is viewed by those in control of the major political parties as a bad thing in itself and that the only way forward is to subcontract private companies to do the work the state was previously doing. This is a consequence of several things: the failure of greatly increased public spending since 1997 to improve public services; the increasing demands of the EU to reduce direct state funding; and the seemingly religious belief in globalism displayed by Blair himself. (I expand on these issues in section 41).

To facilitate the move from direct public to subcontracted public provision, the public is being fed a continuous diet of bad news about the directly provided public services by the mainstream media, the majority of which is all too willing to climb on the “public service bad, private enterprise good” bandwagon. (The mainstream media has overwhelmingly bought into the free-market propaganda – ask yourself, when did you last read a newspaper article or watch a TV programme which concluded that “free markets” and “free trade” are undesirable because of their adverse consequences for substantial parts of the populations of the First World, whose natural employments are lost and whose lives are made generally insecure).

Because of its natural importance and central place in the hearts of the electorate, the NHS is the biggest and most gory source of “shock horror” stories. Every horror story about the NHS is paraded on the front pages, while the frequent errors made by private medicine rate barely a mention. The fact that any organisation as gigantic as the NHS – it employs the better part of a million people – will inevitably be the source of regular errors is barely mentioned and almost no attempt is made to place the level of failure in that context. Not only that, many of the “scandals” are less than scandals when they are looked at in detail.

There is also an increasing loud and ever more unguarded attempt by politicians and sections of the media to suggest that the Welfare State is “too expensive” in its present form to survive and that people must make much more private provision for things such as pensions and healthcare.

Sadly, the direct public provision case is now largely going by default, which is enraging because it is very strong, both as a moral necessity for a civilised and free society and as a practical necessity to maintain the efficient functioning of a modern industrial state. That is case which I have attempted to supply.

2. What are governments for?

The traditional areas of government have been defence, foreign affairs, policing, the provision of justice, the execution of legal judgements including criminal sentences, the collection of taxes and the allocation of those taxes to the public enterprises mentioned above. But long before the rise of the modern industrialised state, the more organised and effective governments recognised that something beyond this minimalist role of government was desirable, not least because underlying any society is a fear of civil disorder (which might overthrow the status quo) and crime if there are too many have-nots (this was one of the primary reasons for Imperial Rome providing a daily dole of bread to its citizens.) England has had a legally enforceable national welfare system since 1601. In the sixteenth century, enclosure of mediaeval open fields and the dissolution of the monasteries drove many from the land and removed most of the informal welfare system which had long existed through the charitable works of monasteries. The consequence was the creation of a large number of “sturdy beggars” (a substantial rise in the population of England at the time was a considerable aggravating factor). This drove the Tudors to introduce various Acts which attempted to both restrict the movement of the poor and to provide for them. These efforts culminated in the 1597 and 1601 Poor Laws. These Acts, for the first time anywhere in the world, created legally enforceable provision for the poor for an entire nation (although it took half a century or more to get the Poor Law generally enforced).

Along with the fear of social disorder ran the natural feelings of pity and moral obligation, feelings bolstered by the custom of hospitality and of a religion which enjoined a duty of alms-giving to the poor. Such sentiments were gradually assimilated into public policy.

Of course, the national and political desire to provide for the poor and the unfortunate has been massively enlarged in the centuries since the Elizabethan Poor Law was passed. In Britain, we think that everyone in our society should have the necessities of life – food,shelter, warmth, clothing, preferably from their own efforts in part or whole, but where necessary from the taxpayer. The vast majority of Britons believe that these things are desirable, although there are differences of opinion over the extent and nature of the provision.

But most Britons – both at the political level and as a large majority of the population – also think that a good deal of other state provision should exist, not merely for the poor or unfortunate but for every citizen. We recognise that there are other things which the state should do beyond maintaining the integrity of the state and providing the basic means of subsistence. These are enterprises which are deemed to be both for the public good and in need of public action because private provision will not do them at all or only do them inadequately.

We expect the roads to be maintained by the state because that increases the efficiency of commerce and industry and enhances private life (most of the population probably think the same of railways.) We believe that no one should be left without medical treatment within the limits of what can be reasonably afforded. We think it necessary that the population should be educated to a certain level because that is essential for the individual’s chances in life and because a modern industrial society requires educated people. The more thoughtful see education as a civilising process which has general value for a society.

Equality before the law, or even justice itself, is a special case of social provision because it requires social provision for it to exist. Unless the state provides the means for each individual to have equal access to the law to remedy a wrong and to have equal access to professional legal assistance when they are a defendant in either a criminal or civil case, there is no equality before the law. All legal assistance must be free, because otherwise there is no equality for an individual will either not be able to afford the assistance or be deterred from seeking it because of the cost.

Law exists to provide a peaceful alternative to private action to right hurts and no defendant has a choice of whether they are defendant. Those two facts should be remembered by those who balk at the idea of universal legal aid. Sadly, legal aid in Britain, although still generous compared with many countries, is inadequate and is being reduced.

All social provision, from the supplying of basic needs such as food and shelter to education, has a further role. In a reputed democracy, each person is supposed to be an autonomous human being capable of both existing and of making decisions about who shall govern and what shall be done. A person constantly wracked with the uncertainty of poverty and the fear of ill-health or insecure employment will have little time to devote to anything other than surviving. A person denied a formal education will probably be illiterate and have a poorly developed intellect. To possess such disadvantages in our world is effectively to be excluded both from the more comfortable and influential parts of society and, consequently, from politics. And such disadvantage follows down the generations, with the children of the poor taking on the privations of the parents.

If we are to have a meaningful democracy, or more exactly a representative system (elective oligarchy) which allows the masses to exercise meaningful democratic control over the elite through their votes, every member of the electorate has, ideally, to be in a condition whereby they both have the time to consider matters beyond the everyday and the education to understand matters of public policy. The ideal is of course unobtainable, but many more will be brought closer to such a condition if supported and encouraged by public provision than if left solely to the vagaries of private provision. It is worth noting that historically elites have generally been opposed to expanding the intellectual world and material standing of the masses. There is a good if immoral reason for this: the poorer and less educated a population, the easier it is for the elite to control it.

3. Why do we need public provision?

Why do we need public provision? Why cannot we live in the type of world envisaged by extreme libertarians, who imagine that everything could be supplied through private arrangements and charity? The short answer is that private provision never provides universality of provision or anything approaching it. We know this because all the experience of history shows no case where private provision has met the general need.

Most societies at most times have had no state provision for welfare. In those societies private charity has invariably fallen not merely short but far short of meeting need. Periodic famine, illiteracy, untreated illness and poverty have been the all too common lot of the masses throughout history. Unless a society is willing to allow people to starve, suffer and remain uneducated – and no politician in a modern western country would openly espouse such an idea – the only answer is state provision to assist those who cannot afford to pay or who are unable to find charity. Consequently, it is pointless asking the question could private charity and individual effort provide a better general service in the provision of this or that vital service than public enterprise because private charity and individual enterprise will and can never provide comprehensive provision.

The extreme ideologues who advocate private action as the only legitimate means of providing social goods invariably fail to meaningfully acknowledge the elephant in the room, namely, what happens to those who are unable to buy what they need or who cannot obtain charity? When pressed they claim that the abolition of tax, or at least its reduction to the low levels needed to maintain a minimalist state, would allow charity to rise to a sufficient level to meet all demands for social provision. The fact that this has never happened in the entire history of the world does not concern them. Like Marxists who still claim that communism only requires the right circumstances to be realised, the supporters of private provision remain convinced that their utopia is just waiting to be realised if only society was ordered by their rules (It is worth noting that a utopian libertarian society could only exist if all other political ideas were suppressed).

What can we say to these vaulting optimists who appear to be oblivious to the facts of human psychology and sociology? These extreme disciples of the free market, civil society and private charity should remember that even the Messiah of laissez faire economics, Adam Smith, allowed that there were things of purely economic concern which could not be left to private provision because it was inadequate, for example the maintenance of the roads. Smith also recognised that there was more to life than economic relationships and that the social consequences of economic decisions sometimes mean that unfettered economic arrangements are unacceptable, for example, in the provision of war materials which have a strategic value as well as an economic one. In more modern times, one of the creators of neo-liberalism, F. A. Hayek, acknowledged the need for public support of the needy, for example, “We shall again take for granted the availability of a system of public relief which provides a minimum for all instances of proved need, so that no member of the community need be in want of food or shelter” (The Constitution of Liberty Routledge pp 300-301).

It is difficult going on impossible to envisage a time when the poor (relatively speaking) will not be with us. In the most benign social circumstances, there will always be substantial numbers who through illness, injury, age, bad luck or general incapacity will need and deserve taxpayer provision. To take but one example of a widespread and unalterable disadvantage: approximately 10% of the population of Britain have IQs of 80 or less. An IQ of 80 is the point at which most psychologists consider an individual begins to struggle to live an independent life in an advanced modern state such as Britain. Because of the way IQ is distributed – more or less as a Bell Curve – most of that 10% will always be drawn from the poorer sections of society (attempts to boost IQ with enhanced environments, for example Headstart in the USA, have persistently failed to do so by more than a few points and often the gain is not permanent. The implication is that IQ is to a large extent genetically determined). The low IQ poor will be likely to need substantial social provision because their families and friends will not have the resources commonly available to the low IQ individuals within better-off families. If substantial public provision is not available to them, the likely outcome will be increased anti-social behaviour from those unable to cope or earn a living capable of supporting them. The moral to be drawn is that any society should, simply as a matter of prudence let alone morality, provide a viable life for all of its people, not merely the fortunate or able.

There is a further consideration: the responsibility of governments for the general conditions in which people live. For example, the position of low IQ individuals in poor families is considerably worse now than it used to be. British Governments over the past 25 years have changed, primarily through a commitment to free markets and free trade and increasingly uncontrolled immigration, have removed many of the circumstances which previously gave Britons with a low IQ the chance of living an adult life largely independent of the state.

Manual jobs, especially in heavy industry, long-established working-class communities, cheap housing and a tight labour market have all been greatly diminished or have vanished altogether.

Mass immigration, especially from the new EU members, is especially disadvantageous for the low IQ, low skill Briton. The immigrants, even the well-qualified, are happy to take the low paid unskilled jobs which would be suitable for those Britons with low IQs. They do this because the money they can earn in Britain doing a menial job is considerably more than the average wage in their own countries. For example, £3,000 a year in Poland is a good professional salary. A Pole earning even the minimum wage in Britain can often save that in a year because his money will probably not be taxed and he will be living either in squats or in very overcrowded conditions which cost him little. (Give native Britons the chance to save the equivalent of a doctor’s salary in Britain by working in a menial job in a foreign country and watch them flock there.)

The consequence for the low IQ, low skilled Briton is not only competition for the sort of jobs he or she has traditionally filled but reduced wages and even exclusion from part of the British job market altogether, because certain types of job become effectively reserved for immigrants of a particular ethnicity – this is particularly the case where foreign gangmasters operate for they commonly employ only people of their own ethnicity.

Of course, the effects of the actions of governments go far beyond the low IQ individuals in a population. To take another example which affects most, if governments engineer, as has happened in Britain, a decline in the state education system through demands that the same formal school exams must be sat by all pupils or that 50% of school-leavers should go onto higher education, then the politicians who introduce the policies take upon themselves the responsibility for any inability of the ill-educated to lead productive and socially useful lives. (A fully discussion of the problems with education can be found at section 36).

4. Public provision is a good deal

The essentials of life are food, water, clothing, shelter, healthcare and a livable income in times when a person cannot work through want of a job, disability, illness or old age. Most people most of the time can afford to pay for shelter, food, water, heating and clothing from their private resources. Most could not afford the rest of the essentials and very few indeed could survive long term unemployment without state aid.

It is important to realise what small incomes the majority of Britons have. Take these figures from the Government’s Regional Household Income Comparison 2004:

“Inner London had the highest disposable household income (after tax) per head of population (£16,500) in 2004. The area continued the trend of previous years and in 2004 was 29 per cent above the UK average of £12,800. This was lower than in earlier years. In 2000 it was 36 per cent higher than the UK average. Tees Valley and Durham in the North East had the lowest household income per head at £10,800. This was 16 per cent below the UK average in 2004.” (http://www.statistics.gov.uk).

The uncomfortable truth is that even the average disposable British household income is insufficient to comfortably bring up a couple of children, pay an average mortgage and make substantial pension contributions. Worse, much of the population has less than average household incomes, many very substantially less. But even those with household incomes substantially above the average – many of whom support the idea of private provision for those “who can afford it” – would find themselves deeply embarrassed if they did have to meet the cost of everything they now receive from the state.

To take a concrete example, that of a middle class husband and wife with two children with a net annual household income of £40,000. At present they can, if they choose, educate their children free at state schools. The entire family can be treated under the NHS. Until they are sixteen, the children will not even pay prescription charges. If their children go to university, as they probably will being middle class, much of the cost of the education will still be met out of taxes (tuition fees even at their new levels do not come near to meeting the full cost of a university education). If either parent falls ill or is injured, the taxpayer will provide basic support. The same applies in the case of unemployment. If any member of the family isunfortunate enough to be the subject of a criminal assault, the Criminal Injuries Board will compensate them. The family will receive child benefit which is not a means tested benefit.

Just imagine what it would cost to either provide such services by buying them directly or through insurance if one could find an insurer willing to issue cover.

A decent private day school education would be at least £12,000 for two children and could well be a good deal more. A university education would cost tens of thousands of pounds. Private health insurance for a family to cover everything covered by the NHS cannot be obtained, but even the best that could be purchased – and it will provide a much inferior cover to that of the NHS – would cost several thousand pounds a year and will not cover existing conditions either at all or for several years – those who doubt this should check out the BUPA website and see what even their most expensive plan does not cover (you will get a very nasty shock). Drugs, including prescription drugs, will have to be purchased at their full cost. If the family has a member with a chronic condition requiring regular treatment or a condition requiring expensive one-off treatment, they will soon find their private insurance will not cover the treatment or will do so for only a restricted period. Mental health problems and long term nursing care are rarely if ever adequately covered by private insurance. Where private insurance will not pay, the family will be left with bills which at best will severely constrain their lives and at worst bankrupt them. (The most common cause of personal bankruptcy in the United States is medical bills.)

Private insurance for sick pay and unemployment pay is both very expensive and strictly limited in the time it is paid – a year is normally the longest period covered. The same applies to mortgage insurance cover. There would be no child benefit or criminal injuries compensation available without public provision.

If the cost of providing for the family is restricted to just the items discussed above the family would be hamstrung by the bills even if no major disaster such as a serious operation hit them. A mortgage to purchase even a modest house in most areas would be out of the question. University education would become a very big gamble for the children.

If a major disaster did hit the family, they would not be able to cope for an extended period because any private insurance they could purchase would soon run out.

The family I have described is by normal standards comfortably off. It might be able to struggle along provided it did not hit a catastrophe which robbed the household of its breadwinner(s) or an emergency such as a serious medical condition which swallowed up vast amounts of money, but it would not be a materially comfortable or psychologically secure family. Most families (and individuals) have considerably less income than this fictional family and a substantial minority live on an income well below the average, while half the British adult population have no meaningful savings or occupational pensions. The large majority of the population would be utterly unable to provide for themselves in times of hardship such as sickness, old age and enforced unemployment.

Those who claim that all the poor in Britain are only relatively poor should reflect on this stark statistic: the latest Inland Revenue figures for marketable wealth distribution ( 2002) show the top 1 per cent own 23% of national wealth and the bottom fifty per cent of the population have a staggeringly small 6% (Office of National Statistics (ONS) website – published 2004).

In short, the majority of the British population live as they have always lived: from one pay packet to the next. They do not have the resources to withstand the withdrawal of state provision and are very vulnerable to the competition of immigrants and offshoring, which either destroy their employment or reduce their pay.

What applies to what might be termed social provision applies to all other public charges – such as defence, policing and the justice system. Most individuals do not have to bear the full cost of these because they pay far less tax, direct and indirect, than is needed to finance a per capita share of total public expenditure. A quick calculation will demonstrate this. The projected public expenditure for 2006/7 is £488 billion. There are approximately 45 million adults in Britain. £488 billion divided equally between them runs out at nearly £11,000 per adult head.

The future is even bleaker because of the absurd cost of housing, the rising cost of a university education and the likely high cost of energy and water supplies. There are even suggestions in current price movements that cheap food may be a thing of the past and the price of manufactured goods from China and its Asian cohorts is also showing signs of inflation as their populations’ wages and living standards rise and they consume more of what they make.

The effect of everyone “paying their way” just for things such as education and healthcare would have a severely depressive effect on already dangerously low Western breeding rates as people had fewer children because of the increased costs falling on the individual.

5. The moral value of general provision

If public provision is necessary should it be available to all? Why should it not be granted only to those who through a means test show that they cannot support themselves from their own resources? The answer is threefold: personal dignity, practicality and the engendering of social cohesion.

Anyone who has had the misfortune to claim means tested benefits or who has assisted someone to claim will know what a frustrating and degrading experience it can be. The rules relating to claiming are Byzantine in their complexity and a simple error on a form (which can run to 20 pages or more) can result in benefit being withheld or delayed. But even when the forms are correctly completed and the criteria for the benefit are met, the delivery of the benefit is frequently seriously delayed because the volume of claims and their complexity simply overwhelms the administrative capacity of the public servants dealing with them.

If all public provision was means-tested, including NHS treatment and education, the administrative cost would be massive and the efficiency of the delivery of the provision greatly reduced. The additional administrative costs would have to be set against any saving gained by denying provision to people.

General provision also underpins social provision. Where all are eligible, all feel that they have a stake in the Welfare State. That improves social cohesion. Exclude the better off and the odds are that eventually political circumstances will arise which allow those with the power to reduce or even destroy utterly public provision. At best, if social provision is seen as only for the poor, it will gain a stigma and the quality of the provision will be of little or no account to those who do not benefit from it.

The provision of public services gives everyone rich or poor the assurance that if the worst comes to the worst they will not be utterly without the means to live. That is the bottom line of having the privilege of being a British citizen.

Apart from simply making life more pleasant and secure, a socially cohesive society has considerable cost benefits, because it will experience less anti-social behaviour. That translates into fewer police, fewer trials, fewer people in prison and, indeed, fewer laws to moderate social behaviour to administer – regrettably many laws are passed in response to moral panics.

6. Why should those able to pay for themselves pay for others?

The most obvious reason for not allowing anyone to opt-out from that part of taxation which is devoted to public provision is that no one can be absolutely certain that they will not meet some calamity in the future which will leave them unable to pay. The experience of medical care in the USA shows how easy it is even for the rich to find their wealth shrinking to a point where they cannot get all the treatment they need – the Superman actor, Christopher Reeve, one of the highest paid Hollywood actors, found his resources exhausted within a few years of suffering the injury which paralysed him.

But there is a more subtle reason. The wealthier members of society should always remember that they owe their privileged position to the restraint of the have-nots and the power structures of society which are overwhelmingly weighted in favour of the haves. Individual effort and talent do of course play a significant role

in the lives of everyone, but it is also true that most people’s lives are to a large degree determined by the circumstances of their birth. If you are born into a wealthy family, the odds are you will live the life of the wealthy throughout your life. A person born into poverty will probably remain at the bottom end of the social spectrum. The same applies in varying degrees to those born between the top and bottom of the social pile.

No one needs academic studies to prove the truth and potency of inherited advantage. All people require is the evidence of their own experience. Let any man examine the lives of all those he knows and he will find that most will occupy a similar social position to their parents.

A simple way of understanding how much inherited social position determines lives is to consider crime. Proportionately, the working-class commit crime much more often than the middle classes (and even within the working class the frequency of offending rises with the degree of poverty). That cannot be because the working class are innately less able, intelligent or self-controlled, because we know that many of the middle class are also dim, incompetent and socially inept, yet they rarely end up with a criminal record.

The only plausible explanation for the greater criminality of the working class can be their different material and social circumstances. These are much more precarious than those of the better off. They lack money and the social network which eases access to better jobs, while the opportunities to intellectually develop that are commonly open to the middle class are denied them. Give every person the means to live a middle class life and crime would drop dramatically simply because the press of material necessity would not be there and because the alienation of the poor through being poor would have been removed.

The better-off also need to admit to themselves that there is no moral basis for inherited wealth. The person who inherits money and possessions has by definition done nothing to earn it. The person who earned the wealth, if it has been gained through moral means – and often wealth, particularly great wealth, has not been so gained – has a moral right to it, but no one else. The same applies to non-material advantages such as social connections.

There are, of course, those who attempt to treat inherited wealth as a moral matter. They claim that a person has the right through the consequence of ownership to pass on what he or she has to whoever they choose. That, of course, begs the question of how the wealth was obtained. But let us assume it was achieved entirely morally and by the direct efforts of the person – the best possible case for the supporters of inherited wealth. Even in that instance the effect of the transfer of wealth to others is to create a situation which is manifestly unfair, namely, the establishment of privilege for someone who has done nothing to earn it. Taken at the level of a society, that rapidly results in a permanent class privilege for the haves and their descendants. The fact that the development of hierarchies is an inevitable consequence of human society is neither here nor there when considering whether the consequences of a hierarchy is moral. Clearly the deliberate disadvantaging of some to the advantage of others is not a moral act, any more than enslaving a man is (the group now living who have by far the greatest moral claim to reparations are not the descendants of slaves but the descendants of the poor).

The American philosopher John Rawls in his book A theory of justice resurrected the idea of the social contract which was much in favour in the 17th and 18th centuries. He posed, in so many words, the question “Suppose a group of people were to form a society from scratch, what society would they favour if each person knew nothing about the other people and had no idea where they personally would fit, socially and economically, into the society?” He concluded that the only rational choice would be one in which people had equality because no rational man would chose an inferior position for himself and no agreement would ever be reached which created an unequal society, whether in terms of social status, rights and duties or material circumstances.

Note that Rawls did not rule out a man or woman choosing an unequal state – some might do so thinking it would be worth the gamble to have a chance of gaining one of the favoured positions in an unequal society – he merely thought that it would not be a rational or normal decision.

Although Rawls’ hypothetical state (“The Original Position”) was not realistic, his thought experiment does demonstrate that what we have now as a result of the organic development of society is not what many, if any, would risk for themselves if they had the choice Rawls’ offered them.

Why not take away all inherited wealth? All of historical experience shows that such a cure is worse than the disease. Where the state controls (at least in theory) the totality of people’s lives, such as in the Soviet Union, the consequence is privilege and abuse not by the possession of money but by the wielding of state power. There

is also something peculiarly degrading about the idea that everything a person does is to be ordered and permitted by the state. A degree of private wealth is a bulwark against state power. The trick is to ensure that wealth does not become too concentrated in the hands of the few, producing an uncaring and oppressive plutocracy.

As for the wealth which individuals create for themselves, to tax to produce material equality would plausibly have a deleterious effect on society generally. If a person is not to benefit from their own legitimate enterprise, why should they bother to make any extra effort or take risks? The obvious answer is they have no incentive to do so. However, that is to take to nakedly a material view of humanity. Even in circumstances where what someone did had no effect on their income, people would vary considerably in their willingness to work regardless of the material outcome because personalities differ and there are rewards other than material ones such as the approval of others and celebrity. Nonetheless, it is reasonable to assume from the experience of communist societies that the overall effect would be to substantially reduce the individual will to work and take risk.

Of course, absolute material equality is improbable in any society, but the disincentive effect applies incrementally as the personal tax burden grows. Once tax reaches a certain level people either work less or become dishonest and evade the tax. That applies not only to the obvious case of the entrepreneur but to jobs generally, for people will be generally disinclined to take the more demanding jobs if the material rewards they offer are not significantly better than those for unskilled and easy employment.

It is also true that Man being a social animal will always form hierarchies because social animals necessarily organise themselves in that way (if they did not, sociality would never arise because the members of a species would be in constant antagonism to one another and could never reach the point of sociality). Even if all material advantage was removed there would still be the advantages and disadvantages of genetic inheritance, the differing qualities of individual parents and pure accidental circumstances, such as the work available at a particular time and place, to create a socially layered society with patterns of dominance and dependence.

But that does not mean that societies should simply be allowed to develop without any state intervention to ameliorate socially determined disadvantage. Without social provision of necessities the poor are left to live hopeless lives which struggle from day-to-day, while untaxed or very lightly taxed wealth of the most successful results in a plutocracy within a few generations.

Plutocracy at best produces wider private charity – which is always inadequate – and at worst an uncaring attitude towards the masses which sees nothing wrong in allowing them to starve if that is a consequence of the economic circumstances of the society and times or even simply God’s will. Plutocracy is in fact one of the most oppressive forms of society and one of the most difficult to end because it cunningly presents itself as being the society of individual opportunity (“the Ritz is open to all”) and is not nakedly oppressive in the same way that, say, Nazi Germany or Stalin’s Russia was oppressive. Consequently, there is no obvious focus for discontent, no single hate figure and it has a much greater enduring power than an overt dictatorship.

What a society can safely do to narrow the differences in life chances at birth is to act to ensure that all have access to education, healthcare and the means to live in a decent manner. That is the minimum. A society can go further with the greatest public resources being directed at those in the poorest circumstances, for  example, more money for schools in “sink” areas. It would even be possible to devise a scheme for those who inherit little or nothing by way of money or possessions to receive a payment from the state to remove to a degree the disadvantage of inheriting nothing.

7. How should public service should be determined?

It is easy in principle to decide whether something should be left to private or public enterprise. Simply ask five questions:

(1) Is the service or product generally considered to be a necessity?

(2) Will profit compromise safety?

(3) Is the service obviously inappropriate to be left in private

hands, for example policing or defence?

(4) Can the service be provided by private enterprise without subsidy?

(5) Can free enterprise be reasonably expected to deliver the necessity universally?

If the answer to any of (1)(2)(3) is YES or the answer to either (4) or (5) NO, then it should in principle be provided either directly or indirectly by the state.

8. What should be provided directly by the state?

Certain things should be reserved to the state as a matter of absolute principle. They are defence, foreign policy, policing, justice, the implementation of judicial sentences and decisions and the administration of welfare. They should be reserved absolutely because either they involve the use of force or the threat of force, punishment or the distribution of taxpayers’ money in areas such as unemployment benefit.

For reasons which I shall shortly examine, the state should also directly control any essential service which is a natural monopoly. What counts as a natural monopoly? Railways and utilities such as water and energy are examples They are natural monopolies because it is simply not practical to have competing lines running to the same destinations or competing utility pipes and cables supplying the same area.

It is possible, as has happened in some of the British privatisations, to allow different companies to compete to supply services such as trains, energy and water, but that is at best an insufficient or incomplete competition and at worst a wholly bogus one because the actual lines of supply – the railway track and the pipes or cables – still have to be maintained and owned by some organisation, private or public. That means the infrastructure has to be either owned publicly or, if owned by a private company, the company must be rigorously controlled by the state, as is the case with the British telephone landline infrastructure which is owned by the privatised British Telecom.

British government interference with natural monopolies since privatisation has gone far beyond controlling the infrastructure. In the case of the railways, a considerable public subsidy has been paid and continues to be paid to the private operators. In every monopoly industry a regulator has been appointed to control both prices and, in theory at least, to force companies to do things such as provide a certain level of investment in new equipment and to be conscientious when it comes to maintenance and operation of the infrastructure. To pretend that these monopoly industries are private companies working in a free market is patently absurd. They are effectively public services contracted out to private contractors.

A few services only work as monopolies, the classic example being the universal letter post, that is, letters delivered to any part of a territory for the same price. This only works if it is a monopoly because if there is competition from private companies or municipal postal services they will take sufficient of the profitable trade in the towns and cities to make it impossible for the universal supplier, in this country the Royal Mail, to subsidise the loss making deliveries to parts of the country outside the main urban centres. No private company would ever provide universal coverage unless they had a monopoly.

Why should the state directly control essential monopolies? Firstly, because there is no opportunity for meaningful competition and consequently the state must step in to prevent abuse of the monopoly position. To do that, as we have seen, it has to interfere very strongly with the running of the monopolies. In practice, it can only efficiently do this if it directly controls the monopoly.

If the state subcontracts an essential monopoly to private business or allows private business to buy a monopoly two general problems arise. The first difficulty is that a private business may at any point fail as a business or simply refuse to continue with a contract if it is not making money for the business. If that happens the state is over a barrel because it does not have the resources to immediately take over the enterprise, nor is it probable that another private company would be able or willing to step in at a moment’s notice – the worst outcome would be the cessation of a vital industry. Nor, if a company failed, is it obvious how a Government would prevent its assets being sold by a liquidator. In principle when Railtrack failed – the company which after privatisation had the responsibility for maintaining the infrastructure of the British rail network – the shareholders owned the assets (the railway infrastructure including much highly profitable land) and the creditors had a legitimate charge on them.

Clearly no government could allow the railway or vital industries such as water, gas and electricity simply to go under, either at the national or regional level. Hence, any government will, when shove comes to push, have to pay through the nose (your taxpaying nose in fact) to maintain the threatened industry, whether that be through enhancing a contract to make it more profitable, granting more profitable contracts to a new private contractor or through the payment of outright subsidies. A government is in a similar bind if a company is doing a bad job: they cannot simply sack them because who is to take their place?

Natural monopolies also raise other problems if they are in private hands. There is insufficient public control over areas such as maintenance and strategic planning. Good British examples can be found in the privatised water and energy industries. In the case of water the privatised companies have failed to invest adequately to stop the considerable loss of water from cracked pipes. Nor has a single major reservoir been built in England since privatisation. These investment failures have occurred despite the water companies consistently making healthy profits. The Water Regulator huffs and puffs but achieves little because the water companies know he can do little. Indeed, he has to date not even fully used the powers he has despite issuing many warnings to the water companies. And the Government? Well, they could pass a new law giving them direct powers over the water industry but what then? If a water company simply refuses to do what is needed where does the Government go? Nowhere fast is the answer.

With energy it is the strategic planning which is emasculated. Successive British governments have allowed Britain to sleepwalk into a position where the country went rapidly from being self-sufficient in energy to becoming a net importer. This was entirely predictable as it was known long before it happened that North Sea oil and gas was going to decline substantially from the beginning of the century. Despite this no meaningful strategic planning has taken place since privatisation with governments until very recently childishly claiming that it was not for them to interfere in the actual provision of energy now the industry is privately owned (the Blair Government has just woken up to the strategic danger of being dependent on foreign supplies but even now -2006 – no definite decision has been made on future British energy policy). The upshot of this lack of planning has been rapidly rising energy prices since 2005.

If water and the energy utilities had remained in public ownership, the fact that politicians had ultimate responsibility for them would have ensured that maintenance and strategic planning was not neglected because no politician or government could afford to be blamed for a water crisis or soaring power prices. Government could also subsidise  prices, something it cannot do now even if it chose to because of EU  competition rules. . The same principle applies to most of the privatised industries – take away the political responsibility and the profit motive rules.

Certain things are simply too important to be left to private efforts. Natural monopolies such as the railways, water and gas are literally essential to the survival of an advanced state such as Britain. Because of that stark fact alone they need to be treated as something much more than a commodity which can be simply left to the market. They should to be seen for what they are, strategic assets, and placed firmly under national control.

There is a further general reason why essential monopolies should be in public hands – the need for general provision. Left to private enterprise, even with an unfettered monopoly only the profitable parts of an industry would be supplied. Roads and railways would only be maintained if the traffic warranted it. Gas, electricity, water and telecommunications would only be supplied where sufficient profit could be made. The problem is we do not want roads and railways only over profitable routes, or the utilities such as gas and water supplied only to urban areas. We want them over the entire country. Only public provision can truly satisfy that need. Of course, private companies can have a duty to provide a general provision placed on the them but what if none is willing to take it or they take on the responsibility but then fail to meet it? The government then has to decide to either subsidise the company directly or to loosen the contract conditions to which the company has agreed.

The final type of enterprise which the state should always take in hand are those which experience tells us are beyond the resources of private business. Private enterprise can never be trusted to handle Tunnel. Margaret Thatcher insisted that no British public money would be involved and that private enterprise would bear the entire cost. It soon became clear that this was a nonsense. The Tunnel itself was completed but the companies which built it were not so much bankrupt as on another planet called Debt. And this was despite the very serious amounts of money pumped into the enterprise by the French Government,  both directly and indirectly. The situation was rescued, if one can dignify what happened with the word, by the banks and other  creditors rescheduling debts so far into the future that they all but vanished and the French Government surreptitiously pushing in more money via the French banks. To this day, the Channel Tunnel is the whitest of white private enterprise elephants, with the latest ” debt restructuring” always just around the corner.

Direct provision also has a further benefit. While assets are publicly owned and employees directly paid by the state, it is politically much more difficult to reduce or abolish that part of public provision. If the provision is supplied by a private company their contract can simply not be renewed or cancelled. If the provision is directly supplied, the government has the ticklish problem of having to take responsibility for the redundancies, something which greatly raises the profile of the removal of the provision.

The best example of the dangers of losing direct provision is the gradual privatisation by stealth of the NHS. To suddenly privatise the entire NHS would be impossible, but salami slice it over ten or fifteen years by continually increasing the private sector involvement and the position is completely different. Then the politician can use excuses such as “So much of it is in private hands now that the rest might as well be,” “We can’t have such a comprehensive service because private companies can’t provide it” and “Costs have risen so much that we have to cut this or that”. The whole system will be such a confused mess of public and private that the public will not know what to think. Also, the privatisation by stealth may have surreptitiously changed the way the public view the NHS so they see it no longer as a national institution but merely as a provider of medical care through disparate means. That in itself would reduce the moral outrage needed for any successful public protest.

9. What should be provided indirectly by the state?

Just because something is a necessity does not mean that the state must or should provide it directly. In fact, the less direct provision the better, because in a free society government should only touch that which it needs to touch. For example, whereas there are not many possible suppliers of air traffic control systems or railways, there are many possible suppliers of food. Government may safely leave food distribution to the private supplier and provide assistance where it is needed through payments to those in need. It should be noted that it is not the market or private enterprise which provides the general provision in cases such as food but the giving of taxpayers’ money to those who need it which provides the general provision.

Service is really the crucial criterion. Governments should become directly involved in industrial work very rarely – the exceptions are defence suppliers, utilities such as water, gas and electricity because of their status as natural monopolies and their immense importance. No nationalised industry making or extracting anything has ever been an economic success. Governments running manufacturers, farming or the extractive industries such as coal mining are neither necessary nor desirable, because private enterprise will always do the job adequately and more efficiently provided the economic circumstances are right,that is, vital industries are protected through tariffs, quotas or subsidies to the extent necessary to make them profitable.

But such vital industries are the Government’s business because they have both a strategic and a social and economic value. Consequently, governments do have is a responsibility to ensure that they are maintained.

Any country which cannot feed itself, produce all essential manufactured products and services, is not self-sufficient in energy and does not have substantial reserves of essential raw products such as iron ore, is constrained in what it may do both nationally and internationally and the greater the reliance of imports, the greater the constraint. Of course any advanced industrial state will not be completely self-sufficient, but it is possible for a country to have a large degree of self-sufficiency in the essentials especially food. With modern crop yields and modern animal husbandry, Britain could feed itself at a pinch if her market for food was protected to allow reasonable profits to be made by farmers using not merely the best or most convenient land, but the more marginal land as well.

Where a country is severely dependent on imports, as is the case with Britain, they are utterly at the mercy of international blackmail and events. Even the most powerful state in the world, the USA, is much restricted because of its reliance on imported oil. Such constraints have the most serious of consequences. Would George Bush  have invaded Iraq if the USA was not reliant on Middle East oil? I doubt it.

The free trade dream of buying where a product can be produced cheapest is based on the absurd premise that never again will international circumstances arise which will place any country at risk of war or blockade. There is also the question of what happens when raw materials run short and the scarce materials either remain in the countries of origin or go to the richest and most powerful countries with the rest left to go hang. Free trade is not merely a fantasy but a dangerous one in the long term.

There is also the economic and social case for protection. Cheap imports from countries which have labour costs many times below those of the mature industrial states, goods made cheap by state subsidies and plain old-fashioned “dumping” means that no company in the West is able to compete with the imports. The effect of allowing such imports is twofold: either the workers in the importing countries must take lower wages or, more probably, watch the obliteration of the domestic industry.

The same thing happens where mass immigration is permitted. If the immigration did not occur the wages for the type of jobs which immigrants take would be higher. That in turn would lessen or end the shortages of native workers willing to do them. For most jobs all that is needed to solve a shortage of labour is a wage sufficiently competitive with other employments to attract enough applicants. A good example in Britain are nurses: a shortage of native applicants a few years ago has been turned into a surplus now by a substantially increase in their pay.

The loss of jobs and suppression of wages through cheap imports, outsourcing, or large scale immigration has considerable social and economic effects. Those who lose their jobs either remain unemployed or take jobs which pay much less, are less secure and have lesser benefits. Those who remain in their jobs but whose pay is suppressed suffer similar difficulties. Both groups find their spending power is reduced. They pay less tax. If they are unemployed the Treasury is a net loser. New immigrants compete for scarce public goods such as free healthcare, education and social housing. Most particularly they compete most directly with the poorer native members of society who have most need of such social supports.

Poor pay, insecurity, unemployment and competition from mass immigration all place a severe strain on the social cohesion of a country.

Neither the Left or Right need recoil in horror at the idea of a judicious protectionism and a strong immigration policy. The Labour Party has been strongly protectionist throughout most of its history. The Tory Party was protectionist before the repeal of the Corn Laws in 1846 and protectionist again between 1931 and the advent of Margaret Thatcher. For most of their history both parties have been in practice opposed to mass immigration.

10. The railways – a classic public service

The railways in Britain are not simply a private enterprise. They are a necessity to maintain general economic activity. Take away the railways and a substantial part of those employed in London could not continue to work there because the roads will not take the extra traffic. The same applies, to a lesser degree, to other large cities and towns.

The railways also fulfill an important social functions in providing transport to those without cars, by reducing car use generally and moving much heavy goods traffic from the roads. Finally, railways have a strategic value in times of war or blockade.

Without massive public subsidy the railways could not be maintained. No national railway system in the First World operates without taxpayers’ subsidy. Parts of systems may be profitable but not the entire system. It is not that our railways would simply shrink if left entirely to private enterprise, most of the system would not run

at all. Commuter traffic is running at near capacity in the South East of England and fares are already so high generally that the massive price hike needed to meet the full cost of rail travel would result in a vicious circle of decreased traffic and decreased revenue.

The cost of maintaining Britain’s railways is simply beyond the private sector. Profit can be made on some intercity routes but that is about it. Even with the massive subsidies given to private companies since privatisation – ironically substantially larger than the pre-privatisation subsidies in real terms – private companies have signally failed to invest adequately. Indeed, the companies have radically reduced staffing levels – which may well have contributed to some crashes – and have constantly failed to meet their timetables.

The farce of the company with responsibility for railway maintenance immediately after privatisation in Britain, Railtrack, is a cautionary tale in itself. It created a completely different culture from that under the nationalised railways. Instead of employing most of the labour directly, they engaged subcontractors to do most of the work. The army of skilled workers built up by the original private companies and inherited by the nationalised British Rail was dispersed in reckless fashion and, inevitably, control over standards of maintenance became much diluted as it always does with subcontracting.

To put the cherry on the Railtrack story, the financial resources of the company, even with public subsidies, proved hopelessly inadequate. In 2002 the plug was pulled and it went into administration to eventually re-emerge restructured as a not-for-profit company  Network Rail. But before the administration was done and dusted, the taxpayer had to cough up a great deal of money to compensate  shareholders because the government was faced with legal  action by the shareholders alleging maladministration, an  action which looked as though it might not only succeed but in the  process wash some very dirty government linen in public over exactly why and how Railtrack went into administration.

11. Safety

There is a further consideration with public services – safety. It may be that the public will have greater confidence in, for example, a state run railway simply because it is state run. The public’s confidence might be completely unfounded but that would not matter: theconfidence itself is a valuable thing.

The experience of all privatisation has been to make money by enforcing massive job cuts. Of course there was overmanning during the nationalised industry days. The trouble is that the cuts made since privatisation have often gone beyond improving efficiency. They went to the limits of safety, and probably past it, in pursuit of profit. Maintenance staff were reduced and consequently maintenance was reduced. The facts which have emerged since the Watford train crash in 2000 shows beyond doubt that many of the people involved in rail track maintenance are inexperienced at best and completely raw at worst.

When the state does not take direct responsibility for a service which has inherent safety consideration, the danger is that governments will respond to any safety fears by imposing ever more onerous obligations on the private suppliers of the service. The private companies are also susceptible to being overly cautious after an accident has happened or a possible danger becomes the subject of public comment.

Train crashes in Britain have been thankfully rare under both nationalised and privatised regimes, but when they happened under the nationalised industry the government was able to keep the show on the road because the public had confidence that safety was not being compromised simply to save money. Since privatisation crashes have been met with absurd caution by both the bodies responsible for the infrastructure and the Government, with the national rail network being reduced to a farce after cracks in some rails were found after the Watford crash mentioned above. For the better part of a year, rail travel became a misery as hundreds of emergency speed restrictions were introduced and rails were tested for cracks and a massive programme of ail replacement was begun. The consequence  was horrendous delays and vast numbers of cancelled trains. The effects are arguably still being felt in 2006.

Perhaps the classic industry to which the safety consideration applies is the production of nuclear energy. Despite this this Government is saying that if a new generation of nuclear power stations is built it must be with private money and run by private companies. A clear case of  ideology – private is best – driving common sense out of the window. (It should be added that Labour said the same when in office.)

Foreign ownership further complicates matters. When a massive explosion devastated a fuel storage and refinery complex in Hemel Hempstead in 2006 and further parts of the complex were thought to be in danger of exploding, it was impossible to get the necessary information quickly because the company which owned the complex was French and no one with  sufficient authority could be immediately contacted.

12. Public and private efficiency

Having worked both as a civil servant and for private companies, large and small, I always raise a wry smile when the advocates of private enterprise claim, with a look of religious certainty in their eyes and the ringing voice of the true believer, that private enterprise is by definition much more efficient than public endeavour. In fact, private enterprise can be every bit as wasteful and often far more reckless than public service.

Take a couple of blatant examples of crass incompetence by private enterprise from the past ten years. The directors of a major defence and electronics company Marconi managed in a few short years to reduce the company from one with several billion pounds in cash reserves and astock-exchange value of some £30 billion to a company with billions of pounds worth of debt and shares which were effectively worthless after the creditor banks took ownership of what remained of thecompany.

How did Marconi management accomplish this stupendous feat? They decided that their highly successful core business of defence equipment was just too boring and “not now” for words and sold off most of this highly profitable business. They then ploughed into telecommunications, a business in which they had little experience, which was “utterly now” and “obviously” on the brink of a mobile phones bonanza. There they caught not so much a very bad cold butcommercial double pneumonia.

The second example is the assurance company Equitable Life. In the 1980s and early 1990s this firm offered financial products with an attractive guaranteed return. Unsurprisingly, they proved very popular. Come the time to meet these obligations Equitable found they could not do so. They tried to renege on the guaranteed return promise but, after several years of legal battles, the House of Lords decided against them. At that point they were arguably insolvent. Instead of going into administration, they began a series of actions which made a mockery of that for which they supposedly stood – assurance.

For fear of trading fraudulently or even whilst insolent – any new business might well have been considered fraudulent because of the possibility of a failure to meet existing obligations – they closed their books to new business. Then by stages – the torment for the policy holders was extended – they reduced payouts to those who had not had the guaranteed return and by stages considerably raised the penalty for clients taking their money out of the Equitable. Their customers were left with the ghastly choice of losing a large slice of what was already a reduced pot of money or taking a much lower income. Most choose the latter course. Equitable said in so many words take what we offer or be fined (or even worse, drive us into liquidation and lose most or even all of what is left). Those unlucky enough to be coming up to retirement during this time were left with pensions and lump sum payments much less than they reasonably anticipated when they took out the policy and substantially below the level which could be blamed on the general stock market fall. All of this was of course quite legal, but the shareholders who did not have the guaranteed return could have had no inkling of what might happen to their policies when they took them out.

I do not claim that public service is wondrously efficient and economical. Rather, I say that private business, at least at the larger end, is much the same. In fact, any big organisation displays the same characteristics of bureaucracy, a lack of imagination, organisational inertia and less than optimum manning. Marks and Spencer, until the late 1990s one of the reputedly best run of British firms, suddenly fell prey to just these traits and has only just got back on the rails.

But large organisations also have their advantages. They are capable of providing a wide range of services. They can provide those services over a large area. They have a degree of “slack” which allows emergencies to be dealt with and bottlenecks due to variable demand to be managed when they arise. Such “slack” is very important in industries such as gas and electricity and services such as the railways. As we shall see when I turn to the experience of privatisation, the slack in many of the privatised industries has either vanished altogether or been reduced to dangerous levels.

13. What do we mean by efficiency?

There is also the question of what we mean by efficiency. Private business ultimately judges that by profit. But is profit a good indicator of efficiency generally? More particularly, does it have any place in public service?

Many a company does well for a period because it strikes lucky with a product and then plummets when the good luck runs out. Or a company may have a good profits run simply because there is a general boom in the economy and it is easy to make profits.

Then there are businesses where it is virtually impossible not to make large and regular profits, for example, the clearing banks, because the goods or services they are supplying are too essential for people not to purchase them and the number of competing companies is small, either because a few companies have been able to destroy the competition or because the cost of getting in the business is too great for new competitors to emerge. The problem of greatly reduced competition through expansion of an existing company rather than takeover of other companies is a growing one, a problem exemplified by the relentless march of Tesco in Britain – in practice British anti-monopoly law only deals with takeovers – the only thing which halts Tesco is planning permission. Once a company has a really large share of a market efficiency becomes less of a pressing problem because customers in an area dominated by the likes of Tesco often have little choice but to use the dominant company because it has destroyed local competitors.

It can also be very difficult to find out from the published accounts the true state of a company, vide Enron and WorldCom. Even where outright fraud is not practised there is still a great deal of scope for accountants to engage in “creative accounting” and massage accounts to inflate the profit in a given year. As directors are commonly paid a large part of their remuneration in the form of shares which they canpurchase at a later date at a discounted price (share options), companies have every incentive to inflate the share price in the year when the share option can be exercised.

