Queen's Speech a textbook example of meddling and failure

Today’s Queen’s Speech is another fine example of government meddling and failure.

One Bill after another is being introduced to interfere with people’s legitimate freedoms and try to paper over the cracks in their interventionist system.

I have recently written on the phenomenon that government intervention is doomed to fail and that in doing so it encourages further intervention as governments try to repair the unintended consequences of their own legislation. Clear examples of this are to be found in the Queen’s Speech.

There is too much in the speech, and there is too much as yet unclear, to make a comprehensive attack on the Labour agenda for 2008-9, but the following is an analysis of some of the problems raised.

Business Rate Supplements Bill

The proposals to enable upper tier local authorities and the Greater London Authority to levy a supplement on their business rates, and use this to promote economic development, have a certain charm in that they restore a tiny modicum of tax-raising discretion to local authorities (though not, infuriatingly, to the 32 London Boroughs!).

Of course, any wise local authority would exercise the better part of discretion and not exercise the power. Increasing business rates by up to 2p in the pound will simply squeeze business profits, putting some out of business, driving others away and reducing the ability of the remainder to invest in capital goods (including training) that improve their productivity (and thus the wages of staff). The money raised will never achieve the level of “economic development” that would otherwise be achieved by individuals allocating resources based on their own priorities (a level of information detail that no government can hope to emulate) but will instead be wasted on schemes that appeal to legislators and those who are best able to influence them. It will replace the freedom, efficiency and effectiveness of the market with imperfect politicised outcomes.

Interestingly, the Bill makes provision for allowing businesses to vote on any proposals. It must be assumed that this vote will not be extended to those businesses (with rateable values of less than £50,000) that will not be taxed, as representation without taxation would just allow them to pillage the profits of their more-successful rivals.

It does raise an interesting question, however: why not allow Council Tax payers a similar freedom: a plebiscite enabling them to veto any council policy that would be funded primarily by local taxation. That would certainly put the wind up spendthrift officers and councillors.

Local Democracy, Economic Development and Construction Bill

The devil is in the word “Construction”. Little detail is available on this one, but it does appear to include provisions for a more level playing field for construction businesses, particularly smaller local ones, in construction contracts. Whether this is more anti-success regulation is unclear, but considering the onerous costs that businesses and authorities already have to incur putting tenders through OJEU and other legal competitiveness tests, this can only be detrimental to business. Fairness is best achieved through a free market, where those that discriminate against providers for any reason other than efficiency will be forced to pay higher prices for poorer goods or services and so will see their businesses suffer.

Saving Gateway Accounts Bill

The government’s plan to establish a Saving Gateway scheme, administered and approved by HMRC, with the government “matching” every pound saved with 50p from government up to a maximum of £300 (not the “matching” that Anglophones will be familiar with!), is old-fashioned redistribution of wealth with an added paternalistic twist: the poor must “do the right thing” – by which Labour means save money in bank accounts – to earn their redistributed wealth.

Glossing over questions about the sense of or justification for transferring wealth, this is bad legislation for two reasons: firstly, because it creates a massive dead-weight cost in that the government will have to pay people who would have saved the money anyway; and secondly because it will encourage rent-seeking as people make arrangements to borrow-to-save, for example by borrowing on credit cards (at rates of, say, 25% or 30%) knowing that there is a guaranteed profit of 50% in the first year.

Children, Skills and Learning Bill

The Children, Skills and Learning Bill promises to enforce compliance with the Standard Teachers’ Pay and Conditions Document. The very existence of this document is a problem, as the setting of national standards across England ignores the different costs of living and levels of supply and demand, and further undermines educational independence. At worst, it could see pay and conditions set at too low a level to attract staff to some areas, while being unnecessarily generous (with the resources of local taxpayers) in others.

It also creates a statutory entitlement to apprenticeships for all those suitably qualified by 2013. Unless the meaning of “apprenticeship” has changed, this is idiotic. Apprenticeships involve qualified individuals working for established providers so as to learn on the job; the government cannot increase the number of apprenticeships beyond the demand among qualified workers for apprentices. The proposed duty on the Learning and Skills Council to provide apprenticeship places may easily morph into the provision of further course-based training, which would defeat the supposed purpose.

Policing and Crime Bill

A bill to protect vulnerable groups, particularly women and children, may seem welcome at first. But one has to wonder at a government that considers 51% of the population to be a “vulnerable group” simply because of their gender!

The main problem with this bill is the plans to tighten regulations on lap dancing clubs and the sale of alcohol. Lap dancing clubs are places where consenting adults go to watch other consenting adults perform erotic dances; it should have nothing to do with the government what these individuals (or groups) choose to do. Similarly, government has no business interfering with the right of businesses to sell, or adults to buy and consume, alcohol. As I have noted before, this kind of legislation is never directed at our claret-swilling elites, but at those whom they see as they look down their wine-flushed noses.

Where there are ancillary problems (for example, anti-social behaviour in the environs of the club or pub) they should be dealt with in their own right,

Marine and Coastal Access Bill

The Marine and Coastal Access Bill continues the assault on private property by forcing property owners to allow trespassers to walk over their land simply because they happy to have bought property adjacent to the sea. If the proposal was applied to all properties, so that ramblers may cross anyone’s land at will, it would be fair, but it would also be as welcome as the Poll Tax.

Constitutional Renewal Bill

Finally, something good in the government’s proposals. Thank heavens they are finally repealing their own, oppressive legislation. One law down, 10,000 more to go!

An eerie echo of the past

Earlier on I set out how 80 years ago an Austrian economist predicted the ineffectiveness of current efforts to intervene to improve economic conditions.

I have since been directed to an interview with another Austrian economist (this one also a British citizen) that - aside from the poor quality and the stilted voices - could have been recorded yesterday.

