THE LAST DITCH An Englishman returned after twenty years abroad blogs about liberty in Britain

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Limiting the power of government - money [Guest post by Mark]

Since the 17th/18th century capitalist seizure of government power, and specifically following from the 1694 creation of the Bank of England, the government's debt has been the basis of our monetary system. This combination of government power and capitalist credit money made possible a broader based integration between government and the economy - contributing directly to the explosion of British economic, industrial and military power which later gave birth to the British Empire.

This system has obvious advantages with respect to the coordination of a mass economy but from the perspective of individual freedom it is deleterious.

Some argue that the private creation of government money is a separation of powers which itself limits government. In reality, the opposite is true. Finance is government and government is finance - and at the same time, if we wish to do business, we cannot help but be drawn into this government-private hybrid money nexus. The power of government is surreptitiously (or not so surreptitiously) extended to every aspect of economic life.

Not only is it nearly impossible to escape this system but also, if the government relies upon and controls the private money system, we face the twin dangers that (1) control of government/finance becomes the most profitable activity in society and (2) the temptation to raise revenue for government takes precedence over real economic considerations.

The Fred Goodwins of the world, or the trend for physicists to become bankers are a result of (1) while the austerity/ higher tax campaigns are a result of number (2).

Libertarians would generally seek to solve these problems by eliminating the government from money creation. There are a number of problems with this approach. Firstly, credit networks without government support tend to be either small and personal, or entirely unstable. Secondly, there is no evidence that pure "commodity money" has ever existed or that barter can be used to run a large scale economy. Thirdly, almost everyone agrees that there must be some role for government and if government must use private money we again run into problems (2) + (1) - because government relies upon private money it cannot be separated from private business.

Now, there may well be a trade off between the ability to run a mass economy and individual liberty, in order to be free we might have to accept fewer things. I'm relatively comfortable with that - from the perspective of libertarians the destruction of the mass economy may well be a feature rather than a bug. However, I do feel that, rather than eliminating government money creation, as libertarians suggest, (or eliminating private money creation as per the positive money proposal) - we should allow both systems to operate alongside each other, but to exist, entirely and conspicuously separately - in essence, make using government money and engaging in the mass economy a choice.

Government created money could be a form of virtual commodity, (with the function of gaining respite from the taxman - essentially a tax credit). If the government did not require private money, there would be no (revenue related) reasons for it to tax these transactions. Therefore, it would be relatively easy to eliminate VAT, income tax, capital gains tax and replace it with some form of flat tax on tax credits only. In this way, the ability to do business would be separated from the need to pay tax.

Personally, I would set up the system in such a way that it would be possible to choose through lifestyle to avoid tax entirely. (For example - we distribute 100 tax credits to each citizen every year and tax on the basis of natural resource consumption- 100 tax credits for every 10 squared meters of land - by making a lifestyle choice to consume fewer natural resources you could avoid taxation and then be free to engage in whatever other business you choose - obviously many people would insist that people did "work first" before they get credits.)

You could then choose to conduct business either using surplus tax credits (which would offer the mass stability of government money), private credit agreements or barter/commodity money. These entirely independent monetary systems would provide a *real* division of economic power and be based entirely upon voluntary exchange.

As I say, I don't know if this would be more efficient from the perspective of production or "raise GDP", but I do think it would be more conducive to personal liberty.

Guest Post: Economics

After the 2011 tsunami, Fukushima nuclear power plant exploded and was unable to produce electricity, necessitating rolling blackouts and widespread efforts to save electricity in the Tokyo region/ East of Japan. The disruption that this caused was completely inevitable given the circumstances. At the same time, in the West of Japan there was also a widespread campaign to reduce electricity consumption. Lights in supermarkets were turned off, air conditioners not used despite soaring temperatures, workers all crammed into one office, people generally encouraged to turn things off regardless of inconvenience - to help the people in Tokyo.

All this, despite the fact that there was absolutely no way to transfer electricity to the areas with a shortage. The Eastern and Western halves of Japan operate on completely different electricity systems and are unconnected. Consumption in the West is entirely unrelated to availability in the East, yet people still believed that their sacrifice would somehow help their countrymen.

You might find this behaviour strange, or perhaps noble, but to me this represents more than just another oriental peculiarity or example of Japanese communalism. This is the way that most people around the world think, most of the time. It's based on the principle that resources are universally exchangeable and unfortunately, it is a damaging mistake. The reason why we make this mistake, is money. We are so familiar with equating the things we consume and do with money, we forget that different types of work and different resources are often entirely unrelated.

For example - if I manage to refrain from eating a chocolate bar, the number of motor cars does not increase. There is some real physical limit to the number of chocolate bars which can reasonably be produced in the present. There is also an unrelated limit to the number of cars which can be produced. A chocolatier cannot design a motor car and a chocolate factory cannot make one.

