Category Archives: Finance

Only the little people pay taxes


by Richard North
http://eureferendum.blogspot.com/2012/03/only-little-people-pay-taxes.html

Not content with ripping off their taxpayers big time, nearly a hundred senior local council employees are using tax avoidance schemes to minimise the amount they put back into the pot. Although these people are paid as employees of their respective authorities, they have been allowed to set up limited companies, as fronts into which their inflated salaries are paid. Continue reading

(Sir) Fred Goodwin: Forever My Knight in Shining Armour!


by Percival Glyde

Several years ago, I bought a car on what I later discovered was an unfavourable leasing agreement. I’d normally have whined about this, but got on with the payments. Then I changed my bank, and forgot to carry over all my standing orders. The car finance company immediately registered that I was in default just as I was trying to arrange a new fix on my mortgage. I did call the finance company to explain, but found myself in an argument with a youngish Scotchman, who shouted me down, and gloated that my credit was ruined for life. Continue reading

Which Side Are You On?


by Kevin Carson
http://c4ss.org/?p=8630

Occupy Wall Street has come under fire from some libertarians, on the grounds that it’s relatively silent about the role of big government, and its proposed remedies lean heavily toward increased government intervention. Continue reading

Labour re-writes the past – their economic management


by Robert Henderson
http://livinginamadhouse.wordpress.com/?p=1097

The Labour hierarchy has worked out its narrative on the economic mess they created. It runs like this: NuLabour in power may have made some mistakes, but these were minor and apparent only with hindsight, while the real culprit is the global economy in general and the USA’s obsession with sub-prime mortgages in particular. This is not only a grotesque lie but a stupid one because it can be readily exposed. Continue reading

Warren Buffett’s Financial Incentive to Push for Higher Taxes


by Stephan Tawney on August 17, 2011
Did I say “financial incentive”? Why yes, yes I did. It turns out that Mr. Buffett — new liberal hero thanks to his push for higher taxes on the “rich” — isn’t really a disinterested party: Continue reading

Bitcoin: More Important Than You Realize


by Kevin Carson
http://c4ss.org/?p=7149

Neal Stephenson’s “The Diamond Age” was set some years after encrypted currencies and e-commerce removed most economic transactions into darknets beyond the government’s capability of monitoring and regulating, and thus caused tax bases around the world to implode. This followed, in short order, by the collapse of most nation-states.

Encrypted currencies and darknet economies have been promoted as a real-world model for resilient communities, in the impending age of hollow states, by such thinkers as Daniel de Ugarte and John Robb.

So you can imagine my reaction to recent news of Bitcoin, “a Peer-to-Peer Electronic Cash System.” Continue reading

The EU Euro stability fund draft press release…


Christopher Houseman

Found in the memory hole.

In the wake of widespread pessimism and protests in Europe regarding the very existence of the Euro, the European Commission and the Council of Ministers have agreed that a permanent Euro stability fund will be established shortly.

All Eurozone members will be expected to pledge impressive sounding amounts of money, which won’t in fact be anywhere near enough to cover the gaping hole in the heart of our wonderful would-be global reserve currency. And we won’t actually expect them to pay anywhere near as much as they pledge – unless they urgently have to.

The existence of a permanent Euro stability fund will reassure the gullible citizens of our glorious Union that all is well – until they actually have to buy something more valuable than our promises about their future earnings and productivity. In fact, the very existence of the stability fund means that:

1) We have no intention of trying to turn the Euro into a sound currency, and we probably wouldn’t know how to do so anyway.

2) We won’t be able to stop Eurozone members overspending in the future. Why else do you think we need this fund? Besides, we know every such crisis provides the justification we need to centralize even more money and power in our hands, so why would we even bother to try?

3) We will pay no attention whatever to calls for repudiation of national debts and a return to national currencies by Eurozone members. Any politician who tries to do this had better have very good life insurance and first-class bodyguards. Our message to the little people is simple: Shut up, pay up, and trust us to spend more money than you can possibly imagine. We’re a government – what else do you expect?

We note that UK citizens have been assured that non-Eurozone countries won’t have to contribute to the fund. We’re glad you like the eyewash, and rest assured that we’re working hard to address this state of affairs.

FLC198, The Coalition and the Economy: A Fanning of Stale Air, Sean Gabb, 28th October 2010


FLC198, The Coalition and the Economy: A Fanning of Stale Air, Sean Gabb, 28th October 2010.

David Webb on Pension Reform


Doh – I sent this directly via e-mail. It was stripped out. Apologies to all, and here is the post as it should have been.

Dear Dr Gabb,

I am on holiday in China, but want to send you some comments on pension reform, but I couldn’t find a thread on the LA site to post it in. Would you consider opening a thread on this topic?

I am totally opposed to the government’s decision to force all companies with more than 50 employees to have a pension scheme and to auto-enroll all employees in it. While it is good for everyone to have a pension account, a scheme run by your company is not yours to manage and control – and in times of economic downturn it can leave companies nursing large pension deficits for people who no longer even  work for the company, requiring extra money to be put in just at the wrong time.

In Hong Kong, all employees contribute to their Mandatory Provident Funds, and I think their employers either can or have to contribute too. I would like to see a system whereby national insurance was totally scrapped, and everyone on PAYE (as long as it lasts, as libertarians would scrap income tax altogether) be required to contribute 10% of their monthly salary into their own SIPP, self-administered personal pensions. The company could also contribute more (but not be forced to), and all these SIPPs would be up to you yourself to manage. You could make the decision to invest in commodities, emerging markets or whatever yourself, and your pension scheme would be your own – and also your own problem. There would be no pension debts in company accounts (or only for already retired employees as the existing arrangements are phased out), and no public sector pension deficits either. Quite simply, all public servants would also pay 10% of their salaries into their SiPPs too.

There would be no 200k pension for ex-police chiefs – quite simply police chiefs would pay 10% of their existing salaries into their SIPPs and manage the assets themselves thereafter. For most people, the abolition of NI would largely cover this scheme, and it would eventually free up the population from total reliance on the state in their autumn years. I would not increase civil service pensions to cover the fact that they were now having to pay into their own SiPPs – the abolition of NI (which would require cuts elsewhere) would cover that – and existing pension monies, where they existed would be distributed to the pension members as contributions to their SIPPs. Quite simply there would be no pension assets other than the SiPPs, which everyone would hold.

I would then abolish the state retirement pension as an entitlement. Those after 65 whose SIPPs had not earned enough could apply for income support (a benefit, not an entitlement). Clearly we have to think about getting out of the whole social security arena, but that would be easier to do in the future when everyone had saved up a bit in their SIPPs.

I would also make pension assets fully inheritable with no inheritance tax. Currently that is only the case between spouses. I would also totally remove the requirement ever to buy an annuity, which is just one way of making sure there is nothing left of pension assets when you die. I would also look again at the 25% lump sum that can be taken out of your pension at 55. As long as the pension assets remaining after a lump sum was taken out were enough to finance a retirement, there would be no need to restrict the lump sums to 25%. Eg if you had 1 million in your pension, why should you only take out 250K as a lump sum? As 750k is more than is required to finance your retirement, assuming a 400K pension paid a 28K pension at a 7% annuity rate. In other words, I am saying anything over 400K should be available as a lump sum free of any tax. And some access to pension monies earlier than 55 years of age, eg to buy houses, should be facilitated, as long as there was enough left in the pension fund to reasonably expect to fund your retirement.

I know libertarians want to get the state out completely, but I think what I outlined above would be a good stepping stone. It would make it easier to fully get the state out later on, as people would have assets. The point about abolishing the trillion-plus public sector implicit pension debt at a stroke would be a huge improvement in our country’s finances.

Regards, DJW

Strategic Offence and Insecurity


Christopher Houseman

So, the great threats du jour are cyber-terrorism and international terrorism in the style of al-Qaida. Hmm… I can see why we’ll need a couple of new aircraft carriers to fend off those evil beasties, especially if HMG can’t afford to put any planes aboard them. Still, at least nobody’s talking about renting the (not yet completed) aircraft under a PFI scheme, along with the refueling tankers.

Meanwhile, in the name of “not giving in to the people who’ve been angered into action by our previous intrusions into their lives terrorists”, HMG has either got to carry on with business as usual (which means buying enough kit and posting enough troops in the right places abroad to placate the US government) or at least reassure everyone that’s what it intends to do as soon as it can print enough new money convince the markets it’s solvent again.

Personally, I doubt a mere 8pc cut in the MOD budget (while everyone else takes a hit of up to 25pc) will be enough to woo foreign creditors back in their droves. But at least as Remembrance Day draws near, we can all pause a while to give thanks for this country’s glorious victory over the evil Nazi supporters of “Guns before butter”, and encourage ourselves with the thought that the British people are far too noble and wise to fall for that old lie.

Those who do not learn from history…


…and you know the rest of that one.

David Davis

But this looks like it will be worth reading.

A quick response to Mr. Osborne’s Emergency Budget


Christopher Houseman

This tough austerity budget, in which everyone will bear the pain together, has everyone at the BBC prattling on about the projected 25pc departmental spending cuts.

Apparently, everyone’s forgotten George Osborne’s admission that, because of his refusal to cut capital spending projects, overall Government expenditure is set to rise from £637bn to £711bn over the five-year term – a mere £74bn increase (that’s well over 11.5pc).

Wow! What a sacrifice by the State. Imagine how much more Government would have awarded itself if we weren’t in a recession.

I further note that, as indicated beforehand by David Cameron, some Government departments are more equal than others. Spending at the Department of Health (doh!) and the Department for Overseas Bribery Development won’t be cut. I guess the coalition Government needs to keep renting votes in the North-East and the UN General Assembly, and Big Business needs some more taxpayer-oiled overseas contracts in the “Developing” World.

Clobbered: middle England (esp. those on household incomes of £40-60k), anyone on State “benefits”, anyone planning a big ticket purchase in the New Year (when VAT will rise from 17.5pc to 20pc)

Pseudo-clobbered: the rich (28pc CGT is still less than the top rate of 40pc income tax, so that loophole remains cost effective), the banks (surely the new bank tax won’t be passed on to customers in the form of higher charges – will it?)

Encouraged: Some small business owners (various breaks relating to entrepreneurs’ CGT, NI breaks for SME’s outside London and the South East).

Overall: Open for (Big) Business as Usual.

The New Barbarossa?


Christopher Houseman

George Osborne’s emergency budget tomorrow will coincide with the anniversary of Hitler’s decision to invade Stalin’s Soviet Union in 1941.

Those of us who, on the one hand, grieve “New” Labour’s sovietization of British society and the UK economy, wait with some trepidation on the other for the new Chancellor’s pronouncements.

The coalition government is reportedly keen to raise income allowances but will at the same time penalise any attempt to translate this extra income into investment capital by slashing non-business CGT exemptions and raising CGT rates. Meanwhile, the combined result of reported plans to raise VAT with recent cuts in the number of tax inspectors is a subsidy of the so-called “black” economy. No doubt, this subsidy will be further enhanced by the usual rises in taxes on petrol, diesel, alcohol and tobacco.

When combined with ongoing efforts to artificially depress interest rates, the unmistakable end result will be to encourage people to keep spending as much or more than they earn, but to try to do so “off the books”. And no doubt any future reversal of the proposed war on capital gains will involve encouraging capital formation under the control of large financial institutions. I can think of no outcome more likely to disillusion coalition members and the wider electorate alike in the longer term.

In 1941, some people hoped that Operation Barbarossa could somehow result in both sides losing. Sadly, until control of the money supply (at the very least) is wrested from the political system’s cold dead hand, such a hope will again be too much to ask for.

All in all, it sounds to me like a good time to go long on gold, silver and ferry companies (the booze cruise boost), and short on the FTSE in general and off licence chains in particular.

Libertarian Alliance Examination Board: a sample Science Paper


Fred Bloggs.

Here Is a newly issued paper from the LAEB (Libertarian Alliance Exams Board)

Appreciate or Die (Quote from Socialist art gallery).

Image4

Please only use a black ballpoint pen in this examination, as our exam marking                                                                                                                                                                                     monkeys are colour blind.

Time allowed : 3.278×10-29 sec

  • The maximum mark for this exam is 34.7
  • Show some of your working, but not all, if you do so marks will be deducted.
  • You will be awarded extra marks for answering these questions in a specific different language, but we’re not going to tell you which, if you answer in the wrong language you will automatically fail.

Any injuries sustained during this exam are the fault of the person taking the exam and not the LAEB (Libertarian Alliance Exams Board)

Sign Here: ________________________

Questions Start

1  Estimate the DC current, flowing in a one-turn copper coil which follows the earth’s equator, which would cancel the Earth’s magnetic field at either pole. (Horizontal component of field at lat 86o 30` N = 0.18 gauss, vertical component = 0.9 gauss. I gauss = 1E-5 Tesla.)

Answer:_______________________

______________________________

______________________________

______________________________

Maximum Mark: 2.3

2   Calculate the cross-sectional area of a square copper turn, polished and unblacked, and fully suspended, whose surface temperature will not exceed 800 K in dry air temperature of 320 K.

Answer:_________________________

_______________________________

_______________________________

_______________________________

Maximum Mark: 6.1

3   Calculate the gravitational field strength existing between the Milky Way and a hypothetical galaxy 13 billion LY away. Use 2E42 Kg for the mass of the Milky Way and 9E41 for the other galaxy.

Answer:_______________________

_____________________________

_____________________________

_____________________________

Maximum Mark: 7

4   Estimate the cross-sectional area of each of two Duct-tape fixtures, of 48mm width and 0.5mm thickness, applied always parallel to the direction of force, which would be required to separate reliably two opposite charges of 1C each at a distance of one meter in free Space. (Young’s Modulus of Duck Tape is assumed to be 4E9 Pa.)

Answer:______________________

_____________________________

______________________________

______________________________

Maximum Mark:2.4

5   Estimate the number of moles of human DNA on the Earth as of now, its total estimated mass, and the molar mass of human DNA. (Assume that one haploid human genome, complete, = 1 molecule. Also assume that the mean volume of all human cells is about 1.9 picoLitres.

Ignore human gametes in this answer, but also estimate the total number of these present on the planet at any moment. Use your knowledge of human population trends and age-band-statistics to derive as accurate an estimate for this number as possible, differentiating male form female gametes.

Answer:_______________________

_____________________________

_____________________________

_____________________________

Maximum Mark: 0.6

6   Calculate the reduction in heat capacity of the Gulf Stream over a calendar year, caused by a wind farm of 10,000 turbines directly in the path of the airstreams above it at latitude 55oN, each turbine having an installed generating output of 100Kw, at a height of 100M and operating at a 16% duty cycle. Use your own knowledge of geography, natural climate movements, astronomy, the heat capacities of water and moist air. The Sun’s radiated power output is about 3.92E26 Watts.

Estimate the extra mass, surface area and volume of North Polar ice that would build up in the Barents, Norwegian and Greenland Seas in one year, assuming that no other areas are affected, as a result of this set of turbines. (For quickness of solution, assume polar ice above latitude 65 radiates IR into space at 25 Watts/M2 at all temperatures above 240K.)

Answer:_______________________

______________________________

______________________________

______________________________

Maximum Mark: 1.6

7   You are to deliver a shell weighing about 1.5 imperial tons, at a range of 60 miles, from a barrel of diameter 460mm, at a target at the same elevation as the emplacement. (g = 9.81m/s2) Devise a suitable mathematical model from which the answers could be derived, and then calculate, in no particular order:

(a)  The barrel length

(b)  The time of flight

(c)   The maximum height reached by the projectile

(d)  The required muzzle velocity at 40o barrel elevation

(e)  The mean gas pressure (assume uniform)

(f)    The acceleration in the barrel

(g)  The muzzle velocity

Answer:___________________________

__________________________________

__________________________________

__________________________________

Maximum Mark: 4.7

8   Calculate the number of 25Kg sacks of rice that would be required, and the total volume of rice grains in cubic miles, if the Great King had been able to grant the wish of the Resident-Court-Mathematician who had invented Chess for him. The inventor asked for “one grain of rice on the first square, two on the second, four on the third, eight on the fourth, sixteen on the fifth…..”. Assume a grain of rice is a cylinder of length 6mm and diameter 1.25mm and that they pack approximately efficiently. State your packing density assumptions in your answer.

If the sacks used above are made of polythene, and must be 0.8mm thick, estimate the area of film to be manufactured, its mass, and the number of barrels of Saudi Heavy Crude that may have been used to make it. Use your knowledge of thermal cracking procedures and also of the average mass of a “barrel” and how much of this is realistically convertible into monomers for this question’s use. Density of polythene (MDPE type) is about 0.932 g/cm3.

Answer:____________________________________

___________________________________________

____________________________________________

____________________________________________

Maximum Mark:10

End Of Questions.

Are the non-Domiciled Rich and the City Good for England?


Sean Gabb

Free Life Commentary,
A Personal View from
The Director of the Libertarian Alliance
Issue Number 168
19th February 2008

Are the non-Domiciled Rich and the City
Good for England?
by Sean Gabb

On my way out of the house this morning, I was called by a BBC researcher to discuss my opinion of non-domiciled tax status. As my opinions were not the ones expected, our conversation did not lead to any broadcast. But I was rather pleased with what I said, and I might as well spend the rest of my railway journey writing it down.

For my readers who live abroad, I should explain that resident foreigners in this country enjoy significant tax privileges. I, as a British citizen resident in the United Kingdom, pay tax on my income earned here and elsewhere in the world. A foreigner living here, who can persuade the authorities that his permanent residence is outside the United Kingdom, pays tax only on what income he earns in this country and on what income he brings in from abroad. Whatever he earns abroad and leaves abroad attracts no tax. That is why so many rich people have moved to London.

This privilege is now under attack. During the past eleven years, the British State has almost doubled in size. The Ministers have justified this by an endless chant of “investment in essential public services”. In truth—whether to a few white proles, or to Shopping Coordinators for Bearded Men with HIV, or to the various Tarquins and Jaspers who get the contracts to redesign logos and headed paper every time a Ministry name is changed—our tax money has gone on raising up an army of Labour voters. So far, most of us have not paid attention to the systematic looting required for this. Some of it was cleverly disguised. Much of it was enabled by an expansion of the world economy that brought in more revenue without increases in the rates of tax.

This may now change. If we go into recession, the amount of tax paid will fall at current rates. At the same time, there is no room left for imposing taxes that will not be noticed and felt. Therefore, if the payroll vote is to be kept on, let alone expanded, the Government must now openly increase taxes or inflate or both.

That is why the non-domiciled are to be hit with a poll tax of £30,000 per year. This will not put off the fiscal crisis. At £800 million, the sum projected is barely a fifth of one per cent of total government spending. Nor will it last very long. The non-domiciled are already threatening to leave. That means a farewell to Madonna and to Roman Abramovich. More importantly, it means a farewell to some of the most dynamic people in the City of London. To raise barely enough cash to run the National Health Service for a week, the Government is prepared to lose people who contribute billions in employment and indirect tax, and to damage a vast financial machine that generates more than a third of the national income.

But when a state is hungry, every little extra can look tasty. That it may not last beyond the next election is not something at all likely to worry our present set of politicians.

I think the lady from the BBC expected me to run out of breath as I denounced the scheme. She had me listed on her database as Director of the Libertarian Alliance, and took it for granted that I opposed taxes and supported the rich in general and the City of London in particular.

Well, I did denounce the taxes. They were bad, I said, because they stole the produce of a man’s labour: taxing is enslaving. They were bad, I added, because they enabled government spending that, even when not obviously wasteful or oppressive, tended to corrupt both direct and indirect recipients.

Her problem started when I moved to the rich and all those City people. Good riddance to the lot of them, I said. If it needed a tax to get them out of England, I might almost find something nice to say about taxes.

That was the end of our conversation. The BBC lady made her excuses and rang off. I imagine she then did a search in her database for Tory Boy Intellectual, and was soon hearing a lecture about London as “the Jewel in the Crown of the British Economy”.

I suppose I should explain myself. There are those who think libertarianism involves a defence of riches and of the rich. Some libertarians seem to agree. I do not. A libertarian is someone who wants to be left alone, and who wants to leave others alone, and who wants others to be left alone. People must be taken as the owners of their bodies and of what they create in or appropriate from the external world.

Given that all exchange and other association needs therefore to be voluntary, we move to an endorsement of what is called the free market. If some people do better in life in others, so much the better for them. If they contrive to pass on some part of their success to their children, so much the better again.

This is not, however, an endorsement of actually existing capitalism. A free society is not Tesco minus the State. It is a place of small craftsmen and farmers and traders, of artists and of unlicensed doctors and lawyers, and of others needed if individuals and free associations of individuals are to live well. We cannot say much more than this about the arrangements of a free society. But we can be sure it would have no place for big business as it now is found.

Big business corporatism, I would never seek to deny, is the best economic model humanity has known in over a century. It does generate vast amounts of wealth, and does ensure that much of this is distributed with some approximation of justice. Give me a choice between what we have and any of the state socialisms tried or recommended since Plato, and there is no doubt what I should choose. Nor is there any doubt, though, that the civilised nations made a big collective mistake around the middle of the 19th century. A system of scientific and industrial progress that might have grown into an unmixed blessing was partly hobbled and made into a new instrument of class domination by laws that allowed firms to incorporate and that gave shareholders limited liability for the debts of firms.

The result was a channelling of investment into firms that would never have been trusted had investors continued to face the risk of joint and several liability for debt. As these firms grew to enormous size, they monopolised or cartellised whole markets. They accepted and often quietly called for schemes of tax and regulation that harmed them, but harmed them less than their smaller competitors. In Britain and America, they demanded the underwriting by the State of their foreign expansions.

To ask whether big business bought or were colonised by the political class is irrelevant. All that matters is that we live in a world where political power and corporate wealth are possessed by different wings of the same ruling class. It is a ruling class that presides over whole nations of people transformed by brainwashing and mild but continuous discipline from human beings to human resources.

More than any other financial centre, the City of London stands as the heart and mind of the global corporate system. Every statistic the BBC lady was hoping I might drool on air—that there are more American banks in London than in New York, that German banks employ more people in London than in Frankfurt, that over a third of all currency conversions take place in London, and so on and so forth—is further condemnation for me.

Anyone who regards the City as identical with free market liberalism is deceived or trying to deceive. It is a place where markets clear, and where profit comes from working out returns in fractions of one per cent. It is one of the few places where reality and the textbook world of perfect competition nearly merge. It is, however, a place maintained in being by the scheme of state-granted privilege that is limited liability. At the very best, its activities are useful to protect us from high taxes. But in a world of free societies, there would be no City of London or anything like it.

A further evil of the City brings me back to the non-domiciled rich. Whatever their immunity from income tax, these are people who pay large amounts of indirect tax. They hand this over without much resistance or complaint, and they hand over large amounts. Political quietism plus great wealth is always dangerous to freedom. When the quiet rich are also foreigners, or at least highly mobile, is still worse. They will not protest at any use of their tax money to oppress other people than themselves. The moment their own freedom is infringed, they will retreat to somewhere more congenial.

For all the airs and graces they try to assume, this is what makes the non-domiciled rich different from the old landed aristocracy. Though tiresome in their defence of legal privilege and unearned wealth, these latter were incidentally useful in slowing the rise of big business corporatism. Like the rest of us, they had nowhere to run to, and were by training and inclination the natural leaders of resistance. Roman Abramovich and Madonna are none of these things. They live among us, but are in no sense with us. The same is true for the more anonymous bankers and fund managers who have for the past generation found this country useful as a trading platform. The same is true of the rich in general. Unlike the workers, who may have little else, the rich have no country.

