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Britain should exit the European Union

May 13, 2013

Fortunately for Britain, the European Union does not prohibit member countries from seceding. No Abraham Lincoln sits in Brussels, willing or able to wage a war of continental aggression, should Britain decide to leave an organization that imposes net economic costs upon it.

The economic case for exit is now dominating debate across the Pelagic Isle. The large single market of the EU has brought benefits to Europe’s many small economies,especially those with a relatively large industrial base. It is bringing transfer benefits to the profligate PIIGS who are exploiting the charity of German savers. The UK, however, is a large economy with a small industrial base. It is fully capable of correcting its own fiscal excesses, especially under Conservative Party governance. For the United Kingdom, the regulatory burden of the single market massively outweighs the benefits.

The key assumption that underpins this judgment is that Britain – in the absence of becoming a member of the European Economic Area – Norway, Iceland and Liechtenstein – would still enjoy access to free trade with the European Union. This assumption is highly probable, since Germany and the Netherlands – the two best functioning EU economies – would welcome open access to the large British market. A negative trade shock imposed on the UK is in the economic interest of no EU economy, however perfidious, Albion may be regarded by some of its former allies and enemies.

Article 50 of the Treaty on European Union, one of the two treaties known together as the Lisbon Treaty, provides the option for an exit. Negotiations would be required between the British government and the various European institutions. Most likely, Britain would secure an exit placing it into a comparable situation with Switzerland i.e. a bilateral free trade deal. This would be a sweet deal for a country that desires to retain the City of London as Europe’s major financial center, and to evade the strangulation of the financial transactions tax and European-style banking regulations that the EU bureaucracy is panting to impose.

So, contrary to the advice given today by President Obama to Prime Minister David Cameron in the Oval Office, my advice is that Britain should exit now, without attempting to reform the EU from within. A country operating outside the euro-zone has precious little leverage to secure a deal that will weaken the social market philosophy that now dominates euro-land. Remember that Britons are still predominantly Anglo-Saxons, Prime Minster Cameron, and that their ties remain closer to North America and other former colonies than to Old Europe.

Hat Tip: Wolfgang Munchau, ‘Lawson is right – Britain does not need Europe’, Financial Times, May 13, 2013

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Posted in Bank Regulation, do well while doing good, political philosophy, property rights, relevance of economic knowledge, Uncategorized | 1 Comment »

Sir Alex Ferguson: the bagpipes honor a remarkable career

May 12, 2013

As an Englishman residing in the United States, I have retained an abiding love for the beautiful game – soccer – a game that has yet to reach its true status in the United States. Soccer is a game for extremely fit men (and women) who can stay on the field for a full 90 minutes of fast, highly-skilled movement. Soccer players do not retire to an oxygen tent after 5 minutes on the field as do so many American footballers. I doubt if anyone carrying in excess of 200 pounds has ever played for a premier soccer team. No 450 pound body-armor-protected fatties for the beautiful game. Soccer players do not require continuous radio contact so that the manager can tell them which is left and which is right, and where to move on every play. For the most part, they have sufficiently high IQs that they can think for themselves within a general strategy defined by the team manager.

Throughout my time in Virginia the team that I have supported is Manchester United, the Red Devils, a team that has dominated the English soccer scene for the past 26 years. Throughout that time period, Man U has been managed by Alex Ferguson, now Sir Alex Ferguson, who announced his imminent retirement last week at the age of 71 years, after 1,500 games in charge of what has become one of the world’s richest and most popular sports clubs. Few Britons have been more successful, in any sphere, in recent times.

His longevity as manager is a mark of this success. There are twenty clubs in the Barclay’s Premier League. Over the past year alone, 8 of these clubs have sacked their managers. Many others have faced speculation about their imminent demise. Only Sir Alex, a Glaswegian Scot from the blue-collar shipyards of that famous city, has been entirely secure, so secure indeed that he has been privileged to choose his own successor, and has been elevated to the Man U board of directors following his retirement. Sir Alex has earned job security and widespread respect because he is a winner. Under his leadership, the Red Devils have lifted 38 trophies – Premier League, F.A. Cup and European Championship – a record that no future manager is ever likely to match.

