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Monday, 5 April 2010

Job creating government?

One of the greatest truths is simply this - the government spending my money or yours, does not “generate jobs”. By that I mean, they do not generate jobs that last. Those are created by commerce and industry and a wise government is lean and light on regulation so as to stimulate activity and encourage enterprise. This is something Louis XIV’s Minister of Finance recognized in the 1690’s and which British governments followed up to the day that Prime idiot Gladstone created the Civil Service. Unfortunately it is not something the present socialist ideologues infesting Westminster and Whitehall recognize either. The present political truth clings to the belief that government alone has the money and the ability to create jobs – and at the heart of that is the belief that in an “ideal socialist state” the “government” can, by controlling commercial and industrial activity and expanding the bureaucracy, “create” that glorious Utopian dream – “Full Employment”.

As students of history are coming to realize, experiments of this sort have been tried in the past – and failed. The most obvious is the former Soviet system which, as these systems always do, favoured those who could sing the Party song. Thus, quite often, total incompetents would be placed in charge of organizations – frequently over far more able people – and left to run it any way they liked. It didn’t matter that central planning required production of goods and materials no one really wanted. And it certainly didn’t matter that the organization ran at a huge cost producing something no one wanted, or that the workforce weren’t that happy, they had jobs didn’t they?

The same problem begins to appear when Rooseveldts “New Deal” is examined closely. Many short term jobs were initially created, but it is now argued by some analysts that the “New Deal” may well have prolonged, rather than shortened, the Depression. Similar schemes in other western countries seem to have had the same outcome. The problem is a simple one – governments do not, contrary to the belief of many, have any money of their own. It comes from your pocket and mine, from your labours and mine. In short, it’s our money they are spending and here’s the conundrum - in order to spend they have to tax everything we earn or do. The next problem is that in order to “manage” all this spending, they create huge bureaucracies …

So you end up with a very large slice of the money supposedly “creating jobs” actually paying those who administer the schemes and doing very little “job creation.” The money goes into a sort of carousel with our taxes paying bureaucrats and politicians and their hangers-on, which is taxed and goes into paying…

When you have the situation we now have in the UK where 21% of the total workforce are directly employed by central government, local government or agencies of government, you are beginning to approach a point at which tax on people paid from taxes simply recycles tax. Now you really have to get creative to find ways to raise more money to pay more bureaucrats.


In a similar vein I find the arguments, as presented on international news broadcasts, from Washington on the proposals for the health care provisions envisioned by Mr Obama sensible. Of course, as ever, the devil is in the detail of “who pays?” Here again, it appears that members of Congress seem to have this grand scheme that somewhere down the line the “government” will at least part fund this from tax and “government borrowing”. Once again we see a disconnect between those spending the money and those providing it. “Governments” have no money or wealth – it belongs to the people and not to the party in power or the bureaucrats who control the spending of any government’s “budget”.

What is immediately apparent in the debate in the US on this issue is that there is a need for providing health care to those who cannot afford it or cannot obtain it even if they can afford it. But, as in my opening to this chapter, I am not convinced that creating more jobs for bureaucrats who will regulate what the insurance companies can and cannot do to those buying into their health care policies, is the best way to do it. Bureaucrats seldom, if ever, provide “value for money”. Usually the opposite.

As always someone has to pay and it is seldom those who make these laws and proposals. In fact, the one thing which leaps out to a cynic such as myself, is that these proposals are similar in intent to the “games” staged in ancient Rome for the “amusement” of the population. They are about making sure a certain section of the electorate remain loyal voters. In short, it’s a bribe, and the person paying isn’t the politician handing out the bribe. This is classically revealed in the latest election battle between the three main parties in the UK.

Labour have run out of tax options to fund their runaway spending, so now they are turning to one of the dishonest taxes they created almost sixty years ago and which subsequent governments have kept going. Its called “National Insurance” and it was created to fund Unemployment, Pensions and the NHS. The idea was that everyone in work and every employer, would contribute a certain amount each week or month which would fund these government handouts. Most of us have paid it throughout our lives, not realizing that no effort was ever made to “ring fence” it or to invest it in anything that would provide an income from which to fund any of the three things it is supposed to cover.

Over the years it has increased in contribution, but, never was it actually put aside. Instead it went into the “general” revenue and was squandered gaily by Whitehall who claim that legally they cannot “invest” it. So we reward free spending, overspending and waste by giving them more money each year because they used the full budget last year. So now we have a situation where Brown’s raids on the private pension funds have destroyed them, the State Pension is now unaffordable, employment is falling which means tax and National Employment revenue is falling and Labour’s proposal is to increase tax and increase National Insurance.

So they can spend some more “creating” jobs.

First of all let’s take a look at one of the “projects” they claim has “created” jobs. Centralising the Emergency Services Control Rooms from 44 into nine was supposed to save money. It still isn’t running, the budget is now twice the original costing and it won’t be online for at least another two years. Has it “created” any jobs? No, but it has certainly redistributed some of our wealth into the pockets of a small group of contractors and their politician and civil service “advisers.” The project is already years late and will actually reduce the number of Control Officers currently employed by two thirds. That’s a pretty good round of “Job Creation” if you ask me, but it is also typical of other “Job Creation” schemes. They tend to be short term, costly, and in the long term, counter productive.

Then there is the disincentive of increasing National Insurance. Let’s be clear on this, NI is paid by the worker – typically about 9 – 11% of salary or wage up to a maximum level, though Labour again removed the ceiling recently meaning that they were able to take considerably more from this, but it is also paid by the employer for each and every employee. So increasing it means that they are actually taxing the employer for employing you. Plus, of course, taxing you for being employed on top of your contributions through Income Tax, Property Tax, Value Added Tax, Fuel Tax, etc., etc.
They legitimize all of this by claiming that when you or I vote for them (or not as the case may be) you are giving them a “mandate” to spend your money. If you or I tried this we would be whipped into court on charges of Grand Larceny at the very least.

Must be lovely to be able to self determine how much you can steal out of other people’s pockets for your own comfort and even more so to be able to make it all a criminal offence to refuse to play the game. I was strongly reminded of the Vampire Lord in Terry Pratchett’s wonderful spoof on politics called “Carpe Jugulum”. In it the Vampires have gained control of government and instead of attacking everyone whenever they need blood, simply line everyone up once a month and take a little at a time…

An interesting analogy.

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