Living in the Age of Keynes

The path to prosperity

In 1935 John Maynard Keynes wrote to his friend George Bernard Shaw: “I believe myself to be writing a book on economic theory which will largely revolutionize, not I suppose at once but in the course of the next ten years – the way the world thinks about economic problems.”

That book, The General Theory of Employment, Interest and Money, published the following year, would go on to fully realise Keynes’s expectations. After World War Two, following Keynes’s analysis, policy makers and economists around the world used fiscal and monetary tools to pursue the goal of ‘full employment’. Keynes gave his name to both the economics and the age itself.

It is conventionally said that this Keynesian Age was brought to an end by the Stagflation of the 1970s. To the extent that responsibility for ‘economic management’ was simply transferred from politicians with primarily fiscal tools to central bankers with monetary tools this can be argued. But there is another sense in which we never left the Age of Keynes.

The first substantive chapter of The General Theory is chapter two, ‘The Postulates of the Classical Economics’. Here Keynes ridicules a set of beliefs which he ascribes to an ill-defined group of ‘Classical economists’. For these Classicals income was either spent on consumption or saved. These savings, as capital, were invested with the two quantities, savings and investment, being equilibrated by the interest rate. As Keynes’s Classical mentor Alfred Marshall put it:

“[I]t is a familiar economic axiom that a man purchases labour and commodities with that portion of his income which he saves just as much as he does with that he is said to spend. He is said to spend when he seeks to obtain present enjoyment from the services and commodities which he purchases. He is said to save when he causes the labour and the commodities which he purchases to be devoted to the production of wealth from which he expects to derive the means of enjoyment in the future.”

Keynes, by contrast, saw no such essential unity between savings and investment. In The General Theory he wrote that the “decisions which determine Saving and Investment respectively are taken by two different sets of people influenced by different sets of motives, each not paying very much attention to the other”.

It was possible, Keynes argued, that investors driven by mercurial “animal spirits” could become so pessimistic that the Marginal Efficiency of Capital (the expected return on their investment) could plunge below the interest rate (the cost of funding that investment) so that no investment would take place. The Marginal Efficiency of Capital could, indeed, sink so low that nominal interest rates couldn’t offset it, giving rise to the ‘liquidity trap’ and monetary impotence. Marshall’s link would be broken and aggregate demand would fall.

For Keynes, the way to guarantee the continued investment which not only guaranteed aggregate demand in the present but also increased prosperity in the future, was for the government to underwrite the profitability of investment by acting as spender of last resort, via fiscal stimulus, to prop up the Marginal Efficiency of Capital.

This was the polar opposite of the Classical view. Whereas Keynes believed that spending made you rich enough to save, the Classicals believed that saving made you rich enough to spend. Though Keynes would have agreed with the father of the Classicals, Adam Smith, that “Consumption is the sole end and purpose of all production”, they took totally different routes to get there.

This stems from a striking difference in attitudes to saving. Adam Smith, anticipating Marshall, wrote, “What is annually saved is as regularly consumed as what is annually spent, and nearly in the same time too; but it is consumed by a different set of people…by labourers, manufacturers, and artificers”. Keynes, by contrast, said that “whenever you save five shillings, you put a man out of work for a day”.

Is it Smith or Keynes’s attitude towards consumption and saving which animates western policymakers today? Since 2008 we are supposed to have seen ‘The Return of the Master’. In truth he never went away. We’ve been living in the Age of Keynes for decades.

This article originally appeared at The Commentator


Heavens on Earth: Exploiting human ingenuity

The social sciences provide few controlled experiments; there is no Cern Laboratory for sociology or economics. But the 20th century provided something rather close.

The impoverished, war-torn Korean peninsula was split in two, the North trying communism and the South opting for capitalism. After 60 years South Koreans are on average three inches taller than North Koreans and live 12 years longer.