Just about the only very rich foreigner possessed of any public spirit is Mohammed al-Fayed. He expresses that spirit in what may seem an eccentric cause. But he certainly cares something about this country. He is also domiciled here and is subject to the same taxes as the rest of us. Not surprisingly, he is hated and reviled by the establishment media, and has failed to obtain a British passport in an age when these are handed out to any parasite who can hold his place on the underside of a lorry.

In closing, Gordon Brown and his Ministers do not intend to do well by us. They are traitors to us in their external policies, and rapacious tyrants in all their internal dealings. But their desire for short term gain may set us on the path to a better world. And if they are not to be thanked for this, I am not inclined to join in the chorus of disapproval.

NB—Sean Gabb’s book, Cultural Revolution, Culture War: How Conservatives Lost England, and How to Get It Back, can be downloaded free from http://tinyurl.com/34e2o3. You can help by contributing to publishing and distribution costs

Free Life Commentary No 168, 19th February 2008

Star Wars


Fred Bloggs

MP’s expences can now be seen from space. They realy can’t hide from the taxpayers any more.

They’ll be claiming for the satellites next.

Good Economics, Standard Theology


Bruce Porteus

WILL  THERE  BE  A  GLOBAL  ECONOMIC  COLLAPSE,   OR  RECOVERY?

Will there be a global economic collapse, or can the world’s economy be saved from a total
melt-down? Will the current stimulus packages work? Will there be an economic recovery?

These questions are now being asked by many business leaders, politicians and economists
around the world. There appears to be little agreement on what will happen as the unprecedented
economic crisis continues, in spite of optimistic forecasts from some world leaders. This article will
explain the causes of the current economic crisis, and what the outcome will be, in simple,
layman’s terms.

Firstly, let’s look at the causes of the current crisis. For over 30 years the Anglo-Saxon nations
(USA, Canada, Australia, UK, New Zealand) and a few other countries have been spending
considerably more money than they earned from exporting goods and services, accumulating large
current account deficits internally, and massive external debts internationally. To finance these
external debts they have borrowed money from creditor nations, in particular Japan and China. This
has allowed the Anglo-Saxon nation’s financial institutions to have the capital to continue growing
their economies, enabling them to finance costly wars and still import consumer goods to satisfy
their self-indulgent life-styles. They have continued to expand their currency supply in order to
maintain economic growth, but that caused an escalation of property prices, and growth in
borrowings to finance domestic consumption. Up to now they have been fortunate to avoid being
affected by the high inflation that normally follows an increase in the money supply, without a
corresponding increase in productivity. This was, in part, made possible by switching to the
purchase of imported goods and services produced by low-wage countries and paid for with the ever
increasing supply of US dollars.

The problem arises when Federal Reserve Notes (U.S. dollars) accumulate in foreign hands. A
Federal Reserve Note is an I.O.U. and rather unstable as it floats against the arbitrage basket of
international currencies. The only alternative for these nations to avoid being overexposed to
unbacked dollars which might tank at any moment, is to purchase United States Treasury
Certificates which are (so far) considered safer as they are rated (so far)”triple A.” Either way, other
nations are trusting that these I.O.U.’s will one day be useful for the purchase of goods, services or
other more stable currencies. The purchase of these Treasuries (loan certificates) by foreign nations
repatriates the dollars which are then spent domestically or overseas again.a vicious circle.

This inflow of money borrowed by the Anglo-Saxon nations has allowed them to maintain generous
state-funded welfare programs that have directly contributed towards undermining the role of the
family as the foundation of a successful society. This has encouraged people to look to the State
for their needs, rather than the extended family accepting responsibility for other family members,
sapping the drive and willingness of their people to compete in a competitive world. Socialism by
stealth in Western nations has done so much to destroy the family structure, the foundation from
which all successful societies are built. An increasing amount of Western Government revenues are
drained into providing expensive welfare programs such as health care, pensions, benefits for the
unemployed and inadvertently encouraging single parent families, but leaving little money for
investment into infrastructure and provide capital to develop their economies. Asians culture
encourages the extended family to accept responsibility of caring for other family members in times
of misfortune, paying for their education and health care, rather than the State. Most Asians accept
the premise that unless you work, you go hungry – sadly in the West it is expected by many that
the State will provide, regardless if one works or not.

One of the results of the current economic crisis is that the Anglo-Saxon Governments no longer
have revenue to support their expensive welfare programs; just at the time when there are the
greatest financial demands being placed on them. An aging population, escalating health-care
costs, growing unemployment is blowing out government budgets, causing unsustainable deficits.
Meanwhile the Asian countries, not burdened with such extravagant welfare programs, have been
able to use taxation revenue to invest into developing their domestic economies. As a result the
Anglo-Saxon nations have become less competitive in the global market-place than the Asian
economies. Added to this, the lack of domestic savings by the Anglo-Saxon nations has made
them dependent on borrowing from those countries that have large current account surpluses,
causing them to slip further behind in maintaining the standard of living that their people still expect
to enjoy.

The end result has been a gradual break-down of the social fabric of western society till today they
are crime-ridden, diseased, over-indulgent, debt-ridden and self-destructive. The Anglo-Saxon
nations are now so heavily indebted to their overseas creditors, that even an increased amount of
export revenues would not enable them to service their external debts. However with falling exports
and large current deficits, it is only a matter of time before they slide into bankruptcy, unless they
are able to operate with a current account to service and repay their international debts. The flow of
US dollars into Asia has enabled their economies to obtain the capital to finance their domestic
growth and accumulate overseas reserves. In turn, lending their surplus capital back to the
Anglo-Saxon nations has allowed these countries to obtain the financing to purchase more imports
from Asia. This arrangement has worked well up to now for all concerned, but is not sustainable.
However, it is proving very difficult for the Anglo nations to expand exports to the rest of the world
during a global economic recession which is causing a lack of overseas export markets for their
goods and services.

Up to now the USA has been in the fortunate position of having the US dollar as the world’s reserve
currency, and being able to print dollars to finance its deficits, avoiding the need to borrow in other
currencies. As long as the global demand for dollars to finance world trade remains, it has been in
everyone’s interest to continue with this arrangement and retain the US dollar as the world’s reserve
currency. Over the last decade surplus dollars have been recycled back to the American banking
system, creating surplus liquidity in the Anglo-Saxon nations, and encouraging their banks to adopt
loose lending practices to generate paper profits from loans to domestic customers.

The current economic crisis was triggered when American and UK banks accumulated bad debts
from reckless lending, as their customers began defaulting on their loans. This quickly led to a
chain-reaction of banks defaulting and the need for government intervention to bail them out. This
has led to the current global economic crisis we now have.

In an attempt to avoid a total economic collapse, the governments of UK and USA have created
trillions of dollars of credit to inject into their banking system to save their banks from collapsing, as
well as guaranteeing deposits. This was intended to allow the banks to continue lending to prevent
their economies from going into free-fall, and government revenues collapsing. It appears this may
be working, although the banks have still not written off trillions of credit card debts and real estate
loans. The real question is, where has all the money gone that was lent though the bank’s bad
debts which have been written off? This money is still in circulation, but much of it is not
recoverable from those who have defaulted on their loans. What has happened to this money? It
has not just vaporised. Much of this money remains in circulation outside the USA and is now
controlled by foreigners.

Another difficulty faced by the Anglo-Saxon nations is that trillions of dollars have been written off of
their equity and property markets, wiping out much of the collateral from their banking system. Still
not accounted for are the trillions (possibly quadrillions) of dollars involved in the derivatives markets
- a sleeping time bomb ready to explode at any moment. In effect this has resulted in much of the
wealth of Anglo-Saxon nations disappearing, lowering the standard of living, slashing government
revenues, and will inevitably result in widespread poverty.

The Federal Reserve policy of creating new currency to replace toxic bank loans is like putting fuel
on the fire. In the short-term it may prevent the US economy from unravelling, but in the long term it
will be disastrous. It will result in run-away inflation as money looses value. Admittedly the US does
not have much choice – if they had not propped up their financial institutions, the economy would
have unravelled already, collapsing government revenues, and dragging the world into a depression.
They would not have had the revenue to service their national debt. Either way, the economy
collapses. The option of printing currency to inflate the money supply in an effort to stimulate
consumer demand and maintain economic activity is a very risky one, and will eventually lead to
erosion of the fiat value of the currency and uncontrollable inflation. Governments flooding markets
with currency to revive economic growth without increasing goods and services will only result in the
collapse of the currency.

So what happens next? The flood of money that has been injected into global markets may lead to
temporally restoring consumer confidence and spending for a short period. Sadly, the imbalances
that have led to the current crisis have not been addressed. Nothing has been done to correct the
imbalance of global trade between the Anglo-Saxon nations and Asia. The Asian nations continue
to accumulate more and more US dollars from exports and income from their investments. The flow
of capital from the West into Asia to finance imports continues. The outcome can only result in one
thing – a total collapse in the value of the currencies of the Anglo-Saxon nations.

The coming collapse of the US dollar will result in significant readjustment of global economic and
military power. It will result in the end of the Anglo-Saxon nations’ dominance of the global
economy. They will be replaced by two significant economic power blocks (Asia and the EU) filling
the vacuum created by their collapse. It will also be a time of further economic turmoil, followed by
political upheaval. It will lead to the end of many of the democratic freedoms which we have today,
replaced by authoritarian regimes regulating the global economy. Not only will there be a denial of
political, economic and social freedom, but also religious freedom. These institutions will be
replaced by authoritarian institutions regulating how people live their lives, denying much of the
individual freedom that we have come to accept today.

There is general agreement amongst many world leaders that the free-market unregulated
economic model advocated by the USA can no longer continue. In its place they are advocating
what UK Prime Minister Gordon Brown calls a “new world economic order”. What is planned is to
have much greater controls on the movement of money, where and how capital is used – controls on
speculation in futures, derivatives, commodity trading, etc. Technology available today will enable a
single world currency supported by one global central bank, to control both the supply and
movement of money around the world. This is being advocated by Germany and France under the
pretence of controlling tax avoidance and regulating markets, in reality it will go much further than
this – controlling the movement of money and all commercial transactions, with a cashless society
where governments can monitor all commercial and personal transactions.

The Euro is the only currency large and strong enough to replace the US dollar as a world reserve
currency, or a new world currency. Germany is the one country which has sufficient currency
reserves to underpin the confidence in the Euro allowing it to become the new global reserve
currency, having been for years the world’s largest exporter. Increasingly German dominance is now
dictating the direction of Europe – all that is lacking is the leadership.

The EU lacks a leader who can unite the various competing political and nationalistic factions to
enable decisions to be reached to bring about a cohesive economic policy and revive the European
economies. As the economic crisis spreads throughout Europe, unemployment continues to grow,
and political unrest becomes more severe, the need for the appearance of a strong leader will
create a power vacuum into which someone will surely step. Europe now desperately needs a
modern-day Napoleon, Hitler or a revived Holy Roman Emperor who can save the continent from
economic and political disintegration – a strong and commanding personality who can unite the EU
and lead it to economic recovery. Yet unity cannot happen unless the present disparate political
structures that currently exist are reformed, and the proposed new constitution adopted. The
materialization of a single leader that can unite the various European nations into a unified United
States of Europe, who has the ability to revive their economies, and provide the decisive leadership
required to lead them out of this crisis is the obvious necessity.

The fate of the Anglo-Saxon nations now looks extremely bleak. The collapse of their currencies will
be followed by total economic collapse. They will be unable to repay their international debts. They
will slide into bankruptcy. There will be wide-spread poverty, starvation, great suffering of their
people as their nations slide into insolvency. Disease will become wide-spread. Many
drug-dependant people will perish. Crime will spiral out of control, as a total break-down in law and
order develops. Most jobs will disappear. Governments will have no revenue to continue functioning
or pay for public servants or services. They will no longer have the income to maintain their defence
forces.

Throughout history empires rise, declined and collapse. The coming collapse of the Anglo-Saxon
Empire will happen quickly – this group of nations will disintegrate, which will result in the reshaping
of the political and economic landscape of the world. Without the stabilising influence these nations
have had on the world, many of the freedoms we take for granted today will disappear. The
Anglo-Saxon nations originally had a value system based on the Bible, but as they have rejected
the teachings of the Bible and the Law of God, so has their influence in the world declined. Now
these nations are facing total economic collapse, not economic recovery as many hope. They are
now being cursed for rejecting the teachings of the Bible and the Law of God.

Bruce Porteous

Bruceporteous50@yahoo.co.nz

1 May, 2009

Thought it was a bit quiet.


Mummylonglegs

The start of this week was very quiet, it was hard to find anything decent to blog out, Politics wise. Obviously Dan Hannan was a hot topic but apart from that, not a lot appeared to be happening. I reckon I have figured out why.

The Government and Gordo have been drip feeding the MSM lots of scaremongering stories about possible riots at this week ends marches. As the week went on more and more time was devoted to covering and speculating what was going to happen in London. The MSM have been willing poodles in this propoganda, only because there wasn’t much else to write about.

Gordo sat in some country (not sure where) and rubbed his hands with glee. As far as Gordo was concerned he couldn’t lose. Riots, civil unrest etc was just what he needed. He could use it to invoke the Civil Contingencies Act if it got too bad, but more importantly he could use it to slip a whole wedge of bad news. Another Banking Bailout, JaqBoots hubby claiming porn on expenses, UK’s debt increasing at a F1 type speed,G20 Countries appearing to be doing a whole lot better that the UK etc, etc, etc.

Only there were no riots. 35,000 people from quango’s, fake charities and wagons of Righteousness decended upon London and only 1 person was arrested. Leaving nothing for Gordo to hide behind. He has had to hastily retract the Banking Bailout and hope for a sale on Monday (I still reckon the Bailout will go ahead – it will be announced on the 1st). Gordo should be presiding over the G20 summit next week from a position of authority, unfortunately, due to his and his Governments total incompetency he is going to be presiding over a very slow, prolonged, drawn out car crash of a summit.

I notice that after all the talk by the Police at the start of the week about how many thousands of officers had been drafted in to cover these protests, all the talk that intelligence led them to believe that some factions were planning violence and unrest, the Police are now changing their story a little. Now they are intimating that their presence was very low key. What a crock. And of course the propoganda is starting again.

But there are fears that trouble could flare when further protests take place as world leaders gather in the capital next week.

I for one am greatly relieved that yesterdays protests went off quietly. As we all know, The Righteous have no problem in turning to violence when the want to get their point across, and they could have easily given Gordo and The Government exactly what they were after. For once they kept a lid on it, which means next weeks real protest can go ahead. As one person said “We don’t think our protest will change the world, but if every unhappy person in Britain realises they are part of a larger group it gives the individual and the group much more power to try and effect change”. And that is the truth.

I hope next weeks protests are peaceful. Violence is not a solution to the troubles we face. It is easy to throw stones at a bankers house. It is easy to start a riot. It will not change anything. It will give more power to those we oppose. Gordo, The Government and the rest of the world must be shown how unhappy this country is. We cannot get The Government out any other way. Gordo will not call an early election. He has no need. He knows his party is doomed. All he can do is hang on long enough to ensure that who ever gets in after him, i.e David Cameron will have the most almighty struggle on their hands.

I don’t know too much about politics. I don’t know how a vote of no confidence in a Leader or a Party can be bought about. All I can hope is that next weeks protests demonstrate to all 646 members of Parliament how much this country wants Labour out. They will not be able to hide from the protests, they will not be able to ignore them. G20 is going to be a disaster for Gordo, and the press will be all over it, so all Gordo and Labour can hope for, is that the protests turn nasty. It will be very interesting to see what other Government disasters await us on the 1st.

To all those attending the protests I ask you, don’t give them what they want. Don’t give them something to hide behind. They need a riot more than anything else at the moment.

If in doubt….PAYRISE!


Fred Bloggs

In the face of the current economic crisis (some might say fiscal armageddon) the goverment has devised a plan, which consists of, briefly, giving themselves a 60% pay rise. No doubt this “plan” will solve all the economic problems in the world, feed all the starving Africans, raise Atlantis, and with all its well-crafted majesty, scare the Russians so shitless they’ll give Lenin a haircut. Or, well, maybe not.

Apart from the Atlantis bit.

Find out more Here.

Being the boss


Mummylonglegs

I’m a simple soul. I don’t want much from life and I’m pretty much happy with my lot. I have 3 lovely Squids and a comfortable life. I get’s a little rocky sometimes and money is always tight but on the whole it’s ok. I have achieved this lifestyle the hard way. Finding the balance I have now and ensuring the well being and safety of those I look after has been a learning curve to say the least.

My Hubby, bless him, was a bit of a muppet. He was the Boss as it were. Unfortuanately, he wasn’t very good at telling the truth, he wasn’t very good with money, and he wasn’t very good at being either a husband or a father. He constantly put his own wants and needs before the rest of us. No matter what he did, it was always some one else’s fault, from taking on debt he couldn’t repay to constantly being unfaithful. He never once said sorry. In May 2004 I left him. At the time he was in debt to the tune of £150,000.00. and had no job. As his wife I had to take a chunk of that with me. He kept the house I got the kids. And half the debt. But, I became the Boss. I became responsible for sorting out the mess that I had found myself in.

Here’s how I did it.

Slowly but surely I cleared my debts. I didn’t do this by consolidating them all and paying them off with another loan. I got good financial advice, some of the debts I wasn’t liable for, the rest, I spoke to the creditiors, told them the situation, made arrangements to pay them off, and stuck to those arrangements. I looked at what I could live with out, what I could reduce and by tightening my belt. It was hard, but I knew I had to do it. It has taken 5 years, but I have done it. I took on no new debt, and I ruthlessly cut back on all excess expenditure. Only spending what I had to.

When I started this the very first thing I did was talk to my Squids about it. I explained that things weren’t good and that we would all have to go with out some things. I promised that the essentials would always be there. Food, clothes, car etc. and assured them that although it was going to be a real change, if we all pulled together it would be ok. I promised them that certain thing would remain sacrosanct and would not be affected by the cut backs. Birthdays and Christmas would be the same as it always was. But no more Maccy D’s. No more Take aways. No more little toys every time we went shopping.

They were a little bit miffed at first but then I explained that we had a choice, carry on as we were for another 6 months and then watch everything go, or nip it in the bud, enjoy what we can have, and forget about what we can’t. I introduced the radical cut backs slowly, over a couple of months. The best thing I did was show them that I was prepared to go with out as well. No more new clothes for Mummy. No going out on a friday night. I am responsible for them and they know it. It would have been grossly unfair for them to be punished for my mistakes.

The other thing I did was include them in all my decisions. I explained the problem. Told them the solution that I wanted and between us we discussed how to get there. We all planned how we could cut back.When I go shopping on a Friday, in the morning I ask them what they would like. We barter over it, I explain the costings, we discount some stuff and add other stuff. Then we come to a general agreement and I go get it. They still get little treats but they are exactly that, treats. There are birthday parties to go to, costume days, fun days, school disco’s, school trips etc. They get to attend all of these because I feel they are important.

If we have a catastrophe, car breaks, washing maching blows up etc we have an emergency meeting. I try and keep money back to cover things as this but it is not possible to see into the future. We talk about where we can make further short term cuts to get through the crisis, with the assurance from me that once the situation has been sorted life will get back to normal. If I get a windfall (£70 on a scratch card my friend bought me) we sit down and discuss how we would like to blow this money. It’s not in our budget so it will be used on something that we can’t normally have. With the scratch card we went to the Cinema, bought loads of sweets, then had a meal at a local pub afterwards. We loved it.

5 yrs and we are sorted. Debts are cleared and our standard of living is more than adequate. How ever I am not about to use that as an excuse to start the cycle of again. I am happy with this stable life. And so are my Squids. We still have to go with out some times and there is always tears from some one if they can’t have something they have set their heart on.

We have learnt that although I am the boss, we work best as a team. I never blame their father, there is no point, Squids have short memories, they live in the here and now. I never lie to them, I never promise what I can’t deliver, I include them in all decisions from the tea time menu to where we go on holiday. If I cock up, I don’t blame some one else, I take it on the chin and apologise and it is me that goes with out, I do not punish them for my mistakes. They trust me to take care of the grown up stuff, paying bills etc but if something directly affects them we talk about it. I don’t keep them in the dark and they understand that although sometimes I have to do stuff that I don’t want to, it is done with all of us in mind, because we are all in this together.

As for the old Boss, well he’s out there somewhere, I don’t know where. We don’t have any real contact with him, and to be honest I actually think the Squids have forgotten he exists. Which is a little sad, but in all honesty, he only has himself to blame. My Squids respect me, trust me and look to me to keep them safe and well. It’s a job I do with relish and a job I do well.

It’s hard work being the Boss, if you do it wrong you stand to lose everything, but if you get it right the rewards are endless.

Mummy x

The Kevin Dowd lecture on free banking | Samizdata.net


Sean Gabb

The Kevin Dowd lecture on free banking | Samizdata.net

The Kevin Dowd lecture on free banking

Johnathan Pearce (London) Globalization/economics

As promised, I have some thoughts following on from the talk given by Kevin Dowd, a professor at the Nottingham University Business School and a noted advocate of what is called “free banking”. He gave his talk at the annual Chris R. Tame Memorial Lecture as hosted by the Libertarian Alliance. (The LA was founded by Mr Tame, who died three years ago at a distressingly young age after losing a battle against cancer.)

Professor Dowd covered some territory that is already pretty well-trodden ground for Samizdata’s regular readers, so I will skim over the part of the lecture that focused on the damage done by unwisely loose monetary policy of state organisations such as central banks, or the moral-hazard engines of tax bailouts for banks.

Instead, I want to focus on those aspects of Professor Dowd’s talk in which he tried to sketch out what a laissez faire, free market banking system would actually look like. This is essential; a great deal of commentary so far – while it is very good – has mainly focused on how we got into this fix and why the fixes being attempted by Western governments are proving so stupid. As PJ Rourke said recently, the attempt by the Obama administration to flood the market with cheap money as a “solution” is a bit like the case of when your Dad has burned the dinner, so you ask the dog to cook it instead. No, what Professor Dowd did this week was lay out three broad areas for reform.

Firstly, he says we should remove many of the existing regulations, government-mandated deposit protection schemes, bank capital adequacy rules and other restrictions on what banks can do and how they work. For example, government support for depositors – who are also effectively creditors to their banks – means that there is a moral hazard problem; the banks have less incentive than they would otherwise have to act prudently if there is always the government, acting like a sort of 7th Cavalry, able to ride to the rescue. That has to go. Professor Dowd also wants to hack away at the morass of rules and regulations that violate client/banker confidentiality, or those rules that force banks to lend to people, as is the case in the US, where banks are forced to lend to certain groups or else violate laws about racial discrimination, etc.

Secondly, Professor Dowd addresses the issue of letting banks fail. At the present, policymakers adopt a sort of “too big to fail” doctrine; this doctrine, while not explicitly laid down in any form of statute or operating manual – as far as I know – is a rule that says that some institutions are so large, and the attendant systemic risks posed by their failure so catastrophic, that they should not be allowed to go out of business. The problem of course is that this rule of thumb is often arbitrary and subject to political horse-trading. To wit: the US government’s decision to let Lehman Brothers go down last September, followed shortly by the $85 billion bailout for AIG, showed a total lack of clear message to the markets, and to bankers, one way or the other.

Professor Dowd believes that banks should be allowed to fail and furthermore, if modern limited liability laws were weakened or abolished completely, then such massive conglomerates would be economically and legally unsustainable in the first place.

As a result, banks would probably be smaller, and there would be a lot more of them, so the failure of any individual bank, while unpleasant for some, would not wreck the system as could happen if a mega-bank goes wrong. Also, instead of wide-ranging and hideously expensive bailouts, Professor Dowd favours putting banks into administration, writing down, in full, the value of their loan books, and getting depositors to exchange their status as creditors for that of an equity holder.

