Quote of the day...

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On the "gulf" between rich and poor:

Actually Neill, never in human history has there been a smaller percentage of humanity living one failed harvest away from communal starvation. Is the divide between rich and poor actually increasing and more extreme than, say, in the eighteenth century? Or any time before then actually. In reality never has a larger percentage of humanity been, by any reasonable definition, middle class, than right now.

The fact large areas of poverty exists at all in our technologically advanced age is a dark miracle wrought largely by state imposed impediments to trade, insecurity of private property title and many other government policies of the sort Matt Damon (that tireless supporter of state education whose children are in private schools) strongly approves of.

Absolutely.

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On the valuing of education...

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And how state systems don't value teaching well. At least not compared to this:

Kim Ki-hoon earns $4 million a year in South Korea, where he is known as a rock-star teacher—a combination of words not typically heard in the rest of the world. Mr. Kim has been teaching for over 20 years, all of them in the country's private, after-school tutoring academies, known as hagwons. Unlike most teachers across the globe, he is paid according to the demand for his skills—and he is in high demand.

Kim is paid this much because the product he provides - or rather its benefits - are valued very highly. And the hagwon system rewards the best teachers because they are what the pupils want:

The most radical difference between traditional schools and hagwons is that students sign up for specific teachers, so the most respected teachers get the most students.

This is a strikingly different world from that we are familiar with - a system where the best teachers get the biggest reward and where the choices of the customers, the learners, drives that success. In Korea the failings of the state system lie behind the hagwons, that coupled with the pressures to achieve socially, academically and financially.

And the conclusion? It might be this:

...in an information-driven global economy, a few truths are becoming universal: Children need to know how to think critically in math, reading and science; they must be driven; and they must learn how to adapt, since they will be doing it all their lives. These demands require that schools change, too—or the free market may do it for them. 

Certainly food for thought and a challenge to the deadening government systems we see in the UK.

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Capitalism works and we should celebrate

After all there's an International Workers Day, why not an International Capitalism Day.

Here in England we've got rather used to being told just how bad capitalism is. And how a decent society is only possible because of the control and regulations placed on that capitalism by the benevolent hand of the government. There's sort of a point to this argument - it justifies government (and the millions it employs to administer those controls and regulations) and it reminds us that we can never be completely free.

But what is missing in all this is a celebration. Something that recognises just how fantastic capitalism has been for us, how it allowed us to escape from the bitter toil of subsistence agriculture, how is gave us wages to spend and, in time, a surplus from those wages to spend on pleasure. We seem to have forgotten just what capitalism did for us.

Fortunately, we get a glimpse still of capitalism's wonders:

"There have been big changes," she said, sitting in her office on an industrial estate 20 miles from the city's market. "Yiwu is changing every year - new buildings, new markets, new products and also many new customers." Yu Hexi, 52, the manager of Yiwu Beautiful Life Flower Co. Ltd a local firm that makes the imitation flowers that adorn the heads of women across Europe has fared even better.

"I never imagined, or even dared to imagine, that I would enjoy such a good life now," he said. His parents were once part of a rural Communist production team. Now, he runs a company with an annual turnover of more than half a million pounds.

"When I was little, we were really, really poor. My parents were peasants.

We didn't have enough food. Now our family has three cars. We built the best house in our village.

Multiply Yu Hexi's experience a million times and you get an idea of what capitalism is doing for China - and, because we're buying the things those Chinese businesses are making - for us too.

But it's not just the people who run the businesses, it's the workers too:

"There have been big changes in recent decades," she added, without pausing from her packing duties on the production line. "The city is getting better year after year. The most important change for me is that more factories are bringing more job opportunities." Shen Youfeng, 52, who works in the factory alongside her 18-year-old daughter, Feng Xueqing

More jobs, rising wages, the benefits of urban life and the chance to progress through education, hard work or both. This is what that capitalism brings to China and what we should be celebrating because we only have those things today because of capitalism.

