From 1982 to 1986 I attended a Quaker boarding school, The Friends’ School, Saffron Walden in East Anglia, not far from Cambridge. Quakerism was formerly a persecuted religion. Consequently, the modern teaching purposely took a broad-ranging attitude to the study of religion and social systems. From the ages of 12 to 16, we had classes relating to the study of all the world’s major religions, and their social and political systems. Permeating the Quaker school was an over-riding respect for individuals, and tolerance for their ‘space’. At all times, pacifism and non-agression were taught as first principles. Suffice it to say, I was given a broadly liberal education.
During this time, two localised external events and the wider realisation of one titanic struggle between the West and Communism represented by the former Soviet Union, moved me away from this path.
The Miners’ Strike
In 1973, the Prime Minister, Edward Heath, was faced with the three-day week, introduced via strikes from various Trade Unions, including the power workers and coal miners. When these unions caused electricity to be available for only two days out of the five-day working week, the Prime Minister decided to call a general election. This was the famous one, becoming known as the ‘who governs Britain?’ election. It became the rallying cry of Ted Heath and the Conservatives. The British people told Ted Heath and the Conservatives very firmly that he didn’t govern Britain, and that the Unions did. A Labour government, under Harold Wilson, was duly elected.
During the early 1980s, Mrs Thatcher and her government were determined not to fall foul of this situation again. Elected governments should rule, she continued to maintain -not unelected Trade Union officials. Consequently, from the day she took office in 1979, large stockpiling of coal in the UK and South Africa took place as various acts of Parliament were introduced to break the union closed shop and various monopolistic privileges, which at the time seemed to me to smack of gangsterism. In the face of this, the unions became agitated. At that time, the National Union of Mineworkers (NUM) had some 900,000 members, representing 1/30th of the workforce of the UK. They were producing coal that was too expensive for industry to use, and therefore fuel that nobody wanted. It was patently obvious that in the private sector a business faced with this situation would go to the wall. The saving grace for the NUM was the fact that the industry had been nationalised after the Second World War. Their members, via various coercive and monopolistic practices, had managed to squeeze out of the government very high prices on a guaranteed basis, plus exceedingly high wages. The NUM called its members out on strike whereupon a period of industrial action took place on a scale of brutality that had not been seen in the UK before, and, hopefully, will never be seen again.
During this uprising, businesses were burned down, and the practice of intimidating workers who wanted to work would make any Mafia style protection racket look on with great admiration. What amazed me was the miners’ only moral case (on their terms) seemed to be the right to work. Of course, whenever there’s a right there’s a duty – and, following this logic it became the duty of the rest of us to provide them with money for products we didn’t require because they were too expensive. This struck me as monstrous unfairness towards the other workers in the UK at the time. Margaret Thatcher took this view as well, and proceeded to break the back of the NUM, de-nationalising the coal industry so that elected governments could govern. The market, not labour hooligans, now determines energy prices in the UK.
In the early 1980s, an entrepreneur from Manchester, Eddie Shah, launched – using new technology (computers) – a national newspaper called Today. It was a low-cost newspaper, taking maximum advantage of technological innovations in printing, and it employed very few production workers. This gauntlet was thrown down to Fleet Street workers: reform restrictive practices or other newspaper proprietors will follow the example of Today and restructure their businesses accordingly, to the detriment of the print unions. Rupert Murdoch’s News International during this period of dispute did not produce a copy of The Times or The Sunday Times for many months, due to strike action. Meanwhile, The News International Corporation had bought land in Wapping in the Docklands area of the East End of London where it constructed a large, modern, computer-driven printing press. The new production was started there, and the unions, taking great offence, embarked on a campaign of brutality and gangsterism, which echoed that of the miners’strike but was focussed on a smaller scale in Docklands. The principle printers’ union was The Society of Graphical and Technical workers (SOGAT). It was led by the particularly pernicious Brenda Dean, (now a Baroness in the House of Lords and part of the Blair hegemony). After many months, she came to the negotiating table with Rupert Murdoch. To my great surprise and delight, News International offered all the Fleet St workers it employed a most imaginative solution: a very large redundancy package amounting to some fifty million pounds, plus it would give the whole of The Times’ and The Sunday Times’ printing works and buildings to the union gratis for them to print their own newspapers if they so wished. The unions, in a rare moment of wisdom, decided to turn this deal down as they realised they could never hope to run a newspaper operation for profit with their archaic and restrictive practices. (Needless to say, they had demanded, with threats of violence and intimidation, that Murdoch’s News International Corporation do just this.) But once the tables were turned and they were faced with the choice themselves, the deal was impossible. This action also summed up to me the madness of trade unionism.
