Wednesday, October 31, 2012

Yes you can privatise the roads - says UK thinktank

The Institute of Economic Affairs (IEA) is rapidly becoming one of the highest profile think tanks in the UK, certainly it has been getting increased media exposure, including the regular appearance, on the BBC no less, of the excellent Communications Director Ruth Porter (who has links to New Zealand, having once worked for the Maxim Institute - not a reason to hold against her though).

It describes itself as "the UK's original free-market think-tank, founded in 1955. Our mission is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems".

It has become one of the foremost advocates for questioning new government interventions, preferring less government spending and regulation, and seeking solutions involving free markets and personal choice over statism.

The latest report commissioned and published by the IEA, has been written by German transport economist and President of the Institute for Free Enterprise, Dr Oliver Knipping, and IEA deputy editorial director and director of its transport unit, Dr Richard Wellings.

It advocates privatising all roads in the UK.  Yes, ALL roads.  

The report is available here, and makes a compelling case that damns the existing system for producing inefficient outcomes (congestion, poor maintenance standards, inadequate supply of capacity in some areas and overbuilding in others) and suggests that the government simply get out of the way, by selling some roads and giving others away perhaps to co-operatives of road users and property owners to decide for themselves how to make money from them.

The authors propose that all roads, motorways, major highways, rural roads and urban streets could be privatised. Just selling the major highways is estimated to generate £150 billion for the government, which could be used to repay public debt, saving several billion a year in interest.  That would still leave local roads to be privatised by transfers to co-operatives of businesses and residential properties.

The new owners could choose to toll, issue access permits or leave the roads free when and where they saw fit, using whatever technologies they decided.

In exchange, the authors suggested abolishing vehicle excise duty (the equivalent of motor vehicle registration), and cutting fuel tax by at least 75% (noting that the UK, unlike NZ and the USA, does not legally dedicate any fuel tax to government spending on roads - but the existing fuel tax takes four times as much tax revenue as is spent on the roads), with the remainder being a sop to environmentalists by reflecting a carbon tax and tax on emissions.  This would reduce the price of fuel in the UK by a whopping 53p/l (though they neglect to note that EU law sets a minimum tax rate for energy that is about 29p/l).

Wouldn't the new road owners rip everyone off?  Well the authors say no. They have several ideas to avoid this.

They argue that the way privatisation is carried out should be done to promote competition between road owners.  For example, major highways could be sold to different companies, so that the M6/M1 and the M40 would have different owners offering different prices for driving between London and Birmingham.  Yes, there will be many cases where competition isn't feasible, but having some competition is more than exists now.  They see breaking up the road network so it doesn't resemble the patchwork of central and local government controlled routes now, would promote competition and innovative approaches to pricing.

By allowing road owners to price flexibly, it would mean prices at off peak times would likely be lower than at peaks, because underutilised assets are better off with customers willing to pay to use them, especially cars as they inflict relatively little damage to road surfaces compared to trucks.   As such, it may be much cheaper to drive outside commuter and holiday peaks than today.

Local roads owned by businesses seeking customers are more likely to discount access or offer it for free, especially if it attracts retail customers.  They may see this as important as offering free parking, so that the incentives are wider than just paying for the roads.

There remains competition  from other modes for certain trips, such as railways, airlines and canals.  In addition, telecommunications technology makes it increasingly attractive to use phones, Skype and other forms of teleconferencing instead of travelling.  Road owners will not be insensitive to these options.

Indeed, the question about being "ripped off" becomes more moot, if road owners are seeking to attract users by having well maintained, well signposted roads, which are priced to avoid congestion by spreading demand, and a planning system that does not prevent new capacity being built except by road owners needing to consider private property rights.  The likelihood is that the motoring experience will improve.

Finally, it's worth noting (though they did not appear to do so in the report), that with government in the UK already recovering four times as much in motoring taxes from road users (fuel tax and vehicle excise duty) than it spends on roads, that motorists are already being ripped off, by the government.

The UK government is today considering how to get more private sector involvement in financing and building roads, this report shows how far it could really go, and is one of the few studies I've seen which actually breaks apart the "consensus" of state owned and operated roads, and shows how it might be different, and better with privatisation.

Tuesday, October 16, 2012

Lithuania isn't in a recession - No Right Turn is not right again

I do read the No Right Turn blog from time to time, and it demonstrate how willfully blind and deceptive some can be when the facts reported in the same story they quote from, don't fit their blinkered vision.



Lithuanians went to the polls today in the first round of parliamentary elections - and have voted resoundingly against their neoLiberal, pro-austerity government which had plunged them into a Greek-style austerity-induced recession.


He links to a BBC article about the election and says that the government "plunged them" into a recession.  The leftwing meme being simply that reforms that shrink the state sector create a recession and Greece's problems are that it is cutting spending, not that it can't borrow to sustain overspending anymore and is having to beg from other states to cover its overspending until it can balance its books.

Yet that very same article from the BBC says this about the Lithuanian economy:


Mr Kubilius came to power in 2008, just as the global financial crisis was bringing a dramatic end to an extended Lithuanian boom fuelled by cheap Scandinavian credit.


So Lithuania's recession started the same way as most of the others, cheap credit from banks with state issued fiat currencies, overborrowing and an adjustment when reality set in.


Mr Kubilius enforced a drastic austerity programme, to stave off national bankruptcy.


Presumably the leftwing view of this is that the government should simply print more money.  After all if the state can't borrow anymore, it either has to cut spending, raise taxes or print.


Meanwhile, economic output dropped by 15%, unemployment climbed and thousands of young people emigrated from the Baltic nation of 3.3 million in search of work.


Yes, a fiat currency credit fueled boom adjusting itself, and the government balancing its books.


The budget deficit has since been tamed and GDP reached growth of 5.8%.


Hold on.  Growth of 5.8%? What is this austerity induced recession?  Indeed according to Eurostat, Lithuania's unemployment rate has been dropping from a peak of 18.3% in June 2010 to 12.9% in August 2012.  

Idiot Savant need only have read the rest of the article for it to be obvious the recession in Lithuania is well and truly over, and a 5 minute search to find the Lithuanian unemployment rate.

However, that wouldn't suit the "evil neo-liberals want to destroy the state and ruin the economy and want mass unemployment, but socialists love people, want prosperity and know how to do it, if only they were allowed to spend money that doesn't exist, and could get their hands on all the money of the evil capitalists" monologue that he, and the left (becoming more and more out of touch with economic) have been preaching.

Greece is a totemic example of the failure of socialism to deliver sustainable prosperity, followed by Portugal and Italy.  Spain and Ireland are totemic examples of the failure of cheap credit created from nothing through fiat currencies and fractional reserve banking.

Maybe Idiot Savant might want to revise his tired empty thesis that the only people to blame when governments overspend, are those who loaned money to them in the first place,  because when they stop, what does he really expect should happen?

Sunday, October 14, 2012

European Union peace prize?

Oh how I laughed, so much, when I read that news.

Whilst I understand why the Nobel Committee gave the EU the Nobel Peace Prize, it is, quite simply, wrong.

The peace in Europe since 1945 was due to the following:

-  The complete unconditional defeat of Nazi Germany by the US, UK and USSR (with a little help from partisan resistance groups);
-  NATO (and France outside NATO). Keeping the USSR and the Warsaw Pact at bay, especially after the Berlin airlift;
-  The economic integration of Western Europe since 1945 facilitated by the USA through the Marshall Plan, followed by the forerunners of the EU and the GATT/WTO.

There would have been no EU without the unconditional defeat of Nazi Germany, or rather no peace unless you would have counted a unified Europe under Hitler.  

There would have been no EU without NATO deterring the eastward roll of the Red Army by Stalin, using strategic and tactical nuclear weapons.  There would have been no peace either.

There would have been no EU without the commitment of West Germany's post-war leaders to economic reconstruction, a business friendly environment, and to face up to what happened.   To that end, for Greek protestors to fly swastikas because they don't like being told their government might want to keep spending within limits of what it raises in revenue, are dead wrong.