Germany and its capital city were split down the middle in 1945, the west going capitalist and the east going communist. The architects of the Workers’ Paradise in the east had to build walls to stop the unappreciative proles escaping to the west to be exploited. And then the Workers’ Paradise collapsed.

The results of these experiments have proved problematic for statists. In recent years the economist Ha-Joon Chang has become popular on the left for arguing that the economic success of West Germany and South Korea relative to their eastern and northern neighbours is not because of a lack of state intervention but because they had just the right kind of intervention in just the right amount. For Chang there is nothing inherently wrong with a Gosplan, you just have to make sure you have the right boffins drawing it up.

In his new book, Heavens on Earth, JP Floru utterly rejects this argument. He takes eight case studies, from Britain’s Industrial Revolution of the 18th and 19th centuries to Singapore’s journey to prosperity, and argues that the spectacular results achieved came from the release of market forces. Where Chang prescribes intensive government involvement in the economy, Floru recommends that politicians and bureaucrats set up a solid legal framework then get out of the way.

Economically speaking, the source of the increase in wealth these countries experienced was increasing productivity, the production of as much with less or more with as much. The increase in the quantity of goods and services available for consumption which this permits is the essence of increasing wealth.

The Theory of Comparative Advantage, outlined by David Ricardo 200 years ago, extends this worldwide. As a unit a country will grow rich if it produces goods or services for which the inhabitants of other countries are willing to exchange the goods and services they have produced. And countries will see their terms of trade improve the more efficient, or productive, they are.

Floru’s argument echoes that of Douglas Carswell’s recent book The End of Politics, its central feature the ‘Hayekian Knowledge Problem’. Economics is, as Alfred Marshall wrote, “a study of mankind in the ordinary business of life. It examines that part of individual & social action  which is most closely connected with the attainment and with the use of material requisites of well-being”.

It is not, as much mainstream neo-classical economics would suggest, the study of the allocation of given resources among known ends via some identified production function. It is, in fact, the study of the process of the discovery of all these things; resources, ends, and means.

The knowledge of how best to produce cars, linen, or financial services does not exist in some one place where one of Ha-Joon Chang’s Platonic philosopher kings can simply go and get it prêt-à-porter. It is lurking somewhere, probably dispersed, in the vast collective brain made up of each individual in the wider economy, and it has to be discovered.

A free market economy is far better at tapping this collective brain and efficiently discovering and coordinating the hidden, dispersed information it contains than a state command system which relies on the brains of a handful of experts. That is the lesson of Korea and Germany.

There is an incredible amount of economic gloom as debts rocket, growth stagnates, and incomes fall in the developed world. But, as the United Nations recently reported,

“The world is witnessing a epochal ‘global rebalancing’ with higher growth in at least 40 poor countries, helping lift hundreds of millions out of poverty and into a new ‘global middle class’. Never in history have the living conditions and prospects of so many people changed so dramatically and so fast”.

Thanks to free market capitalism more people are living better than ever before.

Since at least 1798, when Ricardo’s friend Thomas Malthus predicted a destiny of misery for mankind, there have been people warning of an imminent end to our material progress. But whatever the situation with regard to his material resources, one truly inexhaustible resource man possesses is his (or her) ingenuity, or human capital in the economists’ terminology. A system which allows for the maximum exploitation of this ingenuity, of its discovery and coordination, remains humanity’s best hope for the ever more prosperous future which is on offer.

In 1776 Adam Smith wrote that “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice”. JP Floru’s excellent new book performs the vital service of reaffirming this fundamental lesson.

This article originally appeared at The Commentator

Class war, Adam Smith, and the Marginal Productivity Theory of Distribution

Father and son

There is a pleasure almost cruel in seeing someone deploy irrefutable logic to destroy an opponent’s arguments. I felt it this week reading George Reisman’s Open letter to Warren Buffett where the well booted doctrines of Karl Marx got another kicking. By now Marx and his followers ought to be used to this sort of punishment at the hands of Austrians. Eugen von Böhm Bawerk produced his devastating destruction of Marx’s economics, Karl Marx and the Close of His System, back in 1896.