This “debt for equity swap” arrangement, while it would anger depositors who lose money, would come with the promise, and hopefully the reality, of a rise in the capital value of their equity stake in a bank if confidence returns to a more robust banking sector, as the debt/equity swap recapitalisation is designed to achieve. And of course banks are entirely free, as are their clients, to take out deposit insurance in a commercial market.

The third leg of his solution is broader, and more long-term, although there are some immediate measures that could be taken. Professor Dowd is against fiat money – money not backed by actual commodities or real assets of any kind – and in moving to a commodity-based/asset-based system. He is not, by the way, necessarily arguing for the gold standard or some gold-based system, although he points out that in the 200 years up to the First World War, the UK enjoyed a remarkable period of stable prices, with the odd blip. What he is arguing, however, is that the message on a banknote that says “I promise to pay the bearer on demand the sum of X” should be an enforceable legal contract, not what amounts to the jeering joke that it now is.

In the subsequent Q&A session afterwards, one person made the excellent point that a simple reform would be to ban legal tender laws. Such laws currently require a person to accept as legal tender a currency that the state has mandated for a particular region. Instead, if a person wants to refuse to accept sterling and only wants to accept dollars, euros or Swiss francs instead, he can do so. He can also choose to trade in whatever medium of exchange he wants, and with whoever wants to accept it.

Inevitable questions arise. First of all, in thinking about free banking, private monetary systems and the like, the first objection will be is that this will be very messy; there has been no real experience of such monetary systems in the past, etc.

But this is incorrect. Free banking, as defined by Professor Dowd, in fact operated in Scotland, for example, up until legal changes in 1845. South of the River Tweed, the English system had operated under what amounted to state-controlled banking under the Bank of England, set up in 1692. In the 18th and 19th centuries, England saw a number of booms and recessions, such as the 1840s railway boom and the downturn of 1870s. One should remember that the BoE was established by the-then post-Glorious Revolution government as a way to raise money for wars without having to keep asking a fractious public for taxes, and without having to borrow at expensive rates in the money markets. N.A.M. Roger has explained this issue of financing for naval warfare brilliantly. Indeed, it reminds us that state monopoly money systems typically arose in order to finance wars, while the welfarist aspects came later.

There are also current, not just old, examples of banks that operate with unlimited liability partnership structures – Pictet, the Swiss bank, and Lombard Odier, are just two examples. There are dozens of such banks using these structures in Switzerland and by no coincidence; they have avoided the worst of the credit crunch. These banks are typically for the rich but it seems to me that there is no logical reason why such an approach could not be used more widely. So there are different ways of doing banking right now. And do not forget the humble UK mutual building society: they have their limitations, but as a business model they had a lot to recommend them.

Another objection might be that the debt-for-equity swap way of restructuring failed banks under bankruptcy protection laws would be politically unfeasible, since depositors would be hit. I understand that, but Professor Dowd is not trying to imagine what sort of reforms would appeal to David Cameron, say, but what sort of reforms would be workable. That is a rather massive difference, as I am sure readers will agree.

Another objection is that “real money”, as opposed to the state-arranged fiction that we have now, cannot work for as long as governments take such a large slice of GDP. That is probably correct. One of the reasons why so many advocates of Big Government regard “gold bugs” or free bankers as dangerous nutters is that they realise their welfare states would be unworkable under such monetary arrangements. The Ponzi schemes of most welfare states would not be able to function. Even so, as long as governments retain the ability to tax, they have the ability to raise debt in the financial markets in the knowledge that their collateral can be collected at the point of a gun. But a real-money system still hampers such activity considerably.

In the longest run, the best hope of avoiding such financial disasters in the future is to wean the public and policymakers off the seductive delusion that one can create wealth by turning on a printing press. Sooner or later, if you try to fake reality, it bites you hard in the arse. Of course, it is a mark of the kind of man Professor Dowd is that he is too polite to put it as bluntly as that.

I await comments!

Comments

It sounds all very interesting and I really wish now I had been there as the other event I was at did not afford me the opportunity I had hoped to grab my local Oxfordshire MPs and try and sell them my idea for a “Bank of Oxfordshire” using, believe it or not, partnerships and asset based scrip.

I particularly like his ideas about what to do now, practically speaking, because I guess I always focus on the “hereafter” policies of competitive currencies and so on which are probably still a bit far up the Overton window for most peoples’ comfort.

There was an interesting piece about C Hoare & Co in one of yesterday’s newspapers just so people recall that there is at least one UK based bank on an unlimited liability model.

Was any mention made of Gesell, WIR Bank and similar alternative structures that often started up in the Depression and some of which, such as WIR, are still going from strength to strength?

Posted by Jock at March 19, 2009 02:05 PM

Firstly thank you for organising an enjoyable evening and thought provoking talk.

One additional area that will be critical to moving in the direction of free banking is reform of the insolvency laws and procedures. However desirable it may be to put a bank into an enforced reconstruction the law, particularly in England, makes it impossible to complete in a realistic time scale. The timescale for advertising ceditor claims, the lack of sufficient powers of an administrator to cut a deal amongst creditors and make it stick without protracted legal action, and the absence of any legal recognition (in statute or precedence) of priority for the counterparties of many of the new financial instruments mean that any administration process under current law would take months or probably years to resolve. A bank will go under if the uncertainty lasts more than a few days.

Sorting out the legislation and enforcing the current competiton rule to break up the major banks into more managable units will be preconditions of Prof Dowd’s approach.

A further and slightly off topic thought. The Sarbanes-Oxley laws in the US require CEO’s and CFO’s of companies, including banks and other financial institutions, to sign declarations that their organisation has fully effective internal controls, the records are complete and accurate, and that the financial statements can be relied upon. Clearly these representation for AIG, Citibank and other were patently false. Why are there no CEOs and CFOs in handcuffs awaiting trial??

Posted by RobertD at March 19, 2009 02:16 PM

It certainly appears to have been an excellent talk; I look forward to seeing a video of it.

Johnathan’s summary mentions two points which I think could be implemented fairly quickly and do much to improve on the current system: repeal of “legal tender” laws and elimination of deposit insurance. The former is fairly straightforward and explained in the article. The second bears more discussion.

Deposit insurance (in the US, anyway) is an artifact of the Great Depression, installed to prevent catastrophic “runs” on banks, sometimes sparked by mere rumor. It was (and is) a legitimate concern, and while the problem is exacerbated by a fractional reserve system (as I’m sure Paul will interject here at some point), it would also be a problem even without fractional reserve lending. The US’s solution was to create a new federal agency (the FDIC) to run the insurance fund, and (not coincidentally) directly regulate most banks. Therein lies the flaw.

The FDIC is staffed by government bureaucrats with no personal economic stake in the game. They are, by and large, decent and well-meaning people, but they aren’t the “best and brightest” (such people don’t work for bureaucracies) and they are hampered by hidebound rules and a lumbering, ineffecient and inflexible system. Insurance “premiums” are not established on any actuarial basis, but are essentially identical for all banks, however well or badly managed [1], and setting the rate is quite politicized. The proper response should be to use private deposit insurance.

With private deposit insurance, banks could shop around for insurance companies with the best rates and service. The insurance companies themselves would more accurately and carefully assess “risk” than it would ever be possible for the government to do, and would price accordingly. They would set capital levels which make sense given the specific nature of the bank’s business (rather than one-size-fits-all rules), assess the true value of its assets and liabilities (including, where appropriate, off-balance-sheet contingent liabilities), and in general do a better job of assessing the because it is their (and their shareholders’) money which is at risk. If the FDIC misprices, the insurance fund gets depleted and they go to the government for more money. If a private insurance company misprices, its capital gets depleted and shareholders replace the management. Competition among insurance companies would keep any from becoming unduly risk-averse in their regulations or expensive in their pricing. It’s a true free-market solution, and would work.

[1] There has been a move in recent years to incorporate some sort of “risk-adjusted” element to the premiums, but if this has actually been implemented (I’m not sure about that) the differential was essentially nominal.

Posted by Laird at March 19, 2009 04:28 PM

RobertD, you make a good point about the speed of administration process under existing English law. Prof. Dowd made the point that the debt-for-equity swap and recapitalisation of a bank would have to be done very fast, over a weekend. A long delay would be a disaster, in particular, because of the need for businesses etc to make payments and handle invoices, etc.

Laird, thanks for the detail on the insurance angle.

Posted by Johnathan Pearce at March 19, 2009 05:01 PM

I am delighted to see articles like this posted on Samizdata Jonathan – excellent, more in this vein as and when you can please.

Posted by mike at March 19, 2009 05:19 PM

This is the problem I see with insurance: How can an actuarial table be constructed?

Do bank failures follow a known statistical pattern? Clearly not.

I wouldn’t believe any private agency offering deposit insurance. Gold reserves are all that can be believed. At least until an actuarial table can be constructed.

Posted by Current at March 19, 2009 05:23 PM

Two questions:

1. As Laird pointed out above, the bank guarantees were specifically made to avoid panics, wouldn’t the removal of these guarantees necessarily cause panics? With the advent of instantaneous communication available to even the stupidest among us, wouldn’t ‘runs on the bank’ become a regular event?

2. Fiat money v. asset backed currency -
With fiat money there is a good deal of leverage that is not possible with the asset backed. This seems to imply that under a asset backed regime the economy would be significantly less dynamic one, and growth could be curtailed. Yes, a blessing in the possible smoother booms and busts, but it would seem a curse in reducing growth, productivity.

Looking at the historical rates of inflation / deflation it really appears that prior to the 1930′s, this cycle was much more dynamic than after: (UK) Consumer Price Inflation Since 1750(Link)
I realize this study is a reconstruction and I have no way of evaluating the methodologies but it seems relevant.

Posted by Will Anjin at March 19, 2009 07:26 PM

This isn’t life insurance; there are no “actuarial tables”. That doesn’t mean that the risks can’t be rationally assessed. How do you think an insurance company insures any one-time event? Lloyd’s has known how to do this for centuries (even if they’ve fallen off course a bit lately). [I need help here from someone with better knowledge than mine about probability; is this a Bayesian analysis?]

Moreover, the real point isn’t whether there is going to be deposit insurance; that’s a given, after the experiences of the Great Depression. The only question is who provides it, and at what cost? I submit that government is the least qualified entity to do so, for a variety of reasons (some noted in my previous post). In a truly free market each bank would decide whether to offer it or not and the market would reward or punish that decision, but even in a regulated environment the government could simply mandate that banks carry some minimal level of deposit insurance as a condition to maintaining their charter. Banks could choose to carry more than the minimum amount, and again the market would determine whether or not that was a wise decision, but it’s still a market solution. (Probably a market would develop for banks with different insurance levels: minimal for those with relatively small balances wanting cheap banking services, higher for those with more money who are willing to pay a bit more for peace of mind. Let the market sort it out.)

Posted by Laird at March 19, 2009 07:36 PM

Obama Dollar Sterling money banking crisis credit crunch: Kevin Dowd gives Chris Tame memorial lecture 17th Mar 09: Libertarian View of the Financial Collapse


Sean Gabb

This is the Second Chris R. Tame  Memorial Lecture. It was given at the National Liberal Club in London on the 17th March 2009, and sets out a libertarian response to the financial crises of the past year. A full text of the speech will be published in the next week or so. In the meantime, here is the video. A better quality video file on DVD is available  on request from Sean Gabb <sean@libertarian.co.uk>for £5.

Euro destruction: perhaps, in 1998 I merely spoke too soon.


David Davis

About eleven years ago, I was in a newsgroup called “eurofaq”: I believe it still to be in operation somewhere (probably on yahoogroups now if you want to go searching.) To enliven our internal exchanges with intelligence from elsewhere, I had various run-ins with some starry-eyed young people from something called “YEM”.

To do this, I used to go and lurk on their groups under the name of Jacques Bommaerts, a Belgian “student”, occsionally surfacing to ask seemingly naive questions about the forthcoming Euro, such as how one currency could be imposed on 15 nations – remember! We in the UK were to be for it too! – without either elections or referenda, and under what economic parameters it was to operate.

The responses of enraged and indignant uproar were fun to behold.

Eventually I was rumbled. Years before most of us knew about internetty-stuff, a clever-clogs on the Enemy Staff worked out that my IP address was the same as an identifiable member of eurofaq, and I was expelled from the YEM crowd amid showers of rotting cyber-cabbages and virtual-tomatoes. But the fun lasted about a year.

At the end, on my exit, I bet one of them £25 that the Euro, starting about 70p, would be under 50p by Christmas. unfortunately it wasn’t and I had to pony up, which I did.

And now, today, we have this Simon Heffer analysis – of where the Euro, and indeed the entire fascist EU project, stands.

Years pass, and I might even have been dead by now, but I’m not, which is fortunate. I have lived to see the day when the Euro might actually come undone, be toast, totalled. Another Rouble-type experiment to actually bite the dust…and in my lifetime too. 

Actually, it’s very sad: I have lived to see that modern people  _still_  let their governments get away with not learning the lessons of History. This is the main problem that I think should concern libertarians, if we are at some distant time to form the very kind of administration which sets out to cull most of the State.

A major philosophical battle will need to take place about de-sovietisation of money, so that no further disastrous monetary union experiments are tried.

Labour “Peers” and “cash for law changes”: the buggers get off.


Of course they will: whatever did we suppose?

David Davis

There are two nations now – firstly, the one the Enemy Class inhabits (see Dr Sean Gabb’s site for further clarification of these buggers) into which there is Active Transport of money, up a very very steep Concentration Gradient.

And then there is the one they chain us in  – fenced in by cameras, terror-police and DNA databases, where the money is produced, and from which it is extracted, as if we are their farm animals.

At least Old Holborn has said something about this sad matter. Everybody else seems as bored as we are.

Sean Gabb: Another Rant about the Recession


Free Life Commentary,
A Personal View from
The Director of the Libertarian Alliance
Issue Number 179
28th January 2009
Linking url: http://www.seangabb.co.uk/flcomm/flc.179

The Car Industry Bail Out:
Are There no Politicians Now Who Understand Economics?
by Sean Gabb

The British Government has just announced what may be £2,000 million of subsidies for the car industry in this country. Responses to the announcement range from gratitude that jobs and manufacturing capacity are to be saved to complaints that the subsidies do not go far enough. My reading and viewing may not be comprehensive, but I have seen nothing in the mainstream media denouncing the subsidies as at best politically motivated – much of the car industry being located in constituencies held by Labour – and at worst economically illiterate. Since the first grounds of denunciation ought, after nearly twelve years of these people, to be self-evident, I will devote myself here to the second.

We are continually told at present – which is somewhat more than usual – how government spending had created, or will create, so many jobs. Therefore, the immense expansion of the British State since 1997 has created three hundred thousand jobs or whatever. Some deplore this because most of those employed can be expected to vote Labour. Hardly anyone denies there has been a net addition to the number of employed. The same reasoning underlies all discussion of how we are to get through the recession on which we have now started.

The truth is, however, that government spending does not so much create as displace employment. Every pound spent by the Government must first be taken from the people, who cannot then spend it for themselves. If the money is taken is taken through taxes, it exactly reduces the ability of the people to spend or invest it for themselves as they wish, or to save it for transfer, via the banking system, for others to spend or invest as they wish. If the money is borrowed, it again exactly reduces the amount of money that the people can borrow to spend or invest.

It is more complex if the money is printed by the Government – or, more likely nowadays, borrowed from the banks in a fractional reserve system. But if its effects are often hard to trace until after the event, inflation is no less a tax than any other means of providing money to governments. It may reduce the actual purchasing power of money left in the hands of the people. Given the downward pressure on manufacturing costs we have seen during the past generation, inflation will at best reduce the potential purchasing power of money that already exists.

This being so, the argument that government spending creates employment relies on a blindness to the concept of opportunity cost – that every pound spent on paying one salary is a pound less to spend on another salary. Put more simply, it is a case of what Bastiat described as “what is seen and what is not seen”. We see the jobs created by the Government in it “regeneration” projects. We do not see the jobs that would otherwise have been created to supply things that people actually would have bought had the money been left in their own pockets.

For the past six months, the argument has been reinforced by the claim that government spending is needed to make up for a disinclination by others to spend or invest. This being so, it will not be a zero sum game, but will create net employment. There is no doubt that there has been a deflation. People are borrowing less and saving more. The banks have been increasing their financial reserves. But it does not follow from this admission that government spending is needed to make up the deficiency. The fall in spending is not the cause of the problems we face, but is a symptom.

For perhaps the past decade, many central banks in the rich world have kept interest rates below the level needed to balance the supply of savings and the demand for loans. When other prices are forced below their equilibrium – rent control, for example – the result is shortages. In the fractional reserve system that we nowadays have, however, pushing interest rates below their equilibrium has simply enabled the commercial banks to create money out of nothing. In the past, this would have led almost at once to price increases. This time, with most consumer goods made in countries where supply curves are very elastic, and with exchange rates only loosely related in the short term to the financing of foreign trade, and with financial and property markets able to absorb what long seemed to be limitless amounts of money, the result was a speculative bubble, in which consumer prices hardly rose, and in which most of us were persuaded that we were growing richer.

These bubbles never last. The new money is brought into being through bank lending that cannot continue forever. There comes a point where people have taken as much debt as they can service, or  where they have invested on the basis of trends that stop rising. It is then that some event that would otherwise have been overlooked becomes the excuse for a panic. The bubble bursts. Net borrowing turns negative. Prices of overbid assets fall. Prices of securities fall to the value of their underlying assets – assuming there are any that can be identified. Much investment in new capacity is shown to have been unwise.

On this reasoning, the present fall in spending is not an event in itself that needs to be and can be cured by higher government spending. What we now have is really part of a cycle that began with the artificial lowering of interest rates, and that will end with the liquidation of the unwise investments and the correction in asset prices. The British Government’s policy of trying to halt the deflation with higher spending and even lower interest rates cannot do better than lengthen the cycle during its unpleasant phase. It also increases the size of the State – which already takes far too much of our money and spends it on things we would never buy given a free choice.

But I return to the bail out of the car industry. This is not a case of limiting collateral damage. The car industry is not a fundamentally sound victim of circumstances. It is instead one of those sectors in which unwise investments were made. There is no shortage of finance for businesses that really are considered sound. Even I still receive one or two pre-approved loan offers from banks I never knew existed. If the car companies cannot borrow to maintain their working capital, it is because no one believes in their fundamental soundness. Even at the height of the boom, it was claimed that there were too many car makers, given present and future demand for cars. There will now be several years when hardly anyone with an ounce of common sense will spend money unless he must on a new car. No one seems to care if estate agents all over the country are losing their jobs. If car workers are now to lose their jobs, it is for the same reason.

Of course, there are things the Government could do and ought to do to help the car industry. These are all negative. For the past twelve years, it has been running propaganda campaigns and piling taxes and regulations that have tended to make driving less attractive than it might otherwise have been. These propaganda campaigns should be ended. The road excise and petrol duties should be cut. The cameras and yellow and red lines should be taken away. The police officers now deployed to harass drivers should be dismissed – there being, in any event, more policemen than needed to enforce the laws of a free country.

I move back now to the general difficulties we face. With increasing desperation, Gordon Brown is denouncing anyone who questions his policy of inflation as wanting to do nothing. Well, doing nothing at all would be an improvement on what he has been doing. However, there are things the Government could do. None of it would take us back straightaway to the prosperity we have lost. But it would shorten and moderate the pain that stands between us and recovery. I suggest the following:

  • The Government should balance its budget – and do so not by increasing taxes, but by spending less. This would tend to restore confidence to markets that are presently working on the assumption of a soft pound, and where default on the national debt is no longer thought impossible.
  • The Government should force all banks that have limited liability to reveal their true financial position. This would not be an interference in their private affairs, as limited liability is a privilege bringing responsibilities that may be varied as thought reasonable. This would again tend to restore confidence, and it would do more than printing money has to persuade the banks to start lending to each other.
  • The Government should return to a fully convertible gold standard. Unless otherwise contracted, it should be regarded as fraud for a banker to take a deposit and not have sufficient reserves to redeem it at once on demand. This would prevent the periodic explosions of credit that are behind the trade cycle.
  • Of course, the Government should also abolish income tax, valued added tax and excise duties. If this does not cut the tax burden by three quarters, it should abolish some other taxes. To keep the budget balanced, it should also cut spending.

I could go on, making more and more claims unlikely ever to be conceded by the British Government or any other. But the first two, plus a few cuts, would go far to shortening the recession. Sadly, even these will not be tried – not at least until the Keynesian remedies everyone wants have been tested to destruction.

Further Reading:

Murray Rothbard, America’s Great Depression
Henry Hazlitt, Economics in One Lesson
Hans-Hermann Hoppe, Credit Creation or Financial Intermediation?: Fractional-reserve Banking in a Growing Economy

NB—Sean Gabb’s book, Cultural Revolution, Culture War: How Conservatives Lost England, and How to Get It Back, can be downloaded for free from http://tinyurl.com/34e2o3

Play “Bail Out Brown” online


David Davis

Here

Courtesy of Guido. And here’s a piece for us, by Kevin Dowd, on the coming inflation.

LA News Release: Let Failed Banks Go Under


NEWS RELEASE FROM THE LIBERTARIAN ALLIANCE
In Association with the Libertarian International

Release Date: Monday 19th January 2009
Release Time: Immediate

Contact Details:
Dr Sean Gabb on 07956 472 199 or via sean@libertarian.co.uk

For other contact and link details, see the foot of this message
Release url: http://www.libertarian.co.uk/news/nr073.htm

“NO BAIL OUT OF THE BRITISH FINANCIAL SYSTEM” SAYS LIBERTARIAN ALLIANCE: “LET FAILED BANKS FAIL”

The British Government’s latest proposed rescue of the financial system is a fraud on the taxpayers and will fail, says the Libertarian Alliance, Britain’s most radical free market and civil liberties policy institute.

[The British Government proposes to spend up to £200 billion of the taxpayers' money on lending to the commercial banks in an effort to end the alleged liquidity crisis. This is in addition to the £600 billion already handed over.Full story at  http://news.bbc.co.uk/1/hi/business/7836259.stm.]

According to Sean Gabb, Director of the LA:

 

 

“Final responsibility for this crisis rests with the authorities. For at least ten years, the Bank of England – and the central banks in most other countries – has kept interest rates below the market equilibrium. The result has been an frenzy of credit creation by the commercial banks. This led to an asset price bubble that has now burst.

“The recession we now face cannot be avoided by pseudo-scientific manipulations of ‘aggregate demand’ It is the natural result of malinvestment and general speculation. A return to prosperity is best achieved not by trying to reflate the speculative bubble, but by allowing the liquidation of bad investments to proceed as quickly as possible.

“We agree that this will be painful to those who lose money or livelihoods. But there is no avoiding the aftereffects of an inflationary boom.

“Governments can stand back and let weak institutions fail. This will bring on the worst financial collapse since 1931, and be followed by a nasty recession. Or they can spray vast amounts of our tax money into the financial markets, which might briefly delay the worst financial collapse since 1931 and a nasty recession to follow.

“The only real beneficiaries of this rescue will be those working in the financial markets. They have spent the past decade stuffing our savings up their noses while telling us they were invested. Now their friends in government have come up with a scheme to use our tax money to pay next year’s bonuses.

“The Libertarian Alliance denounces this proposed rescue and predicts bad times for years to come.”

END OF COPY

Note(s) to Editors

Dr Sean Gabb is the Director of the Libertarian Alliance. His latest book, Cultural Revolution, Culture War: How Conservatives Lost England, and How to Get It Back, may be downloaded for free from http://tinyurl.com/34e2o3. It may also be bought. His other books are available from Hampden Press at http://www.hampdenpress.co.uk.