But even if it is allowed that profit is a good yardstick of efficiency for most enterprises, a highly debatable proposition, it does not follow that it is a good yardstick for all enterprises. The provision of universal public services is by its nature not susceptible to the notion of profit because the unprofitable work must be undertaken as well as the profitable, for example the Post Office delivers letters to hideously costly rural addresses as well as to highly profitable city haunts for the same price (that service incidentally subsidises all private business in the UK because they can deliver anywhere for the same price).

If profit is not the yardstick what should be? I suggest that the real tests for public service competence should be (1) is the service being delivered to all who need it? and (2) is the cost reasonable in comparison with equivalent operations in other countries? By these tests, the NHS, for example, still compares well with the health care in other advanced countries, providing both a universal service for the vast majority of treatments and operations and doing so at a significantly cheaper cost than most, despite the great amounts of extra money pumped into it since May 1997.

14. Private enterprise providing public service

What is rarely if ever taken into account when complaints about the inefficiency of public bodies are considered is how efficient private enterprise will be or is when it is offered the opportunity to provide a public service. Take the Post Office as an example. For a century and a half it has turned a profit and ensured a level of universal service well nigh unique in the world. It has done this because it is a state monopoly.

No private company would ever provide a universal one-price service without massive public subsidy and the halfway house of part private part public merely weakens the public provider. The government first loosened the rules governing private delivery of parcel, then bulk letter mail went to full competition and in 2006 private companies moved into the delivery of letters over a certain weight. That competition alone will cripple the universal post. The Post Office has already been forced to drop the second delivery as a general service and will now provide it only for a fee, whilst the last time for collection has become earlier and earlier in the day and the single free delivery later and later.

As a second example take the BBC. Suppose the licence fee was abolished or reduced and the BBC had to introduce private finance on a large or an entire scale. The inevitable result of that would be the BBC increasingly turning from its public service role, not immediately but in time, towards commercial programming. The dismal example of how commercial terrestrial television “meets” the public serviceobligations written into their prospectuses when they bid for licences shows you what the BBC would rapidly become (the obligations/promisesmade when gaining licences are substantially ignored once the licences are granted).

There is nothing wrong with employing private businesses to perform specific functions such as road building because that does not produce a conflict between public service and profit. A road is simply a road,which will be used regardless of who built it. Once it is built,there is no ongoing direct service to the public beyond whatever maintenance is required and the maintenance of roads is completely different from the maintenance of railways, because the use of roads is free in all but a few instances and the safety issue is nothing like so important for a car can be driven on a potholed road while a train cannot be run on a faulty piece of track. Where conflict arises between the provision of a general service and the profit motive is in cases such as the NHS where the delivery of the service is directly to the public.

Private business is poor at providing services where there is no direct link between the provision of the service and the payment for it. If a service is provided to a person and they pay the provider, private enterprise will generally do a decent job if the customer has a reasonable choice of provider. Where a private business provides a service on the basis of a contract signed with a contractor, that is, it is a sub-contractor, the relationship between the customer and the provider becomes nebulous. It is true that the sub-contractor may have a contract cancelled or not have a contract renewed if too many complaints are received by the contractor, but often enough the contractor will wear any number of complaints provided profits remain healthy.

15. Public service inefficiencies and politicians

We can all recount bureaucratic horror stories and in truth there are a host of them. What most people never ask is why they exist. The answer is very often found in the irresponsible behaviour of politicians. They pass too many laws, introduce laws or other measures not requiring legislation which are administrative nightmares and demand action such as the meeting of “targets” which are simply beyond meeting.

A fine example of the “too many laws” syndrome is tax law. No living human being is a master of British tax law in its entirety or anything approaching its entirety. There is an excellent reason for this, it is beyond the capacity of any person to encompass so vast and complex and ever changing labyrinth of legislation. When the public deals with the best trained and most experienced Inland Revenue inspectors or employs the highest-powered tax consultant in private practice, they will still be dealing with people only competent to advise in particular areas of tax law. Worse, the law is frequently less than lucid because of the poor drafting of Acts of Parliament or of the statutory instruments which give administrative power to enforce Acts.Consequently, tax law is frequently open to plausible differences of interpretation. The upshot is that the Inland Revenue can often appear incompetent or unreasonable, despite the best efforts of its staff, simply because politicians have created an impossible situation.

The same applies to Customs and Excise (now amalgamated with the Inland Revenue).

To the complexity and opaqueness of most laws and regulations can be added the fact that most of the administration of such laws and regulations is not undertaken by highly educated, highly trained, highly intelligent people, but by the rank and file who find the complexity and opaqueness far more difficult to cope with than the highly educated, highly trained, highly intelligent few.

It is rare to encounter a politician who considers the administrative implications of laws before they are passed. Many laws on the statute books are largely dead letters because if they were enforced generally the effects on policing, the justice system and prisons would be dire. Imagine the numbers of prosecutions if the police religiously enforced the law on wearing seat belts for example. The magistrates courts would grind to a dead halt. Our present prison overcrowding is to a substantial degree the consequence of ever more laws with severer prison penalties being passed blithely by Parliament and the practice of Home Secretaries, both Tory and Labour, encouraging courts to be more severe in their sentencing. Either policy would be administratively defensible, whether one agreed with the principle or not, if governments ensured that the additional prison places were made available before the laws were passed or the instructions to courts on sentencing policy were issued by the Lord Chancellor’s Office. This has not been done. Extra provision is either inadequate or non-existent.

The prison population has also been significantly boosted by other government decisions. The first was the “care in the community” which closed most long-term accommodation for psychiatric patients and the seriously mentally deficient. Many of the people who fall into those categories unsurprisingly now end up in prison. The second was allowing massive immigration in the past ten years which has driven the foreign component of our prison population up to over ten per cent. To these causes could be added the government sponsored destruction of many of the jobs available to the lower IQ and poorly educated members of the population and the inadequacies of the state education system (see section 37). .

A classic of “unjoined up” Government thinking was the Community Charge known more popularly as the Poll Tax. To produce the required tax, around 90% of the adults living in Britain had to pay the tax. To anyone who understood the general problem of the tax collection, this was a non-starter. It would have been a non-starter had the system generally been seen as fair simply because people will understandably avoid tax wherever they can and tracking people to their private addresses is the devil’s own job, both in terms of identifying the addresses and in having the manpower to chase up non-payers.

The fact that the tax was seen as generally unfair provided its opponents with a ready made propaganda tool. Apart from the obvious difficulty of justifying a new tax not obviously linked to ability to pay, many suffered genuine hardship because people on very small incomes were suddenly asked to pay two or more times what they had previously paid under the domestic Rates system, which the Poll Tax replaced. Opposition politicians and parties quite naturally did everything they could to oppose the tax and soon magistrates’ courts were overwhelmed by hordes of non-payers and the receipts from the tax fell well short of what was anticipated. The coup de grace was given by a violent protest in Trafalgar Square.

A current administrative nonsense is the recent introduction of AS Level exams. For our purposes forget about whether not these are a good idea. It may seem obvious that if you introduce additional new general exams for schoolchildren you will need many more examiners. Not to our politicians. The upshot is that there is a crisis in ourpublic examination system because of overstretched examiners.

Then there are the laws which have unintended consequences. There is a beauty currently wrecking havoc throughout the land. In his 2002 budget, Gordon Brown announced changes to allow sports clubs to claim rate relief by becoming charities. The consequence has been that local authorities in many places have withdrawn or reduced the discretionary rate relief they were allowing sports clubs unless those clubs become charities. But becoming a charity is a complicated and expensive business and most sports clubs cannot afford it. To take one example of additional cost and complication. Charity law does not allow charities to sell alcohol. Most sports clubs gain a good deal of their income from bar receipts. To maintain the ability to keep a bar, the club would have to set up as a charity and then run a separate limited company for the bar takings.

Governments in the past twenty years have introduced two new forms of interference which are destructive of public efficiency. The first results from the mistaken belief that private enterprise methods can be generally applied to public services. The second is “league tables” and “targets”.

Private business practices, that is commercial practices rather than merely questions of efficiency common to both private and public organisations such as the utilisation of staff, are completely inappropriate in public service. Take the introduction of the “internal market” to the NHS and its effects on hospitals. This was a scheme introduced by the Thatcher Government with the idea of making the NHS more accountable and cost-efficient. Before it was introduced Governments decided how much was to be spent on health in a given year and, broadly speaking, the money was spread evenly throughout the country. NHS hospitals were given a budget and left to operate within it. Accounting for the expenditure was to use a favourite civil service term “broad brush”. This system worked because hospitals knew where they were at the start of a year and had the further advantage of seeming fair – everyone, NHS staff and the public, could see that each part of the country got more or less the same provision. GPs referred patients to their nearest hospital as a matter of course – which naturally set a fairly constant level of demand for a hospital – and administrative costs were low.

The “internal market” and subsequent reforms changed all that by making money follow the patient – which meant a hospital did not know exactly how much money it had to spend – and consequently required very detailed monitoring of expenditure. Worse, it also created competition between hospitals. The result is a massively bloated NHS bureaucracy which is both very expensive and a major cause of poor morale amongst medical staff, who object both to the added paperwork and procedures and the constant administrative supervision of their activities.

Similar “value-for-money” accounting schemes have been introduced elsewhere into public enterprises with similar dire results. The experience of these suggests strongly that when dealing with public service it is best to decide what is desired and what the taxpayer can afford to pay and then pay it. That does not mean money should be given out without regard to how it is spent. Rather, it means that costs should be determined by rational criteria before funding is decided upon and then the organisations should be trusted to spend the money provided they deliver what they are supposed to deliver. Provided the costing is realistic, the taxpayer can be sure that the money is being spent reasonably efficiently and no-corruptly. Gross inefficiency or corruption on any scale would show up through funding shortfalls within the budgetary year of the public institution concerned. Funding based on proper estimated costing is in effect a pre-audit which achieves essentially the same result as an audit but does so at the other end of the financial process. If a degree of inefficiency or corruption is not identified by this process, the loss both in terms of money and misapplied man power will be far less than the cost of an inflated bureaucracy and the demoralisation of public servants which arises from close scrutiny of expenditure.

Realistic costing requires that funding within an organisation is broadly similar for equivalent parts of the organisation. For example, in present circumstances any NHS hospital outside London of a similar size and range of medical treatment should cost broadly the same to run because national wages are paid in all places but London where a “weighting allowance” tops up the national salary.

League tables are an idea which has a superficial attraction. What could be more reasonable than to know which are the best local schools through their exam results being publicly available so parents can compare schools? A great deal. The effect of league tables has been to lead to a substantial rise in exclusions from schools, increased de facto selection of pupils and the restriction of the exams children may take. Faced with parental and state judgement of their performance, schools have understandably been unwilling to have children in their schools who will perform badly in exams. Inferior exam results at a school equals fewer and less able children applying which equals fewer pupils which equals less state funding. Nor, of course, are private schools immune from the pressures, for the lower their position in the “league table” the more difficulty they have in attracting pupils, especially the brightest.

The consequence of league tables in schools is that education is distorted. Children are denied the opportunity to take exams if it is thought they will do badly. 16-year-olds who do less than well in their GCSEs are denied an opportunity to take A levels at their school. Children who are seen as academically unable or disruptive are excluded from the better schools and effectively left to rot either in a state of permanent truancy or in schools which are essentially doing no more than child minding. More profoundly, the concentration on passing exams, including the National Curriculum tests, has not only narrowed the academic curriculum as schools “teach to the test”, but has led to the exclusion of non-academic activities such as sport and music. The broader idea of education has been largely lost.

Of course, unfairness and ineffective education existed prior to the “league tables”. The point is that the position has been made ineffably worse by the “league tables.”

The “league table” distortion which has arisen in schools will be and, indeed, is mirrored elsewhere because the same general pressures apply. Hospitals seek to avoid operating on high risk patients, councils want to divest themselves of “tricky” work such as running council houses and school examination boards and universities inflate exam marks to both attract students and to guard against a growing tendency for students to demand good exam results because “they have paid for them”.

The first cousin of league tables is “targets”. Government targets are of course not new. In the immediate post war years Governments delighted in announcing that so many hundreds of new houses would be built. What is new is that “targets” have become so prevalent that they seriously effect public policy. Targets to reduce street crime force the police to divert resources regardless of whether it is the greatest priority. Targets to reduce hospital waiting lists force hospitals to manipulate their waiting lists and concentrate on non-urgent treatment at the expense of more serious conditions.Targets to expel failed asylum seekers lead to the reclassification of asylum seekers. And so on for any number of public agencies.

On the privatised industry side, targets set by the various regulators are largely cosmetic and are inexorably downgraded when their honest application would severely damage or even ruin a company.

Of course, most targets, whether for public or privatized organisations are not actually met even with the strenuous massaging of figures. They are then swept aside as being of no consequence. The result is a growing public scepticism about any government plans or promises which they increasingly treat as Russians treated “five-year plans” and “potato harvest figures” in the Soviet Union. This is decidedly unhealthy because if the electorate cannot trust any promise made by a politician what is the point of elections?

16. Other public service inefficiencies

It would be idle to pretend that public service does not have substantial shortcomings which have nothing to do with political decisions. These are an over-extended a command chain, the cult of the generalist and the too ready movement of staff.

The modern British Civil Service was founded in the nineteenth century with a tripartite division based on Plato’s Republic. (This is not asbizarre as it sounds because most of those in public life then had a classical education). The Administrative Grades were the philosopher kings who planned and directed, the Executive Grades were the mechanics who put into operation and administered the plans of the  Administrative Grades and to the Clerical Grades were left the task of being the metaphorical hewers of wood and drawers of water.

This consequence of this structure was that chains of command and responsibility became ridiculously extended. In modern times there have been 13 mainstream Civil Service grades (and others peculiar to particular departments and offices). In addition, the distinction between the Administrative/Executive/Clerical general grade functions produces an artificial separation. Many jobs cannot be neatly fitted within one of Administrative/Executive/Clerical, yet the Civil Service attempts to do so. The result is that instead of having one person doing a job in the most efficient manner, the job is arbitrarily divided between different grades.

In recent years attempts have been made to reduce the numbers of grades, but without great effect. They need to be reduced to six or seven. That would put them broadly in line with large private corporations.

When the Administrative/Executive/Clerical division was devised the idea was that the Administrative Grade would be staffed by generalists who could apply themselves to any task without needing any particular expertise. Rather the Admin Grade Civil Servant would be of high intellect which he would apply to analysing any problem and producing solutions to the problem. There is of course a place for such people, but it is very limited. The trouble is that the Civil Service still largely operates on the idea that the Admin Grades should be generalists. Worse, the idea has spread to the other grades to a considerable degree. The consequence is that Civil Service jobs tend to be allocated by grade rather than the relevant experience of a civil servant. The position is aggravated by the fact that people are often placed in positions novel to them without adequate training. Much greater attention needs to be paid to both the suitability of people for posts and to the provision of training.

The frequent placing of unsuitable and untrained people in posts produces a “culture of incompetence”, whereby those in positions of authority are reluctant to criticise their subordinates. This reluctance stems from (1) the fact that they are not often insecure in their own ability and knowledge and (2) because they know that their subordinates are often in posts for which they are unsuited or untrained.

The other great structural bugbear is the all too frequent movement of staff (anyone who has had regular dealings with public bodies will recognise the frustration of dealing with a new person every time they write or phone and the immense amounts of time and effort wasted.) Most Civil Service work is administrative. Continuity is a boon when it comes to administration. Where staff are working to implement very detailed regulations, as is the norm in the Civil Service, continuity becomes vital.

Regular movement of staff, human nature being what it is, is also a device to avoid responsibility. Once a public servant has moved to another position his successor can simply say “nothing to do with me guv. Now, let’s start from scratch”. It is also rare for a civil servant to be meaningfully disciplined once they have moved jobs.

Civil servants know this and it affects their behaviour for the worse while in a job because they know that if they make a horlicks of it, they will simply be moved elsewhere or even promoted to resolve an embarrassing situation. This reinforces the “culture of incompetence” . Keeping people in post for a reasonable length of time and holding them to account for error after they move would concentrate the minds of civil servants wonderfully.

In varying degrees, the defects of the Civil Service are found in public service generally.

Any large organisation requires periodic shaking. Small businesses rarely need it because they are always subject to the pressures of the market in a way that a large company is not. A large company has greater reserves both of capital and credit than a small concern and can weather economic storms more easily. The consequence is the gradual accretion of inefficiencies and costs. What applies to big business does so with greater force to government departments, which have even less external pressure on them to be efficient. However, the shaking should always be within the context of a public service ethos not a private business one.

17. What should public service workers be paid?

“Tube drivers, who now earn £31,300 for a 36-hour week, along with six weeks’ holiday a year, a final-salary pension and free travel for their families….The Tube drivers’ salary is almost twice as much as a nurse or an ambulance worker gets for working longer hours on more complex jobs. It is half as much again as a bus driver, who works 50 hours a week, a firefighter, who works a 42-hour week, or a police officer, who works a 40-hour week – each of them doing very stressful work for the payment they get.” ( The Evening Standard commenting on a prospective tube strike 02.10.02).

Driving an underground train on a partially automated system cannot  realistically be considered as more skilled, dangerous and stressful than that of a firefighter. Most people would say the Tube driver had the easier job by far. But is the firefighter’s job more stressful than that of a bus driver who has day in day out to deal not merely with London traffic but in many cases has to take fares as well? And what of a nurse or ambulance crews? Is the emotional distress they suffer more of a burden than the fear a firefighter may feel when goinginto a fire? Going outside public service jobs, a trawlerman’s job is considerably more dangerous than that of a firefighter’s and the ordinary crew member will not earn as much as an Underground driver. In short, comparability is a minefield.

All our experience shows that “fair” job evaluation never works because no one engaged in the employment evaluated can ever objectively agree on their place in the job hierarchy. Hence, even where deals are struck, dissatisfaction soon breaks out again about “comparability”. As for the public, the pay and conditions arrangements of public service workers are generally so opaque that most people can make neither head nor tail of them. The result is an unstable situation which satisfies no one for long and leads to the general public having an unrealistic conception of what public employees earn, both by underestimating and overestimating pay.

Even in a society where there is a strong natural commitment to public provision, as was the case in the quarter century after WW2, the public servant has a vested interest in working to retain public confidence. Unless the taxpayers generally continue to think that the money being spent is worthwhile, there will come a time when a government will be elected, as happened in 1979, which will substantially reduce government expenditure and the opportunities for public service. Worse, circumstances can arise as they have done now, where not only the government but also the main opposition party are hostile to direct public provision. Therefore, it is especially important at the present time for public servants to persuade the public that they are both necessary and giving value for money. The best way of doing this is to arrive at a pay structure which is both simple for the public to understand and constructed in such a way to ensure that pay and conditions are adjusted automatically by reference to an objective standard to keep them in line with wages and conditions in private business.

What is needed are criteria based on broad similarities, which the general public can understand and support. Most jobs are much the same in terms of the general demands they make on people – stress, responsibility, intellectual effort and special knowledge or skill. Moreover, those jobs which demand more than the norm also fall into readily identifiable categories. (Anyone who doubts this should try an experiment. Produce a list of twelve disparate jobs of the same general status – all non-management or all management and so on – and which have no emotional plus or minus against them in the public mind – exclude nurses, estate agents etc. Then get people to assess their worth in terms of wages. Most people will judge the value of the jobs to be similar).

Public service jobs are even more readily categorised than the totality of occupations in a society because the range of work in public  service is much more limited. In a way the civil service already recognises this because the standard civil service grades cover an immense variety of job titles. The civil service division of grades into administrative/executive/clerical provide a starting point for the broad criteria mentioned above. These could then be augmented with categories based on danger, stress, responsibility etc. If recruitment becomes a problem in a particular area, the problem can be solved byraising pay through re-grading.

The second problem with public pay is keeping it up to a realistic level. Previous attempts a pay formulae have not been linked to the average male wage and that has been the primary cause of their failure. It has meant that periodically public sector workers have fallen behind private sector workers as governments run into financial trouble.

What is required for all public service jobs is a formula which uses the average male worker’s earnings as a baseline, with the various public service grades being a percentage of the average male worker’s earnings – the percentage could be less or more than 100% depending on the grade of the job. Such a system would mean regular upgrading of pay and avoid the demands for very large percentage increases when pay falls behind.

Should pension entitlements, holiday entitlements and security of employment be taken into account when calculating public sector pay? Only to the extent that they differ from the arrangements of large private corporations. Historically large private companies have offered non-salary benefits very similar to that enjoyed by public servants. That is changing, in particular final salary pensions are rapidly becoming extinct in private business, and any grading of public service jobs should reflect any difference which arises between public and private in the future. However, care must be taken to avoid a situation where public servants cease seeing public service as a secure career. Most of what Government does benefits from having career employees because continuity is a great deal in administrative work, which forms the great bulk of public service employment.

The third major problem is national pay. This is perhaps the most sacred of cows of public service workers and unions, but there is no logic or fairness in such arrangements. If everyone in the NHS receives the same pay for the same job regardless of where they are living, there is in reality no national pay because of the considerable regional differences in cost of living. There are parts of the UK where, for example, teachers earn below substantially below the local average and others where they earn well above the local average. Hence, we have regional pay but quite perniciously the lowest pay is paid in the highest cost areas. The consequence is that there are often staff shortages in the higher cost of living areas and the quality of staff employed in such areas may be below the standard required simply because no one else can be recruited at the pay levels. The answer is to introduce regional RPIs (Retail Price Indices) – which would include housing costs – and vary wages according to those.

Regional RPIs would solve much of the present difficulty for public service workers in high cost areas. It would not be politically possible to reduce the pay of existing employees, but it could be held static in the lowest cost areas and differential increases given in other areas until regional pay was established. For example, suppose area A is the cheapest area and area Z is the most expensive. Area A gets no increase until its pay level reaches that which matches its Regional RPI, while Area Z immediately gets an increase which raises its pay level to that required by its Regional RPI. Ditto for all areas between A and Z. If their pay is beyond that required by their regional RPI, it remains pegged until pay and cost of living equalise: if below their Regional RPI, they get a rise to match it. As time goes on, the higher pay of the higher cost areas will be balanced by the lower pay of the lower cost areas. There would be no massive extra ongoing expenditure as eventually the lower and higher pay levels would broadly cancel each other out. However, there would be an initial cost because no one will have their pay immediately reduced while some will have it increased substantially.  [RH 2012: although I am still in favour of regional pay, this is something which should be accomplished in good economic times not the times we have now. That is because some areas are much more dependent on public sector jobs than others, something which affects the economy of the area generally.  Even though the reduction in money would be gradual under my scheme it might still in present circumstances be the straw which breaks the camel’s back in areas struggling to move out of recession.]

Much of the problem of regional cost variations could be obviated if the cost of housing was substantially reduced. Government can take the lead by making more housing available in the areas in which it is scarce – see section for detailed suggestions. In particular, a ready supply of housing both to let and buy at reasonable prices would largely overcome the problem of the young who have yet to buy. A middle-aged person who brought their home 20 years before requires far less to live comfortably than someone trying to buy their first property. The latter have near insuperable problems in many places.For example, in inner London, an income of £50,000 would not be enough to buy the most basic family home because a three bedroom property would be in excess of £300,000 in even the cheapest areas.

The cost of any re-grading could also be offset by reducing the numbers of public servants in some areas. This would naturally meet with resistance from public servants, but if it is done without compulsory redundancies – and it could be – the objection to it is not strong. Staff can be redeployed to other posts and new recruitment to the remaining departments reduced to accommodate them. Attention has to be paid to the age structure of a workforce – no large organisation wantsto find itself in the position of having a sizeable proportion of its staff retiring at the same time – but with an employer as large and diverse as the Government, this should not be an insuperable problem.

Why not simply have wages set by what the market will bear  in any particular place? If there is a shortage of nurses in London why not pay them £30,000 if that is what it takes, but only £10,000 if that is a competitive wage in, say, Cornwall? That begs the question of the quality of the recruits you attract and their long term retention. You may get enough recruits at the low rate but they may be of poor quality. There is also the question of motivation once employed. Poor motivation equals less efficient working. Pay should be high enough to avoid those two evils. If higher wages produce greater motivation and ability in the staff employed, the number of staff could be reduced.

The great advantage of adopting a system of broad definitions – tying pay to the average full time wage and Regional RPIs – is that it would be both stable and largely self adjusting. Problems could arise where recruitment becomes an issue. Then, as mentioned above, re-grading might have to occur to raise pay in a particular area of work or region.

All the Public Service Unions and many public servants will instinctively reject what I have suggested because such things as national pay scales and the preservation of jobs are part of the emotional scenery in public service. But public servants do not have a right to determine how many people will be employed by the Government and they should always remember that a public servant must have a necessary and useful function to maintain public support.

What public servants do have is a right to a decent living wage for what they do and to reasonable working conditions which includes the assured opportunity for a career and staffing adequate to carry out the tasks Government sets them. If they start from those two premises they have a much greater chance of achieving their ends than they have in merely maintaining the status quo.

Above all, it should never be forgotten by the public servant that the taxpayer is the paymaster for all government spending. A statement of the blindingly obvious perhaps, but one which tends to be glossed over by governments who speak as though they are spending their own money when they talk of “an extra £3 billion for the NHS” or “£200 million to  take crime off the streets”. Public money is not unlimited nor is the level of public spending without consequences for the general economic health of the country.

Most public servants know that there are pluses and minuses in public service and that moving to private employment has its disadvantages as well as being very difficult in areas where private businesses are not thick on the ground. There is also the example of public sector employees who have had their jobs privatised. They have frequently found that their new conditions of work are inferior to those they enjoyed when in public service. Public servants also know in their heart of hearts that security of employment is still considerably greater in public service than in private business. Consequently, the government has a strong card to play if they choose to play it, namely, continued security of employment in return for the radical changes described above.

18. The right to strike

Some public service workers do not have the right to strike – the police and the armed forces. Is it unreasonable to deny them this right? I think most people – myself amongst them – would say no. They would see that the right to strike has to be balanced against the public good of having the streets policed and soldiers,sailors and airmen who will be unquestionably available to provide national defence and to attend to national emergencies.

If we decide as a society that the police and servicemen cannot strike, there is no reason in principle why the removal of the right to strike cannot be more widely extended for we have already decided it is not an absolute right. The question is how far to extend the denial of the right.

There is a case for a general ban on striking by public service workers because they are funded by the taxpayer and ultimately responsible to the taxpayer or at least the electorate. But before any such ban could be reasonably considered the general pay and employment conditions must be made fair and secure in the manner described in the previous section – their pay and conditions would have to be such that the majority of the population would think them reasonable. That would leave the problem of union action over unfair dismissal or other disciplinary action, but it is difficult for a union to argue that there is not adequate recourse through Employment Tribunals or, if the union wishes to fund a case brought by one of their members, through the courts.

If a general ban is thought too severe, there is good reason to ban strikes in those organisations which provide services which are both vital and immediately necessary. It would be difficult to argue that all-out strikes by NHS staff or firemen would cause less public damage and chaos than strikes by the police or servicemen.

Because of privatisation there are also private companies whose employees in principle need to be banned from striking, particularly the utilities such as gas, water and electricity. That raises another objection to the placing of utilities in private hands: it makes action such as ruling strikes illegal for certain workers very difficult, even impossible in practice. The utilities being private companies,  governments cannot control their wages and  conditions of employment  as they can those of public bodies. Or rather, they could do so, but then they would be taking so much of the control of a fundamental part of a private business out of its management’s hands (this would be in addition to the areas already covered by the various utility regulators) that two questions would arise: (1) could any private  company operate under such constraints? and (2) if a company has to be so constrained by government, what is the point of it being a private company? The answer to (1) is probably no and to ((2) no point.

19. The ability of private companies to manage public services

Take the case of the NHS. It is the largest employer in Europe, employing not far short of a million people. No private company has any experience of managing an organisation anything like that size. In fact, very few private companies have any experience of managing a workforce of even 20,000. A fair number of Government departments and agencies are considerably larger than the 20,000 employee business. On the grounds of size alone the transfer of large scale public service activities to private sector control is problematic because the private sector simply does not have that many people with experience of running such large concerns.

An even more fundamental difficulty is the fact that much public service work is specific to public service. The administration of complex legislation and rules present an employee with a far higher learning curve (for even rank and file staff) than would be found in the vast majority of similar level private sector posts. To this is added the need to keep up with the ever more frequent changes created by government to the law (this is partly driven by the innumerable EU directives). Consequently it is not a simple matter to substitute private sector workers for public sector workers because the private sector workers have to be trained from scratch.

Of course, when public sector work is shifted to the private sector public sector staff often move to the private employer. But private companies are profit driven and when moving into public sector work almost always seek to maximise profits by severely cutting staff. This both reduces the number of experienced staff and frequently demoralizes those who remain because they have an ever increasing burden. This in turn leads to many of the experienced staff leaving and the expertise available to the employer to continually diminish.

20. Private money in public projects – “Buy now, pay later”

The introduction of private money into public projects, whether under the title of the Public Private Partnership or its successor the Private Finance Initiative, is a fraud on the public. As Hire Purchase used to be advertised in my youth, it is “Buy now, pay later”.  Private companies put up the money for, say, a hospital, build it and  then lease it back to the NHS.. The taxpayer then pays through the nose for twenty or thirty years as the lease is serviced. For example, Tory health spokesman Andrew Lansley has just elicited the truth from the Government about the cost of the new hospitals built under PFI. For hospitals worth £8 billion the taxpayer will pay the private sector companies responsible for them a total of £53 billion over thirty years, a return on capital of 540% (Daily Telegraph 27 10 2006).

The honest way for Governments to finance projects is to raise taxes or increase the national debt. Then the public can see clearly what is being done and judge the cost. With PFI and its ilk, the cost does not appear as government spending immediately. It is “Enron accounting”, the removal of expenditure from the balance sheet for the present but not the future. The expenditure only appears gradually as the debt is met by charging the government for the services provided or alternatively by charging the customer directly. For example, if toll roads are built and/or maintained by private capital, the contractors could charge the motorist directly to recoup their costs.

But the deceit goes beyond the hidden deferral of expenditure. Much of the detail of the contracts made with private companies is not being made available to the public on the spurious grounds of “commercial confidentiality”. Even the Government has had to admit that the cost of PPP and PFI projects will be considerably more than if they were undertaken directly by the Government using taxpayers’ money. The deputy Prime Minister, John Prescott, made such an admission in his speech to the 2002 Labour Party Conference. What we cannot be sure of, because of the lack of public openness in revealing the contracts, is how much more expensive PFI and its ilk will be. What we can be sure of is that the difference is likely to be considerable.

The Government’s justification for paying over the odds is that it allows things to be provided quickly rather than having to wait for the money for direct public funding to become available. As more public money will have to be found in the future to fund PFI projects set in train now, the consequence will be much less money for public provision when the PFI bills come in. Therefore, at best, future generations will be paying more in tax for less in public services. The real justification for PFI is of course that it allows a government to claim credit for what is provided now in the knowledge that when the bills come in the people making the decisions cannot be held responsible.

Many of the contracts being granted to private companies are for periods of 15, 20 even 30 years. The life of a politician in government is short on average, either because of election defeats or sacking by the PM of the day. Five continuous years as a cabinet minister is good going. In the vast majority of cases the politicians who made the decision to go ahead with PFI will be out of office not merely long before the final bills are paid but in all probability by the next Parliament after a contract is signed. Once out of office, they can ignore any problem which arises and the sad truth of the matter is  that nothing can be done to make them take responsibility for their decisions as things stand. At worst, all that will happen is the electorate in a constituency throwing them out at the next election, which for an ex-minister is no great loss. It should be added that it rarely happens that an individual MP is thrown out by the electorate for his or her personal failings because the power of party label is too great.

Why are private finance schemes so much more expensive? They have to make a profit of course but there are other reasons. The private concerns financing the projects have to borrow money at a higher rate of interest than the Government can, perhaps 1-2% more. That is because the risk is greater for the lender . The borrower has to make a profit on the borrowed money so he must charge more than he is paying for the money to finance the scheme. That is the obvious extra cost. But there are many hidden additional costs.

Most problematic is the fact that private business will not accept all risks. For example, the company bidding for the Tube maintenance contract will not accept the financial risk of tunnels under the Thames being flooded. The consequence of this is that contracts exclude the really high risks. The Government has to cover them. So it ends up with both the major risk and paying more for the construction work.

The actual position is even worse than that. Private companies may accept risks and obligations in their contracts which they simply cannot meet. The Government is then forced to step in. Thus the Government in practice underwrites the whole business, either officially or unofficially.

Much of what is happening is a halfway house to public disengagement. Hospitals can be granted “Foundation Status”. This allows them to raise whatever money they can on the private market on terms they decide upon with the lenders. That in turn implies that they may l have to start charging for services if Britain’s economic circumstances  alter seriously for the worse – thus reducing tax revenue – or a government’s attitude to the NHS changes. . The difference between an unambiguously privatised NHS and what is likely to occur some years down the line is very narrow. And, of course, the closer the situation gets to full privatisation, the more probable will become full privatisation, because the financial structures required for it will exist and the moral argument against it will have largely eroded by the failure to stoutly defend the principle of public service.

21. The London Underground – PPP in action

Christian Wolmar’s book “Down the Tube – the battle for London’s Underground” points the way to the shape of public/private things to come. It is a truly depressing future.

Ignoring the shambles which are our privatised railways, the Labour Government has forced a PPP on the London  nderground, one of the largest Metro systems in the world and a transport conduit absolutely necessary to London’s functioning, carrying as it does millions of people a day. They have added insult to injury by retaining the running of the trains in public hands while putting the maintenance of the infrastructure – track, stations, signalling etc – in the hands of private companies. The fact that it is the maintenance of the infrastructure which has caused the most serious of the problems in the privatised overground railways has simply been ignored.

This PPP has just about every flaw that one could imagine. The contract is very long – 30 years. Even if everything goes to plan, the cost to the public is unknown. Right from the start the taxpayer will be paying a subsidy to the private consortium of œ1 billion a year, despite assurances originally that no subsidies would be paid. Worse, even the Government admits that it does know what level of subsidy will be required throughout the 30 years of the contract. Nor can it give any figure of cost to the taxpayer if the PPP fails, that I, the private companies either liquidate or walk away.

“Walk away?” do you say? But surely the companies have accepted the risk and are legally liable for any failure to meet performance targetsor for any catastrophic events such as flooding of the tunnels under the Thames?  Actually, no. Their liability for cost overruns is capped, more or less, at £50 million for each quarter of the 30 year deal and they have written into the contracts a disclaimer for events such as flooding. If the private companies really run into trouble, the taxpayer takes over responsibility for 95% of the loans taken out by the private companies.

Then there is their profitability. The private companies have a “guaranteed” rate of return on capital of almost 20%, a return twice that considered to be a good commercial profit.

On top of all that cost and potential risk to the taxpayer, there will be a truly daunting administrative burden. The contracts to set up the PPP run to some two million words.  Responsibility is diffuse and the criteria for assessing the performance of the private companies opaque. The PPP will require a large additional bureaucracy just to oversee the workings of the contracts and the inevitable disputes between the private companies and the public body as to interpretation of the contracts will be a bonanza for the lawyers.

22. Capita

We already have a great deal of evidence of the effects of private enterprise on public services. The results generally have been less than sparkling. Remember the Criminal Records Bureau fiasco of September 2002 when schools were prevented from opening for the new term because those working in the schools had not been vetted for criminal convictions in time? Or how about the Individual Learning Accounts scheme which resulted in a loss of at least tens of millions of pounds in the past few years? If you are a resident of the London Borough of Lambeth you may recall housing benefit being so badly run by a private company that it was rapidly returned to the control of the council. Or how about the maladroit administration of the London Congestion charge which makes London drivers’ lives a misery? All these are examples of a private company taking over the administration of public matters and making a pig’s ear of things.

More worryingly, they were all the responsibility of a firm called Capita. I say worryingly, because Capita, far from being shut out from other public contracts, is positively cornering the market for such business. In addition to the contracts mentioned above, Capita collects the BBC’s licence fee. It also runs the written part of the Diving Test in parts of the country. The “Connexions” card being promoted to schoolchildren by the Government, a Trojan Horse for a general ID card, is run by Capita, who also supply management software to 23,000 UK schools. Capita even have the contract to run the pension scheme of the Inland Revenue.

Had Capita proven itself to be a model of competence, such a concentration of work in one company would be disturbing for it suggests at best that the competition for these contracts is extremely limited. It would be interesting to know who else tendered and what the tendering process was. But even if these details were made public, the old cry of “commercial confidentiality” would almost certainly prevent any meaningful public examination of the merits of the various tenders.

Capita is far from being the only company rewarded with new contracts despite clear evidence of incompetence . The people who brought you the Railtrack maintenance fiasco, Jarvis, have just been awarded the contract to build a new surgical and heart care unit for an NHS hospital in London, the Whittington at Archway.

There are two possible reasons why poor performance does not disqualify a company from future contracts. The first is structural. Many of the contracts being offered are of a size and complexity to reduce the number of realistic bidders to at best a few and at worst one. Thus the idea that private input into public business will ever generally equal greater efficiency is doomed. All that has been created is a form of public/private monopoly.

The other possible reason for continued contract winning regardless of performance is corruption. That is not to suggest that corruption has occurred to date, merely that the possibility exists. It deserves a section to itself (see section 27) .

A company bidding for public contracts may well quote a price which is simply too low to maintain performance. They may deliberately bid too low. Having gained the contract, the company confronts the Government with a claim that they can only make a profit (or even break even) unless they reduce the service from that for which they have contracted or receive more favourable payment terms. The government is then left with a decision: can they afford to drop the contractor? Is there another contractor which could take over? The answer to both questions is almost certainly no.

23. The morality of privatisation

Does a British government have the right to sell off industries and property owned by the state? In Britain the answer legally is yes. Barring restrictions agreed to in treaties, most particularly the Treaty of Rome and its successor treaties, a British government may legally do what it wishes. It may also repudiate existing treaty obligations. Parliament may in principle pass any law it wishes. That demonstrates the danger of having a political system without any constitutional bars to government action.

But if privatisation is legal, it does not follow that it is morally justified. These are enterprises and property which were either developed from scratch by government or were taken over by the state, often from municipal undertakings which were public developments in themselves. In each case taxpayers’ money was used to either start or acquire them. For Britons who bought shares privatisation was a form of taxation. They paid money for that which the state already held on their behalf. Non-British taxpayers purchased that which was not morally the State’s to sell. But the deceit went beyond this. By selling that which was held in common for the British, they robbed those Britons who did not purchase shares and the future generations who would have no stake in that which was sold before they were born.

Privatisation could perhaps have been morally justified if every British citizen had been issued free shares in each privatized industry, which they could then have held or sold as they chose. The Government would not then have had the proceeds, of course, but it should be remembered that the prime reason given by Margaret Thatcher for privatisation was that it would modernise great British industries through the invigorating blast of free enterprise. Ostensibly at least the raising of money for the government was not the prime motivation.

The money received from privatisation has simply vanished into general government expenditure. Had the money been earmarked for particular projects dear to the public’s heart, such as new hospitals and schools or placed in a separate fund to help pay the state pension in the years when it is anticipated that those working will substantially decline in relation to those who are retired, at least the public would have something concrete and identifiable to set against the loss of public assets. As it is the public as a whole has nothing.

It is of course impossible to prove whether taxes would have been higher or that government expenditure would have been lower if there had been no privatisation proceeds, but it is a fair bet that extra money in government coffers has simply meant additional government expenditure without a proper regard to whether the expenditure was warranted. That is the common experience of governments and public money.

The money obtained through privatisation should not be viewed as pure gain in terms of government expenditure. Privatisation has caused agreat deal of what private business euphemistically call “downsizing”. The resultant unemployment costs – unemployment pay and other benefits – have to be set against the privatisation receipts. In addition, a large proportion of those who have gained alternative employment have found themselves earning a good deal less than they did previously. That equals less tax paid.

24. Our general experience of privatisation to date

The prime problems with privatisation are (1) the provision declines,(2) the taxpayer has to pick up the bill when things go seriously wrong and (3) privatised industries are often left in a situation of naturally restricted competition.

The best example of what happens when the state simply opens up amarket to private interests is probably bus deregulation. This happenedin the mid-eighties. The consequence has been predictable and devastating, with the countryside being virtually denuded of buses and even the big cities apart from London – where a massive public subsidy has continued – have experienced a decline in services as bus operators concentrate on only the most profitable routes. In addition, on the profitable routes, there are so many competing buses that the buses themselves can become a cause of congestion themselves – Manchester is a good example of this phenomenon.

The railways are the most disturbing example of cost to the taxpayer after privatisation. Not only has the taxpayer paid larger subsidies to the rail companies since privatisation than were paid to nationalised British Rail, and absurdity in itself, several billions of taxpayers money have been required to rescue the company responsible for maintaining the track and associated equipment, Railtrack, after it became insolvent and was put into administration. (The company has now been reborn as a strange hybrid creature, anon-profit making company called Network Rail.)

Another example is the immediate difficulty suffered by the National Air Traffic service (NATs) after partial privatisation in 2002. The new company had barely started trading before the Government had to extend a £30 million loan to it.

As for competition, the government appointed regulators are supposed to remove the natural abuses of restricted competition by controlling prices. Whether it is possible for even a genuinely disinterested person to determine objectively what a reasonable or efficient price for a product or service is in such circumstances is dubious,  because what constitutes legitimate profit, the right level of investment or the desirable level of service to be offered are ultimately matters of opinion.

But these problems of definition are in practice redundant, because regulators are subject to pressures from politicians, the public, the industry they regulate and business in general. The result is that pricing frequently bears little relationship to any considered view of what is necessary, but is variously a response to what the government wants, a reaction to higher than anticipated profits being made by the regulated industry or threats from the private companies of dire consequences if prices are not raised.

What are the unambiguous successes of privatisation? Telephones, perhaps, most older people would probably say as they remember the absurdly long wait for a new line and the complete lack of choice of phone in the days of the nationalised British Telecom. Beyond telephones, it is difficult to see any privatisation in which the balance of advantage has been clearly in the country’s or the individual’s favour. The railways have been an unmitigated disaster, basic industries such as coal and steel have either collapsed or effectively been exported – with a massive loss of jobs inducing structural employment in places. The gas and electricity companies produced cheap power for a while but that was largely the result of Britain’s because of North Sea gas. When that self-sufficiency began to wane energy prices rose dramatically. In the case of water, prices have risen substantially since privatisation while shortages have grown and customers are now facing the prospect of compulsory water metering – some areas already have it. Investment has been inadequate – for example, no new reservoir has been built to serve the water starved SE of England since the privatisation of the nationalised water utility – and service, especially on the maintenance side, is widely perceived to have declined because of the dramatic cuts in the workforce.

Even in the case of telecommunications the picture is blurred. Nationalised British Telecom might have been a something of a disaster on the marketing and customer front, but it did ensure that coverage with landlines was near universal in Britain, something which would have been impossible had their provision been left to the market – how many private companies would have laid and maintained lines to small villages or even small, isolated towns? So when BT was privatised it started with the immense advantage of a near universal infrastructure which existed because of public provision.

But the rise of the mobile phone has made any proper comparison between the pre and post privatised situation virtually impossible. Even if BT had never been privatised and the landline phone market had remained a  monopoly, they would still have had to face private competition from mobiles. In other words, privatisation in that case largely pre-empted what would have happened naturally.

25. Private money in public service = a democratic deficit

The employment of private companies to carry out public tasks necessarily involves heavyweight contracts between the companies and the Government. These invariably carry a large compensation provision in the event of a government or a lesser political authority such as a Borough council deciding that it does not wish to honour a contract to its end. If they did not carry such compensation provision no private company would accept the contract.

The practical effect of such contracts is to create a democratic deficit. Because the compensation to be paid is very substantial, politicians are understandably reluctant to cancel contracts. Consequently, it becomes very difficult for a party to change a policy if it involves the cancellation of a contract. A first rate example is the introduction of the Congestion Charge in London by the Mayor of London , Ken Livingston. In the next mayoral election his principal rival, the Tory Steve Norris, promised to abolish the charge. It is dubious whether he could have done so if he had won because, according to Livingstone, £80 million in compensation would have had to be paid to Capita.

If an enterprise is run directly by public servants, it is in principle much easier to change policy because there are no contracts which require compensation if they are cancelled.

26. When private becomes public by default

Any really large private company by virtue of its size takes on aspects of the public. It does this because it becomes too important to be ignored by Government. If Barclays Bank was in danger of going bust no British Government could allow it to liquidate because of the effect on general confidence, both national and international, in the British economy. To confidence may be added cases where very large job losses would result from a liquidation or a vital domestic industry would be severely damaged by a company’s failure.

The implications of this for government are clear: they cannot simply stand back and ignore the behaviour of large private companies. That means governments should recognise that they may need to act to protect domestic industries – even in rare cases taking them over – and, where there is a strategic interest such as arises with a major domestic defence supplier, to place legal restrictions on what the company can do, for example by requiring export licences for weapons.

27. Corruption in Public Service

In modern times the British Civil Service has been remarkably free from corruption (local government is a different matter), a fact made all the more surprising because of the truly colossal amount of money it disposes of each year – government spending for the financial year 2006/7 will be around £500 billion. There are two reasons for this. The first is the hard-won tradition of public service which in which the Civil Service as an apolitical institution and as such serves no political ideology or party but provides politicians of all stamps with disinterested advice and executes their policies. This tradition has been underpinned by the lifelong working careers which public servants, especially senior ones, have commonly had. Of course, that was merely the ideal and, as with any human institution, the reality fell some way short of the ideal. Nonetheless, such sentiments and conventions have affected the behaviour of public servants for the better, especially in the area of honesty.

