Ed Miliband: A Case Study Of Rhetoric Over Facts

On an almost daily basis Ed Miliband, Leader of the opposition Labour Party, announces his latest attack on the ancient regime of ‘capitalists’. No matter how specious his argument he is rarely challenged on facts by the other ineffective politicians he criticises, often being left to set the political agenda du jour; only his minions are challenged by more astute journalists on Today or Newsnight. The government’s collection of idiots is left running to catch up, often implementing policies worse than Miliband is prescribing.

This has repeatedly happened with much of his recent agenda-setting such as the ‘cost of living crisis’, where he focused on energy prices, the largest rise in the last 20 years being overseen by him when in government. His outpourings have cause energy companies to increase prices to lock-in profits ahead of any 2015 Labour majority, and to cause the shares of the banks wrongly nationalised under his and Balls watch to crash, reducing value to the shareholders (i.e. us, mainly).

In his FT article entitled ‘Our toxic blend of capitalism and short-termism‘ Miliband calls for a discussion on “how we can build a better, more responsible and productive form of capitalism” and blames a crisis “caused by inadequately regulated financial activity” and “rules that encourage wealth creation focused on short-term returns, fail to reward productive behaviour and skew distribution towards the top”. Yet again, these accusations all fly in the face of evidence: the banks are more heavily regulated than at any time in the past and he calls for many unproductive and anti-re-distributive policies (e.g. 50% tax). In the same piece he says: “short-termism seems hard wired (sic) in to our economy, with small companies unable to access the capital they need” not recognising that the high corporation tax that he advocates encourages businesses and their owners to make short-term decisions.

Miliband, in his speech to the Labour Party conference in September 2011, asked “are you on the side of the wealth creators or the asset strippers?” The Director General of the CBI responded that “I don’t recognise this idea that there are large numbers of companies in this  ‘predatory asset stripper’ class. This is just very black and white and it  doesn’t reflect the world as I see it”. Perhaps Miliband had recently watched Michael Douglas in Wall Street, imagining it to be a documentary? Digby Jones, former CBI Director-General and Labour government Minister for Trade and Investment, said Miliband’s comments were “divisive and a kick in the teeth for the only sector that generates wealth that pays the tax and creates the jobs this country needs.”

The view that Hedge Fund managers are evil capitalists just trying to put people out of work is quite stupid; like all of us in life they are trying to make a profit. All of us, in business or our personal lives, want to make a profit. Socialists may deny that fact, but quickly accept that spending more than you earn is a bad thing and leads to poverty; they expect the state, i.e. taxpayers, to make the poorest families ‘profitable’, yet denounce those very taxpayers (individuals and businesses) that attempt to do so.

Hedge Fund activists are simply trying to make a profit too. Their chosen method is no different to any other business – they buy something which is of lower value than they consider it should be, attempt to make some change to the underlying product and then sell at a profit, often several years later. And yet Miliband calls these people “irresponsible capitalists“.

Miliband recognises that “some [takeovers] might have been crucial to turning a failing company around” but fails to identify his data in this area.

An excellent Economist Blog on Corporate Governance published tomorrow (!) entitled ‘Anything you can do, Icahn do better‘ states that critics of Hedge Fund, such as Miliband, are wrong: “empirical proof that activists exacerbate short-termism is strangely elusive” (thanks to @johnycassidy for tweeting this). As usual Miliband’s calls for action are driven by his socialist view that the market (i.e. us citizens making voluntary transactional decisions) is wrong, and that he and his political clique are right.

The Economist Blog refers to an excellent paper recently published by Harvard Law School, entitled ‘The Long-Term Effects of Hedge-Fund Activism‘. This paper concludes thus:

“This paper has investigated empirically the claim that interventions by activist hedge funds have an adverse effect on the long-term interests of companies and their shareholders. While this claim has been regularly invoked and has had considerable influence, its supporters have thus far failed to back it up with evidence or even to subject it to an empirical test. This paper provides a comprehensive investigation of this claim and finds that it is not supported by the data.

[…]

We find no evidence that interventions are followed by declines in operating performance in the long term; to the contrary, activist intervention are followed by improved operating performance during the five-year period following the intervention.”

As usual Miliband believes his dogma is correct despite evidence to the contrary. He rabble-rouses his natural electorate against the productive in society who fund his privileged position, his pension fund, expenses-based lifestyle, and all of his beloved socialist infrastructure that the state controls.

He is an evidence-free zone; a snake-oil salesman of socialist rhetoric.

An Eloquent Brand of Revolution

Russell Brand has caused yet another disturbance in the Twittersphere with his recent appearance on Newsnight. Many question why a mere comedian should be afforded the gravitas of a one-on-one interview by Jeremy Paxman. The obvious answer is his obvious intelligence and eloquence, but he is interesting beyond his showbiz facade.