The evidence of the last three decades - a time of unprecedented improvement in the lives of the world's poorest people - tells us that the idea of a free market, of free trade and of capitalism provides the sort of social and economic improvement we want for everyone. Yet we never pop open the champagne corks or put out the bunting to celebrate what free enterprise and free trade has brought the world.

If you want to reduce poverty then go buy things made by poor people in poor countries. And this is also why everyone who is even vaguely lefty in outlook, even a tiny bit concerned about improving the lot of the poor, should be pro-trade, pro-globalisation, in short, should be neoliberal capitalist running pig dogs intent on exploiting the labour of the poor.

And the reason for this is that it works.

Every other approach to improving the lives of the poor has failed. Every single one from socialism, fascism and communism to import substitution behind trade barriers and the grand state approach so loved by central African despots (and their French sponsors).

Capitalism may seem "unfair" - some people got pretty rich - but the deeper truth is that this unfairness is a chimera, a distraction from the real business of globalisation, free trade and free enterprise. And that business is making us all better off. Not just in economic terms but in every measure of human development. Free enterprise and free trade really do make our lives better. Every time.

Capitalism - free enterprise, free trade - made us rich. It's making the Chinese rich. And it will make Africans rich. Let's celebrate it just for once.

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Free speech, free enterprise, free trade...

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...and while I’m about it free choice and free markets.

It hurts doesn’t it! I’ve been struck by the swiftness with which people have told me that, yes, believing in free speech, free enterprise and free trade are great but that this doesn’t mean supporting free markets. Because free markets are a bad thing.

Don’t you just love the division of freedoms? We launch enthusiastically into supporting freedoms where we like them but feel unable to back those freedoms where they don’t suit our prejudices. So here’s a little game with my three freedoms.

Supporting free speech means:

• Opposing the arresting of people for the ‘crime’ of causing offence - free speech means having the right to offend and to be offended.
• Believing that there is no institution, religion or organisation that is above criticism or immune from satire – free speech means having the right to criticise, to question and to condemn
• Rejecting the banning of advertising – marketing communication is speech and should be free, to suggest otherwise is to undermine free speech

Supporting free enterprise means:

• Believing that there are almost no circumstances where “more regulation” is either right or appropriate – free enterprise can only work where markets are free
• Rejecting the concept of ‘market failure’ – markets always and everywhere, when left to their own devices, succeed and failure is the result of intervention
• Opposing market fixing devices such as guilds, registrations, subsidies and regulations that restrict market entry – free enterprise requires a level playing field not a protected system

Supporting free trade means:

• Rejecting managed markets – and this includes so-called “fair trade” – since they prevent free exchange and free enterprise
• Opposing protectionism in all its forms whether regulatory or financial – tariffs, duties, anti-dumping rules, quotas and environmental or employment regulation
• Supporting the liberalising of international markets in finance, government services and insurance – without free trade in these areas, other trading arrangements are compromised

This is the deal with freedom – it doesn’t come in tidy little units where we can have a little free speech but not have free trade. If you want it you have to want it all. So when people try to tell me that they want a free press but not a free market in news (because of the big bad Murdoch) then they are, in truth rejecting that free speech. When people say they want free enterprise but that free markets must be controlled, I know that they don’t support free enterprise. And when people tell me they support fair trade (and suggest that this is somehow ‘ethical’), they are no friend of freedom.

All these freedoms interlock – dividing them doesn’t work and diluting one freedom compromises another. It’s hard to have free enterprise without free speech, free trade requires free enterprise and the ability to choose, interact and exchange is central to any society laying claim to being free.

Those three things – free speech, free enterprise and free trade – are the things that matter. And we know they’re working when we have free markets, free assembly and free choice.

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How the state still wants to crush banking innovation...

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Or something like that;
 

Ethan Clay, 31 years old, opened Whalebone Café Bank seven months ago in his shop, Oh Yeah!, a year and a half after he was hit with $1,600 in overdraft fees from a local bank where his account was overdrawn by a series of checks.

Mr. Clay says he wants to offer an alternative banking experience, and has accepted small deposits and made small loans. He claims he isn't subject to banking rules because his operation is a gift-card savings account.

