Tag Archives: poverty

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 erstwhile nationalised company 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 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 really massive projects. A classic example of this is the Channel 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.

How do we decide what should be provided by the state?

 It is easy in principle to decide whether something should be left to private enterprise  or public service. 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.

Politically incorrect film reviews – Made in Dagenham

Made in Dagenham

General release 2010

Directed by Nigel Cole.

Main cast:  Sally Hawkins,  Bob Hoskins, Kenneth Cranham, Miranda Richardson,  Rosamund Pike, Jamie Winston, Andrea Riseborough and Geraldine James.

This is a piece of childishly crude feminist propaganda, a fact which has (sigh) inevitably  guaranteed it glowing reviews in the mainstream British media.    The film, based on a true event, is set in 1968 with the machinists at the Dagenham Ford factory (all women) up in arms at being downgraded to  unskilled which provokes them to strike.  They may have been justified in their anger, but the film is so one-eyed in its portrayal of the argument for equal pay that it has all the veracity of a Tom and Jerry cartoon, with the male characters in the role of Tom and the women cast  as Jerry.  British listeners to the BBC Radio 4 serial The Archers will have a good idea of how the men are portrayed, as weak  or  moronic bastards.   Their roles call for very little change of facial expression as all that is required are looks of bafflement, anger ,  fear and condescension.  

Sally Hawkins as the shop steward Rita O’Grady is marginally less irritating than she was as Poppy in Mike Leigh’s Happy Go Lucky in which she carried cheerfulness to the point of imbecility, but to balance this slight relief  her character of  Rita  is even more unbelievable.  She  begins as a neurotically nervous cockney factory hand who transmogrifies overnight,   in heroically unconvincing fashion, into  the leader of the women after their original shop steward  Connie  (Geraldine James)   becomes terminally distracted by her personal  life.  (This involves a tiresome sub-plot revolving round Connie and her husband  George (Roger Lloyd-Pack) who is, yes,  you have guessed it, useless because of his experiences in bombers in the war, the feminist sub-text being the suffering of women lumbered with a man )

With the exception of  the union convener  Albert Passingham (Bob Hoskins), the men routinely behave in a male chauvinist fashion along the lines of “don’t you worry your pretty little head about it”.  As for Albert, he  might best be described as a Quisling in the feminist cause. It is one thing to believe in equal pay, quite another to be indecently gleeful when the machinists’ strike brings the entire Ford factory to a halt and puts thousands of men out of work.

Miranda Richardson as Barbara Castle has the most cringeworthy scenes, either  humiliating two of her senior civil servants (played by Joseph Kloska and Miles Jupp) who literally cower before her,  fraternising  in sisterly solidarity with the Dagenham women’s representatives  or haranguing  Harold Wilson (a rather feeble effort by John Sessions).

There are  modern feminist stereotypes gratuitously thrown in for good measure.  Andrea Riseborough plays a promiscuous girl who is taking the same view of sex as men (and thus becoming in feministspeak empowered) and Jamie Winstone is a wannabe model  who eventually has to choose between Ford giving her a break into modelling and remaining true to the strikers. Guess which she chooses. Yes, that’s right, it’s support the strikers and go back to machining after the strike is over.  Thus sisterly solidarity is verified.

The working class male is not spared parody or lecturing.  Rita’s husband  Eddie (Daniel Mays) is besieged with clichés as he is shown struggling with household chores while Rita is off on union business. He is also a target for stern feminist lectures.  He tells Rita he is not happy with her going off on union business all the time. He is accused of trying to keep her in her place.  He has the  temerity to suggest  that it might not be all for the best  that the factory has been brought to halt by the machinists strike putting thousands of male breadwinners out of work. He is told  sternly that he is being unreasonable.  At his wit’s end, Eddie makes  a heartfelt  inarticulate  plea to Rita  by pointing out that he  is a good husband who works,   doesn’t go out on the booze, beat the children or hit her.  This provokes a short  denunciation worthy of a Soviet  commissar as  his wife shrieks that  such behaviour should be the male  norm. Rita then heads  off on yet another union trip. The saga ends with Eddie making a Maoist-style confession of fault as he  catches up with her as she addresses the TUC conference.

Monty Taylor (Kenneth Cranham)  as an old-style union fixer, a man  in favour of compromise and perhaps complicity with management ,  and all too fond of his expenses. He is cast firmly in the role as the enemy within the feminist camp for not being rigidly aggressive and unreasonable. As he dealt in moral  greys rather than blacks and whites, he did bear a vague resemblance to a real human being.  It was by far the best performance in the film.

