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By Steven Baker MP, on 12 May 11
I do not doubt that the Government is sincere in its wish to make Britain “open for business” and to deliver greater life chances through reform of the welfare state. I gave some time to the Centre for Social Justice and now I see many of their ideas filtering through to public policy. I support those reforms from both a practical perspective and in view of their moral necessity.
The Prime Minister is correct to talk of the culture we have lost, particularly in respect of private shame. I am put in mind of C S Lewis’ book The Abolition of Man: there is, after all, such a thing as right and wrong. Lewis predicted humanity’s ultimate destiny on the path which embraces subjective morality: a dystopian society in which “we find the whole human race subjected to some individual men, and those individuals subjected to that in themselves which is purely ‘natural’ — to their irrational impulses.”
Some readers will recognise the problem and the dangers but reject the state’s role in finding a solution. However, we do not live in that world where the state is comprehensively rejected. There is a welfare state and it needs reform. The Government is getting on with it, and in the right direction too.
However, what the Government is not addressing is the de-civilising effects of inflation, that is, increasing the money supply.
What is commonly called “inflation” – a rise in the general price level – is an automatic consequence of debasing the currency. And currency debasement has been fierce in our lifetimes: the consequences have been and remain profound.
There is a presentation which, in one form or another, I have given many times. It shows, in a few charts:
- How the state has grown inexorably since 1900,
- How taxation reached an apparent limit at rather less than the scale of state spending, remaining there since 1971 or thereabouts.
- Where our debt projections are heading,
- How our money has been debased, particularly since 1971.
By the end of the presentation, I have explained our banking, fiscal and economic crisis. Given that what it shows is a monetary and fiscal catastrophe, people receive it surprisingly well. As far as I can tell, people can handle the truth and they want it.
One of the key slides is a price index from 1750-2003:
The grotesque debasement since 1971 – when Bretton Woods finally collapsed – hides the detail of the nineteenth century on a linear scale, so I include the same chart on a log scale. The log chart shows that, despite a number of crises and fluctuations, a pound in 1900 bought about the same basket of goods as a pound in 1800.
In contrast, money has lost almost all its value since the Second World War.
The Ethics of Money Production by Jörg Guido Hülsmann is particularly relevant at this point. Hülsmann writes:
To appreciate the disruptive nature of inflation in its full extent we must keep in mind that it springs from a violation of the fundamental rules of society. Inflation is what happens when people increase the money supply by fraud, imposition, and breach of contract. Invariably it produces three characteristic consequences: (1) it benefits the perpetrators at the expense of all other money users; (2) it allows the accumulation of debt beyond the level debts could reach on the free market; and (3) it reduces the [purchasing power of money] below the level it would have reached on the free market.
While these three consequences are bad enough, things get much worse once inflation is encouraged and promoted by the state. The government’s fiat makes inflation perennial, and as a result we observe the formation of inflation-specific institutions and habits. Thus fiat inflation leaves a characteristic cultural and spiritual stain on human society
He goes on to write of inflation’s tendency to centralise government, to extend the length of wars, to enable the arbitrary confiscation of property, to institutionalise moral hazard and irresponsibility, to produce a race to the bottom in monetary organisation, to encourage excess credit in corporations and to yoke the population to debt. He explains how “The consequence [of inflation] is despair and the eradication of moral and social standards.”
That all sounds familiar.
Hülsmann’s work is not scripture of course, but neither are his ideas isolated. Consider Ayn Rand:
Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence.
It is my firm view that inflation – the debasement of money – was the primary cause of the banking crisis. That inflation was a deliberate policy choice of welfare states. You may recall Eddie George’s remarks in 2007 and now Mervyn King has said, “Of all the many ways of organising banking, the worst is the one we have today.”
Moreover, if Hülsmann, Rand and other scholars including Mises and Hayek are to be believed, then inflation is also a major contributor to the moral and spiritual decline of our country. No amount of welfare reform alone will solve that.
