Friday, 2 February 2018

Claiming credit where it isn't due (cognitive dissonance part II)

From the comments to a recent post:


@ Lola "For quicker wealth creation we want more laissez-faire."

Doesn't really match up with rapid post war expansion of wealth creation in the US and Western Europe which happened to coincide with more activist government and powerful trade unionism. That's the trouble with 'cognitive dissonance'. It's always easier to spot in others... ;)


@ Paul156. Nope. You have to correct for inflation, and you have to factor in the false growth created by having to rebuild stuff destroyed in WW2. I found a graph the other day that I can't now find that corrected GDP for inflation...stand by.

Paulc156, being a hard leftie credits the government with the rapid post-war growth, and Lola, being laissez faire, appears to admit that the government did have a larger role, but claims that the growth was either purely inflationary or down to post-war rebuilding (although the USA didn't suffer any damage, it just had to turn production lines from tanks back to cars).

IMHO, there was significant economic growth and development post WW2, but there's no point crediting exclusively 'big government' or 'laissez faire', it was both and neither. For the umpteenth time, "the government builds the roads, private businesses manufacture the cars and private individuals uses the cars" -  in a metaphorical and literal sense.

If the government decides that 'we' need more cars, all it needs to do is expand the road network, have more car parks where needed, ensure traffic runs smoothly. Then people will use their cars more, and will want to buy cars more, and private businesses will build and sell more cars.

If, conversely, the government decides to take over a moribund car manufacturer and just subsidise the production of more cars, then... British Leyland! Even worse, the government sub-contracts decisions on new roads and toll charging to the likes of Carillion or Capita...

The same goes for just about everything. The right way round is the taxpayer funds basic education for all children* (a kind of infrastructure or raw material for the private sector) and thus improves overall average skill levels and the private sector then employs school leavers. Try that the other way round - no state school system, only private education for the middle and upper income levels, and everybody leaves school and goes to work for the government or a nationalised industry?

So the 1950s-1970s were the brief Golden Age of Capitalism because public and private sectors were sticking to their own side of the line (British Leyland excepted) and doing its best. Government stuff (like owning MoD housing and collecting from the MoD, FFS) was not sub-contracted to private companies, that's the worst of both worlds.

The other point is, we had Georgism Lite in those days in most of the developed world, so wealth was distributed more equally and financial crises didn't interrupt everything and put us back ten years every eighteen years forward.

* In turn, this could be done just as well with education vouchers given to parents. This is bottom-up privatisation (like with pre-school nurseries) which provably works, as opposed to top-down privatisation like 'academies', where the council hands over an entire school and million pound budgets to their mates in the nominally private sector (which is doomed to failure, see Carillion and Capita etc).


Lola said...

Erm. I didn't say total laissez-faire I said more laissez-faire. I am not giving total credit to the private sector. I am not an anarcho-libertarian. Laissez-faire works best when you have private property rights - enforced by a state run system of justice. The sanctity private contract - where the Courts infrastructure is provided by the state can be accessed on the payment of fees to access to arbitrate. And sound money (although that does not need the State as such). It also needs the primary role of government, the defence of the realm, which also seems to work best as state run on the UK model where we employ both indigenous soldiery and mercenaries, e.g. the Ghurkhas.

Personally I would not state fund education to any level, but as a compromise I'd be happy with 'vouchers' and not have the state running the schools. Ditto healthcare.

Infrastructure i.e fixed capital like roads and railways...hmm. Quite happy to have private both, as long as their rent seeking opportunity is taxed away or maybe in the case of railways both taxed away and used as payback for bringing the railway to somewhere - better than handing it to landlords.

Mark Wadsworth said...

L, I am pretty much in agreement with you on finer details. I just wanted to contrast two ends of the spectrum, taking PC and you as examples.

What I am trying to emphasise (to a neutral third party) is that both government and private have a clear role to play, it's symbiotic. When the lines are crossed in either direction, it all turns to shit.

Lola said...

There's something else about the period 1945 to 1973 (I chose those dates deliberately) that although that period became the high point of the growth of socialism and massive nationalisation it didn't all happen on the from 15rd August 1945. For example although the UK health care system was nationalised in 1948 the first new NHS hospital was not built until 1963 (I found this which rather proves my point ). By the 1970's the cracks and flaws in nationalising everything - the 'commanding heights' of the economy - were beginning to show. And in 1971/73, due in large part to Kennedy / Johnson social programmes (and the Vietnam war) and hence US money and credit expansion, Bretton Woods collapsed.
And off we go on the punk Keynesian claptrappery false choice inflation or unemployment.