"It's a strange case, we don't have the authority to go close an ice-cream store," said Ed Novak, spokesman for the Pennsylvania Department of Banking. "But we are going to do something. You can't mess with people's money."

Those people with their money - they've a choice between Mr Novak's approved (and failed) bank system and Mr Clay's creativity.

...customers who make deposits earn interest in the form of "exclamation dollars." A $100 deposit is worth $5.50 a month that can be spent on ice cream, waffles and coffee in his store. It works out to be a straight 5.5% monthly interest rate, he said.

Whalebone Café Bank also loans money. Two weeks ago, Ryan Howard, a 33-year-old designer and photographer who occasionally works for Mr. Clay, said he needed $510 to attend a therapy workshop. He borrowed the money from Whalebone Café Bank, and is paying the money back at $60 a month, and will be charged $25 for the loan.

Mr. Clay said he has $550 from depositors and has loaned $1,700, an amount that includes some of his own seed money. "My goal is to get to $100,000 in deposits by Dec. 21," he said. "This is the prototype, but I hope to become the neighborhood bank."

This innovation and creative - capitalism at its finest - must be crushed by the grand alliance between the big banks and big government. A pox on them!

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All business conducted within the law is good business...

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What is it about politicians wanting to pass moral judgement about business? Today it’s Nick Clegg’s turn:

The Deputy Prime Minister will launch today a campaign for a “well-rewarded workforce”, saying that businesses owned by their staff are more dynamic and have higher morale.

He wants to encourage companies to follow the model of John Lewis, the department store group which is owned by its employees and distributes its profits between them.

Mr Clegg’s call for “responsible capitalism” will come as City firms are preparing to pay executives billions of pounds in bonuses, despite pledges from politicians to curb excessive pay and growing hardship among ordinary families.

Those words – “responsible capitalism” – echo the sentiment of interventionist politicians down the years.  From Heath’s “unacceptable face of capitalism” to Miliband’s crass distinction between ‘producers’ and ‘predators’, we find politicians seek political capital from the making of moral distinctions between ‘good’ and ‘bad’ businesses.

None of this is to say that it’s a bad idea to reward employees with shares – this cements their interest in the firm’s success and acts as a spur to profitability. But it is a matter for the owners of businesses not a concern of government – granting some sort of “right” to demand that the company gives shares to employees is a pretty gross intervention in those businesses however much we might think it a good idea.

It is simply not the role of politicians – however well-qualified we make think we are – to pass moral judgements about capitalism. I can respect someone who believes that capitalism is immoral – they are wrong but honestly wrong – but the person who says that some capitalism is bad and some capitalism is good is trying to have his cake and eat it.

For my part, I believe that capitalism is inherently moral since it is the only form of economic organisation that reflects the primacy of individual choice and preference. All other forms – those imposed by governments in a futile search for man’s perfectibility – are immoral since they require that some people are told “no you can’t make that choice”.

And when we look at the distinction made between ‘good’ and ‘bad’ business, it has more to do with the effectiveness of the different firms’ public relations than a real understanding of the morality or otherwise of that business. We like John Lewis because it does nice advertising and runs Waitrose (where the supermarket-hating commentariat prefer to shop) – if Provident Financial adopted the same ownership approach would we suddenly approve of selling expensive loans to poor people?

People start businesses with the intention of making themselves some money not as some noble social project. If people didn’t do this all the lovely stuff we take for granted – you know, the schools and hospitals – wouldn’t be there. If smart young people didn’t work eighty-hour weeks on trading desks the City of London wouldn’t be the world’s biggest financial centre producing £100 billion and more in added value.

If we start pretending that business isn’t about earning a living, if we begin to force our prejudices onto business owners, we set off down a road to a less wealthy, less creative, innovation-free society. Rather than condemning the city trader for his money, we should celebrate the fact that an ordinary guy from Dagenham or Sidcup can make that kind of cash and enjoy the good life that goes with it. It is wrong to make some moral distinction between the hedge fund manager and the artisan baker, to pretend that one is ‘good’ and the other ‘bad’.

All business conducted within the law is good business and the only irresponsible businesses should be businesses that fail.