We are told, often and loudly, that the rich must pay their fair share in order to contribute to the poor. I suggest that this is not possible. The rich absolutely cannot pay for the poor, because the resources that they use are entirely unrelated to those which the poor need. The rich spend most of their money on positional goods. If we lower spending on diamond rings, will more food become available? Will lowering spending on Ferraris increase the number of houses? No.

"But," you cry, "if we spend money on the poor, we must get it from somewhere!"

Yes - we make it. If the supply of money is the only factor which is limiting production, then presumably producing more money will increase production ( for free since money costs nothing to make). I assume that price rises are driven by supply and (nominal) demand, so if production increases, presumably price inflation will be limited. In this case nobody has paid anything to feed the poor, though some people have chosen to work.

If there is some real limit to production, then producing more money will lead to inflation. But even in this case, it won't be the rich who pay.

Price increases for everyday goods, will effect the rich only a little and in order for the price of the positional goods which they want, to increase, the rich would have to be getting more money (or who else would pay for them). In real terms, they have lost nothing. In reality, the price increases would affect ordinary people - so they would be the ones paying for the poor.

If printing money is inflationary, then taxing it must be deflationary. Why not give the money to the poor, but reduce the inflation impact on ordinary citizens by taxing the rich? Again, this won't work. Given that the rich spend so little of their income on everyday goods, the only way we can have an effect on the demand for these goods is if they stop paying so much money to their workers, ordinary people.

If we want to pay for the poor and there is a limit to real resources, it will be the ordinary people who pay - through consumption tax or food price inflation - in real terms, through less everyday goods.

There are, of course, other reasons why we might want to tax the rich - perhaps their wealth causes great unhappiness to the rest of us, or they earn their wealth through exploitation rather than contributing to the common good. Perhaps by taxing the rich we will encourage people to work harder in real jobs. Perhaps the rich will work harder to make up the money they have lost. Who knows. Taxing the rich could equally cause them to work less hard and make us all poorer. The case isn't clear which is why people generally try and justify taxing the rich on the grounds of them "paying their way", even when their true motivations are quite different.

As far as I'm concerned the effects of taxation on this group are so unclear, we probably shouldn't worry about it over-much. Ideally, we would have a society in which wealth wasn't produced by antisocial activities, but destroying the entire mechanism of money as motivator isn't likely to achieve that.

In the same way, by not consuming a chocolate bar, perhaps I might, in the long term, lead to an increase in investment in car factories. Only if I use my money to buy more cars.

We are also told that increasing government debt means the impoverishment of our children as they work to pay it off. This is the temporal version of the Japanese Electricity Fallacy. As Bertrand Russell once wrote, "a man cannot eat a loaf of bread that does not yet exist". By taking a piano lesson today, I am not reducing the number of piano lessons available to my children. Government spending, resulting in debt can only reduce the welfare of future generations to the extent which it reduces investment in the economy. But the reason for increased government expenditure and deficits at the moment is the desire of the private sector to save.

That is what government debt is - the savings of individuals and businesses. And that is why interest rates are low - businesses fear that demand is weak and therefore don't wish to invest - they are saving their money. This saving does not result in productive investment. The government can help, by either giving money to people in the private sector who want to spend but have no money, thereby boosting demand and encouraging investment or by investing in public goods themselves.

"Ah!" you exclaim, "eventually, interest rates will rise and then we will be bankrupt!"

If interest rates rise, it will mean that the price of bonds have fallen. What would prevent the government from buying these bonds back at less than they issued them for in the first place, exchanging interest bearing bonds for zero interest cash? They would turn a tidy little profit on it at the same time (though the idea that the government (representing the country as a whole) should be trying to make a profit(at the expense of the country as a whole) is utterly ridiculous).

It is absolutely true that if savings are sufficiently high and growth in productive capacity sufficiently low, that the people making savings have absolutely no hope of getting their money back. They will lose out to either inflation or tax (this is what will happen to the Japanese eventually). But, what do you suggest we do about this? Surely the only thing we can do is attempt to boost demand and investment through government spending. The "do nothing" charter will absolutely doom savers to losing their money, and mean the rest of us have fewer sunglasses at the same time.

Having said this, there is a definite limit to what government spending can achieve. All unemployed people are not the same and giving them money will not neccesarily increase real production. It will however increase demand which will encourage those capable of production to get on with it.

In my humble opinion, we shouldn't worry about debt, deficits or unemployment - an excessive concern for any is likely to be counter productive. We should instead be pragmatic and attempt to buld the best possible society while ignoring the twin evils of egalitarianism and market fundamentalism.