He can be contacted for further comment on 07956 472 199 or by email at sean@libertarian.co.uk

Extended Contact Details:

The Libertarian Alliance is Britain’s most radical free market and civil liberties policy institute. It has published over 800 articles, pamphlets and books in support of freedom and against statism in all its forms. These are freely available at http://www.libertarian.co.uk

Our postal address is

The Libertarian Alliance
Suite 35
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Mayfair
London W1J 6HL
Tel: 07956 472 199

Associated Organisations

The Libertarian International – http://www.libertarian.to – is a sister organisation to the Libertarian Alliance. Its mission is to coordinate various initiatives in the defence of individual liberty throughout the world.

Sean Gabb’s personal website – http://www.seangabb.co.uk – contains about a million words of writings on themes interesting to libertarians and conservatives.

Hampden Press – http://www.hampdenpress.co.uk.- the publishing house of the Libertarian Alliance.

Liberalia – http://www.liberalia.com – maintained by by LA Executive member Christian Michel, Liberalia publishes in-depth papers in French and English on libertarianism and free enterprise. It is a prime source of documentation on these issues for students and scholars.

This news release will also be placed on the Libertarian Alliance blog – https://libertarianalliance.wordpress.com/

Libertarian Alliance home

Credit Crunch hypotheses…interesting idea No-378B :-


David Davis

From the Daily Mirror, of all places. But I know for a fact that “securitisation” of mortgages went on before 1997. I was written to by the Bank of America (I wonder what became of that?) while living in London with one of their mortgages, sometime in the early 1990s, to say that I was “to be securitised” and sold to some other bank, and did I object?

Not having a blinking clue what it meant, I simply nodded….”whatever”….

So I do think that some ” enhanced financial product development initiative manager” in some bank or other, probably invented the process.

Be of Good Cheer: Christmas Greetings from Sean Gabb


Sean Gabb

Free Life Commentary,
A Personal View from
The Director of the Libertarian Alliance
Issue Number 178
25th December 2008

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Be of Good Cheer:
A Christmas Greeting
from the Director of the Libertarian Alliance
by Sean Gabb

There being nothing else on any of the channels we can receive, my wife and I have spent much of the day watching the various Christmas greetings from religious and political leaders from around the world. These range from the vacuous (Her Majesty the Queen), to the impressively malevolent, so long as the volume is turned down (the Bishop of Rome), to the plain stupid (the Archbishop of Canterbury). I will not bother with reviewing these utterances. Instead, I will issue one of my own.

There is little doubt that 2009 will be a bad year in every respect where the politicians have influence. In England, we may have a general election before the summer. If this happens, and if the votes are fairly counted, or if the police decide not to arrest all the opposition leaders, Gordon Brown and his Labour Party will be ejected from office. In the past decade, he has helped turn this country from the incipient police state established by the Conservatives into a true police state that is tempered only by the mockery we are still permitted to heap on its projectors. It would be nice to see these people out of office – especially since they could never be re-elected, and the only thing they have ever really wanted in life was to be in office. But there is no reason to suppose the Conservatives would do much to prevent our final slide into totalitarianism. They have too many nasty inclinations of their own to break up the vast apparatus of control brought near perfection by Labour. Even otherwise, I suspect they are too stupid and lazy to know how to break it up.

I would ignore political developments elsewhere in the world – only it would deprive me of the opportunity to feel sorry for the Americans. I saw their President-Elect in a newspaper the other morning. Posing shirtless, he looked for all the world like one of the more raddled black boys you see selling their bodies in Leicester Square. I think this says more about the tone of his coming leadership than his choice of Hillary Clinton and the usual neo-con suspects to run his foreign policy, or his having accepted the full climate change nonsense. I have no doubt the BBC will cover his inauguration as if it were the Second Coming. It will be watched in much of England, even so, with laughter and contempt. President Obama will be rather like Tony Blair, but without the taste or restraint which Princess Tony will, by comparison, be shown to have possessed.

Since they too are influenced by the politicians, 2009 will be a bad year in most respects economic. I am not sure when the present cycle started, but interest rates have, for many years, been manipulated by the politicians below the level needed to balance savings and loans. The resulting additional demand for loans was satisfied by creating new money out of nothing. This enabled a gigantic speculative bubble that sprang a puncture last year, and that has now burst. Recession is the natural result. The structure of relative prices has been distorted. Investments have been made that are now shown to be unwise. There must be changes. The beginning of change is to allow interest rates to rise and unsound businesses to go bankrupt. The faster this is allowed to happen, the sooner we can return to prosperity.

Sadly, the political response has been to look for any scheme to save or replace the speculative bubble. Interest rates have been cut in England and America. The taxpayers’ money has been lavished on propping up the more unsound banks. Governments are threatening to inflate without limit. The stated purpose of this is to avoid recession. The result will be to make the recession longer and deeper than it needs to be. The politicians tell us that Keynes was right after all. Perhaps that is what they believe. More likely,  they have been taken in by the bankers with warnings about total collapse of the financial system, and are now responding like the victims of those Internet frauds run from Nigeria. I see the car makers have taken up the bleat for subsidies. I suppose they will be joined soon enough by the coffee bars and every other business that overexpanded.

2009, therefore, will be a bad year in the economic sense. If it is not, the pain will only have been delayed until 2010, when it will be felt with compound interest.

Here, though, is an end of my gloom. Much is bad now, and will get worse in the next few years. So long, however, as we can avoid a collapse into totalitarianism, the future is nowhere near so bleak as we are presently assured. Scientific and technical progress continue at the most wonderful speed. Sooner or later, there will be a renewed scramble to bring the results to market, and our lives will be still further enriched – and this time, I hope, considerably extended.

And there need be no relative decline of the West. We have been told for years – usually by self-righteous lefties, gloating over a fall that they assume they and their families can personally avoid sharing – that the coming economic giants of this century are China and perhaps India. This is as fatuous as earlier claims about Japan. If you type the phrase “population pyramids” into Google, the first result will be an American Government website showing how the population of every country in the world is, and will be, distributed by age. Until we know how to extend not merely life but also youth, the most dynamic people in any country will be aged between twenty five and forty five. In England and in America, this age group will predominate throughout the present century. In the Orient, every developing country is following the Japanese pattern of rapid ageing, followed by actual decline of population. The Japanese at least reached Western standards of living before they stopped having children. The Chinese may simply grow old before they get rich. After a fashion, China has been getting richer for about thirty years. We shall see how long that can continue once the majority of the population is over the age of fifty, and have neither savings nor children to support them in old age.

And China has been getting richer only after a fashion. About thirty years ago, its Communist rulers decided to turn the country into one big sweatshop, supplying the West on razor thin profit margins. They managed this by unlimited force. Ordinary working people in China have been ruthlessly exploited. With the banning of real trade unions, and with generally oppressive contracts of employment, labour there is free only in the nominal sense. Otherwise, costs have been socialised for favoured companies; and competitiveness has been maintained by an undervalued exchange rate. Look beyond those glittering towers built for the ruling class and its foreign partners, and you find endless and increasing misery.

Even without the start of demographic crisis, this may now be ending. We are told about the huge scale of the foreign currency reserves maintained by the Chinese Government and its banks – as if money were the same as riches. At least the mercantilists in old Europe wanted their governments to accumulate gold and silver. These could eventually be made into imports. What the Chinese Communists have done is to send us a continuous stream of manufactured goods, accepting in exchange a mountain of dollars – and at an undervalued rate – that are only worth anything if they are not spent. The moment these reserves are used for imports, or switched into more stable currencies, their value will collapse.

The Americans have had the main benefit from this fraud. But so far as the Orientals have had an insatiable hunger for dollars, and the rest of us have had no trouble in getting dollars to hand over, all other Western peoples have benefitted.

This brings me to the supposed crisis of our national debt. The English and American Governments have been borrowing for the past decade on a scale that would once have been thought reckless. Gordon Brown has already given this country the ratio of debt to output that we last had after the Second World War. This is without the further borrowing he has announced. The Americans are facing the same explosion of public debt. Some economists are telling us that we shall have to pay higher taxes for at least a generation to service these debts.

But this is not true. Our governments will borrow little from us – most of us having no savings to lend. They will instead continue selling bonds to the Arabs and the Orientals, and a few Russians if the price of oil recovers in time. The real value of these will then be inflated away.

None of this pleases me. Inflation harms us all, if in ways that are often hard to trace. But once the mess of the last boom has been cleared away, it will become plain that the chief victims of that boom were the very countries everyone thought were the chief beneficiaries. We shall have had our cheap notebook computers and our flat screen television sets. We shall have increased our wealth in the present, and increased our abilities to grow wealthier in the future. Those who screwed their peoples to the edge of destitution to make this possible will find themselves holding our increasingly worthless paper. Chinese growth will grind to a halt. India will break up. Eventually, the Arabs and Russians will learn that we have discovered some cheaper source of energy than their carbons. All we need to do is somehow bring our politicians under control, and we shall enjoy a most agreeable twenty first century.

And so I wish all the lucky members of my mailing list a Happy Christmas, and – if the coming year will be dreadful – the prospect of much better times to come.

NB—Sean Gabb’s book, Cultural Revolution, Culture War: How Conservatives Lost England, and How to Get It Back, can be downloaded for free from http://tinyurl.com/34e2o3

Spending Our Way to Economic Collapse


Sean Gabb

Free Life Commentary,
A Personal View from
The Director of the Libertarian Alliance
Issue Number 177
24th November 2008

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The British Government’s Tax and Spending Proposals:
Testing Keynes to Destruction (Again!)
by Sean Gabb

Tomorrow afternoon, all the journalists have been primed to say, the British Government will cut taxes and increase spending. The alleged purpose of this is to prevent a deep recession. The real purpose, there can be no doubt, is to win the next general election for Labour – and, since the Conservatives remain as useless as ever, it may well work. I will, however, discuss the alleged purpose. Politics aside, it will be about as catastrophic a response to our current troubles as can be imagined.

The politicians of every party, and every journalist I have read, are agreed on the nature of these troubles. The crises of the past year in the banking sector have caused investment to fall. Consumption is now beginning to fall. To use the Keynesian jargon, aggregate demand has fallen, or is falling, below the level needed to keep national income at its full employment level. The answer is for the Government to cut taxes, thereby encouraging people to spend, and to increase its own spending.

It is also agreed by all that interest rates should be cut, thereby encouraging people to spend still more and encouraging firms at least to go back to investing as much as they were until the troubles began. It is admitted that doing all this might cause other problems. But this admission is followed by warnings about the horrors of the deflation we otherwise face.

This kind of economic reasoning is not as worthless as some of my friends believe. In countries as heavily regulated and corporatised as modern Britain and America, an increased preference to hold cash will not be balanced in the short or medium term by changes in the structure of relative prices. Firms will cut production rather than prices. Trade unions will prefer job losses to wage cuts. This can mean a very long and severe recession. There can be little doubt that, regardless of whatever would have followed, even without the Second World War,  the currency debasement of 1931 moderated the effect here of the Great Depression.

However, while not entirely worthless in certain conditions, what we are now being told is entirely worthless now. There is no doubt that people are spending and investing less than they were, and that they will continue to spend and invest less for some while to come. But, before agreeing that the politicians should be allowed to do what they most enjoy – namely, spending money that is not their own and that often does not yet even exist – we need to ask why we are in such trouble. The answer will explain why the proposed response will be catastrophic.

For many years, interest rates have been held below the sort of level needed to balance the supply of savings and the demand for loans. The result has been inflation. That many consumer prices have been falling is no argument against this proposition. Inflation is best seen not as price increases but as monetary expansion. There was a time when monetary expansion led fairly soon to price rises. Where at least Britain is concerned, though, most consumer goods are imported. So long as foreigners are willing to finance a growing current account deficit without devaluation, demand for imported consumer goods can expand rapidly and for years without any increase in prices.

The new money will therefore be used partly for investments in new production that may or may not be wise in the long term – and also to bid up the prices of property and of paper assets.

These bubbles never last. There comes a point where people lose faith in a currency, and where the upward spiral of asset prices is checked.  The fall in the currency will push up consumer prices. Overvalued assets will fall in at least real terms. Many other investments will be shown to have been unwise. The immediate reasons for their bursting are less important than that they always will burst. This has now happened. There is no definite rule in these matters. But it seems that the length and intensity of the boom is roughly in proportion to the scale of the recession that follows.

The financial collapse we are now witnessing, therefore, should not be seen as some autonomous fall in aggregate demand that can be offset by increasing other variables in the national income income equation. It is instead part of the unavoidable correction to past experiments in demand management. All the clever people disagree. They do believe that playing with aggregate demand can avert, or at least moderate, the coming recession. Now, these people are often very clever – most of them more so than I am. They are still wrong.

Cutting taxes is always a good idea. Not balancing them with spending cuts is not so good. If the British Government will do tomorrow what the journalists say it will, the inflation will be continued, though now without the confidence in sterling that allowed it before last year to create the illusion of prosperity. Taxes will fall. Government and other spending will rise. Interest rates will be cut. In the short term, this may be enough to win the next election for Labour. It not even before, though, the pound will collapse shortly after. Interest rates will then need to rise sharply, if the Government is to continue selling its bonds and if consumer prices are not to rise sharply and continuously.

There is no reasonable chance of deflation. For the next few months, while the collapse of sterling is only gathering momentum, firms will be able to reduce prices to keep up demand for their products. This will give the appearance of deflation. Eventually, though, their margins will not be further reducible, and the collapse of sterling will raise costs that must be handed on. This will happen even without further action. The bank rescues of last month were financed by money creation that will, sooner or later, find its way into circulation. Deflation is the last of our worries.

I have no professional expertise in finance, and so give no warranties of any kind. This being said, I think it a good idea for anyone who has a mortgage to get the best fixed rate he can between now and Easter, and otherwise to avoid saving money at any rate fixed longer than six months ahead. If he wants to buy imported consumer goods, he should do so now or, at latest, in the sales after Christmas.

Beyond this, I have no advice. Just because I do not believe in the solution that everyone else is urging on us does not mean that I have any alternative solution to offer. We should never have got ourselves into this mess. Failing that, the recession should have been allowed to hit last year. Since it was then deferred, it should be allowed to hit now. It will do nothing to moderate the inevitable recession. But there is a good case for cutting taxes and government spending now by at least a third, and then by five per cent a year every year for the next decade. And there is a case for returning to a fully convertible gold standard.

Of course, no politicians will take my advice. If any do read what I have just said, they will at best laugh with contempt. But I am right, and I feel some grim satisfaction in being able, come 2010, to send this article out again under the heading “See – I Told You So!”.

NB—Sean Gabb’s book, Cultural Revolution, Culture War: How Conservatives Lost England, and How to Get It Back, can be downloaded for free from http://tinyurl.com/34e2o3

Libertarian Alliance Statement on Financial Crisis


Sean Gabb

NEWS RELEASE FROM THE LIBERTARIAN ALLIANCE
In Association with the Libertarian International

Release Date: Wednesday 8th October 2008
Release Time: Immediate

Contact Details:
Dr Sean Gabb on 07956 472 199 or via sean@libertarian.co.uk

For other contact and link details, see the foot of this message
Release url: http://www.libertarian.co.uk/news/nr072.htm

“NO BAIL OUT OF THE BRITISH FINANCIAL SYSTEM” SAYS LIBERTARIAN ALLIANCE: “LET FAILED BANKS FAIL”

The British Government’s proposed rescue of the financial system is a fraud on the taxpayers and will fail, says the Libertarian Alliance, Britain’s most radical free market and civil liberties policy institute.

[The British Government proposes to spend £50 billion of the taxpayers' money on lending to the commercial banks in an effort to ease the liquidity crisis. Full story at  http://news.bbc.co.uk/1/hi/business/7657422.stm.]

According to Sean Gabb, Director of the LA:

“Final responsibility for this crisis rests with the authorities. For at least ten years, the Bank of England – and the central banks in most other countries – has kept interest rates below the market equilibrium. The result has been an orgy of credit creation by the commercial banks. This led to an asset price bubble that has now burst.

“This should never have been allowed to happen. Interest rates should have been allowed to settle at levels that equalised the supply of savings and the demand for loans. But the question now is what should be done about it. The British Government is proposing to use £50 billion of the taxpayers’ money to buy shares in illiquid banks and other institutions.

“Since this is a state-created problem, some state involvement in solving it might be appropriate. Therefore, if there were any chance that spending the taxpayers’ money would restore stability to the markets, the Libertarian Alliance might not object.

“However, it is obvious that £50 billion will not be enough to restore stability. There are trillions of pounds of imaginary money on the markets. The fundamental problem is that no one really believes in this money today, and it just disappears whenever people stop looking at it. No government on earth can painlessly clean up the mess left by the bursting of the credit bubble.

“Governments can stand back and let weak institutions fail. This will bring on the worst financial collapse since 1931, and be followed by a nasty recession. Or they can spray vast amounts of our tax money into the financial markets, which might briefly delay the worst financial collapse since 1931 and a nasty recession to follow.

“The only real beneficiaries of this rescue will be those working in the financial markets. They have spent the past decade stuffing our savings up their noses while telling us they were invested. Now their friends in government have come up with a scheme to use our tax money to pay next year’s bonuses.

“The Libertarian Alliance denounces this proposed rescue and predicts bad times for years to come.”

END OF COPY

Note(s) to Editors

Dr Sean Gabb is the Director of the Libertarian Alliance. His latest book, Cultural Revolution, Culture War: How Conservatives Lost England, and How to Get It Back, may be downloaded for free from http://tinyurl.com/34e2o3. It may also be bought. His other books are available from Hampden Press at http://www.hampdenpress.co.uk.

He can be contacted for further comment on 07956 472 199 or by email at sean@libertarian.co.uk

Extended Contact Details:

The Libertarian Alliance is Britain’s most radical free market and civil liberties policy institute. It has published over 800 articles, pamphlets and books in support of freedom and against statism in all its forms. These are freely available at http://www.libertarian.co.uk

Our postal address is

The Libertarian Alliance
Suite 35
2 Lansdowne Row
Mayfair
London W1J 6HL
Tel: 07956 472 199

Associated Organisations

The Libertarian International – http://www.libertarian.to – is a sister organisation to the Libertarian Alliance. Its mission is to coordinate various initiatives in the defence of individual liberty throughout the world.

Sean Gabb’s personal website – http://www.seangabb.co.uk – contains about a million words of writings on themes interesting to libertarians and conservatives.

Hampden Press – http://www.hampdenpress.co.uk.- the publishing house of the Libertarian Alliance.

Liberalia – http://www.liberalia.com – maintained by by LA Executive member Christian Michel, Liberalia publishes in-depth papers in French and English on libertarianism and free enterprise. It is a prime source of documentation on these issues for students and scholars.

This news release will also be placed on the Libertarian Alliance blog – https://libertarianalliance.wordpress.com/

Bush should stride down Pennsylvania Avenue with a goodish bayonet, and…..


…knife both Clintons in the chest. The Spectator takes apart the world’s monetary crisis, in spades, kicks arse, and names names.

David Davis (annoyed even more than usual with barbarian, bleeding-heart, fascist murdering GramscoMarxiaNazis.) (so I’m purple today instead.)

The Atlas of the Real World….


….was probably meant to be a new-lefty-bible, and was almost certainly drafted by them, but Free Market Fairy Tales has kindly gutted-and-filleted the crux-or-nub of the liberal Classical Free Market case, yea, even from its maps (very clever they are too….wish I’d thought of viewing the world’s movable parameters in that way.)

I hope that Strange Maps picks it up soon.

David Davis

Sean Gabb on the Financial Crisis (Yawn!)


Free Life Commentary,
A Personal View from
The Director of the
Libertarian Alliance
Issue Number 175
19th September 2008

Free Markets and the Financial Collapse
by Sean Gabb

I was called earlier today by someone at the BBC to comment on the collapse of the financial system. I have no particular qualifications for commenting on this. I do not know how long it will last, or how the recovery will begin. I certainly have no detailed advice on what should be done by anyone during the next few days.

The reason I was thought worth contacting, though, was obvious. The narrative in the establishment media is that markets were too lightly regulated after about 1980, and that the consequences were a ruthless and short term greed that has now reached its natural conclusion. This being so, the answer is how much regulation should now be introduced to prevent all this from happening again. I am a libertarian. I believe in markets. If markets are now being denounced, I am the right sort of person to approach for a defence.

The problem, the researcher discovered, is that I was not the right sort of person to approach. I think, for most people, it is a matter more of ignorance than of intellectual dishonesty. But there is a general tendency to identify free markets with any set of institutional arrangements that allow things to be bought and sold.

When it comes to the Private Finance Initiative, or the privatised utilities, or the internal market in the National Health Service, I do grow impatient. These are not examples of free markets, but of corporatism: they have been called into being by the State, and are at every step regulated and privileged by the State. Where the financial markets are concerned, the identification is more reasonable. After all, these are dynamic and highly efficient markets. Perhaps more so than any others, they conform to the neoclassical concept of perfect competition. Many people who work in finance are sympathetic to libertarianism. The markets are often discussed and defended in libertarian terminology.

What I tried to explain to the researcher was that, for me and for many other libertarians, markets are to be defended not according to how efficient they may be, but according to whether they are or would be part of a voluntary order.

What libertarians want is a society in which people come together only in uncoerced relationships. Some of these � marriage and partnership agreements, for example � might be hard or even impossible to dissolve. Some others � the main example being parents and their children � might involve some coercion for a limited period. But we do require, so far as reality permits, that no one should be compelled into any relationship.

When we defend markets, we mean those relationships, outside the circle of our friends and loved ones, than involve exchanges of legally binding promises, usually with a price attached. We do not defend priced relationships that are based on any degree of coercion. Therefore, we denounce slavery and trading in slaves. We denounce the collection of taxes to pay for services provided by the government. We denounce regulations that limit the range and nature of relationships that people can choose.

And we denounce patterns of indirect coercion that herd people into relationships they might not otherwise have chosen.

The financial system, as it currently exists, is based on this last type of coercion. Consider:

First, we have taxes and a monetary framework that make prudence, as traditionally known, unwise. It used to be that people would save for emergencies by putting money into savings accounts or contributing to mutual insurance schemes. For their old age, they would save money for purchase of annuities on retirement. But we have long had levels of inflation that eroded capital values, and taxes that depressed real returns. We can respond to this by playing the markets. But this requires more time and understanding than most people are willing to give; and there is the problem � at least in Britain � of capital gains tax when securities are sold at a profit.

The answer has been to put our savings with groups of professional speculators. These claim to understand the markets better than ordinary people. Undoubtedly, they have more time to follow the markets. And there are tax laws that privilege such companies.

The result has been to concentrate most savings into the hands of people whose job is look out for short term profit, and who are inclined to welcome exotic new products that no ordinary investor would ever dare touch.

Second, there are the company laws that allow easy incorporation and limited liability for debt. These have allowed giant business organisations to rise up and flourish. The result here has been to increase the number of securities that can be bought and sold, and to call into being whole armies of professional speculators, employed by multi-national banks and other organisations.

Third, there is fractional reserve banking and fiat money. Ever since the development of modern finance, bankers have been tempted circulate more notes than they could honour. What kept this in bounds was knowledge that the monetary base was a certain amount of gold that would not quickly be changed in size. Nowadays, if bankers cannot finance all the lending they would like to make at prevailing interest rates from the stock of savings, they can simply create more money. They still have an obligation to redeem their promises. But they operate in circumstances where the monetary base can be increased at will.

I do not say that there would be no financial markets in a voluntary order. There would be intermediation between lenders and borrowers. There would be trade in bonds. There would be securitisation of debt. There would be speculation on future values of commodities and securities.

I do not even say that the financial system we have is wholly useless or malign, given the highly corporatized nature of business. Fears of shortselling or takeovers provide a check on corporate sloth or greed. The endless speculation enables those of us who have some money not to have it all stolen by our government through taxes or inflation.

