Friday, March 08, 2013

Regulatory barriers to innovation in Britain (and elsewhere)

What do you think of when picturing an ‘innovator’? I would hazard a guess that the skinny, t-shirted frame of a computer developer forces his way into mind. He is likely in the middle of developing a new app or website, and is keen to end his summons before your mind’s eye to get on with typing inscrutable code and eating pop tarts.

This is a shame. Not the interruption of our computer nerd - who we’ll leave alone now - but the fact that innovation has become such an internet and computer centred phenomenon. It is also, however, no coincidence. The ‘techy’ sectors have enjoyed huge advances in recent years in no small part because of the relative lack of regulation and red tape they’ve faced.

This has kept start-up costs low, compliance with legislation cheap, and product development swift. The economic benefits of this business freedom have been extraordinary. In 2010 the UK internet economy contributed £121bn to GDP, in 2016 this is set to be £225bn. This is a remarkable 86% growth in 6 years. According to McKinsey in 2011 2.6 jobs were created for every (mainly high-street) job lost. It is no surprise that London’s ‘Silicon Roundabout’ has grown in notoriety in recent years. We would do well to follow the advice of Dominique Lazanski’s recent ASI paper to keep the stellar growth going.

Other sectors have not been so lucky – over the decades industries like pharmaceuticals and food production, which once saw equally impressive innovation, have been overwhelmed by creeping legislative burdens. The rise of the grisly ‘ealf and safety brigade, backed by big business eager to block new entrants, has gradually put a stop to the leaping advances. The regulatory obstacles are so great now that aspirin would not be passed by the FDA (it would be red flagged because it risks causing gastrointenstinal bleeding). Similarly, rising levels of regulation contributed to the end of so-called ‘green revolution’ in food production between the 1940s and 70s, which hugely increased yields and lowered prices.

The risk of failing to comply with standards discourages businesses from engaging in the kind of innovation that can lead to radical break-throughs. It is safer to opt for more mundane improvements safe in the knowledge that they will be allowed to make it to the market-place.

I can hear the hard-hatted inspectors and boardrooms bursting to object. ‘This regulation is designed specifically for the benefit of consumers, they clamour; in its absence people would be exposed to improperly tested, and therefore potentially lethal medicines and foods. ‘Are you in favour of sacrificing human lives at the altar of innovation?’ they ask.

I can think of two replies to this. First, in the developing world millions die of starvation and disease; if more rapid advances were allowed many more lives would be saved than lost. Second, as our President Dr. Madsen Pirie argued so persuasively on the Daily Politics, the expectation of progress and improvement is an important component of a society’s well-being. Increased optimism about the development of new life-saving medicines and lower food prices would be a welcome addition to looking forward to the new iPad.

A bonfire of regulation would attract the best innovative minds from around the world and reignite economic growth and job creation in Britain. Exit double dip recession, enter double digit levels of growth. Who knows, we might even discover another drug as effective as aspirin.



"The War"

BOOK REVIEW of "Churchill, Hitler and the Unnecessary War" by Patrick Buchanan.  Review by Jim Davies

There is little doubt that FDR was itching for a war, even though the American people were not.  So the theory (advanced below) that FDR supported Britain even before the war began is plausible -- JR

The book is about the origins of World War II, and there are very few who have no need of intense interest in that subject, for it affected hundreds of millions of lives and ended 50 to 80 million of them prematurely. My own ne plus ultra on the subject is A.J.P. Taylor's masterpiece of that title, but CHUW is a welcome and worthy augmentation. Interesting, that Buchanan often quotes from that work and clearly admires it; yet he is an Old Right conservative while Taylor was a socialist. Their common ground is to demolish the conventional wisdom that still infests government school classrooms and The History Channel. Buchanan, more than Taylor, begins by detailing the origins of the First World War, because that was the true, basic origin of the Second due to the vicious terms imposed on Germany at Versailles.

So the first two chapters of CHUW deal with the end of the 19th Century and the disastrous blunders of the European government leaders in the first decade and a half that followed it. Those chapters are worth the price of the book on their own, and far exceed in value the standard textbook on the subject, Barbara Tuchman's The Guns of August, which to my mind is hardly a history at all, rather a mere chronology.

Of particular interest to me was how Buchanan brings out the fact that there was no treaty obligation on the British government to take part, because the Anglo-French entente of 1905 was just that – an understanding, not a formal obligation. Thus, while all the other participants did have treaty obligations in that early form of Mutual Assured Destruction, the UK could have opted out – but for one factor: the Germans chose to attack France via Belgium, and there was in effect a 75-year-old treaty to guarantee Belgium's neutrality. Buchanan suggests that this was used in London as an excuse to join the war, the real motive being that without her participation, a German-Austrian victory was very probable, and domination of Europe by a German empire would have upset the stability of the worldwide British one. So entry hadn't much to do with pity for “little Belgium” as advertised, but a great deal to do with its centuries-old policy of opposing whichever nation in Europe stood poised to dominate the others.