There would have been no EU without the United States providing the aid, providing the foundations of NATO, providing the bulk of the nuclear deterrent, providing support for the GATT (now WTO) to force open global markets in manufactured goods (the core of the Western European economy in the 50s and 60s).


Yes, the EU has helped bind former warring states together, it has also enabled there to be some recognition of mutual values  (however flawed they are in interpretation and application), of free speech, freedom of religion, belief in open liberal democracy, belief in the separation of powers (judiciary, executive, legislature and police), and a broad acceptance of liberal values that reject state racism and sexism, but overwhelmingly are opposed to authoritarian rule.  Yes, there are many ways that is flawed and inconsistent, but compare it to Asia, the Middle East, Africa and Latin America.  Compare it to half of Europe before 1989.

But as the Saturday Daily Telegraph said, it has hardly got a glowing record when faced with major threats to peace and security.

The Nobel committee’s citation explicitly referred to its work in Yugoslavia. Yet Europe largely wrung its hands on the sidelines, until the US ended the bloodshed and forced a peace, as it later did in Kosovo. More recently, in Libya, it was Britain and France, not Brussels and Baroness Ashton, who acted as liberators – again with America’s support.


The EU did not bring down the Berlin Wall, the people of east Germany did after Gorbachev made it clear the USSR would not support east Germany continuing to oppress its people, and east Germans had spent decades watching West German TV and listening to radio from West Germany, the UK and the US.

In Yugoslavia it took US military action against Serbia for the genocide to cease and for Milosevic to stop "ethnic cleansing" of Bosnia, parts of Croatia and Kosovo.  However, it is important to note that one reason many Europeans, in continental Europe, support the EU, is because they have relatives who in living memory endured occupation by the Nazis, or lived under fascism of one kind or another, and have been sold the idea that the EU has stopped all that.  Conveniently, of course, whitewashing out the key role the United States has played, in money and lives, in keeping half of Europe relatively free and staying steadfast to allow almost all of the rest to be relatively free now.

On economics, the liberating movement of the EEC/EU in bringing down barriers among members have been somewhat matched by new barriers with the outside world.  The Common Agricultural Policy, essentially a scam that enabled France's antiquarian farming sector, propped up by grotesquely generous subsidies to pacify (and avoid a perceived fear of Marxist revolution in the countryside), to survive thanks to German, British and Dutch taxpayers, meanwhile dumping subsidised produce on the rest of the world, shutting out efficient producers beyond quotas and tariffs and contributing to environmental degradation and higher food prices in Europe.  The EU maintains massive programmes of vanity projects, like Galileo to replicate GPS and more recently efforts to replicate US, Japanese and European state programmes for earth observation satellites.  It dares demand austerity in the Eurozone whilst seeking annual increases in its own budget beyond inflation.   It's own politicians and senior officials, partly hand picked by national politicians engaging in patronage, enjoy lavish lifestyles travelling in luxury, feeling self important, whilst being ever so distant from those who pay for them.

Now it is printing money, demanding some Member States eviscerate their own private sectors with tax rises whilst trimming their public sectors with spending cuts, stating that the Euro -which should simply be a currency - is not an economic project, but a political one.  

I'll let the Telegraph editorial finish my thoughts on this:


Yes, Europe has been transformed over the past half-century – in the committee’s words – from a continent of war to a continent of peace. But that came about largely through the establishment of trade links, the free movement of people, the knitting together of an economic union rather than a cultural one. The irony of yesterday’s announcement is that the single gravest danger to that peace – provoking riots in Spain, demonstrations in Italy, the rise of far-Right movements in Greece – is arguably the European project itself, as it exhausts the Continent’s treasuries to prop up a crumbling currency union. 

The good news is that there is still time for Europe to pull itself out of this grim spiral, to rediscover and reaffirm the shared freedom and shared prosperity that made it such a beacon to the impoverished or imprisoned nations on its borders. If it can do that, it might even deserve such a prize. As it stands, this bauble feels more like a decoration for the headstone of a once noble ideal.

I would say the EU doesn't deserve it, but then given how debased the Nobel Peace Prize is (and has been for decades), then I wouldn't really wish it on anyone unless I was wanting to mock them.  It has become a caricature of what it is meant to stand for.

What's only funnier is the EU-crats, politicians and their lackeys thinking how very deserving they are for their great efforts.  Yet if it continues to be a barrier to prosperity in Europe, if it continues to expound the socialist view that the successful striving saving nations should pay for the deficit ridden corrupt and spendthrift ones, the only thing keeping the EU together is the good will, of Germans, who don't want to be thought of as being like the Nazis.   Right now, they are willing to let a lot of their taxes and some of their savings, be taken for their reputation.  How long that continues, depends on how many of them remain in jobs, remain immune from inflation and turn a blind eye to being called Nazis despite their hard work and generosity.

It is the USA, NATO and West German/reunifed German political leaders that have produced a legacy of peace.  It is the EU that arrogantly presumes that this legacy is immutable.

Thursday, October 11, 2012

What went wrong with Greece

Aristides Hatzis is Associate Professor of Philosophy of Law & Theory of Institutions at the University of Athens, Department of Philosophy & History of Science.

He has some firm views of what went wrong in Greece, and it is not a view that fits the conspiracy theories of the Syriza party or the empty claims that Greece is a victim of financiers.

Hatzis says Greece joined the then EC (now EU) in relatively good economic health:

Seven years after embracing constitutional democracy the nine (then) members of the European Community (EC) accepted Greece as its tenth member (even before Spain and Portugal). Why? It was mostly a political decision but it was also based on decades of economic growth, despite all the setbacks and obstacles. When Greece entered the EC, the country’s public debt stood at 28 percent of GDP; the budget deficit was less than 3 percent of GDP; and the unemployment rate was 2–3 percent. But that was not the end of the story.

Greek voters voted to the left, and that changed everything:

Greece became a member of the European Community on January 1, 1981. Ten months later (October 18, 1981) the socialist party of Andreas Papandreou (PASOK) came to power with a radical statist and populist agenda, which included exiting the European Community. Of course nobody was so stupid as to fulfill such a promise. Greece, with PASOK in power, stayed in the EC but managed to change Greece’s political and economic climate in only a few years.

He continues to explain that PASOK changed the relationship between the state and the people, but even the so-called "rightwing" opposition did nothing to change that.  Recognise that pattern in other countries?

Today’s crisis in Greece is mainly the result of PASOK’s short- sighted policies, in two important respects:

(a) PASOK’s economic policies were catastrophic; they created a deadly mix of a bloated and inefficient welfare state with stifling intervention and overregulation of the private sector. (b) The political legacy of PASOK was even more devastating in the long-term, since its political success transformed Greece’s conservative party (“New Democracy”) into a poor photocopy of PASOK. From 1981 to 2009 both parties mainly offered welfare populism, cronyism, statism, nepotism, protectionism, and paternalism. And so they remain. Today’s result is the outcome of a disastrous competition between the parties to offer patronage, welfare populism, and predatory statism to their constituencies.

It wasn't as if the political classes didn't know there needed to be reforms either, but the bare minimum was done to reach a magic goal - joining the EURO.  So how did Greece expand spending on such a grand scale?  It wasn't from taxation, because tax evasion was rampant and tax collection very inefficient, but borrowing.  

He calls it  "party time":

The borrowing became much easier and cheaper after Greece 2adopted the Euro in 2002. After 2002, Greece enjoyed a long boom based on cheap and plentiful credit, because the bond markets no longer worried about high inflation or a devalued currency, which allowed it to finance large current-account deficits. That led to a crippling €350 billion public debt (half of it to foreign banks) but, more importantly, also to a negative effect that is rarely discussed:The transfers from the EU and the borrowed money went directly to finance consumption, not to saving, investment, infrastructure, modernization, or institutional development. The Greek “party time” with the money of others lasted 30 years and—I must admit it—we really enjoyed it! Average per capita income reached $31,700 in 2008, the twenty-fifth high- est in the world, higher than Italy and Spain, and 95 percent of the EU average. Private spending was 12 percent more than the European average, giving Greece the twenty-second highest hu- man development and quality of life indices in the world. 

