Central Planning, the Corporate Way

From Adam Smith to Milton Friedman, rational pro-market thinkers have made the case that knowledge is dispersed throughout society and the market is needed in order to put most of that knowledge to a productive outcome. Central planning of the economy by Government just doesn’t work. It has been refuted by theory and even for those starry-eyed idealists who still insisted socialism was morally superior, the clincher came with the collapse of the Soviet Union.

Why, then, whenever a corporation grows beyond a certain size, do managers insist on replicating that same central planning paradigm internally? My own belief has always been that this happens about the same time they acquire a personnel department. More recently personnel departments have been renamed “Human Resources” as if people were not individuals but a sort of commoditised mincemeat that can be sourced and fed into the production process.

A chap called Gerard Fairtlough has published a new book in which he argues that rigid hierarchies are not the best way to organised businesses - shared goals and vision being far more important. In fact, he argues, hierarchies can get in the way of productivity and creativity. Looser, more informal ways of working may be more effective. More about that here.

Neil’s Hayek lecture

Was given yesterday to IEA invited guests. It was excellent and blunt. No shock there then.

Conclusion: The EU is stuffed in the long run and the UK will be as well if it does not wake up and smell the realities of the world in which it lives.

The longer explanation is that while the US is looking to Asia at the emerging markets there; the EU is figuring out new ways to wreck any prospect of growth. While China and India are slowly adopting Hayeking ideals; the EU is slipping back into concensus statism. China and India are opening their markets while the EU is closing theirs.

It was a breathtaking speech of pure 100% Euro/Sino/Amero realism. It will be ignored by those who need to heed its warnings and celebrated by those who know its truths already.

I have rarely heard a better piece of oratory. Andrew Neil is the opposition to statism personafied and is doing what the Tories should have been doing for many a moon.

Let’s hope the IEA publishes the speech for all to read. But until they do here is the speech in its entirety for all to enjoy.

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Guest Column - Getting Davis’ Tax Cuts in Perspective

Former Conservative Parliamentary Candidate, John Harrison argues that far from undermining confidence in the economy, a renewed commitment to controlling public spending and reducing taxes is vital:

British Conservative leadership contender David Davis has been criticised in some quarters for promising to cut government spending to 40% of GDP and use the money saved to cut taxes if he becomes Prime Minister.

Critics have been claiming that this would raise interest rates and damage the British economy but on closer inspection, these claims sound more like regurgitated Labour Party soundbytes than a reliable evidence-based critique. My view is that however difficult they may be to sell to the BBC and Guardian-reading classes, the Davis tax strategy has a great deal of merit and David Cameron would be unwise to paint himself into a corner by opposing it too vigorously.

Let us look at the facts. David Davis is not being unrealistic in proposing to reduce the share of GDP taken by the state to 40%. Government spending only rose significantly beyond that figure as a result of Labour’s spending spree which started around 1999. In the two years before that, Labour claimed to be sticking to “Tory Spending Plans” and actually reduced state spending as a proportion of GDP. If Labour can achieve a reduction in the share of GDP, an incoming Conservative Government certainly could. There is certainly more money being wasted now, providing an incoming government with some easy wins which would not be too politically difficult.

The second factor to take into consideration is the effect the overall package would have on confidence in the British economy by the financial markets. A renewed commitment to controlling government spending would certainly be viewed extremely positively. In reaction to Davis’ plans to restore tax credits to pensions Britain would be likely to see significant net inflows of foreign money in the weeks following a Conservative victory. This would have a downward effect on interest rates, providing a temporary boost to the consumer and crucially, raising economic growth in the private sector.

If a Conservative government could deliver a genuine reduction in the share taken by the state and give that money back in tax cuts, it would be fiscally neutral. Aside from the obvious longer term benefits to the economy, there would be no upward pressure on interest rates. The issue then becomes one of timing. A very cautious approach would be to wait until spending restraint had born fruit - higher tax revenues from growth leaving headroom for tax cuts. Alternatively, the Reagan/Bush approach - cut taxes immediately on the basis that it will feed through next year in higher growth and higher revenues.

I favour the second approach. If cutting tax is a good thing, the sooner it happens the better. The benefits of lower taxes takes time to come through in higher growth and we know there is potential for the UK to improve its growth rate. Under Labour the average rate of growth has slowed significantly as the Government gobble up any surplus generated by the private sector.

The amount of extra borrowing required to produce a noticeable tax cut pales into insignificance next to what the current Labour Government is already doing:

Britain’s Labour Finance Minister, Gordon Brown is issuing GBP 65 billion in government bonds this year.

This has not forced interest rates up, caused a currency crisis or any of the other disaster scenarios predicted by left wing commentators should David Davis do a little borrowing to carry out his more modest tax cuts. Davis is talking about around GBP 30 billion over five years. Brown is issuing GBP 65 of bonds this coming year alone.

Tax cuts are an investment in the productive part of the economy and are a return of power from politicians to ordinary people. There was a time when Tories instinctively understood this. David Davis shows that there remain some people in the Conservative Party who still do.