[Even more than his previous posts, this - Mark's final contribution here - only represents his own opinion and is not endorsed by The Last Ditch in any way, shape or form. Tom]

Twin Cities and Boondoggles

I am indebted to Tom Paine for suggesting that I contribute to The Last Ditch. Being new to the business of blogging, perhaps my initial offerings will be on the tepid side of hot stuff, but nonetheless here goes.

Tom and I have recently gone our separate ways after a few days of hard work, punctuated by a most agreeable dinner, in the south of France. At the dinner table were bright people who worked in Moscow, Kiev, London, and in my case Edinburgh/London.When I meet new people from Kiev it reminds me that Kiev is twinned with Edinburgh - a fact very few Ukrainians or Scots know. I suspect that, apart from me and a few others who have travelled fairly frequently between these cities, the only ones who know are the civic leaders(?) who decided to do the twinning in the first place.

Imagine the scene. The City Chambers in Edinburgh, some time around 30 years ago. "Who are we going to twin with, Hector? Birmingham has got Frankfurt, Glasgow has Nuremberg, and Manchester has had to settle for Chemnitz." (Where's Chemnitz I hear you say. A good question. Chemnitz United is not the world's best known football team. It is somewhere in the former DDR).   

MapofukraineTo Hector's credit he put his "O" Level geography to good use, and picked up the Atlas. "Fraser" he said, "we shall have to go further East". And so it was that his finger lit on Kiev, then little known to those outside culinary circles, and of course a large number of unfortunate chicken.

It was an inspired choice. When the high hedjuns (top people) from Edinburgh City  Council went to Kiev they would have been greeted by Party Officials in ill fitting suits, but doubtless also surprised by the beauty of the Ukrainian ladies. Glasgow, Manchester, Birmingham, eat your hearts out - Edinburgh had come out on top  (possibly in both senses of the word).

The beauty of the ladies of Kiev is well documented. In the late 1990's the European Bank for Reconstruction and Development (now there is a name from the past to be conjured with) held its Annual Conference in Kiev, and there was considerable disquiet ahead of the event because of the shortage of hotel accommodation of even a modest standard. The then President of Ukraine was quoted in British papers as saying words to the effect of " once the delegates get here and see the beauty of our Ukrainian women they will stop worrying about their hotel" - a thought which went down like a lead balloon with delegates wives.

Well, fortunately for Mrs Paine and Mrs Primrose the ladies in Cannes were not nearly so alluring, and Mr Paine and I contented ourselves with an excellent dinner, with convivial company which tried, and inevitably failed, to convince us that the world in general, and Britain in particular was in fine fettle. It would be a much better place if the best people felt able to stand for office without the certain knowledge that they would get either hacked to pieces by the gutter press, or wind up as a "celebrity" on TV. Sadly we live in a time when the pinnacle of most young men's aspirations is to be either a professional footballer, or to run a hedge fund. Politics nowadays is for the foolhardy, or so it seems. Who are the conviction politicians now?   Robin Cook is dead. Desert Island Discs today had Tariq Ali as the guest, and much as I dislike his views, I respect the strength and sincerity which he has to maintain an ultra left stance well past its sell by date.

Tomorrow I tackle a 500 mile drive to Cornwall, and a few traffic jams en route could put me in real Victor Meldrew mode, but in spite of dire warnings about Easter motoring there is hope.  Tonight on the News a reporter on a motorway bridge in Bristol was saying there was little traffic and no hold ups in sight, so there is hope for a clear run. That said, mother nature may have last laugh, as howling winds from the north are forecast to bring snow, which in infinitesimal quantities can bring Britain to a grinding halt. I shall take flasks of coffee, chocolate, and a little emergency ration of whisky, and will report on the odyssey in due course.

A New Settlement ?

Here is a piece from our guest blogger today, Guthrum. He wrote this while I was in Cannes earlier in the week, but it provides convenient "cover" for me today, while I get steadily sozzled on my birthday. Over to you, G.

400pxwilliam_hogarth_032As Tom is enjoying the south of France, he has been kind enough to allow me to share some of my thoughts on the constitutional challenges we all face.


It has been nearly one hundred and seventy years since the great Reform Act of 1832. This Act was passed as a rational attempt to reorganise political life and to head off the revolutionary undercurrents of the 1820's and 1830'€™s, in the post Napoleonic period.


Rotten boroughs like Old Sarum that had eleven houses and could return two MP's in the gift of the local land owning aristocracy, were swept away. Once passed the defects in the Act were apparent - the vote was based on a property qualification, for example. However, the fact that the reasons and conditions that caused it to be passed are barely remembered is evidence of the Act's success. The stability that it engendered spared Britain the convulsions of the revolutions that swept Europe in 1848.