All is not lost however. To return to that log-scale price index, money’s value was substantially more volatile in the first half of the nineteenth century than in the second. In 1844, the Bank Charter Act, Peel’s Act, took from the banks the privilege of extending bank notes in excess of specie (coins of inherent worth). It was recognized that this extension of candy-floss credit un-backed by prior production of real value was a systemic cause of economic and banking crises.
Unfortunately, that Act left the banks unmolested in their ability to create deposits. As our system of money and bank credit has evolved, that loophole, combined with central banking and the socialisation of risk, has delivered us into our present predicament.
It falls to our generation to solve this problem and that is why we established The Cobden Centre.
As Martin Wolf wrote in the Financial Times on 9th November 2010, “The essence of the contemporary monetary system is creation of money, out of nothing, by private banks’ often foolish lending.” And then we wonder why house prices have raced out of reach. We wonder why the basement garages in Canary Wharf are full of supercars while what was once our industrial heartland languishes in state dependency.
I admire the Prime Minister and the coming welfare reforms. I will back them gladly. But, until we end inflation as a way to fund the promises of the welfare state, we shall not have done the decent thing. We shall not have established objective morality in banking and in that lifeblood of society: money. Honest money is a prerequisite for social progress and it must be delivered if reform is to succeed.
By Toby Baxendale, on 27 August 10
”The National Health Service is the closest thing the English have to a religion,” wrote the former Tory chancellor Nigel Lawson in his memoirs.
Daniel Hannan MEP was torn to pieces politically for daring to say that in his view the service provided was not optimal. In the book he co-authored book with Douglas Carswell, The Plan: Twelve Months to Renew Britain, they suggest alternative solutions.
In the late summer of 2009, in the run up to the General Election the following year, this sparked David Cameron into a defensive stance, and being the astute politician he is, he sensed the political mood music and declared his “wholehearted commitment” to the NHS. He suggested that the NHS represented a “simple, practical, common sense, human understanding of a fantastic and precious fact of British life”. He added “That’s why we are committed to the NHS and the principle of a healthcare system that is free at the point of use, based on need and not the ability to pay.”
It is generally understood that if you wish to be taken seriously in this country, you must never be critical of the NHS. Suggest a reform here and a fine tuning there, but don’t so much as imply that fully taxpayer-funded and state-provided health care might not the best solution for the people. Should you dare go down that line of thinking, you are sure to be dismissed as a wide-eyed loony!
It is assumed that the market for health care is naturally monopolistic as the medical profession can organise at the expense of the consumer, who is ignorant. Naturally, the State needs to step in and protect the ignorant consumer. This is akin to saying that food producers know more about food (essential for life!) and they will have a tendency to organise at the expense of the consumer, so the State should step in and we can have a National Food Service (God forbid: an 18 month wait for a can of Baked Beans!) and all those starving people that the private sector does not provide for will be fed! Also private provision will never cover the poor, already sick, and the needy; therefore the State must step in. Historically this has notbeen the case.
David Green in 1985 wrote a magnificent book Working Class Patients and the Medical Establishment: Self-help in Britain from the Mid-nineteenth Century to 1948. He shows that health care provision prior to the 1911 National Insurance Act was spontaneously provided by worker-organized mutual or friendly societies. Indeed, 75% of all provision was via these organizations with the balance paid for by private provision by those who could pay on the nose directly for medical related services; and for the utterly impoverished small minority, the Poor Law provision. Interestingly, these societies were paid for by a flat subscription fee for all. Green shows that only 4.5% of applicants were turned down.
These societies employed doctors, on the whole provided drug dispensing services and sick pay for their members. Doctors were often elected and answerable to the committee of lay people of the society. This democratic control was detested by a vocal minority of doctors as it afforded accountability. They also detested the dominant consumer. Many, though, were happy and content.
The societies, who negotiated individually with doctors, would ensure a good wage for the doctor, but some in the General Medical Council viewed this to be “infamous conduct” — lowering your wage to be affordable to the masses was enough to get you struck off. Ironically the Trade Union thugs and dinosaurs of the 70’s and 80’s would have no doubt approved of this closed shop, restrictive practice which was so much at the expense of the working-class patient. How the original trade unionists, who were so supportive of the friendly societies, would be spinning in their graves.