In it, Nobel laureate Prof. Friedrich von Hayek explains that inflation is always the result of government action, is the great evil against which we need to battle, and that efforts to intervene to prevent recessions that follow from periods of government-led inflation are doomed to failure.
The part of the inteview from 14.00 minutes to 16.50 minutes is particuarly chilling!

The following is a summary of what he says (I have slightly augmented it with my own understanding of his take on economics, though where possible I have enclosed these additions in square brackets):

1. Germany out-performed the UK in the three decades after WWII because the German trades unionists remembered that inflation is the enemy of the working man;
2. If people do not recognise the danger of inflation they will continue to believe that it can be used as a short-term solution to economic problems, as a result of which inflation will continue to wreak havoc upon the economy;
3. Unemployment results from inflation, which encourages the misdirection of labour [because easy money is made available to enterprises that would not, under normal conditions, be viable, allowing them to offer higher wages than would be possible if the easy money had not been thrown into the system by Government], so it is wrong to suggest that in the long term one needs to tolerate unemployment to curb inflation;
4. Curbing inflation will cause short-term unemployment, but this need only last a year or so [before the market re-asserts itself and labour is employed once again];
5. As Jeffrey Tucker notes, the “hilariously naive and idiotic” line of questioning demonstrates how “people really believe that policy makers can manipulate the economy like a machine, trading off unemployment for inflation and back again, with no trouble”
6. Non-compulsory planning will have no effect and so can do no harm [or, indeed, any good];
7. “Stopping the printing presses” is a euphemism as the real cause of inflation is credit expansion rather than the actual printing of hard money;
8. “All inflation is ultimately the problem of activities which government determines and can control. And all inflations have been stopped in the past by the governments stopping creating money or preventing the central bank from creating more money” [thus putting the lie to the government’s suggestion that inflation is caused by outside factors such as rises in the cost of commodities];
9. A tax cut will not work to stimulate the economy because deficiency of aggregate demand is not the problem. Rather, the problem is that the boom and employment that has been created by the previous inflation can only be sustained by further inflation [which, if perpetuated, would lead to hyper-inflation and ultimately a crisis];
10. If government continues to inflate to sustain the boom it may have to try to ameliorate the effects by imposing price controls which will lead to the imposition of a planned economy [i.e. socialism];
11. Political freedom exists hand-in-hand with economic freedom and the former cannot exist without the latter;
12. The power of labour unions and corporations does not lead to inflation unless that power is used to encourage inflationary policies;
13. Wages/Prices/Incomes policy is utterly ineffective except as a means of managing in the very short term the period of deflation/restoration;Not all problems are solvable in the short-term and trying to do so may cause more harm than good;
14. Equities remain a good investment in the long term;
15. “Inflation is like over-eating and indigestion. Over-eating is very pleasant; so is inflation. Indigestion comes only afterwards and so people do not see the connection”;
16. Economists are intellectually attracted to the concept of a system that they can control and therefore are instinctively opposed to free markets and non-intervention;
17. Continued government-induced inflation and subsequent intervention by government will inevitably destroy capitalism [as Karl Marx predicted and hoped for].

Hat tip to Kit for drawing it to my attention, and to mises.org for hosting it.

Forced bank lending the latest instalment in Labour’s doomed spiral of intervention

Alistair Darling appears set to commit an 80 year old mistake. In his misguided attempts to control the UK economy and force businesses to conform to New Labour’s agenda, he is again going to intervene between banks and their customers.

He has already intervened countless times over the past year, but this latest intervention is pitifully predictable. Indeed, as was explained 80 years ago, it was inevitable that his previous interventions would have unintended consequences that would be the opposite of what he intended, and that to counter those consequences he would be obliged to intervene again and again to ever greater degrees.

Published in 1929, just as another depression was about to rock the world economy, Ludwig von Mises’s Critique of Interventionism demonstrated that as soon as politicians began to intervene in the economy, they would have to continue to do so until ultimately the entire system came under their control. According to von Mises, interventionism was simply unsustainable: either one accepted the laws of economics or one was forced to implement socialism.

We can see how this works if we consider price controls – an example that has striking relevance to Mr. Darling’s current dilemma.

If government tries to fix the price of a commodity, it will not be able to sustain prices below those that the unhampered market would set. This is because with price controls:

"Sellers are forced to sell their goods at lower prices, so that proceeds fall below costs. Therefore, the sellers will abstain from selling and hold on to their goods in the hope that the government regulation will soon be lifted. But the potential buyers will be unable to buy the desired goods."

The result, therefore, will not be the increasing availability that the government sought but a reduced availability of the good resulting from suppliers having no wish to supply at such a low price. To raise supply to the level the government desires at the price the government has mandated, it must therefore intervene again to force suppliers to supply the good: “…it tends to supplement the price ceiling with an order to sell all goods at this price as long as the supply lasts."

However, as the good is now on sale for below its real value, far more customers will emerge than would do so if the good was priced naturally. And since the price is "below that which the unhampered market would set, the same quantity of goods faces a greater number of potential buyers who are willing to pay the lower official price. Supply and demand no longer coincide; demand exceeds supply, and the market mechanism, which tends to bring supply and demand together through changes in price, no longer functions."

There is still not enough of the good to go round, but now it is not because of suppliers reticence but excess demand caused by under-pricing. Government has prevented the price mechanism from operating to prioritise this demand. Therefore another means must be found to decide who gets what, which leads to the third wave of intervention: Rationing.

"Of course, government cannot be content with this selection of buyers. It wants everyone to have the goods at lower prices, and would like to avoid situations in which people cannot get any goods for their money. Therefore, it must go beyond the order to sell; it must resort to rationing. The quantity of merchandise coming to the market is no longer left to the discretion of sellers and buyers."

