Scraping the barnacles off liberal

I read a nice piece yesterday by firebrand Member of the European Parliament and YouTube star Daniel Hannan, who visited New Zealand last year and spoke at a Business Roundtable function in Auckland – see his excellent speech on why Britain should get out of the EU here.

In the blog Dan examines the origin and abuses of the word liberal and the need to restore its true and honourable meaning.  Like the terms left and right – labels to which I and many others strongly object (see my black holes speech) – liberal has been commandeered for all sorts of misleading purposes.  Dan Hannan’s preferred label for himself? – a Whig.  

Dan begins:

My old friend Sholto Byrnes asks at The New Statesman whether “liberal” is becoming a dirty word again. He recalls the way Michael Dukakis was bludgeoned to a bloody pulp by the epithet in the 1988 American presidential election, and cites two contemporary examples of liberalism in retreat, one to do with gay rights in the US, the other with multiculturalism in Germany.

If we scrape away the barnacles that have attached themselves to it, the word “liberal” is rather an attractive one. It means committed to freedom, generous, tolerant.

and ends with a stirring defence of the liberal tradition:

Like Sholto, I think the liberal tradition in Britain is an honourable one. It has great achievements to its name: parliamentary supremacy, religious toleration, meritocracy, votes for women, the legalisation of homosexuality. I am, as regular readers know, a Whig. I believe in British particularism, parliamentary sovereignty, personal liberty, small government and maximum democratic control. I’d have been for Parliament in 1642, for the Revolution in 1688, for Reform in 1832, for Gladstone against Disraeli. I’d probably have been one of those Whigs who broke with the Liberal Party when began its drift towards social democracy at the end of the nineteenth century (the “and Unionist” bit in my party’s title dates from the merger of these “Liberal Unionists” with Bonar Law’s Conservatives in 1912).

Because liberal, in the US, simply means Leftist, Americans who believe in maximum freedom took to calling themselves libertarians, a soubriquet that crossed the Atlantic in the 1970s, but hasn’t caught on here to the same degree. Call it what you will, it’s as persuasive and manly a creed as any on the market. I leave the last word to J S Mill:

The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it. Each is the proper guardian of his own health, whether bodily, or mental or spiritual. Mankind are greater gainers by suffering each other to live as seems good to themselves, than by compelling each to live as seems good to the rest.

Click here to read the full blog

For those who haven’t seen it, and because I couldn’t resist, here’s Dan’s evisceration of Gordon Brown in the European Parliament last year:


Hello Asia

I was in Sydney last week at a Pacific Rim Policy Exchange conference of think tanks in the Asia Pacific region, led by the Property Rights Alliance.  A particular highlight was a dinner speech by Rowan Callick, the exceptionally well-qualified Asia Pacific editor of The Australian who has a deep knowledge of Asia and has lived for some years in China.  He started by reminding delegates of the Western-driven mentality behind the UN’s Millenium Goals:

The goals are worthy targets in themselves, emanating of course from guilt-laden but increasingly broke Europe, and largely devoid of an economic context. They have come to be identified with the affirmation of a certain take on the “development” process – that of kind rich folk developing hapless poor supplicants through noblesse oblige.

Callick noted that the same mentality pervades our ‘world’ view of the GFC:

For you are meeting in the wake of the recent North American-European financial crisis – NOT a GLOBAL financial crisis – and just as this region is taking over, in my view unshakeably, the leadership of economic growth, if not of the global economy itself.

He observed that the example so many Asian countries have set in climbing out of poverty through rapid economic growth has largely gone unnoticed by the Western-dominated world of official aid, but not by the rest of the world.

I was living in Beijing when 43 African heads of state and government almost four years ago attended a summit there, which launched China’s extraordinary burst onto that continent. China wanted resources primarily, and ultimately once Africans begin to spend, its markets too. And as in Latin America and central Asia and the Pacific islands, such economic vitality proved both attractive and contagious. China’s Premier Wen Jiabao said he wasn’t interested in exporting a China Model of development. And I believe him. His priorities are domestic, first second and third. His party’s legitimacy depends on economic health at home.