From the crade to the grave - so long as you are slim

A health authority in east Suffolk - where I was born and where my folks still live - proposes to prevent obese people from having hip replacement operations, at least until such dreadful fatties shape up to the prescribed standard. I assume that the argument goes a bit like this: obese people put a lot of pressure on their joints and hence do not deserve to get a replacement as much as a slim person.

This is dangerous. My mother, who is in her 60s, had a hip operation performed about two years ago and was not, as far as I can tell, overweight. She is in pretty good shape (where do you think I get my movie matinee looks from?). But even if she was not slim, she has paid taxes all her life. The NHS is increasingly playing God with people’s lives, and as some have long feared, the Soviet system of healthcare in this country is increasingly being used to dictate how people live. On the logic of the Suffolk health authority, former Manchester United football god, George Best - an alcoholic - would have been refused a liver transplant op and now be dead.

In a free market, of course, people who lead very unhealthy lifestyles, who smoke, drink heavily, take no exercise and so forth would probably pay higher insurance premia that those who looked after themselves. Such a market incentive could be a spur to living well and better. There can be no objection to that. However, for as long as the current state-run system endures - and I hope not for long - it is an outrage that people should be excluded from operations in this way.

Related thoughts on health care here.

Pollard on Smoking…

I tried to post this on Samizdata; but their comments system seemed to object for some reason:

Pollard does a wonderful line in hypocrisy…and this is just another example of it. New York bars since the ban are stale, or even more stale, rooms that serve booze. What little character they had is now gone; the health fascists want to kill any ambiance in the UK pubs as well. Then people will stay home and not go out and drink…bingo no anti-social drinking problem. Or so its thought. Oh, and of course, create a whole new market in smoke-easies.

Says it all really…

Via: Tim

Left Activism Can Be Fun!

Remember Christmas 1993 when capitalism was brought to its knees?

Subject: CONSUMERISM FAST: JOIN US
Lines: 97

SEASON’S GREETINGS! WHY NOT TRY A DIFFERENT APPROACH THIS YEAR, ONE
THAT WILL BE GOOD FOR OTHERS AND YOUR CONSCIENCE AND YOUR ACTIVISM?:

Newsgroups: misc.activism.progressive
From: “M.i.c.h.a.e.l.”
Subject: International No Shop Day
Message-ID: <1993Nov1.211430.28412@mont.cs.missouri.edu>
Followup-To: alt.activism.d
Originator: daemon@pencil.cs.missouri.edu
Sender: news@mont.cs.missouri.edu
Nntp-Posting-Host: pencil.cs.missouri.edu
Organization: ?
Resent-From: “Rich Winkel”
Date: Mon, 1 Nov 1993 21:14:30 GMT
Approved: map@pencil.cs.missouri.edu
Lines: 78

** UPDATE: The pack for International NO SHOP Day (4th Dec 93) is now
ready… it includes background information and lots of artwork and
ideas for stickers, fliers, posters, action, media work and so on.
Copies of the pack are available by sending an A4 SAE (preferably with
about one pound [UK] to cover our costs) to Manchester ENOUGH!, 13
Paton Street, Piccadilly, Manchester M1 2BA.

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Ray on Aussie politics

John Ray has yet another blog going; this one focuses on Aussie politics. Considering the past output of Ray; I would suspect it will be well written and informative. It has been blog-rolled.

Inflation is a Disease of Money

or Why I Won’t Be Betting the Farm on Interest Rates Rising Much Soon

It may be a saying of wizened old monetarists but that does not make it any less true. While the economic illiterati that pass for journalists at the likes of the BBC are all in a flap about higher oil prices causing inflation, the Bank of England seems to potter along in a relaxed way.

Commentators alternately forecast doom - rising oil prices, we are told, will lead to permanently higher inflation as people adjust their expectations and pay demands to the new, higher level of prices and we will all end up with a nasty inflationary spiral like we did in the 1970s.
Then bust - the Bank will raise interest rates to choke off this inflation, leading us into a new recession. Isn’t the economy already stalling?
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Remember When Governments Were Just Stupid Rather Than Nasty?

THE WISDOM OF THE TORIES

“Political suicide can end a career.”

- John Major

“Suicide is a real threat to health.”

- Virginia Bottomley

“Anyone would think we were living on some island somewhere.”

- George Walden

“It’s not the future I’m talking about, I’m talking about tomorrow.”

- John Gummer

“The trend in the rise in unemployment is downward.”

- Gillian Shepherd

“The more important things are more important than the less important
things.”

- Stephen Dorrell

“When the IRA plant such bombs, it proves they can scare people, it
proves they can kill people, it proves nothing.”

- Peter Bottomley

“We said zero, and I think any statistician will tell you that… zero
must mean plus or minus a few.”

- William Waldegrave

“Who Sadam Hussein kills, dies.”

- Jeffrey Archer

“There’s no smoke without mud being flung around.”

- Edwina Currie

“I will never forget the 1981, or was it 1982? honours list.”

- Julian Critchley

“All those people who say that there will never be a Single European
Currency are trying to forecast history.”

- Kenneth Clark

“The British public sees with blinding clarity.”

- Michael Heseltine

“You know what they say, don’t get mad, get angry.”

- Edwina Currie

“We are not wholly an island, except geographically.”

- John Major