The second reason for a lack of corruption has been the direct provision of most the services provided by central government. This has meant that the number of large central government contracts offered to private business has been small in relation to the money spent on the direct provision of public service in all its aspects. In such circumstances serious fraud becomes difficult going on impossible for most civil servants because they do not have access to large amounts of taxpayers’ money. (Where they do have access, for example in the Inland Revenue, in most instances there are strict accounting procedures which make the embezzlement of large amounts of cash  extremely difficult). Moreover, where there are few government contracts, most civil servants are not in a position where someone would find it fruitful to bribe them because they have nothing to sell.

Unsurprisingly, where serious corruption amongst public servants employed by central government has occurred in the past, it has been overwhelmingly in those areas where large government contracts exist, most notably in Defence Procurement and building contracts. It is a reasonable assumption that the more public contracts offered to private companies, the greater the corruption will be simply because the opportunity for corruption increases.

The Thatcher and Major Governments began the attack on these two anti-corruption pillars of public service – the public service tradition and direct provision – by appointing people from outside the civil service to senior posts within the civil service, introducing private enterprise culture to public bodies (for example, the NHS “single market”), privatisation and by increasing the use of private finance and contractors in public services. But what they did pales before the Blair Government’s behaviour, which has done the same things but on a much greater scale. In particular Blair’s Government has shown a truly obsessive drive to replace direct public provision with private money and private firms. Literally nothing seems to be off limits, with public provision as disparate as the Prison Service and logistical support for the NHS being treated as suitable.

The Blair Government has also done two things the Thatcher and Major Governments did not do. First, it has radically altered the terms of employment of new civil servants, especially with regard to their retirement age and pensions, thus undermining the unspoken pact between government and civil servants that relatively poor pay was balanced by a relatively generous pension. Second, the Blair Government has classified “special advisers” that is political advisors, as civil servants, the most notable of whom is Blair’s erstwhile Press Spokesman, Alistair Campbell. These people have been given authority over career civil servants.

All this change is undermining the British public service culture. The appointment of special advisors as civil servants is destroying the apolitical nature of the civil service. The idea of a career civil servant is falling into disuse because no one can be sure what is next to be privatised or where a department may be moved to. The morale of civil servants is generally depressed. All of that translates into less commitment to the job, on average less time in a job and probably the employment of fewer able and trustworthy people as civil servants because the more able and trustworthy are now less willing to come into public service and standards have had to be lowered to recruit sufficient staff.

The weakening of the public service ethos and the probable lowering of the quality of the people employed is likely to have increased the number of civil servants willing to behave corruptly if the opportunity arises is increasing at the very time that the opportunities for corruption are multiplying because of the large number of private companies being given government contracts. Put those two circumstances together and it is odds on that civil service corruption has increased substantially.

What is applicable to national politicians and civil servants applies to other public servants, at both the national and local government level, and politicians below the national level.

In theory competitive tendering for public contracts should be a guard against corrupt practices. The problem is that in most instances the number of firms tendering will be small. Quite often there will be only two bidders. On occasion the process lapses into farce and only one firm will bid. This happened in the London borough of Camden where a £62.5 million contract for renovating an estate called Chalcots attracted only one bidder, a consortium going under the name of United House. The council’s housing director Neil Litherland claimed bizarrely that talking to just one bidder would lead to “better uses of [council] resources by reducing the negotiation and evaluation period” (Camden New Journal 12 12 2002).

There are good reasons why the number of bidders is often small. First, the size of the operations and their frequently unusual nature (often there is no comparable private sector work) means that there will only be a few private companies able to plausibly bid for a contract. Second, the bidding process is very expensive both in terms of money and time, especially management time. These two entirely rational and legitimate reasons for a paucity of bidders build great opportunities for corruption into the system of bidding. Where there are, say, only four companies capable of undertaking work in a particular area such as social housing, they can act as a cartel and effectively deal out public contracts amongst themselves by agreeing who will put in the highest bid for any contract.

Corruption is more than people receiving money in brown envelopes or material benefits in kind such as  expensive holidays. It is also the  granting of jobs years down the line, directorships for politicians and civil servants who have controlled the granting of Government contracts or who have used their influence to progress things such as planning applications.

The current rules regarding ministers and public servants taking posts in private industry are so lax as to be next to meaningless – they can take up posts after a year or two, regardless of how closely the private sector job is linked to their previous post. Moreover, the definition of which private industry posts are sensitive enough to demand even that slight obeisance to common decency is open to an elastic interpretation by those supposedly enforcing the rules if the secret view of politicians and senior public servants is that the rules are simply a public fig-leaf to cover their indecency. In effect, successive governments have legalised corruption and of course the more government contracts offered to private business the more opportunity there is for this type of “legalised” corruption.

Corruption can also be the giving of an honour or public service appointment in return for corrupt behaviour. For example, a contract could be granted to a private contractor corruptly through a conspiracy between the contractor, a cabinet minister and a senior public servant near retirement. The public servant corruptly facilitates the granting of the contract, retires and is rewarded with a quango sinecure. Again, the increase in contracts offers greater scope for such corruption.

That which is corrupting national politicians and the Civil Service is also evident in other public bodies, both national and local.

28. The behaviour of private companies

The blurring of lines between the public and the private arguably has a general effect for the worse on the behaviour of those in the public sphere, the bad practices of private enterprise being imported into the public sphere.

Private business is very prone to corrupt practices, from outright bribery to the formation of cartels and tricks such as industrial espionage, but the legal behaviour of private companies is frequently morally scandalous.

Directors of even the largest and ostensibly most publicly accountable companies commonly act in a manner which to most people’s  minds is immoral. The executive directors have absurdly generous and long-term contracts which are so undemanding that no matter how  badly a director performs, if they leave the board they can expect  the outstanding period of the contract to be paid in full. In many cases they receive more than their contract entitlement to persuade them to resign and go quietly.

While on a board, they executive directors receive performance bonuses set at targets which are simple to achieve. They will probably have  share options which, even if accounts are honest, are a one way bet for the director. If the shares rise above the discounted price of the option, the directors sell and pocket the profit. If the shares fall below the discounted price, they simply do not buy. It is of course easy enough to manipulate shares to boost their price at a particular time.

Why do directors get away with such behaviour? Simple: they can effectively control the company for their own purposes. In large public companies, directors’ remuneration is normally decided by a remuneration committee, which is normally composed of non-executive directors. Non-execs are supposed to act as a restraint and a check on executive directors. In practice they do not – try to find a case where a non-exec has blown the whistle on even criminal action within a large company. When it comes to directors’ remuneration, they know the score, produce the right executive director contracts or run the risk of being excluded from the lucrative non-exec gravy train.

The matter is complicated by the fact that many non-execs are executive directors with other companies where they have overly-generous contracts. What more natural than to think that because I earn this someone in another company should be similarly paid? Finally, especially in the largest companies, there is also a good deal of you-scratch-my-back-and-I’ll-scratch-yours. Executive directors of one company will expect to be non-execs of companies in which their non-execs have an interest.

Most of these practices cannot of course be imported directly into public service – inflated salaries, perks, bonuses paid on soft targets and generally overly favourable contracts are three which can and have been imported, for example, Johnston McNeil, the former head of the Rural Payments Agency, left his post after farm payments to English farmers were left in chaos early in 2006 but is still being paid his £114,000 salary in October 2006 (Daily Telegraph 18 10 2006). But the mentality rubs off on public servants (particularly the senior ones) who now deal with private business far more often that they use to and are urged by government to follow supposedly superior private enterprise practices. Sometimes the values are directly imported by the parachuting of people from outside of public service into senior public service positions. Where some part of public provision is subcontracted to a private contractor the ills of private business are imported wholesale.

29. Charities 

Most people when faced with the word charity attached to an institution are inclined to be well disposed to the organisation regardless of what the charity is supposed to do or how efficiently it does it.  If it is a popular area of work, such as medical research or the provision of services to disabled children, rationality goes out of the window. Hardly anyone questions how the money is spent or how much of it actually goes to the people the charity are supposedly helping. Nor do people distinguish between the sources of charitable income and many perhaps most are unaware that much of it is public money. This means that governments can support unpopular policies, such as those associated with political correctness, without the general public being aware that public money is being used to promote the policies.

The use of charities by politicians has other pernicious effects. It allows a government to evade responsibility even more effectively than the employment of private companies does because charities, especially popular ones, throw up a moral shield. As mentioned above people feel that money spent by a charity is a good in itself. That applies even when it is taxpayers’ money. A government can also make charitable donation part of their PR because they can gain kudos from the public by publicising their donations of taxpayers’ money to popular charities.

There is general  objection to the use of charities as publicly funded providers. They have a moral and civic role. The whole point of a charity is that it is the product of the individual will, a conglomeration of the active decisions of those who choose to make a contribution. It is part of what academics like to call civil society, those institutions which men naturally form in a free society and which fall outside the ambit of the state. Lose or even seriously diminish those institutions and the state determines all, for there is nothing to oppose it or offer an alternative.

Making a charity simply or largely a client of government undermines the very idea of charity. There is every chance that if charities are seen as arms of government, private donations to them will begin to dry up. That in turn would have spending implications for the taxpayer, because although often inefficient, charities do fund a considerable amount of what would otherwise be described as public provision. The taxpayer would end up footing the bill for extra public provision. State funding also makes charities forget their original role and become dependent on the state funding.

Government already channels gigantic wads of public money to charities for the purposes of research and active provision of services. This fits in with the drive to subcontract public provision which is now officially supported by not only the Labour Party and Tories but half-heartedly by the LibDems. Whoever is in power for the foreseeable future, it is a fair bet that the relationship between charities and the Government will broaden and deepen.  That will remove charities ever further from their original moral purpose.

Charities also epitomise the practical difficulties of mixing private and public. It is true that as non-profit making bodies they share some of the ethos of public service and the profit motive is absent. The problem is that charities, even large ones, are often very inefficient. The poorly run ones spend a great deal on administration. Many of the largest use professional fund raisers who take between 15-50% of what they collect from the public (the young men and women who increasingly infest our pavements on behalf of charities are paid employees of a professional fund raiser). They spend inordinate amounts on advertising. They hoard money rather than spend it. They manage their money poorly. They fail to modernise their service. Their accounts are inadequate.

Take the case of Scope, the charity previously known as the Spastics Society, which aids those with cerebral palsy. It is a mainstream charity of just the sort to attract public sympathy in large measure. The first thing to note is that it changed its name in 1994 from something everyone could immediately understand – the Spastics Society – to something which most people would not have a clue about. The charity had allowed itself to be seduced by the marketing sirens. It is difficult to imagine this confusion did not have some effect on fundraising.

In January 2006 Scope announced it was shutting 50 of its shops because it had a predicted £310 million deficit. (Daily Telegraph 13/01/2006). The Telegraph account went on to disclose that Scope’s last accounts showed that it was budgeting to spend £35.6 million more than it received in the financial year 2006/7, that there was a hole in its pension fund and that its buildings suffer widespread dilapidation through lack of investment. I think most people who think about it would be somewhat disturbed by the idea that a charity had a pension fund of any size and that a substantial part of their donations are going to fund it. Charities in the public mind are thought of as institutions where people offer their services either free or at a discounted rate. The idea that their paid employees are just like any other employee does not fit comfortably with the public’s idea of charity.

One of the directors of Scope Jan Hildreth (also a former director-general of the Institute of Directors summed up the mentality of his and many other charities: “Like many charities, the concern of the society has always been its activity and not its finances.”

Interestingly, Scope blamed part of its plight on ‘the Government for underfunding services it provides, such as residential and school places. “It wants our services, but it doesn’t want to pay for them,” the spokesman said. “This is a drain on our coffers.” ‘

The idea that charities will generally be more efficient than direct public provision is simply laughable. Not only do they suffer from the structural ills of public service they lack any proper public accountability. Charities are audited each year, but that audit is much less demanding than the audit required of large public companies. Moreover, their frequent failure to keep adequate records makes any audit of the use of public money very difficult. It would also be a very expensive job to monitor their spending of public money meaningfully.

As the Scope complaint quoted above suggests, governments may also see charities as a cheap means of public provision. Whether it is or not is another matter – personally I would doubt it because of the widespread incompetence in the charity world.

There is a further problem wih charities, namely what is a legitimate charity? Take our public schools. They are overwhelmingly charities. They also have in most cases a history of one hundred years or more. This means that the profit motive is absent and a quasi public-service (civil society) ethos has had time to evolve. Yet public schools – which get around £100 million tax relief – have always subsidised the education of the poorer middleclass children rather than the education of the truly poor. Why should they have status of a charity?

There are also many questionable cases where the charity exists to fund something which is essentially, even in principle, a private or sectional interest, for example the Royal Society for the Protection of Birds. Why should the taxpayer subsidise such institutions?

[RH in 2012 There are more than 200,000 charities in the UK. Does anyone honestly believe that there can possibly be that number of good causes? http://www.ncvo-vol.org.uk/networking-discussions/blogs/116/09/10/06/how-many-charities-are-there. Many disburse little of the money collected or, in quite a few cases nothing, to the causes they ostensibly support. Quite a few are set up by the wealthy who gain tax relief on donations to their charity and then use the money donated to finance their pet projects and/or draw substantial payments in the guise of expenses or pass on some material benefit to friends and relations by getting the charity to employ them].

30. Does market competition produce greater choice generally?

One of the prime arguments for introducing business practices, private money and private business into public provision is that it improves choice. British citizens, increasingly referred to as consumers or customers rather than patients, passengers or any other appellation which emphasises the public nature of the provision, supposedly want choices of schools for their children and to go to the “best” hospital or to enjoy the “superior” service coming from private companies with public provision contracts such as those running the railways or utilities such as water or gas.

Take the case of the privatised railways. Before privatisation all a passenger had to do was buy a ticket and get on a train. The only thing the passenger had to consider was whether there was a time or date restriction on the ticket. Now, the passenger has to not merely worry about time and date, but whether he or she is getting on a train run by a particular company – how many people have been on an intercity train when the ticket inspector has got into a dispute with someone who has bought a ticket for the train’s destination but it is the wrong ticket for that particular train? The customer is also besieged by a bewildering array of pricing, far more than was on offer when the railway was state owned.

I doubt whether the average passenger welcomes either the multiplicity of carriers or ticket prices. A person can have too much choice. Human beings want some but not a vast amount, which merely becomes confusing. If you want to travel somewhere you do not want it to be a demanding exercise in both finding out what the cheapest fare is and ensuring that the terms of the ticket are not inadvertently breached.

Does market competition produce greater choice even in a “free market”? There is a good argument to say it does not. The natural tendency of a free market is to produce reduced competition. Governments of all colours in countries which have a large free enterprise component to their economy recognise this by maintaining anti-monopoly legislation. (What are called free market economies are in fact state regulated economies and regulated in the most fundamental way, that is,  the prevention of increase of market share beyond a certain point).

But anti-monopoly legislation only prevents the worst anti-competitive excesses. There is still very wide scope for anti-competitive forces, especially in capital intensive and technologically advanced industries – think Microsoft and operating systems or airliners in a market of two or three suppliers.

But the process is a general one. Even enterprises which are not innately capital intensive are affected. Retailing is a good example. A hundred years ago department stores were still in their infancy. Supermarkets and shopping Malls unknown. The vast majority of purchases  were made from small, privately owned shops or from open air markets.  Most of the shops specialised in a narrow trade.

Today we have far fewer shops and markets. Supermarkets and Shopping Malls abound. The chain stores of at most a few dozen companies become  ever more pervasive. There are many fewer specialist shops. The private retailer is assaulted from all sides by the large  multiple-store retailers and increasingly succumbs as the public is seduced by the immediate temptations of price and convenience without regard to the social long-term consequences of what they do. The  =privately owned shop does not even have to be in the immediate vicinity of a giant chain store to suffer. It merely has to be within reasonable driving distance of the chain store. The consequence is that the poorer areas of larger towns and cities and country villages and small towns are denuded of their shops. The choice of the poorer residents of such places is tremendously reduced. The wealthier do not of coursecare about this because it has no direct effect on them. They have the wherewithal to either live in areas well serviced by stores and services or can afford to drive to the large supermarkets or have goods delivered from far afield. Such developments fall within the remit of government. It is not for Government to operate supermarkets but it is within their remit to prevent commercial behaviour which is anti-social.

What constitutes choice anyway? Is it, for example, having more shops offering a smaller range of products or fewer shops offering a greater range of product? In practice fewer shops will mean reduced variety of product as well as service. But what of all the choice in giant supermarkets you say? Do they not have a much greater range of product? Surely they provide more choice. They may provide a greater range in one place but that is all.

The advent of industrial-style agri-farming, the bringing in of increased amounts of imported food from around the world and introduction of new manufactured foods may give the impression of greater choice, but is an illusion. The number of varieties of staple fruits and vegetables has been massively reduced, as have the various breeds of farm animals.

Of course, the providers of anything which sells can always say “If people didn’t want it they wouldn’t buy it”. But that begs the question of what alternatives are available. If only three types of washing powder were available doubtless they would sell massively more than any one brand does now. That does not mean they are more popular merely that people have to have such a product and were forced to buy one of the three brands available. Such restriction of choice is increasingly commonplace.

31. How Government gratuitously takes on obligations

Governments regularly make rods for their own backs. Social policy is an area more prone to this sickness than most.

When a government urges the electorate to take action it places itself under both a moral and democratic  obligation. It may even in certain circumstances place itself under a legal obligation when a government sponsored supervisor such as those supervising the financial services industry, fail to act to prevent the mis-selling of pensions.

Since the 1980s British governments have pressed people to buy houses, take out private pensions, pay for private healthcare and insure themselves against unemployment. The consequences have been at various times, negative equity in houses and widespread repossessions, pension scandals ranging from the Maxwellian hand-in-till to an attempt to renege on the conditions of policies by the Equitable Life and ever more expensive private health care and unemployment insurance. The consequence has been that time and again the taxpayer has had to come to the rescue either by paying compensation in cases such as Barlow Clowes or through increased benefits paid to those who have lost their saving or investments. In those cases where the Government has forced private companies to compensate people directly, such as the various mis-selling scandals in the pension industry, the result has been higher premiums for all and frequently reduced pensions, annuities and endowment payments for many.

The sensible course for a government is to allow people to make private choices completely unhindered by state propaganda. That way they do not incur any moral obligation if things go wrong. It also ensures that the electorate does not automatically blame the government when investments turn sticky.

Of course, the state does have to regulate those who offer private insurance, mortgage and pension schemes to prevent outright criminality, such as that which occurred in the Robert Maxwell Mirror Pensions Fund scandal. This regulation should consist of (1) laws laying out what can and cannot be done, (2) very strict auditing rules

for such businesses and funds, (3) laws placing responsibility firmly on the shoulders of those who administer the businesses and funds and (4) the efficient enforcement of such laws – those responsible for the businesses and funds must believe that there will be no walking away from a mess if money goes missing or reckless mismanagement occurs.

What, no regulators for financial institutions? Well, experience shows that having a regulator to licence such businesses is pointless at best – think of BCCI and Barlow Clowes – and may even help fraud and gross mismanagement by giving a spurious respectability and solidity to the firms they licence. Moreover, the rules which regulators operate by are frequently bent as circumstances dictate, for example, the solvency rules by which Assurance companies operate have been relaxed several times in the past ten years simply because, with the fall of the stockmarket, many of the largest companies would probably have gone under if the original rules had been enforced.

32. Making personal private provision – the problems of investing

To expect the vast majority of human beings to be expert enough in financial matters to make wise private investment decisions is absurd, as absurd as expecting every man to be his own lawyer. Therefore, all but a few of us will turn to supposedly expert advisors for advice. The problem with such people is twofold: they often have a vested uniters in selling or promoting a particular product and even when they do not, they are frequently bad judges of the financial future. (If investing was easy and certain for the so-called experts, all financial institutions would be permanently hugely successful).

When someone sells you a private pension plan or insurance, he does not do it out of the goodness of his heart. He does it because he earns a commission or fee from it. As the pensions mis-selling scandal of the Thatcher years showed, that incentive drives many, probably most, financial service consultants to sell the product most beneficial to their income rather than to the customer.

The customer can also get misled if he takes reputedly independent advice, whether this be from a self-described independent financial adviser or out of the financial pages of newspapers and magazines or investment newsletters. The advice given may be anything but independent. Unbeknown to the client, an advisor may get a commission for recommending an investment and media share tipsters often have no scruples about recommending shares which they know to be poor performers, either because of direct inducements from the companies or because they work for a company which gets business from the share tipped. Share tipsters can also make a profit by “ramping up” a price in shares they hold by recommending it or depress a share by criticising it and then buying at the depressed price.

Those recommending shares or financial products are in a wonderful position: they can tip to their heart’s content without taking any responsibility for their tips. No tipster has a consistent record of predicting successful investments. Quite a few have utterly dismal records over years. Indeed, so poor is their general performance that one might ask whether it is any worse than randomly selecting investments. It may even be worse. As Woody Allen once remarked, “A stockbroker is someone who invests your money until it is gone”.

The Daily Telegraph put the matter of share tipping to a sort of test in 2001. It employed a professional tipster, an astrologer and a four year old child to notionally invest £5000 in the stock market. The professional tipster applied his supposed expertise. The astrologer selected her shares using her star charts. The four year old child chose by repeatedly tossing (at the same time) a number of pieces of paper in the air with the names of shares written on them. At each toss she caught one. After a year all the investments had lost money, but the four-year-old-child lost least, followed by the astrologer with the supposed financial expert bringing up the rear quite some way behind.

A rational examination of the actual performance of tipsters and advisors could only lead to the conclusion that predicting the future economy is a mug’s game. Why would an expert do worse than a four-year-old child and an astrologer? Well, it could have been a fluke, but an unlikely one as both the child and the astrologer did better. More probably the financial advisor’s knowledge is a positive hindrance. A parallel is with the football pools. Many people have a very considerable knowledge of the form and general state of professional football clubs. Yet these people do not appear to be any better at predicting results than the punter who knows nothing about football and does the pools by putting a pin in the matches or has fixed numbers.

The truth is that no one can guarantee investment for a secure future or even come anywhere near to it. All calls for private provision replacing public in whole or part should be placed in that context.

33. Supporting old age

The most problematic of all public provision is what to do about the old. The value of actuarial calculations – the statistical analysis of risk based on instances of the risk occurring – made sense for pension calculations when life spans from generation to generation were fairly stable. Because of our ever increasing ability to cure and prevent disease and to provide a more materially certain livelihood for the majority, life expectancy in the future is no longer easily predicted. Even if the wilder extremes of SF are avoided, it is reasonable to assume a significant rise in life expectancy in the next forty years. The rise does not have to be dramatic to make a nonsense of pension provision made today – even a five year rise in the average would have dramatic consequences for pension planning.

A substantial rise in the average lifespan does not necessarily imply some major scientific breakthrough to slow or even reverse ageing. All that would be required is for scientific advances to reduce the diseases which kill many before they reach the average age of death. In other words, more people survive to the ages which are now the average lifespans. It is quite conceivable that within the next 40 years simply reducing early death could extend the average lifespan by ten years.

More dramatically, it is conceivable that science may extend human lifespans substantially beyond their current limits. Work on animals such as mice have resulted in greatly extended lifespans simply by restricting food intake from early in life. If human lifespans are extended greatly all pension bets are off. In such circumstances no meaningful actuarial prediction for pensions could be made for the odds would be that further, unforeseeable increases in life span would occur continuously after the initial scientific breakthrough was made. The fact that such scientific advances are possible in itself makes current pension planning hideously uncertain.

What should we do as a society to plan for the future lives of the old? Let us assume that average lifespans are extended simply through the diminution of early death rather than from any radical scientific discovery, what then? If the average lifespan of Britons rises to, say, 90, over the next 40 years, an obvious move would be to delay retirement. But that raises a problem. Most people could probably work to 70, but beyond that the incidence of severe but non-fatal disease rises steeply. Keeping people alive longer does not at present equal keeping them fitter. More 70+ year-olds means more people suffering from various forms of dementia, crippling diseases such as arthritis and people simply too physically weak to undertake work which could provide an income to support them. Hence, extending the retirement age, for both state and private pensions, is only a partial answer unless science advances enough to massively reduce the infirmities of old age.

It is also true that many people are struggling to cope with their job long before the current age of retirement. People in manual jobs cannot be expected to work to 70 and those in heavy manual jobs or those in jobs which require physical strength and fitness such as grassroots policing, are probably past useful employment by the age of 50, certainly by 55. In principle they can retrain to lighter work, but in practice this is very difficult. People who have spent their lives working with their hands in a workshop or in the open air often do not take easily to working in an office or shop. Moreover, the pay they will get from such “second career” jobs is likely to be low, which is both a disincentive to work and may leave the person unable to support themselves fully.

But even if a person can adapt to new ways or has been throughout their lives in the type of employment which can be carried on into old age, the odds are that they will struggle to remain in employment as they reach late middle age. Employers are prejudiced against the older worker for various reasons. Part of that reason is financial – the cost of employing them is high compared with a youngster – but it is also in large part to do with the adaptability and energy of the young compared with the old. In a time of ever increasng technological change the natural resistance to change and learning becomes ever more of a handicap than it was in the past. Government can pass whatever age-discrimination laws it wants but employers will still find ways to employ who they want to employ without falling foul of the law (short of a law which insists that a percentage of people in an organization had to be in various age categories).

However much as we may like to believe – and I write as a budding wrinkly myself – that experience compensates for youthful enthusiasm, the truth is that all of us become much less receptive to new ideas as we get older, energy falls, physical strength fails, our memory diminishes and concentration becomes harder. Consequently, employers have good cause for employing younger people in most jobs. Of course experience does count and in some jobs can be valuable well into old age, but in most jobs it does not count for much after the age of 60. Even in “people” related employment, which the older person is supposedly better equipped to handle, experience may be a positive disadvantage. For example, suppose an employer wants to employ someone serving the public. It may well be that the average customer for the business prefers to be served by someone young and employing the old would be the kiss of death for the business.

The position of the older worker is being further undermined at present by the high levels of immigration, both official and unofficial. Most of this immigration is of the young, much of it young males. These young workers will tend to take much of the work which would otherwise be available for the old.

Even in the most benign likely circumstances – an extension of the average lifespan by five or ten years through the deduction of early death, it is clear that many people will require support for a very long period of retirement or reduced employment. Some of that may well come from private pensions and savings. But clearly for a very large part of the population adequate private resources guaranteed to support someone for 30 odd years will be beyond their grasp. Hence, state provision sufficient to allow people to live in old age is a must.

If great scientific advances are made which greatly extend life we shall simply have to start planning again from scratch. Obviously if average lifespan was increased to, say, 150, the whole perspective of a life would have to change. There are any number of exciting or disturbing possibilities. For example, it might be that only the newly conceived or newborn children could have their lives increased by a new treatment. We would then be in a position where that generation and succeeding generations had the increased lie span while anyone born before the treatment became available lived to an average age of 90.

The other great concern about pensions is demographic. The population is ageing and the British birthrate is substantially below (around 1.7 children per woman) the replacement level (roughly 2.1 children per woman). The doomsday scenario is insufficient working people to pay the pensions of the old in the future. If we were talking about a demographic change which was going to take place overnight I would be worried. However, we are not. Rather, the demographic effects will be worked out over thirty or forty years. Past experience suggests that society will evolve to make the necessary arrangements. We cannot foresee what the birthrate will be in five years let alone twenty or thirty.

However, we should not put all of our eggs in basket. It would be wise now for the Government to begin a state pension fund into which one per cent of GDP (currently around £11 billion) was put each year. This fund would not be touched for 20 years at least and would be used to ease any future pension problem arising from a tax shortfall due to a smaller working population.

The currently fashionable solution for the future pension bottleneck – importing large numbers of young immigrants – would be no answer in the long term. The young people who arrived in this generation would eventually grow old and would need people of working age to support them which would mean more immigration which would mean more old people  to support in the next generation and so on ad infinitum, a literal absurdity because any territory has a limit to the number of people it can support. In other words, confronting the problem of a demographic  imbalance would merely be delayed for a generation or two by immigration.

34. The housing crisis

Because it is one of the essentials of life, government clearly has a moral responsibility to ensure, directly or indirectly, that there is sufficient housing. It also acquires responsibility because it interferes considerably with the housing market, often with the effect that new building is discouraged, for example, by overly strict planning laws.

The government sets the rules for building new homes, renovating old ones and adapting non-residential buildings for residential use. The provision of taxpayers’ money for social housing is dependent on government. The rules by which social housing is allocated are the government’s rules. Planning permission is in the gift of politicians. The terms on which property may be rented and leased are set by them.

Then there are the measures which indirectly the housing market. To a very significant degree the government still controls the economy by the use of taxation, the indirect setting of interest rates through Bank Rate (the targets for the so-called independent Bank of England to meet – at present merely the inflation rate – are set by the Chancellor), the obligations placed on employers, subsidies to industries such as farming, the size of the public sector and the acceptance or otherwise of free trade obligations. All of these things feed through into the housing market by increasing or diminishing the amount of money in the public’s pockets and their confidence or otherwise in the future. Governments also determine the level of net immigration into a country – when it is running at the level Britain is currently experiencing substantially affects the demand for housing. In short, the cost and availability of housing is to a considerable degree determined by government policy.

The ongoing and seemingly inexorable rise in British property prices is rapidly making many parts of the country a desert for first time buyers (according to a Halifax survey the average house price has risen from £62,453 in the first quarter of £1996 to £179,425 in the third quarter of 2006, a rise of 187% – Daily Telegraph 28 10 2006) ). A combination of very low interest rates, lax lending rules by mortgage providers (some are lending up to 5 times salary), the introduction of easy to obtain “buy-to-let” mortgages, rising wages for substantial parts of the population, the continuing right-to-buy policy (RTB – the right of tenants to buy their council or other social housing properties at a discount) for those in social housing and a great diminishment in the building of new housing, both public and private, has led to a shortage of housing which can be bought by someone on average earnings in a majority of counties. In some areas of the country, most notably in the SE of England, prices have been further substantially inflated by the massive and ongoing immigration into Britain, most of which ends up in the South East.

The position in the rental sector mirrors that of home ownership. Social housing is in desperately short supply in those areas with higher property prices, particularly London, while reasonably priced private rental property is effectively non-existent. Every London Council has a waiting list of thousands for social housing.

The provision of housing, whether rented or purchased, that most people can afford is necessary for the simplest of practical reasons: every community, no matter how wealthy, requires large numbers of people who are not well paid. They must of necessity live fairly close to their jobs because, apart from considerations such as travelling time, those on small wages will not be able to afford the fares if they have to travel a long way. That means there must be reasonably priced homes for them to buy or rent not too far from their work.

There is also the moral and political case. There will always be housing segregation of people by price, but there is a big difference between not being able to afford to live in the most expensive parts of a town or city and not being able to live there at all. That is the point which is being rapidly approached for people on even above average incomes in a surprising number of English counties. In such circumstances free movement – one of the defining practices of a free society – becomes practically a dead letter. It is also very socially divisive, which is poison to the democratic process.

What can and should a government do to ease the problem in those areas where houses are in dangerously short supply? The first and most obvious move would be to stop mass immigration and restrict social housing to British citizens. Whether that could be done either legally or in practice if it could be done legally, while Britain remains within the EU is extremely dubious. However, other things could be done.

A Labour government of old (indeed, a Tory government of the fifties and sixties) would have turned to fiscal and practical measures to relieve the problem. They would have put controls on the amount of money mortgage providers can lend, used compulsory purchase to acquire  land in the property hotspots and engaged in an extensive programme of  council house building. Instead, we have the Blair government tortuously twisting and turning within the limits of the free market ideology with ill-thought plans to provide an inadequate number of “affordable homes” in the South East, without any mechanism to ensure  that they remain available to the people they are supposed to cater  for, that is, the likes of teachers and nurses. But even if the scheme for these “key workers” was successful, it would not address the general problem of house prices being out of the reach for the large majority of people working in the South East and it cannot be morally sustainable to say that only those with vital functions should be subsidised, a subsidy which would in effect subsidise those wealthy enough to live in the area who can afford to buy or rent a property at market rates because the services they received would only exist because of the public subsidy of “key workers” homes.

In areas with a shortage of housing, the Government should begin a massive programme of social house building with truly affordable rents, It should use compulsory purchase to acquire land being hoarded by private builders. If a builder has not built on land within a given period, it should become available for public housing or for another private builder who is willing to build on it. The Government should limit the amount of money a mortgage lender may advance to a level whereby a borrower can continue to pay if interest rates rise considerably. It should relax the planning controls for private developments. It should give priority in social housing to those local to the area and to workers with scarce and needed skills.

The question of RTB is a difficult one. I do not criticise anyone for exercising RTB because once such a scheme is in operation, for an individual not to exercise RTB is to place themselves at a massive disadvantage. It is also a fact that in a council tenant in a large block of flats may have a very real fear that if they do not buy, at some point in the future control of the block in which they live may be transferred to a less sympathetic and politically responsible landlord such as a housing association or a private developer, and they as a tenant would have absolutely no control over the landlord.

In areas where there is substantially more social housing than can be let, it makes sense to sell them and give purchasing priority to their tenants to maintain a community. But the selling off of council houses is self-defeating in areas where demand exceeds supply, which is now much of the country after twenty years of RTB and much diminished building of homes both publicly and privately owned. If council properties were sold at their full price it would be damaging enough, but the discount given pours oil onto the flames.

The Blair Government has (since January 2003) restricted the value of the RTB in areas of high demand such as London by reducing the maximum discount available to tenants. Such reductions are arguably open to legal challenge by existing tenants with a RTB. The RTB is a form of property in the same way that an option-to-buy can be considered a property. The question is whether the Government is entitled to arbitrarily reduce the value of the property. It has not been tested in the courts to date.

Similar considerations would arise if the RTB was simply abolished. The Government could certainly remove the RTB from future tenants, but if they were to try to remove the right from those who already have it, they could leave themselves open to legal challenge on the grounds that they were being dispossessed of property. If the courts upheld such a challenge, the Government would then be left with a choice of depriving only new tenants of the RTB or compensating those from whom they take an existing RTB. In the first case, this would greatly distort the effect of abolishing RTB – its full effect might not be felt for 40 years – or would result in a truly horrendous bill for the taxpayer as all those with the RTB would have to be compensated, not merely those who were actively seeking to exercise the right.

The desperation of the Blair Government is epitomised by their announcement on 6 January 2003 that it was considering taking to itself the power to compulsorily seize empty residential properties and let them. It is still kicking this idea around. This would probably be illegal because of the protection provided for private property under the Human Rights Act. Even if it is not, it is highly questionable whether property owned by private individuals should be compulsorily taken by the state in such an arbitrary manner. It is true that compulsory purchase has existed for many years, but this is different. It appears that the Government is thinking not of purchasing the properties for letting, but merely taking them for an unspecified period and letting them.

But even if these properties were to be compulsorily purchased before letting, it would go against the normal principle of compulsory purchase, namely that it should only be used where it is impossible to achieve a clearly defined general public good such as a new road or railway line which cannot otherwise be achieved. That is not the case with housing. To be a meaningful public exercise the forced seizures would have to be very substantial and thus not exceptional, and the increase of housing could be achieved by other means such as I have described previously.

35. Council housing

Nowhere is the hostility to direct provision seen more clearly than in the provision of council (municipal and state funded) housing. This type of housing was created to provide secure tenancies for decent accommodation at a rent the poorer members of society could afford. In the years after 1945 both Labour and Tory governments were committed to building a great number of such properties and ironically in view of their later Thatcherite policy it was a Tory Housing Minister, Harold Macmillan, who boasted in the mid 1950s that the Tory Government intended to build 300,000 council houses and flats in a year.

The rot for council housing set in under Margaret Thatcher. Many council properties (unsurprisingly disproportionately the more desirable ones) were transferred to private hands through Right To Buy (RTB). Most of the money from these sales was not used to build new council properties because central government forbad councils from doing so.

RTB had two consequences. It reduced the social housing stock and complicated the ownership and running of council properties. Councils were left with a housing stock which was gradually honeycombed with the private purchases of freeholds and leaseholds. This meant that a council had to establish a new relationship with their new leaseholders – a particularly fraught business in large blocks of flats where disputes over service charges, ground rents and external repair charges have been legion – which increased the costs of managing the properties.

More importantly RTB blurred the relationship, both legally and in the public’s mind, between what was public and what was private. There is a good deal of difference between saying here is a public asset and here is a part public part private asset. To move the entire housing stock of a council out of council control when it is just council housing is politically difficult because it is seen simply as the transfer of a public asset. That was particularly true in the 1980s when the public at large still had imprinted in them the idea that the state owning public goods for the public good was natural. But let that housing stock be sold off to private buyers bit by bit until, say, a quarter is privately owned, and the public no longer sees the council housing stock simply as a public asset. Indeed, with RTB much of the public sees possession of a council house as not a social good but something akin to a lottery win because of the substantial discount it brings – RTB has created a great deal of envy from those who have not been able to get a property. (This envy is misplaced in the majority of cases because, as many tenants who have bought properties in less desirable locations – especially on large council estates and in large blocks of flats – have found to their cost, the charges made by councils for service charges, grounds rents and most particularly external repairs – these are capped only for the first few years after purchase – are extortionate and the properties often next to impossible to sell at a reasonable price or even at all).

This blurring of the relationship between councils and council housing and the change in public attitude towards council housing has fitted neatly into the strategy of all governments since 1979 which has been to diminish the direct control of council housing by councils. The primary tactic used apart from RTB and a diminution of state funding for low rent housing, has been the transfer of government funding of most new build social housing from councils to Housing Associations which are non-profit self managing corporations. These, unlike council housing, are not subject to any degree of democratic control.

There has also been a push by governments to get existing council housing transferred to Housing Associations. This is somewhat tricky because tenants have by law to vote for such a transfer. To get round  this awkward and annoying piece of democracy the Blair Government has  been attempting transfer control of council housing stock into Arms Length Management Organisations (ALMOs). These are limited companies (limited by guarantee not by shares). The council housing stock is still owned by the council but the management of the housing stock is transferred to the ALMO board which is bound by company law. Thus the relationship between tenant and the council is completely changed because (1) local councillors no longer have any responsible for the management of the housing stock and (2) the ALMO board, being bound by company law, have to operate according to that law not a political agenda. Again, democratic control is broken.

A third tactic is to allow PFI companies into the management of part of a council’s housing stock. This again ties the hands of politicians because the contract with company means the council cannot act of its own volition.

The experience of tenants in Housing Associations and ALMOs has been mixed but there have been too many instances where rents and service charges have been raised to levels higher than those in directly owned council properties and where management of the property has left much to be desired. Worst, some Housing Associations and ALMOs have got into financial trouble. The only ways out of such a mess, after rents have been raised as high as they can, is for either a council to rescue the properties by taking them into direct control or for the properties to be placed in the hands of a private company, either through some form of PFI or outright sale of the property. The private option is the one almost all councils go for in such circumstances.

Whatever tactic is used – ALMOs, transfer to a Housing Association or PFI – it is always sold to tenants by councils insisting that remaining in direct council control is effectively a non-starter because central government money for renovations will not be available if that happens.

But even where council housing stock remains within council control there are an ongoing problems. The “affordable” rents plan of the Blair government will raise rents to considerably over the next ten years. In addition, council are increasingly seeking to charge additionally for services such security, cleaning and caretaking.

Service charges have the advantage for politicians of allowing them to say they have kept rents down to a lower level whilst effectively raising the rents. In addition, there are probably fewer legal restrictions attached to levying and raising service charges than there are attached to raising rents.

Council housing was never intended to make a profit for central Government or even local councils. It was social provision for the poor. This appears to have been lost sight of by Government, viz: “Your average council home generates roughly £2,500 a year in rent, £1,000 of this goes on management costs, £500 for repairs, leaving £1,000 being siphoned off by Government. Why can’t councils keep this sum?”. (Labour MP Austin Mitchell “Defend council housing” Camden New Journal 30 Jan 2003).

If nothing is done to prevent the privatisation/commercialisation of council housing, I sincerely wonder how long it will be before the poor are unable to afford council housing in London.

36. Education

Education is a first rate example of how quasi-commercialism can corrupt. It was a pincer movement from the bottom and the top, from schools to universities.

Prior to the end of the 1980s our universities had been funded for decades by the University Grants Committee (UGC) which was made up  academics. The UGC received an annual sum of money allocated by the Government to higher education. The UGC then allocated this to the universities. This was not a perfect system because the academics tended to favour the older universities over the older regardless of performance. However, broadly speaking it worked and most importantly there was no pressure on universities to tout for students regardless of quality. This in turn meant that academic standards were maintained. Indeed, the newer universities were very sparing in their granting of degrees because they wished to build their academic reputation.

The Thatcher Government changed all that. They first cut in real terms the funding of given to the UGC, then abolished the UGC in 1987 to be replaced by the University Funding Council (UTC) which was manned not by academics but businessmen. The money was then primarily attached to  the individual – a second criterion based on the quality of research was also introduced but it was the numbers of students which brought in the large majority of the money. This forced universities to actively compete for students. This might not have mattered too much if the numbers of students had remained static but it did not because the Thatcher Government began the push towards dramatically expanding student numbers without a corresponding increase in funding. This meant that spending per student was reduced and universities had to get as many students as they could to maintain income. That alone caused universities to drop their standards, both in terms of who they accepted and the class of degrees they awarded, because universities with a reputation for high entry standards and strict marking of degrees risked being shunned for those with a reputation for being laxer. To take on stark statistic: in 1970 less than 40% of degreesawarded by British universities were firsts and upper seconds: the figure for these classes of degree awarded in 2006 is over 60%.

The massive increase in student numbers from the late 1980s meant that the average quality of student was lowered. This is not a subjective judgement. IQ is distributed within the British population approximately as follows: IQ below 90 25%, IQ 90-110 50%, IQ Above 110 25%. In 1970 less than 10% of school-leavers went to university. They could all comfortably come from those in the 111+ range (they will not have done but most would). Raise the numbers to the current level of around 40% and as a simply matter of arithmetic, many must have IQs of less than 111 and because a significant part of those with above average IQs will not go to university, there must be significant numbers now going to university with IQs below of 100. The difficulty of degree courses had to be lowered to cater for the lass able.

Because the increase in student numbers has not been met by a proportionate increase in state funding,  staff-student ratios have increased, teaching time for each student reduced, both in terms of direct instruction and the time available to staff for marking.

To these attacks on university standards were added eventually the toxic effects of the poison injected into the opposite end of the education system. “Progressive, child-centred education” really gained a hold in the 1960s. Anti-competitive and ideologically driven, the grammar schools were first almost destroyed, ironically rescuing the public schools which were on their financial knees by the mid-sixties because of the drain of middleclass pupils to free grammar schools, and teaching methods gradually corrupted so that children were not challenged over errors and all opinions (at least the politically correct ones) became equally “valid”.

The progressive ideal was greatly furthered by the introduction in the 1980s of a single school-leaving exam (the GCSE) to replace the CSE and O Level’. Had assessment remained entirely by final (synoptic) exams, The introduction of the GCSE would still have been mistaken because no examination can meaningfully assess the broad range of ability displayed by those who sit it – there has been a tacit recognition of this by the inclusion of questions and course tasks of different difficulty within a GCSE subject and candidates can choose to do the hard or the easy and this is reflected in their grades. The exam consequently says nothing about the standard of the candidate as such because the mark tells you nothing about the difficulty of the tasks attempted: for example someone taking just the harder questions in an exam could score the same mark as someone attempting only the easy  questions.

Mistaken as the exam was in principle, it was further damaged by the inclusion of substantial amounts of coursework – cue plagiarism and third party out-of-school help – and coaching by teachers, licit and llicit (the licit includes teachers being able to take an initial piece of coursework by pupils and making suggestions for its re-writing) and the use of modular exams (exams which tested only part of the course) which can be retaken several times during a course.

The school examination system has been further contaminated by the various examination boards becoming nakedly commercial bodies who compete greedily for candidates. The result is similar to that experienced by universities: standards have been dropped to attract business. The old practice of setting percentages for those gaining a grade and for those passing was dropped allowing any number of people to gain any grade. Freed of this constraint grades have inexorably risen year after year for both GCSEs and the university entrance A Levels. So bad has the inflation become that A* grades had to be introduced because A grades were so plentiful that they allowed no distinction to be made between the better candidates. Predictably, theA* grade has now met the same fate as the simple A.

Finally, because so many more pupils were taking GCSE than O Level, the standard of the exam had to be reduced for the same reason that the standard of the degree was reduced: the number of less able students taking the courses increased dramatically. The dire failure of GCSE has begun to be acknowledged by even the Blair Government with first the Education Secretary Alan Johnson announcing that coursework would be reduced in some subjects and abolished in a few such as maths (the Times 6 10 2006) and then a junior education minister Lord Adonis announcing that consideration was being given to allowing state schools to substitute the International GCSE (IGCSE) for the GCSE (Daily  Telegraph 25 10 2006). The IGSCE is an exam closer to the old O  Level and is taken by pupils outside Britain and increasingly by private schools in Britain.

The upshot of all this is a decline in academic standards generally. The decline of GCSE standards meant A Level pupils began their A Level courses less well prepared than they had been previously which meant A-Levels had to be reduced in difficulty which meant that those arriving at university were less well prepared and the degree courses had to be made easier.

A further pernicious consequence of the gigantic expansion of university numbers is the abolition of student grants and the imposition of tuition fee to fund the much greater numbers. . This is not only discouraging students from poorer homes – there is now a lower percentage of workingclass students  in the British university population than there was in the 1960s (although many  more because of the increase in student numbers)  – and leaving most students with considerable debts, but also creating a mentality amongst students, politicians, educationalists and indeed the general public, that education is only a tool to obtain a better job, that it has no general value.

The irony is that even at the economic level this mentality is at odds with reality. Successive governments have claimed that the lifetime earnings of a graduate are on average £450,000 greater than that of a non-graduate. This may have been true of graduates before the great expansion in student numbers but it is not now. The £450,000 has been revised to £150,000, a pretty small sum divided by the 40 years of the average working life. Of course that figure, even if it is true, hides a multitude of difference, with some degrees being next to worthless either because of the subject or the class of degree obtained.