But the financial system, as it does now exist, would not exist as part of a voluntary order. It would not be the huge global casino that it is. It may be efficient. It may be plausibly claimed as an instance of the free market in action. But it is not part of a voluntary order, and therefore has at best only partial legitimacy to libertarians.

Moreover, if the financial system is a creature, directly or indirectly, of government, its current problems have been wholly caused by government. I do not know when the inflation started. It may have been to float us out of the last recession, back in the early 1990s. It may have been to avoid the expected panic of the Millennium Bug. It may have been to pay for the War on Terror. It may have been the product of all of these and others. But for many years, money has been lent that was not first saved. The gap between savings and loans was bridged by money creation. It is testimony to the skill of regulators and the sophistication of the markets that the speculative bubble was able to grow so large. But, however long delayed, its bursting was inevitable. The media can blame crooked mortgage sellers in the American ghettoes, or coke-fuelled graduates in the London dealing rooms. But financial collapse was always a matter of when and not if.

When I gave a potted version of this to the BBC researcher, I could almost hear her eyes glazing over. For the second time this year, I was not called into the studio to defend the City. I understand why I was not called in. What I am saying does not fit into the establishment narrative of what has happened.

And though I never got to tell the researcher, I also have no idea of what should now be done. Perhaps the bank of England should raise interest rates sharply and stand back while much of the financial system goes insolvent. This would get things over and done with, and move us reasonably fast into the recovery stage of the next bubble. Or perhaps it should flood the City with fresh money, in an effort to bring about a soft landing. I really do not know.

Something I do know reasonably well, however, is how to stop these bubbles from starting. If I ever came to power as the front man for a military coup � somewhat unlikely for several reasons, but still worth hoping for � I would do the following:

First, I would cut taxes and government spending by at least two thirds. The remainder should pay the interest on the national debt and honour the pension commitments made to those over about the age of fifty. I would then end the tax privileges of the investment funds. This would, among much else, allow people to plan for their future without having to sit behind the institutional equivalent of a compulsive gambler.

Second, I would repeal the Companies Acts and make the declare the directors of existing corporations the true owners with joint and several liability for their debts. This would put an end to the impersonal, bureaucratic nature of modern business. It would also reduce the number of securities to be bought and sold and reduce the number of people employed to buy and sell them.

Third, I would move to a fully-convertible gold standard, with the heads of every bank made jointly and severally liable for redemption in gold of all obligations, unless contracted otherwise

As said, even a stateless voluntary order would still have financial markets. And the semi-statist system I am recommending would have not only financial markets, but also some room for speculative bubbles. But neither would be anything like the world in which we actually live.

The shame is that what we have is largely what we shall have. Sooner or later, the present collapse will be over. Then, whatever �tough regulation� the politicians may have brought in will be circumvented by a new generation of clever speculators, and the next bubble will begin to inflate.

It could be worse, however. We are not talking about Soviet Communism here, but a corporatism that, if neither stable nor just, does enable the creation of vast amounts of real wealth. And, I might say, I have done rather well personally out of the late bubble. I am assured I shall not lose disastrously now it has burst. This means I am well placed to benefit from the next bubble.

As the Good Book says: �Unto every one which hath shall be given �.�

NB—Sean Gabb’s book, Cultural Revolution, Culture War: How Conservatives Lost England, and How to Get It Back, can be downloaded for free from http://tinyurl.com/34e2o3

Here is a Great Slab of Text from Sean


Market Behaviour in the Ancient World:
An Overview of the Debate
Sean Gabb

This is the text of a speech given to the
Third Conference of the Property and Freedom Society
held in Bodrum, Turkey, in May 2008

 There is nothing so extravagant and irrational which some Philosophers have not maintained for Truth.[1]

Introductory

It is a settled assumption among most libertarians, classical liberals and English-speaking conservatives that market behaviour is part of human nature. Whether or not we care to make a point of it, we stand with John Locke and, through him, with the men of the Middle Ages and with the Greeks and Romans, in trying to derive what is right from what is natural.[2]

We believe that there is a natural inclination to promote our own welfare and that of our loved ones. We further believe that, given reasonable security of life and property, this inclination will lead to the emergence of a system of voluntary exchange. That is, we will seek to trade the things we have or can create for other things that we regard as of greater value to ourselves.

In doing so, ratios of exchange that we call prices will be revealed. These prices, in turn, will provide general information about what should be produced, in what ways and in what quantities. Furthermore, changes in price will provide information about changes in preferences or in abilities to produce. Custom will set aside one or more goods to serve as money. Institutions will emerge that channel savings into productive investment, that spread risk, and that moderate expected fluctuations in price. Laws will develop to police the transfer of property and performance of contracts.

We believe that market economies emerge spontaneously and are self-regulating and self-sustaining. This is not to say that all market societies will be the same. Their exact shape will depend on the intellectual and moral qualities of the individuals who comprise them. They will reflect pre-existing patterns of trust and honesty and the general cultural and religious values of a people. They will also be more or less distorted by government intervention.[3] But we do say that market behaviour is natural – that, in the absence of extreme government coercion, or extreme disorder, buying and selling to increase our own welfare is what we naturally do.[4]

The Power of the Naturalist Apologia

It is not necessary for us to believe this. We can take a purely utilitarian view of social and economic arrangements. We can ignore whether markets are natural, and only ask whether they maximises human wellbeing. But, as said, we do tend to believe it. And it is perhaps the most powerful long range weapon in the libertarian and conservative arsenal. This is because our whole civilisation stands within the natural law tradition. For all it is ignored where not denigrated, this tradition shapes the assumptions of common debate. Show that marriage and the family are “natural” institutions, and they are much harder to attack. Let it be shown that slavery is “unnatural”, and its defence must rest on purported arguments of utility or on cultural acceptance.

In our civilisation, therefore, it is a very strong defence of market behaviour to say that “capitalism is what people do: socialism is what governments do”.

Not surprisingly, this naturalistic claim has been subject for at least the past two centuries to systematic and continuous attack. For much of this time, the strongest attack has been in the counterclaim that, whether natural or not, markets lead to avoidable inequality and to economic instability. More recently, we have been told that they damage the overall environment of our planet.

These kinds of attack have been refuted or are in the process of being refuted. This does not prevent them from being endlessly repeated in different forms. But I will say no more about them. I will instead discuss the more subtle form of attack, which is to deny that market behaviour is natural – to claim that it is a product of specific circumstances, which have not always existed and need not always exist.

Relativism

The most notable philosopher in this tradition was, of course, Karl Marx. He argued that the values of any civilisation – prior, at least, to the socialist culmination – are determined by its mode of production. He says:

In acquiring new productive forces men change their mode of production; and in changing their mode of production, in changing the way of earning their living, they change all their social relations. The hand-mill gives you society with the feudal lord; the steam-mill society with the industrial capitalist. The same men who establish their social relations in conformity with the material productivity, produce also principles, ideas, and categories, in conformity with their social relations. Thus the ideas, these categories, are as little eternal as the relations they express. They are historical and transitory products.[5]

This is a radically subversive claim. It allows any institution, any custom, any set of beliefs – no matter how obviously right or true they might appear – to be dismissed as “ideology” or “false consciousness”. Let this claim be accepted, and our own claims about the naturalness of market behaviour fall to the ground.

With the remaining exception of North Korea and perhaps too of Cuba, the Marxist political experiments of the twentieth century have all long since collapsed, and, bearing in mind their known record of mass-murder and impoverishment, there are few who will admit to regretting their collapse. But Marxism as a critique of the existing order and as a theory of social change, remains alive and well in the universities. In its reformulation by Gramsci, as further developed by Althusser and Foucault among others, it may be called the dominant ideology of our age. Its hold on the English-speaking world has been noted by both conservative and libertarian writers, and is subject to an increasingly lively debate.[6]

What I wish, however, to discuss in this speech is the rather less well noted hold this line of attack has acquired in the field of classical studies. Though Marx was himself a classicist of some distinction,[7] his followers have said little of interest about the ancient world. His influence, though profound, has been indirect. It passes, with much alteration, through the work of Karl Polanyi (1886-1964) and Moses Finley (1912-86).

The Polanyi Attack

Karl Polanyi was born to a prosperous Jewish family in Budapest. After studying Law and Philosophy, he was called to the Bar in 1912. He served as a cavalry officer in the Austro-Hungarian army during the Great War, and was invalided out after fighting on the Russian Front. After the War, he supported the first republican government in Hungary. When this was toppled by the Communist revolution, he fled to Vienna. Here, he edited Der Oesterreichische Volkswirt, a socialistic newspaper, between 1924 and 1933. He then moved first to England, and then to America, where he taught and where published his most important works – some posthumously. These are:

  • The Great Transformation (1944)
  • Trade and Markets in the Early Empires (1957, edited and with contributions by others)
  • Dahomey and the Slave Trade (1966)
  • Primitive, Archaic, and Modern Economics: Essays of Karl Polanyi (1968).
  • The Livelihood of Man (Studies in social discontinuity) (1977)

There are two essential arguments in this body of work. The first is the familiar socialist claim of the 1930s and after, that the Great Depression was a systemic and universal market failure from which the market economies of the world would never recover. The second is that the market economy itself was only a recent and passing phase in human development. He argues that

[t]he concept of the market economy was born with the French Physiocrats simultaneously with the emergence of the institution of the market as a supply-demand-price mechanism…. This was, in the course of time, followed by the revolutionary innovations of markets with fluctuating prices for the factors of production, labor and land.[8]

That is, the patterns of market behaviour, which economists from Adam Smith onwards have regarded as natural to man, are barely as old as the classical economics that seeks to analyse them. For the rest of history, he says,

no economy has ever existed that, even in principle, was controlled by markets…. Gain and profit made on exchange never [before the nineteenth century] played an important part in human economy.[9]

In place of the market, he argues,

[t]he outstanding discovery of recent historical and anthropological research is that man’s economy, as a rule, is submerged in his social relationships. He does not act so as to safeguard his individual interests in the possession of material goods; he acts as to safeguard his actual standing, his social claims, his social assets. He values material goods only in so far as they serve this end.[10]

This is not to say that there was no market activity before the end of the eighteenth century. There have been production and trade and money and prices throughout recorded history. People have often been ruthless in their pursuit of self-interest and the interests of their friends and relatives. But market behaviour as we would recognise it was always peripheral to the main organising principles of society.[11] These principles were Reciprocity and Redistribution.

The meaning of reciprocity is that, in pre-modern societies, people specialised in the production of goods and services that they were best able to provide, but did not do so with any thought of trading these for money with which to buy other things. They did this instead to share with those around them. Those around them did the same. The outcome was societies in which prices might exist, but in which prices gave no indication of what and how to produce.

Redistribution takes place when the authorities take possession of harvests or other social gains and share these among the people according to their needs or status. Once more, this left no room for competitive pricing of goods in order to maximise individual welfare. The function of prices was to provide “[s]imple quantitative equivalences for grain, oil, wine, and wool [to] allow the staples to be substituted for each other”.[12]

In evidence for these claims, Polanyi appeals repeatedly to the civilisations of the ancient Near East – Sumeria, Babylon, Egypt and so forth. Take, for example:

Even in highly stratified archaic societies such as Sumeria, Babylonia, Assyria, the Hittites or Egypt, storage economies prevailed; and, in spite of a large-scale use of money as a standard, its use for indirect exchange was negligible. This may, incidentally, explain the complete absence of coins in the great civilizations of Babylonia and Egypt.[13]

There was, he does not deny, considerable foreign trade in these civilisations. Very little timber was grown in Egypt, and so this had to be imported. There was much export of luxury goods from Egypt and of corn. But this trade, according to Polanyi, was always directed through “ports of trade”. Here, prices were set by treaty, not by supply and demand; and care was taken to insulate these ports from the main territories that they served. Within these territories, no external influences were permitted on either prices or production decisions.

Polanyi dismisses the work of earlier economic historians – Henri Pirenne,[14] for example, or Michael Rostovtzeff[15]as biased by “economic solipsism”.[16] These did believe that ancient civilisations were based on market behaviour. Their claims were largely worthless, however, because they brought to their examination of the evidence the assumptions of modern economics. They supposed no discontinuity between earlier civilisations and our own. And because they never doubted that it must have existed, they found evidence for market behaviour where none in fact did exist.

Moses Finley

Though not a disciple – he was influenced at least as much by Max Weber[17]Moses Finley carries this sort of analysis into the civilisation of classical antiquity. Educated at Columbia University in New York, he became known as a Communist sympathiser. He moved to England, and became, among much else, Professor of Ancient History at Cambridge.

In his most important work, The Ancient Economy, published in 1973, he argues that considerations of status and civic prestige determined the allocation of resources among the Greeks and Romans, and that modern economic analysis is either useless or misleading as a guide to their behaviour.

Together with Polanyi, he did not deny that the men of classical antiquity produced and consumed goods, engaged in various forms of exchange including long-distance trade, and developed monetary systems employing coinage. But all economic activity took place within a culture that stressed the welfare of the community over that of the individual. Economic activity took place in so far as people had to provide income for themselves and their families. The main source of income was from the land, and most farming was for immediate consumption, not for the market.

He says:

[T]he prevailing mentality [in the ancient world] was acquisitive but not productive.[18]

Indeed, the Greeks in particular had a low opinion of any economic activity that was not connected with farm management and getting goods and services for immediate consumption. They despised commerce and industry. If there was ever a surplus, its purpose was not to be invested in further production, but to make time for the leisure necessary for participation in the political and military affairs of their city states.

These states were not centres of commerce and industry. Much rather, they were places for people to lead pleasant lives, or from which a territory was governed. They had market places, but were not central points for extended market behaviour. Unlike modern cities, they were parasitic on the agricultural territories, consuming much and contributing nothing in the tangible sense.

Moreover, their specific motivations aside, Finley argues that the Greeks and Romans could not have been rational economic agents in the modern sense. Even had they wanted to be other than they were, they lacked the conceptual and organisational tools without which a market economy is impossible. They had no idea of how to determine what was economically rational. They were unable to distinguish between capital and income. They were unable to measure profitability. They had no functioning markets for land or capital. Savings were mostly coin hoards. Most lending was for consumption by the rich or to exploit poor farmers pressed by the tax gatherers. Most labour, outside the smallholding, was performed by slaves; and, as with other capital goods, there was no way of calculating what, if any, net contribution they made to total output.

In support of these claims, he notes that the title of Marshall’s Principles of Economics is made up of words derives from Latin and Greek, but cannot itself be translated into either language. He continues:

Neither can the basic terms, such as labour, production, capital, investment, income, circulation, demand, entrepreneur, utility, at least not in the abstract form required for economic analysis. In stressing this I am [not suggesting] that the ancients were like Moliere’s M. Jourdain, who spoke prose without knowing it, but that they in fact lacked the concept of an ‘economy’, and, a fortiori, that they lacked the conceptual elements which together constitute what we call ‘the economy’. Of course, they farmed, traded, manufactured, mined, taxed, coined, deposited and loaned money, made profits or failed in their enterprises. And they discussed these activities in their talk and their writings. What they did not do, however, was to combine these particular activities conceptually into a unit, in Parsonian terms into ‘a differentiated sub-system of society’
 

It then becomes essential to ask whether this is merely accidental and intellectual failing, a problem in the history of ideas in the narrow sense, or whether it is the consequence of the structure of ancient society.[19]

And so they lacked the concepts of economic analysis because they had no economy that could be analysed. Therefore, he says,

no modern investment model is applicable to the preferences of the men who dominated ancient society.[20]

Who Controls the Present Controls the Past….

The debate over the Polanyi and Finley view of ancient economic organisation – or perhaps over the Marx and Weber and Polanyi and Finley views – does not seem to have been followed with much attention by libertarians and conservatives. It is worth following, even so. Beyond a very basic level, history is as much about the present as the past. Gibbon’s Decline and Fall of the Roman Empire is a glorious work of pure history. But it is also an account of what he saw as the long night of reason – and its attendant nightmares – between the golden age of the Antonines and his own age, and an anxious search for reassurance that there would be no second sleep. Macaulay’s History of England is in part an attempt to legitimise the Victorian settlement as the culmination of historical processes that had their local origin in the 1680s. How readers can be brought to think about the past will insensibly affect how they see the present.

Now, if it could be shown that the Aztecs had no concept of market behaviour, and that they were motivated by considerations wholly different from our own, it would be of little consequence. Everything we know about Aztec civilisation raises doubts whether it was worth calling a civilisation. The Aztecs had no writing and were ignorant of metal working and wheeled transport. Their cultural values were expressed in ritual torture, mass human sacrifice and cannibalism. The Mayans and Toltecs and all the others of their sort seem to have been no better. We may deplore the brutality of the Spanish conquest, but still conclude that it was, on balance, a blessing for the peoples of South America.

But it is different with the empires of the ancient Near East – and very different with the Greeks and Romans. These latter races are our intellectual fathers. Everything we ourselves have achieved is built on the foundations they laid. They gave us the names of all our arts and sciences. Eighty per cent of the English vocabulary is derived from Greek or Latin. Knowledge of these languages may be less widely diffused than it was until a century ago. But the general prestige of the Greeks and Romans is barely less now than it was among the mediaeval pilgrims who gaped at the crumbling remains of the Colisseum and the Baths of Diocletian. If it can be shown that they were wholly unlike us in their economic motivations, that would surely place in doubt the notion that market behaviour is natural to us.

And if few people outside the relevant university departments have read Polanyi and Finley, their conclusions are transmitted through popular histories and newspaper articles and television documentaries, and through large numbers of students who, however superficially, are exposed to these conclusions.

Moreover, Polanyi has had an often pervasive influence in social science departments throughout the United States, and on certain kinds of archaeology. According to Peter Sawyer,

Polanyi’s analysis… has been enthusiastically accepted by some archaeologists who think it provides a basis for reconstructing social, economic and even political phenomena in periods for which only material evidence survives.[21]

We need, therefore, to know about these writers, and – if not quite so much as in the case of the climate change propagandists – to know in what manner their claims are best refuted.

It is not enough to insist that market behaviour is indeed natural, and that all evidence from the past must be interpreted in this light. The reply, as said, will be that we are guilty of “false consciousness” or of “economic solipsism”. Just because we cannot imagine a viable civilisation without market behaviour does not mean that such has not existed.

Ad Hominem Replies Rejected

Nor is it enough to show that Polanyi at least had an obvious polemical interest in making his claims about pre-modern economic behaviour. For all his differences with the Bela Kun Government, he was a socialist, and he was convinced that our future development should be in the direction of a gentler, wealthier repeat of the reciprocity and redistribution that he believed he saw in the past.[22]

His wife says of him:

It is given to the best among men somewhere to let down the roots of a sacred hate in the course of their lives. This happened to Polanyi in England. At later stages, in the United States it merely grew in intensity. His hatred was directed against market society and its effects, which divested man of his human shape.[23]

Speaking more bluntly himself, he says:

In order to comprehend German fascism, we must revert to Ricardian England.[24]

But we would all, I hope, agree, that a man’s motive for putting an argument has no bearing on the validity of that argument. Let us suppose letters of Ludwig von Mises were discovered, in which he claims that the text of Human Action was dictated to him by the Archangel Gabriel – would this invalidate his economics? I think not. Nor do Polanyi’s socialist beliefs in themselves invalidate his answer to the question:

What is to be done, though, when it appears that some economies have operated on altogether different principles, showing a widespread use of money, and far-flung trading activities, yet no evidence of markets or gain made on buying and selling? It is then that we must re-examine our notions of the economy.[25]

Problems of Definition

A better approach is to ask what Polanyi and Finley really mean by a market economy. They were both socialists. With few exceptions, socialists are better at denouncing than understanding market behaviour. Not surprisingly, their definitions are eccentric.

For both of them, it seems, a market economy exists in any society where everything is bought or sold. Polanyi comes close to this caricature view of markets:

All transactions are turned into money transactions…. All income must derive from the sale of something or other, and whatever the actual source of a person’s income, it must be regarded as resulting from sale….[26]

Let there be – or appear to be – a society in which there is evidence of reciprocity and redistribution, and it becomes, by definition, not a market economy. Let other evidence be shown in the same place for market activity, and it can be dismissed as “peripheral”.

If this is a fair reading of at least Polanyi, we can deny that there has ever been a market economy. In modern England and America, for example, probably most services are not exchanged by way for formal market transactions. And I am not referring to the very large amount of state activity. My wife does not expect payment for ironing my shirts. I do not expect payment for changing my daughter’s soiled nappies. Friends do favours for each other. People give to charities. Even many goods are exchanged within large business organisations at prices that are administratively convenient rather than determined by demand and supply.

Even so, just because it is grossly overstated, or made to rest in part on false definitions, does not in itself invalidate a case. The claim is that market behaviour was alien to earlier civilisations than our own. The only proper way to test the truth of this claim is to look at the evidence alleged in its support.

The Appeal to Evidence

Here, we reach a notorious problem. If someone were to claim that market behaviour was peripheral to life in eighteenth century England, it would be easy to laugh at him. This is not to say the claim has not been or will not be made. But if it were made, it could be refuted with a mass of government and private statistics, of newspaper reports and law reports, of high literature, of sermons, speeches and letters, of descriptive and analytical surveys, of biographies and novels, and of physical remains. Ludicrous claims can always be based on selective and misread evidence. In this case, the weight of the evidence must be decisive.

If we turn, however, to the ancient world, the evidence must almost always be indecisive. Very few ancient writings have survived. Obviously, two thousand years are a long time; and ancient civilisation did collapse. Add to this that far fewer documents relating to economic matters were produced or could be preserved than has been the case with us. There was no printing: everything had to be copied by hand. The best writing material was papyrus, which was both expensive and fragile. The normal writing materials for accounts and administrative documents were waxed tablets, which were scraped and reused, and thin wooden sheets, which were thrown away once they had served their purpose.

The literary remains of Greece and Rome which have come down to us through generations of copying and recopying are the products of a rather snobbish culture, and contain little direct information about economic behaviour. The great writers, as Finley observes, do seem to have lacked the conceptual framework for intelligent discussion of finance and commerce. Even otherwise, these were matters they regarded as beneath the notice of history. Thucydides, for example, gives full discussion to the political causes of the Peloponnesian War, but says nothing of what we know from the archaeological evidence was the complete Athenian displacement of Corinth in the pottery markets of the Western Mediterranean world.

During the past century or so, the rubbish dumps of Egypt have revealed a mass of the everyday documentation we have for no other area of the ancient world. There are tax records, and commercial correspondence, and administrative commands, among much else. The problem here is that Egypt was always an exception. From its earliest history, its geography opened it to capture and exploitation by rent-seeking elites. The Pharaohs were worshipped as gods and given whatever they demanded. The Ptolemies organised the country into one gigantic state enterprise and used the proceeds for making a big noise in the Hellenistic world. The Roman Emperors kept up the monopolies and requisitions, treating Egypt as their personal property, and so far as possible isolating it from the rest of the Empire. The documentary evidence, therefore, we have from Egypt may not be representative of the ancient world as a whole.

But all this, plus the material archaeology, is all we have. And if we want to know anything for economic motivations and behaviour, we must press the evidence we have as hard as we can. The history of the ancient world is, in many important respects like a mosaic that has been broken up with many of its tiles thrown away. The whole must be reconstructed from the parts remaining. It is a difficult enterprise, but it can be attempted.

If there is little direct, there is much indirect evidence. This is scattered through the surviving body of ancient literature. It consists of casual remarks, illustrations to arguments, even comments that are in themselves foolish. It is a question of looking for this, and of knowing how to use it.

