Quantitative easing is a corporatist con

Back in August, the Bank of England claimed more quantitative easing was necessary for the sake of the economy. Detractors said that was just an excuse to offer more subsidy to a corporate cartel. Who do you think was right?

Yesterday, the Telegraph reported that corporate borrowing under the Bank’s latest QE is far higher than expected. The Bank has bought £5 billion in corporate bonds in just three months.

So a few big corporations have taken advantage of ultra-cheap borrowing. What about the rest of us?

The Bank’s Governor, Mark Carney, has taken credit for preventing the post-referendum slump that has never even looked like materialising. That’s fantasy, to put it mildly.

There was no sign of a slowdown when he announced the measure, as I wrote at the time. It was based on nothing but Project Fear propaganda.

But QE and ultra-low interest rates do have long-term effects – and they’re extremely damaging. Asset bubbles. Zombie banks. Too much credit. Too few savings.

A systematic transfer of wealth from the asset-poor to the asset-rich.

To manipulate the price of capital is to misallocate it. Central bankers may be hubristic enough to believe that they are managing the economy, but, in reality, they are merely stoking the next financial crisis.

When public bureaucrats set the price of capital – offering handouts to Big Business in the process – free-market capitalism has been seriously corroded.

Beating the corporate oligarchy requires breaking the monetary monopoly.

Brexit is changing Parliament for the better

Yesterday the government published a Bill to withdraw from the EU. It’s an incredible moment. Not just because Eurosceptics have been waiting for it for decades. But because it shows how the people have forced politicians to change.

Throughout most of my life, every piece of legislation on the EU has been about more integration. The European Communities Act. Maastricht. Lisbon.

As a Eurosceptic MP, I always used to vote with the minority in the ‘No’ lobby.

But that has all changed. Since the Referendum Act, Eurosceptics have been voting ‘Aye’ on bills about the EU – and we are in the majority. In December, most MPs voted to trigger Article 50 by March. Both the Conservatives and Labour will be whipped to back the Article 50 Bill.

The remarkable thing is MPs haven’t changed their views. Parliament is still made up of a majority of Europhiles. But the people have left politicians with no choice.

The economist Milton Friedman made this point best when he said:

“I do not believe the solution to our problem is simply to elect the right people. The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing.”

I keep that quotation on the wall of my office.

Some worry about the fact that Theresa May, along with majority of her Cabinet and MPs, campaigned to Remain. They see a non-Eurosceptic running a Brexit government as a bad thing.

But I think the approach we should take is the precise opposite. We have made it politically profitable for the wrong people to do the right thing. This is what success looks like.

The British people have made the entire establishment to reverse course even without changing the personnel. That’s some revolution. Just think of how much more we could change.

Why Labour loves EU red tape

At PMQs yesterday, ex-Eurosceptic Jeremy Corbyn defended EU regulations, and attacked the prospect of a US-UK free-trade agreement. The line of questioning was revealing. Brexiteers want to enable free trade. Labour want officials to restrict it.

Labour MPs still campaigning to keep Britain in the single market – and, thereby, effectively in the EU – make out that it has to do with trading access.

But that argument doesn’t hold up. We don’t need to have the same rules as EU countries to trade with them – and do so on good terms. Access to the single market doesn’t require membership.

The truth is, for many on the left, the rules are really the goal. That’s what the single market is, after all – the European Union’s regulatory system.

Corbyn and co are hostile to a US-UK trade deal because they see consumer choice as a bad thing. They don’t trust us to make decisions about what we buy, eat, or drink for ourselves. They want officials to decide for us.

At its core, this is a debate about the nature of society. Many on the left can’t accept that trade happens when it is mutually beneficial for both parties, not when the state coordinates it. They see progress as something that happens through top-down planning, not bottom-up evolution.

But, in truth, society is self-organising – as the market demonstrates. Freedom has created prosperity. Central planning has only ever held progress back.

Many supporters of the EU sincerely believe that officials in Brussels can run our lives better than we can ourselves. But we’re leaving that behind. Brexit means more power for individuals to organise themselves. It truly does mean taking back control.

 

This Parliament needs to back Brexit

Yesterday’s Supreme Court ruling has cleared the way for Brexit. MPs have already backed triggering Article 50 by March. If they drag their heels now, we can always elect a new Parliament.

The real risk in yesterday’s ruling wasn’t the government losing the case. It was that the court might give the devolved administrations a veto over Brexit, or specify what kind of legislation the government would need to put before the House.

But that didn’t happen. The judgment makes it very clear that the next steps are for Parliament, and Parliament alone.

That’s good news. It means the government can put forward a simple one-line bill. The Brexit Secretary, David Davis, has signalled that he will advance legislation within days.

Watching MPs question David Davis in the House today, it was striking how continuity Remain has dissipated. Europhile MPs have been reduced to points about process. The argument has been won.