Mark Wadsworth said...

L, The Golden Age applied pretty much across the developed world, almost by definition.

Sure, some countries (UK, France, Italy) got bogged down in nationalisations, with varying degrees of failure. The USA started ruinous wars. Germany always steered a middle path. But overall, people were a lot better off by the 1970s than 30 years earlier.

The SE Asian countries tried different strategies and by and large, they all 'worked'. They might have been third world in 1945, but now we'd consider them developed.

Details, details.

My post was just about the correct demarcation between what the government/taxpayer does/pays for and what is best left to the private sector, as far as private sector is concerned, the more laisser faire the better.

And there are some things which the government should supervise closely, with the private sector providing the service and running the actual businesses (European healthcare systems, refuse collection in the UK).

Or to give another example, the government runs the national grid and private companies run the power stations. The government has to make sure there is enough spare generating capacity "just in case" as it is not in the interest of a private business to set up another power station and leave it idle.

Sobers said...

"o the 1950s-1970s were the brief Golden Age of Capitalism because public and private sectors were sticking to their own side of the line (British Leyland excepted) and doing its best."

Nonsense - the State owned pretty much the entire 'commanding heights of the economy' during that period (Mines, steel mills, railways, road transport, docks, shipbuilding, power generation and distribution, telecoms etc etc). There was no way the State was merely sticking to building the infrastructure allowing the private sector to grow, it controlled the majority of the economy. And as for doing their best, we all know what happened to the mines, the steel mills, the railways, the shipbuilders etc.

Lola said...

Mw. Yes. The trick is to stop government expanding.

Bayard said...

S, There appears to be a widespread assumptions that nationalisation took good, profit-making industries ans turned them into bad, loss-making ones. However, there is a lot of evidence that most of British heavy industry was pretty knackered after WWII, having been run into the ground on behalf of the war effort. Coupled to this it was riddled with bad management practices and all nationalisation did was prolong the inevitable result of us continuing to try and compete in markets where other nations were always going to out-compete us, whilst giving up in areas where we might have been world-beaters, e.g. computing.

paulc156 said...

MW. I accept your broad analysis. I'm less of an ideologue than you imagine.And less of an ideologue than Lola ...I would argue. It was just me having a bit of fun with L.
I mean true laissez-faire never existed anywhere except on paper or in people's minds whereas varying levels of state involvement in the economy are manifest and so can be looked Ă t empirically. I'm more of an empiricist than L I would say, whilst L is more of a fundamentalist.

B. Agree that management played an important role in the UK's economic demise just as well as the state. I think management today is also rather suspect. Preferring cheap labour to capital investment and on job training for example.

I wouldn't want to see the state adopting activist policies in retail or software development but I find the arguments put forward against state intervention in energy and rail for example as largely self serving or ideological in nature. It's not as if there is anything like a free market in energy distribution or generation or rail and we don't even have to look far for good examples of heavy state involvement in either. ie. Across the channel for rail... ditto for energy as France (EDF) along with Chinese investment is set to supply us with some of the most expensive energy in the world and come to think of it how many of our rail franchises are actually subsidiaries of foreign state run enterprises?

L fairfax said...

Sadly a lot of homes built in the 60s and 70s were rubbish. So not 100 percent golden age.

DBC Reed said...

Too much fundamentalist tosspottery.You cannot have people with loads of money running ,say, bus services: you end up with all the buses crowding the main roads and no buses out in the sticks as actually happened pre London transport.The bus services had to be forcibly rationalised across London so night buses were available in the sticks because they could be cross subsidised by routes awash with fare income.Caveman competitive laissez faire does not allow for cross subsidy.
Then there was the brilliant fire fighting system: you insured with one of several companies.They turned out in their falling to bits machines (a feature of privatised bus services too btw) but if the fire spread to non insured houses next door ,the whole row burnt down.
Much amusement was to be had when rival crews turned up to adjacent buildings and then fought each other over the fire hydrant (who provided that?) The houses burnt down while they finished each other off.
The whole argument that privatisation is the enemy of bureaucracy is fundamentalist/ mentalist bullshine. Two organisations competing to provide a service have to have two complete sets of personnel: 100% bureaucratic inefficiency. When private firms merge they do so because they do better with only one HR department etc. This country is overmanned with firms pretending to compete but agreeing to arrange prices to keep the whole bloated show on the road.Privatised medicine just creates meaningless unnecessary bureaucratic jobs often in hounding people for bills.

Lola said...

B. Correct. For example the railways. Where arguably nationalisation inhibited modernisation.

Mark Wadsworth said...