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Dear Nick, competition doesn't mean "flogging off to the highest bidder"

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When some people speak of ‘privatisation’ they refer to the process of commissioning private businesses to deliver public services through some form of tendering process. And it leads to the Cardhousian contortions of Nick Clegg:

In a speech at a London hospital, the Lib Dem leader will say he supports the use of private providers in the health care service and that they have improved patient choice.

However, he will add: "It's not the same as turning this treasured public service into a competition-driven, dog-eat-dog market where the NHS is flogged off to the highest bidder."

So there you have it – after all the shouting about how the Liberal Democrats will be different, about how they will die in the ditch to protect the beloved NHS from evil Tories what do we get? Just what we have already – a system using private providers but where those providers are accountable only to NHS managers not to those using the service or to elected officials (and don’t give me all that nonsense about accountability to the Secretary of State for Health).

Now I’ve trawled through the collected comments (well perhaps not all of them) of health ministers, have looked at the proposed changes and nowhere in all this can I see any proposal – not even an inkling of a proposal – that the NHS will be “flogged off to the highest bidder”. There is a discussion as to how we improve health outcomes and a debate about the merits (or indeed demerits) of competition in helping deliver these improved health outcomes but that isn’t about selling chunks of the service off, it isn’t about ‘cherry-picking’ and it isn’t really much of a change from the programme of change instituted under the last Labour government.

The idea of ‘any willing provider’ is the central element of these pro-competition policies – this isn’t privatisation any more than using external suppliers is privatisation. What AWP is about is preventing NHS commissioners from closing off the market by saying they have to consider any organisation that is able to comply with the requirements. The result should be a more diverse supply to the system and end of the current situation of bureaucratic inertia.

As competition dawns there will no doubt be many providers, both larger and smaller, seeking to offer so-called integrated approaches in particular communities, which are, in fact, a byword for long-term monopoly. Once the commissioning bodies are dependent on the new arrangements the provider can turn the handle, raise prices and lower quality as much as it wants.

If this happens, it will be an expensive route back to what we have today in most public services: costly, unmoveable, low-quality, low-innovation services. The solution, of course, is for the principle of diversity of supply – allowing no one to become dominant – to be an absolute non-negotiable in local public service markets.

The comment above – from a Liberal Democrat with expertise in health care markets – signals the problem we face. The current situation isn’t good enough and the core solution of pumping ever larger amounts of cash into the service isn’t working well enough (which isn’t to say the cash isn’t welcome, merely to observe that health outcomes haven’t risen in line with that spending increase). However, within that diversity of supply we have to recognise that price must be a consideration in commissioning decisions – this isn’t about simply taking the cheapest but does recognise that price is a driver of efficiency and improved outcomes.

My big worry is that populist considerations fuelled by healthcare producer lobbies and trade unions (and sucked up by an increasingly clueless Labour party) will lead to a big climb down and we will lose the momentum towards using competition to provide accountability for NHS decision-makers and real advances in health outcomes. And it seems more of the evidence points to competition as the most important factor in driving improvement:

This is particularly ironic given the strong evidence now emerging that hospital competition not only works abroad, but also in the UK. Dr Zack Cooper of the London School of Economics and Professor Carol Propper of Imperial College have each produced studies showing that hospitals in more competitive areas performed better on quality and efficiency than those in less competitive ones. The LSE’s Centre for Economic Performance has shown that competition increases managerial quality in hospitals. Dr Nick Black and colleagues at the London School of Hygiene and Tropical Medicine have shown that the much-maligned independent sector treatment centres, introduced by the Blair government to shake up provision of simple elective procedures such as cataract removals and hernia operations, have produced work of equal or better quality than their NHS equivalents.

None of this is about changing the NHS model of free care at the point of need – instead it recognises that there is more than one way to deliver this promise. Breaking away from the hideous monopoly of the centralised NHS – a process begun haltingly under Blair – is essential if we’re to get the full benefit of that “investment” put in over recent years.

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Joseph Rowntree Trust argues for a subsidised housing market with mortgage controls - self-interest or stupidity?