An interesting example of how evidence can be extracted and used comes not from our own ancient world, but from pre-Columbian South America. Deirdre McCloskey has looked at the geographical distribution of Mayan obsidian tools. She notes that, the farther from the sources of their obsidian, the smaller was the ratio of blade weight to cutting length. She comments:

By taking more care with more costly obsidian the blade makers were earning better profits; as they did by taking less care with less costly obsidian.[27]

What we have here, then, is evidence that illiterate, stone age toolmakers were at least as conscious of opportunity cost as any Victorian mill owner, and rather more so than the average socialist planner of the next century. So long, of course, as this is evidence – this is, so long as the tools are distributed as claimed – we have empirical reason for doubting the Polanyi claim that,

previously to our time no economy has ever existed that, even in principle, was controlled by markets…. Gain and profit made on exchange never [before the nineteenth century] played an important part in human economy.[28]

But what of our own ancient world? What of all the indirect evidence that can be extracted from the surviving writings of many civilisations over about three thousand years? What can this show us about economic motivations?

Morris Silver: An Economist among Classicists

An answer is given by Morris Silver, who is now Professor Emeritus of Economics at City College of the City University of New York. He appears to know something of Greek and Latin, though nothing of the ancient semitic languages. However, he does understand economics, which is more than can be said for most other contributors to this debate. Using the most authoritative translations, he has extracted and interpreted what may be a sufficient amount of the indirect evidence.

The Abstract from his first main contribution to the debate reads:

The essay challenges Karl Polanyi’s position – that ancient Near Eastern economies knew state and temple administration but not price-making markets. It is found that the prerequisite functions of a market economy listed by Polanyi – the allocation of consumer goods, land, and labor through the supply-demand-price mechanism; risk-bearing organised as a market function; and loan markets – were all present in the ancient Near East. Although Polanyi criticised stage theories with their ‘predilections for continuity’ he imposed his own version of continuity on history in lumping together many thousands of years under the rubric of ‘archaic society’. This perspective prevented him from recognising that ancient Mesopotamia experienced lengthy and significant periods of unfettered market activity as well as periods of pervasive state regulation.[29]

The next thirty four pages are a step by step demolition of Polanyi. Professor Silver organises the Polanyi case into fourteen assertions, expressed as quotations from his works. He refutes each in turn, thereby establishing his own case that people in the distant past had exactly the same motivations as we have, and responded with frameworks of customs and institutions quite similar to our own. Anyone who comes to his work from reading Polanyi and his various disciples will appreciate just how deadly – and often how funny – his demolition is. He established beyond reasonable doubt that Polanyi and his followers either knew nothing about the ancient Near East or cared nothing about the truth.

To take just one example of what the evidence really suggests, there is this letter of about 2000 BC from an Egyptian farmer called Hekanakht. He is writing to his family. The letter says:

You shall only give this food to my people as long as they are working. Take care! Hoe all my fields, sieve (the seed grain…) with the sieve and hack with your noses in the work. If they are energetic, you will be thanked, so that I will not have to scold you…. Be energetic! You are eating my food…. Now I have caused 24 deben of copper for the rent of land to be brought to you by Sihathor. Now have 20 (?) arouras of land cultivated for us in the Perhaa beside Hau the Younger by (paying) the rent with copper, clothes, northern barley or any[thing], but only after you have sold the oil and everything else there….[30]

It could be that ancient Egypt was a place without significant market activity, and where the pursuit of profit through trade was unknown. If so, no one appears to have told Hekanakht.

Professor Silver is mostly interested in the semitic civilisations of the ancient Near East. He says little in his main works about the Greeks and Romans. What he does say is usually to express his contempt for Moses Finley. And it does appear to be a justified contempt. Finley may have been a good writer and a competent classical scholar in the technical sense. His claims about economic motivation, even so, are about as worthless as those of Polanyi, but never made with the same boldness and openness to refutation.

I have been able to find only one attempted answer to Professor Silver. This is a seven page article from 1985 by Anne Mayhew, Walter C. Neale and David W. Tandy. These writers claim that Polanyi has been misunderstood, that the translations used are the wrong ones, and that Professor Silver is guilty of the usual “economic solipsism”.[31] Professor Silver’s response fills only two pages, and does no more than point out that his critics have not understood him, and repeat the arguments that seem to have caused most difficulty to his critics.[32]

The Uniformity of Human Nature

And this should be it. The argument should have been settled in 1983. We can argue over the meaning of words, and cast doubt on a writer’s impartiality. But there is no reason for doing so. During the past few hundred years, economic theory has done well enough to analyse our actions, and in a sense to predict them. If it can be shown that the same economic theory can be applied without absurdity to people in the distant past, the Polanyi and Finley arguments collapse. The main difference between people now and in the distant past is that our market institutions enable a pace of material improvement that seems to be unique in human history. Because of that, we are richer. Our motivations, though, are unchanged.

Finley is mostly right when he says that the Greek and Roman intellectuals had no concept of market behaviour. But this is not because they lived in a world of reciprocity and redistribution. It is instead because they were members of ruling classes that were more than usually parasitic. Wealth for them was something to be seized from the merchants and workers and peasants and spent on wars of aggression. When they eventually found ways to destroy wealth faster than their victims could create it, their civilisation collapsed.

There is nothing original in this point, however. It was clear to J.B. Say over two centuries ago:

The literature of the ancients, their legislation, their public treaties, and their administration of the conquered provinces, all proclaim their utter ignorance of the nature and origin of wealth, of the manner in which it is distributed, and of the effects of its consumption.[33]

But if ancient ruling classes were parasitic, the civilisation of classical antiquity did last for well over a thousand years. This length of parasitism requires a fairly sturdy host. While there is no direct evidence for the nature and extent of market behaviour among the Greeks and Romans, there is some indirect evidence of considerable sophistication.

Forward Contracts: Thales of Miletus

Let us take the case of Thales of Miletus (c620-c546 BC), one of the earliest of Greek philosophers. This story is told of him by Aristotle:

There is the anecdote of Thales the Milesian and his financial device, which involves a principle of universal application, but is attributed to him on account of his reputation for wisdom. He was reproached for his poverty, which was supposed to show that philosophy was of no use. According to the story, he knew by his skill in the stars while it was yet winter that there would be a great harvest of olives in the coming year; so, having a little money, he gave deposits for the use of all the olive-presses in Chios and Miletus, which he hired at a low price because no one bid against him. When the harvest-time came, and many were wanted all at once and of a sudden, he let them out at any rate which he pleased, and made a quantity of money.[34]

Whether this is a true story about Thales, or even of market conditions in Miletus, is of no importance. What is important is the unvoiced background to the story. It cannot easily be taken as an instance of the predatory capitalism that Polanyi and Finley are willing to grant to the ancient world. Thales decided that there would be a good olive crop. He did not buy olive presses. Instead, he took out options on them. He and those who dealt with him, seem to have understood the nature of the deal made. When it turned out that Thales had predicted right, he seems to have had no trouble with enforcing his contracts. This assumes a familiarity of the courts with such contracts, and a commercial state of mind either among the peoples of Chios and Miletus, or – assuming the story is apocryphal – among Artistotle’s Athenian audience.

Many of the Greek city states were considerable trading centres. They lack any detailed commercial histories. Certainly, no ancient writer thought it consistent with the dignity of history to describe their economic structure and the causes of their commercial greatness. But this casual anecdote must stand in place of the unwritten histories as evidence for thriving and sophisticated financial economies.

Integrated Markets in Capital and Land: The Financial Crisis of 33 AD

Let us next take a brief but important notice in Tacitus, for the year 33 AD:

Meanwhile a powerful host of accusers fell with sudden fury on the class which systematically increased its wealth by usury in defiance of a law passed by Caesar the Dictator defining the terms of lending money and of holding estates in Italy, a law long obsolete because the public good is sacrificed to private interest. The curse of usury was indeed of old standing in Rome and a most frequent cause of sedition and discord, and it was therefore repressed even in the early days of a less corrupt morality. First, the Twelve Tables prohibited any one from exacting more than 10 per cent., when, previously, the rate had depended on the caprice of the wealthy. Subsequently, by a bill brought in by the tribunes, interest was reduced to half that amount, and finally compound interest was wholly forbidden. A check too was put by several enactments of the people on evasions which, though continually put down, still, through strange artifices, reappeared. On this occasion, however, Gracchus, the praetor, to whose jurisdiction the inquiry had fallen, felt himself compelled by the number of persons endangered to refer the matter to the Senate. In their dismay the senators, not one of whom was free from similar guilt, threw themselves on the emperor’s indulgence. He yielded, and a year and six months were granted, within which every one was to settle his private accounts conformably to the requirements of the law.
 

Hence followed a scarcity of money, a great shock being given to all credit, the current coin too, in consequence of the conviction of so many persons and the sale of their property, being locked up in the imperial treasury or the public exchequer. To meet this, the Senate had directed that every creditor should have two-thirds his capital secured on estates in Italy. Creditors however were suing for payment in full, and it was not respectable for persons when sued to break faith. So, at first, there were clamorous meetings and importunate entreaties; then noisy applications to the praetor’s court. And the very device intended as a remedy, the sale and purchase of estates, proved the contrary, as the usurers had hoarded up all their money for buying land. The facilities for selling were followed by a fall of prices, and the deeper a man was in debt, the more reluctantly did he part with his property, and many were utterly ruined. The destruction of private wealth precipitated the fall of rank and reputation, till at last the emperor interposed his aid by distributing throughout the banks a hundred million sesterces, and allowing freedom to borrow without interest for three years, provided the borrower gave security to the State in land to double the amount. Credit was thus restored, and gradually private lenders were found. The purchase too of estates was not carried out according to the letter of the Senate’s decree, rigour at the outset, as usual with such matters, becoming negligence in the end.[35]

So far as we can understand what was happening, the passage largely explains itself. An old law restricting the rate of interest is suddenly revived. This invalidates a large class of loans above the official rate made on short term but renewable contracts. An indulgence is given of eighteen months, during which the now illegal loans are systematically called in. The result is a liquidity crisis in which land prices collapse. The crisis is dealt with by emergency lending by the Emperor.

There is nothing unusual about this sort of crisis. We are passing through something similar at the moment. What Tacitus is showing is a developed economy with much integration of capital and land markets. We can see how easily land can be sold, and how responsive prices are to the forces of demand and supply. Again, special pleading can be brought to bear on the story to try and minimise the extent of market behaviour. But, so far as this crisis can be analysed in terms of standard economic theory, the simplest explanation is to conclude that the economy of the early Roman Empire was, in its essentials, like that of the modern world.

Conclusion

I repeat: the argument should have been settled in 1983, with the publication of the first article by Professor Silver. Perhaps it should never have been suffered to begin. Sadly, though, there is a bitter and unending hatred among the intellectual classes of our civilisation for market behaviour that will be manifested in any subject. The only answer is continual policing and continual refutation.

Our duty, as libertarian and conservative intellectuals, is to be aware of the relevant debates outside our own subjects, and to join in the applause for those who stand subjectively or objectively on the side of truth.

Notes

[1] Jonathan Swift, Gulliver’s Travels (1726), Part III, Chapter VI.

[2] “To understand political power right, and derive it from its original, we must consider, what state all men are naturally in, and that is, a state of perfect freedom to order their actions, and dispose of their possessions and persons, as they think fit, within the bounds of the law of nature, without asking leave, or depending upon the will of any other man.” (John Locke, Second Treatise of Civil Government (1689), Chapter II, Section 4)

[3] “The RHINE flows north, the RHONE south; yet both spring from the same mountain, and are also actuated, in their opposite directions, by the same principle of gravity. The different inclinations of the ground on which they run, cause all the difference of their courses.” (David Hume, A Dialogue (1748?), published in Enquiries Concerning the Human Understanding and Concerning the Principles of Morals, Oxford University Press, 2nd Edition 1902, p.333)

[4] “THIS division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.” (Adam Smith, An Enquiry into the Nature and Causes of the Wealth of Nations (1776), Book I, Chapter 2).

[5] Karl Marx, The Poverty of Philosophy (1847), Chapter Two: “The Metaphysics of Political Economy” – available on-line at: http://www.marxists.org/archive/marx/works/1847/poverty-philosophy/ch02.htm  (checked May 2008).

[6] See, for example: Paul Gottfried, After Liberalism: Mass Democracy in the Managerial State, Princeton University Press, Princeton, 1999; The Strange Death of Marxism: The European Left in the New Millennium, University of Missouri Press, Missouri, 2005; Sean Gabb, Cultural Revolution, Culture War: How Conservatives Lost England, and How to Get It Back, Hampden Press, London, 2007. By complete chance, copies of this last, and very significant, book are available for sale at the back of this room.

[7] He wrote his doctoral thesis on The Difference between the Democritean and Epicurean Philosophy of Nature (1841). It can be found on-line at: http://www.marxists.org/archive/marx/works/1841/dr-theses/index.htm – checked May 2008.

[8] Karl Polanyi, The Livelihood of Man, Academic Press, New York, 1977, pp 6-7.

[9] Karl Polanyi et al (eds) Trade and Market in the Early Empires: Economics in History and Theory, The Free Press, Glencoe, Illinois, 1957, p.43.

[10] Karl Polanyi, Origins of Our Time: The Great Transformation (British edition of The Great Transformation), Victor Gollancz, London, 1945, p.53.

[11] Ibid, pp 41-50.

[12] Polanyi, The Livelihood of Man, p.61.

[13] Ibid, pp 119-20.

[14] See, for example, Henri Pirenne, Mohammed and Charlemagne, Allen and Unwin, London, 1935.

[15] See, for example, Michael Rostovtzeff, Historv of the Ancient World, Clarendon Press, Oxford, 1926; Social and Economic History of the Roman Empire, Clarendon Press, Oxford, 1926; Social and Economic History of the Hellenistic World,. Clarendon Press, Oxford, 1941.

[16] Polanyi, The Livelihood of Man, pp 14-15.

[17] Hinnerk Bruhns, “Max Weber’s ‘Basic Concepts’ in the Context of his Studies in Economic History”, Max Weber Studies (2006 Bhft I) 39-69.

[18] Moses Finley, The Ancient Economy, University of California Press, Berkeley and Los Angeles, California, (1973) 2nd edition 1985, p.23.

[19] Ibid, p.21.

[20] Ibid, p.144.

[21] Peter Sawyer, “Early Fairs and Markets in England and Scandinavia”, in B.L. Anderson and AJ.H. Latham, (eds), The Market in History, Croom Helm, London, 1986, p.61.

[22] He says: “In the receding rule of the market in the modern world, shapes reminiscent of the economic organisation of earlier times make their appearance. Of course we stand firmly committed to the progress and freedoms which are the promise of modern society. But a purposeful view of the past may help us to meet our present over concern with economic matters and to achieve a level of human integration, that comprises the economy, without being absorbed in it.” (Polanyi, Trade and Market, ‘Introductory Note’, p.xviii).

[23] Polanyi, The Livelihood of Man, “Introduction”, p.xvi.

[24] Polanyi, The Great Transformation, p.30.

[25] Polanyi, Trade and Market, p.xvii.

[26] Polanyi, The Great Transformation, p.41.

[27] Deirdre N. McCloskey, “Polanyi was Right, and Wrong”, Eastern Economic Journal, 23, 1997, p.484.

[28] Polanyi, Trade and Market, p.43.

[29] Morris Silver, “Karl Polanyi and Markets in the Ancient Near East: The Challenge of the Evidence”, The Journal of Economic History, Vol. XLIII, No.4, December 1983, p.795. This article was greatly expanded and published as Economic Structures of the Ancient Near East, Croom Helm, London, 1985, and then as  Economic Structures of Antiquity, Greenwood Press, Westport, Connecticut, 1995. He maintains a website on ancient economies at http://sondmor.tripod.com/index-html – checked May 2008.

[30] Quoted in Silver, “Polanyi and Markets”, p.826.

[31] Anne Mayhew, Walter C. Neale and David W. Tandy, “Markets in the Ancient Near East: A Challenge to Silver’s Arguments and Use of Evidence”, The Journal of Economic History, Vol. XLV, No.1, March 1985, pp127-34.

[32] Morris Silver, “Karl Polanyi and Markets in the Ancient Near East: A Reply”, The Journal of Economic History, Vol. XLV, No.1, March 1985, pp135-37.

[33] Jean-Baptise Say, A Treatise of Political Economy, translated by C.R. Princep, American edition, Grigg and Eliot, Philadelphia, 1836, p xxviii.

[34] Aristotle, Politics, Book 1, part XI, translated by Benjamin Jowett, available on-line at: http://classics.mit.edu/Aristotle/politics.1.one.html  – checked May 2008.

[35] Tactus, Annals, Book 6, 16-17, translated by Alfred John Church and William Jackson Brodribb [1864-1877], available on-line at: http://www.sacred-texts.com/cla/tac/index.htm ?checked May 2008.

Sean v Archbishop’s Man re Poverty


(Note: this was published in 2009, but since the current Archbishop of Canterbury has also sold his soul to the GramscoFabiaNazis, and is a critic of liberal capitalism having madee lots of money in it previously, we have retrieved this post.)

Sean Gabb

I’ve been invited on the radio tonight to debate with one of the senior advisers to the Archbishop of Canterbury on whether high salaries should be “capped” in order ot help the poor.

I shall probably be allowed about three discontinuous minutes, while the majority of time goes to some clerical communist droning on about “compassion”. However, what I will try to argue is as follows:

The salaries of those who work for the State come from a forcible transfer of wealth, often form the poor. Such slaries should be capped at £20,000. The salaries and rewards of those who run big business and the City are often based on a grant of state privilege. Such people should be exposed to real market competition.

But most people who do well in this country do so by offering goods and services on terms that others find attractive. Their wealth is justly acquired, and it is immoral to call for it to be taken away. Continue reading

How much Gold is £100 Billion? We did it in tons, now let’s see what space it will take.


David Davis

On 4th April we said this. £100 billion. Now, 5,370 Imperial Tons will, we find, using a little £5-calculating-apparatus, take up about 270 cubic metres, or a cube of about 6.53 metres-a-side, which is 21 feet 5.5-inches-a-side, more or less. This will comfortable fit into an “AFFORDABLE HOUSE”, if you don’t want to be able to enter it, if you employ any available attic-space too, and if you also stack the left-over bullion-bars in the garden shed…..

I don’t think the crappy joists of the first floor, let alone the attic-space, will hold for long.

And if the price moves, what’s a couple of cubic metres of gold between friends, eh? The earth’s crust contains incalculably more gold, and other “strategic metals”, than we can imagine. Cue “unobtainium”.

Return to Gold … Do the Right Thing. Libertarian Alliance calls on British Government to restore the Gold Standard


Sean Gabb

 NEWS RELEASE FROM THE LIBERTARIAN ALLIANCE
In Association with the Libertarian International

Release Date: Friday 4th April 2008
Release Time: Immediate

Contact Details:
Dr Sean Gabb on 07956 472 199 or via sean@libertarian.co.uk

For other contact and link details, see the foot of this message
Release url: http://www.libertarian.co.uk/news/nr065.htm

Statement by the Libertarian Alliance on the Financial Crisis: Time to Return to Gold

The Libertarian Alliance, the radical free market and civil liberties policy institute, today issues the following statement on the present run of crises in the financial markets. This statement is prompted by the various calls made for closer regulation of the financial sector.

Libertarian Alliance Director, Dr Sean Gabb, says:

“The world may or may not be on the edge of financial collapse. But the present run of banking crises is only the latest consequence of the ending of the gold standard. Since 1914, and more particularly since 1971, the ability of governments to create unlimited amounts of fiat money has led to bubble after bubble, each one larger than before. Financial markets have become little more than casinos. Immense resources have been diverted into the promotion and management of speculation. All other economic activity has been subordinated to and therefore distorted by such speculation.

“The latest set of problems, brought on by foolish lending on property in America, is not a failure of the free market system. It is ultimately the effect of government monetary policies. The answer does not lie in some new set of regulations, which may prevent the next speculative frenzy. The true answer lies in the return to a more sensible and more honest set of monetary arrangements.

“We mean by this the return to a fully convertible gold standard.

“The Libertarian Alliance calls on the British Government to do the following:

* To order the conversion of all foreign currency reserves held by in the Bank of England into gold;
* To sell every reasonably marketable asset of the British State, to convert the proceeds into gold, and to lodge these at the Bank of England;
* To revalue the Pound, so that all claims on the Bank of England were equal to the gold reserve of the Bank of England:
* To impose on the Bank of England a legal obligation to pay all claims on it in gold, on demand and without limit:
* To impose on the Bank of England an obligation to do all within its ability, and nothing other than this, to maintain the new parity between the Pound and gold:
* To impose on all deposit receivers operating in the United Kingdom (unless explicitly exempted by contract) to pay all claims on them in gold, on demand and without limit;
* To make the directors or, if they are without the jurisdiction, the most senior management of all deposit receivers in the United Kingdom personally responsible for any failure to make such payments:
* To impress on any foreign government or central bank that might choose to fix a parity against the Pound that no assistance whatever would be given to maintain such a parity.


“We note that these measures would bring about first a severe devaluation of the Pound, and then a credit squeeze that deflated the value of real and financial assets. But this is what we seem already to be facing. A return to the gold standard would provide us with a stable financial system, and would tend to protect us against future bubbles, and would abolish the need for intrusive financial regulation.

“We also note that a fully convertible gold standard would make all money laundering laws unenforceable, and would severely limit the ability of the British State to finance its activities by the unlimited sale of bonds to the banking system. We would unreservedly welcome both these effects.

“We look forward to a Britain, and preferably a world, in which fiat money has become as unusual as state ownership of telephone networks, and in which paper and electronic money is a rare substitute for gold and silver and copper coins.”

END OF COPY

Note(s) to Editors

Dr Sean Gabb is the Director of the Libertarian Alliance. His latest book, Cultural Revolution, Culture War: How Conservatives Lost England, and How to Get It Back, may be downloaded for free from http://tinyurl.com/34e2o3. It may also be bought. His other books are available from Hampden Press at http://www.hampdenpress.co.uk.

He can be contacted for further comment on 07956 472 199 or by email at sean@libertarian.co.uk

Extended Contact Details:

The Libertarian Alliance is Britain’s most radical free market and civil liberties policy institute. It has published over 700 articles, pamphlets and books in support of freedom and against statism in all its forms. These are freely available at http://www.libertarian.co.uk

Our postal address is

The Libertarian Alliance
Suite 35
2 Landsdowne Row
Mayfair
London
W1J 6HL
Tel: 07956 472 199

Associated Organisations

The Libertarian International – http://www.libertarian.to – is a sister organisation to the Libertarian Alliance. Its mission is to coordinate various initiatives in the defence of individual liberty throughout the world.

Sean Gabb’s personal website – http://www.seangabb.co.uk – contains about a million words of writings on themes interesting to libertarians and conservatives.

Hampden Press – http://www.hampdenpress.co.uk.- the publishing house of the Libertarian Alliance.

Liberalia – http://www.liberalia.com – maintained by by LA Executive member Christian Michel, Liberalia publishes in-depth papers in French and English on libertarianism and free enterprise. It is a prime source of documentation on these issues for students and scholars.

The UK Libertarian Party: First press release regarding major policy topic: personal income tax: abolition thereof


David Davis

http://www.lpuk.org 

UK Libertarian Party calls for the abolition of personal income tax 

The UK Libertarian Party has started the new year with a call to scrap personal income tax.

Party Leader, Patrick Vessey, said, “Income Tax raised £153 billion in 2006/07, about one quarter of the £587 billion spent by goverment last year.

“But savings on unnecessary spending could easily be found: for example, current annual spending on Britain’s hundreds of unaccountable QUANGOs — including such luminaries as the British Potato Council, the Milk Development Council and the Wine Standards Board — is running at around £175 billion.

“The Libertarian Party believes that the tax burden should be substantially reduced, and that those taxes that remain should be levied on spending, not on income. This policy will reward those – especially the poorest — who spend within their means and who save for their future.”