But why, if the price is below that at which suppliers can make a profit, would they produce the good at all? Only if the government intervenes to force the production of the good. Consequently, the fourth intervention takes place:

"When that is exhausted the empty inventories will not be replenished because production no longer covers its costs. If government wants to secure a supply for consumers it must pronounce an obligation to produce."

And how can this be achieved when costs are below prices? Only by driving down costs, which requires government to intervene to set the prices of the factors of production that go into producing the good. Ergo, "it must fix the prices of raw materials and semi-manufactured products, and eventually also wage rates, and force businessmen and workers to produce and labor [sic.] at these prices."

But what, you may ask, has this to do with Mr. Darling? If one considers money and borrowing to be commodities, the answer is everything.

Government has long been intervening to keep the cost of borrowing below the market rate. This is the role of central banks: they enable governments to control the supply of money by forcing lending rates down below the market rate, so stimulating artificial and unsustainable booms that keep the voters sweet until the next election. The Bank of England did this again last month. Under normal circumstances, a “credit crunch” should result in an increase in the cost of borrowing. This would result in more saving and less borrowing until a new equilibrium was reached. However, the government has intervened to keep the cost of borrowing low.

As von Mises predicted, however, this has had unintended consequences. The government may have wanted low interest rates, but the banks were still inclined to set interest rates based on risk: as default is more likely now than it was a couple of years ago, the cost of borrowing is raised to take an actuarial account of risk. Also, as the banks have limited capital, they are bound to lend to the most profitable borrowers: those who will pay higher rates. So inevitably the government is again inclined to intervene to force banks to lower rates.

The predictable result is that banks won’t lend. They’d rather buy government securities or look abroad for more valuable investments than lend to businesses and householders at rates that are no higher than inflation or make a tiny real return but involve huge risk (companies will go to the wall; mortgagees will default). So the third intervention comes, as Darling forces the banks to lend.

Not to everybody, mind. Already the rationing is appearing: the BBC suggests that the intervention will be for favoured groups, which at this stage consists of “Small businesses” (which means it might be time to sack that 50th employee and cut one’s borrowing costs!).

One can only begin to guess at what the unintended consequences of this latest intervention will be. However, the two things of which we can be sure are that further interventions will inevitably follow as long as Labour ministers believe that they can over-ride the laws of economics, and that these interventions will continue to have unintended and negative consequences for all of society.

British foreign policy: a tour d'horizon

Every international security pundit would like to summarise the broad sweep of strategic concerns facing the United Kingdom in a single hour. This is just such a lecture.

Sadly (or, for those of you reading it, happily), this is not mine. My comments are limited to parentheses. At least, not originally. Rather, it is a summary of the hour-long inaugural lecture of Professor Michael Clarke, the new director of the Royal United Services Institute.

Prof. Clarke began with the rather trite comment that this was a very uncertain time in international affairs. At such a time think tanks such as RUSI had a lot to offer, for they had the luxury to stoop and think while politicians were too busy reacting to events.

He began (apologetically) with a biblical quote: “the race is not to the swift, nor the battle to the strong … [for] … time and chance happeneth to them all”. The them for (and title of) his essay was Strategy and Fortune, for luck as much as good planning played a role in foreign (one might argue all) policy. Good strategies can ride over bad luck, whereas bad strategies were destroyed by it.

Having said this, he turned to a long analysis of the Blair years. Until 1997, UK foreign policy had been shaped by Realist orthodoxy: sovereignty; territorial inviolability; balance-of-power. Blair characterised this as a “doctrine of benign inactivity” (though it was clear that he did not see this as quite so benign, as bystanders watching the tragedies of the Balkans and Rwanda might appreciate).

By comparison, Blair’s own foreign policy would be shaped by three strands:
1) Policy designed around values such as liberty, democracy, tolerance and justice, where “idealism becomes Realpolitik”
2) The integration of “hard power” (the power to compel) with “oft power” (the power to attract)
3) A recognition that the world was not benign to the UK and that we would therefore need to fight for our values: thus the liberal interventionism exemplified in his Chicago Speech.
This liberal interventionism would have to be based on two strategies: Leadership and Positioning. Leadership meant that the UK should be in the foreground – as it was with Kosovo, climate change and Iraq. Positioning meant that the UK’s success would depend on where it stood; in Blair’s view, the best place to be was among democratic allies, shoulder-to-shoulder with the United States.

Clarke then described Blair as a Shakespearian character whose great successes were followed by great tragedy. And he did indeed begin successfully: his first term saw an increased give and take within the EU, more focussed on the bigger picture; successful intervention in Kosovo where British and French leadership – the willingness to break a deadlock by using ground forces – won the war with Milosevic; a textbook humanitarian intervention in Sierra Leone; and Operation Desert Fox, which Clarke argued was in retrospect far more successful than was at first thought – it nearly led to Saddam’s ouster.

But the events of September 11th changed both the world and Blair’s fortune – not because of what Al Qaeda did, but because of America’s reaction to it. Blair’s April 2002 meeting with President Bush at Crawford, Texas left Blair convinced that the US would invade Iraq and that the UK must therefore back them. He therefore came up with a five point plan that highlighted both his focus on positioning and his self-belief (some might argue hubris). He would
1) Get Europe to back the US, which would encourage
2) The US to work though the UN, which would include
3) The US committing to a renewed push for peace in Palestine, which would lead to
4) A regional settlement for the whole Middle East, which would
5) Draw in the Neo-Cons in Washington as it would play into their democratisation agenda.