Yes, most of the borrowing the Greek government undertook was not to build infrastructure (except for some very high profile totemic projects like the Olympics, a metro, tram lines and a new airport), nor to finance productivity improvements, but to consume.

People lied and evaded tax, but this culture was endemic.  Remember this isn't an outsider, but a Greek academic noting this:


Lying became a way of life in Greece. Still, one might argue that lying to protect what one has created is justified. But in Greece that wealth was not created, but simply borrowed. In 1980 public debt was 28 percent of GDP, but by 1990 it had reached 89 percent and in early 2010 it was more than 140 percent. The budget deficit went from less than 3 percent in 1980 to 15 percent in 2010. Government spending in 1980 was only 29 percent of GDP; thirty years later (2009) it had reached 53.1 percent. Those figures were hidden by the Greek government as late as 2010 when it admitted that it had not actually met the qualifying standard to join the Eurozone at all. The Greek government had even hired Wall Street firms, most notably Goldman Sachs, to help them fudge the numbers and deceive lenders.

Yet for entrepreneurial activity, Greece became a disaster. In 2012 it was ranked 100th out of 183 countries for ease of doing business, being the worst in the EU and the OECD and below Columbia, Rwanda, Vietnam, Zambia and Kazakhstan.  It ranked 154th for laws protecting investors and 147th for ease of employment.  The best ranking was 43rd, for closing a business.  One study indicated that 25% of Greece's GDP was "informal" or outside the law, and petty corruption cost €800 million in 2009.  42% of the state budget is on welfare benefits of some kind.  Pensions were ridiculously generous.  35 years working in the state sector allowed a man to retire at 58 on a pension.  

The "free" public health system actually saw 45% of total health spending coming informally directly from users bribing staff to do their jobs.

Greece is now facing some reality.  It is still borrowing, but this time from taxpayers in Germany in effect.  It is still overspending, but is set to break even in three years.

However, the Greek disease has been socialism, with parties outdoing each other to spend borrowed money to buy votes and evade economic reality.  Greece's economy has had to shrink, because it has been built on credit - not production.  The hard awful reality is that those who benefited from it, never have to pay it back, whereas the up and coming generation face paying for it.

Greece has had its economy destroyed not because of bankers, but because it was rotten at the core, sustained by socialist politicians and those whose support they gleaned by their bribery using borrowed money.   Since the early 1980s, more and more of the economy was built on nothing at all - sadly today, it isn't the public sector facing retrenchment and pain, but the private sector.   Increasing taxes and increasing tax collection is gutting the part of Greece's economy that is productive, and precious little is being done to gut the part that isn't/

Wednesday, October 10, 2012

France's road to disaster courtesy of Hollande

Detlev Schlichter on France:

In 2012, President Hollande has not reduced state spending at all but raised taxes. For 2013 he proposed an ‘austerity’ budget that would cut the deficit by €30 billion, of which €10 billion would come from spending cuts and €20 billion would be generated in extra income through higher taxes on corporations and on high income earners. The top tax rate will rise from 41% to 45%, and those that earn more than €1 million a year will be subject to a new 75% marginal tax rate. With all these market-crippling measures France will still run a budget deficit and will have to borrow more from the bond market to fund its outsized state spending programs, which still account for 56% of registered GDP.

If you ask me, the market is not bearish enough on France. This version of socialism will not work, just as no other version of socialism has ever worked. But when it fails, it will be blamed on ‘austerity’ and the euro, not on socialism.

As usual, the international commentariat does not ‘get it’. Political analysts are profoundly uninterested in the difference between reducing spending and increasing taxes, it is all just ‘austerity’ to them, and, to make it worse, allegedly enforced by the Germans. The Daily Telegraph’s Ambrose Evans-Pritchard labels ‘austerity’ ‘1930s policies imposed by Germany’, which is of dubious historical and economic accuracy but suitable, I guess, to make a political point.

Most commentators are all too happy to cite the alleged negative effect of ‘austerity’ on GDP, ignoring that in a heavily state-run economy like France’s, official GDP says as little about the public’s material wellbeing as does a rallying equity market in an economy fuelled by unlimited QE. If the government spent money on hiring people to sweep the streets with toothbrushes this, too, would boost GDP and could thus be labelled economic progress.

Tuesday, October 09, 2012

Sick jokes are a crime in the UK

Today, the Home Secretary, Theresa May, spoke at the Conservative Party conference and said:

Do we want to see the internet become an unpoliced space? No. Do we want to see terrorists, criminals and paedophiles get away scot-free? No. We are the Conservative Party, not the Libertarian Party. As Conservatives, we believe the first duty of government is to protect the public. That is why the Conservative Party will always be the party of law and order.

She's right of course.  Law and order is about protecting people's freedoms, but she mentioned the word "freedom" once by saying We need to give the police the freedom to use their judgement.

Yes, well if you want the difference between conservatives and libertarians then this case is one of them.

Matthew Woods is a rather vile young man.  He posted a joke that the Police deemed to be grossly offensive, on the website Sickipedia.  The joke was about April Jones, the 5 year old girl who went missing 11 days, and now presumed murdered.  I don't care what the joke was, because it is likely to be grossly offensive to me.  However, that's not the point.

The Guardian reported:

He pleaded guilty at Chorley magistrates court to sending by means of a public electronic communications network a message or other matter that is grossly offensive. The chairman of the bench, Bill Hudson, said Woods's comments were so "abhorrent" he deserved the longest sentence the court could hand down.

He is getting 12 weeks in prison.  

Is this really a matter for the criminal law?  Would he have faced a conviction if he had simply said it to another person?  How about if he wrote it on a piece of paper?  If not, why is an electronic communication so bad that it is time to be precious about vile jokes?

The Guardian also notes there is a long list of similar cases:
- A 56 day sentence for a racist comment about a footballer who collapsed;
- A teenager visited by the Police for being disgustingly rude to Olympic diver Tom Daley on Twitter;

Now the last case probably justified a query, given fear of terrorism, but the rest?  Has British society become so precious that people who offend others deserve a criminal record?  Or is there genuine fear that if there isn't a criminal law against it, that people will throw ever more disgusting insults around in a snowball of nihilism and vileness?  If so, is the right response to offensive speech not simply to insult the person saying it, or to ignore it?


Direct incitement to violence is one thing. But we cannot and should not sentence people for bad jokes, poor taste and terrible manners. That is an issue for parents, teachers and, most importantly, peer groups.

Quite.

Most people in their lives will encounter bores, bullies and a range of rude pricks who will call you names, who will be offensive to you and seek to upset you.  It isn't a crime to insult someone, except it is, now.

I don't blame the Conservatives any more than the other parties.  Labour introduced this law, and both the Liberal Democrats and Conservatives have happily let it be.  However it is wrong.

Free speech is for those who offend as well as those who inspire.  The state should not be policing what offends people, for when will it stop?  Will you be able to call the Police if someone calls you a name?  Will books and songs be banned for offending Christians or Muslims?  Will politicians get people arrested for calling them lying corrupt pricks?

I don't doubt that the latest example of using this law is about someone who has been vile, but then comedian Frankie Boyle is vile, the lowlifes who sell t-shirts to celebrate dancing on Margaret Thatcher's grave are vile, but I don't want the state arresting them.  I don't want the state arresting me because I blaspheme against Islam, or call Russel Norman a prick, or call Sue Kedgley a hysterical control freak, etc etc.

It is time to speak up for free speech, including the free speech of that which offends, for no one should have a conviction because they said or wrote something that upset someone else.

UPDATE:  Peter Cresswell has written about people getting offended by what some politicians say.  He uses a quote I nearly used, which is Stephen Fry's about people thinking that when they are offended, they gain some sort of new right to "something".  No you don't.