But Paul Samuelson was right when he said that “Karl Marx can be regarded as a minor post-Ricardian”. Marx simply took the aggregative, labour value theory based economics of David Ricardo and took them to their dismal and erroneous conclusions. And when Reisman writes “The doctrine of class warfare is a derivative of the exploitation theory, whose best-known proponent is Karl Marx” we ought to point out that it is found also in Ricardo’s predecessor Adam Smith.

Class War in The Wealth of Nations

Book One, Chapter VIII, of The Wealth of Nations is titled ‘Of the wages of labour’.  Smith charts the development from a situation of subsistence production where “the whole produce of labour belongs to the labourer” via the emergence of private property (which gives rise to rent) and stock (which gives rise to profit) to one where a payment for a good must be divided between the labourer (wages), the landlord (rent), and the stockholder (profit).

Smith goes on to say that “It seldom happens that the person who tills the ground has wherewithal to maintain himself till he reaps the harvest. His maintenance is generally advanced to him from the stock of a master, the farmer who employs him and who would have no interest to employ him, unless he was to share in the produce of his labour, or unless his stock was to be replaced to him with a profit” Smith says that “The produce of almost all other labour is liable to the like deduction of profit”.

Here we have the genesis of the Marxist theory of the workers alienation from the means of production, exploitation, and ‘class war’. Workers do not receive the full product of their labour as they did in the “early and rude state of society which precedes…the accumulation of stock and the appropriation of land”. Instead, this product goes to the stockholder as profit and the labourer receives wages.

With wages, Smith states, “The workmen desire to get as much, the masters to give as little as possible”. We have Marx’s “contending classes”. Smith goes on

It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily…In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long-run the workman may be as necessary to his master as his master is to him, but the necessity is not so immediate.

Smith argued that wages would rise when an economy was growing but otherwise he posited a clear general tendency for wages to feel only downward pressures. From this flowed the idea of the ‘subsistence wage’ with which Malthus earned economics the tag of “the dismal science” and Lasalle’s Iron Law of Wages. Wages will stagnate, Smith argues, and profits will rise. Warren Buffett would not disagree.

But looking at the passage from Smith we can see much wrong with it, or at least, much that has no application today.

First, Smith says that stockholders are “fewer in number” than labourers and thus have a kind of oligopoly power. The error here, perhaps less when Smith was writing, is to regard labour as homogeneous. It isn’t. Skills, like capital, can be specific to a certain role and, thus non-transferable. Just as a “tractor is not a hammer”, Joleon Lescott is not Mariah Carey. You wouldn’t consider putting Mariah Carey on Darren Bent at corners and you probably wouldn’t want to hear Joleon Lescott sing Without You.

It follows that workers with different skills are not substitutes for one another; they are not, in other words, in competition. No brain surgeon ever accepted a lower wage from the fear that the hospital might hire a juggler instead.

Of course, where labour is unskilled it is homogeneous and we would expect to see the increased competition for jobs and resultant low wages which we do. At this skill level, also, capital can be substituted for labour providing a further downward pressure. The answer here is not to raise the banner of class warfare but to accumulate skills.

Second, Smith says that stockholders “can combine much more easily”. However, in practical experience, such cartels are always plagued with problems as we see with OPEC. If a cartel sets a minimum price there is always the temptation for one member to sell below that price and capture the market. Although here we are considering the case where a cartel is setting a maximum price for its labour inputs, the analysis is unchanged as we shall see.

Wages and the Marginal Productivity Theory of Distribution

Thirdly, Smith contends that “In all such disputes the masters can hold out much longer”. This might well be true but the question has to be asked; why would they? If, by hiring a worker at £30,000 per year a stockholder would increase his profit by £40,000 per year, why would that stockholder hold out, throwing away £10,000, in an attempt to drive the worker down to £20,000?