Eventually (perhaps sadly) he failed on all counts. Consequently the US went it “alone”, and the UK was bound to join them because of Blair’s conviction that this was the position that the UK must adopt if it was to have influence internationally. Four years later the objectives of the coalition have been radically revised, from creating a peaceful, democratic and free Iraq, they are now happy just to retreat with honour from an Iraq stable enough to hold together while Iraqis settle their own differences. The result for Blair was that he lost his power to lead or to take the initiative; indeed, an axis formed against him personally, led by Putin, Schroeder and Chirac. Blair tried to recover. Clarke noted the focus after 2003 on Africa, the environment and global poverty. Gleneagles was a personal triumph for Blair but perhaps also a parting gift from a G8 glad to be seeing the back of him.

The key messages from the Blair era were that
1) Globalisation is not inherently benign (especially if you are from the Third World) and is certainly not equitable
2) The UK is very well placed to benefit from Globalisation because it has an open society and a flexible economy]
3) The UK lives (and dies) by collective action
4) There is a crisis of collective action in the world today.

At this point Clarke turned to the future, and noted that the challenges for the future depended on how one viewed it. Traditional international security problems would focus on the Middle East, a resurgent Russia, Britain’s place in Europe. Trans-national problems included crime, terror, WMDs, energy-, cyber- and food-security. Structural problems include global inequality, climate change, health and failing states. What is not clear is in what way these impact on Britain. What is clear is that the international consensus is weak, unclear and ineffective, and that even the powerful were struggling to impose their will.

In dealing with the apparent problems highlighted above, however, there was a tendency to ignore the problems of international structures – how one achieves an international consensus. There was almost a tragic fatalism that accepted the failure of international institutions since the Cold War, with new sources of legitimacy replacing “clear pillars” with a “subtle constellation of power”; difficulties of control and influence as a result of network, globalised and disaggregated economies; changing “rules of the game” as international law leant more towards human security.

In fact, international law was weaker rather than stronger, and the West only had itself to blame. The West had played fast and loose with international law – acts of humanitarian intervention had undermined legal norms. This was a dangerous game to play, for in what would be the “Asian Century” the West would lose power and influence, and “rules matter most to the least powerful.”

Yet Clarke remained optimistic. He believe that the US would gain from considering and addressing these issues; the UK would gain by working collectively, which it was traditionally good at; the UK remained part of a broad international consensus (if one looked beyond the immediate challenge of Iraq); and the UK had good armed forces. But Britain must be cautious about using them; their very quality led to a tendency to reach for force too soon. He also lamented (as did Lord Ashdown in his recent book) that while the military was more joined up than ever, it was woefully disconnected from humanitarian and civil agencies.

Blair was, in Clarke’s view, correct to position itself beside the US, but the UK must also recognise that the US is entering an introspective stage, and that when it emerges the old certainty that its Janus-faced strategy would always put the Atlantic fist would be gone; in the coming century, America would be a Pacific power first-and-foremost. The UK’s role in the C21st would be to be a hub rather than a pillar of international security, acting to articulate and lead the consensus (as the Stern Review did on climate change).

As for Europe, it would remain peaceful and prosperous, but in the Asian Century, it would increasingly struggle for latitude in which to manoeuvre.

A full transcript is available from RUSI.

Paddy Ashdown goes to Crete

A little light holiday reading kept me entertained during the long, hard hours lying by the pool or on the beach in Elounda, Crete. I needed something to take my mind off the unending, unforgiving sun. So I took with me a copy of Paddy Ashdown’s Swords and Ploughshares.

Paddy is an interesting writer, though clearly not a great one. He uses the clipped sentences and direct speech of the soldier, yet at times he drifts into mawkish sentimentality (usually when writing about meetings with Bosnian villagers), a habit which the Economist suggests he may have “picked up during his two decades in Britain's third party, the Liberal Democrats.” (Sentimental? Us?!). His writing is also at times a little careless, a flaw which should have been corrected by his editors. In fact, a firmer editorial hand would have been useful all round; several of his anecdotes appear more than once. And there is no shortage of anecdotes – like many military men, he has plenty of good stories to share, perhaps, suggests the Economist, because he has kept the best back for a future set of Memoirs (Ashdown Diaries vol. 3, anyone?).

Nonetheless, it is a compelling book. Lord Ashdown has impeccable first hand experience of conflict prevention, peacekeeping and post-conflict reconstruction. He was involved (unsuccessfully) in efforts to avert a war in Macedonia (which mercifully proved successful in the long run). In the 1960s he fought in the Indonesia-Malaysia confrontation, and in the past few years he was the UN’s proconsul in Bosnia. He explains early on that Swords and Ploughshares is not intended to be a blue-print for the “seamless garment” of prevention, intervention and state-building, but that is clearly what it is. How To Keep The Peace by Lord Ashdown. There’s a new sheriff in town, and that town is Norton-sub-Hamdon.

Ashdown’s justification for intervention is straight forward. While honouring state sovereignty should be the norm, intervention has always and will always occur, and for good reason. Even “internal” conflicts have external effects; threats to international peace and security. When an egregious regime or state collapse leads to mass bloodshed and displacement, the international community must act.

Where his basic justification is simple, his outline for implementation is detailed. It needs to be. The primary legitimising mechanism for intervention should be the United Nations (as it has the legal power to act), but where the UN is stymied by obdurate veto-wielders there are places for regional bodies or “coalitions of the willing” to act instead. International law has a common law basis; law is set as much by precedent as by agreement. Some interventions legitimise themselves, as was the case in Kosovo (which at the time, he noted at the book launch at the London School of Economics, was probably illegal in a strict reading of the law).

However, the UN should never become involved in actual peace-enforcement. It is hopelessly bad at war-fighting, so while it may have a role in permissive environments (Cyprus, Sierra Leone now), in non-permissive environments (East Timor, Sierra Leone in 2000) it should leave the fighting to the professionals (Australia, the UK).