But if MPs, or peers, do still want to be obstructionist, we can always settle the question at the ballot box. A huge majority of Parliamentary constituencies voted Leave. The PM wouldn’t have much trouble securing a mandate for Brexit – or, indeed, radical reform of the House of Lords, should that prove necessary.

Either way, Britain will be leaving the European Union. So let’s just get on with it.

The will of the people on Brexit will be still be heard

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UKIP Leader Paul Nuttall MEP has said the Supreme Court’s decision to deny the Government’s appeal and insist that Parliament vote on the triggering of Article 50 would not jeopardise Brexit.

“This decision is hardly a surprise but in the end it will make no real difference,” Mr Nuttall said.

“The will of the people will be heard, and woe betide those politicians or parties that attempt to block, delay, or in any other way subvert that will.

“Other than making clear that this is a decision of the whole United Kingdom, rather than its constituent parts, what we can clearly see is that it will embolden those who rail against the decision of the people. It may give heart to those in the EU, used as they are to ignoring their own people, to attempt to play hard ball in the negotiations.

“But in the end I am convinced that though this skirmish has been lost in the courts, the war will be won.”

Statement on this morning’s Supreme Court Ruling

“I am disappointed by the outcome of this case. There were strong legal arguments put forward on both sides, and ultimately I had hoped that the government’s case would prevail because it would have reduced the risk of even greater delay to the British people’s decision to leave the European Union.

“Nevertheless, the ruling has now been made. In the United Kingdom, when something goes against us – an election, a referendum, the final process in a legal case – we accept the result and move on. That is the nature of living in a democracy. I fully accept that this result has gone against my views, and now it is the responsibility of our Westminster Parliament to enact the will of the British people and get us out of the European Union.

“Just as I must accept the result of this court case, so too must our MPs and Lords accept the result of the referendum. Exactly seven months on from the declaration of the referendum result, we are still waiting for the decision of the people to be enacted. I call upon Parliament now to pass legislation for the United Kingdom to leave the European Union as a matter of extreme urgency. The democratically-expressed will of the British people can be frustrated no longer.”

What a US-UK trade deal looks like

When Theresa May goes to Washington this week, she will eat food, drink wine, and use goods approved by American regulators. To have free trade, we just need to make it legal to buy those same, federally approved products in the UK – via mutual standards recognition.

Britain has spent so long in the single market, many pundits have come to believe that international trade is impossible without uniform standards. But that’s simply not true.

We don’t need to have the same rules in order to buy each other’s goods. People in different countries have managed to trade for millennia without a common regulatory system.

Instead of imposing new standards – like TTIP – our deal with the US will likely be based on mutual standards recognition. That means whatever can legally be bought and sold in the US we will be able to buy and sell in the UK – and vice versa.

Mutual standards recognition allows a trade deal to be done quickly – within months, as Trump’s team has suggested.

Moreover, it promotes systems competition. It incentivises regulators in both countries to work in consumers’ interests – because consumers will choose which regulator’s products to buy.

Of course, both sides will want some caveats. From our end, that might have to do with chemicals in food. From theirs, it could be drug patents.

But the basic point is that, when dealing with a developed country with similar standards, we don’t need new rules to permit trade – or a new layer of officialdom to make them.

For Britain, permissions-based trade is soon to become a thing of the past. We’re about to rediscover what free trade means.

Inequality is a problem – but redistribution isn’t the solution

Oxfam is once again touting redistribution as the solution to inequality. That’s a false promise. NGOs seem to see private property itself as the problem. But to reduce inequality, we need to recognise that the erosion of property rights is often what causes it.

Inequality is actually falling on some measures – especially here in the UK – while Oxfam’s methodology for calculating it is deeply misleading.

Where it has reached extremes is in the pay of top corporate managers. In 1998, the average pay of a FTSE 100 boss was around 50 times the average UK wage. Now it’s 180 times.

But the issue here isn’t that getting rich is bad per se. The world as a whole is getting better off. We shouldn’t see wealth as a zero sum game – because it’s not.

The problem is that CEOs are being rewarded for failure. Their pay rises far outstrip any increase in the value of the companies they lead. Managers are gaining at shareholders’ expense.

Why?

Because shareholders have lost control. Their votes on managerial pay aren’t binding. And most no longer hold their shares directly, but rather through funds. The proportion of UK equities held by individual shareholders fell from 50% in 1953 to just 12% by 2010.

Redistribution won’t solve a problem caused by poor corporate governance. Moreover, do we really think one form of expropriation can be corrected by another? Shouldn’t we aspire to cut it out full stop?

Rather, the answer is to align the interests of managers with those of owners. CEOs should be made much more legally accountable to their shareholders. Corporate democracy needs to be restored.

To beat the CEO kleptocracy, shareholders must take back control.

Let’s be optimistic about President Trump

Today Donald Trump becomes President. Two months on from his election, some British politicos and pundits still seem to be in a state of mourning. It’s time to snap out of it.

