I’d have to admit that the idea of a stand-up comedian writing about a serious topic doesn’t sound all that promising, but Dominic Frisby has managed to pull off a quite startling achievement; he has written a book about the economy that is actually a pleasure to read. ‘Life after the State’ seeks to address these basic questions: What is money? Who controls it? What happens as a result of that control?
As a keen traveller in Latin America, Frisby undertakes a revelatory visit to Cuba in 1996. Having gone with what he calls ‘preconceived notions about what an amazing place it was’, he starts to challenge his own ideas about government and money after he rents a room with a local professor and his family. His straight-from-the-horse’s-mouth anecdotes about Cuban life and the Cuban economy ought to be compulsory reading for anyone who might still have a rosy view of Castro’s ‘socialist’ paradise.
Frisby found a society “so imbalanced and distorted that taxi drivers and uneducated young people could earn, in one night, many more times than a professor, a doctor, a lawyer or an engineer might earn in a month”, a society where huge numbers of young girls in Havana worked in the sex trade, always for foreign currency. His experience of the useless Cuban peso made him think about how important a properly functioning system of money is to a society and about what happens when politicians use money as a political tool.
By the turn of the century, he has become fascinated by the world of finance and has reached alarming conclusions about the massive Ponzi scheme that is the western economy. He anticipates the crash of 2005-06 (taking preventative measures with his own assets) and is amazed that so many politicians, economists and journalists didn’t see it coming. The bad news is that he thinks there might be worse to come.
His argument is that our fiat monetary system (in which governments, regardless of their assets, print money whenever it suits them) doesn’t just encourage massive debt or stifle innovation and self-reliance; it is doomed to fail. Through the grubby racket of central banking, we are made to exchange goods and services in a currency that is constantly devalued through the dubious practice of money printing (now euphemistically re-branded as ‘quantitative easing’). It's a 'smoke and mirrors' trick designed to obscure the real cost of their debts.
Frisby makes a distinction between the actual free market (which he’s very much in favour of) and ‘crony capitalism’, our current system in which bankers, politicians, large corporations and special interest groups are subsidised by the tax-paying majority. He is highly critical of ‘rent seekers’, meaning individuals and organisations who are able, for one reason or another, to exert influence over politicians. The banks provided the most notorious recent example of this when they pulled off the spectacular trick of privatizing their profits, but socializing their losses. In a genuine free market economy, these bad businesses would deservedly have gone under. Unfortunately, the system encourages rent seekers, lobbyists, quangos, bureaucrats and special interest groups who all benefit from subsidy (at the expense of those who don’t). It's quite clear that the closer you are to the people who control money, the better off you’ll be.
The author writes with passion and clarity to counteract the ridiculous argument that only those who espouse leftist-liberal views on health, education, employment etc. care about people. He believes that human nature, left to its own devices, is invariably a force for good and that, when we limit the freedom to trade and exchange, we limit our possibilities. Describing himself as a ‘bleeding heart libertarian’, he unashamedly espouses his libertarianism to champion ideas that would be familiar to many so-called progressives, although most of his proposed solutions will be anathema to those of a statist mindset.
“All those people agitating for change should forget marches or demonstrations, or calling for this or that regulation or ruling; if they all just concentrated on one thing –reforming our system of money- then … freedom, justice, equality of opportunity and everything else they want can follow.”
But first of all, he argues, we must separate money and state. A recurring theme of ‘Life after the State’ is the inefficiency and inadequacy of big government. If you’re wondering what ‘big government’ means, then here’s one revealing statistic: Before the outbreak of the First World War, an average British household typically spent between eight and nine per cent of their earnings on government. Today, it is around forty six per cent. Some will argue that our society benefits from this and, to an extent, that is true. But, according to the author, the problem is not just that government spends too much money and does too much stuff; it’s the fact that it invariably spends money on the wrong things and does the wrong stuff.
There is a chapter devoted to the decline of Glasgow, entitled ‘How the most entrepreneurial city in Europe became its sickest’. The story of the city’s rise and fall provides a perfect illustration of the fate of industrial Britain. From being known as the ‘second city of the empire’ and considered to be one of the best-governed places in Europe, Glasgow became one of the sickest cities on the continent, with high unemployment rates and areas of deprivation wherein life expectancy was comparable to that in Palestine and Albania. For all the huge amounts that have been spent (with the ostensible desire to do good) on infrastructure, housing, benefits, health, education and various other subsidies, more and more people have fallen into welfare rather than escaping from it. The more the state has provided, argues Frisby, the worse Glasgow has fared.
(I should point out, in the passing, that the author is in favour of Scottish self-determination, mainly because he thinks that independence would force the country to rediscover its entrepreneurial roots and forge a small, vibrant, dynamic economy).
The book contains some interesting ideas on taxation, but Frisby’s big idea is that we should be able to exercise the freedom to choose between competing currencies; this alone would begin to dismantle the power of the state. In a genuinely free market, we could trade in gold or metals or virtual currencies like bitcoin (which –surprise, surprise- HMRC has now started to take an interest in).
But for all the economic analysis in this book (and elsewhere), the truth is that none of us really know where all of this heading. You can’t help but feel, however, that the odds are against it being somewhere pleasant. For all the received ‘austerity’ narrative of the last four years, the fact is that the coalition government has only managed to slow down the rate at which the deficit is increasing. That sentence alone should send a shiver down our spines. We are nowhere near addressing the question of government debt and that is surely a moral issue, because the generations that have benefited most from deficit spending (i.e. anyone reading this article) are about to bequeath something awful to their children and grandchildren.
Writing about the American economy, the Canadian political commentator Mark Steyn observed that: “It took the government of the United States two centuries to rack up its first trillion dollars in debt ... now Washington piles on another trillion every nine months.”
According to Steyn, ‘reality’ (that is, fiscal reckoning) doesn’t need to win popularity contests or lead in the opinion polls. It doesn’t even have to run for political office because, sooner or later, reality is going to win.
‘Life after the State’ provides food for thought and will perhaps encourage more folk to think about where the deficit spending model of government is taking us. James Harding, Director of BBC News and Current Affairs, has described the book as “a wake-up call for politicians and economists”.
I'd like think that some of our opinion makers may yet be influenced by it.