James Knight
My teenage neighbour knows that good GCSE grades are better than bad ones. She has an idea that will help all students at exam time. Introduce a minimum grade level of C, so that no student, however bad, can be sullied with D, E and F grades as they enter the job market.
Only joking. My teenage neighbour is not that foolish. Apparently, though, if you replace GCSE grades with business protocols then some party leaders are that foolish. Green Party leader Natalie Bennett is particularly big on small business subsidies, as I’ve often heard her mention on TV. Ed Miliband feels the same – he’s all for propping up small businesses with tax breaks and surreptitious subsidies. In fact, a good rule of thumb is that if an idea is foolishly inimical to personal freedom and the success of market forces, Ed Miliband is pretty sure to support it.
Most teenagers could work out that misleading students, parents, exam boards and prospective employers about pupils’ scholastic abilities won’t help anyone in the long run, because artificially altering GCSE grades to Cs and above gives a distorted picture of academic ability and employability.
Why can’t party leaders on the left do the same when the case is small business subsidies? The answer, I suspect, is simple: competing parties are not primarily interested in logic, they are interested in securing votes – in this case, the votes of people that think too lazily to realise that small business subsidies are no better than GCSE grade subsidies – as both distort the market in which they operate.
Here’s some advice for such politicians. Small business subsidies amount to the government taking taxpayers money and giving it to businesses that may or may not be viable enough to survive in a competitive market dictated by supply and demand. If taxpayers wouldn’t voluntarily spend their money in these businesses then they are being artificially propped up against the majority of people’s will. If taxpayers would voluntarily spend their money in these businesses then no subsidies are needed. The success of a business is not measured by the State’s ability to prop it up, it is measured by whether it generates enough profit in a supply and demand market.
If demand for Jean’s Knitwear falls, then prices may fall to increase demand. If Jean’s Knitwear can no longer generate a profit to live, the signals are there that her business is inefficient or that her products are low in demand. Prices in a free market are the signals that make what is being supplied adjust to the demand of those supplies. Alas, prices no longer provide this signal when politicians interfere with subsidies or controls – they stop prices exhibiting changes in the supply or demand for goods and services.
It’s easy to see why small business subsidies are popular with voters. They make any party that endorses them seem caring, and mindful of struggling companies, as well as giving the impression of being supporters of the underdog against the often maligned multi-national corporations. In fact, I’d wager that most of the public like the sound of small business subsidies – so public support for them is a bit like pushing on an open electoral door. But like most things that sound too good to be true, the medicine is poison, because nothing comes for free.
The visible benefits are obvious – the beneficiaries are small businesses. But the losers are taxpayers who are having their money spent in places in which they wouldn’t do so voluntarily. But more than that, the other losers – the invisible losers – are those missing out on opportunities to enter the market. Thanks to subsidies, Jean’s Knitwear may now be staying afloat – but as well as taxpayer costs, the cost of such subsidies is the forgone opportunities for other suppliers of goods and services trying to enter the market or stay afloat on their own merit. It’s a shame when small businesses go under. But you cannot fix the problem by distorting price signals and forcing taxpayers to support them as if they were successful businesses. Only an idiot would do that; well…that is, an idiot, or someone who saw a popularity-winning policy and flaunted it to secure votes.
Regretfully, this isn’t just a problem of the left anymore: there aren’t currently any serious mainstream parties that endorse the sentiments of personal freedom and the full qualities of free market capitalism. Even Lord Saatchi, who is pro-market freedom, and is certainly no idiot, proffered a proposal this week to abolish corporation tax only to small businesses – which doesn’t take it far enough. Be warned; expect competing parties to try to secure votes in the run up to next year’s election by seducing would-be voters with all kinds of attractive offers for small businesses – offers that would be paid for by your money. Don’t be fooled by any of it, though – the medicine is poison.
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They’d be better off subsidising these kids direct for a bit to start their own businesses. TheDarkMan will always correct any meaningful error of fact.
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No subsidies please but cut back on excessive regulation. Years ago, a business friend moved from a very nice local business to the British branch of a multinational.
I caught up with him some months later at a conference. I complained how we were being overloaded with (mostly EU-related) regulation.
“We love this, Edward” he said ” we have a whole department which does nothing else”
“We know you have to do the work yourself. That keeps you from competing with us. Eventually you get fed up and we take your business one way or the other”
Such regulation also raises the bar against new entrants to the market.
If you have a friend in the Federation of Small Businesses, ask to see the newsletter. Much of it, every edition, is taken up with announcing new regulatory requirements .