Saturday, October 06, 2012

Russel Norman says "fuck the poor" with his economic illiteracy UPDATED


It's a big "fuck you" to people on low to middle incomes with savings, because he wants to devalue the New Zealand dollar.  Not because there is a major flight in capital from NZ$ holdings, but because he thinks the NZ$ in overvalued.

Russel Norman knows that the money you hold should be worth less.

Not you, not the millions of people who buy and sell NZ$ and in NZ$ every day, but Russel Norman and the Green Party.

He wants the Reserve Bank to print money to devalue the dollars you have in your wallet or bank account.  

It means that the vast bulk of New Zealanders, especially those on low to middle incomes, with small savings, will have part of their own money TAKEN by stealth by the state.  

They know what it means.  It means an overseas holiday is a lot less affordable.  It means a new laptop, car, books, clothes, TV, mobile phone all become more expensive.  

It means petrol goes up, but the Greens kind of like that, as you should be driving less says transport spokesperson Julie-Anne Genter.  Of course it puts up the price of moving freight as well, and flying domestically.

However, whilst devaluation increases the price of imports, the way Russel wants to do it will increase prices across the board.

It is a recipe for more inflation.  

Yet he wants to increase the availability of credit by reducing interest rates, meaning businesses and consumers can borrow more, and so promoting more demand (after all this is what QE does) so hiking up inflation more and more.

You see, the standard response to inflation of the Reserve Bank is to increase interest rates, but Russel Norman would reduce interest rates.

He wants "new tools for managing asset bubbles", yet would be pouring petrol on property bubbles by allowing loose credit and allowing people to borrow more.

His claim is that this will help the productive sector, because exporters will suddenly get a boost because they will be able to undercut foreign competitors.  This is true, on the face of it.  Devaluations do that, but they also increase the price of inputs into production.  Fuel being the obvious one.  Tourism would become cheaper, for foreigners visiting New Zealand.  However, Air NZ wouldn't be able to take advantage of as much of that as its competitors as two of its biggest long run costs - fuel and the capital cost of aircraft, would rise.  

Yet, Norman ignores the consequences of his approach to devaluation, which would be to generate inflation.  With domestic costs soaring, exporters would find their competitiveness would be entirely wasted as they couldn't spend their renewed returns quickly enough to offset inflation, they couldn't save them (with interest rates on savings below inflation - as they are in the UK, US and Japan today) and would be less and less able to afford imports.

His ignorance is breathtaking.  He says that printing money so that the government can engage in..


"Buying Christchurch earthquake recovery bonds will reduce the need for the Government to borrow offshore. Currently, about 60 percent of all Government borrowing is from offshore.


"Buying overseas assets to restore the EQC's Natural Disaster Fund will prepare us better for any future natural disasters."

So he will print money, for the government to borrow from the Reserve Bank, creating inflation, saving the government from borrowing from those with actual money, by debasing the savings of NZers.  Then, having devalued the NZ$ he proposes using it to buy assets from overseas which will suddenly cost more.

He claims that the UK, US, Japan and the European Union (presumably he means the European Central Bank, as there are 11 currencies in the European Union) engaged in quantitative easing (money printing) to boost their export sectors, which is utter nonsense.  It has been an exercise in trying to stimulate demand in stagnant economies.  After 15 years, Japan remains stagnant, whereas the US has small hiccups of demand that quickly subside.  However, in all these cases the effect has not been to substantially devalue currencies relative to major trading partners (nor was it designed to).

He thinks that the NZ$ has a high value because of speculators, yet he himself wants to speculate with the money held by every New Zealander, by debasing it.

The average New Zealander isn't as ignorant as Russel, because they know that when the NZ$ drops, they lose, unless they have earnings in foreign currencies (which few do).

So the losers are the poor and middle income New Zealanders.  They can't readily open foreign currency bank accounts, buy foreign shares or equities and rescue their savings from the thieving politicians and central bankers out to take it from them.

The rich will bail out of Russel Norman's vision for the NZ$.  They can afford to. 

The poor would have to swallow it.   Give up on the overseas trip.  Give up on buying a laptop or a kindle.  Watch while their savings earn nothing in the bank, and lose value in real terms - just like they did when Post Office accounts offered 2% when inflation was 12% under Rob Muldoon.   

Of course foreigners buying New Zealand made goods and services would do well, because the products would be cheaper.  In fact, a holiday to New Zealand would be so much cheaper.   However, they aren't exactly poor now are they?

The Green vision for monetary policy is simple:

- Take money from NZers' savings through devaluation (who pay more for imports from everywhere) - transfer it to foreigners buying NZ goods and services (who pay less for imports from NZ) and NZers who make money from foreigners buying NZ goods and services using foreign currencies.

- Take money from NZers who are savers and transfer to those who are borrowers (through low interest rates).

- Fuel a new property bubble as NZers use cheap credit to enter the property market as a hedge against inflation, and fuel a new sharemarket bubble as the same happens (fleeing savings accounts as a hedge against inflation, and foreigners buy NZ shares because they are cheap).

- Fuel hyperinflation, as the debased currency puts up import prices and the flood of cheap credit overheats demand.

The people who are hurt the most from devaluation and inflation are the poor.  More money printing will make it worse.   This inflationary spiral can only end by:

- Hiking interest rates as happened in the late 1980s, effectively reversing the "gains" for exporters and businesses by pushing their borrowing costs through the roof, sending thousands bankrupt and bursting the property bubble;

- Banning inflation, Muldoon style, creating shortages - (former) east Germany style

- Abandoning the NZ$.

In all of those scenarios, the people who lose the most are those who are least able to leave the country or shift their savings elsewhere.

Hyperinflation, debasement of savings, makes the Green Party's claim to give a damn about poverty almost laughable.

UPDATED:  Of course The Standard embraces it, tribal like, because they see money printing as some sort of anti "neo-liberalism" project.  (yes, anyone opposing the left just want to eat the poor).  The intellectualism in this post is astonishing "I look forward to John Key, when he gets back from fellating Mickey Mouse" showing how asinine the debate is.

The status quo in the Western world, including all US Administrations since Reagan and UK since Thatcher, has been Milton Friedman's monetarism.  That is to progressively increase the money supply regulated by interest rates set by a state central bank to manage inflation.

Hayek opposed this, Rand opposed this, Murray Rothbard opposed this. Alan Greenspan once did, and then embraced Friedman's view. Detlev Schlichter opposes it now.

A fundamental cause of the global financial crisis is the continual state issuing of new credit and new money, so that it isn't savings being reinvested, but money created from..... nothing.

Monetarism, as it is called, attempts to manage the inevitable inflation arising from this (lowering the value of the medium of exchange by producing more of it inevitably means prices rise), but ignores asset price inflation.  The property and sharemarket bubbles caused by malinvestment are ignored.

It has failed.

QE has been the Keynesian response in Japan, the US, the UK and the Eurozone.  The mass destruction of value due to these bubbles popping has been filled by massive money printing, yet it has not resulted in a sustained kickstart to demand for simple reasons.  One is that the banks, which were the conduit of the cheap credit, have been told to increase reserves, so are filling up their reserves with freshly created cash and banks have also tightened up credit enormously, because they were told to not undertake anymore bad lending.  The other is that there is a lack of confidence in the economic fundamentals.   It is why gold prices have soared, as a safe haven.

It wasn't undertaken to improve export competitiveness.  It has demonstrably failed to boost Japan's economy.  It has created minor blips in the US economy, and nothing more.

For the Standard to say that having a consistently high dollar is about speculators making money from New Zealand is demonstrable ignorance.  To think that, say cutting the value of the NZ$ by 25%, is good for the working poor (when it will raise prices of petrol, electrical goods, overseas holidays and any imported books, clothes), is bizarre.

However, socialists have long thought thieving from the mass of the population through debasing the currency was an easy path to spending more money on what they think is good for them.  Easier to implement than a straight out tax, and easier for all of the elite to evade, by shifting their own savings away from the debased currency, leaving the average people robbed.

Thursday, October 04, 2012

Why does the role of the state matter now?

