I don’t like the G20’s enemies

You have to be power mad or government greedy to think the answer to our current economic problems is to tax lower tax countries more.

Step forward Mr Sarkozy, threatening to wreck the summit if he doesn’t get his way. Step forward Mrs Merkel and the core EU to support him.

You have to be mad or bad, to think the solution to the problems of world capitalism is to smash the windows and break the computers in a nationalised bank in the City.

Step forward the violent protesters against the G20.

The problem with the Franco-German stance is it makes no sense. It cannot possibly solve the current problems. Threatening more regulation and higher taxes in the future is not suddenly going to persuade people to buy more cars and homes, is not suddenly going to resolve the current impasse in the banks, nor will it suddenly make monetary authorities wise and supportive worldwide so we can carry on as if nothing had happened. Trying to tax people in Jersey more, or trying to limit what hedge fund managers can buy next year will not create a single job, write a single new mortgage, or buy a single new green source of energy.

The problem with the yobs and protesters is they have no positive agenda. Destroying wealth others have created does not make the poor rich. Invading a nationalised bank is an attack upon poor as well as rich UK taxpayers, as we all have to contribute money to repair the damage and to pay for the huge police presence to stop them smashing up more banks. Breaking windows means more energy will be expended making more glass to replace the ones we have lost. That means hastening climate change on their own theory, the very climate change they claim to want to prevent.

The G20 will cobble together a communique with hopeful words and confirmation of reflationary action already taken by the major countries. It will be a small step on the road to more world power for China. President Obama will fly east with his reputation for articulate charm intact and with the prospect of a nuclear arms agreement with Russia closer. No great harm will have been done. The G20 will not save the world, but it shouldn’t make the situation any worse.It will have put some money in the tills of some London businesses, whilst disrupting the lives of many other Londoners.

Even Mr Sarkozy will probably stay and eat all the meals provided for him. I don’t care whether he does or doesn’t. He just reminds me why I think the EU can be such a deeply unhelpful organisation dedicated to too much useless regulation and to high taxes, at a time when we need lower taxes and good regulation of the things that matter most.

The EU’s vast and expanded army of regulators over the last decade was looking the wrong way and regulating the wrong things in financial services. Instead of rewarding these regulators with higher salaries, bigger bonuses and more assistants, to make a bigger mess in the future, we should be changing regulation for the better. We need fewer regulators, but ones who can see where the true problem lies. We need people who understand the need for prudent regulation of overall cash and capital. We need people who can reduce all this box ticking process driven detailed work which did not stop a single dodgy mortgage or stave off a single banking failure. We need regulators who understand that making everyone show a passport and a gas bill before conducting a transaction does not prevent money laundering and is a waste of time and money.

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18 Comments

  1. Posted April 2, 2009 at 7:21 am | Permalink

    John
    I understand your stance on Regulation, and clearly we do not want more and more additional Regulation, and poor Regulation simply for the sake of it, but we do need better and more sensible Regulation.
    I am not familiar with France and Germany’s proposals on the Regulation stance, but I certainly agree with them that the present system has failed all of us.
    Surely if they are proposing new Regulation which is better than the old, and the old system is scrapped, then what is the problem.
    Certainly a Basic System of Regulation which is common to all Countries is surely better than the chaos that we have now, where each Country appears to do its own thing, in its own way, and international funds search for the loopholes wherever they are.

    I agree the history of Regulation in the EU is shocking, but that is because all the Politicians who are involved are EU Members with EU thinking.
    This time the majority of the G20 are Non EU Members, so maybe (just maybe, and its a big maybe) they could inject some commonsense into the mix.
    It of course goes without saying that any proposed new Regulation if it does come about, has to be sensible and workable, and does not kill the goose that lays the goden egg, as that I would agree is absolutely pointless.

    • Posted April 2, 2009 at 9:17 am | Permalink

      Hello Alan,

      Good points, but you seem to assume that Sarkozy calling for better regulation might actually lead to better regulation.

      Sarkozy wants more regulation. The French seem to have this weird and widely-held view that the State knows best. It is already hard enough to run a business in France. It’s even harder to start one.

      It would be a reasonable guess that Sarkozy’s proposals will be more of the passport and gas bill variety, and less of allowing Central Banks to oversee all aspects of the money and liquidity markets such as derivatives trading.

      It’s possible you’re right, and that Sarkozy is proposing what you call ‘new Regulation which is better than the old’. But I think its more likely that if you looked at the detail of Sarkozy’s proposals for new regulation, you would laugh your socks off. And then weep.

      I think I’m right, but let’s hope you’re right!

      • Posted April 2, 2009 at 4:37 pm | Permalink

        “A Single Market in financial services has long been an objective of the European
        Union. In a Single Market, financial institutions authorised to provide financial services
        in one Member State would be able to provide the same services throughout the EU,
        competing on a level playing field within a consistent regulatory environment.”
        http://www.foreignbanks.org.uk/Publications/AFBDocuments/FSAP%20Guide_1.pdf

        So, you see, we are all, as part of the EU:, in the same boat as Sarkozy and Mrs Merkel.

