|
|
By Jamie Whyte, on 1 April 10
In 2006, the European Court of Justice ruled that the Department of Trade and Industry has misinterpreted clauses 3 and 5 of the Working Time Directive. Clause 3 states: “Member states shall take the measures necessary to ensure that every worker is entitled to a minimum daily rest period of 11 consecutive hours per 24-hour period”. Clause 5 says that workers are additionally entitled to at least one uninterrupted rest period of 24 hours every week.
The tricky word here is “entitled”. The DTI interpreted it to mean entitled. They instructed employers that they must allow, but need not require, employees to take these rest periods. According to the ECJ, however, “entitled” actually means obliged. Employees may not choose to take shorter rest periods, and employers must not give them this option.
The European judges are surely correct on the matter of interpretation. If the words of European legislators are open to several interpretations, then deciding which was intended is simple; it must be the one that most restricts freedom of choice. And if you think that obliged is not a possible interpretation of “entitled”, then there is much you could learn from the judiciary about post-modern semiotics.
If not surprising, the ruling may still seem unfortunate. British employees already enjoyed the right to these rest periods. When it suited them, however, they were free to take shorter breaks – perhaps to earn overtime or to negotiate a longer break for another occasion. This option was surely valuable to them. Why should the manufacturing union Amicus have asked the ECJ to eliminate it? And why should the TUC have welcomed the ECJ’s ruling?
To see why, note that in the labour market employees are the suppliers and employers are the consumers. Employers buy the labour offered for sale by workers. The Working Time Directive, as now interpreted, is a regulation about the kind of service workers may offer for sale.
Product regulations usually impose minimum standards. When it comes to labour, however, we get maximum standards. The ECJ’s ruling means that, with respect to the flexibility of hours worked, employees may not offer a product exceeding a certain quality. And that is precisely why unions support this interpretation. Maximum standard regulations are required by suppliers attempting to fix their prices above the market price.
Consider a different example. Suppose you manufactured a basic type of bicycle. If the most efficient bike-maker could produce such a bike at a cost of £100, then this would soon be its market price. In a free market, price competition between suppliers drives the price of goods down to the cost of producing them. This is nice for consumers but not for suppliers. How might you avoid this unpleasant consequence of competition?
You could try collusion. Create the British Association of Bike-Makers and, at your annual conference, agree that no one will sell bikes for less than £200. Or lobby the government to set a minimum bicycle price of £200.
Alas, a minimum price will not work on its own, because it does not stop competition on quality. If everyone must sell bikes at £200, and my competitors’ bikes are worth £100, then I can get an advantage by producing better bikes at a cost of £110. My competitors will then retaliate with a yet better bike that costs £120 to make. This process will continue until we are all making bikes at a cost of £200, and none of us is better off than when they cost £100. To keep the benefits of our minimum price, we also need to restrict the quality of the bikes on sale: we need maximum standards.
Trade unionists and employment regulators are devoted to keeping the price of labour higher than its market value. So they must also stop the suppliers of labour from competing on quality. The endeavour is corrupt in principle – indeed, it would be illegal if the product were anything except labour – and futile in practice. The legislation they favour does not eliminate competition between workers; it simply benefits some at the expense of others.
I recently managed a team of two consultants. They were of roughly equal value. John was brighter but Don worked harder, often violating the Working Time Directive. If I had stopped him, who would have benefited? Not Don. He would have been robbed of his ability to compete with John, and his chance of promotion would have been reduced. A ban on hard work benefits not those who work “too hard” but those with other qualities to offer. It rigs the competition in their favour.
It is impossible to eliminate competition between the suppliers of labour. Rule it out in one respect, such as effort, and it will merely shift to something else, such as talent. Rule it out in all economically relevant respects – allow no price or quality competition – and it will shift onto irrelevant preferences of the employer. A bigot might employ foreigners if they came at a discount. But why would he otherwise? Immigrants do better in America than in France, not because Americans are less racist, but because their labour market is less regulated.
Labour laws are intended to protect employees from employers. But no such protection is needed. Feudalism ended long ago, and the labour market is not a monopsony (a market with only one buyer). No one is forced into any particular job. Indeed, unemployment benefits mean that no one need work at all. Labour laws merely distort the allocation of labour and arbitrarily bestow costs and benefits across the population. They should not be interpreted more stringently; they should be repealed.