In more recent years, I have met former members of the print workers’ unions who had to retrain and go on to do other things. One gave me the story of how he used to be in charge of delivering newspapers hot off the press to news agents, and how there was a restrictive practice ensuring four individuals always went out in one van: one to drive, one to sit in the passenger seat just in case there was an accident, one to sit in the back of the van to watch the newspapers and open the door, one to go out of the door and deliver the papers to the doorstep of the newsagents. It was their practice that they each would work one night in every four, and only one person would take the vehicle out and do the entire task. The rest of the time each of the other three would have another job altogether – the man I spoke to was a taxi driver earning lots of cash. Recalling the good old bad old days, this gentleman refreshingly told me that you would be absolutely mad, as a member of a print workers’ union, if you didn’t have two jobs. The one protected by the union would take up a maximum of 25% of your time – even though this was the full time job that paid your bills. Then there would be the cabbing, working on the meat, fish and fruit and vegetable markets in London, or on building sites – or other part time employment, all off the books.
As a side note, I have businesses that sell meat and fish to hotels and restaurants in the southeast of England. Until 1997, at Smithfield Meat Market, London’s premier site for meat wholesaling, it was the custom that when you purchased meat there you were still required, as the buyer, to give your order to a salesman, who would then give it to a cutter, who would cut your various portions, who would then give the meat to the scale man, who would weigh the goods, who would then give it to a porter, who would then take your goods the six to ten feet between the back of the wholesale shop and your vehicle. And if anyone did not perform their role, all hell would break loose and the thugs would ban you from the market.
In Billingsgate today, the fish centre for wholesale, you still have to pay ‘bobbing’, a portage charge of 3p per kilo, to a union official, in order to move fish from the said shop to the back of your vehicle when making a pick up. It follows that these markets, with a history in London stretching back for eight to nine hundred years, are in massive terminal decline, as buyers like ourselves by-pass these restrictive practices and purchase direct from source. It never ceases to amaze me why, when we hear the odd conversation from Billingsgate or Smithfield, how they moan about the decline of these once fine market places and they can’t put their finger on why. Some things become a way of life to people.
During my early teens, we were brought up to be conscious that there was a real possibility of a third world war, the Soviets being the bad guys and the allies the good guys. Deployment of Cruise missiles in the UK acted as a so-called defensive precaution against Soviet attack, and the policy of MAD – Mutually Assured Destruction – seemed to me to fight fire with fire. Ultimately, the superiority of the capitalist west in being able to produce more missiles or military might, and the inability of the Communist east to produce as rapidly, ensured that the Soviets collapsed under their own weight.
The moral bankruptcy of the Communist system and its sheer perversity was, to me, in denial of fundamental rights. In politics there was a sharp contrast between a western, or Judeo-Christian system, and Communism. It was a stark choice – there could be only one right answer. I stood very firmly with the Thatcher-Reagan axis of power and what they stood for.
The above three events put me firmly in political allegiance with Margaret Thatcher’s Conservative Party.
During the 1960s and 70s, Arthur Seldon and Ralph Harris ran the Institute for Economic Affairs (IEA). Friedrich Hayek was a great influence on Seldon who was one of his pupils at London School of Economics (LSE). The IEA single- handedly changed the course of world history by putting on the table realistic policies for the privatisation and de-nationalisation of large sections of the British economy. They attacked closed shops, restrictive practices and monopoly privilege wherever they existed. They vociferously attacked the Keynesian hegemony.
In the early 1970s, Sir Keith Joseph, in conjunction with the IEA, introduced Margaret Thatcher to market liberal ideas. These led to the formation of her huge programmes of economic liberalisation of the British economy from 1979 to 1990. Successes were that huge tracts of the British economy, which had been in the hands of the state, were returned to the private sector. The IEA, however, was steeped in monetarist doctrine concerning macroeconomics, and Margaret Thatcher pursued vigorously these policies. While they were an improvement on Keynsian policies of fiscal demand management, still the economy helter-skeltered through various business cycles as the government continued to maintain command of the central economic pillars of the economy. Interest rates were cynically used during the run-up to elections to create boom environments, and vice-versa post-election. This is known as the political boom and bust cycle.