Having to fight is a sign of failure. The international community needs to identify and move to avert conflicts much earlier. Usually, it is not until the villages are on fire that the press, and so the public, and so politicians take an interest in conflict. But by then it is too late – the refugees are already washing up on our shores and the costs of restoring peace to the country will be far higher. Far more effort needs to be devoted to preventing conflicts before they occur. This is the time for soft power, for massive amounts of development aid and offers of mediation, institution building, confidence raising and whatever help we can offer. But in the background a threat must lurk: if the offer of help is spurned and conflict does break out, action will be taken to restore peace.

Where armed intervention is required, the actual war-fighting phase will be brief and may not require much manpower. But the subsequent occupation will need enormous amounts: compare the 60,000 NATO troops that successfully occupied Bosnia, a country of 4 million, in 1997 with the 200,000 that have unsuccessfully occupied Iraq, a country of 27 million, since 2003. The first and most important priority must be to ensure security on the ground. Only once the security of the citizens is assured can any post-conflict normalisation and state building take place. The second priority then must be the rule of law; people must know that the police and judges are incorrupt, that criminals will be prosecuted, and that their families and their property are safe. After that economic reconstruction is the next step. Only much later come elections.

This is an interesting and crucial point. As Ashdown notes, as liberals we see democracy as vital, and democracy is synonymous with elections. But in fact elections are only one aspect of democracy, and one of the most easily corrupted. In post-conflict environments elections are all-too-easily captured by the former war-leaders (a leading UN policing expert once told a conference that I attended that the players in the post-conflict stage are usually not the former faction leaders, but their quartermasters – those who have the money, the networks and the knowledge necessary to transfer easily into politics). In fact, elections can be very divisive and so undermine the peace. They can also leave former warlords in power. In fact, elections should be left as late as is decently possible (in post-war Germany, elections did not take place for four years).

Once the conflict phase is over, the state can be rebuilt. Not, note, the nation. Nations cannot be built by outsiders; they must grow organically through a shared culture and sense of community within and among the people. But the international community can help rebuild the structures of the state: a functioning economy; public services; an impartial civil service not appointed by politicians; businesses free of political interference; a simple tax code; a law code that is fair, but that reflects local principles; media freedom; swift and proper justice, etc. This will be a long haul – politicians from intervening nations do neither their own people nor those on whose behalf they have intervened any favours by pretending that the boys will be home before we know it. Some presence may be necessary in a country for a generation. That is why it is better to prevent these problems before they occur.

Ashdown cannot stress often enough the importance of seeing the whole process as a “seamless garment” (he repeats the phrase so often I can be forgiven for using it twice!). Planning for the post-conflict phase should take place as the same time and on the same footing – indeed, with the same people – with planning for the war. The fact that force may be used to end a conflict must be a clear part of the prevention process (threat). And all of it needs a clear narrative from the very beginning. To generalise: “The international community will not tolerate this behaviour, if it continues these will be the consequences, if necessary we shall intervene with force to restore peace, and when we do so we will aim to ensure that this country can function independently as a viable state, in which all its citizens can enjoy peace and security. If at any time those conditions are met, the international community will acknowledge that this country is a functional member of the community and will leave the government alone to run its country in the interests of all its citizens.” The narrative should not simply reflect our prejudices, however: parliamentary democracy may be a wonderful thing, but it is up to the people to construct their own system of government; a market economy is a sign of freedom, but it must develop from the freedom that is given to people rather than be imposed by outsiders.

There’s a lot more to it, of course. In fact, Ashdown makes it sound deceptively easy (though I’m sure he would be appalled at the suggestion). He comes from a long tradition of Liberal internationalists who believe that there are universal laws that bind all mankind. It is a fine line between such high-minded visionaries and the fanatical saints that would impose their view of goodness upon the world. Ashdown himself notes that of the major international interventions that have taken place since World War II, half have gone sour. He thinks we need to do better. The truth is, we may not be able to; it may be that international intervention is so fraught with problems that we can never hope to get it right every time. But if anything can be done to improve our strike rate, Ashdown has probably put his finger on it. It would be well worth future interveners – liberals and saints alike – picking up a copy.

Zimbabwe in danger of becoming next DR Congo

The spiralling crisis in Zimbabwe is about to take an ominous turn. Until now the situation has been a tragic but domestic issues, but it appears on the verge of becoming an international crisis.
It seems a long time since President Mugabe began to use the coercive power of the state to confiscate land from white farmers and distribute it to the majority black population. The situation has long-since morphed from being an ethnic and class struggle among Zimbabweans to an unequal and often brutal conflict pitting a black-African government against a largely black-African opposition. Over the past few years this crisis has become increasingly tragic and violent.

But until now it has mercifully remained within the borders of Zimbabwe (if one ignores the millions of refugees that have now fled to neighbouring countries). The Mugabe regime has been ostracised internationally: Zimbabwe has been suspended from the Commonwealth, it is under an arms embargo, its assets in Europe have been frozen and its leaders are banned from travel to most of the civilised world (i.e. those bits that respect democracy and the rule of law). But this does not represent an internationalisation of the conflict. This is simply the refusal of civilised countries to have anything to do with kleptocrats and tyrants. Similarly, the criticism of the government by foreign countries is not intervention but interaction and – one would hope – influence. That influence would be more effective if it came from South Africa, but Thabo Mbeki has been pusillanimous in his criticism.

Fortunately, despite the one-sided nature of the conflict, spiralling inflation (the world’s highest rate, at 1,700 per cent), collapsing trade (those white farmers didn’t half sell a lot of tobacco!) and stupidly thuggish land-clearances have undermined the regime to such a degree that it is now struggling to pay its police force. Large numbers of police have resigned due to poor and unreliable wages; commentators are predicting that the situation is reaching its endgame.

