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Sunday, September 21, 2008


The Andrew Marr Show this morning was devoted to an interview with Gordon. Now I rather like him. I think he is head & shoulders above anybody else in cabinet & that he really believes in things unlike Blair & so many other politicians (Clinton, Miliband, Salmond, Obama, Cameron, Sheriden) who would make a good living selling snake oil. It may also be that we are both, by upbringing, dour Scots Presbyterians but I like him for most of the things that make him unpopular. (The same may be true in reverse about Thatcher - that here middle England shopkeeper persona just did not work in Scotland)

As an interview it was solid & unexciting which is OK for him. However he only gave to factual commitments & both are profoundly wrong.

1) He said that what the world financial community needs is more regulation, enforced internationally & he is just the guy to get world leaders to do it - No we absolutely don't. I have doubts if under regulation is the problem at all. Certainly there is reason to think that in the US diversity regulation played a major part in getting bankers to give mortgages to people who didn't have the resources but were part of an ethnic group very short of people with money. The normal assumption with statists is that if regulation didn't work the solution is more regulation, whereas logically it is more likely that it would be better to have less.

In any case world regulations would be worse. Once in place any damage would be worldwide, which would make the present crash look gentle & thus there would be no other example to compare with to see what worked. It would be an excuse for even more bureaucracy & open the door to enforcement of whatever ideas are politically correct at the moment (global warming, peak oil, "fair trade", localism, free migration, serfdom, the impropriety of interest are all ideas which have been, at different times, politically supported). Whatever the idea somebody will want power to enforce it.

2) He said that not only should our government not cut back on spending but should increase it & went on about free childminding services, implicitly increasing public borrowing because he mentioned no tax rises - No. The government is already spending to much & it is seriously cutting our growth rate & thereby destroying our possible future. Free child care for all would be lovely & so would Christmas every weekend but it is not affordable. I don't know much about child minding but I strongly suspect that it is becoming so expensive that many mothers cannot afford to work precisely because it is already so regulated. Certainly government getting further involved is not going to reduce the cost.

Finally he said how keen he was for people to email him with their thoughts, that he was eager to talk to the public & all such would get a reply. Well Gordon here is one I made last May. I'm sure I will get a reply soon:

"The news is not good. Your party's popularity is dropping like a stone. This is almost entirely due to the fact that the economy, the bedrock on which your reputation was built, is visibly crumbling (we are almost out of Iraq & the personal qualities for which you are now being blamed are the same ones which were previously praised in comparison to the aptitude for spin of your predecessor). Oh well, politics is not a fair game & if you are being overly blamed as PM now you were overly praised as Chancellor for inheriting a strong & competitive economy with relatively low government spending which is now less competitive with higher government spending & inflationary pressure. Also you have been given a remarkably easy ride by the other parties who, when you point out that our economy is outperforming that of the old EU counties & Japan fail to counter that it is growing at only about 1/4 the rate of the BRIC counties (Brazil, Russia, India, China & those taking their example).

However may I draw your attention to a proven successful option for a government deep in economic trouble. In 1989 Ireland had very similar problems - stagnation, high government spending & upward inflation. The solved it by the revolutionary tactic of applying the classic liberalism of Adam Smith (& once of the Liberal Party), a gentleman of whom you have spoken favourably.

In 1989 they cut corporation tax, regulations, particularly the regulations preventing housebuilding, & government bureaucrats. By 1990 they were growing at 6% allowing them to cut CT further to its present 12.5% & push growth up to a maximum of 10.5%

All of these options are open, indeed much easier, for you. The relationship between CT & growth is even more clearly established now, you are already under pressure from Northern Ireland & Scotland to match Irish CT rates there (indeed the SNP's promise to work for that played a significant part in their success last year). The housing shortage & hence high prices, are even more egregious here than they were in Ireland & you have already sponsored the Barker Report which made the novel, for UK politics, discovery that the only way to solve the shortage of housing was to allow people to build more. Granted a house price fall would cause significant problems for many bankers but it would certainly be good for ordinary people who want to be able to afford somewhere to live & I do not think the prime duty of government is to ensure bankers continue to enjoy the standard of living they have become accustomed to. This is particularly so since all companies offering mortgages have know for decades that the above inflation rise inn house prices has nothing to do with the manufacturing cost & is entirely the monopolistic cost produced by the "planning" system.

I suggest that you cut Corporation Tax immediately by 5%, which would cost about 9 billion, with a promise to do the same in each succeeding year to bring it down to 10% and the same with business rates. This could be paid for by the elimination of the most destructive quangos, putting Jonathan Porrit off the public payroll & cutting the windmill subsidies. Since you are already now committed, with belated Tory support, to more nuclear, windmill subsidies perform no useful purpose if they ever did

This would indeed be something close to a U-turn, taking the wind out of the Tory & LibDim sails. In one way you have an advantage over them. The Tories have pledged to maintain your public spending, whatever it is, if they come to power but you are under no such restriction.

If you did this you would undoubtedly suffer a year even worse than the present. However at the end of it you would have a country with about 6% growth, a large number of opposition predictions of disaster to throw back in their faces & a reputation as the man who kept his head when all about were losing their's & blaming it on you. At the end of the 2nd year you would have a massive surplus, caused by that growth, to distribute in tax cuts & then sail into the election."

If you go to this site you will see the various position papers of the Railroad Development Corporation:

Many of the papers compare the European rail system to the American system. One of the papers claims that rail-freight service in the EU will soon cease to exist except for the bulk movement of coal and other commodities. Another one shows how the UK's Open Access reform has almost ruined the UK rail system. It is a good read, but you must remember that the author repeats himself in most of the position papers, and as such you must scroll through them to make sure there aren't any hidden gems.
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