The great success of the mutual provision of a private welfare state was in effect its own downfall. Lloyd George sought to extend the benefits that the freely chosen mutual provision of the masses had achieved to cover the very poor. Green shows us how during the passage of the bill, the medical profession, which did not like working for the proles and being governed by lay committees, managed to advance arguments that would deliver control of the goods and services provided by the mutual societies, demanded by the patients and the lay committees that ran them, to the medical profession themselves.
It was successfully argued that the pay that the Doctor received on contract to the Society prevented him from providing a full unbiased professional service for the benefit of the patient. It was argued that the practice of certain doctors in competing for the individual subscriptions of members by undercutting other doctors was bad for the provision of medical care. Working-class fraternalism was the BMA’s worst enemy, as competition for patients kept the doctors’ pay at levels that the masses of working-class people could afford.
The commercial insurance companies too had long detested the competition that the Societies had given them and with the BMA, they formed themselves into the Combine and extracted concessions to the Bill.
Green says
The essence of working-class social insurance was democratic self-organization: amendments to the Bill obtained by the BMA and the Combine undermined it. Doctors pay had to be kept within limits that ordinary manual workers could afford: under pressure, the government doubled doctors’ incomes and financed this transfer of wealth from insured workers to the medical profession by means of regressive poll tax, flat-rate National Insurance contributions.
The unhappy outcome of this legislation initially intended to extend to all citizens the benefits of friendly society membership, already freely chosen by the vast majority, was a victory for the political muscle of the Combine and the BMA. They achieved a very considerable transfer of wealth and power from the relatively poor working –class to the professional class.
Post 1911, the doctors were paid out of the state insurance provision and ultimately by the state via the National Health Service, post 1948. Popular, affordable, voluntarily-funded healthcare was crowded out. We now have inefficient Soviet style provision of health care. Dress it up how you like, but essentially the state is the prime provider of health care. Private provision is sidelined and often only available to the wealthy. Choice in services is limited. Patient consumer control of the doctor / medical provider is negligible. Until we have consumer control, our service will always be suboptimal.
David Cameron and the Big Society: Could this be a return to mass private affordable consumer controlled democratic provision of medical care?
I have previously written here about my enthusiasm for the Big Society project.
On August the 13th 2010, 12 projects were launched that allowed public sector workers to take control of delivering services. Could it be possible that we could take control of our local general purpose hospital and local GP services? For this to happen, we would need to get a full tax rebate for all participating members and form a traditional friendly society and extract those services from the state and return them from whence they came, on the whole, to the working-class mutual societies that Green writes so eloquently about.
Would the government be prepared to give a rebate in our tax so we could use the money as our ancestors did, to arrange our own healthcare in a mutual format? Can we see the lay people of say Welwyn and Hatfield, where I live, rise up and form a mutual for all its members benefit? That is a truly wonderful thought. At the moment, our local QE11 hospital where my youngest child was born is facing closure with only the A&E services and one or two other things being left open, and there is much popular support to keep it open. Do the people want to go this far? If we were given our tax back I am confident most citizens would seek to pay their subscriptions, vote in their doctors, and arrange for the full service that they want on a lowest cost basis. Could consumer control and patient power return to Britain?
How bold are Andrew Lansley and David Cameron?
Readers interested in more from David Green may enjoy his 1993 Civitas paper, “ Reinventing Civil Society: The Rediscovery of Welfare Without Politics“.