It’s absurd to talk about free markets while government exists. Small to medium enterprise game regulations just as multi-nationals do – it’s the cost of doing business. If you don’t believe this, look at how AirBNB and Lyft are being attacked at the local government level with regulations.
All persons are complicit when they accept that the initiation of force is an ethical and a legitimate way of conducting human affairs.
The root of the problem isn’t politicians spending taxpayer money to buy popularity the root of the problem is the taxpayer his/herself, the vast majority of whom agree with the system.
The problem is us. In the specific case of the merry band of pranksters who write and comment at this blog, the problem is we’re unable to demonstrate to the unwashed majority that what they are doing and what they believe is wrong and evil.
Lower taxes are not subsidies, and if one can not get rid of the web of regulations for every business then getting rid of them for small business enterprises (on the grounds that a small business can not afford a Legal Department to deal with all the regulations) is not a subsidy either.
Of course it would better if no business (regardless of size) was subjected to taxation (there is no business tax in South Dakota and some other American States, and there was no Federal business tax till 1909). But getting only small business enterprises out of the tax and regulation net is better than getting no one out of it.
I see no reason why the British government should persecute small business enterprises with taxes and regulations – and it is not a subsidy if they stop doing so.
However, YES INDEED – actual subsidies for small business enterprises in Britain would be a bad thing. And I fear that the present Chancellor (who is attracted to many forms of interventionism) might well go down that path.
Both economies of scale and diseconomies of scale (for example as a business gets larger it gets harder to manage) exist. The optimum size of a business in any industry can only be discovered by the actual market place (government can not know what size of business is “correct”) and it will change over time (each business enterprise, regardless of size, is DIFFERENT, because different people work in each business – we are all different, – a point that the “perfect competition” model of Neo Classical economics over looks).
The ultimate absurdity would be to set up special schemes to help small business enterprises whilst continuing to tax and regulate them to bits – and I think this ultimate absurdity is the “natural” path that the state (regardless of party) would tend to follow. Governments very rarely admit error (get rid of polices that have caused harm) they just add a new intervention to “fix” the bad effects of previous interventions.
“Small business enterprises seem to be in trouble – we had better set up special schemes to help them” – sadly that is default statist thinking.
Also ……..
Christopher Booker and Richard North have done a very good job (in their books and articles) in showing the European Union origins of so much of the regulation that undermine business enterprises (especially small business enterprises) in Britain.
To end on a positive note……
Remember that every big business started as a small business – and that it is still possible (with a lot of effort and creative thinking) to grow a small business into a truly large scale enterprise.
“We will be millionaires Rodney” is not always a laugh line – although the short time scale (“this time next year”) shows a lack of sensible thinking.
The scum of the state antics–regulation/taxation/QE–raising the cost of living and so squeezing potential customers of small businesses–is one of the main causes of problems for small businesses. Stuff your subsidy–just leave people alone to get on with their trade/business.
Apologies for thinking out aloud, but on the face of things, I would not consider, for example, less tax and regulation on smaller businesses as being a subsidy from the state, ergo the tax payers.
How, for example, is a small coffee shop or toy shop or whatever, supposed to compete with the economies of purchasing scale and the tax-shifting chameleons of globalist companies selling the same products?
Then there is the other interconnected things like “minimum wage” and so on. I am not really an advocate of it, I am not really swayed either way, but the point is this…… large companies, say, McDonald’s, might want to apply a higher minimum wage or support minimum wage theory – contrary to what people may think they would do.
Why would they do this? One, so that they can look good, caring, compassionate and all the rest of it – and two, because they can afford to apply a higher minimum wage standard whereas the smaller burger outlet down the street cannot afford those wages.
Combined with the tax avoidance, the economy of scale purchasing, the marketing power and so on, are they not stunted or disadvantaged by this difference and in some cases unable to compete in this supposed ‘free market’ (which I don’t think is one any more)?
Shouldn’t they have some support against this much (rightly, in my view) bashed reach of conglomerates or otherwise huge chains so that they have a chance to sink-or-swim on their own merit within a more level playing field?
If they are still rubbish and cannot compete in those conditions, then, yes, there is not much to be done about it and that is the unfortunate way it has to be.
Just one of the many rackets like subsidised art, higher education and local gov etc., which draws money and opportunities from those furthest away from government; putting it into the pockets of those closest… How many people have passed through ‘free’ government business programs over the years, without the slightest hope of becoming entrepreneurs?
“Visible benefits” are always pleasing to the voter and media pundits alike; it takes brains and wisdom to see long-term ramifications, and to be quite frank, the vast bulk of humanity hasn’t evolved past personal short-term advantage seeking.