From Britain’s perspective, there is a lot to look forward to from the new administration. Unlike his predecessor, President Trump wants to sign a free trade agreement with Britain post-Brexit. He won’t be backing the EU at our expense. That has to be good news.

Those worrying about his attitude to Putin have remarkably short memories. It was President Obama who promised a Russian reset, scrapped plans for a missile defence shield in Eastern Europe, and ignored his own red lines in Ukraine and Syria. If the new president is soft on the Kremlin, it will hardly be a shift from the status quo.

Beyond what President Trump means for us, we should watch his plans to shake up the political establishment with interest. By spending so little on his campaign – half what Clinton spent on hers – he has already shown up Washington’s vast network of fundraisers and lobbyists. He’s lost no time in calling out the price gouging of the defence contractor cartel. And his cabinet picks aren’t afraid to challenge official groupthink – notably on education.

Beating vested interests is a tall order, though. Outsiders have won political office on occasion ever since the Roman Republic. But most have failed to deliver the change they promised. Instead of overthrowing the ruling class they opposed, they ended up entrenching it.

It’s not enough just to change the people at the top. Defeating oligarchy requires abolishing the system that keeps it in place. As my new book argues, that system is almost always based on redistribution, rather than free exchange.

Very often, the danger from insurgency isn’t being radically different from what came before. It’s being the same. So let’s wish President Trump well – and hope he succeeds.

Northern Ireland’s system of government is broken. We must review the Good Friday Agreement

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18 January 2017

 

It was with considerable dismay, but with no great surprise, that I and many others heard the news in yesterday’s statement by the Secretary of State for Northern Ireland, James Brokenshire, that he is having to dissolve the Northern Ireland Assembly and call elections for the 2nd of March.

Relations were bad between the parties in Northern Ireland back in September 2015, which at the time almost led to the collapse of its institutions. Now, matters have gone one step further and, following the resignation of Martin McGuinness as Deputy First Minister, have forced the Secretary of State to take the action of calling the elections.

On the face of it, the issue stemmed from the Renewable Heat Incentive (RHI) scheme, but, in reality, the bad relations between the parties, together with the structure of Northern Ireland’s institutions, can be viewed as the main forces behind the collapse of the Assembly. A stronger, more mature institution could of course have survived what were undoubtedly bad and expensive but not terminal mistakes in the RHI scheme.

Essentially, the problems of the scheme have exposed the much deeper issue that the institutions, which were set up in the way that they were for the best of all reasons – to bring about peace – have not led to efficient or even stable government.

The way the power sharing arrangements have been designed means that while it takes multiple parties to agree on making progress or implementing a certain policy, it also takes just one party acting alone to bring those institutions down. In this case it appears that this is what has happened.

The difficulty now is that we go into elections with many people believing that they will send the parties back to Stormont in similar strengths to how they stand now. So what will happen then? If Sinn Fein don’t feel that they can nominate a successor to Mr McGuinness as Deputy First Minister now, why would they feel able to nominate someone on March 3? Technically, if that were to be the case, the Secretary of State would be obliged to call even further elections.

Sadly, while all of this continues, the people of Northern Ireland will have no representation at Stormont.

Having just returned from a visit to Londonderry, I know of the frustration people feel about the fact that disagreements about the political process and constitutional arrangements dominate the news and the thinking in the Assembly. They would prefer to see the Assembly make progress on, for example, the economy, the health service and connectivity. And, above all else at this time, they would prefer to see the politicians in the Assembly have an input on the Brexit negotiations, rather than be focusing on the unsustainability or otherwise of the present arrangements in Stormont.

So we move now towards new elections. But how long should we continue with this charade? Elections are not the issue. People were democratically elected to the Assembly only last May. It seems clear to me that we must therefore address the problem itself, rather than slavishly adhere to what is now perhaps outdated legislation which allows just one party to be in a position to collapse the Assembly, and requires the Secretary of State to call elections which seemingly very few people want.

During the Secretary of State’s recent statements in the House of Commons, I have suggested that consideration be given to finding a better way forward. Power sharing is a principle which, it seems, all the parties subscribe to. But the constitutional arrangements which enshrine this principle must be able to deliver efficient government to the people of Northern Ireland and, in turn, must therefore be capable of commanding the respect of those people. Failure to do this puts those very institutions at risk, and that’s what we are seeing now.

It is not, therefore, to risk undermining the Good Friday Agreement to suggest that the workings and relevance of the legislation which enacted it should be reviewed. Rather, such a review would enhance its importance, and updating and modernising some of the legislation would protect, and therefore project, the spirit of the Agreement into the future.

Burying our heads in the sand is the greater risk. To keep coming up with the same solutions, expecting different results, would be to put the Good Friday Agreement, and much of what it has achieved, at risk. We should not be prepared to take that risk.

Laurence Robertson is Chairman of the Northern Ireland Affairs Select Committee