Led by Donkeys

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Excerpted from today's PFP Wealth Management Letter

“How can we have this idea that Scots are thrifty and good with financial management?”

- Comment on The Daily Telegraph’s website following news that Gordon Brown has been ordered to release information about his controversial decision to sell Britain’s gold reserves when Chancellor. The writer may also have been thinking about the collapse of the Royal Bank of Scotland and Halifax Bank of Scotland and Sir Fred Goodwin.

Writing in the Financial Times, Martin Wolf suggests that the financial and economic crisis has inflicted huge damage on the reputations of Britain’s two most significant recent political leaders, Margaret Thatcher and Tony Blair. That rather presupposes that the latter has any positive reputation left to defend. Not just within the confines of the UK but internationally, the reputation of politicians has probably never been lower.

Forget the tawdry British expenses scandal, though that is bad enough; there is a more fundamental problem with our polity, and it is not just an alarming and justified lack of trust. Governments throughout the West have proven themselves functionally unable to steward their nations’ finances. Labour had already made the forced redistribution of wealth from rich to “poor” a core component of its policy since election in 1997 (the net income gain for the poorest decile in the UK has been 12%; the net income loss for the most affluent decile has been 15%.

But poverty has now become an entirely relative rather than an absolute concept, defined as a level of household income below 60% of the median income, thus ensuring that within a socialist culture, the poor will always be with us, at least statistically if not in fact, no matter how affluent our society becomes as a whole. That culture bears the seeds of its own ultimate collapse; as Margaret Thatcher is rumoured to have said, the problem with socialism is that eventually you run out of other people’s money.) The more recent redistribution of the nation’s resources from taxpayers to banking interests, while comparably involuntary, revealed just how much government was in thrall to the banking lobby, but it was hardly restricted to the UK alone.

The problem may be rooted in the structure of the modern democratic system, in which the electorate increasingly and inevitably votes for putative self-enrichment (call it bread and circuses, if you will) as opposed to sustainable and productive national investment. In the words of Hans-Hermann Hoppe’s book, democracy is the god that failed.

See full letter (.pdf)