The global financial crisis is seen by the left as the prima-facie case against free market capitalism.   Just under 20 years after Marxism-Leninism was shown up, on live TV, for what it was, a cold ruthless oppressive heartless nightmare, those who quietly had to admit that communism didn't work were ready to gloat.  

The collapse of investment banks demonstrated what happens when a handful of men are driven by a ruthless desire to make money using other people's money, with little regard for the risks or the consequences.  That was and is the line taken by the left.  The British Labour Party, with barely a hint of contrition, blames the banks - not the fact that it was in power responsible for the biggest bank of the mall, the one that all the others are dependent on, and nay encouraged to use for unlimited credit.

The first stage of the financial crisis saw banks face collapse over poor investment.  In a free market economy a bank that does that would be allowed to fail, but the leftwing response (indeed the conservative rightwing response if one looks at the United States) was to bail them out.  The left now claim that this is what free market capitalism is about.  Really?  Is there any sector where free market capitalists argue for state bailouts?  No.  

They who meme that capitalism is about privatising profits whilst socialising losses are talking utter nonsense.  For this would not happen in a true free market economy.  Indeed, in a true free market economy there would have been a couple of key differences from what happened.

One is the often repeated rules set up in the late 1990s by the Clinton Administration requiring lenders to loan to a segment of people who would otherwise be bad credit risks.   That in itself meant people who shouldn't have had credit to buy homes got it.  An explicitly redistributive measure that backfired.

However, the more intrusive role of the state is the central role it plays in creating money and issuing credit to banks.  The state creates money from nothing and distributes it by lending it to banks at a centrally set interest rate which they then lend onto borrowers at a profit.  That isn't free market capitalism, as a core component of capitalism - the means of exchange - is state created and its value managed by growing its supply (created managed inflation).

In such an environment, the state boosts the economy by ever increasing the money supply, with more credit being issued, supporting positive and negative investments, until at some point, the bubble in prices in investments, whether they be shares or property, bursts.  In Ireland, the state, which offered an explicit 100% guarantee of deposits, shifted the burden onto taxpayers.  In Iceland, the state let them all fail.  

The so-called deregulated free market financial sector was nothing of the sort.  It could operate largely as it wished in developing financial instruments with the public and businesses and each other, but it did not with the blood supply from the state of credit issued from nothing.  

Free market banking is not banks that issue state issued credit which is turned on and off like a tap.  

What we have had is mixed model banking, and we have it again now.

The second part of the global financial crisis has come directly from statism.  Banks have finally figured out that sovereign debt in countries that run perpetual budget deficits, and don't even have the instrument of printing fiat money to pay for it, is not safe.  Greece, Portugal, Spain, Italy and increasingly France, Belgium and Slovenia, are all facing up to reality.  The economics of every single one of those states has been ever increasing spending, ever increasing state employment, ever increasing regulation of business and every increasing debt.

The model of the socialist state, that borrows and spends between elections, passing on the burden to the future generation, has been found wanting.  It is a model that the UK has also embraced with aplomb under Gordon Brown and in the US, not just by Barack Obama, but also G.W. Bush and Bill Clinton.  

The level at which people will tolerate taxation is below the level that the left have sold the state to them.  It is that gap that needs bridging across the Western world.  With few exceptions, this is the model that has been swallowed and which virtually all states are now trying to adapt to buy time - yet they are not dealing with the fundamentals.

The US Presidential election is a facsimile of that debate.  Barack Obama believes the answer is to raise taxes to bridge the gap, albeit slowly and to continue with using debasement of the currency, through money printing (quantitative easing) to boost the economy and hopefully ensure GDP grows faster than debt.

Mitt Romney believes in cutting spending, albeit slowly, and although he would also debase the currency he is willing to investigate the merits of a shift to a commodity based currency, rather than currency based on nothing but confidence.  

In New Zealand, this debate is what should be led by Libertarianz/ACT/ the new liberal party.

A belief that the state should hold ever decreasing amounts of public debt, that it should not spend more than it takes in revenue.  That it should encourage independence not dependence, that it should encourage people looking after themselves, their families and each other, not to claim the unearned money of others by force.  That it should promote the benevolence of civil society, community and fellowship, not the sneering, mob rule of people lobbying departments, councils, community boards for new laws, new money, new taxes, engaging in endless rent seeking paid for by force by someone else.

The global financial crisis was not due to free market capitalism, its solutions were not remotely anything to do with capitalism, and today the seeds are being sown for the next financial crisis.   The seeds are quantitative easing, which has been a resounding success in keeping the Japanese economy stagnant for 15 years.

The anti-capitalists seen in leftwing parties and the Occupy movement had a point.  The model that failed four years ago was a massive transfer from all of us to the owners and employees of banks that undertook malinvestments.  

Yet it isn't capitalism that failed, and those who oppose it don't have an alternative, just anger and a desire for more government.

We do have an alternative.  

Libertarianz and a new liberal party?

Unfortunately I can't attend the Libertarianz conference this weekend, not the least because I left NZ seven years ago and haven't looked back.  Unfortunately because it promises to be the best ever, largely because the political environment for a political party that explicitly believes in less government and a smaller state has changed, dramatically.

You see the primary political debate today, as it has been throughout the last century, is the role of the state.  Leaders of major parties try to evade this, because politics has become, to a large part, an exercise in show business, slogans, imagery and trivia.  Rare is there in depth discussion about policy, philosophy or principles, but often is then commentary about politicians' backgrounds, their empathy, how they speak, look and whether they care.

With the rise of television, a medium primarily of entertainment, politics has become the dark science of the sound bite, of imagery.

However, it isn't just about that.  The internet has opened up the opportunity for anyone to comment on politics, to write or talk about it.  That has started to change political discourse, so that what people see and read is not just what the mainstream media wants them to see.

For those of us who seek to advance a consistent stand for less government, both in economics and in people's private lives, politics in NZ is at a turning point.

ACT has shrunk to a rump that is unlikely to be sustainable, and is led by John Banks, a man from the past, with a past that is simply not credible in advancing smaller government on both economic and social matters.  As Peter Cresswell said, its principles are sound, but its policies and strategies have failed to come close to sustaining a party that builds a core support of those who do not want the automatic answer of a politician to any issue of the day to be "I'll pass a new law" "I'll spend some more of other people's money".

Libertarianz has never managed to pass an electoral threshold to make it more than a dedicated club of people who simply couldn't stomach compromising their principles.  Both the presence of ACT, and the very low probability of electoral success, saw Libertarianz largely ignored, perpetuating that lack of success.  Indeed, the two most successful outlets for libertarian ideas and policies have not been the party, but the radio shows hosted by Lindsay Perigo in the 1990s and most recently Peter Cresswell's excellent blog.

So what now?

Maybe this is what I would say if I had a chance to talk to the conference this weekend...

NZ politics is dominated by political parties that share one philosophy - statism - the belief that the state should intervene, should spend other people's money, should borrow on their behalf, should pass new laws and regulations, and that there is no principled reason why it shouldn't do so.

The mainstream media echoes this.  All too often journalists ask politicians what they would "do", not "do you think the government should do something about this" or "should the government get out of the way"?  The education system is dominated by statists, nurtured by leftwing unions and academics, who all sign up to a carbon copy set of beliefs.  At best capitalism is seen as a necessary evil, but along with that are the post-modernist identity politics, the neo-Marxist belief that people are defined by their race and sex, and most recently even religion and body size.  

The legitimate concerns over pollution have been transformed into an all-encompassing religion of environmentalism, where evidence is skewed to suit a particular monologue - that man is a disease, pollution is ever increasing, that key words like "nuclear" "genetic engineering" "fossil fuels" are all placed in a basket of horror.  Where legitimate concerns are exaggerated, where evidence contrary to the monologue is ignored and the message is given that without massive state intervention in the economy and people's private lives, the environment will be destroyed and so will humanity.   