Mugabe has one more ace up his sleeve, however. According to The Times he plans to draft in around 2,500 Angolan paramilitary police. Nicknamed “Ninjas” because of their black uniforms (from boots to balaclavas), they terrify the Angolan people. Now they are being lent to Mugabe to help crush dissent. “I doubt if any of them speak English” a police source told the Times. “They can only be here for riot control and to back up our own riot police.”

This is blatantly illegal and represents a dangerous escalation of the crisis. The principle of national sovereignty does not only exist to protect governments from external meddling; it exists as well to protect people from unpopular governments. The people of Zimbabwe know that with patience and resilience they will eventually prevail against Mugabe. But no people can guarantee to prevail against their government if that government relies on foreign troops to crush dissent. Indeed, it is a fine line between foreign support and foreign occupation, as the history of the Soviet Union makes clear.

Fortunately, the world is not powerless to affect this decision. Action is needed promptly, however. Firstly, it must be made plain to President José Eduardo dos Santos of Angola that intervening in the internal affairs of another country is unacceptable. He is welcome to give vocal support and continue to deal with the regime if he wishes – if he has no self-respect – but sending his shock-troops to help crack down on the opposition must not be tolerated. If he proves resistant to persuasion and obdurately sends in his thugs, he will be complicit in the violence and oppression that is taking place there, and must be punished alongside Mugabe and his henchmen. In the first instance, this should see an extension of the travel ban and arms embargo extended to Angola. If the intervention continues, Angolan assets in Europe and America should be frozen. Finally, if the situation escalates and Angolan troops commit murder or human rights abuses, charges should be filed before the International Criminal Court.

It is possible, however, that the situation may worsen. Violence begets violence, and there is a danger that foreign intervention may tip Zimbabwe over the edge into civil war. One need only look at the Democratic Republic of the Congo to see what that would mean. (Ironically, Angola and Zimbabwe intervened in the Congo, supporting the unpleasant regime of Laurent Kabila.)

However, there is danger here for Angola as well as Zimbabwe. One of the few clear cases where intervention in a foreign country is deemed legitimate is where it is an act of counter-intervention to drive out a foreign power that is upsetting the natural balance of political forces within a country. All things being equal, civil wars play themselves out: nobody had a right to intervene in the English or American civil wars. But when a party steps in to help one side – as Serbia did in Bosnia, for example, or Liberia in Sierra Leone – it is acceptable and perhaps even desirable to redress the balance and punish the meddling nation.

Angolan intervention in Zimbabwe would therefore open the door to an African or even Western military response that has until now had no justification. Jaded readers may point out that Iraq and Afghanistan raise doubts about the efficacy of Western military action. However, a Zimbabwean campaign would be more like Sierra Leone or East Timor. Mugabe’s backers would collapse and flee very quickly; what little support he has is bought with money that is rapidly losing its value. There is a strong and popular opposition that would unite the country – though it would have to contest open and fair elections with Zanu-PF and other parties so that there was no suggestion that a puppet government was being installed. And once the currency was stabilised and trade restored, Zimbabwe’s battered but naturally strong economy (it was once the bread basket of Africa) would begin to boom.

Military intervention should be a last resort, and considered only if another country sent troops to support Mugabe’s regime. Sadly, the alleged deployment of Angolan paramilitaries is the first stage of just such an intervention. The world must act now to forestall such a deployment if a humanitarian catastrophe – and perhaps warfare – are to be avoided.

…and what should be done to tackle climate change.

The European Commission has produced another daft and damaging proposal in their efforts to combat climate change. This is regrettable both for the commission’s image and for the climate cause.

My efforts to comment on this have produced an essay, so I am going to post it in three parts, which readers may read from as they will. In Part 1, I explained why I believe that Europe is the right forum in which to address climate change. In Part 2 I looked at Wednesday’s announcement and explained why I feel it is misjudged. I also touched upon the failing of the EU’s existing cap-and-trade system. In this part I will offer a liberal alternative to the authoritarian socialism that has suffused much of the environmentalist debate.

The European Commissions proposal highlights a far broader problem that infuses the climate change debate: that it is a Trojan horse for authoritarianism and socialism. The commission’s plan is a classic example: to save the planet we are to be told how to drive. Other examples are legion: subsidies for favoured industries and technologies (wind power, trains); protectionism (dressed up as reducing “food miles”); rationing (aka. “carbon quotas”); population control (which needs no explanation); over-regulation (housing and vehicle standards). The list could go on. These methods may or may not curb climate change, but in the process they will curtail freedom and condemn millions – perhaps billions – to poverty.

The Left was quick to see the opportunities presented by global warming and environmental degradation, and have moved quickly to occupy the commanding heights of the debate, from where they will once again seek to control the economy and curtail individual freedom. Climate change may be the justification now, but the techniques are the same, and the desires within the rationalist-progressives are also the same, rooted as they are in a belief that a few intelligent people with the time to think it through can create and manage a better society than we all can as individual actors perusing our interests.

So what’s a liberal to do? Nobody wants to fiddle while Rome burns, but neither do we want to place our writs willingly in the state’s shackles and accept the slavery that we fought so long to resist. Fortunately, there is a liberal alternative. In fact, there are two.

The first, and one that appeals most to me, is a carbon tax. Rather than ration supply by issuing quotas, or picking particular egregious sources of emissions and stamping down on them, we set a price for carbon and let the individual decide how much to pay for. After all, there is nothing wrong with a 4x4 emitting exhaust, or with a skier jetting off to Aspen; what is wrong is the global excess of carbon emissions. Reducing the emissions produced by power stations is not an end in itself; the end is reducing all emissions. Focussing on individual types of emission is arbitrary, because it squeezes some more than others, and it also harms us all more than it needs to because uneven economic meddling reduces the efficiency of economic activity, which means less wealth to go round – wealth that may pay for my holiday, your school or a Gambian’s dinner.

