Douglas Carswell's Blog

19 AUG 2016

Economics isn't just an extension of politics

"The economic risk of Brexit is over", says Moody's. "Now the risk is the US Presidential election." For two centuries, economic growth has been driven by technological innovation. Why do the economic 'experts' seem to think it's all about politics?

Technology is radically transforming the global economy right now.

Last week, the World Economic Forum published a report on how blockchain – the technology behind Bitcoin - is set to revolutionise financial services. It offers more transparency, greater trust, fewer middlemen – and less need for ratings agencies like Moody's.

Blockchain's potential goes beyond business. Two weeks ago, the government made a blockchain company an approved public-sector supplier. It hopes the technology could eliminate fraud and overpayment in the welfare system.

Another incredible innovation on the horizon is the driverless car. Uber is about to pilot driverless minicabs – which will ultimately enable it to cut fares even further than it has already.

Ten years ago, who would have predicted that either of these technologies would now be mainstream?

Innovation tends to take everyone by surprise. That's nothing new.

Two hundred years ago, Malthus predicted mass starvation because of overpopulation. Instead, because of the agricultural and industrial revolutions, not only did the world's population boom, but the standard of living unprecedentedly rose too.

The unpredictability of innovation is one of the reasons why economic 'experts' have such trouble foreseeing the future – and why the doomsayers are so often wrong.

Of course, politics can negatively affect economies. In fact, it usually does. The more politicians try and micromanage the economy, the more they hold it back.

But innovation is changing politics too. Thanks to the digital revolution, politics as we know it is giving way to iDemocracy.

Politicians love to think economic growth is all about them. No one else needs to play along with their fantasy.

18 AUG 2016

We can trust the experts - to get it wrong

Unemployment will rocket if we vote Leave, they said. Instead, it's fallen. Time and again, the economic data since the referendum has proved the 'expert' predictions wrong.

Here's a reminder of their perfect record of failure:

  • Referendum uncertainty will slow economic growth in the second quarter, the Bank of England told us. In reality, the growth rate rose.
  • Markets will reassess the UK's prospects after a vote to Leave, said the Treasury. The FTSE 100 is close to its all-time record.
  • Britain's economy will suffer a post-referendum recession, Berenberg confidently predicted in the spring. Actually, there won't, admit Berenberg now.
  • Foreign direct investment will fall, warned the IFS. Which must be why Japan's Softbank is putting £24 billion into ARM.
  • No one will want to make trade deals with post-Brexit Britain, sneered the OECD. Except China, India, the US, New Zealand, Australia, Canada, Switzerland, South Korea, Japan, Mexico, Iceland... Have I missed any?
  • There'll have to be an emergency budget, threatened George Osborne. Not a chance, we were assured – by his replacement.
  • Farming will collapse, Welsh First Minister Carwyn Jones seriously suggested. The government has already guaranteed to match CAP funding.

At this point, any logical person would be surprised if the so-called 'experts' got something right. Yet the mainstream – or should that be the Remainstream? – media is still shocked by every failed prediction. No amount of reality can shake their faith in their failed oracles.

'Independent' pundits and 'experts' seem to be stuck in their Brexit bunker. Maybe someone could tell them it's safe to come out.

17 AUG 2016

Rail fares rise because the government has a monopoly

Strikes on Southern Rail. Abellio keeping the East Anglia franchise despite persistently poor performance. Rail services aren't improving, but the government is raising fares yet again. If you need evidence that public-sector monopolies don't serve the public interest, this is it.

Rail fare rises are a tax on employment. Many of my constituents have no choice but to commute by rail to London for work. Yet the rail fares have increased faster than their wages.

The idea that rail fares only rise in line with inflation is - as Moneyweek's Merryn Somerset Webb astutely points out - a lie. CPI has long since replaced RPI as the official measure of inflation. But, for rail fares, RPI still applies. Why? Because it's over a percentage point higher. The aim is to milk commuters for as much as possible.

The government raises rail fares because it can. It has a monopoly. It owns all the track. It awards all the franchises. The Department for Transport has much more control since 'privatisation' than it ever did in the days of British Rail.

All the franchise system has done is replace quangocracy with corporatism. Private companies get to operate the railways, and reap guaranteed profits – at the expense of taxpayers and commuters. The rail regulator consistently supports the interests of the operators rather than the consumers.