By Toby Baxendale, on 4 February 10
Drawing on the work of Nobel Laureates in economics from three traditions, plus numerous other distinguished scholars, Cobden Centre Chairman, economist and successful entrepreneur Toby Baxendale presents an informal introduction to our proposal for honest money and the benefits consequent on the reform. See also our precis of Irving Fisher’s 100% Money.
Fact
- The average overhang of credit to money of all banks in the United Kingdom is 34 x to its reserves i.e. its actual money base.
- If more than one person in 34 walks into all banks simultaneously to withdraw their deposits, there will be a system wide bank run and a mass liquidity event with systematic default and insolvency.
- We saw the start of this with Northern Rock in the summer of 2007.
- We attempt to paper over the cracks and restore confidence in the banking system still today – with little success.
 Sterling Liquid Assets (BoE FSR, Jun 2009) A practical, politically-acceptable proposal
Our proposal is, as Irving Fisher wrote, “The opposite of radical”:
- Require 100% cash reserves to be held against all demand deposits; there can never be a crisis if a bank always holds 100% cash against all its demand deposits.
- Parliament can do this with one Act.
A similar Act took place in 1844. The Bank Charter Act or “Peel’s Act” established a 100% reserve requirement for bank notes that were issued claiming to be redeemable in gold. The reality was that there were 23 notes in issue for every one unit of gold at the time, creating instability, “panic” and general economic chaos. Not a too dissimilar situation from today where we have 34 claims on money to one unit of money. Politicians in the 19th century did not see the creation of unbacked credit through accounting entries as a problem, since it was only done on a very small scale. The problem then was rampant note issue (claims to real money) well over and above the monetary base, as this was the preferred method the bankers used at the time.
It is often forgotten but when you place £1m in a savings account (in cash) in say the Royal Bank of Scotland, which has no legal reserve requirement, they then lend £970k (in credit) , keeping on average 3% of cash back in reserves, to an entrepreneur in say HSBC, who then deposits that money in HSBC. We now have one claim to the original £1m and one claim to the £970k. The money supply has moved from £1m to £1.97m – just like magic! This is credit expansion.
The reality is that across all the banks in the United Kingdom licensed by the Bank of England, we have for every £1 of money (in cash), £34 in claims to money (credit)!
Peel’s problem was the over issue of notes to gold: our problem is the over issue of credit to money.
Continue reading “A day of reckoning: how to end the banking crisis now”
By Steven Baker MP, on 11 September 09
Revised and updated: reconciling our conflicting views of the market through consistent principle and morality. This post originally appeared on www.stevebaker.info.
 Leviathan, 1st Edition, 1st Print, from Toby Baxendale's original A Christian friend is an avowed socialist and another associate is determinedly left wing. I asked them recently what socialism meant to them. The answer was essentially “people being good to one another”: kindness, compassion, fairness and justice, even liberty. Who would oppose that?
But can force make it so?
Though I write with great affection for my friends, when I hear or read “socialism”, I understand a quite different thing: misery. Everywhere Marxist theory was determinedly put into practice, the result was tremendous suffering, not utopia, and yet Marxist ideas persist in our thinking.
Socialism, though formally hopeful, causes misery because a socialist society must force individuals to take particular courses of action for the good of all. For example, Lenin’s acclaimed Marxist philosopher Bukharin wrote:
For a long time yet, the working class will have to fight against all its enemies, and in especial against the relics of the past, such as sloth, slackness, criminality, pride. All these will have to be stamped out. Two or three generations of persons will have to grow up under the new conditions before the need will pass for laws and punishments and for the use of repressive measures by the workers’ State.
And so socialist societies have justified sustained repression.
When the Soviet Union fell, it seemed we all accepted that public ownership of the means of production was a dead end. New Labour and the “Third Way” came to prominence, despite the third way being nothing new, merely the idea that government can successfully intervene in a market economy to bring about positive outcomes. The problem is, it does not work.
Today, we have a financial crisis, a credit crunch, but few reflect that for a long time we have laboured under the most pervasive price control of all: deliberate manipulation of the rate of interest. Around the world, millions have waited with trepidation for committees of wise men to announce the interest rate. We have had a combination of historically low levels of saving combined with historically high levels of borrowing. Where did this mismatch come from? The rate of interest has been deliberately suppressed, misleading people into saving less and borrowing more than would have been sustainable.
