IEA Blog

Libertarians have traditionally been sceptical of the case for electoral reform, in large part because there appears to be a relationship between high levels of public spending and the various systems of proportional (or near-proportional) representation. The big government countries of Sweden, Belgium, Germany, Holland and Norway, for example, all have proportional electoral systems, whereas relatively smaller government countries like the UK, USA, Canada and New Zealand all use FPTP. It is believed that PR systems produce higher levels of public spending because of the log-rolling required to build a governing coalition after an election.

But whether the electoral system is the independent variable that produces higher public spending in the manner described may be questioned. Today, UK government spending as a proportion of GDP would rival that of most other European countries, suggesting that FPTP is not sufficient protection against the growth of government. It is also the case that Ireland reduced its public spending from 43% of GDP in 1990 to 34% in 2005, making it one of the smallest governments in the developed world, with a system of PR. It may well be, then, that levels of public spending are determined by other factors, such as political culture, and these other factors may be randomly correlated with FPTP or PR.

It is also the case that FPTP enables a political party with the support of a minority of the electorate to assume absolute political power. In the 2005 UK election, for example, the Labour Party won an absolute majority of seats in the House of Commons with only 35% of the popular vote. With the support of only marginally more than a third of voters and barely over a fifth of the entire adult population (including non-voters), the Labour Party was able to introduce a host of draconian and unpopular policies without any constitutional limit on its power.

Libertarians are rightly wary of the tyranny of the majority; FPTP is an electoral system that creates majorities out of minorities. PR systems create coalition governments, where the views of at least half of the voters must be represented (albeit imperfectly).

Within a FPTP system libertarians may sometimes be influential members of the governing majority – as was the case in the 1980s and 1990s. But given the dubious attractions of political power there is surely a much greater likelihood that statist authoritarians will invest the time and effort to attain high office than will benign libertarians. Hence, the majority-creating potential of FPTP is more likely to be used against liberty than to defend liberty.

It would be naive to believe that any electoral system alone can create or protect a free society, but PR must be an essential component of a constitution that limits the power of government and protects the liberty of individuals. Libertarians should support AV in the forthcoming referendum.

I have no constitutional objection to the Alternative Vote system (AV). Fears over constantly hung Parliaments or permanent coalitions are largely unfounded. In Australia, where AV was introduced in 1919, it has, with the exception of the election last week and the 1940 General Election, delivered strong governments despite the presence of popular “third parties” such as “State Labour” in New South Wales during the 1930s and 40s, the Australian Democrats in the 70s, 80s and 90s and the Greens from 1993.

But AV is not a good way to elect Members of Parliament who will support radical free-market economic reforms. Why is this? In the United Kingdom today almost 50% of the population rely on the government for a sizeable portion of their income, and even more receive some money in the form of tax credits or old-age support.

In the most recent General Election, the British Conservatives (not exactly running on the most radical free-market platform) polled 36% of the vote. Just over a third of British voters were willing to give their “primary vote” for a party willing to cut the deficit quickly and enact the beginnings of free-market school reform.

Any party that wishes to become government under AV will be elected on the second, third or fourth preferences of those parties who finish lower down the ballot paper. If a large proportion of the population receive money from the system, then it is difficult to imagine them placing their second preferences for a party that will withdraw social benefits, ahead of one that pledges to retain them. To put it another way, a lot of those on the left would give their preference to a social democrat candidate, but few on the right would give theirs to a free marketeer.

Market liberals need to remember that Thatcher won 42% of the vote in 1983 – and it is highly unlikely she would have gained a lot of second preferences. Changing the voting system may be good for other reasons, but it makes a government that will be willing to enact radical free-market reform less likely.

The Liberal-Conservative administration deserves to pass its 100 day probation. It hasn’t done much yet, but it has said some of the right things and sounds like it might even get round to doing a few of these things at some point in the not-too-distant future. I’d pretty much accept that from a new staff member, so I guess I should be half-pleased that I seem to be getting this level of performance from my government.

