My letter to the Times on 22 August:
“What a treat to have Matt Ridley and Paul Johnson in the same issue (21 August), effectively delivering similar messages, although from different standpoints.
“Matt Ridley explains convincingly that unilateral free trade is the only effective alternative to the regulatory confusion that has mired both pro and anti Brexit politicians in a wrangle from which they cannot extricate themselves, and which leaves the public increasingly bemused. Unilateral free trade takes place without barriers and, as Ridley demonstrates, it takes place quite naturally between people and businesses – not governments.
“Tariffs and subsidies are barriers that punish only the countries that impose them. If governments have a role at all, it is to get out of the way and allow trade to flow as naturally as it always has, to the advantage of the traders and those they serve.
“Paul Johnson’s article [which refers to the ‘Garden Bridge’, Crossrail, Milennium Dome, HS2 and the NHS IT system] delivers a succinct message: government infrastructure spending is simply not susceptible to economic calculation. The clear inference is that such projects should be taken on only if they represent the public will, democratically expressed, facilitated by private capital – not if they feature as a government-inspired populist dream.
“Did government ever open up rail and sea links in order to facilitate trade? Pioneering initiatives require support from the ultimate beneficiaries, not the bureaucrats.
“All of which leaves the crucial contemporary question of what, then, is the role of government? One thing is clear – it is smaller than anyone in government would have you believe.”
[The Times did not, however, publish it, giving “pressure on space” as the reason. Looking at today’s letters page, I see that the “pressure on space” was caused by their publication of letters on, inter alia: Gender pay gap and maths for girls; gambling addiction; hate crime; medicinal brandy; how to greet bus drivers; and motorway tolls. The logical conclusion: don’t bother!]
Here, however, is a responses from someone whose views I respect:
From Professor Pat Barron, who lectures on Austrian Economics and Banking at the University of Iowa:
Wonderful letter, even if the Times did not run it. I agree with every part, especially that trade is between people and not governments, and that governments are very poor initiators of infrastructure projects for the simple reason that they are incapable of economic calculation, which Mises explains can come only from individuals who own assets.
Only individuals are capable of exercising economic decisions based on personal preferences of how to dispose of those assets in order to improve their own personal satisfaction. I know this sounds odd, but all it means is that I cannot dispose of your assets for you, in order to make you more satisfied than what you can do yourself.
How can I possibly know your personal hierarchy of preferences? Do you value fish and chips over a croque monsieur? How about a ticket to a play over saving for a new car? Yet governments deign to assume that we want high speed rail lines, and they must tax us in order to provide them for us.
Why cannot those who believe that a high speed rail line will make a profit, sell shares and build it? (And, by the way, making a profit is the only way that we can know that we are increasing capital and not consuming it.)
In that case, the only roll of government is to get out of the way and let such a company buy land to build it. This is how James J. Hill built the Great Northern Railway in the nineteenth century. He built a transcontinental railway with no public funds and purchased almost all the land privately.
What those who favour large infrastructure projects always fail to consider: the alternative uses that privately held resources (that government taxes away) would be used for, to create greater satisfaction.
[There is a good case that can be made that the US government should never have participated in building the first transcontinental railway, but should rather have waited until private capital built it. Sure, the railway may have been delayed by several decades, but so what? That simply means that there obviously were better uses of resources.]
Milton Friedman had a great analogy about why government spending is wasteful. He said that there are four ways to spend.
- I spend my own money on myself. I’m very careful and very thoughtful about my purchase.
- I spend my own money on someone else, perhaps a birthday present. I’m a little less careful and a little less thoughtful about that purchase.
- I spend someone else’s money on myself. I’m even l less careful and less thoughtful about my purchase.
- I spend someone else’s money on someone else. I am very careless and very thoughtless about my purchase.
And my letter to Daily Telegraph 24 August:
Sir – Three complementary messages in today’s Business section (24 August):
Firstly, Roger Bootle is explicit in demonstrating the hollowness of EU claims of successful economic management, and why arguments in favour of maintaining membership of the single market are outweighed by the benefits of leaving. He highlights the damage to business of becoming enmeshed in the mushrooming EU regulatory morass.
Then, Allister Heath is equally convincing that the key to a successful Brexit lies in improving our competitiveness, and he despairs that no one in government appears to understand the need for a supply-side boost.
Finally, Ambrose Evans-Pritchard reports on Mario Draghi’s ludicrous warning that central bankers still do not understand how the financial system functions.
The implicit message that these articles share is that building a successful economy requires far less reliance on government and its regulatory tentacles, and a successful Brexit depends on recognising that trade does not take place between agencies of government. Trade is between individuals and businesses. Government’s role is to get out of the way and allow trade to flow as naturally as it always has when left alone. Tariffs and subsidies are barriers that punish only the countries that impose them.
Draghi’s cerebral disconnect is breathtaking, in warning us against the consequences of his own debt-binging frenzy. Savings, the lifeblood of real public welfare, have been annihilated by central bankers’ interest-rate policies.
When it comes to government, less is definitely more!