I know many people dislike Brand, with his airy-fairy bohemian language, over-gesturing, crudeness and simplistic belief in socialism; personally, I like him. I’ve watched his material for years, seeing past the flamboyant performance art of his stand-up comedy to the intelligent foundations beneath. And, importantly, he makes me laugh – a comedian’s raison d’être, after all. Several years ago I arrived in Edinburgh for a few days at the Fringe, walked up those never-ending steps from the dinginess of Waverley station into the majesty of Princes Street, to be greeted immediately by Russell Brand and his entourage walking past. He noticed that I’d recognised him, smiled and said “Wotcha mate!” In that passing second his joie de vivre was contagious.

But Brand is more than just a former addict-turned comedian. Here he was in front of Britain’s toughest political interviewer mocking democracy and promoting revolution; even Paxman looked shocked. Brand rightly pointed out that voting is useless, it changes nothing: “why be complicit in this ridiculous illusion?”. He then railed against the inequity in society and linking this to the self-serving political elite. He boasted of never having voted, to which Paxman used the political-establishment line of ‘if you don’t participate then you have no say’; Brand decried this mantra as the con-trick that it is.

And then on BBC’s Newsnight, its flagship TV news platform, Brand advocated revolution! He didn’t go into detail about how this revolution would happen (thankfully, as advocating violence to enact political change is illegal under the various Terrorism Acts), but was adamant that this was the only way to change society radically. Personally I don’t agree, but I do share his belief that democracy isn’t going to help the state abandon its ways.

At this stage I agree with much of Brand’s enthusiastic critique of society. However, as many other libertarians would agree, it all goes wrong here. As you would expect, if you know anything about him, Brand then espouses as the saviour of humanity “a socialist egalitarian solution based on the massive redistribution of wealth, heavy taxation of corporations and massive responsibility for […] any company exploiting the environment”. His policy to reduce inequality we need to tax corporations hard, ‘catching’ tax avoiders, and all the usual Marxian dialectic and faux-logic (“profit is a filthy word because wherever there is profit there is also deficit”) short of putting evil capitalists up against the wall come the glorious day.

So Brand is intelligent, why socialism? I believe there are a few options on this…

1. He’s taking the piss? His eloquence and political solutions are just his own performance art, and he’s parodying Wolfie Smith.

2. He honestly thinks this is the best solution?

3. He, like many who make their living in the public view, recognises that saying you believe in socialism is the easiest way: you appear caring and cuddly, albeit ignoring the evidence of the vast social, economic and political inequities that socialism brings. (Why anyone thinks that being proud of believing in socialism is any better than believing in fascism is beyond me: they are the same evil ideology separated by relatively few characteristics).

As a libertarian, I share his anger at the political class, the inequality in society, and damage to the environment: he is right to see the existing system as the fault. However, I disagree vehemently with him as to the solution. Only voluntary trade (‘capitalism’ if you will) can improve this. Without the individual’s self-interested actions we would live in a society where the bureaucrat controls our lives, deciding our job, pay and conditions. Why would anyone think that Whitehall can make decisions about my life better than me? This is idealistic nonsense: to decry the status quo and then think that ‘administrators’ could control the economy better than millions of self-interested individuals. The inequalities that Brand so dislikes still exist after 70 years of our glorious welfare state, so why on earth would one think more statism would change that?

Brand is right, a revolution is coming. However it’s not a socialist revolution, despite his support for neo-socialist groups like the anti-capitalist Occupy movement. The rising wealth in China, India and Africa, all due to international trade, is creating a new class of educated young, people whose parents struggled in poverty. Even Bono has come to the realisation that trade not aid is needed to lift Africans out of poverty. This wealth and education, along with the international awareness that social media has brought, will create a desire amongst those not enjoying it to participate. Unfortunately this new-found approach to individual voluntary action isn’t shared by all.

In the UK we have created a society where school leavers expect work to be given to them, or free money if nobody thinks them worth employing. That entrepreneurial spirit required for growth is lacking in many in the UK, despite attempts by the BBC to promote it with such successful pro-business franchised shows as The Apprentice and, more importantly, Dragons’ Den. Sadly many of our youth have been left behind, indoctrinated by state education that society (i.e. government, i.e. the taxpayer, i.e. them and their parents) owes them a living. As Simon Kelner in the Independent says: “His call for revolution may be Spartist nonsense, but Brand definitely articulates a strain of thinking among a growing number of young people who feel disenfranchised, disenchanted, disengaged and, most important, disinterested in the idea that politics can change the world.” While Brand recognises the anger of these left isolated from the productive world around them, he misses the cause.

It is a shame that Brand hasn’t recognised voluntary transactions, free trade, as the greatest route away from the inequality that he rightly despises; that the state that he advocates more of as being the root cause of much of that inequality. Imagine the fireBrand in action, convincing the youth, if he understood and believed in the coherent, egalitarian philosophy of libertarianism.

In the meantime we must just be glad he’s arguing against established politics, politicians and democracy. Come the glorious day…