From where I sat in the British Conservative Party, I was very much aware that people of my views who supported economic liberalism (e.g., free enterprise) were viewed as usurpers within the party. There was a whole history of noblesse oblige, one-nation Toryism and aristocratic snobbery, which was particularly annoying, and frustrating at times. I could have no truck with its support for historic privileges, all in the name of tradition, which always seemed mysterious to me. Blue-collar monopoly privilege was attacked by Thatcher successfully, but white-collar closed shop practices were not. One example was the failure to challenge the monopolistic traditions of solicitors and barristers and the entire judicial process. I recently was a respondent in a high court case when the plaintiff was trying to have a winding up order (e.g. a judgment) placed by me on them removed. We won the case and the other side paid up all the monies owed, but I had to pay £3,000 for our barrister’s representation in court on the day, which could have been covered by our very competent solicitor. I asked why this could not be the case, being aware that this a centuries old stitch up in the legal profession and was told that it is “in my interests dear boy” that I cannot give instruction nor communication to the barrister, but only to the solicitor who will then relay my presumably incompetent requests to the barrister. In the dying days of Thatcherism there were proposals to end this closed shop, but as a very large majority of the Houses of Parliament are made up of lawyers and judges, it would have had no chance of passing into statute.
No-one (including Thatcher) was prepared to attack the five pillars of Soviet style provision left in our country: education, the National Health Service, the supply of money, the provision of defense and the judicial process. These great institutions smacked of monopoly privilege and guild-like practices. Nevertheless, the Conservative Party under Margaret Thatcher still seemed to be the best political party to join.
When I was sixteen years old, I was in charge of the Hammersmith Young Conservatives. I organised a speaker meeting with the then home Secretary, Douglas Hurd. It was to be held at the Polish Club on King Street, Hammersmith. After the Second World War, a number of RAF Poles had become naturalised citizens of the UK and many had settled in this area. As you can imagine, these were all pretty enlightened people regarding the threat of socialism as they had seen how the National Socialists, and the International Socialists, had torn apart their own country. I went into their bookshop. An elderly gentleman, a war veteran, noticed I was looking around fairly aimlessly and directed me to a book by Eamon Butler, head of the Adam Smith Institute, which was an introduction to Freidrich Hayek. Everything in that book seemed to make sense, fuelling my interest in political philosophy.
I went to LSE from 1988 to 1991 to study in the Government Department, for a joint honours degree in Politics and Law. My economics papers in the first year were tiresome and tedious. We read a textbook by Richard G. Lapse called Positive Economics, the UK equivalent of Samuelson’s Principles textbook in the USA. Getting rapidly bored with the Alice in Wonderland nature of Keynesian economics and not feeling entirely comfortably with the monetarist alternative, I gave up the study of economics and pursued courses that related largely to political philosophy and law. By the second term of the first year we had moved into the world of macroeconomics. I closed the page of the textbook and gave up economics never to attend a class again when I was faced with a grown man, a professor indeed trying to teach the class about the multiplier. You all know the story; the multiplier is the sum of a convergent series. Spend £1m today with a marginal propensity to consume of 0.8 and the new people who have received the 1st £1m get £800,000 and so on and so forth. Therefore £1m injected by government into the economy could become £5m of spending in the ecomony. For about two seconds I thought that there was suddenly presented to me a cure for all the world’s problems, poverty abandoned overnight. Reality struck in the third second and I could not look with seriousness at any person who tried, with a straight face, to teach such appalling nonsense. Like a militant trade unionist, I downed tools and refused to be taught such crap. During this time while I was an undergraduate, I participated in a buy-out of a private members’ night club in the Kings Road in Chelsea – the 151 Club – and the also in the establishment of a restaurant in Chelsea, Le Casino, with two other partners. This career was taking off fabulously and my academic studies were being put on the back burner.
But I was taking some very good political thought courses and this confirmed in my mind that I was a natural rights/natural law person. I followed the tradition of Aristotle, St Augustine, St Thomas Aquinas and then the great Enlightenment thinkers: John Locke, and Immanuel Kant. On the law side, I did jurisprudence, again confirming my position as a ‘natural’ lawyer. I had no truck with the positivist doctrines of people like HLA Hart. In our history of modern political thought I was delighted to come across Freidrich Hayek again through his Road to Serfdom, Constitution of Liberty and The Fatal Conceit. These are his latter writings and they provided a justification for a pro liberty society based on spontaneous order. Hayek seemed to come to the natural rights position via a conservative route, the empirical position of the Scottish Enlightenment and Hume. This left a clear gap in my thinking, the natural law position coming very much from a rationalist standpoint and the Hume / Hayek position seeming to be based in the empirical tradition.