The coalition partners were right to shelve their timid pre-election rhetoric about the size of the hole in the public finances. The Liberal Democrats’ implausible insistence that cuts shouldn’t start until next year was ditched as soon as they had “looked at the figures”. I remain bewildered at how and why the figures they looked at after May 5th differed in any meaningful way from the figures that were publicly available beforehand. But at least they reached the right conclusion. We should be grateful for small mercies, even if we do have to endure the sight of Vince Cable looking like he’s permanently sucking on a lemon…

Read the rest of the article on The Spectator’s Coffee House Blog.

Sombre sound bites about the scale of the deficit, the need for deep cuts and the opportunity to use this as a time for comprehensive reform deliver huge promise, but the last hundred days provide precious little evidence that this promise will translate into much else.

The problem of government debt cannot be underestimated. The national debt is officially around £800 billion, but if pension liabilities are included it rises to about £4.8 trillion. Accordingly, we face grave economic problems. The last hundred days have shown a government willing to acknowledge this in its rhetoric, but in actual fact the cuts announced so far only serve to curb planned real terms increases in spending, rather than reducing it. The comprehensive spending review coming this autumn provides an opportunity to actually deliver, but the big question is will the coalition seize it?

Reform alongside cuts has been a mantra of the coalition, but again the policy so far simply doesn’t bear this out. Each government department, especially those of health and international development, should have been gone through, its functions, structures and budgets reassessed - which services should be delivered by the state and which by the voluntary and private sectors? Innovative thinking and an eye to successful policies in other countries is needed. Entire departments such as BIS could and should be closed.

This is indeed an opportunity to improve society - reform combined with cuts can deliver more for less. Again, though, the coalition falls short. The only area where wholesale change is being implemented is education policy, but even here the coalition has failed to endorse for-profit schools, an important component of successful reform.

What of the Big Society? Here again the coalition has tried. The vision has spoken deeply to what good government looks like – small and limited, giving people the ability to run their own lives. But the communication and policy do not reflect this. The mainstream public interpretation of the Big Society has become, “my community needs more government money”, hardly what Burke meant by “little platoons”. Fostering community does not mean government intervening further and directing more taxpayers’ money into projects. It requires putting the onus back on people, letting them keep more of their money in the first place to invest in those around them and reducing the bureaucracy which makes it hard for individuals to get involved with their communities.

To be fair, it is possible to point to some areas where the coalition is delivering to some degree (such as education) and at least the last hundred days have finally put paid to the idea that fiscal stimulus works. But what of the next hundred days and the ones after that? Much needs to be done to create a freer Britain where people have a greater sense of responsibility over their own lives and of those around them, where services are delivered better because funding and delivery is moved out of the public sector and into the private realm, and where the country’s economic problems are resolved. Deep cuts and the wholesale reform of government and its responsibilities must be the standards by which the coalition is judged. The first hundred days has seen the coalition acknowledge this, but now it must develop and implement policy that bears this out.

I go to Singapore to teach every six months, which is always instructive. On this occasion, I discovered something I didn’t know and would never have guessed - that the growth rate in GDP over the most recent period had eased to a more accommodating 16.9%. It has, I admit, come down from the highest growth rate ever, but still you can get by with doubling national income every four or five years. These are growth rates so outlandish they have almost no logical meaning in economies so very different from Singapore’s.

These trips are also different because when I am there I rely in part on the International Herald Tribune for my news, which means I am relying in part on The New York Times, not something I often do. So what I also learned on this trip was that the destruction of the American economy and the jobs market has been so intense that even those who love the American President are forced now and then to draw attention to it.

On this occasion, amongst the columns from the usual gang of commentators, there was one by Bob Herbert. Under the title, “The Horror Show”, he began his column with these words:

“The employment situation in the United States is much worse than even the dismal numbers from last week’s jobless report would indicate.”

And there is no doubt they were dismal. Undoubtedly, as with the rest of the crew at the NYT, the reason for accurate reporting for a change is to help the Obama Administration sell its second stimulus package, something the rest of the country, exhibiting common sense, is reluctant to support. In his column, Herbert wrote:

“At some point we Americans are going to have to claw our way out of this denial. With 14.6 million people officially jobless, and 5.9 million who have stopped looking but say they want a job, and 8.5 million who are working part time but would like to work full time, you end up with nearly 30 million Americans who cannot find the work they want and desperately need….”