S, I think we can agree that the UK went too far with nationalising stuff. That's what I mean by the government crossing the line and meddling in stuff that should be left to the private sector. That is the key to this debate.

Don't fall back on the nonsense that "British Leyland bad, therefore everything the government does is bad" nonsense, that's just as pointless as the lefties saying "Private banks bad, therefore all private industry or enterprise is bad".

But the Golden Age of Capitalism was throughout the developed world. And a rising tide lifts all boats, So it's still fair to say that people in the UK in the 1970s were a lot better off than in the 1940s.

PC, again, you are blurring the lines. The government should keep its nose out of the "private economy" in a true laisser faire sense. The government, on behalf of all of us, is there to provide the infrastructure, physical, legal and educational with some redistribution of the gains to ensure that inequality doesn't get out of hand.

You say there is no free market in energy distribution or generation.

I actually said in one of my replies, and have posted about this often enough, that the 'national grid' should be owned and run by the government, and electricity generation should be left to private or competing power stations (whether privately owned or owned by local government). That is what we used to have, and it is the optimum.

LF, most houses built since the 1930s are rubbish, that is not the point. Better to have a new house for yourself than share a tenement with another family.

DBC, you are picking an example (public transport) where clearly the government/local council has a role to play. Whether that is providing it or merely regulating it and setting prices is another debate.

And we have done the fire brigade a zillion times. It is truly a public service that has to be paid for out of taxation. The fire brigade is not there for the benefit of the idiot who sets fire to his own house, but for the benefit of his neighbours who don't want their houses to catch fire as well.

You are doing the left wing mirror image nonsense of Sober's right wing nonsense, see above. It's really very wearisome.

L, on the facts, and looking across different countries, nationalised rail services are often better than the UK's privatised railways.

paulc156 said...

Yep. I mean arguing that nationalisation held back modernisation on rail here doesn't work if you move 25 miles due east from Dover.
Inconvenient fact rears its head again. Point taken on power generation.

Mark Wadsworth said...

PC, I am agnostic on pro's and con's of whether the government or private businesses should run public transport.

We can all name loads of examples where nationalised trains or buses are run very well or very badly; or where private trains and buses are run very well or very badly.

I live in London, which is pretty much seamless public transport heaven. The Tube is completely nationalised (and is brilliant) and buses and trains are run by private companies but within strict time table and pricing parameters set by TFL (i.e. the government).

Bayard said...

P156c, like you, I suspect that state involvement in promoting computing would probably have been counterproductive, however, it wasn't lack of promotion that we suffered from but an active policy against it, using the official secrets act to prevent commercial companies exploiting the advances in computing we made during the war.

"For example the railways. Where arguably nationalisation inhibited modernisation."

OTOH, the railways really were knackered after the war and were all losing money except the Southern, so I suspect that, had they not been either nationalised, or bailed out, we would have needed with cutbacks that would make Dr Beeching look like a lightweight.
Also, arguably, without the access to public money and the political incentives behind it, the railways might have not spent so much converting from steam traction to diesel and instead gone straight to electrification on many more routes.

Like Mark, I think it is very debatable that public transport works any better in the private sector than in the public sector, but you have to remember, with the railways, that they were regulated by the government from day one (9 June 1758).

Lola said...

Bay. Re rly regulation from dsy one. I seem to recall that the fare was set at a penny a mile.

DBC Reed said...

MW What I find very wearisome is the insistence on this blog that Brexit ( an even-money bet)will produce national surpluses and that various fiddles with putting utilities and the railways in the private sector (or not) will make people better off when the overriding certainty is that any benefit for families will be eroded by increases in land values and property charges.It is a question of first things first.

Bayard said...

DBCR, I am not sure how you see that. The rhetoric on this blog, far from claiming that Brexit will be an economic bonanza, accepts that there will be an economic hit, but that was never the point. There is no point Remainers chuntering on and on and on about the economy, when that was never the point of Brexit, even the frothiest Brexiteers never said it was. The attitude was, and still is, that the hit to the economy is a price worth paying for the political advantages. You may think this is wrong, but in that case, say that it is wrong, don't claim that the point of Brexit was something else altogether.
What the economic arguments on this blog do say, is not that things will be rosy economically, but that they are not going to be such a disaster as Project Fear continues to claim. I am surprised you haven't spotted that yet.

L fairfax said...

@Mark Wadsworth
Are you sure about since the 1930s? I grew up on post war estate* and most of my friends did as well and the quality was quite good. I thought it was later that it started to decline.
*1940-s 1950s, I knew some people who were the only ever inhabitant in their home.