It could be said that the stockholder will lose out on £10,000 this year but will gain £20,000 in every subsequent year. But Smith said that stockholders were “fewer in number”, not that there was only one, so there are those cartel problems. Thus, if, in the initial period, stockholder A is willing to forgo £10,000 and hold out for a wage of £20,000 stockholder B will step in and offer the worker £30,000. He will make £10,000 profit while stockholder A makes nothing. There is a saying about stepping over a dollar to pick up a penny, in this case stockholder B picks up both.

Indeed, if the worker adds £40,000 to profits it makes sense for the stockholder to employ them at any wage up to that (tax wedges notwithstanding). We have arrived, as economists did after 1870, at the Marginal Productivity Theory of Distribution. This simply states that a factor (labour or capital) will be paid to the value of its marginal product.

So, if hiring a first barman generates £100 a week extra profit for a pub landlord that barman will be paid up to £100. If, however, hiring a second barman adds only £80 a week the marginal product of bar staff has fallen to £80 a week and so will the wage even of the first. If hiring a third barman adds just £50 a week and no one will take the job at that wage no one else will be hired and £80 a week will be the wage.

Of course, if there are two barmen earning £80 a week one could go on a cocktail course. His mojito’s might prove a draw, his marginal product will rise and so will his wage. By doing the course, ‘upskilling’, the first barman is differentiating his labour from that of barman two. Their labour is heterogeneous.

Smith himself saw a situation where in a growing economy, one in which the profits of stockholders were increasing, demand for labour would also increase. In this case “The scarcity of hands occasions a competition among masters, who bid against one another, in order to get workmen, and thus voluntarily break through the natural combination of masters not to raise wages”.

However, as we’ve seen, because of heterogeneity on both the labour (due to non-transferable skills) and stockholder (due to cartel issues) sides of the wage bargain it is this which is the general case and not the previously enunciated tendency for wages to fall and profits to rise. Because some ‘hands’ are skilled at some things and other ‘hands’ at other things there is at any given time a “scarcity of hands” in any profession requiring a modicum of skill. And because we have a number of potential “masters” we have at any given time “competition among” them.

Both profits and wages can rise together and the zero sum thinking of Marx and Buffett can be discounted. But Adam Smith’s role in this thinking should not be forgotten either.

This article first appeared at The Cobden Centre

Milk madness – Take 2

Moo are you lookin’ at?

I’ve moaned before about how people generally ignore my articles about monetary economics but that if I write about fiscal policy people get very excited. Well, now I suppose I can add dairy farming to my list of ‘hot button’ topics.

It isn’t hard to understand why. This is one of those cases which economic development continually throws up where the benefits of an action, in this case lower milk prices, are spread over a wide section of society while the costs are concentrated. If, say, milk prices fall so that a pint of milk becomes 3p a litre cheaper (assuming, for arguments sake, that 60 million people drink three litres a week) then the benefits to society will be £280,800,000 pounds a year but only £4.68 for each individual.

But if the costs, on the other hand, are concentrated among a relatively small number of dairy farmers such that each one stood to lose an annual income of £30,000, you can see that they would be incentivised to act more strenuously in fighting against the change than consumers would be in fighting for it. You see this wherever benefits are diffused and costs are concentrated. You always have. It’s what EP Thompson’s ‘The Making of the English Working Class’ was all about.

Still, that shouldn’t mean that wooly thinking goes unchallenged and what struck me about some of the reaction to my article for The Commentator was how confused it was. On the one hand I was accused of defending the iniquitous outcomes of a brutal free market. On the other, I was told that there was no free market in milk and was accused of defending cartels. This should immediately alert you to the standard of argument your opponents are about to deploy.