But Africans who have for generations seen Western taxpayers and NGOs donate $ billions to their kleptocratic rulers are naturally lured to the revolutionary idea coming from the East, that economic growth is good, not merely bad for the planet as they had been told by those sleek Westerners. They are attracted to the notion that shipping, selling and buying stuff provides a better prospect for their families than following anaemic World Bank prescriptions.

A fun formula has it that in 1949 only socialism could save China. In 1979, only capitalism could save China. In 1989, only China could save socialism. And in 2009, only China could save capitalism.

Imagine a Western leader of today proclaiming as Deng Xiaoping did: To get rich is glorious. She or he would be condemned for crass materialism, and for privileging elites.

That determination to get rich is the type of talking dirty that thrills people who are dirt poor – that is, those people who have not already been pre-conditioned towards petty envy and the redistributionist zeal that led so many societies down a false trail, one that ends in the desert – as we see in contemporary Europe.

Callick noted that China has succeeded economically despite hobbling itself with efforts to control its people’s lives – a tribute to Deng Xiaoping’s decision to open manufacturing to foreign investors but also to the Chinese people themselves and their core individualistic culture.

In covering the Beijing Olympics while I was living there, I followed the Chinese teams. When China wasn’t playing, the default country which Chinese sports fans tended to cheer, was the US of A. They feel very much at home in the individualistic American culture.

And they mostly hate paying taxes, and avoid doing so, just as Americans, and I must say Australians, do. When I told a Chinese friend after I had begun working in Beijing, that I thought I should start paying some personal tax, he said I was crazy. Neither he nor any of his pals paid tax, he said. Why should they, when they didn’t choose the government, and mostly disagreed with what it spent money on.

 China also has a huge grey income, and its property and financial sectors are rife with insider trading, market manipulation and much misuse of power for personal gain.

Deng Xiaoping spoke of crossing the river by feeling the stones – cautious progress. He was not referring to taking China from a communist river bank to a liberal democratic one, but taking the party and the country towards prosperity. Where did this great pilgrimage start? With formally conceding the space to do business.

Much of China’s rapid change can be attributed to the determination of its “masses” to carve out better lives for themselves come what may, with the party’s legitimacy relying on its capacity to shift its tactics, even its values, in response to demands from below. 

And with Deng’s contract of 30 years ago beginning to fade, the party is now searching for a new source of legitimacy for itself as, among other roles, the source of security, stability and safety.

And now the party is beginning to use domestic Chinese NGOs to deliver the social services for which the country is increasingly clamouring as it ages, but which the government lacks the structures to deliver. The state’s wealth, including the massive foreign exchange largely still held in $US, was in part built on denying its own citizens a fair share – in the economic as in other realms. But this is proving not to be sustainable. A higher proportion of the economy is steadily being seized by consumers and workers, as part effect and part cause of the structural change from cheap surplus labour and towards domestic services and greater productivity.

In Asia more broadly, the right to do things for yourself, to be an autonomous actor, is coveted more highly than the right to receive support from the state – in part because success in the former will move you up to a higher realm of wellbeing and control over your life.

… I usually tell people who ask my advice on books to read about China today, to start with Charles Dickens. He was also writing of a society that was rapidly urbanising and industrialising, in which ancient extended families were shrinking into nuclear families, a world of casual injustices and astounding coincidences, and of resourceful heroes and, especially, heroines. 

As Callick concludes:

Asia is hardly perfect, it’s a long way from liberal, but for the most part it loves globalization, its people prefer governments to keep out of sight, and… well, welcome to our region.

At the same conference I was invited to speak in a session on free trade and emphasised the case for organisations like the Australian Productivity Commission to shed light on the costs of protectionist policies to consumers and other industries.  I’m a member of the Tasman Transparency Group, a collection of Australian and New Zealand economists and business people who’ve been urging governments to set up transparent agencies of this kind.  A bill to set up a New Zealand Productivity Commission is currently before parliament. 

