Gordon Brown is not a true Keynesian

A budget deficit of 12% of GDP is apparently "right" so says Gordon Brown. This is a Keynesian view apparently.

Well setting aside whether Keynesian is right or wrong (it's wrong, but that's for another day), Allister Heath in City AM has written today about how this was never Keynes's view:

John Maynard Keynes, whose work is often cited as justifying our fiscal incontinence, would in fact have been horrified at the scale of the deficit and our over-sized state sector, which the OECD puts at 52 per cent of GDP. Keynesians argued that governments should allow the budget to go into the red in a recession by a few percentage points of GDP, with 3 per cent usually the maximum – perhaps 4 per cent if things were truly desperate. Nobody ever claimed one could prudently rack up three or four times that level – and crucially, proper Keynesians supported budget surpluses in the good years. Brown’s constant structural deficits even at the height of the bubble would have been anathema to them.

So even if you believe in big spend ups during recessions, what Brown has done is THREE TIMES the scale of deficit spending that Keynes himself argued, and that during times of growth, budget surpluses should be run (which would then pay down debt). Gordon Brown only ran budget surpluses twice as Chancellor of the Exchequer, primarily due to inheriting a prudent Tory budget in 1997 and windfalls from selling mobile phone radio spectrum.

Furthermore, cutting budget deficits is positive because it:
- Reduces transfers from taxpayers to foreign sovereign debt holders;
- Reduces the crowd out of the state in the debt markets, reducing the cost of debt to the private sector.

In addition, the best way to do this is to reduce consumption, not increase taxes and not reduce spending on the few areas of positive economic expenditure like roads (which in the UK are grossly underfunded).

One European Commission survey of 49 countries that cut their deficits found that 24 of these fiscal consolidations promoted growth even in the short term – even when deficits were considerably lower than 12 per cent of GDP. The higher the deficit, the more likely that cutting it will boost growth immediately – a conclusion implied in a February 2010 study from the European Central Bank which found that the crisis has caused markets to punish irresponsible fiscal behaviour even more severely than before.

It’s quite simple: we need to cut the budget deficit as fast as possible by reducing spending. That, rather than messing around printing yet more money, would provide the best, most effective stimulus for the UK economy.

So in short, Gordon Brown has screwed up big time, the UK is only avoiding Greek like concern because UK governments don't default, UK savers have had their cash assets devalued as the pound drops, and the UK government hasn't lied like the Greeks.

To treat Labour as if it has been a profound saviour of the British economy is a joke - it has wasted money, running deficits during the good years and is now running up public debt that will hold down the UK economy for many many years.

It is a good enough reason to kick Gordon Brown out in utter disgrace.

Gordon can't have it both ways

Now if you believe in Keynesian economics, and think that the government pouring money into the economy is “good” for it in prime pumping demand, and consequent economic activity, you think that when the government spends more it is a good thing.

Presumably, you would argue that reducing taxation would similarly be good, as it would leave more money in the hands of private citizens to spend or save (the latter typically in banks or repaying debt).

Well according to Gordon Brown the answer is no.

You see he constantly accuses the Conservatives of wanting to “wreck the economy” by cutting spending more quickly than Labour. Yet when the Conservatives promise to NOT increase tax (a form of income tax labelled National Insurance) as MUCH as Labour, it is doom and gloom because it means the budget deficit will be a problem?

Who is right Gordon?

If the economy should have more money in it, then the state taking less makes sense right? If the budget deficit is a bigger concern, then the state spending less makes sense too?

The ONLY reason you can support more state spending, and more tax is nothing to do with economics, but everything about what you think the role of the state is – to do ever more.

Tony Blair’s “New Labour” which long ago promised to contain spending, following on from Thatcher’s modest degree of fiscal prudence, has clearly disappeared. Labour is now the party of ever bigger government.

A libertarian voting in a UK General Election

So “I saved the world” Gordon Brown has finally called 6 May as the date for the next UK General Election. It is worth noting how electoral terms in the UK are longer than in most countries. The last election was nearly five years ago, and that was a shoo in for Tony Blair and Labour, against Michael Howard and the Conservatives (which barely picked up a handful of extra seats). In coming weeks this will be my primary blogging topic for obvious reasons.