At any rate, Buchanan analyses the moves in that terrible summer of 1914 and allocates blame – there was plenty to go around – and while a lot of mud sticks to the Brits, notably to Churchill who could ill restrain his enthusiasm for war, he shows that the Germans were the most eager to avoid a conflict if possible, and tried hardest to do so. Yet five years later, savage punishment for having started it was loaded on to them, the losers.

That fundamental injustice was forced by Clemenceau of France and Lloyd George of Britain, with US President Wilson ineffectively opposing and eventually concurring. Later, American public opinion correctly judged that the “treaty” had betrayed all the reasons Americans had had for joining the War, and turned away from European affairs in disgust.

Germans, of course, could not turn away, and the injustice rankled, and inevitably a leader emerged with promises to shred the treaty and reverse its provisions. By then – the 1930s – even most French and British pols had concluded that they were too harsh by far, so when Hitler skilfully reclaimed territory occupied mostly by German speakers who desired to live in a restored Germany, there was no wholehearted opposition. Not until Prague, that is, as Pat Buchanan shows; that was the turning point, on March 15th, 1939. Prague was not a Germanic city. Its part of Czechoslovakia was taken as a conquest by Hitler, and that was something up with which British Prime Minister Neville Chamberlain did not feel able to put. So from that date, Buchanan says, he changed his mind; from appeaser, he became an opposer.

So he leads us to his Chapter 9, dealing with the pivotal, infamous “Polish Guarantee.”

I've been puzzled by that for many years. Everyone now agrees that it was by far the biggest blunder ever made in British foreign policy; on March 30th 1939, after a brief Cabinet discussion, Chamberlain announced that Britain would intervene if Polish integrity were violated. No quid pro quo, no prior discussions, even; it came as a surprise to all, including Polish Foreign Minister Beck, and to Hitler, who was furious. Just a blank check, out of the blue. Who suggested this catastrophic error, which did indeed prove, five months later, to be the trigger for World War II? That's the mystery, which I'd hoped CHUW would reveal.

It does not. Buchanan's treatment of the motivation is reasonable, but comes down to the theory that Chamberlain was a gentleman statesman who had accepted Hitler's word six months earlier in Munich, but who now felt betrayed and humiliated by the latter's grab of Prague and his demand for access to Danzig, a Germanic port in Northern Poland. So (it's alleged) he strung that trip wire for war in a fit of pique, as the quickest way to express anger.

Well, maybe. That says Chamberlain was naïve; for he knew full well in Munich in 1938 that he was accepting the word of a man who had systematically murdered some 200 of his own supporters in 1934, to foil an intra-party coup; so he was or should have been well aware that Hitler was no gentleman whose word could be trusted.

An alternative theory is that someone put him up to it. Paul Craig-Roberts, in this recent article on some “What-Ifs” of modern history, names Churchill as the villain, and it's true that he had in the late 1930s been calling on the government to oppose Hitler more firmly. But there is no hint in CHUW of any phone call or meeting between Churchill and Chamberlain, in which the former urged the latter to issue the Polish Guarantee--nor mention of any newspaper article to that effect. Churchill did applaud the announcement at once, but a few days later he backpedalled fast, having recognized with almost everyone else that it was a colossal blunder that left the fate of the British Empire in the hands of a Polish politician.

My own theory is that FDR is the one who put Chamberlain up to it, through his London Ambassador Joseph Kennedy. I've held that view for some years, but have seen no evidence to support it. The motive would be that FDR wanted a new war in Europe, which he could lead the US to join and win, as in 1917-18, bringing huge additional worldwide influence to the USA while diminishing that of Britain. He would have persuaded Chamberlain that the time had come to stand up to Hitler, and promised that if the outcome should be war, America would under his leadership once again come to pluck England's chestnuts from the fire.

CHUW gives me no support, either; Buchanan evidently found no trace of such a meeting. However, coincidentally, another recent publication does. It's a posthumous one by Herbert Hoover, a close friend of Joe Kennedy. The key passage from his Freedom Betrayed is revealed here, and confirms that Kennedy did indeed deliver that message to Chamberlain, at FDR's behest, in spite of his own personal disinclination; he was (or said he was) much in favor of appeasement throughout his London appointment. Hence, not only did FDR provoke Japan to attack Pearl Harbor, not only did he leak the Rainbow Five plan to stimulate Hitler to declare war on the US a few days later, but from the London Ambassador himself we have evidence that he even arranged for the European war to begin in the first place. And this is the President most lauded by every Statist in the land--unless it be that other mega-murderer, Abraham Lincoln.

Buchanan seems to have missed that one, but so had everyone else until Hoover's book emerged. Blame government restrictions on what can be published about its “statecraft.”

That's one of the few disappointments in CHUW, the other being a characteristic absence of relevant economic analysis. For example, Buchanan fails to expose the alleged German prosperity of the 1930s as a complete myth, being based on well-doctored statistics. However, I did learn one thing under this subject head: before FDR authorized the famous “lend lease” program in 1941, to supply the UK with badly needed materiel, he obliged Churchill to part with all the British government's gold. Not quite as altruistic as I'd thought.