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According to a report from dear old JRF, there is an urgent need for 'reform' to prevent another bout of boom and bust in the housing market. This seems to be the gist of their proposals:

Credit controls, such as maximum loan-to-value mortgage ratios, should be considered, the report argues. The taskforce acknowledges this could restrict access to mortgages but says reducing volatility is ‘in the wider public good.’

So we ration mortgages in order to prevent house prices rising and instead shove people into a tenure that isn't what they prefer:

The report says more social rented housing with secure tenure is required as it is the most suitable option for households which seek long-term security but cannot access the mortgage market.

And to do this we need more government spending:

The report says this can only be delivered if there is sufficient subsidy.

Finally, to cap it all we further hobble the mortgage market by removing any downside to borrowing (remember dear reader that this was one of the problems with the US sub-prime market and look where that got us):

The report also argues for a better safety net for borrowers, including making sure borrowers have more information and tools to assess mortgage affordability and a partnership insurance model which would provide cover for mortgage capital and interest payments in the event of loss of income through redundancy, sickness or accidents.

So there you have it - government-approved mortgages, subsidised house-building in the wrong tenure and a 'safety-net' that will act to raise the cost of borrowing. All underlined by a steady increase in government spending on housing. And these people think that will "stabilise" the market?

Do remember, of course, that Joseph Rowntree own thousands of houses for rent and are a significant developer in that sector. So maybe this is just self-interest!

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Vince is right about business and competition - but his solution is wrong, very wrong.

We have to disagree with Vince don't we? After all his rhetoric about spivs and gamblers, his comments about capitalism, his anti-business stance - all these things make him wrong and bad?

Well not exactly. Indeed Vince's comment about business and competition is absolutely spot on:

Capitalism takes no prisoners and kills competition where it can, as Adam Smith explained over 200 years ago. I want to protect consumers and keep prices down and provide a level playing field for small business, so we must be vigilant right across the economy – whether in the old industries of economics textbooks or the newer privatised utilities and cosy magic circles in auditing, law or investment banking. Competition is central to my pro market, pro business, agenda.

Understand this dear reader - business is, to the very core of its being, anti-competition. As a businessman my aim is - or should be - to secure some form of monopoly or monopolistic advantage so as to get closer to the nirvana of maximised profits. Whether it's the market trader who objects to another swagman taking a stall in the covered market, the banker who persuades the regulator to prevent market entry or the steelman who bribes the government party to introduce protectionist anti-dumping rules. Or even the horny-handed farmer moaning about the inadequacy of subsidies. All these businessmen - and women - are not interested in promoting competition. They are interested in reducing competition - at least so as it favours their profitability.

Vince referred to Adam Smith who famously said:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices…. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary.

And that was what Vince was on about - the last labour government (and governments elsewhere and before) facilitated a corrupting association between bankers, financiers and governments that allowed a vast conspiracy against the public interest to damn near destroy our economy. We allowed - just as we have done with health, with education, with agriculture and (increasingly) with social care - the production of the service to take precedence over the consumption of the service. Government has acted against the interests of the people and in the interests of rent-seekers (and spivs and gamblers) seeking to profit from monopolies of service.

We have forgotten what else Adam Smith had to say:

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.

I'm not sure Vince - with his faith in the power of 'better regulation' quite understands - almost always, regulation acts against the interests of the consumer by reducing competition, preventing market entry and stifling trade. So, while Vince is right about business not liking competition he is wrong about how to protect that competition:

But let me be quite clear. The Government's agenda is not one of laissez-faire.

And that's where you're wrong, Vince - if you want more competition you have to get Government out of the way, to stop giving in to special pleading, to break down the monoliths of health and education and to institute again a free-trading, free-market, laissez-faire economy. It will work - and we, the consumers, will be grateful for the wealth that our liberty brings.

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A Good Day Out - Leeds Pannier Market and some other stuff

Leeds Pannier Market - really excellent trip to the city. Bought some funky veg (kohlrabi, yellow zucchini and beetroot), some really nice pancetta - carbonara here we come - and a gooey chocolate cake. All that plus splashing out - £2.99 - on some jewellery for Kathryn!