Unambiguously   risible is the relationship between Rita and Lisa  (Rosamund Pike) the wife of the managing director of Ford in Britain Peter Hopkins (Rupert Graves). Lisa is decidedly posh and wealthy, yet strangely her son  goes to the same school as Rita’s boy, which is where they meet. Not only that , but the two women rapidly form a mutual admiration society  with Lisa at one point  arriving on Rita’s council flat doorstep to assure her that having obtained a first in history from Oxford ,  she had always wanted to know from someone who was making history (in this case Rita) what it was like to make history.  (I must confess I could not stifle a guffaw at this point).

Poor Lisa is also subjected to  a second scene which could only provoke derision. Ford of America send over an executive (Richard Schiff as Robert Tooley)  to sort things out. Tooley goes to dinner at the Hopkins’ house  where he is treated to a lecture by Lisa about the iniquity of Ford’s treatment of the machinists.  Her husband Peter unsurprisingly shuffles her off to the kitchen to stop her talking. This is portrayed as an outrageous side-lining of Lisa as having nothing useful to say because she as a woman. Any normal human being would interpret as a man  not wanting his wife to queer his pitch with his boss.

What the film failed to address  in any meaningful fashion  was the social circumstances  of the time.  This was an age before it was thought reasonable for women to be single mothers or for a man and a woman to set up home without being married. The norm was for couples to be married with the man as the breadwinner. If the woman worked it was a bonus but not considered essential. That being so it was quite reasonable for the men in the film to believe that the prime good was for the male wage to be put before that of the female.   Yet when this idea was raised by the odd character in the film it was treated as absurd. In 1968 it was the norm.  There was no conception within the film that in the social circumstances of the time the men might have had a point. These were working class people who relied on their pay just to survive from Monday to Monday. Nor was there  an attempt to reflect on  what 40 years of feminism  have wrought; no  questioning of whether women with children working  would be a be a long term good or the fact that we now have a world in which it is impossible for large swathes of the population not to be able to afford to have a family life without the woman working.  

A shame that a strong cast was wasted on such ludicrous stuff.

“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 wisest of 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 advantage.  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 Thomas 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, therefore, 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 Marxist.  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 reality of 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 commodity 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.

The present state of global economies

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. 

The reality is that what we have does not even fall within the  arbitrary and narrow definitions of “free markets” and “free trade” which most of the developed world’s  elites  espouse under the banner of globalism.   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 effected 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.

“Free markets”, “free trade” and the emasculation of democratic control

 “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 and self-interest.  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.

 To the anti-democratic  consequences of  Treaty obligations such as those tying  Britain to the UK are added those of more open international markets. “Free trade”   damages democracy by confining economic policy 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.

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 England 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.

 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 billions to its ailing private airlines, but put up protective tariffs to protect its steel produces. It has been 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.

The logical end of a free market is monopoly

The logical end of a truly  free market, that is, a market without any state interference,  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.

Because the natural end of a truly free market is monopoly the self-proclaimed laissez faire believers have introduced the most potent of state interferences into the market, namely, anti-monopoly laws. However,  anti-monopoly laws operate within the constraints of other laissez faire sanctioned interferences with the market such as patent rights and limited liability and widely differing national taxation and social welfare schemes.  In addition, 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.  Those limitations  alone means anti-monopoly laws  are  limited in what they can achieve  and situations of oligopoly if not monopoly commonly arise.

But even where expansion is by takeover or merger,   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.

The upshot of anti-monopoly laws,  state-granted privileges such as patents and the failure of anti-monopoly laws in practice is an economic ideology which is incoherent and a practical situation of markets which are neither free in the sense of being without state control or free in the sense that there is meaningful competition.  

 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 etc.

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.

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 anypoint 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 opulation 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 diven into ill-paid and uncertain employment.

 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 assive 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.

If weather persists it becomes the climate

Letter published  in Sunday Telegraph 26 December 2010

  
Sir,
 
The advocates of man-made global warming meet any meteorological event such as the recent severe winters we have experienced   which does not fit into their ideology by chanting one of their favourite mantras ” weather should not be confused with climate”. The problem for warmists is that when weather lasts for years it becomes the climate.
 
Flows between decades of  warmer and colder climate in Britain are the norm. The decades leading up to the 1940s were unusually warm; those from the mid-1940s to the mid 1970s unusually cold. The odds are that we are now reverting to a colder period.
 
The warmists might care to ask themselves why the period 1945-1975 was unusually cold, when massive increases in man-made greenhouse gases took place during both that period and the warmer decades before 1945.  
 
Yours sincerely,
 
 
Robert Henderson  

Does “free trade” deliver greater prosperity? 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 tradeEngland 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 of 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.

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