In modern business parlance the Management of Change had been effective. Looking at the modern political landscape, I can see no sign of even of a willingness to even acknowledge that change is happening, let alone needs to be managed.


The Whitehall village is happy and secure in its two/three party system. Yet  voters are voting with their feet away from the current system, therefore depriving the political system of its legitimacy. The House of Lords has been tainted as a house of "experts"€™ and turned into a place full of appointees who owe their place to the patronage of the Prime Minister of the day. The PM enjoys the rights of the Royal Prerogative, and can safely ignore the wishes of both Parliament and Country.


The Monarchy is to be passed to a man, who appears to think that his constitutional position is a soap box to influence public policy. Charles Saxe-Coburg-Gotha-Battenburg is not an elected politician and his views may be of interest to the readers of Hello magazine, but should have no more bearing on an elected government than those of any other citizen.

This Government has fought a war on the whim of one man, and is betraying the freedoms that have been fought for.


The political landscape needs to be managed. There needs to be an acknowledgement of our fundamental freedoms in the form of a written constitution with arrangements to strike down attempts to collect our personal data, correspondence and break into our homes.


Political power should be returned to the towns and cities of this country, with any position of real power being an elected one; police chiefs, Mayors etc. Unelected quangos should be declared unconstitutional if they handle public funds. Tax raising should be on a local level, with funds for national defence passed upwards, not taxation collected centrally then distributed downwards. Education should be on the basis of excellence and need. We need as many superb engineers as we need lawyers. This can only be done at local level. Education must stop being a political football.


The House of Commons should be reduced by about half, and instead of involving themselves like over paid social workers in the minutiae of our lives, MP's should restrict themselves to matters of state, foreign affairs and defence.


Personally I see no constitutional role for a hereditary Monarchy.


Unless the management of this constitutional crisis is addressed, the State will assume more and more power over our lives, simply to protect itself. It will be the end of any pretence of this country being a representative democracy, let alone a participatory democracy.


What is your fear, and how have you overcome it?

(by our Guest Author today - Ellee Seymour)

I love words.  I love reading them, writing them, understanding them and delving into their origins. But when it comes to speaking them - well in public at least - I find that words fail me. Or rather I fail them.

It’s a strange and unwelcome feeling. I must be insane to admit that I would rather face the pain of childbirth any day than speak in front of an audience. I have some horrid past experiences to justify this; times when my body became tense and rigid, my throat as dry as cardboard and my voice shaking like a ragmop.

I have no idea how this fear originated. One expert questioned whether it was because I am the third of four children, and then there is the possibility that I may have inherited this fear from my father who was a very shy man.

I know I am not alone, I believe it is the biggest fear that people have. It’s rather like listening to a quiz show such as Who Wants to be a Millionaire when you know the answer to the £64,000 question while the contestant is desperately struggling to come up with the answer– it’s only easy if you know it.

Likewise for public speaking. While Jeremy thrives under the spotlight, and I have a husband who finds it as easy as knotting his tie, give me a pool of alligators to swim with instead, it’s a far less terrifying challenge.

Well that’s certainly how things were until last year when I decided to be more in control and I did two things – I had hypnotherapy with Mark from Winning Minds and joined Cambridge Speakers Club.

Since then, I am delighted to say there has been a slow, but marked, transformation, the difference in my speaking skills is very apparent. Most importantly, I can feel the difference, I am more confident. The racing pulse and nervous rash has lessened considerably.

I made my fourth speech at my Speakers Club this week entitled “Lord Nelson, My Hero”. For the first time I felt that I was able to control my nervousness and my wavering voice. I paused after paragraphs and the words pleasantly flowed off the tip of my tongue like never before. And I was able to make eye contact with the audience for the first time, I even smiled and looked as if I was enjoying it. I had excellent feedback from the audience too, it was almost thrilling. And best of all, the audience said they couldn’t believe I had ever been a nervous speaker, it was music to my ears.

I know I still need to work on my body language, the use of my arms, deciding how and where to stand, but I also know that comes with practice– and Rome wasn’t built in a day!

I also had a fear of spiders which I have conquered after attending a special course at London Zoo as a journalistic assignment for work.


Just as well because I think spiders are becoming even bigger each year, the huge ones won’t fit into my spider catcher.  I still prefer to keep them at arms length if their breadth exceeds the size of a dinner plate!

Just to prove how brave I was, you can see the photo of me holding a giant tarantula in the palm of my hand  taken at the end of the day. Now if I can do this, then I can surely learn how the skills of public speaking.

So tell me, what is your fear, is there a difficulty in your life which you are also trying to overcome? Is public speaking a problem for you too?