The first set of arguments were about the price itself, specifically what it reflected. Flatpackhamster argued that because of collusion among buyers the price was being kept below its ‘proper’ price. But in my article I had argued against the idea of a ‘proper’ price as something that could be objectively ascertained. In this I was drawing on a tradition of economics which is now 140 years old and which holds that value is purely subjective. The ‘proper’ price is whatever the contracting parties judge it to be. Thus, if two parties agree to a price of £1 per litre it is no less a ‘proper’ price than if they agree to a price of £5 per litre.

This subjectivity also applies to the prevailing market price, something trapezium struggled to understand. When you add the subjective judgments of all the market participants you do not get something which actually is objective. This is, to repeat, because there is no such thing as objective value. If 50 million people like Marmite and 10 million people don’t you have not derived an objective ‘fact’ that Marmite is nice.

Another argument, made by several but most clearly by Vimeiro, was that there was no free market in milk “because of the two layers of cartels operating in the middle” (between dairy farmers and consumers). This is a curious argument. After all, when we buy clothes made in China I imagine very few of us buy them directly from the Chinese factory worker who sewed them.

But what of the cartel argument? This is stronger but there is a simple answer to it. If we want to restore market power in the face of relatively few buyers what we need is relatively few sellers. Indeed, as my article said, with productivity increasing in the dairy industry faster than demand you will see fewer dairy farmers. There really is no alternative. In other words, if we allow the market process to work the cartel argument vanishes.

Also, despite what was suggested Charles Barry and others, the fact that supermarkets sell milk at different prices to what farmers sell it for is not evidence of evil price gouging. They are, after all, selling different products. Would you want to drink milk straight out of a cow’s udder? Me neither. It has to be processed, pasteurised, homogenised, treated, and bottled before it arrives on your supermarket shelf. The untreated milk the farmer sells to the processor is a different product to the drinkable milk sold in supermarkets. Hence, and quite obviously, why they are different prices.

The same point applies to cowmangav’s argument that because spot prices are above the offered contract prices these new contract prices are somehow ‘wrong’. The spot market is so called because transactions are settled ‘on the spot’. So, if the spot price is, as cowmangav says, 32 ppl then the buyer will hand that amount over and get their milk right now. The contract price, that which milk buyers are trying to lower and dairy farmers are trying to keep at the present level, is, according to cowmangav, 24 ppl. But, crucially, if a buyer pays this now, unlike in the spot market, they will not get their milk until some point in the future, points spread out over the length of the contract. This leaves room for uncertainty about future market conditions which the spot price does not have to reflect. Hence, it will be a different price. To put it another way, if I want to sell you a cake which I will give to you today, would you pay me more or less than if I sold you a cake which you couldn’t eat until next year?

Cowmangav actually gives an example of this in action. He says that “Milk production in the UK is currently running 4 to 5 percent below last year due to weather effects. This has caused milk procesors (sic) to have to pay 32 -35 ppl on the spot market to get extra milk” So, at some point in the past, buyers committed to paying farmers 28 ppl for milk. But, because of weather, the farmers are unable to deliver so buyers are being forced into the market to get the milk they need at 32 to 35 ppl. Buyers are paying anywhere from 14% to 25% more for their milk than they thought they would be. Can anyone be surprised that the contract price would deviate from the spot price?

There is a further point to be made in response to cowmangav. If the current contract price of 28 ppl is ‘fairer’ than the proposed contract price of 24 ppl, does that not mean that the spot price of 32 to 35 ppl is ‘unfair’ as well? It is, indeed, instructive to note that he doesn’t use this as an argument that the spot price is too high. Apparently a price is only ‘artificial’ when it benefits someone else.As Adam Smith put it back in 1776

“Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people”

That’s special interests for you.

I drew quite a bit of fire for my Commentator piece. I’m not too concerned, as I say, when the costs of an action are concentrated those who will bear them will fight hard. And besides, one of the commenters also dismissed Adam Smith, so not bad company to be in.

