Is Scotland in the Shadow of Stalin or Smith?

This morning’s Scotsman, 'Scotland’s national newspaper', in its business opinion column (‘The Column that Puts Business First’) runs a rather extreme headline and a story to match:

“The spirit of Stalin lives on as more regulation leaves us all poorer”.

It’s author is Ivor Tiefendrun, a successful manufacturing entrepreneur, and its first paragraph is:

“AFTER ten years of control and command, Gordon Brown has made it clear that he wants more of the same in the next ten years. Yet in Scotland we used to understand, courtesy of Adam Smith and the Enlightenment, that personal and economic freedoms are indivisible and that wealth creation arises out of the free expression of human imagination coupled with the freedom to convert ideas into action.'

Comment
Yes, I agree it is depressing that regulators are appointed so often to manage matters great and small. Meeting with my pensions advisor today and completing many forms and signing many statements, including that I was aware of money laundering offences, brings home these regulatory over-kill requirements which are repeated in scores of instances in running a business.

Whether we have quite reached the stage of Stalinist control of the total lives of UK citizens and of their private affairs is a matter of person opinion, and we should allow for a judicious amount of hyperbole in a newspaper column. Editors like trenchant pieces, with headlines that grab the readers’ attention.

That nothing near the plethora of these depressing government regulations existed in Smith’s day is uncontroversial. That many of them should be swept away is controversial, once you move from general to specific examples.

When the Bank of England liberalised the foreign exchange regulations to permit individuals of good standing, but not owned by Banks, to change foreign currency in High Street shops some years ago, questions were raised in the House of Commons about the ‘high profits’ of the ‘money changers’, allegedly exploiting ‘victims’ needing to change money for their foreign holidays.

That this was unexceptional from MPs (it gets them publicity), but that it emanated mainly from Conservative MPs was remarkable, especially in their use of hyperbolic language. The government had widened the amount of competition and the Conservative MPs wanted it regulated! Yet perfectly good mechanisms already existed and were expanding as new entrants appeared in the foreign exchange business. Surely, the Conservatives understood that competitive markets were the best antidote to uncompetitive pricing practices? They claim to have read Adam Smith. Clearly they missed that bit.

Similarly, this month with the collapse of a savings scheme linked to Christmas prizes, where the outcome for many thousands of savers from low income families was the loss their Christmas savings. The immediate reaction was to call for the regulation of such schemes. Find any activity and someone thinks it should be regulated. Yet, perfectly good laws exist to deal with Directors of companies who misuse their company’s funds by neglect or intent (it seems to be the former in this case). Whether some amount of compensation is appropriate is a matter for others; it would be cheaper than a regime of regulation, complete with regulators, support staff, all the associated bureaucratic paperwork, filing and inspection of it, and mirroring of reports by whomsoever monitors the regulators.

Are we close to the regime of the commissars? Not quite. The spirit of enterprise is not yet dead. Scotland is more choked by bureaucrats that in England (half the Scottish GDP is in the state sector), business new starts are below the UK average, in Sunday’s paper the adverts for state, non-profit and NGO vacancies dominate recruitment pages (I counted only two small sized adverts for private sector jobs last Sunday out of six pages), and there are more such committees in the pipeline.

A sizeable reduction in business taxation, a reduction in income tax (and the taking out of the tax bands all low incomes), abolition of the National Insurance charge (another tax), relaxation of the planning laws, and end to petty reporting of this or that activity and a reduction, if not abolition, of local business rates, would begin to turn this sorry situation round.

The Smithian antidote to poverty is the creation of wealth and, from that, of opulence. Ivor Tiefendrun understands the Smithian message.