The track, meanwhile, is still run by a government agency. Network Rail is fully state-owned. That doesn't make it any better than the franchise operators. In my corner of Essex, repairs regularly overrun, causing misery for my constituents as they try to get to work.

No matter how poor the quality of service, the government will always demand more from commuters – because commuters have no choice. Fares never fall, because there is no competition.

"Renationalise the railways," says Jeremy Corbyn. In what sense have they been privatised?

16 AUG 2016

It's time to end Nixon's failed monetary experiment

Richard Nixon was, in many respects, a disastrous president – chiefly remembered for Vietnam and Watergate. But one of his most destructive legacies is often forgotten. It began forty-five years ago yesterday, when he decoupled the dollar from gold.

By ending the Bretton Woods system, Nixon began an experiment that had never been tried in the world before: free-floating, fiat currencies, unbacked by any commodity. For the first time, governments had a total monopoly over the means of exchange.

Bretton Woods – or the gold-exchange standard – wasn't the same as the classical gold standard. It had fundamental flaws.

The idea was that the dollar would be convertible to gold at a fixed rate – although crucially only foreign governments, not individuals, could convert it. Other currencies, meanwhile, could be exchanged for the dollar, which would serve as the global reserve currency.

In practice, the Federal Reserve increased the money supply, inflating the dollar. The real value of the dollar fell, but the nominal price in gold didn't. So, naturally, other countries swapped their dollars for gold, causing a gold run.

But inflation before 1971 is nothing compared to the inflation since. Unbound by any link an external constraint, central banks have gone into overdrive: printing money to boost credit, artificially inflate markets, and fund government deficits.

The price of one ounce of gold has risen from $40 in 1971 to $1,339 today: a 3072% increase. Before 1971, the dollar price of gold had barely doubled in 200 years.

Gold hasn't got more expensive: money has become cheaper.

"So what?" you might think. "Why does it matter?"

Actually, it's hugely important.

Every housing bubble. Every debt crisis. Every banking failure. Every small correction that low interest rates obscure, and major crash that they create. Every bank bailout and subsidy scheme that transfers resources from wealth creators to rent-seekers, and entrenches inequality.

All of it can be traced to the full nationalisation of the money supply.

Financial pundits today treat today's monetary system as if it's normal. Any suggestion of fundamental change is seen as kooky and absurd. They seem to forget the current system has only been around for 45 years – and, in that short time, has brought the global economy to the brink of collapse.

To be a functioning means of exchange, money shouldn't be susceptible to debasement at the whims of central bankers. Commodity-backed money offers some security. Competing currencies, whereby the ultimate guarantor of value is the market, might be better still.

But first, we need to admit that Nixon's monetary experiment has failed.

15 AUG 2016

After Brexit, we can do more than just replace funding

The Treasury has guaranteed post-Brexit funding for farming and science – exactly as Vote Leave promised. It's an important announcement, which puts another Remain myth to bed. But I hope the government goes further than simply matching EU schemes.

The Treasury's announcement ought to be another nail in the coffin of Project Fear. We were told that after we left the EU farming would fold and science would cease. Instead – as Vote Leave said - support will continue, only it will come directly from our government, instead of via a detour through Brussels.

It's hard to understand why that should ever have been in doubt. Britain is the second-largest net contributor to the EU. For every two pounds we put in, we get only one back. All 'EU-funded' projects in the UK are already paid for by British taxpayers twice over.

What's important is not just that we'll have more to spend once we no longer pay dues to Brussels. It's that we – not the Eurocrats – will have control over how our money is spent.

I'd like to see the government explore the options that come with greater control. CAP often subsidises big corporate producers at the expense of smaller farms. Maybe, instead of simply replacing the payments, the government can create a fairer system.

The same applies to science. Many researchers worry not just about the funding but the fate of international collaborations. But Britain could keep participating in Horizon 2020 even as a non-EU country – like Israel. Or perhaps there are universities in non-EU countries that would welcome being better networked with our scientists. Let's look at the possibilities.

In farming and science, no less than in trade, Brexit is an opportunity.

