The Retreat from Classical Liberalism
E-Book, Englisch, 123 Seiten
ISBN: 978-1-84954-317-0
Verlag: Biteback Publishing
Format: EPUB
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INTRODUCTION
For most of my professional career since the early 1960s, as an Indian development economist teaching at Oxford and University College London till the early 1990s, I have worked in and on Third World countries. But after living in Britain for nearly thirty years, it seemed time to become a naturalised citizen of the country in which I had spent most of my life, and where my children were born and bred. Having become a British citizen in 1987 it seemed appropriate to take an interest in the public policy debates in the country. I wrote a number of pamphlets for various UK think tanks from the late 1980s, which are collected in this volume. It may seem vainglorious to put together a collection of one’s past scribblings. But, as many of the issues the pamphlets raised are still part of the ongoing public policy debate in the UK, a new audience may find them of interest. Moreover, they were written from the classical liberal perspective, a perspective at least rhetorically espoused by the Thatcher government, which adopted some of its principles, leading to Britain’s economic renaissance and improved standing in the world from the middle of the 1980s.1 I had planned to put them together in 2009, as an indictment of the failures of the long ‘socialist’ winter since Labour’s second term. But with the new coalition government elected in 2010, it seemed they would rectify many of these failings from the viewpoint of classical liberalism, which many in the government claimed to advocate. But these hopes were soon belied. So, sadly, these pamphlets still remain relevant. But, even during the Thatcher years, the dirigiste impulse had not been quelled, and the earliest pamphlet included in this collection (Chapter 3) was written for the Centre for Policy Studies (CPS) she and Sir Keith Joseph had founded, attacking the nationalisation of Britain’s universities by Kenneth Baker and Robert Jackson. Jackson threatened to sue me, which led to him being lampooned in a cartoon in The Times Higher Education Supplement. But of course my pamphlet had little effect on policy. John Major furthered the destruction of one of the best higher education systems in the world, by converting the numerous polytechnics – which provided an excellent route to vocational technical education to those lacking an academic aptitude – into second-rate universities, with all the academic pretensions and claims of a parity of esteem (in terms of pay and prestige) with the ancient universities. Worse, this de facto Tory nationalisation of what was an independent though state-financed higher education system provided the means for the subsequent Labour governments to their de jure nationalisation, and use for dirigiste social engineering, leading to their ensuing decline. This was the first of my lost causes. The continuing desire of all political parties to use the older universities to ensure ‘access’ by the disadvantaged has been prompted by the dismal performance of the pupils in state secondary schools. This in turn was due to the abolition of grammar schools by Shirley Williams and the socialist ideologue Tony Crosland, which the Iron Lady did nothing to reverse. Grammar schools had provided the essential ladder of opportunity for poor academic children to get the first-class education that their richer peers from public schools continue to obtain. A major error of David Cameron and his band of ‘modernisers’ is their reneging on the earlier Conservative pledge to expand grammar schools. Michael Gove’s push for ‘academies’ as a substitute, though laudable in many ways, is nothing more than a souped-up version of the plans introduced by Tony Blair. Meanwhile, the vast majority of Britain’s youth continue to be short-changed by an education system which fails to empower them for a globalised world, where their prospects depend increasingly upon brains, not brawn. Similarly, it was Lady Thatcher, having been converted by Sir Crispin Tickell, who began Britain’s public adoption of the Green agenda on global warming. She opened the floodgates for public funding of the scientists espousing the theory of man-made global warming by setting up the Hadley Centre and the environmental unit at the University of East Anglia, which has lately been in the news for its purported academic malpractices to further its beliefs. My first foray into this minefield was accidental. In 1989 I had been asked by Ralph Harris to give the Wincott lecture.2 I chose as my theme an attack on the international macroeconomic and exchange rate co-ordination embodied in the Plaza agreement, based on correcting international ‘pecuniary externalities’. As these are merely a sign of market interdependence and not of ‘market failure’ they do not require any public action. To be balanced, I thought I would also include a section on international ‘technological externalities’, which if present would require international public action. The emerging threat of global warming seemed to fit the bill. I asked my old friend Julian Simon, who had spent a lifetime studying environmental problems, for a reading list on the topic. I was appalled to find the fragility of the scientific evidence and the climate forecasting models on which the draconian polices to curb CO2 were based. My lecture on The Limits of International Cooperation became an attack on both the flawed arguments for international macroeconomic and environmental dirigisme. Though the former cause has not as yet been undermined, the second remains ‘lost’, as the West has unanimously embraced this call for an International Green Economic Order. All the political parties in the UK are committed to the most draconian cuts in CO2 emissions, which if implemented would return Britain to the Stone Age. Chapter 9 (which is culled from my monthly op-ed columns for India’s Business Standard) discusses this widespread Western collective madness. But this too remains a lost cause. With the advent of New Labour’s thirteen-year rule in 1997, while the economic liberal policies of the Thatcher era were preserved in its first term, their slow erosion began with the growing public expenditures on an unreformed National Health Service (NHS). Having moved to the University of California (UCLA) from University College London (UCL) in 1991, I was impressed by the excellent health care provided by the US private insurance system for those who were lucky enough to be employed by UCLA. Looking at the total monthly cost (to me and UCLA) of this comprehensive coverage for my whole family, I found that it was about the same in 2000 as the per capita cost of the dysfunctional NHS. I produced a pamphlet for Politiea on the subject (Chapter 3), arguing for the NHS to be replaced by a tax-funded national health insurance system. This had some political resonance, with some reformers in the Liberal Party even endorsing it in their Orange Book, and some Tory politicians accepting that it was an elegant solution. But, public support for the NHS is clearly a religious movement in the UK (rather like the environment and the BBC), as I found when I gave a talk on my scheme at the Reform Club. Not surprisingly, the Tories have joined Labour as being the arch defenders of the largest remaining nationalised industry in the world, which at vast expense continues to serve producer rather than consumer interests. Every party is committed to throwing ever more money into this dysfunctional institution. Yet another lost cause. One of the largely economic essays in the book is a lecture I gave at Politiea on the Economic and Monetary Union (EMU) and which they brought out as a pamphlet in 1999. This emphasised how this was a misguided project as the eurozone was not a natural ‘optimum currency area’ and that, without a fiscal-cum-political union, a monetary union was unsustainable. A judgement being increasingly borne out by the current travails of the euro, with the highly indebted Club Med economies hoist on the petard of the euro. I had argued that its future depended on a contest between the ‘dinosaurs’, who saw the euro as a means to maintain the unreformed labour markets and generous welfare states of the ‘social market economy’, and the ‘modernisers’ who saw the need to create flexible labour markets and to curb the excesses of their burgeoning welfare states. Germany turned out, par excellence, to be a moderniser; the Club Med countries continued to be dinosaurs. With the worldwide boom, and its reformed labour markets, Germany’s real wage fell relative to those in the Club Med countries. Denied their traditional route of devaluation to regain competiveness because of the single currency, they ran trade deficits financed by the growing trade surpluses of Germany. This inflow of capital in turn fuelled a boom in non-traded services – particularly housing and banking – (as their real exchange rates rose), and allowed their ‘entitlement economies’ to flourish. With the global financial crisis of 2008, the unsustainability of the public and private debt (which was foolishly converted into public debt – as in Ireland) accumulated during the earlier boom became manifest. The Club Med countries have found themselves in an actual or incipient sovereign debt crisis. There is little hope that they can grow themselves out of the crisis even if the private and public holders of their debt take sufficient ‘haircuts’, as without a devaluation they cannot attain competiveness. The alternative they have been forced to accept, to keep the euro project alive, is an internal devaluation through...