A carbon tax, by comparison, allows us all to continue to make the same individual decisions in our own best interests that we have always done, but forces us to bear the cost of our pollution. If I drive inefficiently or fly to Aspen my activity carries a cost; if I fit solar panels to my house or buy a bicycle my carbon-tax bill will fall. It is easy to apply and hard to avoid (it would be like VAT). It would be easy to control emissions: if they are too high, the tax rises, if they are well within tolerable limits, it can be reduced. But most importantly, it would not hand power to state officials who are at best fallible and at worst arrogant, capricious or venal. Neither will it admit the command economy through the back door. At worst, there is a danger that it could simply be used as a new tax to fill the coffers of some grasping finance minister, but any government of principle would seek to make the change revenue neutral, and voters would be able to judge their politicians against their tax burden and the state of the world.

The alternative method, favoured in both Europe and the United States (due to the visceral reaction that the word “tax” engenders) is a “cap and trade” system, whereby companies buy permits to emit and then either use them – and hand the costs onto the carbon-consumer – or trade them on the market. While this has had some serious problems (caused in Europe by allowing national governments to issue too many permits, and by the decision to give them away rather than selling them – a licence to companies to print cash) it still has the merit that it leaves individuals in the position to allocate their resources as they see fit, perhaps by driving a big car (which they may need if they have a big family or a big farm) but never flying, or doing both but buying solar panels, or making any number of choices that would see their overall “carbon footprint” reduced, while allowing them to reduce it in the manner that best suits their needs and their lifestyle.

In a seminal essay, Friedrich Hayek explained that the bipolar view of the world as divided between Left and Right wings is inaccurate, a result of conservatives and socialists associating liberals with the other camp because liberals may share common ground with other groups on certain issues. The environment is a classic example of where liberalism is clearly distinct from the other two creeds.

For socialists, global warming requires interventionist measures, complex planning and more power to the bureaucrats. It provides the excuse that for a decade and a half they have lacked for implementing the policies that until the 1980s they advocated on the grounds of economic efficiency. Conservatives for a long time denied global warming; now their responses are typically authoritarian. Liberals are open to the evidence of global warming, but not to the autocratic solutions that most environmentalists propose. The solution is to encourage and enable individuals to find their own way of reducing the negative impact they have upon the environment, rather than force centralised solutions down from above. For liberals, a world in which we are subject to the state is not much better than one where we are subject to the elements.

…why the European Commission is doing more harm than good…

The European Commission has produced another daft and damaging proposal in their efforts to combat climate change. This is regrettable both for the commission’s image and for the climate cause.

My efforts to comment on this have produced an essay, so I am going to post it in three parts, which readers may read from as they will. In Part 1, I explained why I believe that Europe is the right forum in which to address climate change. In this part I will look at Wednesday’s announcement and explain why I feel it is misjudged. In Part 3 I will offer a liberal alternative to the authoritarian socialism that has suffused much of the environmentalist debate.

I have explained in a previous post (probably to the boredom of many of my readers) why economics compels us to treat carbon pollution as a European phenomenon (efforts to create a world-wide approach having failed). Sadly, European solutions are not promising.

The proposal announced by the commission on Wednesday is aimed at improving the efficiency of our driving. Apparently, we are all driving inefficiently, and this is causing our cars to emit more carbon-laden exhaust than is necessary to get us from A to B. Late gear changes, sloppy breaking, stop/start driving, the speed at which we drive and low tyre pressure make our driving inefficient. Something needs to be done.

In the worst traditions of untrammelled bureaucracy, the solution proposed by Industry Commissioner Günter Verheugen is to micromanage our driving. Manufacturers are to be required to fit new cars with electronic stability control, emergency braking systems and warning lights that tell drivers when to change gear or pump up their tyres. The commission also plan to make it compulsory to use headlights even in broad daylight – a policy that might have some merit on grey days in northern Europe, but which will baffle Spaniards in the blazing sun of June.

The commission is not alone in this sort of enviro-economic engineering. Mayor of London Ken Livingstone is expanding his congestion charge by creating a Low Emissions Zone. Richmond Council is to penalise drivers of “gas guzzling” cars through a graduated price for parking permits. These, too, are blunt tools that unnecessarily obstruct freedom of choice. There is something particularly egregious about the European Commission’s plans, however.

While there is probably some merit in encouraging people to drive more efficiently, doing so in this interfering way is likely to generate anger and derision in equal measure. The car is a symbol of freedom for many, and its operation an art. To have it reduced to a science and guided by a bank of irritating lights on the dashboard is likely to infuriate drivers; rather than improving driving quality, it will simply cause drivers to curse the European Union while sticking black tape over the lights. The danger of flicking lights distracting drivers needs also to be considered – I would prefer drivers near me watched the road rather than the dashboard.

As I will explain in Part 3, there is no reason why efforts to curb carbon emissions need to involve bureaucratic control of the minutiae of decision-making. What matters is the aggregate amount of carbon mankind emits; individual decisions as to the source of those emissions are unimportant.

Ironically, the proper solution to car emissions – as a result of both the quality and the quantity of our driving – is revealed in the Commission’s own case. In response to industry criticism that the new bells and whistles may add up to £2,000 to the price of a new car, the Commission argues that drivers will save more in the long run due to lower fuel bills. If this is true then it is surely in the drivers’ own interests to drive more sensibly, in which case this intervention is not needed.

What is needed is a system that makes polluters aware of and bear the costs of their pollution, but one that does not arbitrarily punish some emissions or emitters over others, instead letting individuals continue to make decisions about how to allocate their resources (including the carbon they are prepared to ‘buy’) as they see fit. In Part 3 I will set out the options.

Why carbon emissions need to be dealt with at a European level…

The European Commission has produced another daft and damaging proposal in their efforts to combat climate change. This is regrettable both for the commission’s image and for the climate cause.