Decentralisation would allow local communities to decide how best to spend (or waste) their OWN resources. But all the main in-groups know very well that they can get more concessions with centralised power (at the expense of the more marginalised and productive groups)… It is just a survival strategy, and the only way to fundamentally change habits is by putting forward the ethical argument (not the political one).
Subsidised art is indeed a bad idea – the arts in Britain were in a better state before the government got involved. Ditto education – if one really believes in “academic freedom” one should see the terrible threat that official funding is to it.
But what is all this “local communities” stuff? Are we talking about private clubs and societies (churches and so on)?
It does not seem so – it sound more like communes (like the Ks that failed in Israel) or local government……..
“Their own resources”?
The only advantage of local taxation over national taxation is that it is less difficult to “vote with your feet” (to leave high tax areas and go to low tax ones).
“Local communities stuff?” meaning ward taxation (or no taxation) decided democratically by people living in the ward who hire and fire staff to run their ward (or do it themselves). Surely decentralisation is a step in the right direction?
And don’t those “failed Ks” still account for a significant percentage of Israel’s productive output?
Jeriko One – as I said, local taxation (rather than national taxation) is a “step in the right direction” for one reason and one reason only, it is less difficult to “vote with your feet” (and old “Lenin” did not expect people to vote with their feet as the have done – whenever they have had the chance) to go from local areas with high taxation, to go to areas with low taxation.
There is no special virtue in taxes being local (in 51% of voters agreeing to increase local taxation – especially if many of those voters will not actually be paying the tax they are voting to increase) taxes-are-taxes-are-taxes.
Do the failed K.s account for a significant percentage of Israel’s productive output – errr no they do not, that is why I typed “failed” Ks.
As someone who has been to Israel (several times) I can tell you that Israel is a bit like America is supposed to have been in the 1950s.
Mostly religious (although Jewish rather than Christian) – strong families (a low births-out-of-wedlock rate – the Plato style communal child raising of the Ks failed really badly), lots of firearms (although there are “gun control” regulations), and filled with lots of people interested in making money.
No wonder the left (in Europe and North America and so on) have fallen out of love with Israel – it is not really their sort of place (if it ever really was).
Even back in the 1960s and 1950s no more than 5% of the Jewish population lived in Ks (or other forms of communal living). Things such as the nationalisation of the electricity industry (it was actually a Jewish owned company under British rule – that was grabbed by the Fabian inspired Israeli government soon after independence, I have visited the old offices in Hafia) are regretted now, and have (mostly) been reversed.
What has happened is that, over time, the majority of ordinary Jews (who are much like the majority of ordinary people in other countries) have taken power from the minority of communal Jews – the tail has stopped wagging the dog.
If anything Israel is far too ordinary – credit bubble financial system, taxes much too high (to pay for high government spending) and so on.
The United States in the 1950s spent as much of its economy on the military as Israel does – but the United States (back in the 1950s) did not have a Welfare State as well. Israel tries to have BOTH – and that will not work.
I would argue that even without a big military, an unlimited Welfare State will not work – witness the crises of Western Europe (a slow motion train crash). Or the crises of American cities………
The point I was getting at is that local gov is an oligarchy – far removed from the people they lord over. Much less corrupt to vote your own independent local ward chair/s who can be removed at any time, and give full control over local spending and planning decisions to the people living in the ward.
Where there is voting decent friendship (and civil behaviour) tends to end. I had a walk yesterday – and bumped into a person I know from local politics. It struck me how different he was (how much better) in a non-political context (and, no doubt, he thought much the same about me). Politics (including very local politics) brings out the worst in people.
Even New Hampshire townships (where everything is supposed to be decided by a town meeting once a year) tend to fall into the hands of elected “selectmen”.
As for wards – that is the bed rock of any Machine. The local Ward Boss in somewhere like Chicago is not a good thing.
“Activists” – the sort of people who tend dominate any public meeting, are not a good thing either.
If someone wants to do something for the community he (or she) should just do it (with their own time and their own resources) – not have public meetings and votes about it.
“Where there is voting decent friendship (and civil behaviour) tends to end.”
Thus opportunities to develop better behaviour and negotiation skills. I’m all about moving forward from the apes and teaching people to think. You seem to be talking about ‘damage control’ and ‘practicality’ with a sprinkling of ideology.
““Activists” – the sort of people who tend dominate any public meeting, are not a good thing either.”
Currently, local community meetings are mealy exercises in lip service with activists only present in the hope of gaining a few political points… The things that really matter (planning decisions, housing, local spending etc.) are never put to the vote. ‘Localism’ (local autonomy) would change all that, and would make party politics and public sector unions etc. obsolete (whom exist only because of centralisation).