12 AUG 2016

The Court of Appeal has got it right: leave Labour alone, M'Lud

The debate about who should be able to vote in Labour's leadership contest is none of my business. Labour's internal rules shouldn't be the business of anyone except the Labour party's. So I'm delighted the Court of Appeal has overturned the High Court's verdict, and let the party decide. The implications are profound.

Whether you're a member of any party or none, this ruling has consequences for you – and for our democracy. Parties should to the greatest possible extent set their own rules and arbitrate their own disputes about the application of those rules. Courts should not normally intervene.

Some argue that an activist judiciary is one of the checks and balances necessary for good government. They tend to be people who don't like what the majority voted for. Or lawyers with an inflated sense of what should be determined by lawyers.

Judges aren't elected by anyone. They aren't accountable to anyone. In this country, they aren't even subject to confirmation hearings by anyone who is elected.

So the notion of a judge interfering in politics is the opposite of a check. It's a power grab.

Judicial activism has been emboldened by the EU. Until we joined, it was impossible for Acts of Parliament to be struck down in court. Now they can be if they conflict with EU law: both in the ECJ, and in our own courts.

The courts could yet have an impact on our exit from the EU. A prominent law firm is preparing a legal challenge aimed at forcing Parliament to vote on triggering Article 50 – in the hope that the majority of MPs would vote it down, and block Brexit.

That would be deeply anti-democratic. Parliamentary sovereignty is shorthand for the sovereignty of the people. The referendum makes the will of the people crystal clear.

There may be a temptation for judges to get involved in the Brexit process. I hope the courts will act judiciously.

12 AUG 2016

BBC balance is baloney

The BBC Trust has published a report on BBC impartiality in presenting statistics. It concludes not just that the BBC is impeccably impartial, but that it should be "braver" in "guiding the audience". Is it April 1st already?

During the referendum campaign, I and other Leavers were constantly interrupted by BBC interviewers while trying to get across basic facts and figures about Britain's EU membership. We were barely allowed to articulate our arguments, let alone have them contradicted.

I didn't notice the BBC challenging Project Fear claims about economic collapse. In fact, it's still reporting them as fact – even now they've proved to be nonsense. Why are the so-called "experts" stating them never taken to task?

Yet the FT has reported the BBC Trust's findings as evidence that the BBC didn't attack Leavers enough. If only it had tried to discredit Vote Leave contributors more! Then the voters would have swallowed elite groupthink got the "facts".

Since the end of the referendum campaign – and its explicit restrictions on bias – the BBC has let its full pro-EU sympathies show. This is, after all, the organisation that commissioned staunch Remainer David Aaronovitch to explain why people voted Leave.

So I'm not sure what's more absurd: the idea that the BBC was somehow too easy on Leave campaigners, or the fact the FT – and perhaps the BBC Trust - seriously thinks it could have been.

In its outlook, the BBC is indistinguishable from the Guardian. No one could confuse it for FOX News. The problem is that, unlike the papers, it pretends to be neutral. That fiction is one of the reasons so many people – especially, I suspect, Leave voters – no longer trust it.

Impartiality, for any media outlet, may actually be impossible. But if the BBC is going to be the broadcast wing of the Guardian, it shouldn't be funded with licence-fee-payers' money.

10 AUG 2016

Leaving the EU must mean leaving the Single Market

The IFS has a new report out on membership of vs. access to the Single Market. It's welcome that they've finally grasped the distinction. But it's incredible they still think staying in the Single Market is possible after the clear vote to leave the EU.

During the referendum campaign, Vote Leave consistently showed that Britain doesn't need to be a member of the Single Market to trade with it. Few pundits seemed to understand the point, let alone make it. Yet the distinction is critical.

Single Market membership means 100% of UK businesses are bound by Single Market rules – even though only 6% of UK businesses export to the Single Market.

Access means trade goes on, but only those 6% have to comply with Single Market rules. That will lift a huge regulatory burden on the domestic economy.

But the IFS not only discounts the economic benefits of leaving the Single Market. It also maintains the fiction that remaining in it is consistent with the mandate from the electorate.

Over 17 million people clearly voted to take back control of their laws. That means leaving the Single Market. No amount of "expert" sophistry can change that. There can be no backsliding.

Despite recognising a distinction between access and membership, the IFS misrepresents what access means. It presents the options as binary: either free trade as a Single Market member, or WTO tariffs.

