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On 14 June last year, just prior to the UK General Election, I noticed parallels between the Labour Party and its stated aims and how matters unfolded after that party won power in 1964 under Harold Wilson.
An important event was the sterling crisis of 1967. And this week, we read of how the yields on UK government bonds (gilts) have soared – which means investors are far less confident in the country’s creditworthiness. UK Chancellor of the Exchequer, Rachel Reeves, now dubbed in certain quarters as “Rachel from Accounts” due to her questionable background details, is in China at the moment (interesting destination), and there is talk of how the UK might need to be bailed out by the IMF as it was in 1976. Even if this does not come to pass, the descent of this government has taken place with tremendous speed. We could be headed for a sterling and government debt crunch; there is widespread and justified anger about its handling of criticisms about the “grooming gangs” saga; the questionable decision to hand over the Chagos Islands in the Indian Ocean to Mauritius looks worse by the day; the government is going after private schools and educational rigor more generally; one in five working-aged adults are economically inactive….and on it goes.
We are not out of the first half of January yet. “Hard pounding, Hardy”, as Nelson said at the Battle of Trafalgar.
Holman Jenkins Jnr, an opinion columnist in the Wall Street Journal, reflects on the mix of bad faith, moral cant and low protectionist nonsense that underpins so much Western policy on electric vehicles:
Subsidizing green-energy consumption is simply to subsidize energy consumption, including fossil energy. EVs are “strategic” only for China, to reduce its reliance on imported oil in anticipation of military conflict with the U.S. For the rest of the world, including the U.S., electric cars are a consumer technology, albeit a fast-emerging and promising one. Sensibly, they’re also a technology that should have been left to consumers and carmakers to adapt and develop without distorting handouts and mandates.
The result is finally in view: a colossal self-destruction of the Western auto industry, with Germany’s at the forefront. Volkswagen is in a panic about Chinese competition to the money-losing EVs that Berlin forces the company to sell. Germany’s export-led economy is in free fall. Its bellwether auto giant, VW, is pursuing its first-ever domestic factory closures and layoffs.
Likewise, Ford CEO Jim Farley sees his company’s survival in the U.S. threatened by Chinese EVs given the tens of thousands of dollars Ford already loses on each of its government-mandated electric vehicles. The author of Germany’s auto mess, Angela Merkel, is now reviled as an unprincipled bandwagon grabber. Don’t kid yourself. The same reputational fate is coming for Messrs. Obama and Biden. Mr. Biden’s EV protectionism is America’s admission of defeat. The U.S. went from “Americans must buy EVs to save the planet” to “Americans must be prevented from buying cheap, high-quality Chinese EVs to preserve a government-created domestic boondoggle.”
Jenkins also refers to the concept of “permission structures” and the malign legacy of the Obama administration. (He links to this article at The Tablet.) I like that term – it coheres with concerns about how an “administrative state” has evolved over the decades to impose policy outcomes at a remove from democratic oversight or the sharp and corrective blast of free market competition. Worth a read.
The UK’s Institute of Economic Affairs, the think thank, has recently opined about “mission-directed governance”, which is a sort of automated paternalism (I discussed this offline with Paul Marks of this parish). The IEA piece links to an interesting paper about East Asia and forms of authortarianism.
Update: From Guido Fawkes today:
The UK’s electricity grid came worryingly close to blackouts yesterday – just 580 MW shy of the lights going out – in what independent energy consultant Kathryn Porter described as the “tightest day since 2011 or before”. National Grid ESO had to issue its first Electricity Market Notice of the winter, along with a third Capacity Market Notice, though the latter was quickly binned. No surprise that cold weather means more heating and energy…
A sharp drop in wind output combined with limited electricity imports from Europe left the grid scrambling to keep the lights on. Yet Red Ed is still pushing to fast-track planning permission for a wave of new wind farms — despite the inconvenient truth that these turbines have to be switched off when there’s too much wind and the grid can’t handle it. Meanwhile Labour is ploughing ahead with their plan to make wind and solar the backbone of our energy system to hit 95% renewable energy by 2030.
“The legitimacy of altering social institutions to achieve greater equality of material condition is, though often assumed, rarely argued for. Writers note that in a given country the wealthiest n percent of the population holds more than that percentage of the wealth, and the poorest n percent holds less; that to get to the wealth of the top n percent from the poorest, one must look at the bottom p percent (where p is vastly greater than n), and so forth. They proceed immediately to discuss how this might be altered.”
– Robert Nozick, noting how the presumption of equality of wealth as a just default position is widely held and rarely challenged head-on.