The UK election is likely to be close. Recent polls have put the Conservatives ahead by between 2% and 10%, with 7% needed for an overall majority (bearing in mind the UK has a First Past the Post electoral system). Some pundits are picking the Conservatives winning a plurality of seats, but short of a majority, so requiring the support of others to govern (which currently is mostly the Liberal Democrats, the Scottish and Welsh nationalist socialists and the Ulster sectarians).

The big issue for me is who to vote for (or to vote at all). The Libertarian Party UK is more like ACT in NZ, and probably wont have a candidate in my constituency in any case. It may come down to Conservative vs. UKIP, in both cases there are a long list of reasons to say “no”, with maybe only one or two reasons to say “yes” to either. It goes without saying that Labour is beyond redemption as a party of ever growing nanny state in both regulatory and financial terms, and the Liberal Democrats are just a different version of Labour. There is every reason for the Labour government of Gordon Brown to be consigned to the proverbial dustbin of history, but little reason for the Conservative Party of David Cameron to be given the chance to tinker with the nanny state, and slow its growth. Voting for the Conservatives means removing Gordon Brown, but is it right to endorse a different way of cooking the same dish? Poison laced with chocolate instead of lemon is still poison. Is it better to vote UKIP to send a message to the Conservatives that compromising on your principles costs you support? Or is the populist nationalist rant of UKIP so unconscionably awful that it doesn’t deserve endorsement? Should I simply choose based on the candidates themselves (a good small government minded liberal if any exist)?

Greens continue to oppose economics and individual freedom on transport

It's not just because transport is my area of expertise that the Greens particularly annoy me in their treatment of this sector, but it actually displays so much more of their ideology and their approach to reason, economics and individual liberty than many other sectors do.

The Green answer to everything in transport is to take a simple child-like approach to it all. It comes down to:

"People make the wrong choices (according to us), we should force them to make the right choices by taxing the wrong choices and subsidising the right ones, and banning the development of wrong choices."

One of the most liberating development in modern history has been the technology of transport. The steam engine changed the face of international trade and travel by sea, and then nationally and locally by rail. The internal combustion engine did the same for road, sea and rail, and facilitated the development of air travel. Since then, asphalt, mass production, radiocommunications, the jet engine and the continued advances of technology have opened up the planet to exploration, communication, trade, travel, commerce and social exchange.

Now there is no doubt that there have been some negatives along the way. Millions have died through accidents by faster transport. It has been inevitable that engines would explode, catch fire, or fail to function, or that people would get in the way of vehicles, or would make mistakes while driving them. Yet on a per passenger km basis it is the safest it has ever been.

Many cities suffered from chronic pollution due to high concentrations of vehicles, but few environmentalists today would think that it was the steam locomotive that first caused that concern. The now very sought after suburb of Thorndon in Wellington was once not so appreciated, as the steam locomotives in the Wellington rail yards produced smoke and noise that was less than pleasant for many local residents. However, again the pollution from vehicles on a per vehicle km basis is steadily lower, as they become more and more fuel efficient. The introduction of electric cars promises to take this further, but the Greens are willing to dismiss this.

Why? It will "take too long" to have more electric cars in the fleet (apparently not believing their religious faith that Peak Oil will price petrol powered vehicles off the road), and it wont solve congestion.

Well they are right on that front - congestion is simply due to demand exceeding supply of road space. The answer is to price usage of the road so they are in equilibrium, and surpluses might be spent on additional capacity if it makes economic sense. Nowhere has a new world city reduced traffic congestion by the Green fetish of highly subsidised public transport.

However, embracing the technology of the stone age in the form of walking (and its close cousin cycling) is also telling. Now both are perfectly viable for short trips, for many people. They are useless for freight, useless for trips of more than a few kms and of course many (elderly for example) simply can't use them for much. How can anybody looking forward get excited about walking and cycling?

Of course, the main competitors for walking and cycling are public transport - which the Greens want to heavily subsidise, so that people are more likely to ride a bus or train than to walk or cycle. However, that's about economics, which is simply ignored in the Green view.

The Greens reject reason in ignoring the overwhelming evidence that forcing others to pay huge amounts of money for public transport does not resolve traffic congestion, and still only means a small minority of trips are taken by public transport in cities. They further ignore any talk about public transport sometimes being less environmentally friendly than driving - such as the support for the trains that carried less than a busload of travellers to Napier and Invercargill.