Got milk? – Yes, plenty thanks


There is something about the countryside. Perhaps it is its beauty; perhaps it is its seemingly ancient and unchanging way of life. Whatever the reason, the countryside and the agricultural sector has the ability to send otherwise reliable economic compasses haywire.

The Telegraph illustrated this last week when it threw its weight behind the burgeoning campaign to get a ‘fair’ milk price for dairy farmers.

This language ought to set people’s teeth on edge. What is a ‘fair’ price? Whenever one person is willing to sell a good or service at a given price and another is willing to buy it at that same price the exchange will take place. Both parties might prefer some other situation; the seller might prefer a higher price and the buyer a lower one. Doubtless both would consider their respective preferred situations ‘fairer’.

But that is the beauty of an exchange economy. It reconciles differing, subjective ideas of ‘fairness’ (of which there are as many as there are economic agents multiplied by the number of transactions they undertake) to arrive at a mean of what society deems ‘fair’.

Food is an essential for life. Thus its price elasticity is low, meaning that when its price increases people do not curtail their consumption, they just pay more. The alternative is starvation. Unless they can’t pay more, then they will curtail consumption.

Increases in food prices hit those on lower incomes hardest. They will pay a disproportionate share of the ‘fair’ price. Well-heeled Telegraph hacks might want to ponder that before pontificating.

Campaigns for ‘fair’ prices are simply attempts by some sectional interest group to use either the bully pulpit or legislation to assert its particular notion of ‘fairness’ over the market derived societal mean.

The Telegraph isn’t alone in being lured into a thicket of economic nonsense. In the Guardian dairy farmers, Helen and David Banham, told us that “The typical day for us starts at 5am and finishes at any time after 7pm, seven days a week, 52 weeks a year, Christmas Day, New Year’s Day; days when you don’t feel like getting out of bed and wished you could have a day off sick; irrespective of the weather, from -15C to 30C, rain, snow or sun”

Interesting enough but from an economic perspective completely irrelevant. The value of a good or service to society is not a function of the amount of effort expended on its production. That was the lesson of the Marginalist revolution in economics led by Carl Menger, William Stanley Jevons, and Leon Walras.

The marginalists showed that value was not derived objectively from the labour expended in production, as classical economists liked Adam Smith and Karl Marx had believed (examples to the contrary were too numerous to name), but was a subjective property assigned by individuals.

As sometime economist Bishop Whatley put it, “Pearls are not valuable because men dive for them; men dive for them because they are valuable.” If we want to judge the ‘fairness’ of a price the effort expended by Mr and Mrs Banham is neither here nor there.

But it would be harsh on the classical economists to tar them with the same brush of economic ignorance as the ‘fair’ price people. Smith understood that one of the vital sources of The Wealth of Nations was increasing productivity, the amount of output we can produce with a given amount of inputs; think of his famous pin factory.

As Matt Ridley recorded in The Rational Optimist

“A half-gallon of milk cost the average American ten minutes of work in 1970, but only seven minutes in 1997. A three-minute phone call from New York to Los Angeles cost ninety hours of work at the average wage in 1910; today it costs less than two minutes. A kilowatt-hour of electricity cost an hour of work in 1900 and five minutes today”

This is caused by increasing productivity, producing more with as much or the same with less. Increasing productivity, making things cheaper, allows us to buy things we couldn’t before. It is what increasing wealth is all about.

236 years later this seems to have been lost on the ‘fair’ price people. As Tim Worstall explained in the Telegraph, between 2000 and 2010 the milk yield, the amount of milk produced per cow, increased by 22 percent, an increase in productivity.

If demand for milk is unchanged then obviously, as Worstall points out, the answer to the Telegraph’s question – “Does Britain need dairy farmers?” – is: fewer than we have now.

The productive factors freed up can go into producing something else. It might be something that doesn’t exist yet, but aren’t we better off than our ancestors now that increased agricultural productivity means that we can produce many times the amount of food with a fraction of the workers so that we can eat well and have people producing TVs, fridges, planes…?

