Tuesday, August 02, 2011

Beyond a joke

Via Strange Stuff, I find Dan Hannan highlighting the EU's latest intrusion into our pockets sovereignty.
As the law stands, people wishing to settle in Britain must demonstrate that they have the means to support themselves, either through work or through an alternative source of income such as a pension. The European Commission claims that this amounts to discrimination against EU citizens, who are supposed to enjoy the same rights as British nationals.

In fact, as so often happens, Eurocrats are disregarding the plain text of their own rules. Article 7(1) of the Free Movement Directive gives EU citizens the right to reside in another member state only if they have “sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State”.

In order to get around this clause, the European Commission is deploying a piece of sheer sophistry. It argues that, if immigrants were able to top up their income with British benefits, they would have “sufficient resources”.

In May, the Supreme Court ruled on the claim of a Latvian pensioner, who had just moved to Britain and had demanded Pension Credit on grounds that her Latvian pension was too small. Although our courts like to rule in favour of immigrants, the law here was so clear-cut that, by 4-1, judges turned her down. If the European Commission were to get its way, she would not only be able to claim Pension Credit, but also council tax and housing subsidies—despite not having paid a penny into the system.

There are several issues to be addressed here, and they touch on a number of issues.
  1. The idea of National Insurance was that it was an insurance (or, practically, assurance) scheme: if you paid in, then you could get a pay out in the correct circumstances. But the point is that yo only get a pay-out if you pay in.

    If you die, your family cannot apply to insurance company for a pay-out of you haven't been paying any life insurance.

  2. Yes, we all know that National Insurance is a colossal Ponzi Scheme so there is no insurance fund (which Obama's administration recently confessed). It is only a matter of time before one EU country or another tries to absolve themselves from legislation like this by pointing out they they don't have the money to pay.

  3. At that point, I'd put even money on the EU suggesting that all social security taxes should go into a central EU fund which will ensure the payment of social security. At which point, of course, the EU will harmonise the level of payment across all member states in order to ensure the fair distribution of funds.

    At which point, of course, we can all kiss goodbye to whatever semblance of independence or sovereignty remains to us.

  4. This is an especially important point: THERE IS NO FUCKING MONEY LEFT.

The low-grade panic and the pathetic desperation inherent in Obama's recent sham negotiations—coupled with our own government's pathetically-failed attempts to curb state spending have only confirmed the act that the Western economies are effectively bankrupt.

In fact, let us be more precise about this: every single soft socialist democracy is bankrupt—with the possible exception of Germany (which is, instead, being bankrupted by the other economies to which it is bound).

In fact, as Detlev Schlichter has so eloquently put it, we can, at last, welcome the death of politics.
Should we feel sorry? Worried? Desperate? – Well, with apologies to Oscar Wilde, but one has to have a heart of stone to read about the struggling political class without laughing.

The modern state is in terminal decline. Good riddance.

While I do not want to belittle the upcoming upheaval and the pain it will cause to many, all of us who love liberty should rejoice. The state is bust. Game over.

Hoorah, the state is dead!

We libertarians have been treated as slightly eccentric for years, no, for decades. Our plans to convince our fellow men and women of the benefits of small or no government, of the power of voluntary cooperation on free markets, of the global division of labor and of personal liberty – they were greeted with the pitiful smile reserved for the hopelessly naive. No political party would ever win on such a platform, we were told. If given the choice, the public votes not for freedom with all its uncertainty but for the caring, paternalistic state with free health service at point of delivery – and while we are at it, why not all sorts of other freebies, too? And, let’s face it, our critics were right. The chances of Ron Paul becoming the next American president are – well, zero. The political process – in particular modern mass democracy in which every vote counts the same whether from a taxpayer or tax-consumer – is designed to increase state power, not to limit it. As Mark Steyn has observed so pointedly, government is like coffee at Starbucks: It only comes in three sizes: tall, grande and venti.

But as good libertarians we should not rely on politics like our enemies, the statists, do. That is their game. Let’s not play it. We should rely – as befits proper anarchists – on our fellow man’s self-interest. Not more, not less. Most people prefer more goods to fewer goods. For that they need markets, not politics. Politics just gets in the way. Just as the market is working and delivering the goodies every day even if most people don’t understand why and how, so the state is collapsing under the weight of its own inconsistencies whether the people still want to believe in it or not.

“Events, dear boy, events.” All we have to do is sit back and let the state collapse. We know that in the long run, the state is dead. And the long run may be sooner than we think.

And he is right: in between the planted distractions of phone-hacking and assorted media wank, we have all witnessed the scrabblings of our Lords and Masters as they attempt to rescue their doomed political projects—do they realise that it's all in vain?

With all of the highly paid advisers at their beck and call, they surely must? But then I realise that most advisers to the (mostly) terminally stupid, ignorant and venal MPs are recently ex-students—not exactly the cleverest people on the planet in the first place—and civil servants desperate to preserve the illusion of business-as-usual in order to preserve their cushy jobs and platinum-plated pensions.

So perhaps they do not realise. Perhaps they don't understand.

The state is bust: there is no more money for any more bail-outs. The biggest bond-buyers are the banks (why do you think the world's governments agreed to bail them out?) and even they are shying away this stupidest of stupid investments.

As Detlev points out, the state is bust and all libertarians have to do is sit back and watch it happen.


ManNotNumber said...

Got my PMs, got my popcorn.

Roger Thornhill said...