When I graduated from LSE to pursue a business career, I vowed that once my entrepreneurial situation had settled down I would rekindle my interest in these debates and try to solve in my own mind why I was a natural rights/natural law advocate. My overall political philosophy favored Hayek, via the empirical tradition; this seemed to encompass my whole political outlook.
By 1996, my business affairs were going well. Sitting down at my computer and looking at my books I thought it might be time to stimulate those philosophical gray cells again. I thought of some of the works of Hayek and how he repeatedly refers to an individual called Ludwig von Mises. I put that name into the search engine and – bingo! The Ludwig von Mises Institute came up. All of a sudden, the mist in my mind began to clear and a great clarity began to develop as I delved more and more into the work of Ludwig von Mises, and also Freidrich von Hayek when he was an economist at the LSE. Articles on the website were so sound, crisp, clear in their exposition, I thought I must look deeper into who von Mises was and to this end I bought my first book of his, Human Action. This amounted to a false start, because as I read the first few chapters I thought: what the hell is this all about – there are too many long words here. So I put it aside while my business went through a massive growth spurt.
Next, I took the opportunity of buying Percy Greaves’ Mises Made Easier. It gave me the key, I realised, to understanding the first two hundred pages of Human Action. After a certain amount of dogged determination, the genius and simplicity of the book became apparent to me.
You start with one irrefutable axiom: that humans act purposefully. Within this premise is implied all the laws that govern purposeful behaviour, just as a right-angled triangle implies Pythagoras’s Theorem. So Mises’ theorem, though the axiom of action is: people act to remove uneasiness at all points in time and this is purposeful. They prefer goods now rather that later, from this you get the Law of Diminishing Returns, The Laws of Supply and Demand, the theory of interest etc, etc. From this, you can deduce the – indeed, the laws of everything in economics, which Human Action so beautifully does.
One of the problems I carried from the LSE was the notion of having to justify a truly free and liberal society on the basis of the Hayekian evolutionary spontaneous order. This in turn had its foundations in the rather unfortunate mystical notion of the “invisible hand” of Adam Smith and each individual, seeking his own personal benefit nevertheless served the general good. This last point had been fine to justify the end point of where I wanted to be, but as a weapon in the critique of any social engineering or socialist system, I did not feel it hit the nail on the head.
Hayek’s final work – The Fatal Conceit – attacked the rationalistic ambitions of central planners who sought to manage the economy and efficiently allocate resources amongst competing ends by saying – this is impossible; the knowledge to do it could never be held within the hands of central planners. Also, individuals utilizing the price mechanism succeeded in efficiently allocating resources through a process of spontaneous evolution.
Mises’s Human Action, starting from the axiom of action, showed me how man, through his very reason, actually produced the most robust ‘planned’ economy possible. The free market coordinated the actions of billions of rational humans, each seeking to remove uneasiness. They take goods and services from those people who remove these feelings to form the greatest of all things: societies based on human co-operation and the division of labour that massively enriches all its participants. It became clear to me how any intervention in this process whatsoever is detrimental to the good of that society. According to the irrefutable logic of action and economic laws that emanate from this, the process of logical deduction is a very robust defense of the free society and indeed allows you to go on the offense against any socialist or collectivist system.
This rationalistic approach, then, has allowed me to square off or to hook up nicely with my natural law and natural rights way of thinking. The epistemology of Ludwig von Mises is an advance over the point where Kant stopped by setting the axiom of action firmly in reality; the positivist onslaught becomes blunted. The logical deductive method of Mises has been a true eye-opener and a pleasure to read. I am very grateful to the Mises Institute to bringing it to my attention.
Although Mises replaced Hayek as my most favourite philosopher cum economist cum political scientist, Mises had rekindled my interest in Hayek – but as Hayek the economist rather than Hayek the social and political thinker.
Ludwig von Mises’ 1912 book The Theory of Money and Credit had set out the first formulation of the Austrian theory of the business cycle, showing how an artificial lowering of interest rates could cause a change in people’s time preferences and misallocate capital away from consumption and into investment-orientated projects. As entrepreneurs know, with the availability of cheap money bringing marginal projects to fruition, this ultimate capital overhang brings over-investment to certain sections of the economy at the expense of under-investment in others – hence the boom-bust cycle is born.