Under market capitalism prices are the signals which direct resources toward more productive ends. Despite what the Guardian thinks, farmers are not entitled to a profit. Profits must be earned by taking inputs and adding value such that society judges your outputs to be worth more than your inputs.

If society thinks your outputs are worth less than your inputs – you are destroying value in other words – you will incur a loss. As Worstall puts it, society is telling you to stop so that the resources you are using can be utilised by someone else who will add value to them.

Joseph Schumpeter called these “gales of creative destruction”. Next time right wingers argue that we shield dairy farmers from these, replace ‘dairy farmers’ with ‘coal miners’ and ask why they argued for leaving them to face their full force.

True, HE Bates never wrote a novel romanticising coal mining, but economic logic is economic logic. We can’t embrace it when it affects left wing union members and reject it when it affects Tory voting rural dwellers. That really wouldn’t be fair.

This article originally appeared at The Commentator

New year, new blog

Another belated New Year

Well, here I am. After more than five years as The Boy Phelan I decided it was time to grow up. Not too much, but I thought I could use something a little more descriptive. The new title was a little tricky. I solicited opinions and though My Struggle was a favourite of mine people seemed to like Child of Thatcher. While I can appreciate the thought it seemed a little restrictive. It would give people the idea that they knew what Id say on this or that simply by seeing what Maggie said about this or that. So I plumped for Manchester Liberal. How so?

The Manchester Liberals were a 19th century group inspired by the writings of David Hume and Adam Smith among others, members of the Scottish Enlightenment who extolled individual sovereignty. They were, in this sense, quite distinct from the contemporaneous school of thought based around Rousseau and later cranks like Hegel with their concepts of ‘General Will’ and the like which went on to inspire socialism, the biggest wrong turn made by humanity since it decided to give the dark ages a try.

Manchester was one of the thriving industrial centres of England in the early 19th century yet its people couldn’t afford to eat. The Corn Laws, enacted and maintained by the Tory land lords who benefited from them, made corn expensive and raised the price of food.

It was, thus, clearly seen that the free market in corn was in the interest of the average worker. The Anti Corn Law League was founded in Manchester in 1839 and, with figures such as Richard Cobden and John Bright, it made the case for free trade. When Peel’s Conservatives buckled and abolished tariffs in 1846 it ushered in more than half a century of rapid growth and rising wealth.

There was more to it than just this though. The Manchester Liberals were concerned with social issues of poverty and improvement. They saw the solutions not in the vast and largely useless hand of the state as increasingly did those who called themselves Liberals under the doleful influence of John Stuart Mill. They saw them in the spontaneous relations between free individuals which would be written about at length by Freidrich von Hayek, a thinker far more in tune with Enlightenment impulses than Mill.

So Manchester Liberalism is the belief that free markets and free people, the two are largely indivisible, is the optimal social arrangement. Making this cause the cause of the worker was the its great achievement.

That is why, though quite a partisan Conservative today, I am not a conservative. It is why half a dozen suggestions for Conservative or, worse, Tory themed blog names were rejected out of hand. Im a liberal.

So if you’re new to this blog that’s broadly what you can expect. If you’ve followed from the old blog it the same old rubbish.

Laissez faire is not the only culprit

Not guilty

Not since Henry I ordered “that all the mint-men that were in England should be mutilated in their limbs; that was, that they should lose each of them the right hand, and their testicles beneath” have bankers been so unpopular.

Politicians, grateful for cover for their own responsibility for this mess, issue blood curdling threats against bankers salaries. The left argues that banks should be left to stew as they brought this on themselves, a stance they have never adopted towards other failing enterprises such as coal mines or car factories. Meanwhile the ordinary voter is wondering why there appears to be a bottomless pit of cash for banks when parties are proposing spending cuts.

To continue reading click here