“…[T]here are now 3.4 million fewer private sector jobs in the U.S. than there were a decade ago.”

Given that, you would think that they might start to work out that Keynesianism is actually poison rather than a stimulus to faster growth and more jobs. But as Samuelson accurately observed, once something gets into the textbooks, it is almost impossible to get it out again.

Keynesian economics is the instruction manual for our economic elites which they use to trash the economy believing they are doing good. It is too much to hope they will eventually work out that leaving things to the market is an infinitely better way to proceed. But at least they might finally recognize that public spending on worthless projects is not the way to get an economy to grow.

You don’t have to be Einstein to recognise that insanity is doing the same thing over and over but expecting a different result, although as it happens it was Einstein who said it first. But if they really do apply a second stimulus in the US, with all the evidence of failure right before their eyes, in what other way would you describe such decisions or the people who made them?

Today David Cameron has spoken of his ambition for the UK to break into the top five tourist destinations in the world, from its current sixth position. This apparently entails moving away from the neo-socialist “Cool Britannia” to focus on Britain’s heritage.

According to the Prime Minister, tourism’s contribution to the economy could grow by over 60% to £188 billion in 2020, from the current £115 billion, bringing significant employment benefits.

Cameron’s enthusiasm for “rebalancing the economy” may, however, translate into a policy of “picking winners” – an approach that has proved economically disastrous in other sectors. There could be government initiatives to invest in tourism or subsidies to incentivise new entrants into the market. Evidently, there are significant opportunity costs associated with allocating public money in these ways, and current very high levels of government borrowing make it particularly inadvisable.

A better approach would be for the government to improve the incentives for private investment through lowering taxes and removing regulatory constraints. Another worthwhile strategy would be to privatise national heritage sites to maximise their profit potential.

If it is serious about encouraging growth in tourism, the coalition must also act to make the UK more accessible to visitors. It should be much easier for foreign tourists to obtain visas. The high level of red tape inherent in the process needs to be cut. Tourists are unlikely to visit Britain if faced with border controls and security measures that treat them like criminals.

It may seem like a fox writing a publication on keeping geese. Nevertheless, the New Economics Foundation (NEF) has joined the debate on the ‘Big Society’.

The core messages of Ten big questions about the big society, decentralised governance and a greater role for civic organisations, are all very well. But before this happens “we” have to rebuild our economy, and in fact our whole society, from scratch: “Nothing short of a Great Transition to a new economy will do [...] This means changing how we live and work, relate to each other, organize our economy and society.”

It is reminiscent of Lenin’s claim that the Soviet state would eventually unwind itself – but only when the foundations of a classless society have been established, which would “temporarily” require an infinitely greater concentration of power in the hands of the state.

The NEF, too, wants to devolve power eventually. But first, ‘we’ have to:

• reallocate income and wealth (“While these inequalities persist, people who have least will benefit least from the transfer of power and responsibility”);
• curtail people’s consumption and re-educate them in an anti-consumerist spirit (“The big society [...] must help to loosen our attachment to carbon intensive consumption and give greater value to relationships, pastimes, and places that absorb less money”);
• end economic growth;
• turn back the formal division of labour; and  
• erode property rights (“economy with stronger democratic control”).  

It just so happens that these “preconditions” for the Big Society coincide with everything the NEF has been advocating for years. Two further oddities are worth pointing out.

The author, Anna Coote, raises the legitimate concern that some people would be better equipped than others to utilise their new freedoms. Some enjoy a lead in terms of “education and income, family circumstances and environment, knowledge, confidence and a sense of self-efficacy, available time and energy, and access to the places where decisions are taken.” Therefore, she wants politicians to create equal starting conditions first.

This is bizarre, because the factors which Coote lists are also the ones which make some groups more successful than others in bending the political process in their favour. Coote demands that “[t]hose with less capacity need help to build up knowledge, skills and confidence, as well as the material means (such as access to information, training, IT, communications media and premises).” But what, precisely, does this mean? Since the government cannot just hand out cash, office space and free services to anyone who claims to run a civic society organisation, there will be some discretion in prioritising, and some will be better positioned in this process than others.