Have no doubt, environmentalism is the hijacking of universal opposition to pollution and appreciation of nature, to embrace an almost misanthropic desire to control, to attack capitalism, to grow a paternalistic, regulated state that tells people what to do, what not to do and takes their money to penalise what they don't like (e.g. flying) and support what they do like (windfarms and railways).

The Greens, of course, the ones carrying the banner for this.

Never is there a problem that doesn't demand a new law, or for more money to be spent on it. 

Behind the smiling faces of bright eyed bushy tailed people who claim to be speaking for what is clean, what is good, what is right and to help the poor, are people who sometimes tout xenophobia (if you doubt me, see how they talk about foreign investors, and how that parallels communist parodies of capitalists), who claim to use science and evidence, but peddle scaremongering.  I remember in 1999 Jeanette Fitzsimons said it was the last Christmas when we could trust a potato.  The genetic engineering armageddon hasn't happened, more than a couple are only wishing the global warming one does.   Most recently has been scaremongering about mobile phone transmitters, purely on perception. 
 
They believe in big government, with the small exceptions of scepticism about unlimited state surveillance powers and drugs, it is a party that thinks the state is people.  It sees children as not the parents' responsibility, but everyone's.  It sees people not as individuals, but as races, as sexes, as sexualities, as classes, as labels.  A party of Marxists, nationalists and even misanthropes.  People who believe the way to help people is to give them more of money taken from other people.  People whose contradictions are endless.   

I'll take one favourite of mine.  CO2 emissions should be cut, they say, but foreign ships carrying freight to and from NZ, that visit several ports along the NZ coast, shouldn't be allowed to carry freight between NZ ports.   Even though a ship that is travelling anyway emits hardly any more pollution carrying some freight from say Lyttelton to Auckland, it shouldn't be allowed.  Why?  Because the Greens sympathise with the workers on board those ships, as they aren't paid as much as NZ seafarers.  So the Greens, who say they believe in the environment, and believe in jobs and say they aren't racist, would rather have more pollution to shift freight, would rather deny Filipino seafarers jobs that are, rationally, better than others they have, all to protect their well above average salary (i.e. rich by their measure) union mates.

It doesn't take long to get down to what they really believe.  The Greens want more and more laws, more and more of your money and to spend more and more of it on their pet projects.  Precious little of it is about freedom, and for them the state is your friend, even when it is telling you what to do, spending your money on what you don't want and frightening your children with talk of Armageddon. 

Of course Labour has done a lot of that as well, for much longer.  Between the Greens and Labour it's purely a matter of degree, but I recall when Helen Clark said "the state is sovereign".  She didn't think there was anything that should stop government and politicians from doing as they think is best.  It simply made me realise what drives Labour politicians today - the desire to tell people what to do, to change society by passing laws, by spending other people's money, but most of all the cold, humourless, finger pointing oppression of the suppression of free speech.  The willingness to call anyone racist, who dares question special treatment on the basis of race, or sexist, anyone who doesn't want to introduce quotas for women on boards, has infiltrated our universities, our media and the state sector, and has been a method to deny debate and to debase argument, whilst smearing those who question in like a Red Guard from Maoist China.  Phrases like "cultural safety" have spread a climate of fear in some institutions.   A belief that people should never be offended, never be upset and that the state should police this has been one of the more insidious developments in the last twenty or so years.  It parallels the demand for faux respect of young thugs who gleefully lash out violently at those who look at them the wrong way, as if everyone should be ultra-vigilant about their behaviour and language to not offend these empty esteem-less flowers.

Being able to be open, honest and unafraid of offending people is the hallmark of a liberal society.  Labour has cultivated a culture that has eroded that.  Dare criticise Islam without being labelled an Islamophobe.  Dare criticise Maori organisations or Maori specific initiatives without being labelled as racist.  Dare criticise calls for laws to enforce quotas for women on corporate boards, or to challenge the DPB, and be called sexist.   It's not just intellectually lazy, it's aggressive, confrontational and authoritarian.  Name calling is not an argument.  The left do it all the time, we must resist doing so, unless the facts speak for themselves.

Labour's saving grace is to have courage of its convictions, meaning that almost every Labour government makes changes that endure.   It is a point those of us who want to advance freedom should grasp.   However, for the good that Labour has achieved - and most of us may look back at some of the dramatic changes pushed through in the 1980s - it has also given birth to a welfare state that has promoted and sustained intergenerational dependency, it took the just cause of redress against historic state racism and property theft to create a new taxpayer funded Maori elite, to which it is blasphemy to challenge or to hold accountable.

Labour is driven by the desire for state intervention, by the desire to change people through government, and has been responsible for so much corrosion of individual responsibility, of pride in individual success, of promotion of moral relativism and envy, that it is simply the Greens diluted.

How about National then?  What a relief so many of us felt when it was 2008 and finally we said farewell to Helen Clark, as she was about to embark on a new job, in New York, ending world poverty, on a US$500,000 a year tax free salary, travelling first class and staying in five star hotels.

However, the euphoria didn't take long to end.

The National Party, like ACT, has founding principles that I can largely agree with, but in reality it is a party with one single purpose - to be in power.  With the exception of three years when Ruth Richardson saved the country from bankruptcy, National's legacy has been at best to slow Labour, at worst to preside over a mammoth growth in the state that would make any socialist blush in the form of Think Big.  Right now it is, once again, the party of fiscal incontinence, with a new Think Big focused on building roads and a state broadband network.  National brought us the Resource Management Act, and sees reform of it largely to allow it to embark on its Think Big programme.  National sees the criminal justice system as going only one way, with new laws to allow stop and search of anyone, to allow search of property without a warrant.   National can sometimes throw us a tax cut, can sometimes ever so courageously try to sell a minority stake in a power company, it might even reverse the powers given to local government.

However, for all that, there is little sign National will advance real reforms to liberate planning laws by supporting private property rights, luke warm interest in opening up education to choice and liberating it from centralised command, control and rent seeking from teaching unions.  National is building, once again, the corporatist state, with fervent state intervention and investment in telecommunications.  It wont dare touch the Maori corporatist state or the race based electorates.   Beyond all that National offers absolutely nothing on personal freedom.   It wont even contemplate questioning the war on drugs, despite such radical forces as The Economist calling for an end to it.   It's behaviour on law and order says all you need to know - little respect for the presumption of innocence, little respect for due process.   To National, the people the police question or arrest are not "their" people, they are probably guilty anyway, so aren't really deserving of sympathy.

For a party that's meant to be about aspiration, individual achievement and respect of freedom and private property, this is contemptible.

Beyond all that, we have two race based parties, born from the belief that Maori, as a people, must have parties that mean the state specifically looks after them.   Parties that embrace the corporatist Maori elite, parties that believe that it is racist to have a colourblind state, that it is racist for an election to mean one person one vote, that it isn't possible for Maori to be individuals, and to not want Maori statist politicians to represent them.

No other party offers anything that consistently supports less government, less tax, more freedom, and a presumption that the answer to policy issues is not for government to do more.  

That's why we should.

ACT failed because it sold out principles for populism, for bending as the wind blew and so being a party like every other, slippery, slimy and more interested in power than principle and policies.  It is as good as finished.

Libertarianz failed because it has been unable to gather momentum for ideas, for principles and sell a convincing message about less government.   Quite simply not enough NZers believe in a future without the welfare state, without universal basic education and healthcare, and they aren't convinced that capitalism, free markets and most of all, individual initiative, can be an effective as well as a moral substitute for government.

There are good people in the National Party, people who do believe in less government.   They may mean that, in the long term, there is some hope.   However, they are in a party that exists to straddle the mainstream.  They face opponents who embrace the state, who talk of "investing" other people's money and passing new laws, and of being modern and "reinventing" politics, when virtually all of them are just rehashing statism, again and again.

Those good people in National are our allies, but National will not and cannot be a sufficient platform in itself for disseminating liberalism.   

So what do I mean by liberalism?

It isn't the leftwing definition, whereby it means being liberal with other people's money or being a moral relativist about crime.  It doesn't mean letting murderers and rapists out of prison in a handful of years because it wasn't really "their" fault.  I am using it as a synonym of libertarianism, classical liberalism or whatever you want to call it.  