But there is of course a third option: a UK-EU deal to maintain free trade. An entire government department has been created to negotiate an agreement. Yet somehow the IFS seems to discount it as a serious possibility.

At this point, some "experts" like to point out that not being a member of the Single Market means we don't get a say on the rules. That's a misnomer too.

First of all, it's doubtful we ever had much of a say over the rules – as one 28th of a bloc.

More importantly, regulatory convergence has gone global. Rules on finance or pharmaceuticals aren't made in regional blocs, but in worldwide trade bodies.

Leaving the EU allows Britain to regain her voice in international regulatory bodies – like the World Trade Organisation. We will now have more of a say on the international rules affecting our key industries, not less.

The IFS spent the referendum campaign stumping for Project Fear. They now seem to be a surrogate for the denialists of continuity Remain. It's well-known that they receive EU funding. Reports like this don't do much for their credibility.

What a pity that, six weeks since the referendum, pundits and "experts" still won't take seriously the points that Vote Leave made, and over 17 million people voted for.

09 AUG 2016

Is Pax Americana over?

Six months ago, the US sent $400 million in cash to Iran when four American hostages were released. In secret. Without telling Congress. President Obama claims it wasn't a ransom. Iran says otherwise. Ransom or not, it symbolises a worrying shift in US foreign policy.

The President says the $400 million was backdated payment for an arms deal made before the Shah was overthrown. But that seems pretty odd too. Why settle up now with the regime that forcibly overthrew him?

The cash looks all the more concerning in the context of the Iranian nuclear deal. In theory, that stops Iran acquiring a nuclear bomb. In practice, not so much.

The deal lifted Western sanctions on Iran, worth billions of dollars. But the concessions in return were minimal. No destruction of centrifuges. No decommissioning of its plutonium reactor. Limited inspections.

Plus, it expires after 10 years. Not that the ayatollahs need that: Iran is already cheating according to German intelligence.

Yet none of this seems to concern the White House. Per Obama's chief foreign policy SpAd Ben Rhodes, the real achievement wasn't actually getting Iran to ditch its nuclear ambitions, but spinning the deal to the public.

The President seems to have pursued a policy of rapprochement with Iran no matter what. No matter its sponsorship of Hezbollah terrorism and Assad's genocide. No matter its avowed intention to destroy Israel. No matter its ruling regime's open and deep-seated hatred for the West, by which every American ally is a surrogate for the Great Satan.

The President tried the same approach with Putin: the Russian reset. The idea was that if America reaches out, peace follows. Events in Ukraine suggest otherwise.

As global policeman, the US hasn't always got things right – see Iraq and Vietnam. But in general it has been a positive force that kept rogue states in check.

Under Obama, it has retreated from that role. The question is: will that be a permanent shift, or a temporary holiday?

The next President will be either Obama's Secretary of State or an isolationist who seems to prefer the Kremlin to NATO. Either way, Pax Americana could be a thing of the past. Now we'll see how much we miss it.

08 AUG 2016

'Economic stimulus' is just corporate welfare

Taxpayer-owned RBS lost another £2 billion in the first half of 2016. Its shares are now worth less than half of what Gordon Brown paid for them. Yet policymakers still pretend that bailing out banks with public money is good for the public.

The Bank of England's unnecessary Brexit bailout includes another £100 billion for the big banks – such as RBS - plus another £10 billion to buy corporate bonds. Mark Carney calls it a stimulus package. The more accurate name for it is corporate welfare.

Printing money to give to banks doesn't come cost free. Ordinary savers and consumers have to pay for it via higher inflation – as Carney freely admitted. In effect, the banking elites who falsely claimed the economy would collapse if the majority voted Leave will now be paid a bonus with the majority's money.

For most people, corporate subsidy is the opposite of an economic stimulus. Channelling resources from savers and wealth creators to rentiers not only increases inequality, but also hinders real economic growth. It's one reason why productivity in the UK has flat-lined.

Because of the trillions pumped into zombie banks, the global economy is drowning in debt. If we want sustainable growth, we shouldn't be expanding corporate welfare; we should be cutting it.

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The End of Politics and the Birth of iDemocracy

"A revolutionary text ... right up there with the Communist manifesto" - Dominic Lawson, Sunday Times

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