Anarchy, State and Utopia, page 232. The book’s second section, in which Nozick demolishes egalitarian ideas about equality and what he calls the “patterned” approach to justice in holdings, is in my view the best bit of the book, and enduringly influential on many classical liberals, libertarians, etc, to this day. The book was published in 1974, and Nozick was a Harvard academic at the time. (Proof that the 1970s was in some ways a fertile time for good ideas, and Harvard was in better shape than today.)
“Build 1,000 new state of the art nuclear power plants in the US and Europe, right now. We won’t, but we should.”
– Marc Andreessen
TIME Magazine has made Donald J Trump, re-elected to the White House, as its Person of the Year. These POTY titles don’t necessarily mean the publication thinks that X or Y are good or praiseworthy; what counts is that they are significant in some overwhelming way. Trump fits the bill perfectly. Without a doubt, his election in November will shake things up, not always for the better. But shake them up they surely will.
If I were to choose an alternative POTY from the ranks of politics, my choice would be Javier Milei, president of Argentina. He’s been in the job for just over a year. On his watch, inflation in a high-inflation country has sunk to low single-digits. He’s deregulated the rental market and prompted a flood of new rental housing, cutting rents as a result. He brandished a chainsaw as his symbol of what he wanted to do to government. Thousands of public workers have been laid off; a number of regulations have been scrapped. The price of Argentinian debt, both public and private, has risen, and the yields have fallen. This represents a massive vote of confidence in the creditworthiness of a nation renowned for its fecklessness for decades. This will attract capital and investment, helping the country pull out of recession and hopefully, boost living standards in a sustainable way. It needs to happen: there is a lot of poverty in that country.
As a result of some of this free market medicine, the Argentinian peso has risen in value: The peso-dollar has surged 22 per cent a year before. So much so, in fact, that Keynesian columnist Ambrose Evans Pritchard, who often predicts the case for reflating this or that country with lots of cheap money, has denounced this situation. For those who have seen Latin American currencies reduced to dogfood (apart from maybe in Chile) in recent decades, no higher praise for Milei can be higher than catching the glare of a columnist who is so often wrong in his predictions.
So there you are: My choice for Man of the Year would be a chainsaw-wielding fan of Austrian economics in Buenos Aires, an actual classical liberal in a world gone increasingly collectivist.
Update: I fixed the way of expressing the foreign exchange rate; apologies. The point stands: the peso is worth a lot more today than a year ago.
Another update: Does a stronger Argentina make it more likely the government might try and re-take the Falklands? Maybe; one risk factor now in play is that under a socialist and self-hating PM, Sir Keir Starmer (who has an inferiority complex about Mrs Thatcher), the Argentinian public might, with some reason, think there is a chance the UK could be persuaded to transfer control. There is a lot of oil down in the South Atlantic; Milei does not, as far as I know, give a damn about Net Zero and might eye the area as a key resource. But he is also not a fool and might, with justice, think that a row with the UK is not worth the trouble, particularly if Argentina looks to rebuild trade relationships, particularly in a world of rising tariff barriers.
“But there is a limit to how much we can gain from a combination of long-term reforms and controlled disruption. The deeper problem with the public sector is not the people who run it but the people who use it. The combination of an ageing population and a stagnant economy means that a growing number of countries can no longer afford the largesse of the post-war era. And the only viable long-term solution to this problem (barring a productivity miracle) is to cut big entitlements rather than to pretend that we can force the public sector to produce miracles. What really needs to be disrupted is not so much the workings of government as the public’s expectations.”
– Adrian Wooldridge.
“I honestly don’t understand how it can be so hard to cut immigration. The government has and has long had all the tools it needs at hand to actually do it – if it actually wants to. Especially as only around 25% of visas are actually work visas. I wonder if the way forward is just to give responsibility for incoming workers to companies. If they need workers [that they] can’t find in the U.K. they can hire abroad, sponsor, house and finance them within a 3-5 year circular visa system. [This] Takes stress of public services especially the NHS and housing; it allows workers to make money to take home and reduces long-term numbers. Japan has a system much like this.”
– Merryn Somerset Webb, columnist. These comments appeared on her Linkedin page.
While many on the free market side of the fence can be at odds on the immigration issue, what seems plain to me is that controlling legal immigration ought to be pretty straightforward if that is the policy. So why is this so hard to do in practice? I cannot help but think that it is a lack of political will, and an element of resistance to enforce democratically-enacted policy at the level of the Civil Service. In which case, it is no wonder that the Conservatives got crushed in July and that, on current trends, the current shower in government will go the same way.