My efforts to comment on this have produced an essay, so I am going to post it in three parts, which readers may read from as they will. In this part, I will explain why I believe that Europe is the right forum in which to address climate change. In Part 2 I will condemn the announcement that was made yesterday. In Part 3 I will offer a liberal alternative to the authoritarian socialism that has suffused much of the environmentalist debate.

Let me be clear about where I stand from the outset. There are things which should be settled at a European level, and there are things which should not. One of those that should is carbon emissions.

Pollution is a classic “free rider” problem. Firstly, pollution is an “externality”, dull econospeak for a cost which an individual (business or person) can place on society while reaping the benefits themselves; I gain from driving my car, whereas the cost of the exhaust is shared equally by all of us. Secondly, reform costs the producer a lot and the benefits are shared across everyone; I give up a lot if I decide to forego the car, but the benefits are spread very thinly across lots of people. Consequently, as Jean Jacques Rousseau pointed out so eloquently in the C18th, the rational choice for the individual is to encourage others to do the right thing while being selfish oneself.

Producing energy from carbon is cheap, because the producer bears only some of the “social cost”, the rest being “externalised” to the wider population through pollution. If we are to curtail pollution, we must make individuals (be they businesses or people) bear the full social cost of what they are doing. However, national governments cannot be trusted to do this, again, due to the free rider problem: restricting activities that generate waste carbon dioxide will reduce short-term and localised economic efficiency, while the benefits are long term and widely distributed. Consequently, it is in any one country’s interests to let others confront climate change while the country in question carries on in the most individually-economically efficient manner; so China may burn coal like there’s no tomorrow, while hoping that the USA joins the EU in sweating about climate change.

The economic principle behind the European Union (not always treated with due respect by its member states) is that no country should seek economic advantage by trading unfairly. This is why we are faced with sometimes baffling European directives: it is only if a German customer knows what a Portuguese manufacturer means when they say “widget”, and what has gone into producing it, that the German customer can make an informed choice as to whether the Portuguese widget is worth buying in comparison to the (perhaps more expensive) German variety. Sometimes this goes too far: if the rules require that everything going into the widget be the same, including (for example) the cost of labour, then the Portuguese lose their competitive advantage and, potentially, if over regulated to the point of uniformity, the whole point of competition is lost. Thus not everything needs to be regulated at a European level.

Carbon emissions are one area where European collaboration is required. No individual nation-state can be relied upon to curb carbon emissions if it requires the government to cut off the nation’s economic nose to spite the world’s polluting face. In truth, as this is a global problem, this probably requires a global solution. The flawed Kyoto protocol aside, however, this remains a pipe-dream – or perhaps a nightmare, if too much universal government is the price that must be paid. However, in the absence of a global solution, a multilateral scheme among some of the world’s largest economy’s, which between them form the largest single economic union in the world, seems like a good place to start.

France (say) will never cut carbon emissions if it fears that Italy (for example) will thumb its nose at such efforts and gain an economic advantage by carrying on as normal. But if enough major economies take a stand, the costs will be spread, the benefits tangible, and other nations may just be shamed into pulling their weight.

Only through working together can climate change really be addressed. Collaboration is essential, but it alone is not sufficient. The right policies are also required.

Who really represents the working class

Having posted a couple of criticisms of fellow bloggars’ postings recently (hating the sin and not the sinner, I hasten to add!), it is a pleasure to be able to cite an excellent entry by Tristan about David Cameron’s recently announced aspiration to make the Conservatives the party of the working class.

Much as we may want to ridicule this, Tristan is right to note that for a long time the Tories appealed to the naturally conservative tendency within a big proportion of the population, while Labour’s intellectually-driven egalitarianism only appealed to the working class when it was combined with cynical class-war populism.

Where I would question Tristan (there’s no point in just agreeing meekly with him, after all!) is where he writes that “Neither party could ever truly claim to be the party of the working class, and no party can today…” This overlooks the very interventionist sentiment that suffuses much of the working class (though if his point is that interventionism isn’t a class issue I would have to agree, for the middle classes seem equally convinced in the merits of paternalism).

One thing that Margaret Thatcher did brilliantly (better than we ever did, sadly) was to convince large swathes of the population that it was in their interests to vote for a party that espoused economically liberal doctrines. For the past decade the majority of voters in the UK have been of the opinion that their interests are best served by paternal government – so much so that the Conservatives have now jettisoned their economically liberal beliefs and are returning to the Conservative-Interventionist position that they occupied in the third quarter of the twentieth century.

My first reaction to this is to shake my head sadly as these auxiliaries abandon their association with liberty as soon is it no longer advances their real aims. But in fact there is an opportunity here, if we have the courage to seize it. I believe that David Cameron is making a mistake in shifting his party back towards the interventionist axis just as people are beginning to tire of Brown’s “nanny state.

With less and less discernable policy-space between the Conservatives and New Labour, the Liberal Democrats alone can argue the case for a society based on individual autonomy and limited government. Rather than appealing to any one class, we should appeal to that part of every voter that recognises that they are best placed to make decisions about their own lives.

I am frankly tired of being associated with the Conservatives just because they have on occasion shared with us an opposition to socialism. Too often when we champion the market or question state monopolies we are accused of being Thatcherites. The fact that the Tories arrogated our beliefs in a free economy has created a daft situation in which economic liberalism is seen as Conservative philosophy while the Liberal Democrats are left with only the social aspects of liberty. This perception is widespread in the media and even some within our own party are afraid of liberal economics because of its association with the old enemy.

So let David Cameron try to win the working class by stripping them of autonomy and expropriating their assets. Let us empower them and offer them freedom. It may seem at present that intervention and the large state dominates, but the tide will turn. The voters, be they the over-taxed middle class or working class playthings of bureaucracy, want freedom.