What more could we want? Oh yes - a fine lunch - which we obtained at The Cross Keys in Holbeck. Two cracking sausage sarnies and some beer brewed at the Goose Eye Brewey in Keighley. Wonderful.

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Choice, markets and the middle-class busybody

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Despite the best efforts of us all to educate about the wonders of market mechanisms, the liberation that choice brings and the salvation that is the price mechanism, I have concluded that some people are seemingly lacking in the genes that allow for the grasping of this concept. Billy Gotta Job appears to be in that class of deprived folk – ironic as his post touching on asparagus and education discusses this very type of genetic lack:

And it transpired that those who could smell the disgusting whiff from their own urine could also detect it in that of their fellow participants; whilst conversely those who thought that their own excretory juices were pure and undefiled were equally convinced that everyone else’s were as well. So it is now believed that everyone produces post-asparagus-munching foul piss, but only those with the necessary genome can detect the fact.

Now the point of all this isn’t to provide a long explanation of classical liberal economics – others have done this before me and better – but to consider how that very “…perspective rooted in middle-class volition and middle-class means…” that Billy talks of creates a belief that other people are not capable of exercising choice – mostly because the choices they exercise when given that chance seem not to match the choice us middle class folk might make in that circumstance.

You will have heard often from your friendly neighbourhood, middle-class busybody how controls are needed on advertising. Not because that busybody is taken in by the adverts – oh no – but because other, less intelligent folk, probably working-class and smelly will be taken in by Ronald McDonald and will rush off to fatten themselves up at his emporium. This – our busybody believes – is the wrong choice and must be stopped (or rather because banning Big Macs is too shrill, the argument is to stop them advertising – to remove their right to free speech).

And, every time the subject of education is raised, you will hear the same arguments. Giving parents a choice only confuses them – I mean what do the poor dears actually know about education? Well, given we’ve an education system that routinely condemns a third of young people to a semi-literate existence, unable to access work, confused, angry and excluded – a system created and managed by middle-class busybodies – there is a sound argument for change. And why not give a choice? After all before compulsory state elementary education was introduced the vast majority of children attended (fee-paying) schools and literacy levels were as good – maybe better than they are today.

So choice is a bad thing – yet it is the basis for markets to work. Without choice you have monopoly and this – as we know (and the public sector demonstrates every day) – brings higher prices, lower consumer surplus, inefficiency and diseconomies of scale. Yet we tolerate unnecessary monopolies in health and education – under the careful direction of expensive qualified middle-class busybodies – because we’re told that markets are a bad thing. I argue – with a great deal of support – that markets (cp) bring lower prices, consumer surplus, efficiency and economies of scale.

There may be circumstances – geographical restraint or unavoidable free rider issues – where markets do not operate well but this is clearly not the case for either health or education (and perhaps more controversially security) since we can see effective and efficient markets running parallel to state monopoly provision.

But the real issue to me is a moral one. If it is possible for me (or anyone else) to have choice in education and health, the Government should not have the right to reduce or remove that choice through fiat. This doesn’t mean I get my choice – the oversubscribed school remains an oversubscribed school – but it protects my rights. And choice requires that the barriers to market entry are removed – hence free schools (and I hope in the future free hospitals).

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Oh dear, free markets make us less free do they?

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Now I don’t want to scare y’all but we’re all doomed.

At least in the opinion of two clever chaps writing in today’s Sunday Telegraph. They start well:

"According to the economist Friedrich von Hayek, the development of welfare socialism after the Second World War undermined freedom and would lead Western democracies inexorably to some form of state-run serfdom."

Not a lot to argue with there – Hayek, along with Popper, was the man who exposed socialism for what it really is: a threat to our freedoms. But then Peter Boone and Simon Johnson go and spoil it with this execrable nonsense:

Hayek had the sign and the destination right, but was wrong about the mechanism. Unregulated finance, the ideology of unfettered free markets, and state capture by corporate interests are what ended up undermining democracy both in North America and in Europe.

Oh dear, free markets make us less free do they?