How has he achieved such success? Hard bloody work is one answer. Sir Alex is not some Spanish, Portuguese or Italian playboy management consultant, like Jose Mourinho. He is a rough-hewed, gritty, foul-mouthed Scot, prepared to apply the dreaded ‘hairdryer’ to under-performing stars during the half-time interval, even to kick a soccer boot at the head of one of his most famous stars, David Beckham, when the occasion so deserved. Sir Alex controls everything in his club, from brand-management, to talent-spotting, to the players’ tea. When Wayne Rooney experiences the ‘red mist of rage’ on the soccer pitch, he knows that he will be benched by his manager and that he will experience a much more dreadful red-rage from that fearsome Scot, once he returns to the dressing room.

Economy is another answer. Soccer management is about squeezing out more performance per salary pound than one’s highly competitive rivals. This Sir Alex has done, season after season, spending a lower proportion of the club’s revenues on wages than any other Premier League club. This achievement has attracted the attention of businessmen and political leaders, especially from those within his beloved Labour Party.In particular, Sir Alex and Tony Blair bonded deeply, each recognizing the leadership qualities of the other. Although Gordon Brown is a fellow-Scot, Sir Alex despised his shambolic leadership, though he was never tempted to cross party lines.

Sir Alex may be a committed Labour Party supporter, but that does not mean that he is anti-capitalist. Far from it. He embraced New Labour long before Tony Blair invented the name. English soccer would become the best, during his 26 year reign at Old Trafford, because it pays the most. The average weekly wage in the Premier League rose by 1,500 per cent between 1992 and 2010. Sir Alex accepted his fair share of the rewards. He named his mansion Fairfields, after the dockyard where his father once labored.

Most of all, Sir Alex’s success was based on an enthusiastic embrace of globalization. He inherited a squad that contained two Danes, four Irishmen, and 18 Britons. He leaves a squad with players from a dozen countries, including Serbia, Ecuador, and Japan. In this respect, the politician whom Sir Alex most resembles is not Tony Blair, but rather his Tory nemesis, Margaret Thatcher. Of course, Sir Alex claims to detest the Iron Lady, for her blue rather than his red color. Yet, in truth they are very similar. Both won global success through a combination of simple truths and relentless drive. Both revered aspiration and opportunity. Both made Britain great.

The man that I honor today is no Red Alex but rather he is the Iron Man.

Hat Tip: Bagehot, ‘The socialist international’, The Economist, May 11, 2013

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Affirmative action should be terminated

May 4, 2013

Above the entrance to the U.S. Supreme Court four words are carved: Equal justice under law. The message is perfect for a people that pursues inalienable rights to life and liberty and an imprescriptible right to property – even a society that once pursued such objectives very unevenly across the races.

It is tempting for some to request unequal treatment under law designed to benefit those treated badly in the past. Such indeed is a current occurrence in the United States with respect to certain ‘minority groups’. But what may be popular and widespread is fundamentally wrong.

Once equal justice under law has been established, it should never be violated again. For to violate the rule is to suggest that there is a better rule, which is untrue. No society can pursue the goals of life, liberty and property effectively in the absence of the rule of law. And those four words carved above the entrance to the U.S Supreme Court perfectly express the essence of the rule of law.

Hat Tip: Time to scrap affirmative action’, The Economist, May 4, 2013

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BBC displayed left-wing prejudice during Thatcher funeral

April 20, 2013

The British Broadcasting Corporation was originally established in order to provide unbiased accurate coverage of the news. It remains today as a subsidized government agency. All households with television sets must pay an annual fee to the Corporation.