      • Posted April 2, 2009 at 4:44 pm | Permalink

        Bernard.
        We live in hope !!

  2. Posted April 2, 2009 at 7:37 am | Permalink

    We also need economics to be a core subject in our schools. I’ve never, ever, seen so much ignorance, our poor education system will be our undoing in more ways than one. Not to mention the crass material and propaganda put out by the likes of the BBC.

    The G20 protesters are like the barbarians who smashed the Romans civilisation because they didn’t understand it. Whilst China, and Asia in general, educate people we are slipping into the ‘dark ages’ again.

    Morals, history, economics and radical reform of the BBC must all be hight priorities from June 2010. We have to clean out the Augean stables, all of us who undestand the danger.

  3. Posted April 2, 2009 at 8:07 am | Permalink

    Is Obama’s reputation for articulate charm intact? He appeared very hesitant and less than articulate when replying to journalists questions yesterday. Heaping praise on the mendacious, incompetent Brown must also cast doubts on his judgement of character. Brown himself appeared like a grinning goon. Are we seriously expected to take these people seriously and have confidence in their ability to resolve the problems? So far they fall very short of so doing in my opinion.

  4. Posted April 2, 2009 at 8:24 am | Permalink

    Going after tax havens might not fix the issue but at least it will mean the rich paying the taxes they are supposed to.

    I’m no socialist but if you want to live in a country then pay the taxes otherwise get out. Avoiding tax illegally in tax havens should be stamped out.

    I have no problem with Jersey etc having low/no tax, its when they allow overseas citizens to abuse it secretly that it becomes an issue.

    Still cant believe those who got caught in Lichtenstein didnt get jailed. One rule for the rich and poor and its the middle classes who get stung.

    • Posted April 2, 2009 at 1:34 pm | Permalink

      Ian, tax avoidance is legal, it uses the rules/laws to lessen the amount of tax to be paid.

      in countries where tax isn’t as high, far less people use the tax avoidance methods. As such, the goverments of those countries gain higher tax revenues, as well as attract more business.

      don’t fall for the sound bites being thrown around at the moment mate, they are pure spin, intended to get support for the goverments taxation schemes.

  5. Posted April 2, 2009 at 8:29 am | Permalink

    ” You have to be mad or bad, to think the solution to the problems of world capitalism is to smash the windows and break the computers in a nationalised bank in the City.

    Step forward the protesters against the G20.”

    I think you mean, criminals.

    There will have been thousands of genuine protestors.

    But also several idiots who take advantage of this type of event to break the law.

    Reply: Agreed

  6. Posted April 2, 2009 at 9:44 am | Permalink

    These mini-riots are pretty pointless; in fact many of the participants seem unclear about exactly what points they’re trying to make.

    Nevertheless, I don’t think we should ever admit the claim of the state to an absolute, unqualified, monopoly on the use of physical force.

    Even to the point, now, where individuals are being unjustly prosecuted for using force in self-defence when attacked by other individuals.

    It’s condemned as “taking the law into your own hands”, and now the officially required reaction to being attacked on the street is to allow your assailants to kick you to death, then contact the police so that they can deal with the matter, after carrying out the necessary health and safety checks.

    The state exists for the benefit of its citizens, not the other way round; and when the state forgets that, as a last resort the individual citizen has the moral right to use physical force against the state and its agents, notwithstanding the laws of the state.

    “As a last resort” being the crucial condition.

  7. Posted April 2, 2009 at 9:50 am | Permalink

    One outcome of G20 is that the coverage has been an excellent extended party political broadcast on behalf of the Labour party. One must frequently remind oneself that they have an election to win in just under 12 months time.

    Sky News did split-screen coverage this morning, with the Prime Minister, on one side, meeting and greeting world leaders and a long interview with Lord Mandelson on the other side. His Lordship dripped contempt for the Tory party for opposing the G20 and therefore (implicitly) trying to sabotage the wonderful things that would be agreed at the conference. The subliminal message was: Gordon Brown (World Leader and international facilitator) – good; Tory party (forces of darkness) – bad.

    Another subliminal message I picked up was: Taxpayers (paying for it all) – mugs.

    The only jarring note was that Sarkozy screwed up on being the last to arrive – he was pipped at the post by Belosconi so his subliminal message (contempt for the UK and the US) was slightly blunted. However, I am sure his gesture would still have made the right impact with the French voters.

  8. Posted April 2, 2009 at 10:08 am | Permalink

    It is interesting to see that, in our media, France & Germany get a significant amount of coverage while China & Russia don’t. I know which is more important. I also know which is more likely to want sensible free market, low regualtion policies. Indeed the fact that they have had such policies for over a decade explains why they are now more important.

  9. Posted April 2, 2009 at 10:20 am | Permalink

    The hooded thugs who smashed the windows were not demonstrating against anything. They are the wannabe terrorists who join in any action, and are just there for the ruck.