Otherwise, it's a thrilling read, certain to invert many long-held suppositions. Churchill's contribution to his era is soberly analyzed, and he comes up very short. When he entered public life, Britain was astride the world, and when he left it, Britain was a second rate power, and nobody had contributed more than Churchill to the decisions that produced that decline. Time and time and time again, he blundered, and at no time more than in the early days of WWII. He had many opportunities to withdraw from that devastating conflict, but spat on them, every one. He helped achieve the destruction of one totalitarian monster, but at the cost of sicking a worse one on the whole world, as well as bankrupting his own country. Buchanan asks: “...we cannot ignore the costs of Churchill’s wars... Was it truly necessary that fifty million die to bring Hitler down? For World War II was the worst evil ever to befall Christians and Jews and may prove the mortal blow that brings down our common civilization.”

He treats Hitler impartially too, though is by no means an apologist for the Nazi liquidator of six million Jews. But he acknowledges superior statecraft when he sees it, and he sees plenty. Hitler would have waged war on the Soviets, without doubt, but at every turn in the preamble to the war with France and Britain, Hitler tried hard to avoid it. That part of World War II was completely unnecessary – and but for that part, the US would have stayed out.



Congress Goes Bipartisan —Against Civil Liberties

The parties collude to defeat accountability for the national-security state

By W. James Antle III

Civil liberties are theoretically a bipartisan concern. Conservative Republicans who don’t like Obamacare’s “death panels” should be outraged by presidential kill lists. Liberal Democrats who defend due process ought to be offended by secret surveillance law. Protectors of the First and Second Amendments should have a high regard for the Fourth, Fifth, and Sixth.

Yet restricting civil liberties is what actually commands bipartisan support in Washington. The same Congress that barely averted the fiscal cliff swiftly passed extensions of warrantless wiretapping and indefinite detention, assuring Americans that only the bad guys will be affected but evincing little interest in establishing whether this is really the case.

The same Congress that failed to come up with an agreement to avoid sequestration appears to have bipartisan majorities in favor of profligate drone use at home and abroad. Lawmakers are generally less exercised about the confirmation of likely CIA chief John Brennan than Defense Secretary Chuck Hagel.

At the very time it appears Washington is so dysfunctional that the two parties cannot get anything done, Democrats and Republicans cooperate regularly—when it it comes to jailing, spying on, and meting out extrajudicial punishments in ways that on their face contradict the Bill of Rights.

Senate Majority Leader Harry Reid argued that preserving the Bush administration’s national surveillance program—now for the benefit of the Obama administration—was more important than Christmas. Republican Sen. Saxby Chambliss didn’t even want any amendments.

The Senate overwhelmingly rejected an amendment that would apply the same protections against unlawful search and seizure to emails and text messages that already exist for letters, phone calls, and presumably the carrier pigeon.

Despite deep divisions over taxes and domestic spending, members of both parties tend to sing from the same song sheet about the Patriot Act, the National Defense Authorization Act, and the Foreign Intelligence Surveillance Act amendments.

So much for the Democrats’ bedrock belief in the right to privacy or Republicans’ convictions about limited government.

Civil libertarians are currently a rump caucus in both parties. But they are at least starting to work together. In fact, a critical mass of legislators seeks to use this week’s Brennan vote to extract additional drone memos from the Obama administration.

More promisingly, liberal Democrats like Sen. Ron Wyden of Oregon and Sen. Mark Udall of Colorado have been teaming up with such conservative Republicans as Sen. Rand Paul of Kentucky and Sen. Mike Lee of Utah, seeking to impose real checks on powers the federal government acquired to fight the war on terror—a conflict with no real boundaries or identifiable endpoint.

The core purpose of the Constitution is to balance the powers necessary for the federal government to protect the United States with the need to erect institutional barriers to protect against the abuse of those powers. But in emergencies, constitutional restraints often go out the window and it is difficult to restore them after the fact.

This is especially true when there is no transparency or public accountability. Many details about national surveillance, extraordinary rendition, and even the spending habits of intelligence agencies remain state secrets.

Some level of secrecy is undoubtedly necessary to preserve national security. But giving federal officials sweeping, routinely exercised powers without sunlight or scrutiny is an invitation to abuse. That’s why having even a small group of senators pressing for public information is important.

Eli Lake noted in The Daily Beast, “[A]t a moment when inter-party cooperation is almost nonexistent in Washington, any bipartisan alliance—especially one that includes some of DC’s most committed ideological opposites—is both unusual and noteworthy.”

Lake was referring to the bipartisan alliance between civil libertarian-leaning senators like Paul and Wyden. But until they make legislative inroads, the more usual and less noteworthy bipartisan alliance will be the one that exists between John Yoo and the Obama administration, united by a predilection for virtually unchecked executive power.




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1 comment:

Robert said...

Cheers on Rand Paul using a filibuster of Obama's CIA Director nomination to speak on behalf of our basic rights and liberties, and all who joined his filibuster. It appears to have opened a bunch of eyes around the country, who could watch it live, uncensored, undoctored, and unfiltered on C-SPAN, and awakened many to the threat.