I mean belief in less government.  The belief that government can't and shouldn't pick winners in the economy.  The belief that the state sector's role in the economy exists primarily to protect law and order, enforce contracts and protect property rights.  The belief that state welfare should not incentivise its usage as a choice, rather as a last resort and that those who wish to help those less fortunate should be encouraged to do so, with their own money.  The belief that the state shouldn't dominate the education system, but allow it to flourish with diversity, variety and choice, so parents choose and their choices are reflected in where the money goes in the system.  The belief that healthcare policy is not a choice between a paternalistic centralised state system or the broken US corporatist/state system.   Finally, the belief that pensions and retirement cannot be guaranteed by a ponzi like state scheme.   I do not fear foreign investment, but embrace the idea that state owned enterprises should be privatised, perhaps by handing out shares to taxpayers as well as sales to cornerstone investors.

I also think that the basis for a free, secure society is rule of law, which means reviewing all criminal laws, to decriminalise or abolish victimless crimes, including reviewing drugs policy.  A point that needs to work with welfare, education, health and even ACC policies.   The Libertarianz policy of legalising drugs needs to answer real concerns from parents that it will mean schools are awash with brain damaging substances - one of the answers is to look at Portugal.

It means that the rule based RMA, driven by local planners who just think they know best how your property should "fit in" to their grand ideas, is replaced by a property rights based framework, so that what you do and don't do with your property is based on how it affects the rights of others to do the same with theirs.

I also think that monetary policy's role in the recent financial crisis needs to be investigated and the fundamentals of monetary policy reviewed.

A new party needs to come up with some clear messages.  It needs to defend capitalism without shame, it needs to take on every attempt to create a new law, a new regulation and a new tax, with arguments based on principle, experience and reason.   It needs to harness the natural scepticism most people have of politicians and bureaucracy.  

After all, would people really expect their MPs to buy their groceries, their clothes, their holidays?  Why should they trust them to buy them homes, their healthcare, their pensions and their kids' education?

Why should the future of Maori be defined not by what they themselves achieve as individuals, as employees, employers, entrepreneurs, parents, as people - but by what the government gives them in money, jobs or "rights"?

The new party will not have the policies of Libertarianz, not because they are wrong, but because they are unrealistic in a Parliamentary term for a small party.  What we need is a clear statement that the new party will vote consistently for steps to reduce the size of the state in its non-core functions, that it will support fiscal responsibility, so that a tax cut means a spending cut, that it will support property rights and enforcement of real crimes, but not creating new crimes just on the whim of the latest outrage.  It means rejecting Think Big whether it be roads or railways, broadband or solar energy.  It means supporting steps towards individuals having more choice in health and education, and weaning people off of welfare, by making it easier to start up and sustain business without the state wanting its share from day one.

It means changing the terms of the debate. 

It means arguing for less state, not more, for the state to do what it is meant to do well, and to leave everything else to businesses, voluntary groups and individuals.

and to do so proudly.

Tuesday, October 02, 2012

Hobsbawm - influential yes, deserving veneration? Hardly

The death of Eric Hobsbawm at 95 has provoked outpourings of paeans to his legacy, glorifying his undoubted significant contribution to the scholarship of history and in being influential, especially to Labour politicians in the UK. He has many fans, it includes Labour leader Ed Miliband, former NZ leftwing Prime Minister Helen Clark and a virtual who's who of leftwing activists in the UK today.

It is right for those who knew him personally to commemorate him on that level, as a friend or family member.  However, he is also presented as being more than that, as a great historian, but also with a moral fibre that was impeccable. 

Almost universally he was described as gentle, Tony Blair said "He wrote history that was intellectually of the highest order but combined with a profound sense of compassion and justice. And he was a tireless agitator for a better world".

Really?

I am not going to dismiss claims he was a nice man in person, nor will I criticise his works, because I am not a scholar of history and I have not read them.  However, Hobsbawm has his own history, that lasted to his final years, of being an apologist for the most blood thirsty regimes of the 20th century.

He wasn't just a Marxist historian, he was a member of the British Communist Party until its dissolution and he turned his back on the mass murders, starvation and atrocities his comrades committed for the cause, even recently effectively claiming that the ends would justify the means.  


A synthetic quartet, from Age of Revolution to Age of Extremes, dazzles readers with the author’s apparent fluency as he zigzags from First to Third World contexts – unless you happen to be an expert on Cuba, Mexico or Venezuela.Throughout, there was a dogmatic refusal to accept that the Bolshevik Revolution had been a murderous failure. Asked by the Canadian academic and politician Michael Ignatieff on television whether the deaths of 20 million people in the USSR – not to mention the 55 to 65 million victims of Mao’s Great Leap Forward – might have been justified if this Red utopia had been realised, Hobsbawm muttered in the affirmative.

Why is it that people who would, to a man or woman, claim they believe in compassion, even free speech and human rights, choose to have an enormous blind spot about a man who gave succour to those who created rivers of blood for the communist utopia?  

Imagine, for example, if he had embraced National Socialism, and had grudgingly accepted that the Holocaust would have been justified if a greater Europa run by Germany had been a happy, healthy, strong, fully employed economy of aryan people with order, wealth, equality and peace?  I can barely bring myself to write such nonsense, but he would have been vilified and ignored.  However, he embraced Stalin, he stuck with the Communist Party ever after the USSR crushed the revolutions in Hungary in 1956 and Czechoslovakia in 1968.  The various genuine claims about his compassion and character seem awfully cold when there is a calculated lack of passion about those crushed under the machine of "actually existing socialism".


I came across this when I asked Ben Pimlott if he regarded the atrocities of Soviets somehow less vile than those of the Nazis. He said he did but could not or would not offer an explanation. The explanation probably would have been something like: the Soviets were well-meaning, attempting to build a better world and the Nazis were simply evil. This is barely worthy of consideration. Both Stalin and Hitler appealed to better world ideologies built on absurd theories of history and both thought they were justified in killing millions and imposing suffering on a scale never before seen. Even if we give some moral credibility to communism, the character of Stalin is enough to detonate any notion that he was pursuing some great cause.

Cobden Centre fellow John Phelan says that he is no more worthy of acclaim than the pseudo-intellectual David Irving, which seems rather unfair, as Irving has spent his life denying reality explicitly, whereas Hobsbawm simply chose to be wilfully blind:

Time and again Eric Hobsbawm was faced with the full scale of the horror visited by the regime he supported and time and again he remained loyal. As he wrote in 2002“The Party . . . had the first, or more precisely the only real claim on our lives. Its demands had absolute priority. We accepted its discipline and hierarchy. We accepted the absolute obligation to follow 'the lines' it proposed to us, even when we disagreed with it . . . We did what it ordered us to do . . . Whatever it had ordered, we would have obeyed . . . If the Party ordered you to abandon your lover or spouse, you did so”Hobsbawm pleaded for “historical understanding”; he isn’t hard to understand. He was a man who failed to see that the choice of one murderous regime over another was no choice at all, who lacked the humility to admit it, and who was possessed of an incredible ability to blind himself to realities, no matter how bloody, which didn’t fit his view of the world.

Observer columnist Nick Cohen says of his work:

If you need convincing, look at Hobsbawm’s Age of Extremes The most brilliant analysis of the 20th century sits alongside the most abject apologias for tyranny. For all his contradictions, I’ll miss the better side of his intellect.
He notes about how Hobsbawm defended Stalin's Pact with Hitler:

I expect we will hear one excuse tomorrow that ought to have been buried with the Soviet Union: “communists excused Stalin because they were consumed by the laudable desire to fight fascism”. It is a half truth at best. The far left of the 1930s did indeed fight fascism. But in 1939 Stalin stood on his head and signed a pact with Hitler. For two years, until Hitler invaded the Soviet Union, western communists and their sympathisers stood on their heads too and became the Nazis’ de factoallies. I have always been fascinated by ‘the midnight of the century’, when far left and right united against the middle, because it echoes our own time when liberal leftists excuse and indulge the radical Islamist right. 