Secondly, the whole point of devolving power is the recognition that people at the top, even if well-intentioned, can never have complete knowledge of what is relevant on the ground. By implication, this means that a genuine civic society will often come up with unexpected locally-grown solutions. 

And yet, Anna Coote already knows exactly how things will be run in the Big Society. She knows, for example, that “co-production” (a form of cooperation with no formal assignment of roles and responsibilities) should be “the standard way of getting things done”, so it must be “[a]pplied across the board and properly supported.” She also knows the “proper” mindset that all “[p]rofessionals and others who provide services” should have. But if this is all so crystal-clear, then why have any devolution of power at all?

It doesn’t work out. Foxes shouldn’t keep geese, and authoritarians shouldn’t write about devolving power.

Next May there is to be a referendum, at the behest of Nick Clegg, on whether or not the UK should change the first-past-the-post system to the Alternative Vote (AV) system. Under AV, voters must rank the candidates according to preference and if no candidate has an overall majority the bottom candidate’s votes are re-distributed amongst the others, and so on until there is a clear winner. This keeps minority parties in the race, as one would expect under a proposal from the leader of a minority party, but there is no clear reason why that is an improvement, any more than there is for literally scores of other possible voting systems, each of which has its own following.

In terms of benefits to mankind, all voting systems are varieties of the question “how many angels can dance on the head of a pin?” They are poor substitutes for exchanges that can be made amongst individuals under which all gain and nobody loses; if some don’t like the game they don’t have to play and by definition are no worse off than before.

The chattering classes and the elites of politics love elections. A good example of this is the BBC; you can almost feel their paroxysms of delight throughout the whole election process. Yet the process is essentially a very serious game which, by virtue of an advance auction of goods about to be stolen and redistributed elsewhere (with huge commissions to the auctioneers), creates enormous aggregate net losses, just as does any other form of theft.

When government was small this hardly mattered. But now, government doesn’t do small, and as it expands its scope, it attracts people of a very different mind-set. The motivations for a Parliamentary career have changed radically, from a strong wish to do good to exercising power for its own sake and the corruption of the system for personal gain. This fits precisely Hayek’s explanation of “why the worst get on top”.

Thus in 1930 a Labour MP gave his wife and daughter two rail travel vouchers from a pack issued to him (only) for travelling between his constituency and Westminster. The ticket inspector pressed charges and that was the end of the MP’s career.

Over a less than century, serious corruption in Westminster has moved from virtually unheard of to routine. The same goes for abuse of power – examples I recall include Jack Straw’s refusal to release records of how the Iraq war came about (it would “damage democracy”) and Harriet Harman’s reaction to Fred Goodwin’s pension (“it might be enforceable in a court of law but it’s not enforceable in the court of public opinion and that is where the Government steps in”). It’s not that many years since Harriet was a National Council of Civil Liberties activist. 

This decline coincides (but not coincidentally) with the rise of total taxation over the last century or so from about 5% of GDP to about 50%. But we ain’t seen nothing yet. My knowledge of history isn’t exhaustive, but I suggest we’d be hard put to find a democracy that lasted as much as 500 years. Of course there is room for doubt about what a democracy actually is, which is one reason why Churchill’s famous remark “Democracy is the worst form of government except for all those others that have been tried” is little more than a sound-bite.

An unlimited democracy in which all decisions can be settled by a majority vote is essentially the same as two wolves and a lamb voting on what to have for lunch. A “representative” democracy is potentially even worse, with government itself taking all decisions in an elective dictatorship, such as those of Hitler and Mussolini. Modern Britain is getting ever closer to this position.

What is needed above all else is a constitution, listing all the areas which are off limits for either government or majorities to settle (such limits, both personal and economic, being based in particular on the bulwark of private property in its widest sense).

Not one of the original constitutional documents of the USA (Declaration of Independence, Constitution, Bill of Rights) mentioned the word democracy. These documents are themselves bulwarks, but over a period of time “representative” government dismantles them or disobeys them without fear of retribution.