37. Healthcare

The NHS was founded on the principle that all treatment should be free at the point of use regardless of income. The amazing thing is that 58 years after its foundation the principle is essentially intact. We have prescription charges and charges for dentistry and the work of opticians. However, even these charges for the poor, old age pensioners and children are either considerably mitigated or waived completely. For the vast majority of illnesses and injuries NHS treatment is available and no one who is entitled to and receives it need fear that they will be bankrupted by the cost of the treatment and care or that at some point the NHS will say no more treatment because it is too expensive. There are increasing disputes over the funding of expensive treatment, especially drugs, but these affect only a tiny minority of patients. The sole major NHS blot is dentistry where it is difficult to find dentists who take NHS patients in many parts of the country.

But the NHS ethos is under severe attack. The introduction of the “single market” by Margaret Thatcher and then the Blair government’s version of “money following the patient”, league tables of medical outcomes at hospitals and schemes such as hospital trusts being granted “foundation status” (which allows them greater freedom of action) are seriously damaging the idea of a national health service, the stress being on “national”. Hospital trusts are now competing with each other for both patients and the “right” type of patients, the “right” type being those most likely to be easily treatable and to have a good response to treatment.

“Money following the patient” has also resulted in a significant number of hospital trusts running into financial trouble and different areas of the country offering varying levels of treatment, the “post-code lottery”. The variation has been amplified by devolution which allows the devolved assemblies, especially the Scottish, to allocate money independently of Westminster. This has resulted in some treatments being offered in Scotland and Wales but not in England, for example drugs such as Aricept, Reminyl and Exelon which are used to treat Altzeimers are being denied to early stage Altzeimers sufferers while it is available to such people in Scotland and Wales (Daily Telegraph 18 10 2006).

Then there are the targets for waiting times which distort clinical judgements because hospitals begin to treat the conditions which reduce government targeted waiting lists rather than the conditions which clinical judgement would suggest should be given priority. Waiting list targets also result in hospitals fudging figures by devices such as putting people on waiting lists on lists euphemistically called something else, or moving people in Accident and Emergency out of A and E when they have exceeded the target waiting time and putting them onto trolleys in corridors to wait for treatment, which device allows the person to be classified as having been dealt with in A and E within the target time. So desperate has the Blair Government been to reduce waiting lists that it has even adopted a policy of exporting patients to continental hospitals where their treatment will be paid for by the NHS. (This policy could lead to far more NHS patients being referred abroad with the taxpayer paying than the Government anticipated because challenges are being made in the British courts to refusals by individual British health authorities to fund particular foreign treatment.)

In the past twenty years the NHS has almost certainly been subject to more politically initiated upheaval than any other taxpayer funded body, with both Tory and Labour governments forcing major change after major change on the NHS. The introduction of policies such as “the single market” and foundation status” for hospitals have caused profound administrative changes, with people having to re-apply for their jobs over and over again as each new regime is introduced and a general sense of impermanence and staff insecurity has been created. This sense of uncertainty and insecurity extends to new medical staff such as doctors, nurses and physiotherapists. Some years ago the Blair Government correctly identified the underproduction of such people in Britain and quite correctly acted to increase their numbers, both by providing training places and by significantly increasing NHS pay scales. This has had the effect of producing large numbers of these previously scarce medical staff from Britain. All well and good. But supply is only one half of the equation. The Government neglected the demand side and the upshot is that in 2006 there are large numbers of expensively trained medical staff unable to find work within the NHS.

The reasons they cannot find work are four. First, large numbers of foreign medical staff have been recruited and they are still in position. Second, Britain’s membership of the EU means that any medically qualified person from any EU state can compete with the British for jobs within the NHS (large numbers from outside the EU are also competing for the jobs because of Britain’s generally lax job entry requirements for non-EU foreigners coming to the UK). Third, the shortage of money in many hospital trusts and the demand by the Government that each trust balances its books, means that trusts are cutting staff, for example, the Epsom and St Helier Hospital Trust which serves 650,000 people in Surrey and South London, are looking to lose 25% of their staff by early 2008 (Metro 24 10 2006). Fourth, insufficient numbers of particular types of posts have been created, for example, training posts in hospitals for junior doctors.

The general utility of the NHS for patients has been reduced and will, if government plans go through, be much further reduced by a policy of “consolidating” hospital care by closing smaller hospitals and concentrating resources on a relatively small number of “super-hospitals.” Many smaller hospitals have already been much reduced – especially their A and E services – or even closed and many more cuts are in the pipeline. For example, the Daily Telegraph reported (17 10 2006) that 80 cottage hospitals in England were marked for closure. The rationale for such “consolidation” is that smaller hospitals cannot provide the same range of sophisticated treatments as a much larger hospital. This may be true but most treatments are of the simpler kind which can be dealt with in the smaller hospitals and any really difficult case sent to a specialist centre. The consequence of such a policy is that patients have to travel further and further for hospital treatment, often fifty miles or more. There is also some grounds for believing the closures are politically motivated because the Sunday Telegraph (22 10 2006) “surveyed 177 hospitals already affected or likely to be affected by cuts, [and] revealed that Conservative and Liberal Democrats seats are two and a half times more likely to be affected by cuts than Labour seats.”

A special case of hospital closures for “clinical reasons” are the military hospitals, all of which bar one have been closed and the one remaining is waiting decommissioning (Daily Telegraph 17 10 2006). This has meant troops returning injured from places such as Iraq and Afghanistan have been forced to use ordinary NHS hospitals. This has caused problems of morale, security and access to treatment – servicemen best recover psychologically when they are with their fellows, there is nothing to stop any anti-war radical attacking or abusing them in hospital and the treatment they need is not always immediately available, with servicemen having in some cases to join NHS waiting lists.

An unpleasant mentality is also distorting the notion that the NHS is a national health service. Increasingly, politicians, the media and medics are taking the line that treatment can be legitimately withheld from people wicked enough to disobey the official disapproval of smoking, drinking, getting fat and so forth. For example, Norfolk Primary Care Trust has decided that confirmed smokers are to be taken off waiting lists for “all non-urgent operations such as hip replacements….[because] Smokers have three times the complications as non-smokers”. (Metro 23 10 2006) I think anyone needing a hip replacement would dispute the operation’s definition as non-urgent. It is worth adding that the story mentions the Trust is “£50 million in the red” and an unkind soul might conclude that the withdrawal of treatment to smokers is connected to the debt. Nonetheless, the fact that smokers have been targeted speaks volumes for the ideologically driven mentality within the present day NHS. It is only activities which come within the ambit of official disapproval and moralising that are the subject of such withdrawal of treatment – it is noticeable that no politician or health trust has suggested that treatment for AIDs or HIV should be withheld because it is in most instances the consequence of the individual’s behaviour.

The moralising which bolsters the supposed clinical case for withdrawing treatment from certain groups runs along the lines that people are being selfish and irresponsible by smoking, drinking,getting fat etc. Wild claims are made for deaths supposedly due to such behaviour – any smoker who dies at a ripe old age is as likely as not to be classified as dying from a smoking related disease. All this supposedly self-inflicted illness is portrayed as being a massive burden on society and especially on the NHS. Most absurdly and dishonestly, smokers are claimed to be a drain on the taxpayer despite the fact that tobacco taxes greatly exceed any additional costs smokers might place on the NHS.

But do smokers, drinkers and the fat, who on average die younger than those who do not display such traits, actually impose extra costs on the taxpayer? Writing in the Sunday Telegraph (22 1 2006) the historian Niall Ferguson baldly and erroneously claimed those who smoked, drank and got fat are being antisocial because they “tend to expire slowly and expensively”. Most do not and whatever cost to the taxpayer arises from such people it pales into insignificance compared with those who live to a ripe old age. Not only do the latter draw pensions and benefits for far longer than the shorter lived smokers, drinkers and the fat, but the most costly of NHS patients are those who live to extreme old age for they frequently end up in hospitals or nursing homes for months and years. The most antisocial thing a person can do from the taxpayers’ point of view is live to an extreme old age.

The most fundamental threat to the NHS is the creeping privatization of the NHS which ranges from the logistical and administrative to the medical. Hospitals are being built under PFI and their maintenance placed in private hands. Hospital meals are provided by private contractors. Medical supplies to hospitals will soon be distributed by the German firm DHL. Most disturbingly, private medical firms, often American, are being granted massive contracts to take patients away from the NHS, a policy made all the more dangerous for the long-term security of the NHS because the treatments the private firms take are the simpler ones. The NHS are left with a reduced patient base for the simpler operations, which can result in the closure of NHS departments or even hospitals, and leaves the NHS with the more difficult and expensive cases to treat.

But even after the chaos wrought by governments over the past twenty years and the vast amounts of additional money pushed into the NHS to no great visible benefit by the Blair Government – the Health Secretary Patricia Hewitt recently made the astonishing admission that “For all the extra money, all the extra staff and all the extra patients treated, NHS productivity has remained almost unchanged” (Daily Telegraph 21 9 2006) – the NHS still represents magnificent value. Anyone who has ever had private medical insurance will know how incomplete the cover is. Common exemption clauses are a two year waiting period for existing complaints to be covered, a complete exclusion of psychiatric treatment and severe restrictions on aftercare, which is frequently excluded when active medical treatment ends.

Those who have had chronic and serious illness soon discover that the amount of private active treatment and aftercare they can obtain is considerably less than they imagined. Many begin courses of treatment which end before the utility of a treatment is exhausted. They then transfer to NHS care. Frequently operations are funded by their insurance but not the subsequent nursing which is undertaken by the NHS.

Those in Britain who laud the idea of private insurance as a substitute for taxpayer funded health service should examine the effects of such a system in the richest country in the world, the USA. Around 40% of the population have no health insurance. Even those with insurance find themselves left high and dry more often than not. Here are the words of a British journalist living in New York, Zoe Heller,from the Daily Telegraph London 6/5/2000:

“One of my best friends was short of cash one month and  let her insurance lapse. That same month, she was diagnosed with breast cancer. Seven years later, she is still paying off the credit card debts. Another uninsured friend was rushed to hospital for emergency intestinal  surgery. She will be paying her bill on an installment plan.  She counts herself lucky that the hospital has a relatively liberal policy about treating uninsured  patients…”

A recent study established that one in four of every  American declaring bankruptcy in 1999 cited illness or injury  as the main reason for his financial problems and that of  that group, roughly half were insured. In other words, paying extortionate sums to the insurance companies  doesn’t protect you from financial ruin if you happen to fall ill with something serious and expensive enough.

Even the rich in the US find healthcare beyond their means if the treatment is long and serious. The Superman actor, Christopher Reeve, one of the highest paid Hollywood actors, had exhausted his savings within two years of the terrible injury which left him paralysed. Private medicine will guarantee virtually any treatment – if you can afford to pay for it. That is the long and short of it. The NHS provides a remarkably wide range of healthcare free at the point of use. It mitigates strongly against “unfairness”.

The other great threat to the NHS is the media which is only too willing to feed the public with NHS “horror stories”. A good example occurred in the Sunday Telegraph recently. On 27 August 2006 their front page ran “Blunders by NHS kill thousands of patients a year”. Does anyone seriously imagine that any healthcare system in the advanced world does not suffer such casualties or that private medicine is generally more efficient or safer? Of course the NHS makes many mistakes and these add up to a sizeable bald global figure but when you are catering for a population of 60 million that is scarcely surprising.

The real question to ask is why is no public audit of the safety and efficiency of private medicine ever done? If it was it would make interesting reading because private medicine in Britain is notoriously prone to pushing any bungled private treatments back on the NHS without compensation. It also makes little investment in private sector facilities because it can rent NHS facilities for more complicated treatments, facilities which are purchased at well below any realistic cost. Private medicine also makes no contribution towards the cost of training medical staff. In short, private medicine in the UK lives off the back of the NHS and the taxpayer.

The Health Secretary should stop private medicine taking up scarce NHS resources. Even if private medical treatment using NHS resources was paid for in full, it does not follow that would be a good thing for the NHS because the money received may not adequately compensate for  the loss of the NHS facility during the time it is in private use. This is particularly the case where complex treatments, especially surgery, are concerned because the number of NHS facilities able to offer the treatment will be very limited. It is worth mentioning that a sizeable proportion of private medical treatments in the UK, especially the more demanding cases such as those of serious heart disease, involve the treatment of foreigners. It is morally indefensible toallow NHS resources to be hired to be used on a foreigner rather than used to treat a British citizen on the NHS. Where there is genuine spare capacity in the NHS, private medical providers should be charged a realistic price for it. In cases where private medical treatment goes wrong, the private medical provider should pay for the remedial NHS treatment.

The NHS consultants would doubtless froth and whine about reduced private work opportunities and it might be necessary to give their NHS pay a very large boost. But there are not that many of them and the cost would not be vast in the context of total NHS spending.

Apart from making private medicine pay its way, the NHS ideally needs to (1) not only stop further privatisation but to take back into its direct control that which has already been lost; (2) ensure that enough medical staff of all sorts are trained in this country and NHS posts reserved for them; (3) end the practice of money following patients; (4) fund NHS healthcare on the basis of an area’s population and demographic distribution; (5) retain and where necessary build new local hospitals; (6) restrict treatment to the hospital within a health authority area; (7) lay down a national schedule of treatments which must be offered throughout the NHS and (8) restrict NHS treatment other than emergency treatment to British citizens.

No 8 is necessary because a great part of the problem for the NHS in areas such as London is that it is being overwhelmed by the large number of foreigners who one way or the other either have a right to NHS treatment or who obtain it because NHS staff are unwilling to check whether some is entitled to NHS treatment. Of course, there are supposedly reciprocal arrangements for Britons to obtain health treatment abroad but the balance of advantage is all against Britain because the range and quality of provision in many of the countries which provide supposedly reciprocal treatment is inferior to that of the NHS. There are also potentially vastly more foreigners eligible for NHS treatment than Britons eligible for treatment abroad, for example,  400million non-British EU state citizens.

That is the ideal. How much of it could be achieved as things stand is debatable because our EU membership and other treaties severely restrict control over both our borders and what any British government may do. For example, while we remain in the EU we cannot stop any person legally resident in the EU from coming here (apart from special cases of crime or terrorism) and either working for the NHS or claiming NHS treatment.

The NHS goes to the heart of what should be public and what should be private. The prime distinction is between service and profit. Public provision is the provision of necessary services to everyone, which private provision never has nor can supply: private provision is simply the provision of services to those who can pay. This seems to have been lost sight of by successive governments.

Let the NHS become anything other than what it is, a national health service free at the point of use and you will never get it back. It was created in the extraordinary circumstances of the immediate post-war national solidarity when both the electors and the politicians were determined that Lloyd George’s boast of creating “A land fit for heroes” should not be mocked twice.

It is vital that the NHS survives because even with present life expectancies, there are going to be an awful lot of people who will need intensive medical support in their extreme old age. The cost of that will almost certainly exhaust the resources of even those who have made seemingly substantial private provision for their old age.

The NHS has many faults, but for most of the population, it is a better and more complete supplier of medicine than private medicine will ever be or could be.

38. The Post Office and Royal Mail

The treatment of the linked organisations of the Post Office and the Royal Mail epitomises the current state of public provision. The Post Office network has long been a source of social glue throughout Britain. It has provided not merely postal but a wide variety of public and quasi-public services acting as a conduit for such things as the payment of state benefits, applications for state issued licences, the payment of bills and the easy transfer of money. Recent governments have taken a significant amount of that work away from post office by such policies as encouraging the payment of benefits though bank accounts and the removal from post offices of applications for TV licences, which has made them less viable as self financing enterprises.

It might seem inevitable or efficient that benefit payments (including the state pension) should be made through bank accounts, but that ignores two things. First, it takes no account of the general utility of post offices, which utility could be judged to mean that the retention of benefit payments through the post office was justified because it helped maintain the post office network. Second, even today many people either do not have bank accounts or do not wish to have their benefits paid through a bank. The Daily Telegraph (25 10 2006) reported that two million pensioners rely on Post Office Card Accounts to draw their pensions and All Pay, one of the businesses which deal with Post Office over the counter bill payments, has stated that “Even though lots of people have some form of bank accounts, there are all sorts of reasons why people want to pay in cash….If post offices close, millions of people will be under served.”(Daily telegraph 21 10 2006).

Governments have been steadily closing main and sub post offices for the past twenty years but the pace of closure is increasing. The Blair Government is currently making noises which suggest that the current £150 million annual taxpayer subsidy may be curtailed or even dropped altogether. This would result in very large numbers of sub post offices and quite a few main post offices being closed. This would have a considerable effect on many local communities, particularly those in rural areas where often they are an essential part of a village because they will combine the function of sub-post office with that of village shop. Let the post office go and the shop will go. There is also a modern problem, namely, the increasing lack of outlets in rural areas and the poorer parts of towns and cities where someone can withdraw their money. Banks are rapidly deserting both, especially rural parts, and often the only place left where someone can withdraw cash is the local post office.

The fact that British governments over past fifteen years ago have been so casual in their maintenance of the post office network simply reflects the general political mentality of the modern British political elite which no longer sees politics as making pragmatic policies for the entire country but of dancing to an ideology (neo-liberalism) which reduces life to nothing more than economic relationships. This mentality means that the modern British politician does not ask when confronting an issue such as the maintenance of the post office network “what social benefit does this bring?” but “is it profitable.” The fact that we currently have a Labour government which has relatively little support in rural areas suggests that party politics may also play its part in ignoring the interests of the rural population.

This causal ignoring of the interests of some sections of the population can be seem more generally in the failure of Government to take into account the difficulties of those who through a lack of money, knowledge or intellect do not have access to the internet. This lack is increasingly making day-to-day living highly inconvenient as more and more organisations either insist on dealing with people through the internet or make it very difficult to do otherwise. Millions of people are in this position yet the government often seems oblivious to the fact that so many have not joined the digital age, a classic example being the decision to end the analogue TV signal in a few years. The idea that millions of OAPs will be able to negotiate the change from analogue to digital comfortably is fanciful  (there is also the likelihood that substantial numbers of people will not be able to get digital TV when the switch is made because even the engineers estimate that 2% of the country will not be able to receive the signal).

The Blair Government’s attitude towards the Royal Mail displays the profit-is-all mentality as well. They have not had the nerve to go for outright privatisation, but this may well come in the next few years – the Royal Mail chairman Alan Leighton, is currently lobbying for Royal Mail workers to be given a 20% share of the business. (Daily telegraph 14 10 2006). If the scheme goes through it would presumably make it much less likely that Royal Mail employees would resist outright privatisation as that would improve the market for their shares.

The hand of the EU is also to be found in Royal Mail. As mentioned before, the EU competition rules have forced Royal Mail to compete with private companies for much of their business and adopt inconvenient practices such as having to measure letters because Royal Mail can no longer do what it has done for a century and half, deliver letters under a certain weight no matter what their size.

39. Can we afford better public services?

The GDP of the UK is approximately £1.1 trillion (note trillion not billion – a trillion is a thousand thousand million). In the financial year 2006/7 the British government will spend approximately £500 billion. The size of the economy and the British budget alone suggests that there is considerable scope for economies and changed priorities.

 There are immediate substantial savings which could be made. The Treasury per capita funding of the Scots, Welsh and Northern Irish is approximately £1,400 pa per head greater than the per capita funding of the English. If the Celts’ funding was reduced to the English level – note to not below the English level – that would save £14 billion.

Foreign Aid is scheduled to rise to above £6 billion pa in the next few years. After 40 years or so since decolonisation it is reasonable to ask why the British taxpayer is still funding supposedly independent states.

Britain’s present contribution to the EU is around £12 billion. About two thirds returns to Britain leaving a deficit of £4 billion. However, much of the £8 billion is only spent because we are within the EU, for example the agricultural support payments. It is not unreasonable to assume that at least half of the £8 billion would not need to be spent if we were not in the EU. Leaving the EU could plausibly represent a saving of £8 billion. Thus, those three areas alone – the over-funding of the Celtic Fringe, foreign Aid and the EU – could produce a saving of around £28 billion.

What departmental reductions could reasonably be made? Some departments are frankly difficult to justify at all in terms of any useful activity, for example, Trade and Industry, while others have large swathes of administration which exist only because of every modern government’s mania for trying to regulate everything, for example, the Department of the Environment. Such departments could be much reduced or lost altogether if a government was brave enough to make a bonfire of unnecessary regulations. It is also true that even in those public organisations which do a thoroughly necessary job, there is often genuine overmanning, ie, overmanning beyond that required to cope with all likely circumstances, to be found. For example, the heavylayers of bureaucracy inflicted on the NHS by “reforms” over the past twenty years could be substantially reduced if the “front end”financial controls advocated in section ? were introduced.

At the level of strategic decisions money could often be better spent. Take defence and large computer projects. Our armed forces are being shaped not to defend Britain but to engage in action abroad. A good example of this is the ordering of two giant aircraft carriers at a cost (with planes) estimated to be £13 billion, not far short of our present annual defence budget. Such carriers are also hideously expensive to run and require large numbers of ships to defend and supply them. They are also vulnerable to missile attack. By ordering them the whole defence budget has been distorted. Moreover, they have absolutely no military value in defending the UK for any defending aircraft can be launched from land. If our defence forces were restricted to the defence of the UK, our present defence spending would be sufficient at worst and at best might prove more than was necessary and could be cut.

Large scale government computer projects have been an unmitigated disaster, from passports to the ongoing farce that is the NHS computer system which is intended to link every GPs’ records with every hospital. Any large computer system changes the structure of how an organisation works. It means that the people have to work to the machines’ limitations rather than doing the job as best they can.

This means that vast amounts of resources of both money and manpower have to be devoted to training staff, maintaining the system and coping with thesystem when it fails. That alone should raise a question in any organisation as to whether any particular computerisation is wise or necessary. When an organisation is as large as the average government body, the questions looms very large indeed because the costs of such systems and their failures are vast.

Take the case of the NHS system mentioned above. The estimated upfront costs of this ran into several billions initially. That cost has already multiplied a few times and doubtless will continue rising. It is quite possible that if the system is ever completed more than £10 billion will have been spent – and that takes no account of the hidden costs of restructuring the organisation to accommodate the system. Even if it was a success the question has to be asked was it money well spent? Does it really add much to the smooth running of the NHS for hospital staff to be able to access GPs records immediately or GPs to be able to access hospital records? I would suggest it does not. If hospitals or GPs need such information they can get it rapidly by using email. Would not the œ10 billion or more have been better spent keeping wards and hospitals open?

The other problem with large-scale government computer systems is that they do not work properly or even at all. There is every indication from IT experts that this NHS system will not work as a national system and that all the taxpayer will get for his or her money are some remnants of the system which will work within limited areas such as a single hospital trust.

There is also a role for one-off hypothecated taxes, that is,  taxes earmarked for a definite purpose. Suppose £10 billion extra is needed to build and renovate hospitals. A government could impose a new tax to be collected once only to raise that amount. Most taxpayers would support such a tax if it was going to a cause of which they approved. It would also avoid the bane of the taxpayer that once a tax is imposed it normally remains indefinitely. As such a tax would be a one-off, it would not suffer the usual objections to hypothecated taxes, such as the fact that the amount raised could not be guaranteed to correspond with the amount needed for the designated purpose or that people would only support hypothecated taxes for popular causes if all taxes were hypothecated.

Finally, there a great deal of money to be saved by removing all the politically correct trappings from within public service. To give an idea of the scale of that expenditure consider the case of the Metropolitan Police. Last year they spent on “equality and diversity training” £187 million, one sixth of the force’s budget (London Evening Standard 27 10 2006). Apart from the money spent, there is also the loss of efficiency and morale created by the habit public servants have had to develop of constantly watching what they say and do.

40. Does social provision corrupt?

One of the favourite arguments against social provision is that it corrupts the receiver by making them dependent and ultimately damages society by significantly reducing initiative and making people selfish. The facts do not bear this out as a general proposition – there will always be some free riders in a welfare state. Today we have a society in which the self-help gospel is constantly preached, people work longer and longer hours and most mothers work at least part time. This has produced a society in which the birthrate has dropped well below replacement rate. During the period when state provision was most heartily endorsed as part of the national furniture (1945-1979) the birthrate was above replacement rate. The ability and willingness tobreed is surely the ultimate indicator of the health of a society.

But that is not to say all social provision is benign. It is one thing for a society to provide those things which most cannot be reasonably be expected to provide for themselves, but quite another to build dependency into the system. That is what has happened in Britain where more than half the population now draw some sort of public monetary support. Some of those benefits are part of the legitimate armoury of social provision, for example, child benefit, unemployment benefit, sickness benefit and old age pensions. Others are not.

The most pernicious of the current benefits is Working Families Tax Credit, which can be drawn by families with a household income of over £50,000. This is a scheme in a long line of similar ones dating back to the old Poor Law of 1601. It is the granting of state money to those in work. The best known Poor Law example was the Speenhamland System  of the 18th century which allowed outdoor relief to those (primarily agricultural labourers) whose wages fell below a certain level. The result was predictable. Where the scheme operated employers dropped the wages they paid to the level where the Parish (which administered the Poor Law) made up the wages through outdoor relief to those whose wages were lowered.

The Speenhamland System was a subsidy to employers. So is the Working Families Tax Credit. All it results in is employers paying lower  wages. That is not because they are all evil grasping men or women.  Lower wages are forced on all employers because there will always be a substantial number of employers who will take advantage of opportunity offered by any government subsidy to lower their wages. That means all employers must do so to compete.

Apart from the fact that it siphons off large amounts of taxpayers money, Working Families Tax Credit is a pernicious form of subsidy because it makes employers who employ many low wage workers dependent on its continuance, which obviously cannot be guaranteed. Either a  future British Government may decide to abolish it of their own free will or tax harmonisation within the EU may force them to do so.

If it is abolished, such companies will be left stranded because they will have to pay higher wages. Moreover, the subsidy they are receiving now will cause them to be less efficient than they would have been without it. On the other side of the employment coin, families receiving the benefit will also be left high and dry if it ends, for they will have altered their lives according to the income they have received.

This type of structural dependency has evil effects beyond the economic because it can distort the democratic process. If sufficient people become dependent on a benefit such as tax credits they may make it next to impossible for any party wishing to be elected to propose its abolition because to have such a policy will drive anyone in receipt of the benefit to another party which supports its continuance.

41. The future of public provision

The present outlook for public provision is dismal going on hopeless. The Blair Government, having aimlessly thrown vast amounts of extra money at direct
public services such as the NHS to no good effect, is attempting to cover its political blushes by funding much future public provision through private finance and private corporate involvement.

The policy is being introduced into every conceivable part of our public service from the running of prisons to the administration of NHS hospitals. This provokes remarkably little political debate despite the fact that it not only radically changes the relationship between the public and the service they are paying for, but has already proved to be more expensive than direct provision in many instances. Despite the ever more dismaying experience of railway privatisation, Blair’s Government in its second term permitted the part-privatisation of the Air Traffic Control system and careered on in mindless fashion with plans to part privatise the London Tube system and to introduce private finance into a multiplicity of public enterprises from roads to social housing. On the supply side of the public service coin, Labour increasingly stands aside from providing any new direct public provision, no matter how obvious the need in areas such as housing.

Despite David Cameron’s “Tories aren’t complete bastards, honest!” propaganda campaign, the Conservative Opposition are still immobilized in the morass of Thatcherism. Look behind Cameron’s “right on” language and it is clear that the party still instinctively feels the welfare state is bloated and views the direct state provision of goods or services as a recipe for waste and incompetence ay best and as ideologically unsound at worst. The Tory Party continues to advocate private provision wherever they dare and private finance in public projects for virtually everything else in those areas where they do not have the courage to go the whole hog and say that the individual should be left to fend for themselves. The distance between NuTory soft words and policy was nicely encapsulated by Cameron’s portrayal of himself at the 2006 Tory Party Conference as “the defender of the NHS”, while remaining quite content to allow ever more private business involvement in the NHS.

There is a further fly in the direct provision ointment. EU Competition rules are forcing Britain to destroy or greatly reduce in effectiveness some aspects of public provision, for example valuable and justified public monopolies such as Royal Mail (dying the death of a thousand competitive cuts – see section 38) and the 192 directory enquiries system (abolished).

The EU is also threatening public provision through attempts to restrict public spending, for example, Reuters reports (12 10 2006) that the European Commission (EC) is attempting to reduce public spending throughout the EU to prepare for the “pensions crisis” which is supposed to engulf the EU over the next half century.

The EC claims that unless something is done, public debt within the EU will treble to 200 per cent of GDP by 2050. This is reckless scaremongering because no one can meaningfully predict demographic trends that far into the future, let alone the immense economic changes that will happen over such a period. Sadly, that fact will have little bearing on whether the EC will be successful in their quest to cut public spending because that will be a political decision not a rational one. As cuts in public spending would fit neatly with the present “public service bad, private business good” ideology adopted by so many governments within the EU, there is a fair chance the EC will be at least partially successful.

If the EC is successful, any cuts in public spending would in theory bear heaviest on members of the Euro (and thus not Britain) because Euro members are legally committed to keeping their deficits within limits (pause for hollow laugh). However, past experience suggests that whether Britain is a member of the Euro or not, she will find the same rules imposed on her by EU hook or by EU crook to ensure “equality” throughout the EU. (It is worth noting that Britain is already morally committed to keeping within the Euro public spending deficit limits).

Mass immigration is also undermining public provision. It does this in two ways. First, immigrants compete for the social provision Britain offers because the British system allows many millions of foreigners who have not contributed anything to enjoy the full benefits of the considerable public provision available to a British citizen. Any person granted the right to reside permanently in Britain qualifies. That includes some 400 million EU nationals and anyone else legally resident within the EU. British citizens have reciprocal rights in other EU countries but these rights merely require each EU member state to grant the same social provision rights to Britons as they do their own citizens. The social provision in many of the EU states is, as a package, considerably inferior to that offered in Britain. It is also true that far more foreign EU nationals settle in Britain than Britons settle in the rest of the EU – Britain is particularly vulnerable to such immigration because English is the second language of choice for so many foreign EU nationals and the Blair Government, unlike almost all other EU states, made no attempt to stop immigrants from the EU new entrant states such as Polnd.

To the EU population legally entitled to settle may be added those granted asylum, the dependent foreign relatives of British citizens in Britain who are granted the right to join their relatives in Britain, the spouses of those who marry British citizens and those allowed to remain on compassionate grounds, foreign students from outside the EU and those granted work permits.

Finally, many of those who are here illegally manage to obtain access to British social provision by fraud. There is also the problem of “health tourism”, whereby foreigners come to Britain simply to obtain free treatment on the NHS – they are frequently successful because the NHS in practice rarely checks a patient’s immigration status.

All of this puts a tremendous extra burden on the British taxpayer and causes widespread resentment amongst the native population who naturally think that they should not be paying for foreigners or having to compete for the social provision which exists. The poorer members of society are particularly affected because they are the ones who most need social provision, especially in the areas of housing and healthcare – the poorer the area the more need for social housing and often the medical services available locally are meagre compared with more prosperous neighbourhoods. The success of the BNP in Dagenham at the local elections in May 2006 was due in part to the issue of social housing being perceived to be being swallowed up by recent immigrants.

The second way immigration weakens social provision is more subtle. If it is perceived by the native population that large amounts of money are being spent on foreigners, many, particularly those who are less in need of social provision, will begin to question its value at all. This is important because for social provision to be maintained in the long term it requires a general social acceptance. If the better off start to feel they should be paying less for that which they do not use (the better off actually get a very good deal out of the taxpayer – see section 4) there is the danger that necessary social provision will be significantly lessened.

What applies to first generation immigrants also applies to members of ethnic minorities who are born in a country. There are sufficient academic studies (for example, Welfare, Ethnicity and Altruism ed. Frank Salter) of how ethnicity affects the willingness to pay for public provision to tell a clear story: people generally are more willing to support public provision where the provision goes to their own ethnic group.

The public, which is generally in favour of the Welfare State and other public provision such as education, stands helpless, trapped by a stagnant political system which offers them no choice. The ordinary working man is alarmed and resentful to see whole swathes of British industry vanishing as his political leaders tell him this is “inevitable” as employers look abroad for cheap labour. He is nervous when he hears constant calls to introduce private money into public services. Yet he finds that whatever he thinks it does not matter because neither the Labour or the Conservative parties offers him a conduit for his political wishes for both parties disagree with him. Nor can he gain access to the media to express his dissatisfaction or engage in debate. In short, the ordinary elector is practically disenfranchised.

42. Why is the repudiation of public provision happening?

It is easy to see why the Tories are supporting private initiatives over public, but what about Labour? Why are they so determined to go against all their tradition? The answer lies in a mixture of ideological change, expediency and international treaties.

The Labour Party is engaged in an ideological war. New Labour believes it transformed itself into an electable entity in the 1990s by repudiating the Party’s past. Whether that is true is irrelevant for our purposes. (My own view, for what it is worth, is that the Tory Party simply came to the end of the political road and Blair came in by default). What matters is that the received opinion amongst those who control the party today is that the Blairite “re-modelling” was the cause of Labour returning to power.

Blair’s government has increased public spending considerably. The problem is that it has been done shamefacedly and without any clear sense of direction or commitment that neither those in the public services nor the public have any clear idea of what the Government wants or how it will achieve it. Money has been flung at public services and individuals haphazardly, in the manner of a man making a religious or charitable offering, the giving being the important act.

At the same time as direct public spending has increased, the Government has crashed on with introducing ever more private money and private business activity into public service. Those in the public service do not know whether they are coming or going and the public just see more and more money being spent apparently to no good purpose. The consequence is both a blurring of the lines between public and private and a general feeling, whether justified or not, amongst the public that the future is horribly uncertain for public provision, a feeling made more poignant by the absence of any meaningful political opposition to what is happening. The danger is that much public provision could fall by default in such circumstances with the public becoming defeatist about the power of the state to provide the basics where the individual cannot.

Old Labour was and is wholeheartedly pro-public service. New Labour has to a significant but one-sided degree donned the economic clothes of Thatcherism. They have not in practice retained the low tax, low spend part of Thatcherism, (although in truth that was often more observed in theory than practice during the Thatcher years). What they have accepted with the fervour of the religious convert is the Thatcherite commitment to introducing private enterprise into public matters, either directly or through sub-contacting. In particular they want the burdensome government responsibility for complex organisations such as the NHS to be placed either at one remove in so-called freestanding agencies or, even better, cast adrift entirely into fully fledged private business where the public will pay directly rather than through their taxes.

This is not done from noble or even purely ideological motives. It is largely grubby expediency, both at the national and international level. On the domestic front, if a service can be put entirely outside the public realm, the government loses a responsibility. It neither has to account to the public for the service nor raise the money to pay for it. The public pays directly and the one time public employees cease to be a charge on the public purse, both as employees and as future pensioners.

Of course, the provision of some services is so absolutely essential that the government cannot shuffle off all responsibility – such as health and welfare provision – but even there they distance themselves by placing responsibility with so-called freestanding units such as the Benefits Agency or by diluting direct public control through contracting out such jobs as cleaning, transport and food supply. The advantages for the Government are two. First, the government has the opportunity to muddy the waters by saying that the people providing a poor service, for example, hospital cleaners, are not government workers (thus giving the spurious impression that the government are not responsible). Second, overt long-term costs are reduced because no pension costs are incurred by the taxpayer. I say overt because often such savings are offset by increased benefit take-up by those made unemployed, take low paid jobs which qualify them for benefit or who require more state aid in old age because they have no adequate workplace pension.

Although Labour has accepted the distancing of government from direct provision of public services part of Thatcherism, it has not accepted the other half of the equation, that government control of private enterprise should be slackened as much as possible. Judged by their performance since 1997, Labour’s general economic tactic at present is to control business without owning it. This, ironically for a government supposedly of the left, is the classic economic tactic of fascism.

Those are the mundane, dirty causes of the trend towards a repudiation of public provision, but there is also the question of psychology. The most corrosive aspect of politics is ideology. (The only sane way of approaching politics is to ask what ends you wish to achieve and then seek the means to achieve them. The means are important in as much as they should not be immoral or their employment in some way to compromise the desired ends.)

By ideology I mean a political creed which purports to have the  answer to everything. Marxism does that with its attachment to the  inexorable march of the dialectic through history: Neo-Liberalism does it with its quasi-religious belief in the market. It is the latter which has captured modern British politics, at least at the level of those who control the major parties.

Neo-liberalism, like Marxism, has considerable emotional rewards for its disciples because it offers a complete explanation of and guide to action for its disciples. The need for hard thought is removed, all the disciple has to do is refer to set principles and interpret any situation in their light. It is the type of creed to appeal to the religious temperament such as Blair’s.

The Blair Government is reflecting a general trend in the First World. We are moving into an age of plutocracy, of a time when the rich use their power to advance their own interests without concern for the poor and the poor have no power to stop them.

Nor is it only the poor who are affected. The middle classes may ape the rich and parrot their ideology, but they are increasingly finding it more and more difficult to sustain the lifestyle which people in their position had previously taken for granted, such things as home ownership, private schools and even a university education having all become so expensive that even an income well above the average cannot meet them all.

There is nothing surprising in this behaviour. Elites as a group will always behave selfishly at best and be deliberately abusively at worst.There may be individuals within an elite who will have a genuine concern for the poor – Lord Shaftesbury in the 19th Century for example with his campaign against child labour – but their concern will be corralled both by the limitations of their social horizon and by self-interest. Often a humanitarian cause will be divorced from the general inhumanity of the conditions of the poor – Wilberforce’s anti-Slavery campaign is a classic example. Very rarely indeed do members of an elite give up t eir own material privilege – two examples are the philosopher Wittgenstein and the Victorian English missionary C.T. Studd who both gave away their inherited wealth. However, even they did not give it to the poor, but transferred it to other members of their family.

All human institutions become corrupted by elite self-interest. The German sociologist Robert Michels developed the notion of the iron law of oligarchy early in the last century. He intended it to explain why institutions and movements supposedly devoted to the promotion of the interests of the poor, for example Social Democratic parties and trade unions, invariably became corrupted into being vehicles primarily for the promotion of the interests of those who gained power within them. In fact, what he was describing was a general behaviour associated with any formal institution. They invariably become a vehicle primarily for the promotion of the interests of those who gain power within the institution. Its ostensible purpose will be pursued to a degree but only in so much as it does not clash with the interests of its controllers. If we accept that elites will always exist because human  society is inevitably hierarchical, the central political question becomes how far can the masses prevent thwart the naturally abusive tendencies of the elite? For most of history the masses have been generally very unsuccessful in this aim. Their only times of success have come within the context of the modern nation state.

43. The nation state – the only democratic platform

Democracy in the literal direct sense does not exist in the modern world, indeed for practical reasons cannot exist in a state of any size. What we have is what political scientists call elective oligarchy, a political system whereby the electorate is offered a choice ever few years between competing parts of a society’s elite.

That paints a dismal picture for the masses. However, even within an elective oligarchy, they can exercise considerable control given the right circumstances. What the masses can do and have done for most of the past century and a half in Britain is exert an ever increasing control over the elite through representative institutions. But they have only been able to do this because the representative institutions have operated within the context of the national state. Elites as groups have been forced to take heed of the masses because they relied upon their votes to be re-elected and the system worked by and large because the major political parties offered a meaningful alternative on the most of the great issues.

In the past thirty years our political circumstances have changed dramatically. Two things have happened. The freedom of action of the Government and Parliament has been greatly reduced and the political parties have become ideologically aligned.

Entanglement in the EU has resulted in a majority of British legislation ultimately originating not in Parliament but within the European Commission, while various treaties have removed whole swathes of political choice from the electorate, ranging from proper control over foreign policy and border control to the pursuit of a national economic policy. Most profoundly the European single market agreement and the GATT treaty arrangements and membership of the World Trade Organisation (WTO) have left British parties with no choice of economic policy, or as things stand they have to support the notions of free markets and free trade. Any party wishing to offer protectionism and state intervention in the economy cannot do it unless they commit themselves to withdraw from the EU and WTO.

The consequence of the our membership of the EU and our other treaties is that our politicians in practice can offer very little difference in policy to the electorate. And, of course, our politicians find it convenient to use our EU membership and other treaty obligations to excuse themselves from responsibility for unpopular measures or as justification for forcing through vast amounts of detailed legislation which Parliament, let alone the electorate, is barely aware is being passed into law.

The position is worsened by the careerism of the modern politician. This has always existed to a degree, but what we have now is of a different order of magnitude. The really depressing thing about the House of Commons now is the sheer narrowness of experience of the members, many of whom have never had a career other than their political one. Hence, once on the political career bandwagon they cannot afford to get off. The current bandwagon is the internationalist one.

Internationalisation od economics and politics dissolves national sovereignty. The left may cheer this but they are discovering by the day just how restrictive international treaties and membership of supranational groups can be. As things stand, through our membership of the EU and the World Trade Organisation treaties, no British government could introduce new socialist measures because they cannot nationalise companies, protect their own commerce and industry or even ensure that taxpayers’ money is spent in Britain with British firms. As far as economics is concerned, a British government can have any economic system they like provided it is largely free trade, free enterprise.

The Right are suffering the same sickness with different symptoms. They find that they are no longer masters in their own house. They cannot meaningfully appeal to traditional national interests because treaties and EU membership make that impossible. Control of national borders has gone.

A reversion to nationalism need not be a party political matter in Britain, but the modern British left are unfortunately conditioned to believe that the national state is at best outmoded and at worst xenophobic, racist even. This ignores both the history of the mainstream British left and mistakes form for content.

The Labour Party for almost all of its existence has been strongly protectionist and hence de facto in favour ofthe nation state. Indeed, Blair in the late 1980s was still an economic nationalist. Moreover, for most of the time Labour has been consciously in favour of the nation state and of Britain’s independence – few could give the likes of Attlee and Bevin lessons in patriotism.

As for mistaking form for content, it is simply a matter of empirical fact that the nation state does not produce a uniform behaviour – take Switzerland and Iraq from the present day as examples of that. The idea that nation state equals aggressive, xenophobic, badly behaved warmonger is a literal nonsense. In particular, there is good empirical evidence that where there is significant democratic control within a nation state, this makes aggressive war much less likely than where a dictatorship exists.

It is also true that supranational bodies are not noticeably better behaved than nation states. Worse, they have a large element of the sham in them, being invariably dominated by the more powerful component states, for example, the UN being heavily manipulated by the USA and the EU broadly controlled by its major members. Supranational bodies are not simply vehicles for the normal process of power-mongering, but, in practice, that is their prime function. That they give a spurious appearance of international agreement and legitimacy adds to the ability of the dominating states within them to exercise control over weaker states by direct threats, the withholding of money and, most insidiously, the development of bureaucracies which carry forward the policies forced on the supranational bodies by the most powerful members. ( It is often said that the UN has no power. This is utterly mistaken. It may not have an army but there is a vast web of agencies which allow a great deal of control and influence to be exercised over states which seek their assistance. Some such as the IMF and World Bank control client countries from the outside, while others such as UNHCR permit direct internal interference on the ground.)

44. Conclusion

Nothing I have written is meant to suggest that private enterprise is not the best way of managing most human economic activity. Being in favour of public services and the welfare state does not mean being in favour of spending for spending’s sake. Nor does it mean recklessly advocating public provision regardless of the cost.

History shows that governments are poor at managing enterprises in comparison to private business where proper competition exists and universal provision of the basics of life are not at stake. Nor should the government provide directly where the provision of money to those in need will solve the problem. It would be grossly inefficient, for example, if a government decided to supply food directly to people in need rather than give them the money to buy the food and even more outlandish if the Government decided they had to produce the food as well as supply it.

But there are some items which are beyond the realistic reach of most people. The provision of healthcare, education and a liveable pension in old age are absolute necessities because few of the population can undertake the cost of providing for these for themselves and their children. It is also essential that decent housing is available for all and the state should intervene to ensure its provision.

As a matter of policy direct public provision should be restricted to areas of service where universal provision is required and where it cannot be supplied by private businesses because of the need to make a profit.

It is also unhappily true that bureaucracies have no natural size. If a government is willing and the tax revenues sufficient, there is no end to the expansion of administrate for administration’s sake. Strict limits need to be put on the number of administrators, the limits to be set by deciding in advance what is to be provided and how much it will cost.

Universal provision has the advantage of simplicity and of maintaining the dignity of recipients. That rich and poor are eligible for the same provision is neither here no there because any seeming redundancy in providing benefits to the better off can be adjusted through the tax system, that is,  the richer you are the more income tax you should pay. (The very rich and the self-employed to a degree can avoid income tax, but most cannot).

Mixing public and private, as with PFI, fatally blurs lines of responsibility. This means that when things go wrong no one is held responsible. Politicians point the figure of blame at public servants running “arms-length offices” such as the Benefits Agency or the private companies which have supplied the service, civil servants point at private companies or even, whisper it softly, politicians, and private businessmen blame politicians and civil servants. The taxpayer is left with the worst of all worlds, the ultimate responsibility for picking up the bill but no meaningful control over how it is spent.

Necessary and desirable as public provision is, it should be, like private charity, a safety net not an end in itself. Monetary benefits to those of working age should not be so generous as to dull or even remove the desire and need to work where the individual is capable of doing so. Take away the need for private effort and the economy will suffer.

Supporters of public provision should always keep firmly in mind the fact that the money from the provision comes from the profits of private business. Take too much from that and the less there is for reinvestment and the starting of new businesses. In high tax, high regulation economies there is a considerable disincentive effect on business generally with a marked tendency for domestic companies to move to countries with a more friendly tax and regulatory regime and for foreign companies not to invest. That in turn will reduce the amount of future profit and private employment and consequently lessen the tax available for public provision. It is important not to kill the goose which lays the golden egg. This should be obvious, but all too often the supporters of public provision seem incapable of making the link between public spending and the ultimate source of the taxes which fund it.

In short, public provision should be kept to the minimum of what is  necessary for an advanced, civilised and stable communityand that provision should be adequate but not lavish. What needs to be understood above all is that if public provision is lost, the large majority of the population will find not that it is choice between public services and private services. Rather they will find the choice is between much reduced services or no services at all.

“Free markets and “free trade” = elite propaganda”

Note: I wrote this long eassay  in 2005. The financial crash and recession since provide added grist to my arguments as the rich get richer, most people get steadily poorer, public provision shrinks and the inequality between people swells.