By Toby Baxendale, on 1 September 09
There are 2.7 million people claiming Incapacity Benefit in this nation. I often wonder if after the World War Two, did we have more than 2.7m incapacitated civilians on this Island once the soldiers had all returned? I do not know for certain, but I suspect not. Suffice it to say, although 208 British Soldiers have paid the maximum price in the conflict in Afghanistan, we are essentially a country at peace and have been thankfully for a long period of time. Not since the Second World War has the totality of the nation been involved in conflict. So why do we have so much incapacity? With the relentless avalanche of Heath and Safety laws being applied to business, they can for sure not be putting more people out of work by injury. Have the standards of our health service fallen so low over the last 60 years that more people then ever are incapacitated? To all of these, I think not. The majority of these persons who are incapacitated are just plain and simply put, work shy.
In the Sunday Times of the 30th of August, Michael Portillo in this article, said that the intentions behind the formation of the Welfare State were to prevent this abuse of our system by the work shy.
The state “should not stifle incentive, opportunity, responsibility”, wrote Sir William Beveridge in the 1942 report that inspired the post-war welfare state. “In establishing a national minimum it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family.
How many of the 2.7m are genuine in their illness? Would it be 100,000, or 200,000, but certainly not 2.7m. Even if it was a cool 1 million people, we would still have 1.7m people who are work shy and scamming the system.
When I sit as a Magistrate, I often see abuse. I was in a domestic violence court recently where we were reviewing a Pre Sentence Report on a young man who had beaten up his 29 week pregnant teenage girlfriend in the High Street under several CCTV cameras. The Probation Service informed us that he was on incapacity benefit but that he was looking forward to the start of the football season so he could resume playing for his local team as this would take up some time. I do not know if it occurred to the probation service that incapacity benefit and a young man playing football to most would not go together.
Let’s be clear, we the taxpayer pay 2.7m people to sit at home and do nothing. This is a good 10% of our workforce that sit on the payroll of the taxpayer and do nothing. People like the above are forcing the tax burden up on the hard working families of this nation of ours. As Portillo says “As a result, taxpayers have spent £346 billion on payments to those out of work since Tony Blair entered No 10.” This is 2 and a quarter of a years worth of income tax for the whole nation out of the last 12 years just on this!
He then goes on to say “It might have been possible for the state to fine-tune benefits in that way in the days when parishes organised relief and every claimant was known to the local poor law guardians. It is much more difficult today in systems that are nationalised and standardised.
But perhaps, at least, we ought to assume that fit young people are not entitled to anything. If a few young men from sink estates are now heroes in Afghanistan, why should we presume that all the others are capable of nothing useful at all?”
A centrally planned benefits system, like anything centrally planned is bound to fail. It fails because it is impossible for a centrally planning body such as a Whitehall department, to know all the facts and all the circumstances of all the people to be able to access who is actually in an incapacitated state. We should do the following;
- Immediately send the Incapacity to the local councils as the custodians of the state,
- Let the local citizens in each ward choose a voluntary council of wise and impartial people from all walks of life, the “community guardians” in that small local ward area – maybe have a pool of 50 – 100 people who could participate. Perhaps the selection criteria of the Magistrates could be used.
- Each week, let the citizens of the ward apply to the voluntary local ward council or community guardians for “their” benefit.
- The voluntary local ward council , with all their local ward, street by street knowledge, would more than likely have some intimate knowledge and information about the life style of the applicant, or could easily take soundings and find out if their application is genuine or not.
- All the ward based GP’s should as part of their contracts be required to work on behalf of the local community to assess the fitness of someone for work.
- The law must lay down strict boundaries within which communities may be compelled to support individuals and families for reason of incapacity.
- Having knowledge also about what jobs are available in the community and the insights of an on hand GP , they may be less likely to grant benefits to the simply work shy. Indeed they will focus on only those who can not work. They may even elect to spend more on these unfortunate , but in many cases deserving people.
- The final reform would be to abolish the central taxation that relates to this provision of benefits and devolve it entirely down to the local ward to levy a tax on its citizens to pay for the incapacity of its people. With the voluntary policing of its distribution, I am very sure this tremendous burden on the hard working people of the UK will fall substantially freeing up masses of new resources to wealth creation.
Enough is enough: social progress requires everyone who can to do something of value for others. This aspect of the Welfare State needs to be reformed immediately
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