Quite.  Right now we see again and again, the willingness to gloss over someone who had a blindspot, if not quite a denier for the atrocities his comrades committed.

Hobsbawm seemed like an old man who could never face up to the fact that he backed the wrong horse, it saw men and women murder, starve and torture on a scale unheard of in history.   That lack of contrition, lack of strength of character to admit he was wrong, means his memory will forever be darkened.

He was one of those academics that universities, and the politicians and bureaucrats who they spawned, forgave, glossing over these inconvenient black spots in his beliefs, to embrace his thoughts and writings.

Like the umpteen leftwing writers, especially feminists, today who treat Islam and Islamists with kit gloves, because, to them, it represents an attack on capitalism, sexualisation of women and conservative Christianity, those who today praise him - who did not actually know the man - are guilty of the same moral blind spot.

It isn't being nasty or mean to question the legacy of a man who happily sat on the side of murderers, indeed it is morally vacuous to do anything but that.

Douglas Murray writes as if a Nazi sympathising equivalent had died.

More below

A comment on the Daily Telegraph wrote of Hobsbawm and his utopianism and his abject refusal to see the evidence that the results of his philosophical beliefs were misery and horror. I thought it was worthy of repeating:

That Hobsbawm has learned nothing from living in England and that he has failed to grasp the fact that ideologies dedicated to remaking man and transforming him into some gruesome socialist robot have failed, and were doomed to fail, is demonstrated by his admiration of the Communist Manifesto. There are only two types of person that can admire such a hideous manifesto: those who want to exercise power over all other people; and those who are willing to submit to such power provided that their material needs are met, slaves in other words, people born for the whip (but at least they know they are slaves and they enjoy the kiss of the whip). I assume that Hobsbawm sees himself as some kind of Marxist Grand Inquisitor ruling over the dumb proletariat and wielding his whip for their benefit in between sequestering the assets of the hated middle classes and so reducing them to servitude and penury. It goes without saying that no serious Marxist could or would ever derive any envious pleasure from expropriating and defiling the hated expropriators. It is done out of a sense of duty to History (really). 


Some 36 minutes into an interview with Hobsbawm (Life in History, BBC Radio 4, repeated tonight) and I have still not picked up any mention of Lenin, Stalin, Pol Pot or any reference to the genocide carried out by communist regimes in the 20th century. Finally, in the 45th minute, we reach the question for which I had been waiting. Hobsbawm is asked why he stayed in the Communist Party. Ever solicitous and unctuous, Schama and the programme editor avoid posing any awkward questions by the expedient of citing part of an earlier interview with Sue Lawley on 5th March 1995 (I am sure it is pure coincidence but Stalin died on 5th March 1953). When asked about mass murder in the Soviet Union by Lawley, Hobsbawm says that he did not know; he says he did not believe the details, perhaps, he says, he did not want to believe them (so much for evidence then and the reliability of Marxist historians). 

He says: ‘We did not know the extent of it’ [communist mass murder]. Lawley then asks whether such was his dedication to the dream of communism that any kind of sacrifice was worth the price:

Hobsbawm: “Yes, I think so”

Lawley: “Even the sacrifice of millions of lives?”

Hobsbawm: “Well that’s what we felt we had fought WWII for, didn’t we?”

Lawley: “Is there a difference between killing someone in war and killing your own?”

Hobsbawm: “We didn’t know that”

.As Hobsbawm says ‘We didn’t know that’ you can detect the utter fear and panic in his voice. This is the question he has known would come and has dreaded. Hobsbawm clumsily dodges the question and Lawley lacks the killer instinct to press the point of the knife to his throat. No listener can be convinced by Hobsbawm’s repulsive denial. There is, of course, a universe of difference between killing the enemy in war for survival and butchering millions of kulaks, so-called class enemies in the 1930s (circa 11,000,000) in order to build socialism. The fact that Hobsbawm claims not to see any difference between communist class war and a national fight for survival denigrates the struggle that Britain waged against Nazi Germany. According to Hobsbawm’s perverted view there is no difference between British soldiers killing German soldiers and Communist Party activists murdering millions of unarmed and innocent peasants in Ukraine by shooting and mass starvation.When Hobsbawm says ‘We didn’t know that’, one has to ask when he did finally know THAT, that being the real nature of the totalitarian Soviet Union and its imitators. Why did Lenin create the most brutal and long-lasting system of censorship in the twentieth century? What was Hobsbawm’s reaction to the news of the Soviet-German Non-Aggression Pact (Molotov-Ribbentrop Pact)? What did he make of the publication of Doktor Zhivago? Why did the Red Army invade and rape Hungary (1956), Czechoslovakia (1968) and threaten to invade Poland in 1981? What did he make of Solzhenitsyn, the Truth Teller? Why did the Soviet state kill and imprison writers? Why did the KGB arrest the manuscript of Vasilii Grossman’s Life and Fate? Why did Stalin judicially murder some of his most talented army commanders at the moment when the threat posed by National-Socialist Germany was all too clear? How does Hobsbawm explain and justify Order № 00447? 

 When did he realise that the massacre of 21,857 Polish prisoners at Katyn and other sites in 1940 was a Soviet crime not a Nazi one? When did he finally accept that the full scale of the Ukrainian genocide, the Holodomor, with its 6,000,000 dead from genocide by starvation and another 5,000,000 dead from cold, disease and shooting? Does Hobsbawm even accept that the Holodomor took place? Hobsbawm says that his continuing membership of the Communist Party is a Cold War question and is irrelevant. This is a self-serving, cowardly evasion and Hobsbawm knows it. If a 95 year old former member of the National Socialist German Workers’ Party was asked about his continuing loyalty to National Socialism would Hobsbawm be satisfied with an answer along the lines that ‘this is a WWII question and is irrelevant’? Thousands of questions that historians ask about the Soviet regime are Cold War questions: are they irrelevant as well? Recall Hobsbawm’s views on chronology: ‘without chronology there can be no history’. That is true of an individual as well and in a BBC programme dedicated to a ‘life in history’, questions about Hobsbawm’s membership of the most genocidal political institution in man’s history are utterly relevant. 

There is another Cold War question that requires an answer: was Hobsbawm ever recruited by any Eastern European intelligence agency, say, the KGB or Stasi, with the aim of spying on academics and students known to be hostile to socialism? Hobsbawm could remove all doubt and speculation by stating unequivocally that he was not recruited by any Soviet bloc intelligence agency and that he never provided any information to any intelligence agency. Hobsbawm should also ask himself whether an academic, let us say the existentialist philosopher Martin Heidegger, who remained a committed National Socialist until his death in 1976, would have found employment in a British university. Hobsbawm’s continuing belief in Marxism in 2012 reflects a state of mind that, despite all the earlier, reasonable talk about evidence and reason, is one that is demonstrably impervious to evidence and reason: the hallmark of the true revolutionary-believer slave.Hobsbawm’s position on Soviet genocide is nauseating and hypocritical even by the standards of British academics that played down Stalin’s crimes. 

Why does Schama not press the case about genocide committed in the name of communism to the point of destruction? In fact, a more aggressive and less easily deflected interviewer than Lawley could easily have brought about Hobsbawm’s psychological collapse on air. Hobsbawm sounded very close to breaking: he knows that Marxism is repulsive and he knows that for all his adopting the pose of the learned academic that his support of Marxism and his failure to acknowledge the full scope of communism’s hideous crimes against humanity, far worse than anything committed by the Nazis, is disgusting, cowardly and immoral. There is no difference between the person that denies National-Socialist crimes against Jews, the Holocaust, and communist propagandists like Hobsbawm who deny the Holodomor and other crimes committed by communist regimes. Schama’s role here is also disgraceful and shameful since by failing to ask and to press home the forensic questions that should have been pressed home he allows Hobsbawm’s prevarication and mendacity to pass unchallenged.