“If someone wants to do something for the community he (or she) should just do it (with their own time and their own resources) – not have public meetings and votes about it.”
What you are generally saying is logical, but not biological. We are social creatures who naturally form collectives. Trouble is, these small collectives tend to run away with themselves and grow into nation states and beyond… A simple understanding of biology and human nature is what is needed. Otherwise you are just running around in circles in an endless game of “my ideology (dogma) is better than yours”.
J1 – I just pointed out to you that politics (including local politics – in fact especially local politics) often brings out the worst in people, it does not “develop better behaviour” it develops worse behaviour (back biting, back stabbing, plotting – and so on). The only excuse for being in politics is to work for less politics (and I often doubt whether that is a good enough reason).
As for “we are social creatures who naturally form collectives” – you seem to be confusing civil society with collectivism (they are not the same – they are opposites). A commune (or other forms of what Oakeshott called “enterprise association” or universitas – what Hayek called from the Greek “Taxis” or planned order, as opposed to “Cosmos” spontaneous order) is radically different from civil society (civil association).
Start with “On Human Conduct” by Michael Oakeshott.
“it develops worse behaviour (back biting, back stabbing, plotting – and so on”
Which is tolerable at a local level, but devastating at a national level (war, corruption, inflation, money printing, debt, oppression, collusion etc.). And besides, it would be difficult to plot when you need more than half of the community on your side to pass a notion. Most of the corruption today comes from organised mobs like political parties and public-sector unions with their toxic business partners who would not gain any traction in a decentralised nation.
I’m advocating decentralisation, putting power back into the hands of communities (nothing to do with communes), but you seem to be advocating “meet the new boss, same as the old boss”.
Still for those people who want “small collectives” they are available – monastic houses (of various forms).
Experience has shown that sex (both relationships and bringing children into the world) tends to undermine communal living (even at a small scale – indeed especially in small intimate communities), hence the rule of celibacy.
I agree that statism at the national level is worse than at the local level (generally anyway). Because one can vote with one’s feet with less effort at the local level.
Detroit goes insane (the post 1962 Progressive “Model City”) and one moves out. Harder to do that with an entire country.
James Madison hoped that the Federal government would prevent mad statism at local and State level – but he soon revised his opinions, holding that Federal government statism was the greater threat.
Even in modern times people have often to national governments to deal with insane local governments – but the results have normally been disappointing (to say the least).
Often national governments help push local governments into being insane – they certainly did in Detroit.
In Britain national government has been pushing local governments into doing X, Y, Z (whether local voters wanted it or not) since at least the 1870s.
“In Britain national government has been pushing local governments into doing X, Y, Z (whether local voters wanted it or not) since at least the 1870s.”
I’m not talking local government. I’m talking important decisions being made in the ward, by the ward (not by an impersonal, unelected oligarchy of incompetent professionals and self-selecting Party gangsters). There is a major difference there. The reason people don’t currently engage in local politics is that all the important decisions are made in town halls. Local autonomy at a ward level (or even smaller) would make everyone a stakeholder, who’s vote really would count for something and effect real change.
As I have already told you (several times) the only advantage of taxation (or regulation) by “ward” is that it is less difficult to “vote with your feet” – i.e. LEAVE areas where mass meetings have imposed crazy taxes and regulations (leaving those people who have voted for such folly to rot in the mess of their own making).
By the way…. mass meetings (voting and so on) has nothing to do with liberty. There is no Divine Right of the 51% any more than there is Divine Right of Kings. Civil interaction (whether commercial or charitable) has nothing to with “well you have the misfortune to live in our “ward” so we get to tell you what you must do – but, do not be upset, as you get a vote as well…”
Rousseau was not a libertarian thinker – even if one ignores the “Law Giver” and “the will of all” (what people actually believe) being often fundamentally different from the supposedly noble “General Will” (what Rousseau’s “Law Giver” tells everyone they “really” believe even though they do not know it).
Karl Marx, Herbert Marcuse and Noam Chomsky did not invent this nonsense – it is there in Rousseau.
Those who get their ideas about liberty from the tradition of Rousseau drink from a poisoned well.
For the true nature of Civil Association (Civil Society – and why it is nothing with communalism, national or “ward”) I again urge to read (for a start) “On Human Conduct” by Michael Oakeshott.
You’re doing a lot of strawmanning. I presented new concepts to you and you’ve skewed them into something more familiar so you can apply your usual automatic responses by numbers. You can learn critical thinking skills in approx. 30 minutes, so there’s no excuse in remaining an automation.
J1 – please stop being obtuse.
There is no special virtue in taxes imposed by some local (“ward”) mass meeting. And it is not “freedom” to be ordered about by a mass meeting (even if one has a vote).