The lessons of economic history tell this story: a strong domestic economy is necessary for sustained economic growth and stability. The freer the trade with foreign states, the less stable and secure the domestic economy.

Post-war economic experience illustrates this nicely. Britain experienced her strongest sustained growth in the period  1945-1972. This was a period of protectionism and much state intervention in the economy.  Problems arose in the 1970s, but these were largely due to the oil price spike  after 1973, a consequence of globalism.  However, even with the oil price spike, unemployment in Britain never went much above 1 million until Thatcher arrived and wilfully destroyed our heavy and extractive industries.
During the period 1945-1979, Britain did not suffer a serious sustained recession. From 1979 onwards, under the Thatcherite ideology we have had three serious recessions: in the early 1980s, the early 1990s and the present recession.
To our post-war experience I would add the fact that England  built her commerce then the first Industrial Revolution behind very restrictive protectionist measures such as the Navigation Acts.  RH


Robert Henderson 20 4 2012


“Free markets and “free trade” =  elite propaganda”

Robert Henderson

1. Unquestioned ideas

2. The “Free Market” is a state regulated market

3. The “free market” as its proponents conceive it

4. How effective is anti-monopoly legislation?

5. Microsoft and Windows – a natural monopoly

6. The historical trend towards contraction of competition

7. “Free trade”

8. Has “free trade” ever been practised?

9. “Free trade” today

10. Does “free trade” deliver? The lessons of economic history

11. Is society materially enriched by “free markets” and “free trade?

12. What is meant by material enrichment?

13. How the market fails to provide what the customer wants

14. Relative poverty and wealth and happiness

15. Man does not live by bread alone

16. Geopolitics

17. The democratic deficit

18. Does “free trade” increase competition and choice in the long run?

19. The reality of our economic circumstances

20. Why elites are so keen on “free markets” and “free trade”

21. A sane alternative to globalism

22. Free trade as a religion

23. An elite ideology


1. Unquestioned ideas

Because they have the word free in them, the terms “Free markets” and “free trade” have seduced those of all political colours to treat them uncritically as ideas. They are considered good or bad but their intellectual coherence is rarely questioned.

Neo-liberals believe in a childlike quasi-religious fashion in the workings of Adam Smith’s “invisible hand”, which, moved by enlightened self-interest, supposedly creates the best of all possible material worlds through the operation of the market. Socialists see “free markets” and “free trade” as economic “state of natures” which must be ameliorated by the state before a civilised society can be realised. Conservatives in the traditional sense no longer exist as a recognisable political force in the West, but when they did exist they opposed “free markets” and “free trade” primarily on the grounds of national security and the general disruption to society that they caused. Nationalists of the fascistic kind have traditionally opposed the ideas because they see the nation as a single organism which can only be strong if it is master of its own destiny, something which can only be achieved (they believe) through state direction of both the internal  market and of external trade.

There are varying quantities of truth in all these ideological responses, but their utility is seriously tainted by the lack of any  objective or even properly defined and permanent prescriptive truth in the concepts of “free markets” or “free trade”. The reality of these ideas is that they are arbitrary chosen bundles of behaviours which  are excluded or included at the will of their proponents. Moreover, the bundles of behaviours are not static.

The widespread negligence in examining the coherence of these ideas is all the more remarkable because their incoherence as theories and the arbitrary and dishonest nature of their practical realisation is not only readily apparent but fundamentally undermining of the claims made for them by their champions.

2. The “Free Market” is a state regulated market

There is a splendid irony in the objection of the self-defined “free marketeers'” and “free traders” to state intervention for the natural end of a truly free market is monopoly – or at least greatly reduced competition resulting in oligopoly and the rule of cartels. All so-called “free market” societies recognise this by passing anti-monopoly laws. The “free market” is in fact a market controlled by the state in the most fundamental way, that is, to prevent its natural workings. It is one of the great propaganda triumphs of history that “free markets” have been successfully sold as being what happens naturally without state intervention. Call a spade a spade and substitute the truthful “state regulated non-monopolistic market” for “free market” and the psychological shape of the idea changes dramatically.  (Some casuistical “free marketeers”might argue that the “free” in free market applies to the workings of the market rather than the market as a natural phenomenon. That explanation falls because “free marketeers” invariably make the blanket claim that markets only work efficiently without government interference. Their honest position would be to state that they want state regulated markets to prevent monopoly. They will not do that because it would be an acknowledgement that state regulation of the market is legitimate and hence remove any general argument against regulation. That in turn would mean any form of state regulation would be potentially reasonable and consequently each form of regulation would have to be argued down individually on the merits of the case, rather than simply empty-headedly dismissed on the grounds of no regulation = good; regulation = bad.

The state regulated “Free Market” is not even a natural phenomenon made somewhat artificial by rules to exaggerate the natural phenomenon in the same way that we breed animals to exaggerate nature. Rather it is just about as far from being a natural phenomenon as anything can be for it goes against all Man’s inclinations, both individual and social.

Economic history is overwhelmingly a catalogue of market regulation, local and national, from guilds to governments. It would be surprising if it were not because human beings, like all other organisms, naturally behave to secure their own advantage or that of their group. Extended to the nation state, this natural behaviour has commonly resulted in domestic markets being protected against foreign competition. Whether this is a good or a bad thing is another matter – a question I shall deal with later – all I am concerned to do at this point is to nail down that the fact that protectionist behaviour is what is natural.

Historically, whether you were anything from a rich merchant to a poor day labourer  it was obviously not in your personal interest to allow others free access to your markets to offer the goods or services at a lower price or to work for lower wages. The merchant might be driven to bankruptcy by competition, the labourer from his job.  History also tells us that whatever their previous economic station, such people will probably not be able to find equivalent or better paid employment and often may not be able to find any employment at all where structural unemployment arises. What was historically true not only remains true today, but its effect is much magnified because the opportunities for competition are greatly increased by modern communications and the ease of travel and cargo transportation.

Of course, any individual or sectional advantage causes strains in a society and if the material privilege of any person or group becomes excessive, sooner or later there will be a successful revolt and the wealth in a society will either be shared more fairly through a change in the way the society is structured, for example, through the abolition of tolls, the ending of state monopolies or even through a removal of the rich as a class without any increase in the wealth of the majority.

But wherever wealth distribution through social change has occurred it has normally been done with the express intention of benefiting a particular group or even an individual in the case of monarchs. The odd thing about “free marketeers” is that what they ostensibly advocate is not to privilege any particular individual or group but to benefit society as a whole. Whether free markets do so is another matter, but that is their claim.

The “free marketeer” says to a population, do what I say and in time society will become richer. He does not say this person or that group will become richer or even all will become richer, but merely that the society as a whole will become richer. This is an extraordinary thing to ask people to trust in. It is also the most wonderful blank cheque ever written to a politician because not only does it absolve him or her of any need to take the responsibility for regulating the economy, it also means that he or she can never be held to account for dishonesty by any individual if that individual is personally worse off. All a “free marketeer” politician has ever claimed is that his economic way will make society richer. Provided society overall is richer, he has met his met his promise.

It is also telling for their intellectual credibility and honesty that “free marketeers” will oppose government interference in such matters as subsidies, quotas, embargoes, wage rates and working hours and grumble about tax rates and public expenditure, but are generally quite happy to see other gross distortions of the market deriving from government action. They not only tolerate patents, copyright and trademarks, but often defend them as property in themselves and as devices which actually improve economic performance because they encourage invention, investment and expansion. In addition, those who constantly bleat about Adam Smith’s “invisible hand” sorting out the business wheat from the chaff insist that limited liability is necessary. This of course is also a violent interference with the market because it means that the individual shareholder never takes full responsibility for their investment. (It is worth noting that the British industrial revolution – the one and only bootstrapped industrial revolution – took place before limited liability became legally possible (Limited Companies Act 1862) and at a time when patent rights were insecure and in practice limited to the domestic British market.)

It is true that none of these things are actually part of what the concept of a “free market” is and that they are inimical to such a market, but the fact that almost all modern “free marketeers” have tacitly incorporated them into their vision of what a “free market” is demonstrates their intellectual confusion (or dishonesty if you prefer).

3. The “free market” as its proponents conceive it

Let us put aside for the moment the fact that “free markets” are state regulated markets and ask the question what is a “free market” as it is conceived by “free marketeers”? A jolly good question. Even if market distortions which appear acceptable to “free marketeers” such as patents and limited liability did not exist, that would leave many other things which prevent unfettered domestic competition. In an advanced modern economy these include:


Non tax fiscal measures, for example, control of interest rates

The state of the currency

Exchange controls

Overall Government expenditure

State Subsidies

Industry and trading standards, official and otherwise

Public sector employment

Transport costs

Public ownership


Direct and indirect Government intervention

Copyright, trademarks and patents

The moral and social climate, for example, a tradition of wWelfare or the feeling of the

people, for example, the national feeling of Japanese Practical cultural barriers

such as the difficulty of a language


Transport costs

Working hours

Trading laws

Labour laws

Wage rates

Bureaucratic differences

Company laws – particularly the attitude towards foreign ownership

Banking laws

Banking system

Social policy – welfare, health and so on

Physical infrastructure

Honesty of public servants

Foreign policy

National strategic considerations

Education – The amount spent, school leaving age, curriculum,

Limited Liability

Environmental laws

Some of these things such as subsidies, patents, quotas and limited liability could be obviously and legitimately ruled out of order by a “free marketeer” because they are deliberate state interferences with competition, but what of items such as the provision by the state of education or the physical infrastructure of a country? They are undeniably distortions of competition at some level, but they are not deliberate attempts by the state to distort competition. A purist “free marketeer” could just about say such things were no business of the state and still be intellectually coherent because it is possible to conceive of a society without such state provision. But however purist they might be, sooner or later the “free marketeer” will run into features which undeniably restrict competition but which must exist simply because they are an inescapable part of society. The most obvious is tax.

Any modern state needs a large tax revenue to sustain itself, the only questions to determine being how large should be the revenue and what  it should be spent on? Some things such as defence and policing are inescapable expenditures for any state, although even there the amounts to be spent are debatable and elastic. Items such as education and welfare are more subject to variable expenditure. Nonetheless, substantial amounts are as a matter of contingent fact invariably spent on such items by all advanced states. Such countries also engage to a lesser or greater degree in all the forms of regulation listed above.

In theory, and even more in practice, the notion of a “free market” seems to rest on little more than anti-monopoly laws, wages and prices set by the market (although in practice this does not happen purely through the market because of welfare provision, tax regimes etc) and a lack (or at least a minimum) of state interference in such areas as health and safety, employment law and company law.

The inclusion of these narrow criteria are merely a subjective choice made from a much larger menu of man-made distortions of the market. Consequently, there is no objective coherence to the concept of the “free market” as it is conceived by the “free marketeers”. It is an arbitrary ideology based on subjective choice.

4. How effective is anti-monopoly legislation?

Anti-monopoly laws operate within the constraints of the type of social and economic circumstances described above. That alone means they are severely limited in what they can do. They must, for example, tolerate state granted monopolies in the form of patents and copyright.

Anti-monopoly legislation generally only effectively attacks the problem from one end. A company can be prevented from growing its market share by taking over other companies but there is normally no meaningful restriction on a company growing its market share simply by expanding the existing company. Microsoft and the domination of Windows is a classic example.

Where companies try to expand by takeover, experience shows that those charged with applying the legislation allow very large parts of a market – 25% or more – to be held by a single company. The consequence is that a market which would seem to be an obvious candidate for competition, for example, food and domestic supplies retailing, can easily come to be dominated by three or four major players (as is the case in Britain).

There are also those products which are either natural monopolies because of the physical location of their infrastructure – railways, roads, the utilities such as gas – or which are inevitably going to have few entrants in the field because of reasons of cost, for example, aerospace, motor cars, ship building.

Finally, there are those rare markets which are dominated by one company simply because of the nature of their business. The classic example of this is Microsoft and their Windows operating system.

5. Microsoft and Windows – a natural monopoly

In South Park: The Movie, there is a glorious scene where, under martial law, Bill Gates is executed for falsely promising that Windows 98 would be “faster, easier to use and more reliable”. Many long-suffering Windows users doubtless wish that life had imitated art in that instance. Yet despite widespread dissatisfaction Windows remains the overwhelming dominant operating system.

At first glance it might seem that operating systems should be just the type of product which is open to fierce competition because software is a market which potentially has low entry costs. It is true that most areas of programming are competitive – within the constraint of the dominant operating system (OS) – but operating systems are the odd man out. The reason is simple. Once a single OS gained dominance, the chances of any other system effectively competing were very small. This is because the weight of programs available to run under the dominant OS soon became much greater than those which could be run under any other OS. Thus, it becomes inefficient to choose any other OS. That in turn means most of the software is written in a way to make in “friendly” to the dominant OS systems’ users. This further excludes OS competitors and the software to run under them because users, especially employers, do not want to spend the time training their employees on completely new systems, converting data  and so on.

The consequence is that Microsoft still has a stranglehold on the pc market. Moreover, if anyone wants to write any other software, they are constrained by the practical need for it to run under the Microsoft OS if they wish to reach the mass computer user market.

The near monopoly has lasted a long time. It has done this despite considerable attempts by both rivals and the US government to diminish their market position. Windows’ dominance looks secure for the foreseeable future.

 6. The historical trend towards contraction of competition

As remarked previously, the logical end of a free market is monopoly. The reason is obvious: competition tends to reduce the number of competitors through the natural process of success and failure and the takeover of one firm by another. In some trades this does not create an obvious serious anti-competitive difficulty because the initial capital investment is small and entry to the trade within the reach of many. But entry to a considerable and growing number of areas of manufacturing and service provision is too expensive for all but a few.

In a significant minority of trades starting a business from scratch is practically impossible for any one individual or even a group of private investors. The car industry is a first rate example, the number of companies now being small (and becoming smaller) compared with the number of even 40 years ago. Moreover, many of the car companies which do still exist do so only because of state subsidy and protection.

7. “Free trade”

“Free trade” is frequently treated as synonymous with international trade. In principle it does not have to be restricted to international dealings because the concept may be applied to any market, whether that be within a global, regional, national or even a local context. The United States for example displays considerable differences in local tax rates between not only states but within localities within a state, and, indeed, the ultimate aim of the “free trader” is to create a single world market. However, there are considerable differences in practice between domestic markets and international markets, not least because the criteria which are deemed to fall within the concept of “free trade” are not identical with those which are said to be a necessary part of the concept of a “free market”, for example, laws to prevent monopoly are redundant when it comes to international trade because one country will either supply or not supply goods and services to other countries and a country with a monopoly of an important good or service can as a matter of fact only be persuaded to supply the good or service against its will by extra-legal action, ultimately force or the threat of force. Consequently, it is convenient to treat “free trade” as being economic intercourse between nation states and that is what I shall do.

What does and does not constitute “free” international trading? In times gone by, people would have pointed to those honest workhorses of restriction: embargoes, quotas and tariffs and navigation laws and not much else. But in the modern world things are much more complicated as we discover almost daily during the seemingly interminable EU squabbling and the GATT rounds.

Some things are obviously incompatible with “free trade” such as embargoes or state subsidies, but what of different tax regimes, welfare provision or labour regulations? Why should they be excluded from the things which should not be tolerated in a “free trade” regime? After all, a low company tax regime could be regarded as a form of state subsidy to business and all welfare provision could be regarded as a subsidy to wages.

But even such items are straightforward compared to others. What of national sentiment which gives a preference to home produced goods regardless of whether they represent the best value when judged purely by price and quality? Should a country be forced to take the cheapest of  any particular equivalent good or service, regardless of the wishes of the  people of that country, on the grounds that not to purchase that which  gave “best value” constituted “unfair competition”? A reductio ad absurdum? Well, consider the fact that public bodies within the EU (which for these purposes includes any organisation drawing part of their income from public funds) must allow any company within the EU to bid for any work put out to contract, and if the lowest bid is not accepted, the public body risks being fined for a breach of the Single Market rules.

Even more problematic are things which are simply effects of economic activity. Take true dumping, not the state subsidized export regimes which often pass for such, but a simple economic practice to maximise profit.

True dumping works like this. Imagine that a company can make 2,000 units a week. It covers its costs for all 2,000 units if each week it produces and sells 1,000 units at œ1 each. The company finds it can sell a maximum of 1,500 units in the home market at œ1. If it reduces the unit price to 75 pence it could sell all 2,000 but that would only produce the same amount of revenue as selling 1,500 at £1 each.

Consequently, it sells 1,500 in the domestic market at £1 each and the other 500 at 50 pence each (carriage paid by buyer) in foreign markets. Total sales are £1,750 instead of  £1,500.

That is a very simple model of dumping but something akin to it happens regularly with differential pricing from country to country (the European car market is a prime example of this). No state subsidy has been given, no state intervention of any sort has occurred. Why should it not be considered as reasonable a practice as the toleration of different national wage rates? In fact, why should it not be considered more reasonable because wage rates are directly linked to such hidden subsidies as those of welfare and low company taxation? (in fairness, the economic activity of the dumper would also be linked to wage and tax subsidies, but the connection would be more remote.)

Most contentious perhaps is the question of immigration. Does “free trade” require the movement of people as freely as goods and services? This is generally accepted as self-evident by purist “free traders”. Yet there is no logic to the claim. Economic forms are made for men not men for economic forms. We know as a matter of practical experience it is possible to have the exchange of goods and services without the mass movement of people. If a society decides that the benefit gained from the free movement of people is outweighed by the social disruption caused by such migration, it is a perfectly rational decision. A people may decide that they will have or not have free exchange or movement just as they may decide to have this or that level of taxation or welfare provision. It makes no more sense to say a society which restricts immigration – which all advanced states in practice do – is not a “free trader” than to say they are not a “free trader” because their income tax rate is higher or lower than that of their competitors.

The treatment of human labour as merely a factor of production (along with land and capital) is also incompatible with the liberal democratic tenets of the equal worth of each person and the rights and obligations of citizens. Allowing mass immigration to reduce wages or the exporting of jobs to cheaper labour overseas is treating human beings as being of no more account than inanimate objects. It is inhuman.

So what does “free trade” actually mean? Does it require merely that countries may trade with one another without any formal barriers such as tariffs and quotas? Or should it take into account all those items such as national tax regimes, non-tax fiscal measures, wage rates (where these are set by the state), standards of practice and manufacture (official and otherwise), and the size of the public sector. All of these are controllable either entirely or to some degree by men. In other words, they could be removed or altered.

If a definition of “free trade” is accepted which includes these and other non-traditional elements of market distortion, the ultimate logic of the definition is that “free trade” as a global concept cannot exist until all peoples and countries are reduced or elevated to the same general economic condition.

Those who run the European Union would say that is precisely what is required, at least within the EU. But the experience of trying to create unified trading conditions at a supranational level in the most advanced of supranational political and economic entities, demonstrates just how difficult it is to create a supranational market in which there is a broad uniformity in the trading conditions within its constituent national parts. Despite nearly half a century of trying through treaty after treaty and the covering of the EU members with an avalanche of EU directives, there is no meaningful economic uniformity within the EU, either in the circumstances of private enterprise competition or in the function of the state. The introduction of the Euro has painfully revealed exactly how disparate the economies of even the richer EU states still are with Germany needing low interest rates to re-inflate and Italy requiring high rates to control public spending and the European Central Bank paralysed by their inability to square such an economic circle.

The Holy Grail of “free traders” is comparative advantage. This is a first rate example of a neat and emotionally satisfying (to a certain type of mind) intellectual idea which bears little relation to reality. The idea is that every country concentrates on making what it is best at and the overall global product rises because of increased efficiency. Even in theory this is rather dubious because it ignores every other aspect of society than a narrow view of economic relationships and assumes tacitly that a comparative advantage will last. David Landes in his The Wealth and Poverty of Nations (Little, Brown and Co 1998) cites the instance of the Englishman John Borrow, who in 1840 urged the states of the German Zollverin to concentrate on growing wheat, and sell it to buy British manufactures and comments: “This was a sublime example of economic good sense: but Germany would have been the poorer for it. Today’s comparative advantage…may not be tomorrow’s.”

The truth is that any definition of “free trade” is as subjective as that of a “free market”. It has no natural boundaries because the implications of both ultimately embrace the whole of human material endeavour and there are no true natural variables on which to base a definition – even those which might at first glance appear to be objectively and naturally set, such as wages and prices, are determined by matters other than the market, for example tax regimes and welfare provision.

8. Has “free trade” ever been practised?

Between 1860 and 1914 Britain operated the best approximation to “free-trade” the world has seen. In the period 1840-1870 not only did she by degrees open her markets to all regardless of whether other countries reciprocated, but the size of the British state was so tiny that the distortions of government expenditure and taxation were minuscule compared with the present day. But achieving the best approximation to “free trade” was not difficult to achieve because no other country of any size has ever seriously attempted it for any length of time.

For a quarter or a century or so, Britain got away with the ill-effects of being a reckless “free trader” whilst other major countries remained protectionist to varying degrees. She escaped the consequences for three prime reasons: Britain’s industrial dominance, long distance transport of bulk goods remained cumbersome and expensive and the fact that America and Europe were strangely slow to follow Britain’s example and industrialise.

That all changed in the 1870s. Bulk transport was becoming much easier and cheaper. Railways – ironically more often than not built with British capital and technical expertise – had begun to have a considerable influence on the continent and in America and were beginning to snake across Australia and South America. Perhaps most importantly the age of the practical steamship and refrigeration arrived. Manufactured goods, food and raw materials could now move around the world in volumes which dwarfed anything which had gone before. British farmers were especially badly hit when the Americas and Australasia flooded the British market with food and wool.

To these developments, and arguably in part as a consequence of them, there was a widespread retreat into a deep protectionism in the 1870s, most notably by the USA and Germany. Britain failed to respond to these developments by guarding her own markets.

The period of 1870-1914 saw the predictable results of Britain’s quixotic refusal to guard her markets when all about her were assiduously doing so: she lost her general industrial predominance, well nigh destroyed her farmers and failed to dominate vital new industries, such as the chemical, which at one time she had led – Britain produced the first synthetic dye (Perkin 1856) and the first synthetic plastic (Parkes 1855). Two of the most enthusiastic protectionists, the USA and Germany, became the first to exceed Britain’s GDP.

Bismarck summed up what had happened in a speech in 1882 when he said: “I believe the whole theory of free trade to be wrong…England abolished protection after she had benefited from it to the fullest extent. That country used to have the strongest protective tariffs until it became so powerful under their protection that it could step out of those barriers like a gigantic athlete and challenge the world. Free trade is the weapon of the strongest nation, and England has become the strongest nation in the world owing to her capital, her iron, her coal, and her harbours and owing to her favourable geographical position. Nevertheless, she protected herself against foreign  competition with her exorbitant protective tariffs until her industries  became so powerful.”

But even the “free-trade” Britain practised was far from complete. Government contracts were generally given to British companies. Ditto municipal contracts. Moreover, there was a strong sense of patriotism in the country which, as with the present day Japanese, mitigated the effects of free-trade. Nor, of course, was there a WTO, EU or any other body to question and interfere with the internal economic workings of Britain such as taxation, interest rates or working conditions.

British “free trade” was further complicated by the existence of the Empire and a widespread imperial sentiment which created the opportunity and the desire to trade with members of the Empire rather than the rest of the world. It does not do to over-egg the effects of this because British trade with the world outside the Empire, especially the USA, always remained strong, but it undoubtedly significantly distorted British trade.

9. “Free trade” today

If “free trade” was a gigantic gamble for an industrially, commercially and politically dominant Britain in 1850, it is vastly riskier for any country now. Transport even after the arrival of railways and the steamship was still expensive, slow and cumbersome compared with now. The electric telegraph was the height of sophistication. Most parts of the world could not engage in international trade on their own terms because they were colonies, under the practical control of foreign powers or unindustrialised.

Today physical transport is fast and cheap. In place of the telegraph, we have the internet. Many countries have industrialised. The age of formal empires is over.

But there is more than political and technological change which makes a difference between our own time and the last outbreak of “free trade” mania. The “free trade” being advocated now is doctrinaire to the point of idiocy, namely the god of comparative advantage (the idea that each nation should concentrate on those products which are most profitable and forget the rest) is to be applied to everything, even (in the EU) to all public contracts, including those for weaponry. Childishly doctrinaire as they were as they played with their untried intellectual toy, even the most extreme “free traders” in the 1830s and 1840s saw that some parts of the economy could not be reasonably opened to competition for strategic reasons, military supplies being the prime case.

Let us suppose that we had a perfect “free trade” world now, a world in which there were no tariffs or quotas or embargoes or “standards” to meet; that all the artificial restraints on trade were removed; that no government subsidized productive employment in any way and all that remained to differentiate countries were market decided labour rates, carriage costs and the cost of nonproductive public works such as justice and the army. What then?

The consequences would be extremely dangerous for the West. Farmers in the First World would be on their knees and mass production of virtually anything in general demand would quickly become impossible because whatever a company’s efficiency, it simply would not be able to compete with labour which was a tenth or less of the cost of its own native workforce. All such countries could do is try to make high-value goods,

Even if the redundant working populations of the First World could find alternative employment, which is dubious, their countries would be left utterly at the mercy of those who now produced their food and most of the manufactured goods they consumed.

10. Does “free trade” deliver? The lessons of economic history

Free traders base their case primarily on the increase in prosperity which they believe will only come through increased global trade. The general answer to that claim is that Man does not live by bread alone. Moreover, even if there is a general rise in the global product at present, it does not necessarily follow that the same or better result could not be achieved by other means. The experience of all industrialised countries to date is that industrialisation is best achieved – perhaps can only be achieved by protecting the national economy. Indeed, there is a powerful logic in the idea that developing nations today require protection more than the early industrialising states because the early industrialising nations had little competition.

But even if it could be shown indubitably that the global product is increased more by “free trade” than by protection, it does not follow that it is in a particular country’s interest to adopt free trade. Consider the position in a national market which operates “free trade” within that market, but protects its trade and industry from foreign competition. Companies go bust if they do not compete. But successful companies take their place and continue to provide employment at broadly similar rates of pay. The logic of global “free trade” is that countries which cannot compete will go bust and not be replaced by others in the domestic market. There will be no replacement jobs within the bankrupt country because the successful competitor is abroad.

The most lethal ammunition to discharge at “free traders” is the fact that no country in the history of the world has industrialised successfully without very strong protectionist measures being in place. That includes the first industrial nation, Britain, which spent a couple of cosy centuries behind the Navigation Acts, the first of which was passed in 1651, before becoming a free trader. Not only that, but Britain only adopted “free trade” principles after she had become heavily industrialised and did so at a time when the country was still the dominant industrial power in the world by a long chalk and her exports were more or less guaranteed to sell in foreign markets.

Before Britain dropped her old colonial protectionist system in the mid 19th Century, she had industrialised in the modern sense from scratch and expanded her GDP massively. Perhaps most impressively she had managed to continue to largely feed herself without the price of corn going sky high, despite the fact that the UK population almost doubled between 1801 (the first Census) and the repeal of the Corn Laws in 1846.

As described above, Britain’s experience during her most committed “free trading” period was one of declining market share and commercial and industrial dominance while rigid protectionists such as Germany and the USA experienced massive growth. Of course, Britain could not hope to remain so dominant but her decline was remarkably rapid. In 1870 Britain was the richest country by GDP in the world: by 1914 both Germany and the USA had larger GDPs. Moreover, by religiously adopting open markets, for capital as well as goods and services, Britain seriously distorted her economy. Vast capital exports resulted in underinvestment in Britain and foreigners manufacturers and traders took full advantage of Britain’s open doors. The result was that by the Great War in 1914 her farmers were on their knees and modern industries such as the chemical and pharmaceutical were sadly undeveloped because of foreign competition (this distortion of the economy was soon to be a great national embarrassment during wartime when many industries were found to be inadequate to replace imported goods).

Here is a German voice from 1913: “By its free trade policy England has been more useful to us than its numerous political machinations have been harmful to us. Where would our sugar industry – one of the first items to help us in our economical rise – have been today, or our textile and iron industries, had it not been for the free markets of England? Nowhere: we should have been entirely without our new German capital, our financial resources. On the back of free trade England we grasped at and secured our economical world-power….Industrial and political supremacy go together. Warships are machines, and the nation which succeeds in attracting the centre of capital is the nation that can afford to build most. The present rulers of England represent the fourth generation of dictators to the world. It will not be easy for them to give up the role of ‘primus inter pares'”. (Prof von Schulze-Gaevernitz quoted – p347 -in The fall of protection 1840-50 by Bernard Holland)

Britain limped on with “free trade” after the Great War until 1931 when the secular religion was abjured, at least temporarily, during the Great Depression. Although unemployment remained high by historical British standards until WW2, the British economy behind protectionist barriers recovered quickly compared with most of the rest of the world. Most interestingly, the newer high-tec industries such as the motor, chemical and electrical recovered and grew fastest following their protection.

From 1945 to the mid eighties of the last century at least, Britain continued in an essentially protectionist system, as did the rest of the world. The world economy grew strongly during the period despite the protection. Even within the EU the “free market” mania did not really get under way until the Single European Act of 1985.

It is true that since protectionist barriers have come down over the past 20 years economic growth has been strong in the First World, but then it has been strong behind protectionist barriers and, indeed, with state direction of the domestic market. Germany under Hitler in the 1930s recovered amazingly quickly, despite the fact that the Nazis pursued an economic course which was probably as close to autarky as it is possible for a major modern state to bear. Imports and exports were regulated according to what was perceived to be necessary to make Germany strong through self-sufficiency. What Hitler did not do was attempt to run industry directly. Instead, the Nazis allowed private enterprise to run commerce and industry whilst directing what was produced and supplied.

All that tells us three things: that “free trade” is not necessary for rapid economic growth, that state regulation of the domestic market and international trade is not a recipe for disaster and that being a “free trader” when the rest of the world is not reciprocating is a mug’s game.

11. Is society materially enriched by “free markets” and “free trade?

This is an impossible question to answer categorically because there is no way knowing what would have happened if protectionism had remained full blooded throughout the last century and a half. One can compare growth rates under stronger or looser protection regimes, but they really say little because the other determining factors such as public expenditure have varied so greatly. These variables also blur judgement about the comparative merits of controlled and “free” domestic markets.

The most certain thing one can say from the economic experience of the developed world is that governments running commercial industries such as coal and steel directly is generally a mistake. (Governments are the natural suppliers of universal services such as healthcare only because private provision of such things is never adequate.)

What is certain is the fact that the material effects of “free trade” are far from uniform. It is no consolation to those who suffer along the way that others may benefit from their disadvantage. The next generation or the generation after that may be richer but why should their benefit be brought at the cost of disadvantaging a prior generation? Certainly no politician or political party standing at an election would dare to do so on a platform of “we shall make many of you poorer to make future generations richer.” Those living at any point in time have their own moral context and needs.

The constant economic turmoil caused by “free trade” and its inevitable concomitant, the supranational corporation, undeniably leads to  circumstances which greatly disadvantage large swathes of the population in the First World through the removal of First World jobs to the rest of the world. At worst, these people become the perpetual victims of structural unemployment (try getting a job in an area where the main employer closes and you have no scarce or easily transferable skills or you are middle-aged or, indeed, try opening a new business or becoming self-employed in a depressed economy): at best they are driven into ill-paid and uncertain employment.

 12. What is meant by material enrichment? Britain as a case study

The assumption is that the material conditions for most have improved considerably over the past two hundred years. Any economics textbook will plot economic improvement in terms of rising real wages. But those supposedly rising real wages are based on measures which are often questionable, incomplete or derived from very narrow data such as corn prices. Even modern measures such as the Retail Price Index (RPI) are not static, their content and weighting being regularly revised. Nor do such measures fully represent the true costs of necessities, the most notable distortion in Britain being the failure of the Retail Price Index (and its successor index the Consumer Price Index) to reflect housing costs fully. Any comparison between different times based on such measures needs to be treated with caution.

Of course no one in their right sense would question whether there has been massive material advance in the past two centuries. A more  interesting question in our context is whether most people are materially better off now than they were in 1960s, by which time a fully fledged welfare state was bedded in, housing, both owned and rented, was reasonably priced, social housing was being built in massive quantities, university education was not merely free but students subsidized with grants, unemployment was tiny and inflation low.

Today the welfare state is constantly under attack by the British political elite and in some areas such as NHS dentistry already seriously inadequate, while the state pension is much reduced as a fraction of the average wage following two decades of increases linked to the cost-of-living pegging rather than increases linked to the average national wage.

Housing of all sorts in most parts of the country is presently absurdly costly and social housing is greatly reduced through Right-To-Buy and minimal new building since the 1980s.

The cost of university education is rocketing and grants are a distant memory.

Unemployment remains high today (2005) even by the official figures –  approximately 950,000 by the claimant count and around 1.5 million by  the most widely used international measure – figures which most  probably severely understate the real unemployment level because it ignores the considerable disguised unemployment within the 2 to 3  million people currently on long term sick benefit payments (the 1980  figure for such people was 600,000). The increase in those staying on at school after the age of 16 and going on to university has also reduced the present figures by taking hundreds of thousands out of the jobs  market for years. From 1945 to the late seventies unemployment never rose above a million on the official claimant count and for most of the time was considerably lower even with little disguised unemployment and far fewer people staying in education after the school-leaving age (which was only 15 until the mid sixties).

There are other fundamental social changes which bear upon the material state of the nation. Many more people today have to travel long distances to work than they did forty or fifty years ago. That is costly both in terms of fares and time. More generally, it is increasingly difficult for someone on the average wage to support a family on that wage. That often means both parents have to work not from choice but necessity.

Taxation bears much more heavily on the poorer part of the population now than it did in the past. Direct taxation – income tax, national insurance, inheritance duty – applies to many more people now than it did in 1960, primarily because a failure to maintain personal allowances and tax bands at a reasonable level. Direct taxation is also broader in scope, for example VAT compared to purchase tax. Such taxation takes proportionately more of the income of the poor than the rich.

It is a moot point whether overall people are generally materially better off than they in 1960. They may own more trinkets such as TVs and computers and some imported goods such as clothes may be at least much cheaper, but those are small advantages to set against the great increase in housing costs and commuting fares and the diminishment in social provision. Doubtless a section of society has benefited, but it would be a brave man who wanted to argue that the condition of the vast  majority has improved, especially the poorest third of the population.

Many will read this with astonishment, saying but we have so much more today, dazzled as they are by the many new products. It is important not to confuse technological advance with “free markets” and “free trade” or general material wellbeing. People are undoubtedly better off in 2005 in terms of being able to purchase such things as cars or electronic goods then they were in 1960. But people in 1975 were also better off in those respects than those who had lived fifteen years before. That improvement was long before “free markets” and “free trade” had become the elite ideology. It is worth adding that new products often result in additional expenditure regardless of whether the individual really wants the product – any product which becomes widely used is difficult to resist. Technological innovations are particularly prone to induce reluctant purchases.

13. How the market fails to provide what the customer wants

There is no better modern example of the market failing to provide what the customer both needs and wants than the computer industry. If it was driven by the customer, the computer industry would produce hardware and software which was easy to install, had continuity of use, was simple to use and was supported by adequate help lines and manuals. The industry signally fails to do any of these things.

Hardware and software are of course purchased in ever greater volume and computer services, including maintenance, continue to swell. But that is not an indication of customer satisfaction. Rather, it is simply a reflection of how computers have become an inescapable part of our lives, not only as obvious computers but also in the guise of so many of the other machines we use – everything from phones to intelligent clothes. Business and public administration have become so dependent on their use that they cannot do without them. That being so, whatever is on offer, however unsatisfactory, is bought out of sheer necessity. The computer companies have the modern world over a barrel.

It might be objected that although most people cannot completely escape computers at their work, they do not have to bring them into their private lives. Yet increasing numbers buy computers for private use.

Why do they do that if the machines are so unreliable and demanding? Simple: once a significant minority have private computers and business uses them very widely, it becomes very difficult for the rest to resist,  not least because businesses and government increasingly require those dealing with them to do so by computer. But there are other pressures as well.

We have long passed the point where a handwritten document is likely to be read by most people in business unless it is an order or payment. Now, except between social contacts, everything must be word-processed to be acceptable. A word processor or access to one has become a sine qua non for anyone who wishes to be taken seriously. Even amongst private individuals a letter is increasingly seen as unusual or even quaint.

With emails, we have not come to the stage that telephone ownership reached a quarter of a century ago when not to have a phone became considered eccentric, but we are rapidly moving towards it.

Employers increasingly wish to contact employees by email wherever they are and this means the choice is often between having a computer and email at home or not having a job.

Those with school age children, whatever they think of computers, find it next to impossible to deny their children not only a computer but access to the internet, both because the children want it to match their peers and because they have been brainwashed into believing that a computer is essential.

In short, people are increasingly being driven to become computer owners and users not because they actively want to, but because they feel isolated and excluded if they remain computerless. Again, as with the analogy between telephones and emails, within the foreseeable future, someone without a computer is in danger of becoming in the eyes of the majority as much as an oddity as someone without a TV is now considered.

14. Relative poverty, wealth and power

Even if most people or even all people were in absolute terms better off as a consequence “free trade”, that does not mean that their general situation has improved in power terms.

Wealth is not merely an advantage for what it can directly buy but also for the power it brings. The poor are doubly disadvantaged by their poverty by their restricted ability to purchase what they want and their subordination to those who can purchase anything they desire. Consequently, the ordinary man or woman may well be happier and freer in a society which is materially poorer overall but which is less oppressive through the absence of great differences in wealth. Charles Darwin in the Voyage of the Beagle describes a port in South America which suffered an earthquake while the Beagle was there in harbour. The town attached to the port was virtually destroyed and its inhabitants were reduced at least temporarily to the same material level. Darwin noted the happiness, almost gaiety, of the population after this happened.

The example of Britain is instructive when it comes to relative wealth. Until the 1970s inequalities in wealth were narrowing. Despite all the puffing of the “trickle down” of wealth which supposedly results from Thatcherite “free market” practices, wealth distribution has not changed dramatically over the past quarter century of “free market” policies by successive British governments.

A Royal Commission (1976-79) on the distribution of income and wealth found that in 1976 the top 1 per cent of the population owned 25% of all personal wealth, the top ten percent raked in 60% and the bottom eighty per cent had a measly 23% (Penguin Dictionary of Sociology p72). The Inland Revenue figures for wealth distribution in 2002 are show the top 1 per cent own 23% of national wealth and the bottom fifty per cent of the population have a staggeringly small 6% (Office of National Statistics (ONS) website – published 2004). Those figures, eye-opening as they are, conceal the fact that wealth inequality in 2002 would be much greater than 1976 were it not for the increase in home ownership and the rise in house prices.

Another ONS report (2005) entitled “The long shadow of childhood” (TLSOC) based on research by the London School of Economics concludes that there has been remarkably little change in social mobility in Britain over the past 30 years. The study was based on census records between 1971 and 2001.

TLSOC also demonstrated how the social and economic status of children is very much tied to that of the parents. For example, more than two thirds of those with parents in professional or managerial jobs managed to take a degree: of those with semi-skilled/unskilled parents, 14 per cent had a degree.

15. Man does not live by bread alone

Even if the “free traders'” claims of an overall increase in the wealth of a society were true, there would still be strong arguments against the policy because a society is more than its crude economic relationships.

Human beings do not like too much uncertainty. A certain amount of stress is good for them, but only so much. Like masochists and physical pain, human beings are comfortable with stress only in so far as they feel it is within their control. Manifestly, for many people the uncertainty they experience is utterly outside their control. This widespread insecurity leads not merely to individual suffering but damages the social fabric by generally diminishing confidence in the future and the ability to cope in the here and now.

A 2005 study (Molly Watson Western Mail 31 9 2005) by a Cardiff University Department of Psychology team led by Prof Aylward Mansel suggests that the general level of happiness in the Depression was greater than it is now (the team analysed data from surveys of assessing happiness and contentment from the past 70 years.) This conclusion might seem absurd to most people living today who, if they have any conception of the Depression, it is one of a dire time packed with the most horrendous stress. Yet the findings of the report have a certain plausibility because in the 1930s there was undoubtedly a greater sense of social solidarity, especially amongst the working class, than there is now and civil society was far stronger then – the working class not only lived in close-knit communities which offered support to those who fell on hard times, but they were woven into supportive institutions such as the co-operative movement and unions. They were anything but socially isolated whereas today people are often isolated. Social involvement, the Cardiff University study found, was the single most important cause of happiness or unhappiness.

One must be cautious with such studies because however scrupulous the researchers a degree of subjectivity is inevitable. Nonetheless the equation of isolation with unhappiness will, I think, strike a strong chord with most.

There is also the question of a people’s self-confidence. If a nation’s visible and everyday manufactures are predominantly foreign, it tends to produce a sense of dependence in the individual. A man looks around and can find next to nothing he can identify as produced either in his own country or made by companies owned by his countrymen. Not unnaturally he begins to lose confidence in the ability of his own country to stand alone. Peoples throughout history have allowed themselves to be conquered simply because they believed themselves to be generally inferior to those who confronted them and slaves have been routinely controlled by owners who deliberately attempted to reinforce their sense of inferiority.

16. Geopolitics

Free trade is postulated on an absurdity, namely that the world will no longer see wars which will significantly disrupt trade, or at least the trade of the First World. It is a fool’s paradise.

Those with memories greater than that of a goldfish may recall the help and support Britain received from her supposed EU “partners” in the Falklands. Remember how France supplied military equipment in the form of missiles to the Argentine during that war. Imagine what would have happened if Britain at the time had relied largely on equipment which was either wholly or partly produced abroad. Suppose, for example, her main fighter aircraft had been produced by an EU consortium (as it soon will be), what guarantee could Britain have had of fresh supplies of spare parts and weapons during the Falklands war?

The dependence on foreign suppliers affects even the greatest states. The New York Times (29 Sept 2005 – “More US weapons have foreign roots”) documents the reliance of the US military on foreign suppliers. This is still small as a percentage of the whole defence budget but it is growing and already encompasses important areas such as bio-chemical warfare protective suits.

17. The democratic deficit

“Free trade” emasculates democracy. It does this by confining politics within narrow limits. The present “free trade” agreements mean that no political party can easily stand on a platform of extending state intervention, whether by nationalisation, trade restrictions such as embargoes or the subsidy of its own industries. A party which wished to do any of these things could of course propose to withdraw from the treaties, but that would be in practice a very difficult course to follow, especially where the treaty obligations go beyond mere trade such as those involved in membership of the European Union.

Loss of democratic control is obviously to the disadvantage of the masses. However, it also has implications for competition. The prevention of the formation of monopolies and cartels can be done at the national level, but it is impossible when companies become supranational. You offend against America’s anti-trust laws? No problem, you remove your manufacturing abroad to countries which are happy to have you (or at least their clients are) regardless of what arrangements you may have made with competitors or the any monopoly position.

18. Does “free trade” increase competition and choice in the long run?

In the industrialised world at least, the experience of less restricted trade since 1945 is that competition has reduced not merely in the capital intensive industries and occupations but in those which are not obvious. The numbers of farmers has greatly contracted, but so have the number of storekeepers as chain stores and supermarkets have overwhelmed the individual proprietor. In fact, it is difficult, perhaps impossible, to find a mature field of economic activity, that is ,  one which has not sprung up since 1945, which has not displayed reduced competition within the post-war period.

Some of this reduction in competition is simply due to the working of the domestic market towards monopoly, for example, the growth of chain stores, but much of it is directly related to the removal of protection for First World economies.

It is true that large parts of the world have industrialised and increased the number of international competitors, but the overall number of businesses in the developed world has been reduced. multinationals control much of the economic activity of the Third World and, in some industries, dominate the national markets of the First World.

The car industry is a wonderful example of the squeezing of competition. All over the world car companies are being taken over by the giants and many car companies which do exist rely on state aid and favours. The number of companies now being small (and becoming smaller) compared with the number even 40 years ago. Moreover, many of the car companies which do still exist do so only because of state subsidy and protection.

Other traditionally important industries where competition is greatly reduced are aerospace, aviation, shipbuilding, oil, chemicals, steel and farming.

19. The reality of our economic circumstances

What we have does not even fall within the arbitrary and narrow definitions of “free markets” and “free trade” which most of their adherents espouse. States still protect their economies with state subsidies, favourable tax regimes, quotas and tariffs. Nonetheless, protectionist barriers have been reduced sufficiently to severely damage first world industries through products from the developing world with their absence of labour laws and wages many times less than those of developed economies.

First World economies have also exported vast numbers of jobs to the developing world. These range from manufacturing to skilled white collar work such many IT functions. The old middle-class belief that they were immune from the effects of globalisation has received a rude buffeting.

At the same time as jobs and industries have been exported, the industrialised world has increasingly allowed the purchase of native companies by foreigners. Perhaps the most dramatic example of this has been the complete transfer of London merchant banks to foreign ownership.

The fourth strand in the modern “free trade” web is immigration. Since 1945, with the exception of Japan, the First World has allowed through a mixture of design and neglect of border controls, vast numbers of immigrants into their territories, most of whom have been unskilled or low-skilled.

The primary consequences of the slowly evolving post war international economic regime have been two. The first has been the gradual growth of dependence on the imports of vital goods and services by the developed world and a loss of governmental control of companies within their borders, not least because any large multi-national can hold the threat of upping sticks to another country if a government does not play ball.

The second consequence has been the degradation of the economic circumstances of those whose jobs were most at threat from the internationalisation of trade. Those affected are mainly the poorer and less qualified workers and their dependents. They have found their opportunities for work much reduced and the pay and conditions for the suitable work which remains eroded by extra competition from both native workers chasing fewer jobs and immigrants competing for the same jobs.

Those whose jobs opportunities have been degraded have suffered a form of theft. Had mass immigration and the export of jobs been prevented, the wages for the jobs taken by immigrants would have been higher than they are when subjected to the additional competition of immigrant labour and the exported jobs would not have been exported, which in itself would have tightened the labour market. In societies of rising aspiration, this could result in jobs considered menial being better rewarded than those which enjoy high status under “free trade” circumstances. It might be necessary to pay a sewage worker as much as a doctor. Doubtless many would throw their hands up at this. But there is no logic to such a response, because in a society with a large private enterprise component a wage is simply a response to the value the market puts on a job. Unskilled workers may not earn as much as the average doctor or lawyer at present, but skilled tradesmen such as plumbers and builders often do.