“We are seen, bluntly, as a country run by student union activists, a place where violent criminals are released from prison to free up space for people who have posted nasty comments online. If you’re British, you might protest that things are more complicated than that, but you must also concede that our critics have the big picture right.”
– Daniel Hannan
“Britain’s biggest problem is a lack of economic growth – so much else is downstream from that. In per person terms, annual real growth averaged more than 2 percent in the run up to the financial crisis. From the crash to COVID-19, growth was just 0.6 percent on average. And of course these growth rates compound. Before the financial crisis, living standards were on course to double every 35 years; afterwards, it was every 120 years. This is a change with profound societal – and even civilizational – consequences.
“From tax and regulation to institutional malaise, demographic decline, and a culture that denigrates success – there are all sorts of explanations for our economic slowdown. But the way I see it is that we are suffering a progressive loss of economic dynamism, as we gradually replace market processes with bureaucratic ones – often to reduce risk or increase ‘fairness’. To many observers, every individual step along the road is reasonable and easy enough to justify. But over time, the effect is suffocating.”
– Tom Clougherty, Institute of Economic Affairs
“Some 35 years after the collapse of the 20th century’s most rigorous experiment in the failure of central planning, the fall of the Soviet empire, and comparative success of the capitalist West, it is hard to fathom how we’ve got into this climate communist mess. It should be self-evident that the planet doesn’t have a thermostat, let alone one easily adjusted by national leaders ordering technology to improve through a cascade of plans lashed to a target. Decarbonisation will happen regardless and is likely to go faster by inventing better solutions funded from the proceeds from growth, or bottom-up innovation. Rather than five-year battery-powered tractor plans, in the context of mission-led state direction – the latest reinvention of the language of failure by top-down socialist planners.”
– Andy Mayer.
“The necessity of finding a sphere of usefulness, an appropriate job, ourselves is the hardest discipline that a free society imposes on us. It is, however, inseparable from freedom, since nobody can assure each man that his gifts will be properly used unless he has the power to coerce others to use them. Only by depriving somebody else of the choice as to who should serve him, whose capacities or which products he is to use, could we guarantee to any man that his gifts will be used in the matter he feels he deserves. It is of the essence of a free society that a man’s value and remuneration depend not on capacity in the abstract but on success in turning it into concrete service which is useful to others who can reciprocate. And the chief aim of freedom is to provide both the opportunity and the inducement to insure the maximum use of the knowledge that an individual can acquire. What makes the individual unique in this respect is not his generic but his concrete knowledge, his knowledge of particular circumstances and conditions.”
– F. A. Hayek, The Constitution of Liberty, pages 80-81.
With yesterday’s revolting annual Budget statement from the Labour government still ringing in my ears, I thought a bit about how this lot treats ideas of “merit” and what is considered “unearned” wealth. For instance, one aspect of yesterday’s measures from Chancellor Rachel Reeves is to add a deceased spouse’s pension pot to inheritance tax (threshold starts at £325,000); IHT is 40 per cent. Any money paid out from the pension will be hit, subject to certain conditions, at 45 per cent for top-rate taxpayers – an effective rate of 67 per cent. This sort of move stems from the idea that certain people don’t “deserve” to inherit X or Y, and must pay their “fair” share to the Moloch of the State. I urge people to read Hayek’s masterpiece, not least for its dissection, and demolition, of much of the argument put forward about why certain wealth is “unearned”, and why we should be paid according to some social formula of merit. That way totalitarianism lies.
“Britain’s deluded politics are downstream of a deluded public. This country simply doesn’t realise how poor it is; the gulf between public expectations of the state and the state’s means of financing itself has widened to dangerous levels. People on relatively high incomes don’t feel rich and therefore assume that there are plenty of actually rich people who could be squeezed to pay for stuff. Entitlement spending, in particular, is eating British democracy alive. Council budgets are increasingly consumed by social care and special educational needs and disabilities (SEND) spending, with services cut to the bone. Meanwhile in Westminster, successive governments continually forestall capital investment to avoid tinkering with absurd commitments such as the pension triple lock.”
– Henry Hill, writing about the UK Budget statement of Chancellor of the Exchequer, Rachel Reeves. (For non-British readers who want to know what the “triple lock” is, it is a safeguard that ensures the state pension increases each year by the highest of three measures: Inflation: The Consumer Price Index (CPI) for the previous September; Average earnings: The average increase in total wages across the UK for May to June of the previous year; and a minimum rise of 2.5%.)
I agree with Hill that many members of the public, and not just the chattering class, are so economically illiterate they have little idea of how screwed the UK is financially, given demography, state bloat, over-regulation and tax, and the rest. And anyone who pushes against it is one of those sinister people known as “neoliberals”.
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We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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