    How they were allowed to run riot with iron bars and IRA style balaclavas defies belief.

  10. Posted April 2, 2009 at 11:18 am | Permalink

    Hello John….Posted again as it appears to have vanished!!

    I too don’t like the enemies of the G20 however; perhaps I may be one of them!! I don’t like what Mr Brown et al have done to our economy and yet he presents himself as a financial messiah, well to quote Monty Python; “He is not the Messiah, he is a very naughty boy.”

    It appears that the G20 faction led by Messer’s Brown, Sarkozy, Merkel and others, believe they can dictate to the world how to run their affairs. I believe there is a major difference between tax evasion and tax avoidance; the latter being legal the former not so. These countries that the aforementioned wish to regulate are independent nations, why should Brown and Co regulate them; Brown and his EUSSR have clearly failed so why should any other self-respecting nation listen to him?
    I was appalled last year when HMRC paid a criminal gang for a list of stolen British off shore account holders. There is something morally very wrong in this action and in my opinion, laughs in the face of the rule of law however, we should not be surprised as, Labour and its government bodies have ridden roughshod over many aspects of our constitution, conventions, way of life and our common values.

    I agree that it is madness for the “rent a mob” to smash up a publicly owned bank as, in the end, we will have to foot the bill…Perhaps those involved don’t care as they don’t work and therefore don’t really contribute.
    The government spin machine did very well in deflecting that mob away from the real architects of the economic downturn, namely the government, and onto the government’s appointed scapegoat, the bankers in general and RBS in particular.

    It is crazy to introduce more and more EUSSR type red tape and the costs that go with it during a recession. It seems the EUSSR has a very strong urge to generally interfere in all areas of everything.

  11. Posted April 2, 2009 at 11:54 am | Permalink

    I have spent much of the last 30 years building or growing businesses in various parts of the world including developing countries in Africa and Asia – worthwhile and satisfying work. Since returning to the UK 2 and a half years ago to work for a large consultancy, I have spent 2 years of that period helping Clients tick boxes. Much, although not all, of it mind-numbling pointless. Why is it the business of the EU or the British Government to “protect” a rich businessman on his yacht in the Caymans by stopping him executing certain types of banking transaction because he is not a professional institution? Real life example. And yet the bank I did this for failed…without a regulator in sight.

    When MiFID went in on 1 Nov 07 the FSA started to receive thousands if not millions more reports than they had previously. No-one seriously believed they had the capability to read any of it…

  12. Posted April 2, 2009 at 8:45 pm | Permalink

    Mr Redwood, your last paragraph mirrors my own thoughts, and illustrates how small and low regulation can be.

  13. Posted April 2, 2009 at 8:51 pm | Permalink

    Last night I went to coach a boy of 11 years old who was placed in the bottom stream of the local Comprehensive. After just twenty minutes, I saw that he was literate and intelligent. He is “between expert and intermediate” at power kites, (he taught himself). At the moment, he is in a class of fifteen no hopers.
    Why?
    Well, the SATs went wrong didn’t they.
    Meanwhile, in the world of money, boys of that age are already fluent in Greek and Latin, they know where Guatemala is and they are taught rugby and cricket.
    And that is with a Labour government.

    So let me ask this question: how many of the clever hooded men and women on the streets of London have had the privilege of a local comprehensive? And how many are the children of rich people showing off?
    The Mayor of London thinks it is most certainly the latter.

  14. Posted April 3, 2009 at 1:20 am | Permalink

    Anglo finance is in complete dissarray. A little more regulation at the top might have been a good idea. Where was John when his mates were monetising hundreds of millions of illusionary gains in asset prices.

    If he is truely a right radical, he should have been ranting about the dangers of the whole central bank/fractional reserve statist scam.

    I found these arguments self serving, stale and ahistorical.

    “In fact, many of these countries are leading the other side of the debate. The Europeans, led by Germany with its inbred fear of hyperinflation, have balked at the Anglo super-stimulus approach. The continental powers all maintain socialized medical care, comprehensive social security and unemployment benefits. They can therefore afford to accept high levels of unemployment before they face riots and insurrection in the street. The United States has no such cushion.

    The German view is that recession is the natural cure for excessive inflation and growth. They see that the world economy is overleveraged, based on the reckless injection of cheap dollars under Bush-Greenspan. They believe that their economies will not return to health unless deleveraging is allowed to take place. These leaders understand that deleveraging will create massive unemployment, but they are prepared to accept it in order to allow their economies to restructure in a competitive manner. In short, they will accept short-term pain for long-term gain.

    The Anglo-Saxons, led by America and socialist Britain, believe that the solution is to spend their way out of recession. Even Lord Keynes would balk at their non-solution of sending good money after bad in such an overleveraged environment. The Anglo-Saxons know they are falling off a cliff, but they are trying to break the fall with additional capital borrowed from the other developed and developing economies. One must assume all this is being done to help political leaders survive the next election cycle, because the long-term consequences will be an even larger crisis — and even the collapse of the dollar.”

    Not Happy John!

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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