Also at the conference was Kiwiblogger David Farrar who spoke on the role of social media in debating public policy in an era where there seems to be less and less focus on policy analysis in the regular media.  What was particularly interesting was the representation of the free market institutes from the Asia region, most notably China, Korea and India.  I particularly liked the Mongolian Institute for Fair Taxes and Wise Spending.

It was interesting that none of their preoccupations related to the economic debates raging in the West around things like Keynesian stimulus policies, fiscal deficits and the burden of welfare states.

Excursions into economics

A noteworthy article appeared in the Business Herald last Friday, based on an interview with David Mayhew, newly appointed regulator of financial advisers and “likely” candidate for chairman of the proposed Financial Markets Authority.

Noteworthy for several reasons. 

Firstly, for the extensive commentary on regulatory policy issues.

Other regulators, for example Mark Berry at the Commerce Commission, have scrupulously avoided comment on relevant policy, even in private.

There are good reasons for this.  One is conflicts of interest.  In the article Mr Mayhew is already calling for more regulation (of fund managers) and hints at the need for a bigger budget.

Second, those dealing with a regulatory agency need to have confidence that they will be treated in a fair and open manner: regulators should not put that confidence at risk.

Also noteworthy were some excursions into economics (Mr Mayhew is a lawyer).  He is reported as saying “someone needs to tell Treasury and the Business Roundtable that the Chicago school of economics, and its belief in the efficient market, no longer holds sway …  I think you should say ‘Look guys, you’re history.’”

Arrogant? Not for me to judge.

Chicago economics?  Just one strand of modern economics, but one that is now regarded as quite mainstream.  The U of C economics department has produced more Nobel Prize laureates and John Bates Clark medallists in economics than any other university.

The efficient market hypothesis?  Professor Glenn Boyle, a highly respected financial economist at the University of Canterbury, had this to say about it in a recent lecture on the global financial crisis.  He explains what the hypothesis means – it is a technical proposition – and what it doesn’t mean. (Update: for a similar view, see this interview with Eugene Fama, a name closely associated with the EMH)

Another observation: “markets without regulation deliver bad results.”  But, first, no market can operate without rules, and, second, misguided government intervention can certainly deliver bad results, as we saw with the GFC (think Fannie and Freddie).

The policy argument is always about the quality of the regulation, having regard to problems of incentives and information, regulatory capture, rent-seeking and moral hazard. The initial financial advisers legislation was poorly conceived, as many now acknowledge. 

Investor confidence about security of property rights in New Zealand, including enforceable sanctions against fraud, is very important, but that confidence may not have been advanced by some observations in the article.

Eras beginning and ending

Welcome to my new blog.  A self-confessed technophobe, I thought it high time I ventured into the blogosphere and joined the era of new media.  I plan to comment here from time to time on public policy, economics and matters of related interest. 

The launch of this blog coincides with the end of another era, a very significant one in the history of New Zealand business and public life.  The death last week of Sir Ronald Trotter, one of New Zealand’s true heroes, saw hundreds of tributes flow from friends, colleagues and admirers from around the world.  Among his many leadership roles in business and public affairs, Ron was the founding chairman of the New Zealand Business Roundtable and led the business community through a necessary period of profound and painful adjustment to the benefit of New Zealand as a whole. 

In 1995 we inaugurated the annual Sir Ronald Trotter Lecture in Ron’s honour.  The inaugural lecturer, Chicago Professor Richard Epstein, arguably the most brilliant legal scholar of our times, wrote last week of respect for Ron that “comes from a life dedicated to an excellence of character and judgment and of good deeds that are universally known and respected.”

Yesterday family and friends packed Old St Paul’s in Wellington for a most fitting and uplifting send-off that Ron himself would have thoroughly enjoyed.  I was honoured to be invited by the family to make this tribute to Ron.  As Ron’s long-time colleague Sir Roderick Weir noted, Ron rose to the top of business because of his wonderful nature: “Everyone liked him”, Rod said.  Ron will be greatly missed.