From the outset, the BBC violated its mission of independence, denying Winston Churchill access to its radio transmissions during the 1930s, and thereby preventing the nation from understanding the nature of the national socialist and fascist atrocities that were consolidating themselves in Germany and Italy.This mission failure was a direct response of the BBC to pressure exerted by the Conservative government at that time as it pursued appeasement and set the scene for the Nazi domination of continental Europe.

Since the end of World War II, the BBC has stuffed its payroll with left-leaning employees, instinctively hostile to competitive free markets, and favorably inclined to big government. This bias showed itself during the London Olympic Games, when the introductory program focused attention on the so-called ‘Satanic mills’ of the industrial revolution and the caring service provided by the National Health Service.

So, I watched the BBC coverage of Margaret Thatcher’s ceremonial funeral on April 17, 2013 carefully, in order to determine whether BBC personnel would display such prejudice during the funeral of Britain’s most effective pro-free market politician/ stateswoman. And surely enough, bias was observable. I am not alone in that judgment. Ronald Reagan’s speech-writer, Peggy Noonan watched the funeral and confirms my own judgment:

“It mattered that the funeral was in august and splendid St. Paul’s, mattered that Thatcher’s coffin, placed under the great dome, stood directly over the tombs of Nelson and Wellington, in the crypts below.. This placing of Thatcher with the greats of the past, and the fact that the queen and Prince Philip came to her funeral, as they have for no prime minister since Churchill in 1965, served as an antidote to British television coverage surrounding her death.

It was terrible. They could not in any sustained way mark her achievements or even show any particular respect. All they could say was that she was ‘divisive and controversial,’ although sometimes they said ‘divisive and – well really divisive.’ Anchors reported everything as if from a great distance, with no warmth; they all adopted the cool, analytical look they use when they mean to project distance…All this – the media, the left – had the effect of telling people: You’ll look stupid if you speak in support of Thatcher, you’ll look sentimental, old. And it may be dangerous to attend to funeral – there could be riots.

So then, the surprise that was a metaphor. At the end of the funeral, they all marched down the aisle in great procession – the family, the queen, the military pallbearers, carrying the casket bearing the Union Jack. The great doors flung open, the pallbearers marched forward, and suddenly from the crowd a great roar. We looked at each other. demonstrators? No. Listen. They were cheering. They were calling out three great hurrahs as the pallbearers went down the steps. Then long cheers and applause. It was electric.

England came. The people came. Later we would learn they’d stood 30 deep on the sidewalk, that quiet crowds had massed on the Strand and Fleet Street and Ludgate Hill.

When they died, Ronald Reagan, John Paul II, and Margaret Thatcher were old and long past their height of power. Everyone was surprised when Reagan died that crowds engulfed the Capitol; people slept on sidewalks to view him in state. When John Paul died the Vatican was astonished to see millions converge. ‘Santa Subito’.

And now at the end some came for Thatcher, too. What all three had in common: No one was with them but the people.

Margaret Hilda Thatcher, rest in peace.’ Peggy Noonan, ‘Britain Remembers a Great Briton’, The Wall Street Journal, April 20, 2013

You would never find such words reported out by the BBC. But Peggy Noonan, superb writer that she is, put into elegant words thoughts that crossed my mine also during the early hours of that morning (for me in Virginia) as Britain’s greatest ever peacetime prime minister was laid to rest.

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Posted in do well while doing good, liberty and classical liberalism, media rhetoric, political philosophy, property rights, relevance of economic knowledge, Uncategorized, war and peace | 2 Comments »

Margaret Thatcher’s Ceremonial Funeral

April 17, 2013

I have just watched, on BBC TV, the Ceremonial Funeral held in honor of Margaret Thatcher in St. Paul’s Cathedral. It was a very moving spectacle and an opportunity for me to say goodbye to Britain’s finest peacetime Prime Minister.