The Party’s Director of Communications, Chris Mounsey, added, “In 2002/03, the government spent £420 billion. Were we to return to those spending levels, we could abolish personal income tax and still have £13 billion left over.

“The people of Britain are beginning to understand that simply throwing money at public services doesn’t work. The Libertarian Party is dedicated to allowing every person in this country to choose how their hard-earned money is spent and the best way in which to do that is not to steal it from them in the first place.”

The Libertarian Party’s pledge to scrap personal income tax is the first policy to emerge from the new party’s discussions, and will form part of a radical manifesto to be released later in the year.

  Notes for editors 

1)      The Libertarian Party was founded on 21 November 2007 and officially launched on 1 January 2008. The party has concentrated solely on the UK political blogosphere and its own discussion forums thus far: this is the party’s first foray into the wider world. The website is at: http://www.lpuk.org

2)      Libertarianism is a political philosophy based on support for individual liberty.

Wikipedia: http://en.wikipedia.org/wiki/Libertarianism

3)      Libertarianism is a broad church, but the UK Libertarian Party is broadly minarchist in outlook. http://en.wikipedia.org/wiki/Minarchist

4)      Government spending figures can be found here: http://www.hm-treasury.gov.uk/economic_data_and_tools/finance_spending_statistics/pes_publications/pespub_pesa07.cfm

5)      Income Tax was first introduced in 1798, by William Pitt the Younger, in order to buy weapons and materiel to fight the Napoleonic Wars, and ranged from less than 1% to a maximum of 10% over the set thresholds. The tax was abolished in 1802 by Henry Addington, then reintroduced in 1803; it was again abolished in 1816, then reintroduced by Sir Robert Peel in 1841. Wikipedia: http://en.wikipedia.org/wiki/Taxation_in_the_United_Kingdom#History

6)      The QUANGO database: http://quangos.ercouncil.org

7)      The Essential Guide to British QUANGOs 2005: http://www.policyhub.gov.uk/news_item/quangos_cps.asp

 ++ ENDS ++ 

Issued by Chris Mounsey, Director of Communications, on behalf of the UK Libertarian Party. Enquiries to Chris Mounsey:        media@lpuk.org

Natural England (a fascist pre-capitalist barbarian quango) gets money from the EU via DEFRA (department for Ending of Farming and Rural Affairs…not the sexy kind where you can f*** your near-neighbour’s wife and she won’t tell…)


This came From Outside today:

Original Message —–

From: JKelly8543@aol.com

To: MrGrahamBooth@aol.com

Sent: Monday, February 11, 2008 2:30 PM

Subject: Natural England (this is the Wiki-page – ed.)

All in SW

The issue of Natural England and its possible/probable funding from the EU has been raised, and Steve Reed in Brussels turned up what he thinks is the appropriate budget source – LIFE+

Have a look at these 2 links and see if any of it gels with your own knowledge/experience in this area. John Kelly

Hi Bernard, “Natural England (NA)” [THIS IS ITS OWN WEB PAGE - ed.] the quango that wants to turn England into a saltmarsh has received £2.9 billion from Defra to assist this aim and in turn DEFRA got this sum from Europe.  NA make the claim to be independent of the government but this is obviously a false claim and NA seem to be the masters of the Environment Agency. According to the website, NA also gets £400,000 a year for its administration. If this rogue quango of environmental anoraks is not restrained, it will have a very counter productive effect to rising sea levels and sink the population ahead of any natural consequences. It seems to me we are all sleeping while this quango is given excessive powers to interfere on planning applications as a statutory consultee etc. with a very prejudicial interest and objectives. In short, this quango needs to be discredited for what it is doing at our expense and I am hoping your colleagues in UKIP here and abroad can provide some further evidence that supports my perception. See the weblink http://www.naturalengland.org.uk/press/releases2007/061207.htm

I feel I have to comment here. “Natural England” has been also doing stuff round here in the North West where we live. What it proposes is entirely destructive and you can get my views by looking at correspondence on this group,  eurorealist@yahoogroups.com for earlier today (11th Feb 2008.)

If DEFRA really stands for the “Department for Ending of Farming and Rural Affairs” (and I think it’s now called “DERA” which indicates that it thinks that “farming” has ended in the UK or at least England, which is about right) then all this makes sense.

If you are a socialist, and an intelligent one in a liberal Western nation which you hate for what it did for the rest of humanity (so these people could not become your supplicant-clients, for they were already freed by your enemy) then you probably have an Apple laptop (and you hate Bill Gates – OK OK it does not matter, your friends have got their teeth into his ankles for his money and he will now learn better at your hands, while he and his wife are thinking they are doing “big charity” – you will waste his money for him while the poor Africans wait and die.) 

Moreover, lots of you type on an apple, (you guys will end up being made to type outside in the cold, or in the alleyway next door, by us Intel/AMD-Windows-PC-ers….. like the poor smokers, eventually, were made to stand outside by your lot.) Just you try doing the mouse-thing in a hurricane in Lancashire in January, in an alleyway, on an apple. 

You think that “people ought to live off the land” (I have been told this by more than one of you)  and that “intensive farming” is “destroying the countryside”. You can say this and seem to get away with the falsehood, for you ……

(a) control the UK GCSE geography syllabus, and

(b) also you can afford to buy shitty, muddy “organic boxes” of mixed roots of indeterminate colour and dryness, covered in mud and rather shrivelled, delievered by a cheery lad in a van who knows the colour of your money and has an Apple-website like yours, or else you can get stuff flown in from Peru via Tesco (I LOVE TESCO! Strawberries in winter!) You even pretend you want to eat the stuff….and even feed it to your children (God help them) –  devotion to duty if ever there was.

(c) you have suborned all the “science” teachers under about age 42. (That was a clever move – I take my hat off to you. I now have to look to Chindia to save us from your efforts.)

If one wanted to abolish or emasculate an entity called “England”, then one plank of strategy would be to (a) remove its ability to control the extent of the coast line, and (b) to diminish the amount of productive farming that could go on anywhere. I rest my case.

Libertarians should be concerned, and oppose whatever DEFRA, or DERA indicates, since it seems designed to reduce this island to a state of food-dependency on some other outside agency – whether this be the EU, or “suppliers” (who can be leaned on). This island was the birthplace of liberalism – not a dirty word at all, just hijacked by the stalinists in the USA – and this supposed attack is just part of our punishment for doing what we did to free people. They want to demolish, or render unproductive, or at least inundate from the sea, our Land.

Perhpas they would just like to say they want to come and sow it with salt? Then, we will all know where we are.

Horrible nasty news from the EU; which is to say, the EuSSR. Relates to Sean Gabb’s postings about “Banned Video back on web” and “the most astonishing video you will ever see.”


David Davis 

I was, strangely, going to write about “Europe” today. I just felt like it, thinking it’s time the blasted contraption got another push down the hill from us here. The subject was going to be

“What should British libertarians recommend and execute, regarding regime changes in nations on the European continent, when the EU shall have imploded and fallen, and it is the job of the Anglosphere (AGAIN) to put things right for the poor wretched people of this unfortunate collection of states?”

A short enough title for this blog, and I will deal with this matter ,but not today now – for something worse has come out of the woodwork;

  

Subj: [eurorealist] more from fascist europe 
Date: 26/01/2008 15:10:19 GMT Standard Time
From: peter@pwwatson.demon.co.uk
Reply-to: eurorealist@yahoogroups.com
To: eurorealist@yahoogroups.com
Sent from the Internet (Details)

Nigel Farage on his blog and the UKIP website have brought to our attention a rather alarming situation that our colleagues in Portugal are about to find themselves in. The PND [Partido da Nova Democracia] under Manuel Montiero have some similar aims to ours, especially to regain control of their fishing and to oppose the constitution. However a new law comes into force in Portugal in March 2008 that states political parties must have 5000 registered members or they will be declared illegal. Additionally, the names and addresses of the members must be given to the Portuguese authorities. This will mean that ten of Portugal’s fourteen political parties will disappear and the PND is one of them. This intolerance to opposition means that new parties would never be created, existing ones become more powerful and they alone would control party funding.

This situation is caused by Article 191 of the Nice Treaty, regarding party funding. If it can happen in Portugal, it can happen here. A good reason to increase our membership as fast as possible. Although I hesitate to compare it, it does bring to mind the identification of Jews in Nazi Germany in the 1930s. UKIP is currently safe from extinction on these grounds as we have more than three times that many members.

 JOHN BAXTER

UKIP N DORSET NEWSLETTER JAN/FEB 2008
__,_._,___

You’d better read it I suppose. I odn’t see what the f*****g business it is of the EUSoviet Praesidium if anybody wants to form a political party and if so, how big it is. I also can’t see how you get to 5,000 members, so you can be “legal”, without having rather less than 5,000 members for quite some time.

Perhaps my regime change scheme will have to be accompanied by force, like it was in 1944.

Peter Hain goes! Strangely, occasionally, thugs do fall off the rattling Labour gravy-Train.


Thanks to Guido from all round, for getting his teeth into Hain’s ankle early on, and hanging on in.

Why is it that that the more greasy a leftist or a Nazi is, the more likely it is that he/she will be eventually found with a hand in the till? This one is neither the first nor the last.

Really, any free citizen eligible to stand for something, ought to be allowed to get contributions to fight some election or other, from anywhere at all, so from a libertarian perspective i can’t see what the fuss is about. Now, I am prepared to accept some basic level of (non-Governmental) legal regulation of how (and from whom) “donations” of any size may be received. However, I will object to what I see coming next, which is that this and other sleazy scams will be used by this government (or another) to argue for State funding of (all) elections. this would be a bad development, ushering in a shutting-out of small, fringe or “unpopular” parties, and setting a sad grey European fascist sort of “proportional representation” in stone.

I remember the days when conservatives were always found, not with their hands in the till, but with their trousers down in the wrong house and (usually) with a lady who was not their wife. Perhaps their need for money was less pressing, and they were merely short of good, honest sex, with girls who did not resemble horses. Perhaps conservatives are having better sex at home these days, or else their wives have seen sense, as there is little tittle-tattle about what the buggers get up to; I do not know.

HOW MUCH IS A BILLION? SEE BELOW. By the way, Gordon Brown was the first chancellor to SPEND a Billion a day. (Now he borrows the same amount.)


David Davis 

This is fun from the USA.

From: Gaylon Ross

To: Recipient List Suppressed:

Sent: Wednesday, January 16, 2008 4:53 PM

Subject: A billion

How much is a billion?
 

        This is too true to be very funny
 

The next time you hear a politician use the

Word ‘billion’ in a casual manner, think about

Whether you want the ‘politicians’ spending

YOUR tax money.

A billion is a difficult number to comprehend,

But one advertising agency did a good job of

Putting that figure into some perspective in

One of its releases.

A. A billion seconds ago it was 1959.B. A billion minutes ago Jesus was alive.

C. A billion hours ago our ancestors were

     Living in the Old (middle paleolithic) Stone Age.

D. A billion days ago no-one walked on the earth on two feet. (That’s 2,740,000 years approx – I think the writer is wrong but it’s a moot point still – David Davis)

E. A billion dollars ago was only 8 hours and  20 minutes, at the rate our government is spending it.

While this thought is still fresh in our brain, let’s take a look at
New Orleans. It’s amazing what you can learn with some simple division…..Louisiana Senator, Mary Landrieu (D), is presently asking the Congress for $250 BILLION to rebuild New Orleans.  Interesting number, what does it mean?A. Well, if you are one of 484,674 residents of 

  New Orleans (every man, woman, child), you each get $516,528.

B. Or, if you have one of the 188,251 homes in
 New Orleans , your home gets $1,329,787. C. Or, if you are a family of four, your family Gets $2,066,012.Washington, D.C. .. HELLO!!! … Are all your calculators broken??
 

Tax his land,
Tax his wage,
Tax his bed in which he lays.
Tax his tractor,
Tax his mule,

Teach him taxes are the rule.

 

Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.
Tax his ties,
Tax his shirts,
Tax his work,
Tax his dirt.

Tax his tobacco,
Tax his drink,
Tax him if he tries to think.

Tax his booze,
Tax his beers,
If he cries,
Tax his tears.

Tax his bills,
Tax his gas,
Tax his notes,
Tax his cash.

Tax him good and let him know
That after taxes, he has no dough.

If he hollers,
Tax him more,
Tax him until he’s good and sore.

Tax his coffin,
Tax his grave,
Tax the sod in which he lays.
Put these words upon his tomb,
‘Taxes drove me to my doom!’

And when he’s gone,
We won’t relax,

We’ll still be after the inheritance TAX!

Accounts Receivable Tax
Building Permit Tax
CDL License Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges (tax on top of tax),
IRS Penalties (tax on top of tax),
Liquor Tax,
Luxury Tax,
Marriage License Tax,
Medicare Tax,
Property Tax,
Real Estate Tax,
Service charge taxes,
Social Security Tax,
Road Usage Tax (Truckers),
Sales Taxes,
Recreational Vehicle Tax,
School Tax,
State Income Tax,
State Unemployment Tax (SUTA),
Telephone Federal Excise Tax,
Telephone Federal Universal Service Fee Tax,
Telephone Federal, State and Local Surcharge Tax,
Telephone Minimum Usage Surcharge Tax,
Telephone Recurring and Non-recurring Charges Tax,
Telephone State and Local Tax,
Teleph one Usage Charge Tax,
Utility Tax,
Vehicle License Registration Tax,
Vehicle Sales Tax,
Watercraft Registration Tax,
Well Permit Tax,
Workers Compensation Tax.

 

STILL THINK THIS IS FUNNY?
Not one of these taxes existed 100 years ago,
And our nation was the most prosperous in the world.    
We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.
What happened?  Can you spell ‘politicians!’
And I still have to ‘press
1′ for English. I hope this goes around THE
USA at least 100 times
 
What the heck happened ?????

Ron Paul is the only one holding a political office

that really cares.

Gaylon

That Sheep May Safely Graze – Old Article


Sean Gabb

Free Life Commentary,
an independent journal of comment
published on the Internet
Issue Number 153
26th September 2006
14th June 2006
postCount(‘flc153′);Comments | postCountTB(‘flc153′); Trackback

That Sheep May Safely Graze
by Sean Gabb
This evening, the 26th September 2006, the BBC will broadcast its latest Whistleblower programme. This investigates the sharp and often illegal practices of court bailiffs. They are accused of tricking debtors—and frequently third parties —out of thousands of pounds that are not owed. According to a report in The Daily Mail, the bailiffs in one firm are accused of:

  • Doubling or tripling a judgment debt, and then appearing generous by deducting £100—and keeping the whole excess for themselves;
  • Telling the relatives of debtors that they would have their own possessions seized;
  • Threatening debtors with violence;
  • Breaking and entering the premises of debtors and of third parties. So far as they are true—and I have not seen the programme in question—these accusations show patterns of behaviour of which I was not previously aware. Now, of course, if the law has been broken, those breaking it, and those procuring its breach, must be punished. If the law has been abused, it must be changed, so that the rights of debtors and of third parties are more effectively protected. There can be no doubt of this. Laws exist to shield the innocent and to protect the legitimate rights of all. They should not be suffered to exist as a systematic weapon for the unscrupulous. This being said, the story raises a disturbing thought in my mind. This is to what extent people who think and behave like sheep deserve to be treated like human beings.

    If someone knocks on your door waving a piece of paper and demanding money, it is reasonable to expect that you will insist on reading that piece of paper. If you do not understand the meaning of the words on that piece of paper, it is reasonable to expect that you will demand an explanation of its meaning. If a satisfactory explanation is not given, it is reasonable to expect that you will seek advice from someone else who is competent to give such advice. If you stand aside and let him in to burgle your home, you have—in what is still a country based on law— consented to your own oppression. I believe that some of the victims whose stories are told in the programme could not be expected fully to insist on their legal rights. There is the story of a man dying of cancer, who was plundered because someone else had illegally used his disabled parking badge. There is the story of children terrorised with the threat that their mother would be sent to prison for non-payment of a debt. But many of the victims of these bailiffs were adults operating under no obvious defect of health. These people do not seem to have behaved reasonably in the face of purported authority. So far as they failed to challenge the legality of what was done to them, they largely have themselves to blame. Now, I can hear an answer forming to what I have just said. “Sean” it goes, “you are middle class. You have a legal education. You are not particularly frightened of the ordinary organs of the British State. You know roughly what your rights are and how to get them respected. These are poor and ignorant people whose attitude to authority is one of terrified respect. They do not know what their rights are. They do not know how to find out what these are or how to enforce them. You cannot expect them to behave as you might in their position. You are speaking like one of those people who give libertarianism a bad name.” There is something in this answer, and English law has tried for many centuries—if not always consistently or very well—to take it into account. The phrase “poor and ignorant people” is enshrined in the Rules of Equity. Judges have sought to apply contracts with such people with a requirement on the stronger party of just dealing. The problem is that, during the past hundred years or so, the poor and ignorant have been given the same political rights as everyone else. They are allowed a say in the election of a government. They cannot be trusted to look after their own affairs. But they are trusted with a vote that allows others to look into our affairs. If this were a problem affecting five or perhaps even ten per cent of the adult population, it might not be a serious nuisance. But is a problem that, during the past hundred years of so, has been greatly compounded. When he was alive, I used to discuss with Chris R. Tame to what extent many people, even in the better ages of our country, were two legged sheep. How many people, I would ask him, knew why they should be angry with Charles I and James II? How many people were in the habit of demanding due process of law in their dealings with the authorities? His answer was always “enough people to make a difference”. The difference between then and now is that there are not now enough people to make a difference.

    On the reasons for this change, I could write a book and still not do justice to the theme. But there are a number of reasons obvious enough not to need more than a cursory treatment. The first of these has been the rise of an extended welfare state. I have no principled objection to some state welfare. If people are, through no gross negligence of their own, in want, I will consent to pay taxes for their basic relief. This covers some maintenance for themselves, so health care, some education for their children. The law should not encourage claims. It should, much rather, encourage self-help and should encourage voluntary provision for much else. But I do not wholly reject some role for the State in relieving certain kinds of want. However, the welfare state we actually have goes far beyond these minimal functions. It discourages self-help. It tends to co-opt voluntary provision—where it does not positively discourage it—into the agency of the State. It has raised up an army of people whose attitude to the authorities is one of supplication. They have resigned care over their own affairs to the authorities, which stand over them as a parent does to a child. It is asking too much to expect such people to retain any habits of self-respect or of independence. When faced with the demands of authority—whether real or purported—they will defer. I do not need to enter into the further question of how such deference arose and is sustained. It may be purely a cultural change in response to changes of institution. Or it may be— as I suspect—a genetic change in the character of the British people. We lost close on a million of our best young men in the Great War. We lost millions of others in the nineteenth and twentieth centuries to emigration. Is it possible that those who remained—these being less brave on average and less resourceful—then bred further generations of the similarly unfit? Is it possible that their breeding of these further generations was facilitated by welfare policies that externalised the costs of procreation? There is, I do suspect, something in this argument. But I do not need to go any further in its development. And it would lead me into connected arguments that it might not be in my best interests to elaborate. But indiscriminate welfare, I do not see any reason to doubt, has raised up an army of two-legged sheep. I turn to the second reason. This is the general corporatisation of our economic life. Until a few generations back, most people in the middle classes were self-employed. If they paid income tax, they dealt directly with the authorities. Regardless of whether they earnt enough to pay the modest income taxes of the day, they had to make all the important decisions of their lives for themselves. The great majority of middle class people nowadays are the salaried employees of large organisations. Whether these organisation are openly departments of state, or are state-privileged trading bodies in the formally private sector, they expect and impose habits on their employees of external reliance. These people resign everything from career development to pension planning to their employers, and defer in just about all matters to their line managers. They sell their time to a single client. If they are dissatisfied with the deal, they look for another. And never think to expand the number of clients. The effect has been very similar to welfare corruption. Most people in this country, of whatever degree, are not self-reliant individuals. Even if they acquire an intellectual understanding, they do not directly understand how free people think and behave.

    This explains much of how this country now operates. It explains the endless scare stories in the media—everything from “global warming” and “passive smoking” to the alleged danger of letting ordinary people own and use firearms, to the case for omnipresent surveillance cameras on the roads and in other public places. It also explains the demands that “something must be done”. Little of this nonsense, I agree, comes spontaneously from the people at large. It proceeds in nearly all cases from the agenda of various interest groups that want power and income for themselves and their clients. But the successful unpicking of our ancient ways proceeds from the fact that we are—for whatever reason—no longer the people among whom those ancient ways emerged and took hold. We have become like the Roman People of the early Principate. These were no longer the people who had faced down Hannibal outside the gates of their city. They were no longer even the people who rioted at the funeral of Julius Caesar. There were instead the tame people who let the funeral of Augustus pass without disturbance, and of whom that frustrated conservative Tiberius spoke when he condemned himself for having to govern a nation of swine. If there is ever a successful reaction here to this unpicking of our ways, those directing it will need to make some hard and radical decisions about the nature of political accountability. I believe those Victorian liberals were wrong who insisted that all adults could be trusted with the vote. But there was enough in their insistence for conservatives not to fight tooth and claw against the extensions of the franchise. But most people now are not to be trusted with the vote. This applies most obviously to those unfortunates who appear to have let themselves be plundered by dishonest bailiffs. It also applies to those who feel more than commonly sorry for them, and to all those who are content to have control of their lives be fought over by the likes of Tony Blair and David Cameron. Some of these people have good incomes and nice houses. Some have good taste for clothing and antiques. Some have considerable formal education. But they are not the equals of those who cried “privilege” against the Ministers of Charles I—or who took up arms against him, or even for him. Some accountability is necessary for all constitutional government. But the nature of this accountability is not always most effectively based on universal suffrage. It cannot be so in a nation where the majority are in the legal sense “ignorant”.

    What it should be after any Great Reaction I cannot yet say. But I will watch this evening�s episode of Whistleblower with an uncommon interest.

The assault on food: humans should go extinct in order to save corals, and Jamie Oliver, ethical Paragon, celebrity role model, and “chef”, thinks meat should be costly.


David Davis 

I bet you didn’t watch Jamie Oliver, a “chef”, who used once to be a nice scally London oik, who probably ate burgers with relish in both senses, on the Wireless tele Vision last night. Nor did I: but, just like theoretically shagging Elizabeth Taylor (when she would have been rather younger) I could imagine EXACTLY what it would be like.

He and Hairy-Hugh Frightfully-Posh are the latest useful idiots recruited by the Leninist caucus which is assaulting people’s right to buy what food (specially meat) that they want, at the lowest prices that a Market Civilisation is prepared to offer.

I was particularly upset by a phrase I had never seen before, in the Sunday Torygraph’s Wireless tele Vision pages a week or so ago - “The Ethics of Eating Meat” – to do with a trailer for these progs. I mean, meat is food. Man requires it, preferably as nearly like his onw as possible and preferably cooked so as to be able to shorten his gut and look like a man on two legs, in order to keep and run a very expensive brain, that requires 22 times more energy per gram per unit time than skeletal muscle.

Because the state “school” “syllabus” is itself so gutted and contains no scientific knowledge whatever that’s worth the name, plenty of people will have been taken in by his antics, himself electrocuting and blood-draining a chicken on live Wireless tele Vision. (At least he electrically-stunned it first unlike some protected classes of people I could mention.)

Furthermore, if a “super market” offers 3p for a chicken, and a putative farmer is disposed to take it, and no weapons are involved and they either continue to deal or agree to part company, than what business is it of Jamie the “chef”? Is it better that more people should eat animal protein, or fewer? the problme comes when the state interferes and causes the prevailing economic conditions to disadvantage the farmer when he sells at 3p. (I also think a particularly extreme example of one instance has been chosen, to make a documentary paoint.) He’s taking £1.2 million a year from one outfit too, so what is he up to? Distancing himself ready to run? Showing only what he thinks ought to be the right oikish attitude? PLaying to the Gallery? Or does he actually believe what he’s saying – in which case he ought not morally to take the money?