This simple sentence contains its own contradictions – the words “free market” and “state capture by corporate interest” do not sit together. After all the state is captured (by whatever interest) in order to fix things to the benefits of that interest. That, my clever friends, is neither “free” nor a “market”.

More importantly, Hayek was absolutely and specifically right in the reasons for the problem – the inexorable expansion of the welfare state. And there, at the heart of the credit crunch, lie the real issues – corporate welfare in the form of guarantees to banks and individual welfare in the form of requirements to bend lending rules to match “social outcomes”. Yet the new masters of the universe are those grand men, trained in dirigisme by France’s grand schools, who propose further intervention, direction and control as the solution.

Our bloated welfare systems suck up nearly 20% of GDP – we’ve ended up like the wealthy family who supports Uncle Edward out of duty, supplying his whisky, allowing him to lunch out with friends and to stay in the old house despite him contributing precisely zero to maintaining the family’s wealth or income. And worse still the rest of the family has been spending the kids’ inheritance on trips to the theatre, season tickets for the opera and generally living high on the hog.

We may not like what has happened. We may be righteously angry with the bankers. It may be imperative to make substantial changes to the way financial systems operate. But if you think – like these two clever chaps do – that the “market” for money is in any respect free, unfettered, unregulated or gung ho, think again. Along with property markets, finance is the most controlled, interfered with, worried over and state-directed sector of our supposedly free system.

The current problems are a failure of regulation rather than a consequence of freedom. And we are to believe that putting in place a new super-structure, new rules and different oversight will make it all better? We’ll be back – in five, seven or ten years – with a new crisis, another recession, another failure of regulation. But we’ll clutch ever tighter to the welfare state that protects us failing to recognise that it is that very welfare state that, like a giant parasite, is eating up our wealth, our authority and our civilisation. Hayek was right and these two ever so clever chaps are wrong – intervention, regulation, control and state-direction are the problem not the solution.

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Of course markets work - especially free ones

As you all know I like markets – those grand municipal institutions like Kirkgate Market in Leeds (pictured above), little local covered markets like that at Keighley, great street markets in places like Walthamstow and Skipton. I like farmers markets, continental markets and pot markets. And it goes without saying that because of this I like free markets.

What I don’t understand – although I have tried – is why otherwise intelligent seeming folk like Susan Hinchcliffe can make sweeping statements saying that “free markets don’t work”. Especially when she works for a business organisation. Indeed, this sweeping ‘anti-market’ statement is really common – and hardly ever challenged.

Some folk seem only to like markets where everyone is small, where there are no large dominant organisations and no bad capitalists. Just friendly smiley folk talking to you over a market stall or serving you at their shop counter. And the way to do this is to tax big businesses and businesses doing or selling things we disapprove of (gas guzzling cars, premium lager in cans, cigarettes, imitation samurai swords and air travel). Or better still to ban them altogether.

This makes me cross. Firstly because banning things is a blunt – and mostly ineffective – weapon but mostly because really free markets would do just what these folk want if we stopped messing about with them! Why do you think large businesses support environmental auditing requirements, extensions of worker rights, tariff protections, the common agriculture policy, expensive city centre car parking, large regulatory quangos and an array of market controls too bewildering to describe?

Have you guessed? Big businesses like all this regulation because it keeps small businesses from competing! The big car manufacturers lobbied hard for OEM parts protection – and Nick Clegg’s euro-pals said yes and closed down the free market for car parts. All that banking regulation rather suits the banks and will continue to do so as it makes it really hard to set up a bank – keeps down the competition! And have you ever wondered why the newspaper industry is so keen on controlling the Internet and stopping new competition from self-generated news? It wouldn’t have anything to do with stopping competition would it now?

So next time you hear the terms “market failure” or “free markets don’t work” remember the small trader on your local market or the corner shop in your village. And note that they struggle because Government tries to control markets – through taxes, through regulation and through stupid laws. And remember that, despite all this, despite the efforts of government to do the bidding of big business, markets still thrive, still work and still deliver value for you and me.

Free markets do work - every time!

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