They reject the clear economic case that the main problem with roads is that they are managed and priced as commons, not as economic commodities. They furthermore embrace the slowest modes of transport, despite the obvious evidence that they have a peripheral role in most cases, but reject the private car EVEN when it is to be electric powered, because even then it means people travel not when they are scheduled to do so, on a collective mode of transport, but because they choose.

The rational approach to transport is to let the state get out of the way, use private property rights for roads to manage environmental issues and let users of each mode pay their own way. However, for those who believe in collective brains and collective thought, it somehow seems fair for people to pay for how others move, not how they move, and to ignore that the price mechanism remains by far the fairest and most effective tool to ration scarce resources.

Greenwar, what happens when environmentalists get angry

Greenpeace likes to portray itself as embracing non-violence. However, as people around the world have become increasing sceptical about the agenda being peddled by the left dominated environmentalist movement, the continued use of dialogue and discussion has gotten under their skin. Gene Hashimi is from Greenpeace India, and he clearly has forgotten the "peace" part of the organisation's name (not that it has ever used force, no never) with his two part blog post on the Greenpeace blog.

Why would I post a link to it? Because of the threat contained at the end:

he proper channels have failed. It's time for mass civil disobedience to cut off the financial oxygen from denial and skepticism.

If you're one of those who believe that this is not just necessary but also possible, speak to us. Let's talk about what that mass civil disobedience is going to look like.

If you're one of those who have spent their lives undermining progressive climate legislation, bankrolling junk science, fueling spurious debates around false solutions, and cattle-prodding democratically-elected governments into submission, then hear this:

We know who you are. We know where you live. We know where you work.

And we be many, but you be few."

and you'll be up against the wall when the revolution comes. After all, why should you say such a thing unless you were threatening people at their homes or workplaces? Why should it matter that you tell people where they live and work, unless you want to scare them?

Greenpeace has noticed this has caused some alarm. It has engaged in enormous spin to DENY that he is any kind of violent guy. It says "Gene's blog entry is about encouraging PEACEFUL civil disobedience - the kind of peaceful methods that liberated Gene's country (India) from imperialism. I know Gene, and he's a genuinely peaceful guy who believes in the power of peaceful protest to change the world. Some people are trying to portray him as otherwise. Just read what he had to say in context. He is very specific about what he thinks people should do."

Really? In context?

OK. So what does his blog entry say otherwise. Besides the classic anti-US propaganda "Why did the US, despite being responsible for the largest per capita share of global CO2 emissions" - it's not Gene, Qatar is, but too scary to confront Arab monarchies is it?" and then getting upset that the oil industry does what his side has done for many years "The smoke and mirrors created by the fossil fuel lobby are impenetrable. Their own tracks well covered, they operate through front groups, shell companies and think tanks.", it's all just a lot of anger. He is basically upset that some people have a lot of money to put forward their point of view, not that Greenpeace is lacking cash of course.

He talks about how the Micronesian government wrote to the Czech government to tell it to stop the expansion of a coal fired power plant (funny how it didn't write to the Chinese government, except of course China is a generous provider of aid and is unlikely to be responsive). Then lies about it, because the Czech government ignored Micronesia saying "this has revealed that a watertight legal case, a high moral ground and a credible support base are no match for infinitely-resourced and well-muscled think-tanks." Now the coal sector is in cahoots with the oil sector, this "watertight legal case" simply doesn't exist, and what he doesn't say is that the expansion includes modernisation to reduce the rate of emissions. Ahh, Gramsci is alive and well.

So what does he propose to do? "We need to join forces with those within the climate movement that are taking direct action to disrupt the CO2 supply chain". Direct action is code for breaking the law and ignoring private property rights. He endorsed the view of this peaceful person:

"The politicians have failed. Now it's up to us. We must break the law to make the laws we need: laws that are supposed to protect society, and protect our future. Until our laws do that, screw being climate lobbyists. Screw being climate activists. It's not working. We need an army of climate outlaws"

Seems to me a little like another movement that existed in China around 40 years ago.

So the lesson is, if you don't get your way, you break the law and you threaten those who disagree with you.

It's always been nonsense that Greenpeace is about non-violence, as it has heartily embraced state violence to ban, tax, subsidise or compel whatever it wants - now it's more open, Greenpeace supports threatening directly.