People who don’t like battery farming of meat, essential to Man’s diet or he will die, need not buy the stuff. Meat-eating is not and has never been compulsory – unlike many things under socialism that we could all mention. If enough people want it, then as now there will be a Market created and suppliers will find it profitable to supply expensive, free-range beasts. One great pillar of the modern Western world (not the only one) is the banishing of starvation and famine, substantially, from most of it, most of the time. Although we ought to bear in  mind Edward Spalton’s post of yesterday about the threat of global cooling and the tragic harm already done to millions, and more coming, owing to the depradations of the global warm-mongers and biofuel production at the expense of foodstuffs and animals.

We’d all do well to watch carefully the sinister machinations of statists. Remember, how only a few years ago, people were being “encouraged” to “recycle”? Even in 2005/6 the bus-side ads were positive and cheery; “Do it in your pyjamas! Do it while walking the dog!” Now look what’s turned out. we don’t have long to save our food, if the last example is anything to go by.

Oh and corals? There’s a report that “up to 80%” of Caribbean coral has disappeared “in recent decades” (how many?) according to the Royal Society, and “population control” is “needed”. I have nothing to add (as President E Benes said in October 1938 in Prague.)

Sean Gabb on Limited Liability


http://www.seangabb.co.uk/flcomm/flc152.htm

Free Life Commentary,
an independent journal of comment
published on the Internet
Issue Number 152
26th September 2006
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Thoughts on Limited Liability
by Sean Gabb

I was approached yesterday—Monday the 25th Deptember 2006—by an American friend who had just read a piece I wrote in 2005 against limited liability (Free Life Commentary, issue 135: http://tinyurl.co.uk/rfav). Because his enquiry was private, I will not give his name. But I feel it would be useful to make my reply public.

I will begin with an edited publication of his enquiry:

“Sean, I read some of your passionate remarks on joint stock companies. I See you were endorsed by Kevin Carson (http://tinyurl.co.uk/ccnc)

“…I agree with much of what you say but am on the other side of the issue on whether aspects of limited liability could be formed on the free market by means of contracts�.

“I am curious why you say shareholders should be liable in tort—presumably automatically, or necessarily.

“Of course the concept of ownership just means the right to control, and in a corporation the right to control is divided in complex ways. Just as it can be in any business or in other situations.

“We Austrian libertarians ought of course to realize that just because The law draws a bright line of ownership and non-ownership (and relegates various property rights or interests to definitions other than “ownership”) does not necessarily make a difference morally or praxeologically.

“For example, suppose you start a business, and you take a loan from a bank. Does the bank not contribute money to your endeavor (like a shareholder)? Does the bank not impose conditions on what you may do with the property you Use in the business (covenants, warrants), and exert practical influence Over your business (if they insist on  something you might listen—want to re-do the loan later, or not have them call it now). What about employees, and contractors? They are economically supportive of the business. Why are they not responsible too?

“My point is that libertarians seem to jump to some kind of  black-and-white strict liability type rule, that they want to apply from their armchairs. I am all for attributing liability and responsibility to the causally responsible actor. But I am not sure why you assume that a shareholder is necessarily causally responsible for torts committed by employees of a company in which they own shares.

“This rule has to assume respondeat superior, first; it has to assume some kind of strict liability; it has to assume some kind of necessary causal responsibility on the part of shareholders for the actions committed by employees (despite the fact that the shareholder might not even have given money to the company—he might have bought the shares from a previous shareholders; despite the fact that the control of directors, and managers, and employees, is in the chain of causation between shareholder and employee; despite the fact that the shareholder may never have voted and even if he did, his vote may be minuscule, or he may have voted against the managers who allowed the tort to occur); it has to assume shareholders are for some reason more causally responsible than the umpteen other economic types of actors who interact with and have an influence on and give assistance to the company (employees, creditors, suppliers, customers, contractors).

“I write not to attack but out of curiosity if you have addressed these issues or think there is a good response to them.”

Bearing in mind the eminence of the person making this enquiry, I feel some embarrassment at the shortness of the reply that I shall make. But it is better to make some response than none. And I feel it useful to make the response in public so that others may also have the chance to bring to my attention defects in my approach to an issue that I have come to regard as one of key importance.

I will begin by stating an approach that is probably common to many other libertarians whose works I have not read or have forgotten, but which I picked up from the Roman lawyers. This is to ask whether any particular institution could exist without a state to uphold it.

Now, I am not a committed anarchist. But I do regard the likely shape of a stateless society as a partial basis for judging the legitimacy of actually existing institutions. If something could not exist without a government, that is not necessarily a reason for it not to exist. There must, though, be a presumption against its existence. Nothing can be desirable that involves a violation the rights of individuals to life and property acquired by consent. It may be necessary for the prevention of greater evils. But it must, to be accepted, have its case for existing made out on at least the balance of convenience�and perhaps even beyond reasonable doubt.

Marriage, family life, common politeness, most property rights, and so forth � these could exist without a state. They might exist with greater security. They would certainly be different in several important respects. But they would exist. As such, they can be regarded as legitimate institutions. Any laws regulating them can, therefore, be judged on the extent to which they give just protection.

Where limited liability is concerned, I am not so sure. I can imagine a contractual limitation of liability. I might, for example, rent a shop that I own to Boots plc, on the understanding that I am dealing with a joint stock corporation with which ultimate liability rests. I shall have accepted that Boots exists as an artificial person. If Boots is then unable to pay the rent, I shall have no just right to expect any other person to pay the rent.

But suppose you rent a neighbouring shop to Boots, and supposing some negligence of Boots causes damage to my property. Suppose then that Boots is unable to pay whatever damages may be awarded by a court. I see no reason why I or any court should respect an agreement private between you and Boots. The owners of Boots are those who own shares in the company. They appoint the directors. They receive the profits of the company. They must be regarded as ultimately responsible for the torts of the company.

In places where registers of shareholders are inaccurate, or where the shareholders are collectively without sufficient assets to pay damages, this may be a worthless claim in practice. But it was the practice, I think, followed by English courts in the railway bankruptcies of the 1840s. It would also be the practice followed by the courts of an anarcho-libertarian society.

Thus, while a kind of limited liability might arise in contractual arrangements, it would not be recognised in tort.

My correspondent raises doubts about the effective control that shareholders have over their companies, and wonders if they should not rather be placed in the same category as employees or lenders or contractors.

My answer is to assert that they are the natural owners of their companies. They have not lent money to them. They are not providing paid services. They are the owners.

And this is regardless of how much actual control any one shareholder may have. I own shares in various banks. I never ask myself what those banks are doing on my behalf. I never attend the annual general meetings. If I fill out a proxy form, I never give the matter more than the most casual attention. If I did attend a meeting and try to impose my will, the institutional shareholders would flatten me when it came to voting. But that is my choice.

Now, I am thinking at the moment of buying shares in Sainsbury, the supermarket chain. This is so that I can at least attend the annual general meeting and ask awkward questions. But if I do buy shares, I shall not have provided capital to Sainsbury plc. And my correspondent asks if that ought to give me any reasonable liability for the torts of Sainsbury in a world without government. My answer again is yes. I may not be providing fresh capital to the company. But I am stepping ultimately into the shoes of someone who did. I am taking on that person�s rights. I must also be regarded as taking on his responsibilities.

As said, just because it could not exist without a state, an institution does not become absolutely illegitimate. I am not convinced, for example, by arguments that defence of an extended territory could happen without the compulsory taxation of its inhabitants, or that unexpected natural disasters could be handled. The State is legitimate so far � and only so far � as it provides necessaries that will not be otherwise provided.

So, is limited liability one of these necessaries? It may not be a necessary in the strict sense I have laid down. But an argument can be made on the grounds of its convenience, and this may approach to a necessary.

Could railways and motorways be built without a large corporation to mobilise the necessary capital, and to provide the necessary term of existence for the capital to provide a return? Possibly not. Could these corporations raise capital without being able to sell shares to the public? Again, possibly not. Would anyone buy shares in such corporations if he knew he would have no immediate control over the use of his investment, but might be held personally responsible for its use? Probably not. Do you know enough about the transportation market, and about the competence of the Directors, to risk what may be all your possessions in buying shares in Eurotunnel? I hope not.

It may then be convenient, if we want large infrastructure projects and large scale manufacturing, to cap the liability of shareholders to the value of their shares.

I grant it may not be convenient. I am told that such ventures could by financed by the sale of bonds, in which case the providers of capital would be lenders with a liability naturally limited to the value of their bonds. Otherwise, I am told that things like telecommunications networks could be provided by subcontracting and franchising and other free contractual arrangements between sole traders and partnerships.

I have also read the claims by Kevin Carson, among others, that such ventures would not without a state be profitable. Mr Carson says, for example, that the relevant economies of scale are much overstated, and can generally be achieved only by coerced externalisation of many costs. The result, he says, is a “capitalism” that may be a net consumer of capital, and that has little in common with patterns of activity that would emerge in a truly free market.

I will not develop these points. I do not accept all of them in an absolute sense. I have much respect for Mr Carson. But I do not follow him in his rehabilitation of a semi-Marxist economics. I also believe that large corporations do produce things that people want to buy, and may do so better than smaller organisations.

What I will say now about the utility of limited liability laws is that, even if not to the point of consuming capital, they do distort economic activity. And, perhaps more importantly, they are morally corrupting.

They are morally corrupting because they allow the emergence of a ruling class in which political and economic power is as impersonal and as interlocked as in the despotisms of the ancient world. Unlike in early modern English � a place for which Mr Carson has no time � the political wings of these elites have no roots among those whom they govern. Their economic wings enrich themselves by the creation and manipulation of controls that cartellise activity and externalise costs to the systematic disadvantage of outsiders.

The majority of ordinary people find themselves gently conscripted into large organisations that strip them of autonomy and suppress any natural desire for self-direction. They also find themselves locked into patterns of immorality that they would never dare choose for themselves.

Look at the Virgin Group, which is one of the smaller and less horrible of these organisations. I cannot believe its railway and air franchises were gained by wholly non-political means. Its workers are encouraged into a cult of personality of Richard Branson that must strike any person of individuality as unhealthy. And, as said, the Virgin Group is by no means the worst corporation. Look at those corporations that police the actions of their employees both on and off the job. Look at those increasingly common variations of contract that tell workers not to smoke at home or not to engage in dissident politics.

Or, turning to those patterns of immorality, look at the rapacity and corruption of oil companies and other large corporations in poor and barbarous regions of the world. I would never for myself build factories in places like black Africa that sprayed poison in all directions. Nor would I look the other way when politicians I had funded silenced anyone brave enough to object to my actions. But I probably own shares in such corporations. I probably know people who work in them.

Anyone who works for any length of time in one of these big corporations tends to become just another “human resource” � all his important life decisions made for him by others, encouraged into political and cultural passivity. He is essentially a bureaucrat. He knows nothing of how real business is transacted. He cares nothing about laws and taxes that stop others from transacting real business, and so consents to the further expansion of an already bad system.

The British and American peoples, who together have created the world�s only real attempt at a liberal civilisation, have been turned by a century of corporatism into nations of sheep. We have different prejudices. The decay of our national characters has not been uniform in all respects. But we are by the standards of our ancestors almost equally degenerate. It is surely less remarkable that our rulers have gone as far as they have in abolishing our freedoms, than that they have shown such forbearance as they have. We are so corrupt as nations that our rulers are still heaping less misgovernment on our heads than most of us would be happy to accept.

This is largely the effect of a corporatisation of economic activity that would have been impossible without limited liability laws.

I accept that, in a world without limited liability, certain desirable things might not happen. On the other hand, I do not believe there would be no extended patterns of commerce. As said, there is the financing of ventures by bonds, or their organisation through the voluntary clustering of small businesses. And there is the known tendency of individuals to bring wholly unexpected and elegant solutions to problems when they are free to associate as they please.

At the same time, many undesirable things would not happen.

In conclusion, I am against limited liability because it could not exist without a state � and because its actual existence it attended by at best doubtful benefits and by undeniable evils.

That leaves the further question of what is to be done today about it. Parliament should never have passed the first Companies Act. But that was in the 1850s. What should be done now?

I know I should stay with my first conclusion and leave further discussion to another essay. But I will give a brief answer.

Let us suppose I were to come to power as the front man for a military coup in this country. What would I do about the big corporations? Just pulling the plug on them. By giving full liability to the shareholders, would not be an option. Those corporations would be delighted if I were wicked enough to build giant concentration camps up and down the country and fill them with my opponents. They would probably fall over themselves to sell me the necessary cattle prods and barbed wire. But they would soon shut my revolution down if I overtly tried to shut them down.

The answer is that I would keep on a vast mass of intrusive regulation of limited companies—and even increase the burden of corporation tax, and continue the present trend to thinning the corporate veil where certain torts and crimes were concerned � while exempting unincorporated businesses from all such regulation. It was the growing attractiveness of that veil that encouraged small businesses to incorporate in large numbers after about 1880. It must be a growing unattractiveness that will encourage modern business to unincorporate.

But this is a matter to which I have given little thought, and that really does take me beyond the limited answer that I promised to my correspondent.  

NB—Sean Gabb’s novel The Column of Phocas (£8.99)is ready for dispatch. Buy your copy now from http://tinyurl.co.uk/z31v or via Amazon: http://tinyurl.co.uk/2cnw
You can download the first three chapters free of charge from: http://tinyurl.co.uk/kkl4

Happy New Year 2008 from the Libertarian Alliance. The bastards are still in power (everywhere) but WE and YOU are still alive, and therefore there is hope.


David Davis 

Happy New Year. Some news is good. Gordon Brown, described as a socialist, is wallowing in mire. He can’t seem to get out, and his hair grows greyer by the day – have you noticed? He will look like Tony Blair, and soon, only bigger (is this worse?)

Nicholas Sarkozy has a new girlfriend, a very pretty young Italian woman, and highly shaggable too by the look of things. Good for him. Presidents of France should have sex a lot, and with very pretty and slightly younger women, for it is their real job, and I think it will keep their very delightful and nice country (which I do love despite my posts) out of trouble, since they will legislate less, getting up later as they then will. Poor old stuck-up anal “de Gaulle”, patriotic as he undoubtedly was, did not look like a male hominid at all, just some sort of, well, I don’t know what – at least he kept us out of the EUSSR for a bit. The fascist pig Mitterand at least had the grace to have illegitimate children (a creation,) a saving grace that some other fascist pig, a rather small and insignifiacnt one, called Hitler, will not be able to adduce in front of the RECORDING ANGEL, on The Day.

Pakistan’s news is less good. At least they have appointed some young lad from the right University. I’m sorry about his mum and send condolences: I knew her very slightly at a distance then, when she was at LMH. She went to grander parties than I was invited to. But I’m sure they’ll sort it out. Better not say what I had just typed and deleted, re nuclear war due to “inadequate control of weapons” – say you’re safe and the devil will get you next day.

Do we care about a failed socialist “bank” which costs us £57 billion to bail out? To save votes and seats in the English North East Soviet?

Nah. We will DRINK £57 billion of lager alone, next Thursday morning. It’s OUR job (see Nicholas Sarkozy, above.) They have sex, we get drunk and sing and shout. But I hope he spanks the bottoms of the enarques a bit.

Liverpool’s  “European capital of culture 2008″ is going to go DOWN THE DRAIN, in socialist ruin, and indescribable corruption. (Remember I am the “Director of Northern Affairs”  …….  and YOU SAW IT HERE FIRST  !!!  ) I bet you all 5p. Each…………Every reader of this post who takes on the bet. NB! This does NOT mean I am happy about it; all that money, taken especially from poor-people, even lots of poor-people in Liverpool, and everybody taken in by a scam to rival the Olympics, and nothing to show for it except a few thousand bureaucrats, many of which are ill on sick-leave. Like the chief-finger-man Jason somebody-or-other.

Can’t think of anything else to sound lugubrious about right now, perhaps it’s the champagne working. 

Anyway, We at the LA all wish you, our readers, all that you yourselves would wish for you and those whom you love, which is what is really important in life. Socialism statizes love. This is destruction writ large.

If the STATE “does love”, which is to say “care”, then nobody has to love anybody, and that road leads to disaster. That’s the one and only thing I want to put for 2008, to kick it off.

Anybody who thinks anything else has ROCKS in his head. Happy new Year !!!

GOOD NEWS, EARTH IS NOT FLAT …. More on ” Global Warming as political hoax ” … how wonderful.


David Davis 

Got this today from Christina Speight.

I meant to comment plangently and intellectually on it, and did, but aol signed me off in the middle (and I lost everything) as it transpires that my wife’s cousin’s son in |Poland (a student) has cloned my aol account, and so aol sometimes thinks I am signed on in “two locations”.  Never mind, I’m too tired to re-imagine everything on line now, and you’ll just have to imagine what my comments were. I’m sure you can.

THE SPECTATOR

Good News! Earth Not Flat

 Melanie Phillips FRIDAY, 21ST DECEMBER 2007

 And now for some good news. Geophysicist David Deming writes that parts of north and south America and the southern hemisphere, from California to Korea, have been experiencing freezing weather of such unusual extremity and harshness that crops have been devastated and states of emergency declared. (NB: I have removed the quotes from this article because the author has objected to their being reproduced). 

However, maybe at long last the penny is dropping. The New Statesman, no less, this week publishes a piece by sensible David Whitehouse which says flatly:  The fact is that the global temperature of 2007 is statistically the same as 2006 as well as every year since 2001. Global warming has, temporarily or permanently, ceased. Temperatures across the world are not increasing as they should according to the fundamental theory behind global warming – the greenhouse effect. Something else is happening and it is vital that we find out what or else we may spend hundreds of billions of pounds needlessly. … For the past decade the world has not warmed.

Global warming has stopped. It’s not a viewpoint or a sceptic’s inaccuracy. It’s an observational fact…. So we are led to the conclusion that either the hypothesis of carbon dioxide induced global warming holds but its effects are being modified in what seems to be an improbable though not impossible way, or, and this really is heresy according to some, the working hypothesis does not stand the test of data. 

It was a pity that the delegates at Bali didn’t discuss this or that the recent IPCC Synthesis report did not look in more detail at this recent warming standstill. A pity indeed, that the entire western ruling class has been taken in by this scam.But now the cavalry appears at last to have arrived.

According to this story, a US Senate report documents the opinion of hundreds of prominent scientists from around the world who say global warming and cooling is a cycle of nature and cannot legitimately be connected to man’s activities. The report compiled observations from more than 400 prominent scientists from more than two dozen nations who have voiced objections to the so-called ‘consensus’ on ‘man-made global warming.’

Many of the scientists are current or former participants in the United Nation’s Intergovernmental Panel on Climate Change, whose present officials, along with former Vice President Al Gore, have asserted a definite connection. The new report comes from the Senate Environment and Public Works Committee’s office of the GOP ranking member, and cites the hundreds of opinions issued just in 2007 that global warming and man’s activities are unrelated. …‘Many scientists from around the world have dubbed 2007 as the year man-made global warming fears “bite the dust”’, the introduction said.

And there probably would be many more scientists making such statements, were it not for the fear of retaliation from those aboard the global-warming-is-caused-by-SUVs bandwagon, the report said. 

And it details some of this intimidation. (Details in article.)

 Looks like man-made global warming theory is melting away faster than you can say Al Gore. A lot of reputations are now going to disappear along with it: all those who were part of the famous ‘consensus’ (not). Those people should never be taken seriously again. It’s over, guys. Reason, truth and real science are fighting back.

RON PAUL quote of the day…


David Davis 

I liked this from Ron Paul (I’m a Lancashire Bumpkin, so who is Ron Paul, and what pop group does he play for?) (SEE the violet stuff below my red stuff!)

28th Dec 19.22 GMT re-edit:- this inserted:-

You’ll be pleased to know that I’ve finished french-polishing staircases for the day, and I’ve now acquainted myself with what Ron Paul is and what he is for. if he does truly believe what he says down there in violet, then he’s the right man for the job. He could even be the president that BARRY GOLDWATER nevere got to be. I rememebr that Godlwater said something strikingly similar in, oh, about 1964?

Few Americans understand that all government action is inherently coercive. If nothing else, government action requires taxes. If taxes were freely paid, they wouldn’t be called taxes, they’d be called donations. If we intend to use the word freedom in an honest way, we should have the simple integrity to give it real meaning: Freedom is living without government coercion. So when a politician talks about freedom for this group or that, ask yourself whether he is advocating more government action or less.
http://rs6.net/tn.jsp?e=001O4Dyxbw8VklR2yHiLEQ1tho6nfUxkis8wnB0opXFRcSrmqt4FCZq77zlLHbgbgP1RZpD8m7NHkRnk-XVkzRq4CNqIr6OHcllGwqGn8qBrEU6L3VS5GFL3LPnYJh-3CXW85BkDUnEHF4ca_KxeiBW5g0dG4FCtXfM

God knows what that gobbledygook means at the bottom. You lot better click it I expect!

Or perhaps not……Actually I think WordPress meant to display it as this;

http://www.informationclearinghouse.info/article18951.htm

Much better! Why didn’t I just use AOL as usual…?

“Political Correctness Gone Mad”. I wish…God, how I wish, that it was just some sort of madness…..


  David Davis

……and that this was true and it was just a bad dream, and not a misrepresentation of what “PC” is really for. How many, many times do you read in the papers about some poor, sensible human being, tormented by The Forces of Darkness in the form of officials of some British Soviet or other?

A nice old lady who is forbidden to tidy her grass verge outside her house and plant plants on it, because she must wear a hard hat and a yellow-fascist-jacket, and have cones to stop the traffic?

The Soviet of a large British city which celebrates “winterval”, whatever that is? (Must be Nazi….it sounds sort of neopastoral/Nordic/pagan.)

The (many) schools which do not stage a Nativity Play any more (it’s supposed to be “offensive” to other “faiths”) and in a Christian Nation?

I could go on. You know them all, for you – and the entire civilised world – are all irritated by the supposed need these threatening leftist busybody stormtroopers have for upsetting ordinary conservative people, as some sort of displacement activity to make up for their staggering lack of social graces, or of educational/cultural qualifications of any actual value whatsoever.

“Political Correctness”, as a phrase, shows all the marks of self-regarding intellectual arrogance plus an assumed monopoly of the truth. (And I thought the fascist left derided monopolies?) We liberals, being not (infantile or grown-up) leftists but on the “extreme-right” (their term for our position, not ours!) by contrast know that we ARE correct. This is because history bears out the truth of our hypotheses, about how and why the world and civilised human society functions as it does.

Moreover, we do not distort the terms of civilised discourse by banning the use of certain words that we think can define concepts with which we disagree.

To associate the English word “correct”, with (a) political discourse, and (b) the censorship of words so as to lead to the censorship of ideas, is a crime. I only have to wonder for how long a War Crimes judge will send each of these min-Gramscians to prison for, when we finally get our teeth into their bollocks, in return for all the harm they have done to people.

Merry Christmas, and peace and goodwill to all men – but not to you buggers who are trying to destroy our civilisation. I’m sorry, but I can’t make myself extend the Forgiveness of God at this Christmas time to you bastards. There is too much at stake, too many defenceless people alive whose lives you plan to ruin,  and your gloves have been so very, very off, against us, for so long now, and we have run out of patence with you evil imbeciles.

You understand force and threats and death and abolition of cultural ideas you don’t like; so be careful that your ideas don’t end up perishing in the same way. Better just to become real liberals and forget all that childish Marxist stuff, before it’s too late for you to recant.