20. Why elites are so keen on “free markets” and “free trade”

“I just think that a lot of modern corporate capitalists — the managerial class basically — has no loyalty to any country anymore, or any particular values other than the bottom line.” (Pat Buchanan quoted by Daniel Brandt in his article “Class Warfare” in issue 13 of Namebase Newsline -http//www.namebase.org/news13.html).

Buchanan is grasping a demon which he only dimly apprehends. What is happening is vastly more significant. We are presently witnessing the creation of an international class of plutocrats who care for nothing but their own class. They have the potential to form a true international aristocracy. If that happens, the imperfect democratic control the masses have been able to exert over their elites in the past century will end. The prime tool for the creation of such an international aristocracy is “free trade”.

There are parts of Western elites which are more or less reluctant to embrace “free markets” and “free trade”, but the general economic trend is clear: the internationalist, globalist creed is the dominant philosophy when it comes to trade and increasingly the idea of “free markets” in the domestic sphere is being accepted in practice if not in overt political policy.

Why have these elites moved from their previous socially oriented nationalism to internationalism? The answer to this question reveals the nature both of elites generally and the particular philosophy they currently support.

In most circumstances throughout history the wishes of the mass of a population have been of little or no account in any formal sense. The masses made their presence felt through rioting and social disturbance or as pawns in the service of elite members who wished to rebel. An elite took note only when they were frightened enough – the creation of a form of national public assistance by the Poor Law of 1601 is a classic example of such behaviour.

Eventually, representative government evolved to the point where the masses began to have a direct say in the political process through the vote. The elite as a group did not welcome this but felt it could not be resisted. It was not democracy to be sure but elective oligarchy, which was buttressed by elite constructed devices to exclude new entrants into the political process such as first past the post voting, election deposits and a very strong party system. Nonetheless, once the franchise was broadened the masses were able to exercise a large degree of democratic control because politics was still national and a political party had to respond to the electors’ wishes. The elite resented this control over their behaviour as all elites do and looked around for a way to diminish democratic influence. They found the means to do it through internationalism.

In a sovereign country elected politicians cannot readily say this or that cannot be done if it is practical to do whatever it is. That is a considerable block on elite misbehaviour. So elites decided that the way round this unfortunate fact was to commit to treaties which would remove the opportunity for the electorate to exercise control. The most notable example is the Treaty of Rome and the subsequent treaties which have tied Britain into the EU.

Vast swathes of policy are no longer within the control of the British Parliament because of these treaties. Add in the treaties tying Britain to the UN and the WTO and the commitment of every mainstream British party to them, and democratic control has essentially gone.

But internationalism is not simply a bureaucratic elite device to weaken democratic control, it is a sociological event in itself. An elite thinks of itself as a separate group, a group which may in some circumstances extend beyond national boundaries and jurisdictions. The medieval aristocracies of Western Europe thought themselves part of a chivalric whole. When Charles I of Egland was executed in 1649 the monarchs of Europe were horrified because they thought it would set an example for other royal killings.

The ruling elites in the First World today have a class interest which binds them more closely to one another than to the people they rule. Indeed, there is arguably a greater sense of international elite solidarity than ever before. This is because modern communications allow people, goods and ideas to move with an unmatched ease. Because of this the international class can constantly revitalise and extend their group solidarity.

The advantage to the elites of this culturally based international solidarity underwritten by many personal elite relationships across national boundaries, is that it allows them to weaken even further their dependence upon their immediate (native) populations, because not only does a particular national elite have a ready made excuse for not doing something – our treaty obligations will not permit it – but the personal relationships and the growing sense of class solidarity increases the confidence and hence the willingness of the various national elites to act ever more in the international elite class interest.

Indeed, the more they are together and the more they act together, the more natural it will seem.

It is important to understand that elites are not engaged as a group in a conscious conspiracy against the masses. What happens is that the psychological and sociological forces which press upon us all lead the elite to adopt policies which always lead to their retention of power. It is not difficult to see how this happens.

All human beings have a powerful ability to write a narrative in their heads which will persuade them that they act not from self-serving or disreputable reasons but honourable and socially useful ones. The consequence of this is that while individual members of an elite will consciously comprehend the likely effect of their ideology, the majority will simply accept their ideology at face value. This helps to bolster and stabilise the elite’s position because no elite ideology ever overtly states that the masses will be disadvantaged if the ideology is followed, and in the case of formal democracies, the ideology positively claims to materially better society as a whole. This will emotionally reassure most elite members, who will bolster their acceptance of the ideology through inter-elite conversations – if most or all those in a group are positive about something, that is most powerful social reinforcer.

21. A sane alternative to globalism

Economic history suggests that the most effective general strategy to promote economic development in a country is to allow competition within the domestic market (where it does not create serious social discord) whilst regulating international trade through protectionist measures sufficient to maintain the general capacity of a country to point where it can maintain itself in an emergency such as war or blockade and be sovereign in most circumstances.This would require the judicious use of embargoes, tariffs and quotas to ensure that all the vital industries remain as a presence in Britain.

A few industries should be in principle wholly supplied from the British market. These are defence equipment and the various energy sources. The reasons for defence equipment provision being domestic are simple: any foreign supplier can cease to supply goods for political reasons or simply be unable to produce the goods when wanted at all or in sufficient quantities.

Energy supplies should be domestic because if they fail the whole of society is brought to a halt. Self-sufficiency in energy in any advanced country could be achieved in the medium term by nuclear power supplemented perhaps by new sources of energy such as wave and current power and bio-fuels.

A country should also build up a stockpile of essential materials such as metals and the minerals used in the chemical industry. Five years national supply should be a minimum.

A country should be able to feed its population from its own production at a pinch. In Britain this is possible with modern crop yields and animal husbandry. Crop yields are considerably greater than they were even in WW2 and the opportunities for increasing the volume of animal products have multiplied greatly over the past 60 years, for example, in the massive development of poultry farming since 1945.

75% of the market in every other vital industry should be reserved for the domestic market. What is a “vital industry”? Try these for starters: metal (especially steel), chemical, biotech, computers, robotics, motor vehicles, shipping, aerospace, clothing, building, machine tools.

I would also reserve to domestic production at least 25% of the market for goods that are useful but not vital to provide a base for an expanded home production in times of emergency. Trade in wholeheartedly nonessential goods – Christmas trees, pogo sticks and suchlike – could be “free”.

I am not arguing for autarky. What I am advocating are trading circumstances which allow a nation to defend its national interests, particularly in time of war or international crisis. The measures I propose would produce self-sufficiency in food where necessary, the maintenance of the ability to manufacture a complete range industrial goods and most importantly the maintenance of an arms industry which can produce a full range of weapons necessary for the defence of the country.

Such a system would provide the security the state requires and permit very substantial international trade even in essential goods.

Obviously such a regime could not be followed in its entirety by most states. However, all could exist within those parts of it suited to their circumstances, for example, Britain could manage the entire regime, many third world countries could be self-sufficient in food.

22. “Free markets” and “free trade” as a religion

Free marketeers fancy themselves to be rational, calculating beasts. In reality, their adoration of the market is essentially religious. They believe that it will solve all economic ills, if not immediately, then in the medium to long term. Armed with this supposed objective truth, they proselytize about the moral evils and inefficiencies of public service and the wondrous efficiency and ethical outcomes of private enterprise regardless of the practical effects of their policies or the frequent misbehaviour of those in command of large private companies. Their approach is essentially that of the religious believer.

Like the majority of religious believers, “free marketeers and traders” are none too certain of the theology of their religion. (I am always struck by how many of them lack a grasp of even basic economic theory and are almost invariably wholly ignorant of economic history). They recite their economic catechism sublime in the concrete of their ignorance.

The religion has its roots in the first half of the 18th century when there were occasional attempts to suggest tariff reform, but the idea only became a serious political policy in the 1780s with the advent of Pitt the Younger as Prime Minister in 1784 who long toyed with “economical reform”.

The 18th century also provided the religion with its holy book, The Wealth of Nations by the Scottish philosopher and economist Adam Smith. This strongly argued for “free markets” and “free trade”, but Smith also recognised the demands of national security, the need for government to engage in social provision such as road building and maintenance which would not otherwise be done and, must importantly, the nature of a society and its economy. Here is Smith on the Navigation Acts: “…the Act of Navigation by diminishing the number of buyers; and we are thus likely not only to buy foreign goods dearer, but to sell our own cheaper, than if there were a more perfect freedom of trade. As defence, however, is of much more importance than opulence, the Act of Navigation is, perhaps, the wisestof all the commercial regulations of England.” (Wealth of Nations Bk IV. ch ii)

But Smith and his book suffered the fate of all those who found religions, secular or otherwise. As the decades passed Smith’s cautious approach was redrawn in the minds of his disciples to become a surgically “clean” mechanical ideology in which all that mattered was the pursuit of profit and the growth of trade and industry through the application of the “holy edicts” of open markets and comparative dvantage. The disciples, like other religious believers, avidly quoted the passages from their holy book which suited their purposes and ignored those which did not. They also found a further holy text in homas Malthus’ Essay on Population of 1802, whose predictions, although unproven by events, could be used to demonstrate that economic expansion was vital if widespread starvation was not to occur.

The clinical, soulless and inhuman nature of the laissez faire idea as it evolved is exemplified by the English economist David Ricardo. Here is a flavour of his mindset: “Under a system of perfectly free commerce each country naturally devotes its capital and labour to such employments as are most beneficial to both. The pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most economically, while increasing the general mass of the production it diffuses general benefits, and binds together by one common tie of interest and intercourse the universal society of nations”. (David Ricardo in The fall of protection p 174).

The Napoleonic wars largely foiled Pitt’s wish for broad reform and placed “free trade” in suspended animation as a serious political idea until the 1820s, when cautious attempts at tariff reform again were made. But underneath the political elite was a radical class who were very much enamoured of wholesale economical reform. With the Great Reform Act of 1832 they were given their opportunity to become part of the political elite. They took it with both hands, their most notable and extreme proponents being John Bright and Richard Cobden backed by the intellectual power of David Ricardo – all three became MPs.

Within a dozen years of the first election under the Great Reform Act’s passing, Parliament had been captured by the disciples of Adam Smith and the pass on protection had been sold by of all people a Tory prime minister, Sir Robert Peel, an action which kept the Tories from power for most of the next 40 years.

Such was their religious credulity that the “free traders” advocated not merely opening up Britain’s markets, both at home and in the colonies, to nations who would allow Britain equivalent access to their markets, they advocated opening up Britain’s markets regardless of how other nations acted. The consequence was, as we have seen, disastrous for Britain.

Disraeli in a speech on 1st February 1849 cruelly dissected this insanity:” There are some who say that foreigners will not give us their production for nothing, and that therefore we have no occasion to concern ourselves as to the means and modes of repayment. There is no doubt that foreigners will not give us their goods without exchange for them; but the question is what are the terms of exchange most beneficial for us to adopt. You may glut markets, but the only effect of your attempt to struggle against the hostile tariffs by opening your ports is that you exchange more of your own labour each year for a less quantity of foreign labour, that you render British labour less efficient, that you degrade British labour, diminish profits, and, therefor, must lower wages; while philosophical enquirers have shown that you will finally effect a change in the distribution of the precious metals that must be pernicious and may be fatal to this country. It is for these reasons that all practical men are impressed with a conviction that you should adopt reciprocity as the principle of your tariff – not merely from practical experience, but as an abstract truth. This was the principle of the commercial negations at Utrecht – which were followed by Mr Pitt in his commercial negotiations at Paris – and which were wisely adopted and applied by the Cabinet of Lord Liverpool, but which were deserted flagrantly and unwisely in 1846″. (The fall of Protection pp 337/8″).

Ironically, the “free traders” make the same general errors as Marxists. They believe that everything stems from economics. For the neo-liberal the market has the same pseudo-mystical significance that the dialectic has for the Mar ist. Just as the Marxist sees the dialectic working inexorably through history to an eventual state of communism (or a reversion to barbarism to be exact), so the neo-liberal believes that the market will solve any economic problem and most social ills. Neither ideology works because it ignores the realityof human nature and its sociological realisation.

The one track economic mentality of the early “free traders” is well represented by the father of J S Mill, James Mill:”The benefit which is derived from exchanging one commodity for another arises from the ncommodity received rather than the from the commodity given. When one country exchanges, or in other words, traffics with another, the whole of its advantage consists of the in the commodities imported. It benefits by the importation and by nothing else. A protecting duty which, if it acts at all, limits imports, must limit exports likewise, checking and restraining national industry, thus diminishing national wealth.” (The fall of protection p 174). And to Hell with any social or strategic consideration or changing economic circumstances.

After the Great War and the fall of “free trade” as public policy in 1931, the religion went underground for nearly fifty years. When it re-emerged as a political idea in the 1970s the politicians who fell under its spell were every bit as unquestioning and credulous as those of the 1840s. Tony Blair’ statement on Globalisation, ie, free trade, at the 2005 Labour Party Conference shows that it is alive and kicking today.

Scorning any attempt to discuss Globalisation, Blair said of those who wished to oppose it “You might as well debate whether autumn should follow summer”. (Daily Telegraph 1 10 2005.)

None of this would matter very much now if those who believe in “free markets” and “free trade” were without political power. Unfortunately, theirs is the elite ideology of the moment and the past 25 years. In Britain, the Tories may be more fanatical in their devotion to the market as panacea, but Blairite Labour have caught more than a mild dose of the disease. A good example of this is their response to house price hyperinflation where they desperately and futilely attempt remedies within the constraints of what they perceive to be “free market” disciplines rather than opting for the obvious state generated remedies such as restricting immigration, building a great deal of social housing and forcing developers to release land for building.

Both the traditional Left and Right have been duped by globalisation. The Left initially welcomed globalisation as a dissolver of national sovereignty, but they are discovering by the day just how restrictive international treaties and membership of supra national groups can be. As things stand, through our membership of the EU and the World Trade Organisation treaties, no British government could introduce new socialist measures because they cannot nationalise companies, protect their own commerce and industry or even ensure that taxpayers’ money is spent in Britain with British firms. A British government can have any economic system they like provided it is largely free trade, free enterprise.

The Right are suffering the same sickness with different symptoms. They find that they are no longer masters in their own house and cannot meaningfully appeal to traditional national interests because treaties make that impossible.

But there is a significant difference between the position of the two sides. The traditional Right have simply been usurped by neo-Liberals in blue clothes: the traditional Left have been betrayed by a confusion in their ideology which has allowed their main political vehicles to be surreptitiously by the likes of Blair.

The left have historically objected to “free-trade” on the grounds that it destroys jobs and reduces wages. But what they (and especially the British Left) have rarely if ever done is walk upon the other two necessary planks in the anti-“free trade” platform: the maintenance of (1) national sovereignty and (2) a sense of national cohesion. The consequence is that the Left has been and are still struggling with two competing and mutually exclusive ends: internationalism and the material improvement of the mass of the people.

23. An elite ideology

The best way of judging any political ideology is to ask cui bono? (who benefits?) The obvious answer in the case of “free markets” and “free trade” are those who believe (with good reason) that they nor their dependants will never be amongst those who will suffer the ill-effects of free trade. These people are and will continue to be overwhelmingly drawn from the middle and upper classes for the same reasons that such classes have always maintained their superiority, namely that such people will have inherited wealth, social connections and superior opportunities for education which are denied to the majority.

The new international elite is neither left nor right. Its ideology is simply designed to promote the interests of the elite. It has aspects of right and left, but they are merely the policies which allow the elite to both disguise their true intention and to give a pseudo-moral camouflage to their ends. They speak of the internationalist equivalent of “motherhood and apple pie” with exhortations to “end world poverty” and fund a “war on disease worldwide”. If I had to find a term to describe this elite I think I would settle for neo-Fascist because so much of what is proposed is reminiscent of fascism.

It is also telling that Western businessmen who ostensibly support the idea of the positive effects of competition arising from “free markets” and “free trade” never want it for themselves. They always happily grab a state subsidy or an embargo if it is to their advantage. None of the US airlines had any hesitation in grabbing billions of dollars from the Federal government after 911. Large companies publicly complain of government regulation while secretly welcoming it because they can bear the cost of it more easily than their smaller competitors. Multinationals shamelessly play one country off against another in their search for massive subsidies and other favours before they deign to operate in a country.

Countries play the same game, cheating wherever they can. And the more powerful the state the greater the cheating, both in terms of helping particular industries with direct state aid and in the formulation of the treaties governing world trade. Hence, the USA presents itself as the ultimate champion of free enterprise whilst being both now and throughout its history one of the greatest of protectionists and state subsidisers of its industries – that it is seen widely as an enterprise society is one of the great propaganda triumphs of history. Its behaviour after 911 is symptomatic of the unequal nature of modern “free trade”.

The US not only handed, as mentioned above, billions to its ailing private airlines, but put up protective tariffs to protect its steel produces.

It was ever thus. The two greatest names of the early Industrial Revolution, Josiah Wedgewood and Matthew Boulton, were happy to climb on the Enlightenment bandwagon with its beliefs in the universality of Mankind and advocate lesser tariffs and freer trade -until the proposed freeing threatened their own businesses.

What goes for businessmen goes for the individual worker. Who has ever met someone whose job was threatened by “free trade” speaking in favour of it?

Abe Lincoln’s used to put this question to pro-slavers who said slavery was a boon for the slave because they were provided for and were free of normal responsibilities: “What is this good thing that no one wants for himself?” An equivalent question should be put to the “free traders”.

The truth is simple: “free markets” and “free trade” are simply part of an elite ideology and like all elite ideologies they serve the purposes of the elite first, second and last. Those not of the elite who espouse it act merely as useful idiots to promote the interests of the elite.

Opposition to globalisation should not be a Left or Right issue. The socialist and the Conservative should both resist it because it removes the ability of the electorate to control those with power and the power of their political movements to realise their ends.

What should be public and what should be private?

Robert Henderson

Since 1979 every British government has perpetually tinkered with the balance  between private or state provision. Despite the Thatcherite cry for small government the state has has spent  a very large slice of GDP t throughout that time, In 1979 the percentage was 42.75% and in 2010 45.45% The lowest in the period was 34.25%  in 1989 (http://www.ukpublicspending.co.uk/uk_20th_century_chart.html).  However, there have been considerable changes in how the money has been spent.  All the major  nationalised industries have been placed in private hands, Britain’s defence capability has been reduced dramatically;  great swathes of public provision has been either put out to private contract entirely or restructured through mixed public/private enterprises such as the Private Finance Initiative (PFI) and council houses have been  sold off without any attempt to replace them ensure an adequate supply of affordable housing for the future.

Recent governments of any political colour have shown themselves to be firmly in the globalist camp and have allowed more or less unrestricted immigration which has both restricted employment opportunities for native Britons and reduced  wages.  This has added to the massive  unemployment, admitted and disguised, which was created by the structural unemployment resulting from the destruction of Britain’s heavy manufacturing and extractive industries in the 1980s. The immigrants have  also competed for houses and public services  such as education and healthcare.  All of these things mean that much more of public spending goes on the Welfare State and allied services than it did in 1980.

The globalist mania is still upon us with the belief in all major parties that the market is the panacea. This leads the present government to  continue with the idea that anything done by private enterprise is by definition superior to that which is provided by the state, the two great privatising pushes being to privatise the NHS by stealth and the Royal Mail by any means possible, with the first  tentative steps to sell off the country’s roads being taken in their wake. There is next to no serious discussion about what should be privately  and what should be publicly provided. This essay is an attempt to fill that gap by asking the question what should be provided by the state and what should be left to private business and not-for-profit organisations such as charities.

It is easy in principle to decide whether something should be left to private or public enterprise. Simply ask five questions:

(1) Is the service or product generally considered to be a necessity?

(2) Will profit compromise safety?

(3) Is the service obviously inappropriate to be left in private

hands, for example policing or defence?

(4) Can the service be provided by private enterprise without subsidy?

(5) Can free enterprise be reasonably expected to deliver the necessity universally?

If the answer to any of (1)(2)(3) is YES or the answer to either (4) or (5) NO, then it should in principle be provided either directly or indirectly by the state.

What should be provided directly by the state?

Certain things should be reserved to the state as a matter of absolute principle. They are defence, foreign policy, policing, justice, the implementation of judicial sentences and decisions and the administration of welfare. They should be reserved absolutely because either they involve the use of force or the threat of force, punishment or the distribution of taxpayers’ money in areas such as unemployment benefit.

For reasons which I shall shortly examine, the state should also directly control any essential service which is a natural monopoly. What counts as a natural monopoly? Railways and utilities such as water and energy are examples They are natural monopolies because it is simply not practical to have competing lines running to the same destinations or competing utility pipes and cables supplying the same area.

It is possible, as has happened in some of the British privatisations, to allow different companies to compete to supply services such as trains, energy and water, but that is at best an insufficient or incomplete competition and at worst a wholly bogus one because the actual lines of supply – the railway track and the pipes or cables – still have to be maintained and owned by some organisation, private or public. That means the infrastructure has to be either owned publicly or, if owned by a private company, the company must be rigorously controlled by the state, as is the case with the British telephone landline infrastructure which is owned by the privatised British Telecom.

British government interference with natural monopolies since privatisation has gone far beyond controlling the infrastructure. In the case of the railways, a considerable public subsidy has been paid and continues to be paid to the private operators. In every monopoly industry a regulator has been appointed to control both prices and, in theory at least, to force companies to do things such as provide a certain level of investment in new equipment and to be conscientious when it comes to maintenance and operation of the infrastructure. To pretend that these monopoly industries are private companies working in a free market is patently absurd. They are effectively public services contracted out to private contractors.

A few services only work as monopolies, the classic example being the universal letter post, that is, letters delivered to any part of a territory for the same price. This only works if it is a monopoly because if there is competition from private companies or municipal postal services they will take sufficient of the profitable trade in the towns and cities to make it impossible for the universal supplier, in this country the Royal Mail, to subsidise the loss making deliveries to parts of the country outside the main urban centres. No private company would ever provide universal coverage unless they had a monopoly.

Why should the state directly control essential monopolies? Firstly, because there is no opportunity for meaningful competition and consequently the state must step in to prevent abuse of the monopoly position. To do that, as we have seen, it has to interfere very strongly with the running of the monopolies. In practice, it can only efficiently do this if it directly controls the monopoly.

If the state subcontracts an essential monopoly to private business or allows private business to buy a monopoly two general problems arise. The first difficulty is that a private business may at any point fail as a business or simply refuse to continue with a contract if it is not making money for the business. If that happens the state is over a barrel because it does not have the resources to immediately take over the enterprise, nor is it probable that another private company would be able or willing to step in at a moment’s notice – the worst outcome would be the cessation of a vital industry. Nor, if a company failed, is it obvious how a Government would prevent its assets being sold by a liquidator. In principle when Railtrack failed – the company which after privatisation had the responsibility for maintaining the infrastructure of the British rail network – the shareholders owned the assets (the railway infrastructure including much highly profitable land) and the creditors had a legitimate charge on them.

Clearly no government could allow the railway or vital industries such as water, gas and electricity simply to go under, either at the national or regional level. Hence, any government will, when shove comes to push, have to pay through the nose (your taxpaying nose in fact) to maintain the threatened industry, whether that be through enhancing a contract to make it more profitable, granting more profitable contracts to a new private contractor or through the payment of outright subsidies. A government is in a similar bind if a company is doing a bad job: they cannot simply sack them because who is to take their place?

Natural monopolies also raise other problems if they are in private hands. There is insufficient public control over areas such as maintenance and strategic planning. Good British examples can be found in the privatised water and energy industries. In the case of water the privatised companies have failed to invest adequately to stop the considerable loss of water from cracked pipes. Nor has a single major reservoir been built in England since privatisation. These investment failures have occurred despite the water companies consistently making healthy profits. The Water Regulator huffs and puffs but achieves little because the water companies know he can do little. Indeed, he has to date not even fully used the powers he has despite issuing many warnings to the water companies. And the Government? Well, they could pass a new law giving them direct powers over the water industry but what then? If a water company simply refuses to do what is needed where does the Government go? Nowhere fast is the answer.

With energy it is the strategic planning which is emasculated. Successive British governments have allowed Britain to sleepwalk into a position where the country went rapidly from being self-sufficient in energy to becoming a net importer. This was entirely predictable as it was known long before it happened that North Sea oil and gas was going to decline substantially from the beginning of the century. Despite this no meaningful strategic planning has taken place since privatisation with governments until very recently childishly claiming that it was not for them to interfere in the actual provision of energy now the industry is privately owned (the Blair Government has just woken up to the strategic danger of being dependent on foreign supplies but even now -2006 – no definite decision has been made on future British energy policy). The upshot of this lack of planning has been rapidly rising energy prices since 2005.

If water and the energy utilities had remained in public ownership, the fact that politicians had ultimate responsibility for them would have ensured that maintenance and strategic planning was not neglected because no politician or government could afford to be blamed for a water crisis or soaring power prices. Government could also subsidise  prices, something it cannot do now even if it chose to because of EU  competition rules. . The same principle applies to most of the privatised industries – take away the political responsibility and the profit motive rules.

Certain things are simply too important to be left to private efforts. Natural monopolies such as the railways, water and gas are literally essential to the survival of an advanced state such as Britain. Because of that stark fact alone they need to be treated as something much more than a commodity which can be simply left to the market. They should to be seen for what they are, strategic assets, and placed firmly under national control.

There is a further general reason why essential monopolies should be in public hands – the need for general provision. Left to private enterprise, even with an unfettered monopoly only the profitable parts of an industry would be supplied. Roads and railways would only be maintained if the traffic warranted it. Gas, electricity, water and telecommunications would only be supplied where sufficient profit could be made. The problem is we do not want roads and railways only over profitable routes, or the utilities such as gas and water supplied only to urban areas. We want them over the entire country. Only public provision can truly satisfy that need. Of course, private companies can have a duty to provide a general provision placed on the them but what if none is willing to take it or they take on the responsibility but then fail to meet it? The government then has to decide to either subsidise the company directly or to loosen the contract conditions to which the company has agreed.

The final type of enterprise which the state should always take in hand are those which experience tells us are beyond the resources of private business. Private enterprise can never be trusted to handle Tunnel. Margaret Thatcher insisted that no British public money would be involved and that private enterprise would bear the entire cost. It soon became clear that this was a nonsense. The Tunnel itself was completed but the companies which built it were not so much bankrupt as on another planet called Debt. And this was despite the very serious amounts of money pumped into the enterprise by the French Government,  both directly and indirectly. The situation was rescued, if one can dignify what happened with the word, by the banks and other  creditors rescheduling debts so far into the future that they all but vanished and the French Government surreptitiously pushing in more money via the French banks. To this day, the Channel Tunnel is the whitest of white private enterprise elephants, with the latest ” debt restructuring” always just around the corner.

Direct provision also has a further benefit. While assets are publicly owned and employees directly paid by the state, it is politically much more difficult to reduce or abolish that part of public provision. If the provision is supplied by a private company their contract can simply not be renewed or cancelled. If the provision is directly supplied, the government has the ticklish problem of having to take responsibility for the redundancies, something which greatly raises the profile of the removal of the provision.

The best example of the dangers of losing direct provision is the gradual privatisation by stealth of the NHS. To suddenly privatise the entire NHS would be impossible, but salami slice it over ten or fifteen years by continually increasing the private sector involvement and the position is completely different. Then the politician can use excuses such as “So much of it is in private hands now that the rest might as well be,” “We can’t have such a comprehensive service because private companies can’t provide it” and “Costs have risen so much that we have to cut this or that”. The whole system will be such a confused mess of public and private that the public will not know what to think. Also, the privatisation by stealth may have surreptitiously changed the way the public view the NHS so they see it no longer as a national institution but merely as a provider of medical care through disparate means. That in itself would reduce the moral outrage needed for any successful public protest.

The railways – a classic public service

The railways in Britain are not simply a private enterprise. They are a necessity to maintain general economic activity. Take away the railways and a substantial part of those employed in London could not continue to work there because the roads will not take the extra traffic. The same applies, to a lesser degree, to other large cities and towns.

The railways also fulfill an important social functions in providing transport to those without cars, by reducing car use generally and moving much heavy goods traffic from the roads. Finally, railways have a strategic value in times of war or blockade.

Without massive public subsidy the railways could not be maintained. No national railway system in the First World operates without taxpayers’ subsidy. Parts of systems may be profitable but not the entire system. It is not that our railways would simply shrink if left entirely to private enterprise, most of the system would not run at all. Commuter traffic is running at near capacity in the South East of England and fares are already so high generally that the massive price hike needed to meet the full cost of rail travel would result in a vicious circle of decreased traffic and decreased revenue.

The cost of maintaining Britain’s railways is simply beyond the private sector. Profit can be made on some intercity routes but that is about it. Even with the massive subsidies given to private companies since privatisation – ironically substantially larger than the pre-privatisation subsidies in real terms – private companies have signally failed to invest adequately. Indeed, the companies have radically reduced staffing levels – which may well have contributed to some crashes – and have constantly failed to meet their timetables.

The farce of the company with responsibility for railway maintenance immediately after privatisation in Britain, Railtrack, is a cautionary tale in itself. It created a completely different culture from that under the nationalised railways. Instead of employing most of the labour directly, they engaged subcontractors to do most of the work. The army of skilled workers built up by the original private companies and inherited by the nationalised ritish Rail was dispersed in reckless fashion and, inevitably, control over standards of maintenance became much diluted as it always does with subcontracting.

To put the cherry on the Railtrack story, the financial resources of the company, even with public subsidies, proved hopelessly inadequate. In 2002 the plug was pulled and it went into administration to eventually re-emerge restructured as a not-for-profit company  Network Rail. But before the administration was done and dusted, the axpayer had to cough up a great deal of money to compensate  shareholders because the government was faced with legal  action by the shareholders alleging maladministration, an  action which looked as though it might not only succeed but in the  process wash some very dirty government linen in public over exactly why and how Railtrack went into administration.


There is a further consideration with public services – safety. It may be that the public will have greater confidence in, for example, a state run railway simply because it is state run. The public’s confidence might be completely unfounded but that would not matter: theconfidence itself is a valuable thing.

The experience of all privatisation has been to make money by enforcing massive job cuts. Of course there was overmanning during the nationalised industry days. The trouble is that the cuts made since privatisation have often gone beyond improving efficiency. They went to the limits of safety, and probably past it, in pursuit of profit. Maintenance staff were reduced and consequently maintenance was reduced. The facts which have emerged since the Watford train crash in 2000 shows beyond doubt that many of the people involved in rail track maintenance are inexperienced at best and completely raw at worst.

When the state does not take direct responsibility for a service which has inherent safety consideration, the danger is that governments will respond to any safety fears by imposing ever more onerous obligations on the private suppliers of the service. The private companies are also susceptible to being overly cautious after an accident has happened or a possible danger becomes the subject of public comment.

Train crashes in Britain have been thankfully rare under both nationalised and privatised regimes, but when they happened under the nationalised industry the government was able to keep the show on the road because the public had confidence that safety was not being compromised simply to save money. Since privatisation crashes

have been met with absurd caution by both the bodies responsible for the infrastructure and the Government, with the national rail network being reduced to a farce after cracks in some rails were found after the Watford crash mentioned above. For the better part of a year, rail travel became a misery as hundreds of emergency speed restrictions were introduced and rails were tested for cracks and a massive programme of ail replacement was begun. The consequence  was horrendous delays and vast numbers of cancelled trains. The effects are arguably still being felt in 2006.

Perhaps the classic industry to which the safety consideration applies is the production of nuclear energy. Despite this this Government is saying that if a new generation of nuclear power stations is built it must be with private money and run by private companies. A clear case of  ideology – private is best – driving common sense out of the window. (It should be added that Labour said the same when in office.)

Foreign ownership further complicates matters. When a massive explosion devastated a fuel storage and refinery complex in Hemel Hempstead in 2006 and further parts of the complex were thought to be in danger of exploding, it was impossible to get the necessary information quickly because the company which owned the complex was French and no one with  sufficient authority could be immediately contacted.

What should be provided indirectly by the state?

Just because something is a necessity does not mean that the state must or should provide it directly. In fact, the less direct provision the better, because in a free society government should only touch that which it needs to touch. For example, whereas there are not many possible suppliers of air traffic control systems or railways, there

are many possible suppliers of food. Government may safely leave food distribution to the private supplier and provide assistance where it is needed through payments to those in need. It should be noted that it is not the market or private enterprise which provides the general provision in cases such as food but the giving of taxpayers’ money to those who need it which provides the general provision.

Service is really the crucial criterion. Governments should become directly involved in industrial work very rarely – the exceptions are defence suppliers, utilities such as water, gas and electricity because of their status as natural monopolies and their immense importance. No nationalised industry making or extracting anything has ever been an economic success. Governments running manufacturers, farming or the extractive industries such as coal mining are neither necessary nor desirable, because private enterprise will always do the job adequately and more efficiently provided the economic circumstances are right,that is, vital industries are protected through tariffs, quotas or subsidies to the extent necessary to make them profitable.

But such vital industries are the Government’s business because they have both a strategic and a social and economic value. Consequently, governments do have is a responsibility to ensure that they are maintained.

Any country which cannot feed itself, produce all essential manufactured products and services, is not self-sufficient in energy and does not have substantial reserves of essential raw products such as iron ore, is constrained in what it may do both nationally and internationally and the greater the reliance of imports, the greater the constraint. Of course any advanced industrial state will not be completely self-sufficient, but it is possible for a country to have a large degree of self-sufficiency in the essentials especially food. With modern crop yields and modern animal husbandry, Britain could feed itself at a pinch if her market for food was protected to allow reasonable profits to be made by farmers using not merely the best or most convenient land, but the more marginal land as well.

Where a country is severely dependent on imports, as is the case with Britain, they are utterly at the mercy of international blackmail and events. Even the most powerful state in the world, the USA, is much restricted because of its reliance on imported oil. Such constraints have the most serious of consequences. Would George Bush  have invaded Iraq if the USA was not reliant on Middle East oil? I doubt it.

The free trade dream of buying where a product can be produced cheapest is based on the absurd premise that never again will international circumstances arise which will place any country at risk of war or blockade. There is also the question of what happens when raw materials run short and the scarce materials either remain in the countries of origin or go to the richest and most powerful countries with the rest left to go hang. Free trade is not merely a fantasy but a dangerous one in the long term.

There is also the economic and social case for protection. Cheap imports from countries which have labour costs many times below those of the mature industrial states, goods made cheap by state subsidies and plain old-fashioned “dumping” means that no company in the West is able to compete with the imports. The effect of allowing such imports is twofold: either the workers in the importing countries must take lower wages or, more probably, watch the obliteration of the domestic industry.

The same thing happens where mass immigration is permitted. If the immigration did not occur the wages for the type of jobs which immigrants take would be higher. That in turn would lessen or end the shortages of native workers willing to do them. For most jobs all that is needed to solve a shortage of labour is a wage sufficiently competitive with other employments to attract enough applicants. A good example in Britain are nurses: a shortage of native applicants a few years ago has been turned into a surplus now by a substantially increase in their pay.

The loss of jobs and suppression of wages through cheap imports, outsourcing, or large scale immigration has considerable social and economic effects. Those who lose their jobs either remain unemployed or take jobs which pay much less, are less secure and have lesser benefits. Those who remain in their jobs but whose pay is suppressed suffer similar difficulties. Both groups find their spending power is reduced. They pay less tax. If they are unemployed the Treasury is a net loser. New immigrants compete for scarce public goods such as free healthcare, education and social housing. Most particularly they compete most directly with the poorer native members of society who have most need of such social supports.

Poor pay, insecurity, unemployment and competition from mass immigration all place a severe strain on the social cohesion of a country.

Neither the Left or Right need recoil in horror at the idea of a judicious protectionism,a strong immigration policy and a commitment to public provision for those things which cannot be provided by private enterprise either efficiently or at all.  The Labour Party has been strongly protectionist throughout most of its history. The Tory Party was protectionist before the repeal of the Corn Laws in 1846 and protectionist again between 1931 and the advent of Margaret Thatcher. For most of their history both parties have been in practice opposed to mass immigration. Both Labour and Tories have been comfortable with state provision in the past.  There is nothing but their ideological obsession with laissez faire economics and globalism to stand in the way of returning to a more balanced view of how the state should intervene.

The credit crunch: an effect not a cause

Robert Henderson

 How did we get  into this economic hole?

What we are experiencing is a direct consequence of the dominant economic ideology of the age, laissez faire, an ideology which underpins the general political ideology of political elites in the West, the form of liberal internationalism we call globalism.

This neo-Liberal mentality has brought us to the brink of what is probably the most dangerous economic crisis since the Depression. Perhaps it may turn out to be even more disastrous because countries throughout the world (including Britain) are now so much less self-sufficient than they were in the 1930s, while the scope and speed of communications are beyond anything in existence during the Depression.

Most problematic are the immense and entirely novel opportunities permitted by digital technology, a technological development particularly pertinent to the money markets which are at the root of the credit crunch. No one remotely understands the medium-term let alone the long-term implications for the money markets of the creation of a universal market for every form of financial instrument, which is what the Internet potentially provides, or its potential for destabilising currencies. All that can be done at present is to guess, and guessing when the lives and prosperity of entire populations are at stake is a criminally reckless gamble.

 The consequences  of Thatcherism 

There have been outbreaks of  free market and free trade ideological  dominance in Britain from  the 1840s onwards,  but  since  Margaret Thatcher came to power in 1979 the worship of the laissez faire god has become more devout than ever.

Thatcher introduced something quite new. For the first time in history, a British prime minister and government actively welcomed the wholesale destruction of strategically important industries on the grounds that they could not compete. The doctrine of comparative advantage was pursued by the government in an advanced economy to a degree never previously seen. At the same time she emasculated the unions and began

recklessly selling the family silver with  her introduction of  the idea of privatisation which rapidly placed  almost all of the important nationalised industries in private hands.

Mrs Thatcher was also responsible for one great political act of folly in the name of laissez faire when she successfully fought for the Single European Market. The consequence of this was to rob Britain of its ability to favour its own industry economically (beyond what was already being done) and gave any citizen of another EU country the same rights as a British citizen to be employed in Britain or for any foreign corporation to bid for any public sector contract offered in Britain.

Her ultimate triumph was not only to drive the anti-laissez faire strain from her own party, ( a strain which had survived during previous bouts of  laissez faire dominance) but to eventually force the rest of the British political mainstream to follow suit. The upshot today is that the three major political parties in Britain have as articles of faith both a commitment to free trade and the belief that private enterprise is preferable to public provision in virtually every area or life.

The latter belief has created a novel situation in Britain. Great swathes of economic activity which were once controlled by the state – everything from the great nationalised industries to prisons – have been either sold off or contracted out to private companies.  Once privatised, these erstwhile public operations have become prey to foreigners. Because of post-1979 British governments’ commitment to laissez faire, anyone is allowed to purchase any British company, no matter its strategic importance, and most public contracts are given to the highest bidder regardless of their provenance. Nor in most instances (because of Britain’s membership of the EU) can the privatised industries be subsidised by the taxpayer, a particularly telling restriction in the case of the old public utilities when energy prices are rocketing.

Today, British utilities such as gas, electricity and water are largely in foreign hands, our major airports are owned by Spaniards, we no longer have serious mining or shipbuilding industries, and our largest native owned car manufacturer is the company which produces the Reliant Robin. In addition, many of the iconic names of British business – Bentley, Roll-Royce cars, Tetley Tea, ICI, Cunard, British Steel – have fallen to foreign buyers, while the supposed flagship of the British economy – the City of London – has seen the wholesale transfer of British merchant banks to foreign ownership. The present government has even stood sanguinely by while the London Stock Exchange has come under persistent foreign take-over attempts.

What the credit crunch  is not about

It is not about levels of government spending, although that is probably the next great economic shock which will hit Britain as the economy slows, tax revenues stagnate, the  Public Sector Borrowing Requirement grows and the Enron-style ‘off the books accounting’ involved in the Public Private Partnership (PPP) and Private Finance Initiative (PFI) schemes becomes impossible to hide.

What this crisis is about is the virtually unrestrained working of private enterprise, which has created a titanic pile of indebtedness ranging from dangerously generous mortgages to unsecured debt, much of it promiscuously and casually granted with a significant proportion going to people providing false information.

At the heart of the crisis lies the bundling of risky loans (especially mortgages in the United States – the so-called sub-prime mortgages) into financial packages. These have  been sold on and treated not as toxic debt but much better quality debt, debt which could be used by the banks as collateral against which to borrow. Eventually the game was up as people (especially in the United States) began defaulting on payments and banks stopped lending freely to one another because much of the debt they held was seen for what it was, toxic. Banks had to write off bewilderingly large amounts in bad debts and their store of useable collateral to set against future loans was much reduced.

This crisis is a peculiarly difficult thing for free marketers to explain. They cannot rationally blame it on too much government interference, because British financial institutions have been allowed to run their affairs largely unchecked by government for the better part of a quarter of a century, a process begun by the Thatcher governments when they threw away credit controls, permitted the de-mutualisation of building societies and their transformation into banks (which placed them under less rigorous rules regarding what they could borrow and lend) and generally slackened financial controls and state oversight.

These practices have been assiduously followed by successor British governments, who have failed to control the development of exotic financial instruments such as derivatives and by relinquishing the power to set Bank Rate (Bank Rate being, in theory at least, set by a body independent of the government, the Monetary Policy Committee (MPC) of the Bank of England) and by embracing fiscal restraints imposed by the EU, such as restrictions on state aid to industry and restrictions on the setting of VAT rates.

The upshot is that the present government is left with only two very general means of controlling the economy, the variation of taxation and of government borrowing and spending. These are hopelessly inadequate instruments to deal efficiently with the multifarious financial problems which arise in an advanced economy. For example, if  credit is growing too fast, raising taxes to take money out of the economy may actually fuel further borrowing, at least in the short term, as people try to service the debts they have and to maintain their standard of living, while the additional taxation will have the unwanted extra effect of depressing the economy.

Alternatively, cutting taxes could conceivably reduce borrowing, although human nature being what it is people might actually feel more confident about the future and hence even more willing to borrow. However, even if such action reduces borrowing it will tend to worsen inflation because the amount of money put into the economy will probably be larger than any reduction in borrowing.

The setting of Bank Rate by the MPC is arguably a third weapon in the government’s armoury, because the MPC works to a narrow government set remit of controlling inflation within certain limits and the government has a considerable say, both directly and indirectly, in the appointments to the MPC. The behaviour of the MPC in crisis conditions suggests that they will do what they think politicians want rather than sticking to their remit. For example, they have dropped interest rates in the past eight months when inflation is rising. However, even if the setting of Bank Rate is a third weapon in the hands of the British government, it suffers from the same deficiency as the other two, namely, that it is too broad a measure to deal with many economic difficulties. Worse, since the credit crunch began, the interest rates charged by the banks and other lenders (especially on mortgages) have not shadowed the reductions in Bank Rate as history suggests they should do, but have stayed stubbornly and significantly above Bank Rate.

Of course, all economic interventions by governments have consequences which go beyond the narrow desired ends of the intervention, but the more economic weapons in a government’s hands, the greater the likelihood that they will be able to find one which is best suited to solve a particular problem with the minimum of unwonted side effects. For example, if the multiplier of salary for mortgages had remained by law no more than two times salary throughout the past quarter century, the housing market would have been pegged back by what most people could afford to borrow.

The money supply

There is a vital technical reason why government should control credit: it increases the money supply. To understand why this is of fundamental  importance, it is necessary to comprehend  what constitutes money, a concept which is far from straightforward in the modern world and growing more complex by the day.

A currency based on precious metals formed into coins is a relatively simple thing, because it is to a large degree self-regulating. The practices of debasing the quality of the metal or of clipping the edges of coins to remove some of the metal may be common, but such things can be tested objectively by anyone with the requisite knowledge, for example, by weighing the coin.  Moreover, the amount of physical money is limited by the availability of the precious metal(s) used in the currency.

Once a country moves from a physical currency based entirely on a precious metal to one which remains, in theory at least, fully convertible to the precious metal but which uses paper money alongside coins made of the precious metal, government’s role is expanded in importance because it is ultimately the guarantor of the currency’s integrity.

The final stage of physical money is when the link between a precious metal and the currency is broken and the entire currency rests upon trust. At that point a currency is entirely at the mercy of governments because there is no natural restraint on how much money is printed or coined in base metals.

Describing physical money is the easy bit. The concept of money becomes complicated the first time someone makes a loan. That has the same effect as someone depositing money with a bank: where one person had the money before, now two have it. Once a society develops a banking system, government needs to intervene both because of potential fraud and an expansion of the money supply. That applies in principle even in a supposedly 100% precious metal based currency, because even then there are primitive financial instruments such as bills of exchange which effectively act as money.

The more advanced a society is, the less important physical cash becomes as the instruments by which the money supply is multiplied increases. To see what a confused state we are in today we need only reflect on some of the various measures of the money supply which have been used in modern times in attempts to quantify the money supply:

1        M0 is the total of coins and notes in circulation plus banks’ deposits at the Bank of England.

2        M1 is M0 plus current account deposits

3        M3 is M1 plus all other types of bank accounts (deposit accounts, foreign currency accounts, public sector accounts)

But there are many other financial products which none of these measures catches that

arguably have aspects of money. Anything which can be readily traded for money can in effect be used as money in certain circumstances: shares, the vast array of derivatives, debt itself. For example, if I wish to buy a house in theory I could do so by swapping shares I own for the house.

The Northern Rock Debacle

September 2007 saw the first run on a British bank since the 19th Century with people literally queuing round the block to get their money out. A converted building society, Northern Rock, had been operating a reckless business plan whereby their core business of mortgages was predominantly funded not by deposits but by borrowing on the money markets. When the credit market tightened, Northern Rock were left stranded and were forced to go to the Bank of England (BoE) as the lender of the last resort, which made a loan of 25 billion to them.