Civil Association (Civil Society) has nothing to do with communalism.
I’m talking about decentralisation to get rid of party politics and town hall/national oligarchies; putting people back behind the steering wheel of their communities (opportunities for personal development, increasing social capital and generally advancing the species), and you’re quoting scripture and banging on about taxes. We’re not even on the same page…
The article “Orwell, Orthodoxy and Organization” is very apt here (emphasis on ORTHODOXY). But the intended meaning of that text probably flew over your head too…
J1, I would like to know please what you mean by “ward.”
In our usage, the “ward” is a political subdivision of the city which exists, theoretically, to see that the people within it are properly represented. In most of the big cities, the “ward bosses,” who are supposedly the liaison between the people in the area and city government, are vital to keeping the City Machine (usually Democratic) in power. They pass out perks to helpful or favored individuals in the neighborhood, recommend withholding permits, etc. Whether a neighborhood’s potholes get fixed sooner rather than later has to do with the Ward Boss’s pull in City Government. (Of course there’s more to it than just the ward boss, but wards are the subject we’re discussing.)
The Ward Heelers are there too, right-hand-men to the Ward Boss, making sure elections come out the right way by fair and foul means, so forth.
All that is the classic description; see Chicago Machine, Tammany Hall (New York), other cities as well. It’s possible that at least in some cities the classic Ward System as described above has morphed into some variant, though I doubt the basic system is much changed.
However, Jeriko, by “ward” you seem to mean something entirely different.
Therefore, please define “ward” as you are using the term.
No we are not on the same page J1 , because we are not reading the same book.
The book you are reading is fantasy – where local “wards” are (or can be) about “opportunities for personal development, increasing social capital, and generally advancing the species”.
This communalist stuff is total and utter bullcrap. Ravings worthy of a “Community Organiser”.
Julie – no-no.
It would all be different if it was mass meeting of “the local community” – with no politicians and so on.
Accept (of course) it would NOT be different (not in any good way).
So basically you’re advocating a similar kind of authoritarianism that we already currently have? Hardly forward thinking…
No J1 – I am advocating radically smaller government, in taxes, government spending and regulations (how small? keep reducing it – and then reduce it some more….).
And you are advocating renaming the government “the people” and have it (and some local mob-rule level) control every aspect of human life – totalitarianism falsely presented as “libertarianism”.
As for “forward thinking” – spare me the Hegelian hogwash.
There are no “laws of history” and something being “new” or “the spirit of the age” does not make it good.
Localism and decentralisation isn’t “mob rule”. You want freedom for powerful people to build crap on people’s doorsteps and then try to pass it off as liberalism.
As a strategy, what you are advocating will never happen, because people find it far easier to outsource all of their problems and costs to a centralised authority (at the cost of the marginalised). Only by pointing out the questionable ethics of such practises would people reconsider their actions.
Just like those on the Left, you are too absorbed in materialism and political theory to understand how human societies function and where they are heading… If you really want the state to go then decentralisation would be the first step in the right direction.
Well now. I’m just a hick by upbringing of course, but for that very reason I would like to ask J1 what is the maximum number of people he envisions as constituting his ideal community?
Because, suppose a town is very small, a village really, say 400-600 people. Should they all gather together and vote on this or that issue? Because if so, that’s what they do anyway. That’s what a Town Hall meeting is, in the case of a small town anyway. Sometimes the “City Council” or the board of Selectmen consists of honest guys, who really do take the voices of the attendees into account. Sometimes not. But for the sake of the argument, let’s assume a board of men who really do try to follow what the people seem to want.
Which is why I ask just what you mean by “ward.” How big can it be? Should this little town of 400 souls be broken down into 4 wards, or 40? Should the town (or the ward) be interested in encouraging the two ladies two open up their quilting business there? Or would the people in the ward be discommoded by having a commercial enterprise of any sort there? (Traffic, don’tcha know.) Just as some people get all upset of somebody dares to give piano lessons in his or her home, against the zoning rules, or if not we’d better change the zoning rules….
So, how big is this “ward,” and what happens (regardless of its size) some of the folks want the quilting shop and some think the idea’s anathema? What happens then, as you envision it?
J1.
You do not know what civil association (civil society) is – and you are not interested in finding out.
As for the planning law (zoning as Americans call it) – it is not a good thing, and it does not prevent “crap” being built on people’s door steps.
Indeed British towns and cities looked a lot better before the Town and Country Planning Acts were passed.
However, I AGREE with you that big developments should not be subsidised with government roads (and drains and so on) and sweetheart loans.
I hate what is happening to the land.