It was entirely appropriate that the funeral was Ceremonial and not State. For Margaret Thatcher, although a creature of politics, always and vehemently placed the individual before the state. It was also entirely appropriate that Queen Elizabeth II and the Duke of Edinburgh attended her funeral. For Margaret Thatcher contributed more to her country than any single person other than Sir Winston Churchill. The Queen attended Churchill’s State Funeral in 1965, the only other occasion involving a British Prime Minister during her lengthy reign.

Margaret Thatcher, like Winston Churchill before her, was a statesman rather than a politician. Both great leaders had a vision for the future of their beloved country that was not initially shared by a majority of the people. Both had that rare gift of leadership that enabled them to move the center of the electorate to a vision that would prove to be an invaluable lifeline. In the case of Winston Churchill, his vision saved Western Civilization. In the case of Margaret Thatcher, her vision can be expressed in simple but compelling terms:

Individual liberty, private property, constitutional monarchy, limited government and the rule of law.

Margaret Thatcher embraced that compelling vision and devoted her life to helping her people to take back a country that had drifted dangerously in the direction of collectivism, republicanism, unlimited government and rule by man.

May God Bless Her And May She Rest In Peace

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Posted in do well while doing good, economics and public choice, liberty and classical liberalism, political philosophy, property rights, relevance of economic knowledge, Uncategorized, war and peace | 4 Comments »

Margaret Thatcher: conviction politician who knew when to compromise

April 14, 2013

Margaret Thatcher was driven by clear-cut convictions. Her economic policies were based on the scholarship of Friedrich von Hayek and Milton Friedman. Her foreign policy was based on a hatred for communism and a recognition that the Hun is always at the gate.

However, Margaret Thatcher was an extremely successful politician, winning three consecutive elections for her party and remaining Prime Minister for eleven years during a turbulent decade which saw the collapse of an Evil Empire and the consolidation of the European Union. Complete adherence to her convictions would have courted early disaster at the polls and would have returned Britain to the path of economic decline from which she helped to rescue it.

A few examples illustrate Thatcher’s willingness to compromise her convictions. First let me focus on domestic policy. Both Hayek and Friedman were opposed to nationalized education and nationalized medicine, on grounds of economic inefficiency and unresponsiveness to customer preferences. Thatcher shared their views. However, she did not attempt to privatize those areas of economic activity – resisting pressure from her political mentor, Sir Keith Joseph – because she was aware that a significant electoral majority would be hostile to such changes. Very carefully, and cautiously, Thatcher focused her economic policies into fields where public opinion was more favorable – privatization of industrial dinosaurs, recalibration of union privileges, the selling off of council houses (public housing) and the like. She promoted income tax cuts favored by her mentors while paying attention to budgetary balance through the promotion of consumption taxes.She attacked inflation head on through Friedman-type monetary reforms. Even there, she did so pragmatically, tracking the exchange rate rather than focusing exclusively on the monetary base..

With respect to foreign policy, Thatcher flirted with Gorbachev, as a leader of the USSR with whom she felt able to deal. Her initiative was followed by Ronald Reagan and ultimately succeeded in isolating communism to loser countries such as North Korea and Cuba. Perhaps only Thatcher could go to Russia.

With respect to Germany, Thatcher swallowed her fear and made no attempt to stop the reunification of East and West. She made no attempt to remove Britain from the European Union, though she wisely opposed British participation in a single currency regime.

There is an important lesson to be learned from the Thatcher experience for the current generation of conviction politicians who operate in the United States under the Tea Party label. If you continue to eschew pragmatism in favor of hard principle, you will leave the political arena without significant achievements. Successful politicians must always pay attention to the electorate, even while they attempt to shape electoral opinion through policy successes. That is a long hard road to follow for those of you who want to change the world while still in your twenties or thirties. But that is the road that you will have to follow if you are to leave any durable footprints on the sand of time.