Once that news became public, the panic began and the government was forced to guarantee all Northern Rock deposits which committed the taxpayer to a further £25 billion, a total of £50 billion including the loan. The Government then left the bank in limbo until February 2008 as it desperately tried to find a private buyer for the bank. Eventually, it had to admit defeat and nationalised the bank, exposing the taxpayer to another £50 billion of risk as it took over responsibility for the bank’s mortgage book. The taxpayer is now in for a potential liability of £100 billion. To put the scale of the risk in context, the  Treasury  Red Book forecast  for total government expenditure in 2008/9 is £617 billion, so the Northern Rock risk amounts to around 18% of total Government expenditure for this financial year.

All this is worrying enough but just imagine what will happen if a few more banks go belly-up. It is as reckless an act by a chancellor as you can find in British history, for not only are massive liabilities being put around the neck of the entire population, a precedent has been set. If other banks (and quite possibly much larger banks) get into the same position, it is difficult to see how the government could underwrite another Northern Rock let alone one of the clearing banks, especially in the light of the extensive borrowing facilities the BoE has extended to the banks generally. Of course, we are constantly told by the government that the taxpayer is not really at risk as the assets of Northern Rock are solid and that the loans extended to banks generally are held against sound collateral and will cost the banks a pretty penny in a premium on the interest rate they pay. Frankly, why should we believe them when the government cannot even give a guarantee of when the Northern Rock liabilities will be cleared.

Yet it is difficult to see what else the chancellor could have done. If Northern Rock had folded, the rest of the banking sector would have been placed in real danger. The position was not helped by the drawn-out attempt to find a private buyer for Northern Rock (a symptom of the laissez faire mindset of the Government), but that was merely a detail, not the heart of the problem. Had the government nationalised the bank immediately the problem was known, the liabilities would still be on the taxpayer. The scandal is that the lax credit situation was allowed to arise, something which could have been prevented by proper government behaviour over the past quarter of a century.

The developing crisis

Not only have governments been forced in practice to abandon laissez faire, there have been few if any calls for the central banks to stand back and do nothing. Even in the case of Northern Rock the supporters of the “invisible hand” have been loath to let it go to the wall.

Faced with the dangerous mess they created, the banks and big business asked the government to rescue them. The consequence is that the ordinary person gets the worst of all worlds, for they not only have to suffer a contracting of the credit market, but they also have to fund the rescue of financial institutions, either directly in the case of Northern Rock by nationalisation or indirectly through the extension of credit by the Bank of England (as lender of the last resort) to introduce money into the market for the financial institutions to borrow. The ordinary citizen also has to pay in terms of lost jobs, lower pay, poorer conditions and higher prices.

Commercial banks throughout the developed world have run squealing for help to governments, while the major Western central banks have reacted with behaviour ranging from the dramatic to the reluctant. The Federal Reserve has led the way, slashing interest rates dramatically and making tens of billions of dollars in loans to the banks available to the money markets, much of it on distinctly questionable collateral. The European Central Bank (ECB) has been more cautious on interest rates but has also made vast sums in loans available to banks.

Britain has somewhat tardily followed suit, reducing Bank Rate by three quarters of a per cent since September and belatedly providing billions in loans to the banks on collateral of ever decreasing value. The disquieting thing is that no matter what action has been taken, the flow of credit remains stubbornly locked and governments, including Britain’s, are reduced to throwing more and more money at the banks with less and less assurance that the money the taxpayer is risking will ever be repaid.

On 19 April it was reported (for example, The Daily Telegraph) that not only will the Bank of England inject a further £50 billion into the market with the banks using some of the sub-prime mortgage products they invested as collateral, but that the British government will also underwrite credit card debts held by the banks – all this on top of the eye-watering Northern Rock liabilities.

The most frightening thing about the crisis

The truly frightening thing about this crisis is that the people who are supposed best to understand the financial markets, the central bankers, are completely at sea. The Bank of England (BoE) has admitted that its understanding of the money markets is inadequate. Amid accusations that it failed to respond quickly enough to the crisis at Northern Rock, the Bank has admitted that it is struggling to determine the impact of the credit meltdown on the economy.  Charles Bean, chief economist, said assessing conditions in the economy is “subject to considerable uncertainty”. Writing in the Bank’s quarterly bulletin, Mr Bean also stated “One important step in analysing monetary demand and supply shocks involves improving the Bank’s information about credit conditions”.

The Bank’s admission that it needs to improve its understanding of the credit markets comes as John McFall, chairman of the Treasury Select Committee, voiced his frustration following the appearance of Bank of England staff before the Parliamentary watchdog. In an interview with The Daily Telegraph, Mr McFall said: “The responses that people gave were unconvincing as a whole. I’m looking at the system and asking the question: Is it working? And it’s not working” (The Daily Telegraph, “We don’t understand the markets, BoE admits”, by Jonathan Sibun, 24 September 2007).

A failure of oversight by central banks both here and abroad has been compounded by the long period of very low interest rates led by the central bank rates of the leading currencies, most notably by the Federal Reserve (“the Fed”) in the USA, which kept money too cheap for a long time, thus encouraging people to borrow. The prime author of this cheap money was Alan Greenspan, who was treated with quasi-religious awe by politicians and so-called financial experts alike while he was running the Fed. Come the credit crunch and the knives came out for him, vide the famous American monetarist Professor Anna Schwartz: “It is clear that monetary policy was too accommodative. Rates of one per cent were bound to encourage all kinds of risky behaviour…..the Fed failed to confront something that was evident. It can’t be blamed on global events” (Daily Telegraph, 13 January 2008).

The inability of everyone from bankers to governments to provide a solution or even understand what is happening is palpable. In April, Gordon Brown ordered a “summit” with bankers to discuss a way out of the mess and his chancellor Alistair Darling railed against the irresponsibility of the banks for reckless lending, carefully overlooking government’s irresponsibility in this area. Massive amounts of public money have been ploughed in ever more desperately, without the squeeze on lending loosening – “The Bank confirmed it would swap treasury bills for premium asset backed debt owned by the banks. Banks have six months to use the facility. The swap is for 12 months and banks can ask for two year-long extensions, making a total of three years….. The Bank has put no ceiling on the scheme” (Daily Telegraph, 22 April 2008, “Banks hail £50bn boost to liquidity”). That it has had no effect is unsurprising, because the banks have used the money to shore up the holes in their balance sheets.

The effects of the credit crisis

The entire economy is rudely affected by a sudden shortage of credit. Apart from hyperinflation, there is no more toxic disease which can affect a modern economy, especially one dependent on consumer spending. The reduced availability of credit at any price causes an economic slowdown. More expensive credit causes people and organisations to draw in their borrowing horns. The reduction in the amount of money available to spend reduces demand. Reduced demand and more expensive credit drives down profits at best and puts companies out of business at worst. Wages are depressed and jobs are lost. This reduces demand even further.

People habituated to debt find they cannot service what they owe, and default. That is especially important in an economy like modern Britain’s where a large number of people have built their lives on a continuous stream of credit. Things which are heavily dependent on credit, most notably property, lose value. People either cannot pay their mortgage or find them selves unable to sell at all or that the price they could get would be much less than they owe on the property. Even those who are do not end up in a position of negative equity find they have great difficulty in selling both because prospective buyers cannot get a mortgage or because other people are unwilling to sell. Those wishing to move, especially if they wish to trade up, find they cannot easily get a new and larger mortgage.

Britain is more exposed to recession than most because her economy is built primarily on consumer spending, much of which is on non-necessities. Such an economy is inherently more fragile than one which is primarily rooted in the production and consumption of necessities because it is very responsive to changes in economic circumstances. In the language of economists, demand for much of what is purchased in Britain is very elastic.

The economic fragility of most peoples lives

Ever since Harold MacMillan famously declared in 1959 that “We’ve never had it so good”, British politicians have been religiously telling Britons that they are getting wealthier. To support this claim they point to such things as the growth in owner-occupation, the myriad of electronic consumer goods, holidays taken abroad and cost of living indices such as the Retail Price Index (RPI) and the CPI.

Most people have tended to take this at face value until fairly recently. They have ignored the fact if it takes two incomes to maintain a family where one was sufficient before, that is not wealthier. That if most people cannot afford to get on the housing ladder when once they could, that is not wealthier. That if the price of most essentials is rocketing that is not wealthier. And that if the Government uses bogus cost of living indices which ignore housing costs and council tax that is not a true measure of purchasing power.

Data released by the Office of National Statistics showed that household incomes fell last year in real terms, and have risen by only £2.25 a year on average since 2001. The reality is worse because these figures are based on the bogus CPI measure, which excludes housing  costs and council tax . In addition, a majority of the British population do not have savings which would allow them to survive for two months if they lost their jobs, and a large segment of the population lives on incomes well below the average wage, which is still below £30,000. A true recession will consequently hit millions of people very hard indeed.

How do we escape this mess?

The honest answer is there is no certain escape. Nor is a ‘soft’ economic landing likely. Circumstances are forcing more prudent lending behaviour onto private financial institutions, with substantial deposits being required before mortgages are granted, the feckless multipliers of six or seven times salary for mortgages vanishing, credit card limits being reduced, cards withdrawn and new card applications being refused. Unsecured personal loans are being subjected to the same type of scrutiny. The problem is that this is all happening in a rush which creates a tremendous shock to the economic system rather than a controlled decline of credit.

All this will probably cause a sharp contraction in the economy.  This creates a dilemma for the BoE. Its remit is to keep inflation close to 2% as measured by the Consumer Price Index (CPI). Inflation is significantly above that and showing every sign of rising. According to its remit, the Bank should be raising rates not lowering them. Yet the BoE has cut Bank Rate by three quarters of one percent already and is being urged universally by private business and many politicians to cut further and quickly. The likely outcome of such a policy would be our old friend stagflation. Indicatively, the growth in UK output was down to a miserly 0.4% in the first quarter of 2008.

The great problem is the dependence of housing to drive the economy. There is consequently no painless way out of our present predicament. If house prices are kept high by low levels of house building and continuing mass immigration an entire generation will find them selves stranded in a no man’s land where they cannot find good rented accommodation at a reasonable price.

Contrariwise, if there is a correction which brings housing within the reach of first-time buyers we shall have a massive problem of negative equity which will mean existing home owners cannot move and if their homes are re-possessed, being burdened with ongoing debts as their homes are sold for less than they owe. That is the bind governments over the past quarter century have got us into.

What can be done to make a safer future?

There needs to be a sea-change in the mentality of politicians. They need to recognise that government has a vital role in controlling the economy, not via the heavy hand of nationalisation or hideously complicated regulatory regimes, but by simple and effective measures such as restrictions on credit and the use of exotic financial instruments and the protection of strategic industries such as farming and energy supply.

Back to the future is the answer. We need to create a different moral climate. As little as 30 years ago, people still tended to look upon debt as something to be avoided. For the most part people saved up for things they wanted. Part of that caution was enforced because credit was nowhere as readily available as it is now although we were already into the age of the credit card. But much of the frugality was simply cultural; people had been brought up to feel debt was something loathsome and bankruptcy next door to theft. This was a Britain where the morally vital mechanism of shame still had its place.

The credit which was on offer almost always came with some strong strings attached. If you wanted a mortgage you had to save with a building society for quite some time to establish your credentials. When a mortgage was eventually granted, the amount you could borrow was restricted both absolutely (there was an upper ceiling of £13,000 in the 1970s) and by sensible multipliers of household income (commonly twice income and often the mortgage multiplier was applied only to the main wage earner’s pay). 100% mortgages or anything approaching them were not to be found. A deposit of 10% of the property’s price would have been the minimum required and in many cases more would have been asked. Bank loans required a similar establishment of creditworthiness over a decent period and credit card limits were modest. If anything was bought on hire purchase, a substantial deposit was required. The consequence of such a regime was that far fewer people got into serious financial trouble than today.

1        Here accordingly are a few examples of what might be done. Mortgages – the multiplier of salary used to calculate mortgages should be a maximum of three and a minimum deposit of ten per cent required. The re-mortgaging of owner-occupied property to release capital and buy-to-let mortgages should be outlawed.

2        Hire purchase – a minimum of 20% deposit with the monthly repayment no more than ten per cent of the monthly net pay (net pay to be that left after deduction tax, National Insurance and the repayment of any existing debts).

3        Personal loans other than mortgages – a maximum of 10% of net income.

There is also a need to tighten up checks on creditworthiness. Lenders have been incredibly lax about the information that prospective borrowers supply to them. That is a particular problem with credit card issuers who tend to accept whatever the lender says, but it is also a significant problem with mortgages with people allowed to self-certificate their earnings in some cases. The laxity has its roots in the belief by the lenders that they can reliably calculate the percentage of borrowers who are poor credit risks who will default and in the case of loans secured against property, that house prices will continue to rise rapidly, thus increasing the equity the borrower has in the property. The events of the past year have shown that lenders cannot reliably make calculations of defaulters nor rely on house price inflation to increase equity.

What now?

Is there a chance that the laissez-faire mentality of the elite will change and that common sense will prevail? Or will we stagger on in this ideological straightjacket until a true catastrophe strikes?

On the level of common humanity the hope must be that the crisis is contained reasonably quickly, although I think that unlikely. (I am writing this article in May 2008. By the time it is published the danger of a full blown depression may have been averted, although that is improbable because after more than eight months of increasingly desperate governmental pump priming around the developed world there is no sign that the credit crunch is lessening, let alone coming to an end. )

But there is danger in a rapid resolution for if it happens the underlying reasons for this economic trauma may not be addressed by those responsible for the operation of the economy and things will go on as before until the next crisis occurs. The credit crunch is simply the latest in a line of dangerous economic crises stretching back a century an a half which were brought about by the same fundamental problem, the abdication of government responsibility for the economy.

You must be mad if you don’t believe in the liberal globalist credo

Robert Henderson

Anders Breivik has been declared insane at the time of his mass killings on 22 July 2011 by Norwegian  psychiatrists, Synne Serheim and Torgeir Husby. They claim Breivik was psychotic  before and during  his bomb attack in Oslo and shooting  attack on  Utoya Island which together  left 76 dead.  Prosecutor Svein Holden said Beivik has been diagnosed as  insane and that  “He lives in his own delusional universe and his thoughts and acts are governed by this universe”.  (http://www.telegraph.co.uk/news/worldnews/europe/norway/8922760/Anders-Behring-Breivik-not-accountable-for-attacks.html).  If this diagnosis is upheld ,  first by a Norwegian  legal medical commission and then by  the Norwegian courts,    Breivik will  be  incarcerated in an asylum, most probably for the rest of his life.

The question of whether Breivik will have a chance to speak at length in open  court  is  still open, viz.:  “The trial will proceed in much the same manner as if Breivik had been found sound of mind. Evidence will still be examined, and the court has the final say as to whether or not they believe Breivik is guilty of having carried out the attacks.”( http://www.bbc.co.uk/news/world-15954370). However,  if the question of insanity is the primary issue for the court to decide,  that could mean that Breivik is not allowed to testify  either at all or as freely as he would wish. They could well decide that he was guilty of the crimes without any testimony from Breivik (the facts are scarcely at issue and Breivik admitted his responsibility soon after the event (http://www.bbc.co.uk/news/world-europe-14265526)  and then decide on the question of insanity based only on the “expert” evidence.  It is also possible that any court hearing could be held in camera. (It is only too easy to imagine politically correct Norway claiming that as the man was judged to be mentally disturbed,  he should  not be subjected to public scrutiny).   Unless Breivik has a  trial in open court he will disappear from public view without any opportunity  to speak his mind in public.

The matter is further complicated by the question of how Breivik will plead. If he rejects a plea of insanity and wishes to plead not guilty, he will have the obstacle to overcome of having admitted the fact that he did undertake the bombings and shootings.  If he pleads  not guilty  that could result in the court excluding any testimony from Breivik  relating to motive and deciding the matter purely on  his admission to the facts and the question of whether he is or was insane at the time of the killings.  If the Breivik is to plead justification for committing the killings he would need to do so in a way which it would be difficult for the court to refuse him the opportunity to speak at length.  I  think the most probable way he could do this is by arguing that he was acting in self-defence because he believed that the policies of his ruling elite were putting his society and by extension himself at risk. The weakness in his argument would be that he has not attacked those with the actual power and influence but the  youth wing of the party with power..

Breivik’s alternative would be to plead guilty and then use whatever chance the court offers him to speak in mitigation to put forward his justification.  However, if he does that  it would be both easier for the court to restrict what he might say and hold the proceedings in camera.

It will be interesting to see if Breivik is allowed to bring the  witnesses he wants or, indeed,  any witnesses at all,  to court.  These could be to support his claim of sanity or his belief that Norway (and the rest of the European world) is being betrayed by its elites through their  permitting of mass immigration and suppression of dissent about the effects of the immigration.   Those  relevant to supporting his political position could be distinctly embarrassing as Breivik could try to call those politicians he blames for Norway and Europe’s betrayal.  Such applications would almost certainly be refused, but  Norwegian officialdom’s refusal  of them would add to the impression of an elite determined to not hear Breivik’s case.

A taste of the way the things are likely to go in any trial  can be gleaned from this report of Breivik’s court appearance of  15 November 2011: ‘He [Breivik]  then questioned the competence of Judge Torkjel Nesheim “because (the judge) has a mandate from organizations that support multi-culturalism in Norway. Multi-culturalism is an anti-Norwegian hate ideology designed to destruct the Norwegian ethnic group.” He got as far as adding that “destructing the Norwegian ethnic group is the same as ethnic cleansing…” before the judge cut him off, saying the court only wanted to hear from Breivik about his impressions of prison life.

‘Breivik later said he had no problems with the conditions of his custody, but said he “doesn’t accept” his imprisonment because he’s a “military commander.” He recommended Norwegian police look to Saudi Arabia for other “methods of torture.” The judge cut him off several times, refusing to allow Breivik to use the hearing as a “soapbox” to spread his beliefs. As reported earlier, his request to directly address survivors and victims’ families was denied.’ (http://www.newsinenglish.no/2011/11/15/breiviks-altered-sense-of-reality/).  This refusal to allow Breivik to explain himself goes along with the keeping him in solitary confinement and denying him any knowledge of what was happening in the outside world.

Is Breivik  mad?

The psychiatric assessment  is that “He lives in his own delusional universe and his thoughts and acts are governed by this universe”.  The problem with this judgement is that while  Breivik’s  political views can be rejected on the grounds that they  are unpalatable,  they are not  based on fantasy. There has been massive immigration into Western societies.  Vast numbers of Muslims have come to Europe. Post-war non-white immigration has both radically altered the societies into which they have come  and  resulted in European elites who suppress dissent and ceaselessly promote multiculturalism.  If immigration continues at a similar rate it will be a fact that over the next half century societies, especially ones with small populations like Norway, are in danger  of seeing their native populations become minorities in their own lands.  To be insane, at least in the English legal sense (McNaughton Rules), Breivik would have to have been  captured by delusions which rendered him unable to understand  reality, for example, a hearing voices in his head directing him to kill people or suffering from a paranoid belief that someone was trying to kill him.    Clearly this is not the case with Breivik’s political ideas. Those are based in reality and long considered.

There is also  the evidence of the meticulous  planning Breivik undertook and his extensive writings  which show someone fully aware of what he wanted to do and, most importantly for an insanity plea , why he wanted to do it. Breivik clearly understood that what he was doing would have been immoral as uncontexted acts, but these were given (he believed)  a  moral context because of the political and social circumstances  created by the liberal elites.

Nor could Breivik’s killing spree be reasonably used to decide that he is insane. There are innumerable terrorists who have killed with the same callous disregard but they have not been adjudged insane or, indeed, has there been any official  attempt to suggest that they were insane.   Evil, bad, immoral maybe, but not mad.

Compare  Breivik’s s assessment of the world  with the modern  liberals’ belief system. His is a recognition of what mass immigration and political correctness has actually wrought: theirs is a fantasy world  in which humanity is one big happy family with its human atoms readily interchangeable between place, culture and time regardless of race or sex.

An elite stitch up?

The diagnosis  of insanity  comes as no surprise.  Shortly after Breivik’s arrest his lawyer Geir Lippestad  conducted a press conference (on 26th July)  in  which client confidentiality was non-existent and Lippestad’s adverse opinions of his client were given full reign  in a way which is astonishing to  British eyes.   Apart from telling  the world that Breivik was a “a cold personality” ;  assuring them that Breivik hates “anyone who democratic” and that he thinks Breivik’s ideology as outlined in his manifesto is irrelevant to the case (which is a pointer to how his defence may be conducted),  Lippestad  made the astonishing comment  “This whole case has indicated that he’s insane “ (http://www.bbc.co.uk/news/world-europe-14292212).  I listened to  press conference as it was taking place and I noted  Lippstad as saying he was  discussing  an insanity plea with the prosecutor, although he has not seen fit  to tell his client that he is doing any of this.  (I have not been able to track down a full version of the press conference and the excerpts  which  are publicly available do not contain these  statements. Nor can I find it reported anywhere  in print. The longest extract I have found online is around 14 minutes long http://www.youtube.com/watch?v=FtXIGw0BvbM&feature=related).  A diagnosis of insanity would appear to have been the tacitly  or overtly agreed Norwegian  elite solution to the acute problem Breivik represents for not only them but  for elites everywhere  in countries whose governments  have signed up to the globalist multiculturalist creed. As for Breivik’s chances of controlling his defence, Lippestad stated baldly The “I won’t take no instructions [from Breivik]”  (http://www.youtube.com/watch?v=FtXIGw0BvbM&feature=related –  enter at 2 minutes 14 seconds).  On the face of it Breivik has a lawyer who will be unwilling to present a defence as Breivik wishes it to be presented.

How does  Breivik view the situation? He is reported as  describing the insanity diagnosis  as insulting   (http://www.bbc.co.uk/news/world-15954370). However,  he might not be too perturbed in reality because such a ploy by the  Norwegian judicial system would bolster his claims of a  corrupt and treasonous political elite who will stop at nothing to enforce their will and ideology.

Breivik’s  choice of lawyer Geir Lippestad  is interesting. Lippestad is a member of the Norwegian Labour Party.  He  specifically asked for Lippestad to represent him. Bearing in mind Beivik’s penchant for planning and research, it is improbable that he did not know Lappestad was a member of the party he despised. Why did he choose Lappestad?  Probably to ensure that his trial was seen as seriously flawed, to demonstrate publicly through the manner of Lippestad’s  defence how biased and controlling the Norwegian elite has become. The choice of Lippestad also has the advantage of placing a member of the Norwegian liberal establishment in the excruciatingly embarrassing situation of defending the man who has waged war on the young of Lippestad’s  own political party. (I have had the sneaking feeling ever since the killings that Breivik is working the Norwegian liberal elite with his foot).

It has been suggested that Lippestad was chosen because he defended  the white  killer of a mixed race victim in 2002 and Breivik asked for him because he thought Lippestad would be the best defence lawyer  because of the way that Lippestad conducted the 2002 case.  This is very implausible because Breivik could have had no illusions about being found either not guilty or insane.   The best Breivik could hope for  was a trial in open court with his ideas put before the public.  The quality of the defence  lawyer is irrelevant  in such circumstances (http://www.telegraph.co.uk/news/worldnews/europe/norway/8663525/Norway-killers-lawyer-Geir-Lippestad-defended-neo-Nazi.html

Doubtless a public trial in which he has his chance to speak at length  would have been Breivik’s preferred outcome, but the sinister act of having him declared mad – a tactic all too familiar from regimes such as those of the Soviet Union and  Communist China – could fit into his general purpose of demonstrating the  mentality he accuses Western elites of possessing. A flawed trial caused by the wilful inadequacies of his lawyer would reinforce the point that the Norwegian elite are determined not to allow any view but their own politically correct one to have a public hearing.

Can Breivik get a fair trial?

Beivik has been kept in solitary confinement and denied any knowledge of what is happening in the outside world. When he has appeared in court it has been mostly in camera. What we  know of Breivik’s attempts to speak at his court appearances show a judiciary determined to disallow any attempt to explain his motives.  Breivik’s lawyer has made it abundantly clear that he has no intention of doing what Breivik wants.  To cap it all, psychiatrists find Breivik insane.

The solitary confinement might just about be explained by fears  that other prisoners would attack Breivik, although he could have been placed with prisoners without a history of violence. For the  rest it is simply an attempt to

denial of knowledge of the outside  world there is no security excuse and it can only have been  done for the petty reason of denying  Breivik any chance of deriving satisfaction from seeing what effect he has had. However, it has the unintended consequence of  making  it impossible for him to properly instruct his lawyer or  assess the advice given by his lawyer,  things which would seriously mitigate against a fair trial.   It also means that Breivik cannot use the response of politicians and the media to the attacks in any justification based on his  political position.

The liberal’s fear of Breivik

Why are liberals so very terrified of Breivik that they cannot bear the idea of him being thought sane or willingly countenance his  justifications for the attacks being presented to the public ?  After all,  this is a mass murderer  who presents his ideas in a distinctly eccentric form by wrapping his idea for a revolution against the ruling elites in the highly anachronistic clothes of the mediaeval military order of the Knights Templars, a group to which he considers himself and fellow spirits to be the heirs to.   Here is a sample of his curious mixture of ancient and modern:

“3.12 Re-founding of Pauperes commilitones Christi Templique Solomonici – PCCTS, the Knights Templar The European Military Order and Criminal Tribunal (the PCCTS – Knights Templar) was created by and for the free indigenous peoples of Europe. One of the primary purposes of the tribunal and order is to attempt/contribute to seize political and military control of Western European multiculturalist regimes and to try, judge and punish Western European cultural Marxist/multiculturalist perpetrators (category A, B and C traitors) for crimes committed against the indigenous peoples of Europe from 1955 until this day.

“Pauperes commilitones Christi Templique Solomonici – PCCTS (the Poor Fellow-Soldiers of Christ and of the Temple of Solomon), the Knights Templar was re-founded in London in 2002 by representatives from eight European countries, for the purpose of serving the interests of the free indigenous peoples of Europe and to fight against the ongoing European Jihad (referred to as the “third Jihad”). The Knights Templar was re-founded as a pan-European nationalist military order and a military/criminal tribunal with two primary objectives. The order is to serve as an armed Indigenous Rights Organisation and as a Crusader Movement (anti-Jihad movement). “  2083 – A European Declaration of Independence

The original Breivik  link to the manifesto – http://andersbreivik.co.uk/2083/ – has been nullified,  but the full document can be found at (http://www.kevinislaughter.com/wp-content/uploads/2083+-+A+European+Declaration+of+Independence.pdf).

Nonetheless,  in between all the romantic eccentricity are  ideas which strike deep into the heart of the liberal fantasy:  that Islam is compatible with Western society, that mass immigration is treason and that  feminism enfeebles a society by feminising men.   Breivik  is a challenge to   the entire politically correct edifice on which the liberal rests.    Worse, the liberal, like all ideologues, knows in their heart of hearts that their  ideology cannot withstand contrary argument because ideologies are always  incomplete description of  the world and consequently erroneous guides to action.

In the case of liberal internationalism  the ideology is especially vulnerable.  The liberal knows that the society they wish to see conflicts with  the way in which human beings actually behave  in the most fundamental way. That does not discourage the liberal because they do not believe in human nature and ascribe all behaviours to social conditioning. Consequently, any behaviour of which they disapprove can be changed by altering the conditioning.  Any failure of the re-conditioning is ascribed to it being applied over  insufficient time or of the re-conditioning not being rigorous enough.  There is never a natural point for the 24 carat liberal believer to say this will not work.

But although the liberal is certain that success will be eventually attained, they know that during the re-conditioning period the old social habits will remain and can still be powerfully appealed to.  That drives the liberal to believe that suppression of any dissent directed at the imposition of the new “liberal”  behaviours is morally justified on the grounds that the ends justify the means. The problem is the liberal’s view of how human beings  work is wondrously wide of the  mark and the re-conditioning will never succeed because it goes against basic human desires. The best the liberal can hope for is to suppress dissent to give the appearance of a step change in human behaviour.  Breivik is a frightening  challenge to that strategy of suppression.

No matter what the evidence to the contrary is, the true believers will continue to  believe because to do otherwise would be emotionally impossible for them. They believe still that it is simply a question of time and “education”, a word which is unreservedly sinister in the mouth of the modern liberal.  But  many , probably most, ostensible  liberals understand that there is such a thing as human nature and know that what they are asking of people is unnatural and will never be accepted. The problem for such people is that they are trapped into a situation where they have to keep pretending the ideology is correct for reasons of self-preservation.  At best they risk the loss of their privileged position if the liberal censorship is broken ; at  worse, they  could  be held to account for the treason which is mass immigration. Those fears  drive them to support the unreconstructed true believers  when they  behave ever more tyrannically in their suppression of dissent, which in Breivik’s case means  doing their best to censor his words and pretend that he is simply an unbalanced aberration which has nothing to do with their ideology.

Perhaps the most telling moments during Geir Lippestad  press conference of 26th July were  when he   answered the question “Why did he [Breivik] think it was a good idea to start a war by  attacking  members of  the Labour Party  rather than Islamics?”  With “I cannot understand that”  followed by repetitions along the same lines.  (http://www.youtube.com/watch?v=mnbOtoJHUZI – go into the recording at  33 seconds). This was unbelievable because Breivik had  a clear and obvious motive, namely, Breivik was attacking the  next generation of the class whom he had identified as being responsible for the political and social problems which had driven him to act.   In  his mind Breivik  was culling those he saw as the future traitors and  sending messages to both the Norwegian elite and general public that the permitting of mass immigration = treason.   Yet Lippestad could not bring himself to either acknowledge what was obvious or even  offer an alternative explanation.  Interestingly, it was during this  answer that Lippestad  appeared to be at his most stressed during the press conference.

The right-wing broadcaster Glen Beck likened the youth wing whose members Breivik shot to the Hitler Youth: “”There was a shooting at a political camp, which sounds a little like the Hitler youth, or, whatever. I mean, who does a camp for kids that’s all about politics. Disturbing,” (http://www.guardian.co.uk/media/2011/jul/26/glenn-beck-norwegian-dead-hitler) .  It would be more accurate to liken the Norwegian Labour Party’s youth wing  the Workers’ Youth League (Arbeidernes ungdomsfylking, AUF) to the Soviet youth organisation  Komsomol . The AUF is  affiliated with the International Union of Socialist Youth and  Young European Socialists  and the Nordic Labour Youth Movement (FNSU).  Many members of the AUF have gone on to high positions in the party. Indeed, the present Prime Minister of Norway, Jens Stoltenberg, was once a member.  It is in that context that Breivik’s decision to attack the AUF  members should be seen.  I would agree with Beck that “a camp for kids that’s all about politics” is disturbing under any circumstances; in the context of Norwegian politics it is verging on the sinister because of the dominance of the Norwegian Labour Party over a very long period of time.

A de facto one-party state

How ideologically one-dimensional Norwegian society has become can be seen from the position of the Norwegian Labour Party (NLP).  Between 1945 and 1961 it held an absolute majority in the Norwegian parliament.   Since 1935 there have only been 16 years when the Norwegian Prime Minister has not been drawn from the Party.  It is presently the dominant party in the Red-Green Coalition which governs Norway.  (The coalition is formed of the  Socialist Left Party  and the Centre Party).

The history of the NLP  over the past thirty years  mirrors that of the British Labour Party. It began the period as a social democratic party, then shifted to supporting economic liberalisation and a programme of privatisation. At the same time it became every more ideologically committed to what is now called political correctness.

Interestingly, In 2011, the Norwegian Labour Party (Det norske arbeiderparti)  dropped the Norwegian and became simply the  Labour Party (Arbeiderpartiet).  This was ostensibly on the ground that the electorate was confused  by the term Norwegian Labour Party because it was known commonly as the Labour Party. I suspect that the explanation will strike most people as simply absurd as the Norwegians had been returning the Party to the Norwegian parliament in droves for over seventy years.

A more likely explanation is that the “Norwegian” part of the title sat uneasily in a party which was firmly committed to internationalism in general and to Norway’s eventual  membership of the EU in particular.  The EU dimension is more important than it might seem. It is true that the Norwegian electorate thwarted the Norwegian political elite’s wish for Norway to sign up as a full member of the EU, but  the lesser relationship which Norway  agreed to  – its membership of the European Economic Area (EEA) – still allows the EU to exercise profound influence over Norway (https://livinginamadhouse.wordpress.com/2011/05/01/if-we-leave-the-eu-we-mustnt-be-another-norway/ ).

EEA membership requires that subscribing states have to accept the “four freedoms” of the EU: the free movement of goods, persons, services, and capital among the EEA countries as well as those comprising the EU.  This the prime reason for not joining the EEA or having a bilateral relationship with the EU similar to that of Switzerland.  These “four freedoms” mean amongst other things that  EEA members cannot meaningfully control immigration, protect their economy, prevent foreign takeovers or  freely engage in any new taxpayer funded  subsidy  for  which is judged to interfere with the market (article 61).

These restrictions on Norway’s sovereignty mean that the Norwegian political elite can obtain much of their internationalist politically correct ends . Most importantly for the Breivik case, the four freedoms mean that Norway cannot prevent immigration from the EU.  This has allowed the immigration which has disturbed so many Norwegians.  Before the “four freedoms” Norway could control its immigration: now it cannot. Take away the immigration and Breivik may well have never even contemplated doing what he did.

What drove Breivik from ideas to action?

In  Right Now! magazine in July 1995 (issue 8 The Treason of the Liberals (https://livinginamadhouse.wordpress.com/2011/07/23/the-oslo-massacre-and-the-treason-of-the-liberals/ ) I examined the reasons which led Timothy McVeigh to bomb the Alfred P. Murrah Federal Building in Oklahoma City on April 19, 1995. I attributed the cause to the creation by white liberal elites of circumstances which utterly alienated the white masses in whose interests they supposedly exercised power. The permitting of the mass immigration of those who by their nature could not or would not assimilate into white European societies and their overseas offshoots such as the USA by itself undermined the national cohesion.

If that was not damaging enough, the liberal elites used the upheaval wrought by mass immigration as a launch pad for what has become a rigid ideological creed by the name of political correctness. In the name of “anti-discrimination” all the old certainties were overturned: the dominance of the white population in white societies; the traditional place of the man; the distrust of homosexual behaviour all went by the board. The white male who was outside the liberal elite was left high and dry, constantly hemmed in with criticism and accusations about what was permissible.

To enforce the new politically correctly regime the state became ever more intrusive and the white person, and especially the white male, found themselves ever more marginalised. Whites became actively disadvantaged in ever sphere as far as it was in the power of governments to arrange this. Minority groups were given preference in employment (especially state employment) and higher education; political parties and corporate bodies rushed to ensure they could present a “diverse” face to the public and. To speak against this courted loss of employment or even jail.

At the same time Governments throughout the First World wrapped themselves ever more tightly in international treaties such as those of the UN, the WTO and the EU. More and more was taken out of the hands of national governments. More and more liberal elites insisted they could not do anything other than the politically correct because it would breach a treaty or be illegal. Democratic control was sucked  from national politics. Anyone who disagreed with what was being done under the liberal internationalist banner had no democratic path to follow.

The dimension of violence

Many in the West like to imagine that their societies are  beyond not only the crude politics of violence, but  of  socially approved violence generally. This is a myth.  Western societies value many purveyors of violence;  the police, state security organisations, armed forces and private  security guards.  The rich and powerful  have no doubt about the value of personal bodyguards, celebrities routinely use “minders”, clubs use bouncers and everyone but everyone is only too glad to see another use violence to defend them should the need arise.

Liberals will of course recoil at the idea that they are comfortable with  violence, but they are as willing as anyone to embrace those with a talent for violence. Look at the war-mongering propensities of Blair and Cameron which have ensured Britain has been at war since the late 1990s. Even if they do not war-monger they keep their mouths shut when  it suits them. Take the state massacre at Waco (http://www.serendipity.li/waco.html). That happened under Bill Clinton’s presidency. Were the government agents responsible brought to justice? They were not.   Did liberals generally rail against that monstrous act which resulted in women and children being burnt to death? They did not. Somehow the people at Waco were not quite the right sort of victim for liberals to care deeply about.

But it is not just violence which might seem legitimate in as much as the state  overtly  sanctions it  for reasons which are ostensibly at least for the defence of the individual and society at large, whether that be the maintenance of law and order, the defence of  national territory or the etiolated  national interest claims which cover the aggressive wars  in Afghanistan, Iraq and Libya that is accepted as legitimate. Anyone who enjoys watching a sport which involves violence and danger is not merely saying this is violence which is regrettably necessary, they are actively enjoying the violence.  If you wish to see the excitement at its most explicit  and primal go to a an evening of professional boxing.  The men will be excited,  but it is the women you want to watch. They will be in a state of what can only be described as sexual arousal.

Then  there is the very considerable appetite for violence in films, plays and pornography.  War, gangster  and violent super-hero films are perennially popular.  There is a current fad for “torture porn” offerings such as the “Saw”  series.  Sadomasochistic websites are legion – I put “sadomasochism”  into Google and it came up with 2,490,000 results.  People routinely stop to gawp at road accidents. Going back into history the popularity of the Roman games  and the large crowds public executions point to the fact that the interest in violence is deeply imbedded in human nature.  It needs an outlet.  A society which too rigorously controls  such desires  may cause people to satisfy their inclinations  in much more harmful ways than  one which takes a relaxed attitude and offers relatively harmless outlets for the desires.

Why does violence hold such a fascination for humans?  It is dramatic. It causes the adrenalin to flow.   Fictional depictions of it at least offer an innocent escape from a world which is generally not only violence free but physically risk free. Perhaps most pertinently for the Breivik killings, depictions of violence in fictional form may  have a special attraction for men living in a society which is tightly controlled not only in matters of violence but generally. Films such as the Godfather  trilogy show a world in which people are not constrained by the rules of society, a world  in which men respond to even petty irritations with unbridled and disproportionate force. That has an obvious attraction for men  living in societies  which are  subjected to  the petty tyrannies of  political correctness which require  men to deny  all their natural instincts.

Norway is just such a society, one in which feminism is especially strong.   For example, there is a    legal requirement for  women to form at  least  40%  of  the boards of both  private enterprise  publicly quoted  companies  and state owned companies – the latter  include  any company which is  two-thirds owned by a municipality (http://www.nordiclabourjournal.org/i-fokus/gender-equality/article.2011-03-06.0387074773). At the level of mainstream Norwegian politics at least, masculinity is severely marginalised. One of Breivik’s complaints is that he was feminised by Norwegian society because of its emphasis on feminism. It could be that at least part of the reason he moved from thought to dramatic action was because his natural male instincts towards violence had no adequate outlet within the  society, that he felt suffocated by the cloying feminism.

His capacity for and willingness to use violence  sets Breivik  apart. It is one thing to hold dissident views, quite another to translate them into dramatic action . The psychological  power of violence is immense. It gives significance to all who use it. In the film Bronson, Tom Hardy plays Britain’s longest  serving prisoner  Michael Gordon Peterson who adopted the name of Charles Bronson.  At one point in the film Bronson is being transferred to a new jail. There he is  interviewed by the prison governor who says “Bronson, you are ridiculous and pathetic”, which would have been true but for one thing: Bronson’s amazing  capacity for violence.  This simple quality made him anything but ridiculous and pathetic  because it introduced the  most disabling  of emotions “fear”  into the equation.  That  is what saves Breivik from being pathetic , ridiculous and impotent, his capacity for violence and his will to use it.

Breivik put himself beyond the Pale because of the incontinent  manner of his killings, although they were not random because his targets were members of a type of Norwegian Komsomol. But  here is a question: what if Beivik  had killed only those with power, those who had committed  that most fundamental act of treason, namely, the covert conquest of a homeland by mass immigration?  Would it be quite so easy to see his actions as maniacally evil?

The globalist lies about the British Labour market

Robert Henderson

One of the great lies of the modern liberal is that in developed countries such as Britain unskilled  and low skilled jobs are a rapidly shrinking commodity.  Daniel Knowles of the Daily Telegraph  was at it  on 17 November with Our greatest social problem: there are no jobs left for the dim (http://blogs.telegraph.co.uk/news/danielknowles/100118217/our-greatest-social-problem-there-are-no-jobs-left-for-the-dim/).  He tried to explain  away Britain’s growing problem of youth unemployment by arguing that the less bright, less educated British youngsters of  today are unemployed because “Robots and Chinese people have taken over the sorts of jobs that 16 year olds could get without any qualifications straight out of school and work in for a lifetime.  The only jobs left for the under-educated, or often just the less academic, are in service industries: serving coffee, cleaning toilets, stacking shelves. These jobs are not the first rung on the ladder. There is no ladder; no one hopes to work in Pret a Manger for life.”

There are several interesting aspects of Knowles’ comment. First, he assumes that offshoring jobs to places like China is something which cannot be reversed and the practice carries no moral opprobrium.  Second, he makes the assumption that everyone wants a career rather than just a secure job which allows them to live independently. Third, he makes no mention of the role mass immigration has played in creating unemployment amongst the young, something which can only be explained by  Knowles being of the generation which has been brainwashed into pretending that the ill effects  of immigration do not exist.

Knowles’ ideas about the young could be as readily applied to British workers of all ages if one accepts his interpretation of  the state of the labour market.  He is right on the superficial detail that  less well-qualified Britons British workers are increasingly being left without unskilled and low-skilled work, but wrong in understanding of why this is and his implied assumption that Britain’s economic circumstances cannot be changed.

The “we have to live in a globalist world” lie

Britain does not have to be,  in the cant of the globalists,   a post-industrial society.  To begin with Britain still undertakes a good deal of manufacturing, albeit  this has become across too narrow a range of goods.  The base to expand industrial production is still there if only Britain’s politicians forsook the globalist fantasy and concentrated on protecting the domestic British economy,  for example, by having a policy to be self-sufficient in food and energy or by making it illegal to use a call centre outside of Britain to serve Britain.    This would  necessitate  Britain  leaving the EU.   Withdrawal from the EU would also allow Britain to re-establish control over immigration. Turning off the immigrant labour tap  would force British employers to take on native Britons.

Such actions  would place  restrictions on what Britain could sell overseas and lessen  the opportunity for Britons  to work abroad,  but  it would be a case of economic swings and roundabouts . The swings of being an independent judiciously protectionist nation again would most probably exceed greatly exceed the roundabouts of  other nations’ restriction.  This is because the central lesson of economic history is that  a strong domestic economy is  necessary for a country to be economically successful.  It is worth adding that Britons who go to work abroad today  are, unlike the majority of foreigners who come to work here, amongst the better qualified part of the population.  Consequently, any restriction on their ability to emigrate would be to Britain’s advantage.

Being more self-sufficient as a  country also has considerable political advantages. There is less opportunity for  diplomatic bullying, especially of small countries by the powerful. Domestically, the more things which are within the control of  a government the greater the democratic control,  because politicians cannot blame ills on international treaties and circumstances to the same extent.  For example, suppose the controls over British financial sector had remained as they were before the Thatcher government’s relaxations,  the present financial mess would not have touched Britain to anything like the same extent  because lending by British financial institutions would never have got out of hand.

As for people not being prepared to do run-of-the-mill jobs for all of their lives, this is what used to happen routinely and, indeed, many  people  continue to do just that  today.  Nor is this  something restricted to the  unskilled.  Any skilled craftsman – a builder, plumber or carpenter – or someone with a skill such as HGV driving  will do the same basic job all their lives unless they choose to go to another form of employment.  The fact they are skilled does not necessarily  make the job intrinsically  interesting , although it will be better paid generally than those in a low or unskilled employment.  It is also a mistake to imagine that skilled jobs which are  non-manual are generally fulfilling or prestigious.  A country solicitor dealing largely with farm leases and conveyancing or a an accountant spending most of their time preparing final accounts  are scarcely enjoying working lives  of wild excitement while a The truth is most jobs, regardless of their skill level, are not intrinsically interesting to the people who do them, the interest in working arising from the money reward and the social interaction which comes with the work.

The “there are not enough  low skill jobs”  lie

Nor is it true that unskilled and low-skilled jobs are diminishing.  The large majority of jobs today, require little or no specialised  training.  Very few retail jobs involve a detailed knowledge of the product; driving a vehicle other  than an HGV comes with the possession of an ordinary driving  licence; undertaking a routine clerical task can be done almost immediately by someone who is literate.  Until the advent of general purpose robots which can do most of the jobs a human being can do, there will continue to be a plentiful supply of low-skilled work. (https://livinginamadhouse.wordpress.com/2011/07/01/robotics-and-the-real-sorry-karl-you-got-it-wrong-final-crisis-of-capitalism/)

The existence of low-skilled or unskilled work has a positive benefit beyond the work itself.  It provides a means of independent living for the least able. In Britain the average IQ is 100. The way that IQ is distributed – in  a good approximation of normal distribution – means that 10% of the population has an IQ of 80 or lower. An IQ of 80 is thought by most experts in the field of intelligence testing to be the point at which an individual begins to struggle to live an independent life in an advanced industrial society such as Britain.  Without  low-skilled and unskilled work  the low IQ individual is left with no means to live an in independent life. That means in all probability a  heavy dependency on benefits with a likelihood of antisocial behaviour because they cannot live a life of norm al social responsibility.  Full employment is a social good which goes far beyond the overt material product of the employment.  The nationalised industries may have had a significant degree of over -manning in strict

The “ immigration does not lower wages or take jobs from Britons” lies

The immigration aspect of British unemployment is particularly potent. Since 1997 the large majority of  new jobs in Britain  have been taken by foreigners ,  with those coming from Eastern Europe being particularly drawn to low-skilled employments, viz.:

The ONS figures show the total number of people in work in both the private and the public sector has risen from around 25.7million in 1997 to 27.4million at the end of last year, an increase of 1.67million.

But the number of workers born abroad has increased dramatically by 1.64million, from 1.9million to 3.5million.

There were 23.8million British-born workers in employment at the end of last year, just 25,000 more than when Labour came to power. In the private sector, the number of British workers has actually fallen. (http://www.dailymail.co.uk/news/election/article-1264333/GENERAL-ELECTION-2010-Under-Labour-nearly-UK-jobs-taken-foreigners.htm l  –8th April 2010).