If history is anything to go by, the picture is bleak indeed. We are fiddling while Rome burns, which it duly did. As Ludwig von Mises wrote in Human Action, “The Roman Empire crumbled to dust because it lacked the spirit of liberalism and free enterprise. The policy of interventionism and its political corollary, the Fuhrer principle, decomposed the mighty empire as they will by necessity always disintegrate and destroy any social entity.”

Liberalism, empowerment, responsibility, redistributing power so that people in their everyday lives don’t turn to officials or central government for help, but instead help themselves and their own communities – finally, we’ve got Cameron’s definition of the Big Society and it’s a clear and important one. But how we get there is as muddled as ever.

Cameron is arguing for something desperately needed – a revolution in the tired approach to public services which has sucked the life out of many communities, broken the connections between people and encouraged us to think there is no need for us to take responsibility for ourselves, let alone for those around us. Yet it is hard to see how he makes the leap from his visionary starting point of enabling people to the conclusion that the main way to improve this situation is for the state to take more responsibility. David Cameron’s primary commitment seems to be that the government will give people the tools to realise their vision for their local communities.

The precise point of civil society is that the tools people need to realise their visions cannot be given by central government. If enabling people to live a good life was a question just of public money or central organisation then with public spending at 52% of GDP things should be looking a whole lot better than they are.

People help themselves and those around them when they see the necessity of doing so. They understand their local problems and issues; they have flexibility to adapt and to meet need in a messy and diverse way. Cameron fears that if government pulls back, people won’t be there to take up the slack. He suggests that it is up to the government to build the Big Society. But government cannot build the Big Society; a Big Society will only develop by government pulling back and leaving room for people and communities.

A radical reduction in the size of the state is required if philanthropy, community building and personal responsibility are to flourish. This means reducing the number of functions perceived as the responsibility of government rather than individuals, with a corresponding cut in taxes, regulation and bureaucracy. Cameron seems to understand this with his approach of devolving more financial freedom to local communities to decide how their local budget is spent and with ideas such as helping local groups to overcome red tape, but he needs to apply this same principle to other areas.

The present Democratic leadership of the United States avoids owning up to the “progressive” philosophy it adheres to. This may be because the US government’s finances are expected to deteriorate dramatically in the medium term, largely as a result of entitlement programmes such as Medicare, Medicaid and Social Security.

The ideological roots of the Obama administration’s response to the current fiscal crisis lie in the progressive movement of the late 19th and early 20th century, explains Tiffany Jones Miller in the National Review. The takeover of the American constitutional arrangements was inspired by Germany’s “Iron Chancellor” Bismarck. Between 1820 and 1920 thousands of budding American social scientists and others had studied at German universities. According to Miller:

“…[T ]he movement consciously sought to supplant the authority of the principles of the American founding with a new conception of Freedom, History, and the State inspired by early-19th-century German idealism. The progressive refounding of America thus had both a destructive and a constructive aspect.”

German-trained economists such as Richard T. Ely triggered a philosophical revolution which dispensed with notions of limited government and accepted the fundamental underlying role of collective morality. Other influential progressives in the same vein were Theodore Woolsey, John Dewey and James H. Tufts. The “father” of the progressive American Political Science Association, Charles Merriam, later to become the head of FDR’s National Resource Planning Board, wrote:

“The individualistic ideas of the ‘natural right’ school of political theory, endorsed in the Revolution, are discredited and repudiated…In the refusal to accept the contract theory as the basis for government, practically all the political scientists agree. The old explanation no longer seems sufficient, and is with practical unanimity discarded. The doctrines of natural law and natural rights have met a similar fate.”

The progressives were heavily under the spell of Hegelian idealism that replaced the Lockean guarantee of individual property and liberty under the law as stated in the Declaration of Independence. Following Hegel, the progressives believed in a lofty promise of freedom that “materialised” in self expression and perfection of one’s spiritual potential. Perhaps candidate Obama’s campaign visit to Hegel’s Berlin was an ominous sign.