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Britain should go back to the future

April 12, 2013

In a singularly depressing column, Martin Wolf (Financial Times, April 12, 2013, attacks Margaret Thatcher for helping to return Britain to a 19th century role for government. He claims that Margaret Thatcher’s market-oriented policies were responsible for rising inequality, excessive financial deregulation and inadequate investment in human and physical capital:

“The nation did not fall behind the late 19th century US or Germany because its government did too much. It was far more because it was culturally and institutionally incapable of remaining central during the ‘second industrial revolution’ – an era of rapid innovations and giant corporations. Increasingly, the British became rentiers. That was one reason why the City became the leading global financial center. It is not an accident that an effort by a forceful politician to reverse the interventionism of the 20th century has brought the UK so far back to this future. Thus, it has a huge financial centre, weak domestic manufacturing, a deregulated labour market, rising inequality and low private and public investment. It all looks remarkably late-19th century.” Martin Wolf, ‘Britain’s economy should not go back to the future’, Financial Times, April 12, 2013

This is simply balderdash. Has Martin Wolf never heard of the theory of comparative advantage? As Briton’s became the wealthiest people per capita in the world, so high labor costs directed late 19th century investment into high productivity fields of enterprise. As profit margins overseas exceeded those in the UK, so British investments poured overseas, strengthening the credit-worthiness of the home country. As incomes widened between those in expanding areas of enterprise by comparison with those that were stagnant or declining, so resources poured out of agriculture into the industrial and service sectors of the economy. Of course, London – fulcrum of the Gold Standard – became the world’s leading financial center.

No one was to know that Britain would be forced to utilize its financial resources in order to save the Western World twice in just over thirty years from the dictatorship of the filthy Hun, while countries like the United States sat on the sidelines until the 11th hour of two World Wars. Without 19th century free enterprise, the British Empire would not have been in any position to defend France from German barbarism over the period 1914-1918. Without the free enterprise of successive British interwar governments, the British Empire would not have been able to stand alone against Germany, Russia and Italy in defense of Western civilization over the period 1939–1941 when a vacillating FDR was dragged into war by the Japanese attack on Pearl Harbor.

Margaret Thatcher had good reason and uncommon good sense in looking back to the 19th century as the basis for saving Britain from irredeemable decline. Unfortunately, public opinion would not allow this great leader to roll back the state as much as she would have liked. The reason why Britain currently is suffering from economic stagnation is not to be found in any failure of free markets. Human capital is weak because the state schools were not privatized. As a consequence, far-left teachers have indoctrinated successive generations of British school-children into an ideology of dependence that has shackled enterprise. A sequence of Labour governments, since 1997, have run up non-sustainable amounts of national debt that seriously crowd out private sector investments. The financial sector performed badly during the late 2000s primarily because of mis-management by a socialized Bank of England that failed to impose sound monetary controls. The British Prime Minister, Gordon Brown, played an unforgivable role in promoting fiscal and monetary excess that unfairly became associated with market and not government failure.

Britain indeed should go back to the 19th century, Mr. Wolf. Free trade, free markets and minimal government were harbingers of 19th century economic success. They surely would be harbingers of 21st century success, would public opinion facilitate their speedy return.

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Posted in do well while doing good, economics and public choice, liberty and classical liberalism, political philosophy, property rights, relevance of economic knowledge, Uncategorized, war and peace | 2 Comments »

Privatization: an enduring Thatcher legacy

April 10, 2013

Margaret Thatcher (1979-1990) played a major role in creating a modern Britain out of a socialist dinosaur by her radical program of privatization.

Interestingly, such a program did not feature in her 1979 election manifesto and Thatcher was initially cautious about its high political cost. After all, Britain had just suffered through the Labour government’s Winter of Discontent, during which Prime Minister Callaghan had publicly stated that his government prostrated itself before the trade unions and advised all Britons to retreat ‘each to your union’.

Fortunately, Margaret Thatcher was made of sterner stuff. In late 1979, the Conservative government sold off parts of British Petroleum, now BP PLC. In 1981, British Aerospace and Cable & Wireless were privatized. In 1983, Amersham was privatized.