The phenomenon is rather like a gym in which the treadmills may be remote controlled. If just a few people slow down, the central controller does nothing. But imagine the controller sees “too many” people slowing down at once for a break. “This will not do!” he cries, “We must have higher levels of activity!” He turns up all the treadmills at once, and keeps turning them up as exhaustion builds. Eventually large numbers collapse at once. Do we take a break and rebuild ourselves? No! We must inject adrenalin, take sports drinks, anything to get back to peak activity immediately. Eventually, this must end in catastrophe for the participants, but with artificially-low interest rates and quantitative easing, this is what we do to individuals and corporations in the economy.
The consequence is social disaster: high levels of government debt, unemployment and the direct creation of new money, a phenomenon which can only widen wealth inequality because new money is given to the wealthy. Yet this is the consequence of just one intervention in the free market.
When people set out to intervene in the economy by force of authority, they usually fail to realise a simple point: you cannot control the economy without controlling people. The economy comprises the actions of thinking, purposeful human beings with their own ends and means. Socialism requires intervention in that striving, intervention that at best has unintended consequences because the information necessary to intervene successfully is simply not available. Jamie Whyte’s The kindness of geniuses explains charmingly.
Those of us of good faith all want the same thing: prosperity, kindness, compassion, fairness, justice, liberty. People being good to one another. The twentieth century teaches us that state planning of the economy does not deliver these things, so how should society be organised?
Views of the free market
I asked my friends how they reacted to the term free market. They understand this term to mean exploitation. I understand it to mean freely-chosen cooperation for mutual benefit.
As we were sitting in a bar, I asked “Where was the exploitation when you bought that last round?” We wanted a drink, we had earned it in our own ways and the barman was happy to serve it to us. Perhaps the barman was there against his will, but how are we to know? Are we all to approach every transaction with a questionnaire? Should the barman have asked us if we had been exploited before serving us? Are we to invent possible exploitation somewhere up the supply chain for beer? Is it intrinsically exploitative for one man to serve beer to another?
Of course, this is absurd, but people suppose the free market inherently exploits without demonstrating how. This is not to deny the existence of isolated exploitation, but to question how free exchange is inherently exploitative, or corrupting, or the cause of whatever harm is perceived by the commentator. This is Marxist thinking and we know where it leads.
Before me, I have four books which begin to reconcile these difficulties:
Continue reading “Moral Markets and Honest Money”
By Sean Corrigan, on 10 August 09
Sean Corrigan, Chief Investment Strategist at Diapason Commodities Management, has kindly agreed to the reproduction of his briefing “Material Evidence” by the Cobden Centre. In this, 9 July 2009, edition, Sean restates the his position on banks: that they should have to comply with basic, everyday property and contractual law.
 Material Evidence, Sean Corrigan As we have often expounded, the vicarious gangsters we call politicians – while only to glad to bask in the reflected glory (and to revel in the enhanced campaign contributions) during the Boom – have now turned into a whole bath‐house full of petty Marats in their vituperative attempt to harness understandable popular anger and disquiet at the evils inflicted upon the citizenry by the dysfunctional, modern, state‐directed financial system.
This we again face the prospect of ‘hearings’ (would ‘show trials’ be a more accurate description?) in Congress aimed at limiting access to the commodity futures markets to the politically‐favoured few. Here we can only pause briefly to re‐iterate our fervent belief that there would be no need for any new ʹregulationʹ to prevent so‐called ʹspeculative excessesʹ anywhere if banks simply had to comply with basic, everyday property and contractual law; if money were a hard, free market good and not a pliable construct of the State; and, perhaps if recourse to that other positivist legal fiction, the limited liability partnership or corporate entity, were denied to those with fiduciary responsibility for other peopleʹs affairs. It would be much more effective ‐ if politically inconceivable – to address the root cause of all our ills, rather than to visit economically‐illiterate prejudices on its symptoms. If we cut the shoals of ʹvampire squidʹ down to their proper size, we could abolish the CFTC, the FDIC, the OCC, the SEC and the rest of the New Deal alphabet soup altogether, rather than uselessly empowering yet another tool for arbitrary, legislative grandstanding.
|
|