We are witnessing the exposure of the unsustainable "Fabian Covenant" of Social Democracy with its "defined benefits" welfarism instead of a more sustainable "defined contributions" model which, of course, can be operated without the State.

john b said...

National Insurance isn't a Ponzi scheme, since it's never even *pretended* to be a fund. No, not even when it was set up.

NI contributions have always been treated as part of general taxation, and benefits have always been paid out of the general government budget. To be a Ponzi scheme, there'd have to be some kind of suggestion that it's anything other than "benefits paid out to people who've previously paid certain taxes". Which there isn't.

The US is different - there is supposed to be an *actual* social security fund, which assorted governments of both political hues have raided over the last 40 years to the point where the

Finally, on the "there's no fucking money left" point - we're four times richer than we were in 1945. Of course there's fucking money left, if that's how we want to allocate it.

The problem is that tax revenues are lower than spending. To solve that, we *either* need to raise taxes to Swedish levels *or* cut benefits to US levels. Obviously most readers here would prefer the former, but it's entirely a matter of choice.

john b said...

US paragraph above should be "to the point where, for all practical purposes, there isn't one".

ASG9000 said...

@john b: You appear to be saying the state pension isn't a Ponzi scheme because it isn't behaving like a Ponzi scheme as Ponzi schemes typically claim not to be Ponzi schemes. I think what you mean is that everyone knows it is a Ponzi scheme and that makes everything OK. Bollocks.

You're all for fraud on an epic scale. But then your final two points I agree with. A mixed bag.

Devil's Kitchen said...


Obviously, we have discussed this a number of times.

Wikipedia describes a Ponzi scheme thus:

"A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors."

You may assert that it has never been advertised as a fund, but I imagine a great many people think that there is one.

But, sure, you could argue that NI is not fraudulent but, in the method by which it functions, it is a Ponzi Scheme.


john b said...

DK - I'm not sure I agree, in the same way that I don't agree that tax is the same as me getting a gun and demanding the money of someone who doesn't have a gun. This may be an uncrossable ideological divide (although I thought you were a minarchist rather than an anarchist?)

The operation of the benefit and pensions system in the UK is that the government taxes people who are earning money now, and pays the money to people who would otherwise (mostly; obviously some are frauds living in massive houses etc) be destitute or at least very poor.

(there are some bloody stupid sub-aspects to this, such as the one where someone earning minimum wage pays income tax and gets benefits - I'd adopt the Aussie scheme of raising the income tax threshold to gbp15k - but that's a separate point)

Some benefits and pensions are qualified by time spent paying NI; some are not. All are paid out of general taxation. Some taxpayers pay NI; some don't. All the money goes into the same government pot.

The point about a Ponzi is that there's no underlying revenue source. It's definitionally fake. In the context of benefits and pensions, this doesn't work - the underlying revenue source is the economy, so as long as we have one (which I recognise is probably but not certain), then it's not a Ponzi.

Devil's Kitchen said...


"Some benefits and pensions are qualified by time spent paying NI; some are not."

NI is supposed to cover health care, state pension and unemployment benefit.

"All are paid out of general taxation. Some taxpayers pay NI; some don't. All the money goes into the same government pot."

Receipt is supposed to be on the basis of money paid in (which is why freelancers sometimes get shafted); it is not so long ago that you could be refused certain benefits on the basis of "not having paid your stamps".

"The point about a Ponzi is that there's no underlying revenue source."

That's not entirely true: Ponzi did have a revenue source—as did Madoff. What neither of them had was a sufficient revenue source to cover the pay-outs that they were making (and advertising).

By any measure, that curently applies to the British state: it does not have the money to pay out what it advertised to "investors".

Because it is the British state, it can—and does—borrow vast amounts of money to cover the pay-outs, but it cannot do so for ever. For a long time, yes; for ever—no.

Even if the government could take the entire British economy in tax (which would, of course, destroy it), it could still promise more than it could deliver.

As it is, the government is advertising returns that are far, far in excess of its income (feasible tax) and, eventually, its ability to pay: it pays the returns to people with their own money or with that of newer investors (in the case of pensions, the next generation).

This is, quite obviously, a Ponzi Scheme.

Now, you can argue that the state is a special case and should be allowed to run such schemes—but let's be honest about it.


Nightwatchstate said...

As an ex-reader recently returning from the slightly hysterical wing of the anarcho-nihilist right, this post (and Detlev's within) was a neat summation of the hunch I've had for a while: The state might not be dead ideologically, but economically it's had it's time and modern sensibilities being what they are, it will be extremely difficult for a new state to foster its legitimacy. More succinctly: statism is dead and this is the twitching before the rot really sets in and the whole carcass collaspes into itself. Untaxable, anonymous transactions and e-banking technologies will be the final nail in the coffin. Fingers crossed statism isn't inherent to humanity and stateless defense works.

Anonymous said...

I think John B is trying to say that a formal Ponzi scheme has some boundaries - old investors are paid with new investors' money. In the case of NI, sometimes you get paid without paying in, and sometimes you pay in and don't get anything back.

We're just arguing definitions here. However, what is the sum of NI paid in last tax year and how much was spent on health care, state pension and unemployment benefit (the things you claim it is spent on)? I really don't know, but unless they are exactly equal, then NI does not qualify as a "genuine" Ponzi scheme, though of course for all purposes it is one.

Devil's Kitchen said...


"However, what is the sum of NI paid in last tax year and how much was spent on health care, state pension and unemployment benefit (the things you claim it is spent on)?"

I can look out the exact figures, but NI brings in less than £120 billion every year, i.e. less than the NHS budget.