Then Thatcher put her killer high heels right down on the privatization pedal. British Telecom was sold off in 1984 for $3.9 billion, the biggest British public offering ever effected at that time. To boost demand for shares, the government sold them en masse to retail investors.They eventually delivered handsome returns.In 1986, Thatcher sold off British Gas for $5.8 billion. In 1988, she sold off British Airways for $900 million. In 1987, she sold off Rolls Royce for $1.4 billion.

Inevitably, the far-left union leaders who ran Britain in 1979 recoiled at such an onslaught designed to rip the heart out of union Ludditism. But Margaret Thatcher and Sir Keith Joseph had learned Virginia public choice and understood how to undermine the hegemony of elected union leaders over their public sector workers. The Conservative government provided all employees in the privatized industries with shares marked below retail price. The workers stiffed their union leaders and voted through privatization as a means of becoming men and women of property. In a reversal of fortune, public sector workers became principals and forced their ‘leaders to become unwilling agents in the privatization of British industry.

No government since that led by Thatcher – even the miserable socialist government led briefly by Gordon Brown – has ever dared to take back into public ownership the companies released by Margaret Thatcher from their bureaucratic fetters.As Britain surged up economic ranking of Western European nations, continental Europe itself began to emulate the strategy of the Iron Lady, reaffirming the sound judgment of her economic program.

Hat Tip: John Vickers and George Yarrow, Privatization: An Economic Analysis

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Baroness Margaret Thatcher

April 8, 2013

BARONESS MARGARET THATCHER

THANK YOU FOR YOUR EFFORTS TO RESTORE OUR THEN DECLINING NATION

REST IN PEACE

Charles K. Rowley

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Lee Kuan Yew: autocrats are sometimes better than democrats

April 6, 2013

Lee Kuan Yew is the founder and inventor of modern Singapore. When he assumed office as prime minister in 1959, per capita income was about $400 per annum. In 2012, it was more than $50,000. Cry for your economic failure, democratic India!

Mr Lee was not a democrat by nature, although he worked within a nominally democratic system. He used the law courts systematically to bankrupt significant rivals and earned for Singapore the moniker of autocratic capitalism. Singapore is often referred to as a country of clean streets but dirty politics. But Mr. Yew’s contribution went way beyond such cynicism:

“He made it (Singapore) a dynamo. He pushed it beyond its ethnic divisions and placed a bet that, though it is the smallest nation in Southeast Asia and has few natural resources, its people, if organized and unleashed within a system of economic incentive, would come to constitute the only resource that mattered. He was right.” Peggy Noonan, ‘A Stateman’s Friendly Advice’, The Wall Street Journal, April 6, 2013

Mr. Yew has some words of wisdom for the United States, a country for which he retains a very high regard. From an 89-year-old successful statesman, these words are well worth taking to heart.

His advice on immigration: keep it up but keep your culture. This is an important message. The culture that took the United States to economic and political success was primarily Anglo-Saxon in nature mixed with other Western European inputs. It emerged from immigrants anxious to start their lives anew in a New World where everyone was expected to stand on his own two feet and live or die by his success in so doing.

From the mid-twentieth century onward, that culture has been in decline. Immigration policy has switched away from attracting the best and the brightest to a policy of favoring the poor and uneducated, to swelling the welfare rolls and the vote-base of the Democratic Party.

What can destroy America? Multi-culturalism, an approach that Mr. Lee speaks of as not an appreciation of all cultures, but as a gradual surrendering of the essential culture that has sustained America since its beginning. That culture – its creativity and hardiness, its political and economic traditions – is great, and it would be sad for America to be changed even partially. Will waves of immigrants from the south assimilate, or will America become more Latin American? America must continue to invite in all of the most gifted and hard-working people in the world. But it must not lose its culture, which is the secret of its success.

Words of wisdom indeed! Let us hope that they do not fall upon deaf ears tuned more to party political dominance than to the long-term good of the country.

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