MR is on target.
Some excerpts.
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The solution to crony capitalism is not to make it worse with an industrial strategy or with full socialism, but to break it up and let fresh competition into our cosseted corporatist conspiracy.
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Remember that we have run two very careful randomised controlled trials to see if full-blown socialism or half-hearted free enterprise works better. One in the Korean peninsula, the other in Germany. And the results were unambiguous. Socialism was a humanitarian catastrophe.
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It is my contention that this concept of spontaneous order is the central idea of the enlightenment, brought to a pinnacle nine years later by Adam Smith with his invisible hand and applied to life itself by Charles Darwin some decades later. If the English language can get along without a government, why do we so quickly assume that English society cannot organise itself?
To labour the point, today in London roughly 10 million people ate lunch. Working out just how much of each type of food to have available in the right places at the right time to ensure that this happened was a problem of mind-boggling complexity, made all the harder by the fact people made up their mind what to eat mostly at the last minute.
Who was in charge of this astonishing feat? Who is London’s lunch commissioner and why does he get so little credit? Why is this system not subsidised? How can it be so lightly regulated?
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Comparative advantage takes Adam Smith’s division of labour one step further and explains why free trade benefits everybody, even countries that are the worst at making things, even countries that are the best at making things. But it also, in my view, explains prosperity – what it is and why it happens to us and not to rabbits or rocks.
When I raised Ricardo’s law of comparative advantage in the Lords a few months ago, a Lib Dem peer got a laugh by saying she had never heard of it. What are our teachers up to? How come nobody seems to know that trade is not a zero sum game? How come both Brussels and Washington are entirely in thrall to the kind of mercantilism that was disproved 200 years ago? Do they believe in phlogiston and blood-letting too?
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Milton Friedman said: “Societies that put equality before freedom get neither. Societies that put freedom before equality get a measure of both.”
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I once gave a talk in Oxford and an academic approached me afterwards and said that he was troubled by what I had said, for was it not obvious that the most evil people in the twentieth century were all, without exception, capitalists? Surely I could see that. I looked at him, wondering if this was a trick question. Er, what about Stalin, I said? And Hitler? Mao? Pol Pot?
OK, apart from them, he said.
Is it not bizarre, after the 20th century, that people are so forgiving of the state and so mistrustful of the market?
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Visiting Auschwitz a few years ago I was struck not by what some have called the “industrialisation” of death – after all, it is a surprisingly low-tech place, even for the time. But by the “nationalisation” of death: the bureaucratic central planning and meticulous hierarchical organisation of mass murder, backed by state coercion not just of its victims but of its perpetrators too; to paraphrase Hillary Clinton, it takes a government to do a death camp.
Are the plights of North Korea, Afghanistan, Somalia, Congo, Venezeula or Syria caused by too much free enterprise? I don’t think so.
The dreadful Grenfell Tower fire was not caused by an excess of free enterprise; it was caused by terrible miscalculations or misregulations in the public sector. This was in a building that was planned, built, owned and managed by the public sector and refurbished by a contractor chosen and commissioned by the public sector according to regulations and guidelines devised in the public sector and in pursuit of a policy of retrofitting buildings with insulation that came from the public sector.
Whatever mistakes were made in the recladding of the building, or in the fire regulations, or in housing people in tower blocks in the first place – they did not come from too much free enterprise.
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Nor was the crash of 2008 caused by too much free enterprise – not if you understand the role played by the Chinese government in driving down its exchange rate, the role played by the Federal Reserve in keeping down the cost of debt, and above all the role of government regulations in forcing Fannie Mae and Freddie Mac into the sub-prime lending business, where they could fuel a sub-prime boom on the back of government interest rates.
The lie that the crisis was a crisis of free markets, as opposed to crony corporatism, has long been exploded among serious scholars.
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