Little did I know that Lionel Robbins, at the LSE in the 1920s and 1930s, adopted the Misesian position on epistemology and in general economics; having studied at the LSE one would have thought one would have been made aware of this. Robbins invited von Mises’s most prominent student, Hayek, to lecture, and the Prices and Production lecture series was created in 1931.
Hayek presented and reformulated the Austrian theory of the business cycle; both Hayek and Robbins, came into great conflict with Keynes and his followers in Cambridge in the 1930s. Keynes wrote a treatise on money, which Hayek attacked very successfully, and Keynes acknowledged most of the criticism, modifying his position. When the General Theory was published, however, Hayek did not bother critiquing it, as he thought Keynes would change his position. On the contrary, this book of Keynes’ was instrumental in creating the climate for central government, planning and control as the Second World War began. After this war, Hayek left the LSE largely to write on political philosophy in America; indeed, at the University of Chicago he was prevented from joining the economics department. Ironic that he was a first rate economist and his work at LSE resulted in the award of the Nobel Prize in economics in 1973. My delight and pleasure in reading Mises has lead me to discover the works of professor Roger Garrison which are a continuation of Hayek’s. In his book Time and Money: The Macro-economics of Capital Structure, Professor Garrison presents us with an accurate and up-to-date picture of the Austrian theory of the business cycle and how it critiques the Keynesian system and indeed the monetarist system as well.
I am delighted to set up, with the help of the von Mises Institute, the distinguished Hayek visiting fellowship at LSE.
The debate in the UK is largely sterile; although the great intellectual work of Hayek proceeded via the IEA, and with Margaret Thatcher’s great contribution the climate has moved in the direction of a liberal free society, much more work needs to be done. My chosen path lies in reinvigorating the study of the Austrian school, and particularly the economic works of Hayek and the general works of Ludwig von Mises, following the way they were so judiciously studied throughout the 1930s, 40s and early 50s.
Lionel Robbins, in his 1971 Autobiography of an Economist writes:
‘I cannot leave this theme without expressing further indebtedness to von Mises, both for what I have learned from his writings in other connections and for many days of pleasant and entertaining companionship in Austria and Geneva. There are features of his intellectual positioning in regard to pure theory and also in regard to public policy which I am not in agreement. But I should be sorry to let differences of this sort obscure recognition of the importance of his work. Although excluded by sectarian animus from the position in the University of Vienna which, on intellectual merits, was his due – he was neither a Catholic nor a Social Democrat – he represented in his generation, with Schumpeter, the great traditions of Menger, Bohm Bawark and Weiser; and as a thinker in his own right and as a teacher of such men as Harbeler, Hayek, Machlup and Morgenstern, he is one of the significant figures in the history of economics in the first half of this century. It is true that he has a sharp pen with departures from what he believes to be correct views, – I myself have been a victim on one occasion. It is true also that he has adopted some positions which have shown, I think, an unwarranted degree of opposition to hostilities which, whether right or wrong, deserved more sympathetic consideration. But I fail to comprehend how anyone not blinded by the political prejudice can read his main contributions, his Theorie des geldes und der Umlaufsmittel, long stretches of Die Gemeinwirtschart and the magisterial general treaty Human Action, without experiencing at once a sense of rare quality and intellectual stimulus of a high order, however much he may disagree either with the assumptions or the conclusions. And I think that the disparagement which so often accompanies references to this distinguished man, particularly in some circles in the English-speaking world which pride them-selves and being dispassionate and enlightened, is most discreditable and mean- spirited.’
A dedication to a true master and I could not agree more. Lionel Robbins accepted large parts of the thought of Mises. His most famous book, The Nature and Significance of Economic Science, is purely Misesian in its outlook. Being exposed in the Second World War to central government planning and the immediate short-term gains that can be had with the right type of determination and application, Robbins drifted away from the Misesian position. Mises is largely unheard of in the UK. Apart from the Mises Institute in Auburn Alabama, New York University, George Mason University, Loyola University New Orleans, San Jose State University and perhaps two or three others I know of no institution that teaches his works and those of the Austrian school with particular reference to economics, let alone epistemology.
The distinguished Hayek visiting fellowship is our first attempt to rekindle this liberal teaching. This is where the next stage of my new journey for liberalism begins.