The situation has not changed since the 2010 general election. In November 2011 there are 147,000 more foreign born workers in Britain than there were in November 2010. (http://www.telegraph.co.uk/finance/jobs/8894148/Extra-150000-foreign-workers-in-Britain-as-unemployment-rises.html. )

Most of the immigrants to Britain who have entered employment since 1997 have taken low-skilled jobs: –

In the first quarter of 2011, around 1 in 5 workers, or 20.6 per cent, in low-skill occupations were born outside the UK. This figure has increased from around 1 in 11 workers, or 9.0 per cent, in the first quarter of 2002.

This represents an increase of 367,000 non-UK born workers in low-skill jobs, with 666,000 in the first quarter of 2011, up from 298,000 at the start of 2002.  Over the same period there was little change in the number of workers in low-skill jobs in the UK, which stood at around 3.2 million. However, the number of UK-born people in low-skill jobs fell from 3.04 million to 2.56 million.

There were also increases in the percentage of non-UK born workers in each of the three higher skill groups, although the increases there were not as large as that in low-skill jobs. Low-skill jobs are those that need a basic level of education and a short period of training, while high-skill occupations normally require a university level of education or extensive work experience.

The 1.7 million increase in the number of non-UK born workers is comprised of:

• 88,000 from EU 14 countries ((Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden)

• 585,000 from EU A8 countries(Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic, Slovenia)

• 1,010,000 from rest of the world countries Looking at workers at each job skill level, the majority of workers at each level were also UK-born, at 79.4 per cent, 87.2 per cent, 87.6 per cent and 86.1 per cent in low, lower-middle, upper-middle, and high-skill level jobs respectively.

Majority of workers born in EU A8 countries in low-skill occupations As there was a rise in EU A8-born workers in low-skill jobs over the last decade, it was also the case that workers in this group tended to be in low-skill jobs. In the first quarter of 2011, of all those born in EU A8 and working in the UK, 38.3 per cent were in low-skill jobs, while only 7.8 per cent were in high-skill jobs.

Majority of workers in the UK are UK-born Looking at all workers in the UK, the majority were UK-born. However, over the last decade, the number of UK-born workers fell by 223,000, while the number of non-UK born workers rose by 1.7 million. As a result, UK-born workers as a percentage of all workers fell from 91.5 per cent at the start of 2002, to 86.1 per cent at the start of 2011. (http://www.ons.gov.uk/ons/dcp171776_234559.pdf)

Those are of course only the official figures. There will also be a substantial number of immigrants taking jobs by working in the black economy.

If the  1.7milliion  official count jobs filled by immigrants since 1997 had been filled by Britons,   UK unemployment would be officially around 900,000 today, not good but still vastly better than what we have.   The vast majority of the jobs taken by immigrants  could have been done by Britons because they are low-skilled or unskilled.  This gives the lie to the idea that the movement to a service dominated economy would mean  a famine of jobs suitable for the less able and more poorly qualified.  The wilful destruction of much of Britain’s  manufacturing and extractive industries in the 1980s   and the later offshoring of  jobs dealt a severe blow to British employment opportunities,  but it did not in itself mean large numbers of Britons would be unable to find work.  It is the permitting of mass immigration which has brought that about.

It is not only unskilled  British workers who are  being squeezed out.  Certainly in London where I live, the building trade has been taken over by foreigners, especially those coming from Eastern Europe.  The takeover has been achieved very simply: the immigrant plumbers, carpenters, painters  and builders  have been willing to grossly undercut the wages of the British craftsman.    Despite  supposed shortage of midwives, British  midwives cannot find posts in Britain (http://www.telegraph.co.uk/health/healthnews/8889007/Student-midwives-struggling-to-get-jobs-despite-shortage.html) and there are examples of skilled Britons being sacked as foreign companies bring in staff from their own country  ( http://www.theinquirer.net/inquirer/news/2125178/huawei-accused-racial-discrimination).

For most of the decade from 2000 politicians of all stripes and the media refused to accept that immigrants were lowering wages. Around 2010 they began to accept  what the laws of supply and demand should have told them,  more people seeking work equals lower wages and poor non-money conditions of work. (http://www.allbusiness.com/labor-employment/compensation-benefits-wages-salaries/12699472-1.html). This was deeply ironic because following Blair’s election as Labour leader, the left liberal fraternity religiously espoused worship of the market.

The “Britons won’t do the work” lie

Phone-ins, social networking and the individual experience of those around you tell the same story: there are very large numbers of Britons desperate for work, often any work,  who just cannot find any.  Again and again people tell of how they have  tried  for dozens, sometimes hundreds of jobs without getting even an interview. Media reports of employers  getting large numbers of applicants for even menial jobs are a regular feature( http://www.londonlovesbusiness.com/25-people-chase-every-job-in-some-areas-of-london/423.article).  Many new graduates are finding that they have been sold a pup about the increased employability of those with a degree and are lucky to find any sort of  job. ( http://www.guardian.co.uk/education/2011/jan/26/fifth-graduates-unemployed-ons).

It beggars belief that British employers are  employing foreign workers because they cannot find suitable people. Even if there was a problem with the attitude of young Britons, for which I see no evidence for as a general problem, it would not explain why older workers with a good work history are being overlooked.   The most likely explanation is that British  employers find foreign workers are cheaper and easier to lay off when they want to.

It is also true that where large numbers of people are needed,  gangmasters will be used and these are often foreign and only recruit people of their own nationality.  There is also the growing practice of foreign companies in Britain bringing  in their own people (http://www.theinquirer.net/inquirer/news/2125178/huawei-accused-racial-discrimination). There is also the possibility of corruption especially where public service organisations are concerned, with foreign agencies and the British people doing the hiring enter into a corrupt arrangement whereby the Britons ensure foreigners are recruited and receive a kickback for that from the foreign agents who supply the labour. The foreign agent gains through the fees for finding and supplying the foreign staff.

During the Blair/Brown bubble years there may have been an element of Britons unwilling to do some of the menial low paid jobs, but in our present dire financial straits that cannot be the case now even for low-skilled workers.  Moreover even during the Blair/Brown bubble , the rapidly rising property prices and rents and falling wages  often made it impossible for a Briton who had social obligations such as a family to support to take those jobs because they would not provide a means to support the family.  Most of the immigrants who came in, especially those from Eastern Europe,  were young men with no obligations beyond supporting themselves.  They are able , even on the minimum wages, to save a few thousand per year  and that money in their own country is worth multiples of  what it is worth in Britain.   Such immigrant workers  found that  they could work for a couple of years in Britain and save enough to buy a property in their own country. (Give Britons the chance to go abroad and earn enough to buy a  house in Britain and you will be trampled in the rush). In short,   there was never a level playing field between British and foreign workers.

The obligation of democratic governments

The first responsibility of a government in a  democratic country is to promote the well-being of its  citizens above those of foreigners.  To take the view, as successive British governments have  in practice taken since 1979, that immigrants are, in effect,  entitled to the privileges  accorded to British citizens is to render British citizenship null and void.  To think of the world as a single marketplace with labour, goods and services drawn from wherever is cheapest or most immediately available, is to reduce Britain to no more than a residence of convenience which can be used for the purposes of the individual without any concern for Britain as a society.  That is what Britain’s politicians  and her broader elite are dragging the country towards.  All sense of nation has not been lost ye, t but Britons are increasingly seeing themselves as abandoned by those who are supposed  to wield power on their behalf and for their good and are in desperation increasingly  looking for their own advantage without regard to the effects of their behaviour on the society they live in. .

If Britain had a political elite which acted as an elite should do in a democracy, they would cast aside the globalist fantasy and begin to rebuild a stable British economy and with it a much stronger and more settled society.  They would recover Britain’s sovereignty by withdrawing from the EU. They would end mass migration. They would allow Britain to re-industrialise behind protectionist barriers.  In doing those things they would produce a situation which would allow Britons to be employed in jobs which were secure and paid well enough, even at the unskilled level, to live a normal family life because Britain would become a high wage economy. This would be because even the least skilled in society would have a value , for  the unskilled  work would still need to be done and  there would not be an immigrant army  to do it . This would either  put a premium on those willing to do the unskilled work who would command higher pay or the unskilled work would have to be done as incidental work by those  doing more skilled work, for example, cleaning the workplace in addition to being  a draughtsman.  A fantasy? Well, it is what happens in Norway , a very high wage economy.

It isn’t a crisis of capitalism but a crisis of globalism

It isn’t a crisis of capitalism but a crisis of globalism

Robert Henderson


1. Turning a blind eye

2. What is capitalism?

3. Globalisation and the developed world

4. The suppression of dissent

5. The developing world

6. The loss of  national control

7. The undeveloping world

8. Supra-national  politics

9. Just another outbreak of an old  disease

10. Unemployment as a barometer of an economic system

11. Capitalism in a protected domestic economy

1. Turning a blind eye

Amongst the wailing and gnashing of teeth from all parts of the political mainstream over the ongoing  economic crisis  its prime cause goes unmentioned.   Free market capitalism, which has been accepted , whether enthusiastically or resignedly, by Western elites for the past quarter  of a century  as the only economic theory worthy of support, is being questioned.  Even some of its firmest adherents are questioning whether  there has been  too much freedom of individual  action in the economic sphere. Some mainstream commentators who write for resolutely “free market” supporting newspapers  like  the Daily Telegraph and Daily Mail, are even beginning to wonder if capitalism is in a crisis from which it may not recover:




Those coming from the left are unsurprisingly joining in the “end of capitalism” rhetoric (http://www.marxist.com/world-capitalism-in-crisis-1.htm). What you will not find are many  if any  mainstream politicians and economic  commentators  addressing the real source of the crisis:  the cloying and uncritical embrace of the internationalist creed  which we call globalism by Western elites, especially those in Britain and the USA.

Before I turn to the ill  effects of globalism  the tricky  matter of defining capitalism needs to be addressed because  there is a case for saying that capitalism is a state of theoretical  purity which does not exist in the real world.

2. What is capitalism?

Capitalism is seriously difficult to define because it shares so much with economic systems which are not considered to be capitalist.  For example, if the state undertakes an  economic activity such as providing healthcare in an organisation such as the NHS or nationalises the railways and coalmining are they capitalism in action? After all they employ capital,  land and labour, the three  factors of production in classical economics and provide goods and services to the public just as a private business would do.

What do  state enterprises  lack which private business has? The entrepreneur? Well, most large companies are not run by entrepreneurs but corporate administrators.   The profit motive?  Perhaps, but what about state enterprises which consistently make profits for the taxpayer such as the Post Office in Britain while it had a monopoly?  Freedom of action?  Private enterprises are heavily constrained by law and state regulation in every developed economy and state organisations are often granted a remarkable operational freedom.   The risk of going bust if they do not perform? Any state enterprise can in principle be ended or privatised  while private companies when they are large enough  have a good chance of being rescued by taxpayers,  vide the banks in the present financial crisis.  An absence of private money?   State businesses frequently draw  all or much of  their income from  payments they receive from the general public in return for goods or services,  for example, nationalised  energy companies .  Moreover,  many  companies which are classified as private enterprise organisations draw all or much of their income from  taxpayer funded contracts. Then there are the not-for-profit organisations, especially the charities, which increasingly  act as sub-contracted arms of the state as they draw much of their income from the taxpayer  and the rest of their income from donations. Individual and corporate. How should  they be classified?  Part of capitalism? Part of the state? A separate class of economic actor altogether?  It could be any of the three options.

To all those blurrings  of the distinction between private enterprise and public  service must be added  the  macro-economic fact that  all developed economies have a massive part of their GDP in the hands of the state.  The mixed economy is a fact of all reputedly capitalistic economies.  Does that render the idea of capitalist society redundant?   In a sense it does. The broad  differences  in developed  (and increasingly the more advanced of the developing countries)  is in the degree to which state control and ownership is balanced against private enterprise.

There are of course qualitative  differences in the application of the law as it affects the economy and the nature of the control which is exercised over the economy by the state,  especially in areas such as the banking system and the ability of foreign companies to operate. For example,  while countries such as Britain and the USA  allow vast swathes of their economies to be purchased by foreign countries, China will often in practice only allow foreigners in on the basis of joint ventures with Chinese firms. (http://www.booz.com/media/uploads/Making_Partnerships_Work.pdf ) . Nonetheless, there is a general similarity in the economies in as much as all are a mixture of public and private and all permit some degree of government interference and direction of  the market.

Despite the difficulty of definition  the term capitalism is not without utility. There is clearly a difference between a company which acts on its own behalf  without state direction or assistance and a nationalised industry. Parts of mixed economies are capitalist if by that is meant private companies which  operate without  deriving any part of their revenue from the taxpayer,  have management free to act  within the general restraints  of the law  without  state direction  and  which operate on the principle that they stand or fall on  whether they can at least break even.  The companies which receive  taxpayers’ money, especially those which rely on the taxpayer for  only part of their income,  also  have much  of the aspect of a pure private enterprise business in that they will in practice dictate how things are done, the public body funding their work being essentially in the position of a customer who merely sets ends not means.  Capitalism is a spectrum of behaviours  rather than  a clear-cut behaviour.

It is important to understand that  free trade does not equal capitalism. Free trade is   simply the exchange of goods, services and capital between countries. It says  nothing about the circumstances in which these things  are created. These  can be anything from  a command economy to the economies in which free enterprise is most dominant.

3. Globalisation and the developed world

Globalism equals destabilisation.   Until  the financial crash of 2008 the globalists argued that ever increasing free trade generally and the internationalisation of financial markets in particular  increased  economic  and  international  stability by  spreading risk more widely  (which reduced the cost of credit and consequently increased economic activity ) and by that by making countries ever more interdependent  the likelihood of international conflict  was ameliorated.  In fact, both ideas were pipe dreams and the exact reverse  of what globalism actually creates.

There are two  central elements of globalism. The first  is the end (or at least considerable diminution) of protectionist practices. Domestic  economies in the developed world are stripped of  great swathes of their economies, including strategically important ones such as coal mining and steel making, by the removal of protectionist barriers such as quotas, embargoes and tariffs. This  results in either entirely foreign imports  from low-wage economies such as China driving out the necessarily higher priced goods made in the developed nations or businesses in the developed world throwing in the towel and off-shoring their production of goods and services to low-wage economies.    To that is added in much of the developed world the banning of state aid and intervention  by both  treaties  and the domestic laws and rules imposed by national governments in thrall to an uncritical belief in  laissez faire economics and small government.

Getting rid of protectionist barriers and privatising state owned industries  massively reduces opportunities  for employment for the native populations of the  developed countries.  This creates greater competition for jobs which reduces wages and other conditions of employment and   increases insecurity of employment.  In some instances,  as occurred with Britain in the 1980s,  the opening up the domestic markets  to imports results in the  most dramatic and socially damaging of economic traumas,  structural unemployment, which lays waste the primary sources of employment of  large areas , the effects of which carry down the generations.

The second central element of globalism, the free movement of peoples across borders, amplifies these consequences  of free trade  and adds other destabilising  effects.  Mass migration of labour inevitably  goes from lower-wage economies to higher wage economies because there is no incentive for those in higher paid economies to take a run-of-the-mill-job in a lower-paid economy. In a addition,  developed economies offer not only higher wages but also many non-monetary benefits such as those provided by a fully-fledged welfare state which are absent in developing economies.

Mass migration allows employers to radically cut wages in the higher-wage economies and greatly increases competition for most  jobs, especially those which require little training or skill.  The difference in cost of living between the immigrant’s country of origin (low)  and the developed country they go to (high)  are important. Immigrants, whether unskilled or skilled,  are willing to work in such jobs for mediocre pay and live in poor, cramped  accommodation because they know that they will be able to  save a few thousand pounds in a year or two . They can do this even if by  living honestly by paying tax. But  often they  will  be paid cash- in-hand (no deductions for tax) ,  and live in in a  squat (the taking over of someone’s house or flat without permission and living there rent free.   Many will work  while they are claiming unemployment benefits.   If they have saved four or five thousand after a year or two,  this  will be enough to buy a house or flat in their own country  where prices are a fraction of what  they are in a developed country.  (Give Britons the chance to save  the price of a house or flat in Britain by working for a couple of years in those conditions in a foreign country and you are likely to be trampled in the rush).

As more and more immigrants come to developed economies, the position of the native worker worsens. This is  because  not only  are there are more people chasing jobs, but also because native employers increasing rely on gang masters and other recruiters  who are foreign and only  want to  employ  foreigners (frequently foreigners from their own country:  in the following  case it was a Bulgarian employing Bulgarians http://www.express.co.uk/posts/view/277363/Workers-are-fired-for-being-British). Sometimes employers deliberately exclude  native workers by insisting that those employed speak a foreign  language in the workplace, for example,  http://www.dailymail.co.uk/news/article-1257784/Biggest-Asda-meat-supplier-excludes-English-speakers-instructions-given-Polish.html ).

In Britain many employers excuse their recruitment of foreign workers  on the grounds that they either cannot get native workers to apply or that  those who do apply are unqualified for the job.  As the vast majority of the British jobs being taken are low or non-skilled  and there are now millions of native  Britons desperately seeking work of any kind, this must be an excuse in most instances  (http://www.metro.co.uk/news/878903-500-queue-for-just-20-sales-assistant-jobs-at-new-poundland-store#ixzz1b85oCrLr)

Even in the case of skilled workers there is discordance between the claim of lack of skilled applicants and the numbers of skilled British workers unable to find jobs. For example, there are  large numbers of doctors and nurses trained in Britain who cannot find posts in Britain,  while at the same time the NHS is recruiting heavily from abroad. (http://englandcalling.wordpress.com/2011/09/09/no-need-to-speaka-da-english-in-the-nhs/).  More generally,   new British graduates are finding great difficulty in getting both appropriate jobs and, increasingly, any job at all (http://www.telegraph.co.uk/education/educationnews/8283862/Graduate-unemployment-hits-15-year-high.html).

All of that suggests that British employers are favouring foreigners for reasons other than they give. The most plausible causes are lower pay and inferior conditions being accepted by immigrants, the greater ease with which immigrants can be sacked , especially those who are here illegally,  and the possibility of bribes being paid, especially by foreign agencies, gangmasters using foreign labour and people traffickers,  to those recruiting for British employers to persuade them to choose immigrants over native workers.    An example would be where a public service employer uses a foreign agency to recruit abroad.  The agency will receive a hefty fee from the public service employer for each foreigner recruited and  that fee will be  split between the agency and  a corrupt recruiter in the UK.   There is also a natural disincentive for native workers to seek work where they would be in the ethnic minority in their own land, for example, if you are English imagine working a factory where the common language is Polish or Hindi even if it is not a requirement of the job that the language is spoken.

These various  practices mean large swathes of employment become effectively closed to the native population. The extent of the problem in Britain can be seen from one stark statistic: out of two million new jobs created under 13 years of the last  Labour Government 1.8 million went to immigrants (http://www.dailymail.co.uk/news/article-1325013/Migrants-took-9-10-jobs-created-Labour.html)

The removal of protection for the domestic market, off-shoring and mass immigration has meant that material inequality has grown considerably in the developed economies  over the past quarter of a century as the wages of those competing with immigrants has fallen and unemployment has risen, including an army of long term unemployed.   The countries showing the greatest growth between the haves and the have nots  have been the USA and Britain, arguably the two countries most committed to globalism. (http://www.guardian.co.uk/world/2011/sep/18/bronx-manhattan-us-wealth-divide).

But there is much more to globalisation than the creation of material inequality. Mass immigration does not just create competition for jobs. It means there are more people seeking housing, healthcare, benefits and  education .   This further increases insecurity and resentment amongst the native population, especially amongst the poor because  they  are the ones most reliant on the welfare state  and consequently  are the people most likely to be in direct completion with the immigrants.

More generally, there is the natural resistance to large numbers of foreigners  settling in an area. Any  sizeable  influx of immigrants is never evenly spread. Immigrants in large numbers congregate  in self-created ghettos which radically changes the nature of the area they settle in. This  arouses resentment amongst the native population, most fiercely  and poignantly by those directly affected, but as immigrant numbers grow massively, increasingly  amongst the native population generally,  regardless of whether people live in areas of heavy immigration.   The concern is not primarily that the immigrants provide completion for jobs, houses and social services , although those are important triggers of resentment, but anger at territory being  effectively conquered by  immigrants (http://englandcalling.wordpress.com/2011/02/22/part-of-england-has-been-invaded/)

4. The suppression of dissent

Those consequences  would be enough to condemn globalism as a political creed , but there is much more to be set in the debit column of its balance sheet.

Because native populations in the  richer countries  are increasingly disadvantaged and angered at the effects of  immigration, the elites who have permitted it and are committed to globalism have to control the resentment and anger. Politicians  do this in various ways. They use  their power to prevent any honest  opposition to  mass immigration and its consequences by  passing laws which criminalise  the native population if they express  dissent to the policy. They create other  laws which in practice privilege immigrants, for example,  the British Race Relations Amendment Act  2000 which forces all public bodies in the UK to prove they are not discriminating against racial and ethnic minorities. They  use their ready access to the mass media to incessantly  push the “multiculturalism is good” message  and  force it  in school curriculums – in Britain there is barely a subject untouched by its taint, even those subjects such as physics, chemistry and maths which you might imagine would be immune can be taught from this ethnic perspective or that ethnic perspective (Islamic maths anyone?)

Companies which rely on public contracts and charities have to play by the same multicultural rules as public service organisations  and large public companies whether  or not r they are reliant on public contracts in practice do so voluntarily.  As an overarching deterrent, all employers are liable to be taken to Employment Tribunals if someone claims racial discrimination relating to dismissal, unequal treatment or the failure to get a job and risk unlimited awards against them if a complaint against the employer is upheld.

The  multicultural message and the intimidation of dissenting views is religiously supported  and underpinned  by the British  mass media , the members of  which  all publicly subscribe to the idea that racial discrimination (by which they mean any preference for any racial or ethnic group not approved of by the politically correct) is the ultimate evil  and as a consequence are only too willing to conduct a hate campaign against anyone at whom the cry “racist” is directed and ensure that anyone with a dissenting voice is kept from public view.

The consequence of this wholesale  enforcement of the multicultural dogma is that anyone in Britain who expresses  an opinion which suggests that mass immigration and its consequences are less than the quickest path to social Nirvana runs the risk of penalties which range from losing their job (especially if the person works in the public sector) to being imprisoned  for inciting racial hatred.

As for the economic aspects of globalism, Western political elites  and their allies in the media and other positions of power and influence have overwhelmingly  bought into the idea of free trade, at least to the extent that they have been willing to agree to greatly reduced protectionism. Those who would vigorously oppose the idea of out-of-control  laissez faire economics at home and abroad have been  almost entirely censored out of the public picture.  On the odd occasions when some brave soul breaks the censorship and puts forward in public complaints about mass immigration reducing wages or taking jobs and scarce housing or the export of jobs to the developing world ,  these are squashed by the media proponents of globalism with mantras such as  “It’s inevitable because we live in a  global world” ; “It’s market forces”;  “We have to compete globally”.

5. The loss of  national control

On top of all this is piled two  things, the loss of control  of national governments over finance and the signing up of nation states to treaties which emasculate democracy by granting powers to supra-national bodies that should rightly belong to individual states.  The  most striking example of this is the EU, where the nations of the European Economic Area  (over 30  of them) are bound to the so-called four freedoms;  the free movement of goods, services, finance and  people.

The failure to control the banks and their ilk is  a direct consequence of globalism.  The political elites in the developed world have been  driven to not interfere  with the major players in finance by ideology,  self-interest (think of all the cosy post-politics sinecures  in private business  senior politicians acquire) and  fear  (they are terrified that if the banks are not pandered to economic catastrophe will follow). To those bars to  sane financial policies can be added  the interference of supranational  bodies  such as the EU. The existence of such bodies has meant  that even if national governments  had wished to behave responsibly by restraining the bankers’ excesses, they could not have done so because it would have been judged to be anti-competitive by a supra-national body such as the EU competition Commission.

The upshot of this development was frighteningly reckless finance industry business models based on selling mortgages to those who could not possible afford to service them, the development of exotic derivatives such as Collateralised Debt Obligations and Credit Default Swaps and the relentless gearing up of their debt to deposits ratio. This last practice resulted in even supposedly  staid financial institutions such as British building societies getting  into serious trouble  because they became dependent on constant and massive recourse to short term wholesale borrowing , something which froze once the financial panic of began in earnest in 2008.

If banking had remained primarily a national matter, as it was until the late 1980s before the sudden explosion of computers and the embrace of laissez faire economics ,  the damage caused would have been minor compared to what has occurred  even if banks had been allowed to engage in the unsafe practices described in the previous paragraph.  There would have been both far less scope for credit expansion and,  where bank  failures  occurred, they would have almost certainly happened sooner than they did under a globalised system because there would be far fewer  places for a bank in trouble to go to try to borrow to put off the evil day of insolvency. Most  importantly, the  national  financial institutions would have been smaller  and  less able to cause mortal damage to the national economy and would not have had the potential to undermine the international financial system.  In addition, if banking is kept within national boundaries it can be much more readily supervised. Once  it expands beyond a national single jurisdiction, as it does with the EU,  meaningful government supervision and control becomes utterly  impossible.

6. The developing world

Those are the ills of globalisation from the standpoint of the developed world.  But the developing world and the remnants of undeveloped and still undeveloping world are not left unscathed by globalisation.  The developing world experiences an aggregate increase in wealth as it takes manufacturing and service industries from the developed world and improves its infrastructure. But these improvements come at great human cost.  Traditional ways of living are disrupted. Vast numbers flood from the countryside to the towns where they live and, if they are lucky, work in miserable conditions. (http://www.telegraph.co.uk/news/worldnews/asia/china/8818059/100-million-Chinese-farmers-to-move-to-city-by-end-of-decade.html)

Many  find their material conditions  (but not necessarily their psychological state)  improve, but far more are actively disadvantaged by the changes.  If they remain outside the cities people find their  areas being  denuded of many of the most able and vigorous people who leave for the cities; their land being taken with little or no compensation  for infrastructure projects such as dams, railways and factories and their way of life becoming less and less sustainable.  Those who go to the cities for work find their lives are worse than they were before in terms of the conditions they have to endure and subject to great job insecurity . Even in the more developed of the developing Asian countries, where most of the world’s population now lives, there is  a great chasm between the  haves and the have-nots.

Although offshoring production and opening up their markets to  imports from low-wage economies are  disruptive for the developed world and  potentially dangerous  because it puts  them to an increasing extent in the hands of foreign powers , it also  bound the likes of China and India into a dependent embrace.  As the economies of the developing nations  grow they will increase their domestic demand and the capacity and willingness  to satisfy it which  will make them less dependent  on international markets. But that is a fair way in the future.  At present the developing world  is reliant to a very heavy extent on exporting to the developed world.

Countries such as China are also massive  holders of sovereign debt of Western countries, especially of the USA. These  two things mean that the developing economies  are affected by the present depression (let us give it its proper name)  in the developed world,   which is reducing demand for the products of the developing world and,   in the case of countries with large sovereign debt holdings, at risk of losing vast amounts of money.   It is also by no means clear that the financial systems of the developing nations are sound, even if they have not suffered from the same ills as the developed world’s financial  sector.  For example, China is constantly having to patch up bankrupt [projects and organisations (http://www.telegraph.co.uk/finance/china-business/8821094/Chinas-debt-spree-returns-to-haunt.html).

7. The undeveloping world

The part of the world which is not seriously  industrialising also suffers from the destruction of traditional ways of life with nothing adequate replacing them.   Again there has been a flight from the countryside to towns and cities, although in this instance it has not resulted in large-scale  industrial or even substantial  commercial development.   The only winners are those who have tapped into  the funds controlled by the elite who dispense the vast amounts of foreign Aid and the income from foreign companies for mineral rights  to those they favour, whether that be through the award of government jobs or  through straightforward corruption.

Many have been displaced by the demands of foreign countries, especially those extracting raw materials.  Countries have abandoned their traditional agriculture and turned to farming to produce food and flowers for the developed world.  A growing practice is for countries in the developing world, especially China, to buy or lease  large amounts of land in undeveloped countries to produce food for the country which has purchased the land.  It is a kind of  imperialism,  but imperialism without any sense of moral obligation to the ruled.

All of these practices mean that much of the undeveloped world, primarily black Africa, live their lives in conditions which range from abject poverty  to perpetual civil war.  Although I would never pretend that living under colonial rule is unreservedly palatable,  it can bring order and  where the colonial power develops a sense of moral obligation to those it rules, as happened with British officialdom in the final century of the Empire,  it can prevent  serious abuses.   What most of these countries currently have is the worst of all worlds,  deeply corrupt native elites  who sell their countries to the highest bidder, whether that selling being in the guise of gaining aid or commerce, and foreigners exploiting their people and land. There is no check  on abuse.

8. Supra-national  politics

There is a special subset of internationalism, the advanced supra-national body  comprised of nation states which has the nature of a federal government even if it does not have that formal structure.      The EU is the only organisation  which comes close to meeting  that description at present ,but it provides a warning of how such groupings can display the ill-effects of globalism together with some novel features of their  own.

Member states  of the EU have to allow unrestricted  migration within the EU (to be pedantic, within the European Economic Area which includes the likes of Norway and Switzerland as well as the EU) and accept the loss of other great swathes of sovereignty  ranging from  the economic (competition, the making of trade treaties) to the social  (the conditions of work, health and safety).

Most dramatically for the world in general,  17 of the 27 EU states have signed themselves up to the Euro. This  was a criminally reckless enterprise because it married massively disparate economies such as the German and Greek without creating a central executive with the powers of a nation state.  This meant that the controlling and guiding body for the Euro, the European Central Bank, was unable to do  such essential things for a supra-national currency as determine tax regimes throughout the Euro area and move money from the richer to the poorer Euro members .   These errors were compounded by  the failure to implement what  powers existed to impose financial discipline on the Euro members such as  the restriction on the size of  member states budget deficit.  Unsurprisingly,  the Euro eventually ran up against reality and for the past eighteen months the currency’s situation  has looked ever more dire as Greece, then Portugal, Spain and Italy looked candidates for a default as they found it more and more expensive to borrow  on the international markets to cover their budget deficits  and service their national debts, something exacerbated as their  tax bases shrunk during the depression .   In October 2011 the poison looks as though it might even encompass France and Germany.

The ill consequences of the formation of the Euro stretch  far beyond its members.  The constant delay in coming to a conclusion as to what should be done to deal with the Euro crisis, whether that be the wholesale or partial break-up of the Euro or a  decision for the Eurozone to go for full fiscal integration including massive movements of money from the rich members to the poor (the only thing which might rescue the Euro), has created uncertainly throughout  the world and has  significantly worsened an already dire world economic situation.

The Euro crisis has  also sucked in countries from outside the Eurozone to help fund the vast sums needed to bail out the Republic of Ireland and Greece.  This affects the  non-Euro members within the EU and those  from outside the EU who are liable to provide IMF loans.  Countries such as the UK have had to pay  both towards the EU stabilisation fund and the IMF loans.

The lessons from the EU (so far) are that far are that such supra-national bodies amplify the general problems of globalism, especially the loss of democratic control, and add the joker of grand  follies such as the Euro which have massive effects beyond  the supra-national body.

9. Just another outbreak of an old  disease

Globalisation should not be seen as a completely new phenomenon,  although its modern extent and scale  is novel, not least because of the ceaseless march of digital technology and the encouragement, or at least toleration, by Western elites of mass movements of people from the poor to the rich world .   From an historical perspective it is simply the latest example of  the laissez faire  economic ideology capturing  elites and becoming the dominant ideology.

Laissez faire economics has its roots in the late 18th Century when Adam Smith made himself its John the Baptist with his Wealth of Nations (The Invisible Hand playing the role of God’s avatar).   In comparison with those who became his disciples in the  following century,  Smith  was responsible and restrained,  acknowledging that there  were things such as the provision of roads which only the state could undertake and economic areas such as armaments which should as a matter of national prudence be kept in public hands.   His followers such as Richard Cobden, John Bright and David Ricardo In the 19th century knew no such restraint and wanted little if any state interference in the economy at home or abroad.

The consequence was that Britain was tied to the idea of free trade  from the 1840s until the First World War intervened in 1914. During that time the rest of the then advanced world  practised protectionism while Britain outside of the Empire did not.  This resulted in Britain’s dominant economic position in the world in 1850 deteriorating  badly by 1914, with the GDP  of the USA and Germany then  exceeding that of Britain. The years 1840-1914 were a period of great economic  instability in Britain with frequent booms and bust, frequent bubbles, bank failures  and great damage being done  to Britain’s self-sufficiency, most particularly in food.  It was also a period when British industry became deficient in many of the new major industries such as chemicals, despite having been leaders in the early days of those industries.   This was  the outcome of an economy which was allowed to evolve without any state guidance or initiative.  Come  war in 1914 and Britain found itself  dangerously dependent on  imports of not only food  but other vital materials and products, a dependency made  all the more problematic with the development by Germany of efficient submarines to prey upon boats bring the imports to Britain.

Nonetheless, the period  1850-1914 saw a very considerable increase in global transactions and movements of peoples.  This was a consequence of the  development of the railways , the steamship, the Telegraph  and vastly improved roads and the existence of the  various European  empires  (including the Russian) which allowed much free movement of people and goods within the bounds of each empire.

But although this was a form of globalism,  its pernicious social and economic effects were greatly  ameliorated  (at least for the developed world)  by the fact that so much of the world was controlled by the European empires.  The mass movement of peoples occurred  within the colonial possessions not between the colonial possessions and the colonial power’s homeland.   Politics was still contained within the nation state.  The developed countries, with the exception of Britain,   still thought  their national advantage was to be gained by protectionist measures.  Even Britain did not completely buy into the idea of free trade  because legal preference was given to trade within the Empire

A World war and the Great Depression  killed off the laissez faire creed as the elite British and British imperial ideology  for 50 years.  The European Empires were dismembered  and the Soviet and Chinese communist blocs created .   Protectionism ruled (even the European Economic Community, as the EU was then,  did not  greatly change the picture  because it was small to begin with and the radical measures such as the single market  were for the future).

After the second World War it was, for  the developed world,  an era of great stability.   There was no war in Europe worthy of the name, the nearest approaches to it were  several uprisings against Communist rule;  such serious wars as the West became involved in – most notably Korea and Vietnam – were either wars of  choice not necessity  or native uprisings at the fag-end of European colonialism like the British fight against communists in Malaya and  the French retreat  from Indo-China and Algeria.

In this protectionist world  the economies of the United States and Europe  did not shrink or stagnate. Just as the economies of those which practised protectionism in the nineteenth century  grew,  so did  those of the developed world grow between 1945 and 1980. It is a myth that only laissez faire economic policies produce strong growth.  Britain was an exceptionally  interesting case because the Attlee government of 1945-51 undertook arguably the most radical programme of nationalisation ever seen outside of the Communist world and British governments of all formal colours followed what were essentially social democratic policies domestically until the election of Thatcher in 1979

Most tellingly, after 1945 there was no general serious economic crisis until the early seventies when  two extraordinary events occurred. In 1971  the USA unilaterally collapsed the Bretton Woods system which  imposed discipline on the world’s freely exchangeable currencies by   pegging the dollar to the gold standard and the other currencies to the dollar at fixed prices. This  introduced the destabilising volatility of floating exchange rates into the world’s economic system. In  1973 the  oil producers’ cartel OPEC  doubled  oil prices. But even these  considerable shocks  did not knock the world economy over ; they merely made  it stagger.  It took the advent of Thatcher and the American neocons  to drive the economies of the developed world into a world of ever increasing make-believe where their politicians kept on saying how things were getting economically better, that countries such as Britain could become post-industrial and live off service industries alone.  The insanity of that mentality can be starkly seen now as unemployment has remained stubbornly high  in the developed world, something exacerbated by the present depression but not  created by it.

10. Unemployment as a barometer of an economic system

Unemployment is arguably the prime barometer of the social utility of an economic system. It was very low in Britain until the early seventies running along at 2-3%  (http://www.parliament.uk/documents/commons/lib/research/rp99/rp99-111.pdf). Even at the end of the 1970s its was low compared with what it has been since globalisation took off. In 1979 the Independent Labour Organisation (ILO) count  of those seeking work  without necessarily being signed on for unemployment pay  was 1,528,000 and the figure for those signed on for unemployment pay was 1,064,000. (http://www.york.ac.uk/res/ukhr/ukhr0405/tables&figures/04%20004.pdf)

In Britain in 2011 the official ILO  survey figure in August was 2,566,000 (8.1% of all economically active).  Those actually signing on for unemployment benefit totalled 1,597,200. (http://www.parliament.uk/topics/Unemployment.htm).  However, that is not the true figure because there  were 2.58 million people claiming long-term sickness benefit  (Incapacity Benefit and its 2008 successor Employment Support allowance)   in February 2011.  (Perhaps even more staggering there were 5.8 million working age benefit claimants).  (http://research.dwp.gov.uk/asd/index.php?page=statistical_summaries).

In 1979 the long-term sick figure stood at  720,000  (http://www.dailymail.co.uk/news/article-1042141/60-long-term-benefits-claimants-work-admits-minister.html). It stretches credulity beyond breaking point that there are there are some 1.8 million more people of working age who are too ill to work indefinitely in 2011 than 1979.  The reality is that much of  the 2.58 million will be disguised unemployment.

During the 1980s the Thatcher Governments adopted a policy of moving people off the ever growing unemployment register (those claiming unemployment benefit peaked at over 3 million in 1986) and onto the long-term sick count, where they often remained more or less permanently because much of the unemployment was structural (a consequence of deliberately destroying much of Britain’s extractive and manufacturing industry)  and the unemployed simply had no jobs to go to.  The policy was  carried on by  the Tory and Labour Governments which followed Thatcher.

How much of the 2.58 million now on the long-term sick register are really just unemployed?  As it is only those of working age (16-65) who are part of the statistics, it is difficult to see why the real figure would not be similar to that of 1979.  The population has grown since 1979 by a few million so let us say that 1 million are the  genuinely long-term sick.  Add the other 1.58 million to the ILO figure for 2011 and the unemployed rises to over 4 million. To that figure can be added  those who now stay on at school until they are 18 (in 1979 far fewer did) and the vast increase of university students (from around 13% in 1980 http://www.le.ac.uk/economics/to20/greenaway03.pdf to around 40%  in 2011 http://www.telegraph.co.uk/news/uknews/1584495/Labour-sticks-to-50-per-cent-university-target.html). It is difficult to give exact figures here but it would probably push the true figure of unemployed in the UK in 2011 up to around the 5 million mark.

As an example of how globalisation brings instability, both economic and social,  Britain is probably the prime example among developed nations.  All it has brought to Britain is seemingly permanent mass unemployment.

It would be argued by the Thatcherites and their ilk that the high level of employment in the post-war period was due to overmanning, especially in the nationalised industries.   That has some truth in it, although the extent of the overmanning is exaggerated by modern neo-liberals.  It is also a question of what service is given. Much of the supposed overmanning of the nationalised industries was really a matter of giving a superior service to that which is given by the nationalised industries after they were privatised  and manning levels drastically reduced.

But even if it is allowed that there was substantial overmanning  in the post-war period that does not necessarily mean it was not of social and economic benefit. What needs to be considered is the overall picture of society where such overmanning exists.  It ensures that  most people in a society are employed. That  creates social stability by giving people a routine in their lives, by ensuring that people are bound into society , by giving them a sense of purpose and most importantly a feeling of security so they can plan for the future, something particularly important when it comes to starting and raising a family.

That was essentially the situation in the period 1945-1979. People felt secure in their jobs, housing was cheap and plentiful, not least because the massive council housing programme of the  1950s and 1960s, the NHS had been created  and  perhaps most importantly a single adult wage was enough to support a family.

Compare that with what we have today.  People in Britain are increasingly insecure. If they have jobs they fear that they will lose them. If they keep their jobs there are pay freezes or wage reductions. The unemployed seek desperately for jobs – any jobs – but find they are competing with dozens or even hundreds of people for unskilled work. It is difficult in 2011  to support a family on a single adult average wage. Housing,  both bought and privately rented , has become obscenely  expensive  – If the average house price in 2011 was  the same in real terms as the average house price in 1955 it would be less than £40,000 (https://livinginamadhouse.wordpress.com/2010/10/24/the-vicious-poison-in-the-british-economy-is-the-outlandish-cost-of-housing/).  It is a recipe for rabid insecurity and the fuel for renewed class hatred and racial and  ethnic strife.

The dirtiest secret of all in this matter of overmanning under the social democratic regime of the post-war years  or the supposedly more efficient workings of laissez faire since 1980, is that the British government has developed a universal subsidy for employers. It is tax credits which are paid to people in work on low pay (the definition of low pay has been somewhat elastic being up to £60,000 until recently but it is still at £41,000 –  http://www.hmrc.gov.uk/taxcredits/start/who-qualifies/what-are-taxcredits.htm#8).   Hence, the taxpayer is in effect  paying employers to take on labour, rather than, as used to be the case, the taxpayer paying the employee by funding more generously manned  nationalised industries than were strictly required.

The true cost of unemployment  is rarely calculated.  For example, where structural unemployment occurs, as with the coal mining closures in Britain, large numbers of people are  lost to work for many years, not infrequently for life. The cost to the taxpayer in maintaining long-term unemployment is immense, as is the psychological cost to the unemployed individuals and their families.  Even where those made redundant get new jobs they are rarely as well paid as those which have gone. Often precious skills are lost to the country when an engineering company closes or offshores its production. These factors  are  rarely if ever built into cost-benefit analysis of the loss of employment.  British government contracts are a good example. They are frequently awarded simply on the basis of who offers the lowest price. A recent example of this is the awarding of a multi-billion pound contract to Siemens rather than the British-based Bombardier for trains for the Thames Link.  (http://www.bbc.co.uk/news/uk-england-derbyshire-14019992).  If skilled people cannot find appropriate work in Britain, they go abroad.

There is also a general economic benefit from having people in jobs, drawing regular wages and feeling secure: it helps maintain aggregate demand because people  both more confident about spending and , because the money and the spending appetite is spread throughout the population the rate of circulation of money is kept high which stimulates economic activity.

11. Capitalism in a protected domestic economy

If it is not  capitalism but free trade  and the mass movement of people across national borders which causes instability what is the solution?  WE could remove those practices and societies, but then what?

If  capitalism was  allowed free rein in the domestic economy  but free trade and mass immigration were not, would that be the ideal regime?   Capitalism in the domestic market  would certainly have the capacity for damage if there was no state support for the poor, the sick, the disabled  and the old in the form of ensuring that there was sufficient  housing,  healthcare , educational opportunity, pensions for the old  and support in times of unemployment and  illness within the reach of the poor.

There are also things which should remain in public hand as a matter of  policy either because it would dangerous for them to be  in private hands  (the armed forces, police, justice) or because they can only operate  efficiently as a monopoly  (the post office) or are a natural monopoly (roads, railways).

Perhaps most contentiously there is a strong case for nationalising banks,  both because of their potential  to wreak havoc in an economy and because their nationalisation would return control over the money supply, as far as it can ever be controlled  to national governments.  Nationalised banks should also make a handsome profit to for the taxpayer because it would  next to impossible not to regularly make large profits  if they  eschewed the reckless practices of the past generation. (There would of course have to be very strong  constitutional bars to politicians debauching the currency.)

But even if banks were not nationalised, they would be much easier to control within an economy operating within national borders  with national politicians committed to the idea of nations not internationalism. For example, national governments could ban any financial instrument which created confusion between lender and borrower, creditor and debtor.  They could cap the amount of sovereign debt held by a bank.  They could insist upon minimum deposits and maximum multipliers of wages for mortgages.  Restrictions on lending to foreign borrowers could be introduced.

The existing banks are of course operating internationally and it might be thought that all they would have to do is  shift their entire operations out of any national territory which tried to control them.   There are two good reasons why they would not want to do that. First, banks may be international in their trading, but often they still have much or a majority of their  business in a particular country, normally the country of their origin. That would make it difficult to shift their operations because they would have to be willing to  kiss goodbye to a large part of their business if the  national government of a country where they had much of their business was   serious about controlling them.  Any national government could simply say, all right you won’t play ball with us, we shall not let you trade in this country.. The second reason is the fact that banks rely on governments underwriting them to a large degree both in terms of guaranteeing deposits and by  Central Banks acting as lenders of the last resort.  There are not that many countries which can safely offer such guarantees.  That would make the threat of leaving somewhat hollow.

Provided that all  things are done – welfare, nationalisation, protection, control of the banks  –   allowing free enterprise to generally organise most  things economically within the nation state is the best way of proceeding.  If a general  protection for strategically important parts of the economy such as farming and energy production are put in place, a judicious use of quotas  for a wide range of necessary goods  implemented  (says, 75% of all necessary goods to be home produced)  and mass immigration is outlawed,  there is little harm  that capitalism (or private enterprise if you prefer) can do .On the credit side of the ledger, there is  undoubted great utility in  having a self-organising  part of the economic system which satisfies human ambition and efficiently delivers goods and services where the ability to pay is either not an issue or the good or service is not a necessity.  This  would cover  the large majority of economic activities,  because much of the welfare provision would come in the form of money to the claimant and this would then be spent to purchase food, clothes and so on provided by private enterprise.  There is also an argument that it is healthy for a society to have large numbers of people who are capable of taking charge, making their own decisions. One of the problems the countries of the Soviet bloc had after the USSR split and  the communism fell was the lack of people who were capable of taking charge, of creating new businesses or even doing jobs which required initiative.

The alternative to capitalism is states running command economies.  These do not have a happy record. Much better to allow a properly  controlled capitalism to do most of the job of meeting most human needs.

Will the elites of  developed world wake up and see that globalism is the problem? Not from choice because they have nailed their colours to the internationalist banner. But fear of what is happening  in the world they have created – growing class feeling, racial  and ethnic strife and increasing material deprivation and insecurity  – may drive them to bite the bullet. Let us hope that happens before it is too late.

See also









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