To Regulate or Not to Regulate?

I have heard it said that governmental regulation is neither appropriate or desirable. That the state has no right to butcher the freedoms of the market under any circumstances, presenting it to the world as some kind of sacred cow. (Perhaps bull would be a more appropriate anthropomorphicism?) On the other side of the coin, many on the left of the spectrum argue for more regulation, particularly within the financial markets. I don't consider myself to the left by any stretch, nevertheless in my opinion, regulation is a necessary evil since without it there could not exist a free market.

Allow me to explain; the free market cannot survive in isolation and whilst I don't believe that the state should be involved in setting prices or any long-term subsidy of business, as such policies only encourage inefficiency, regulation is necessary to maintain competition. If we may look to the fundamentals of the cornerstone of market economics, the Wealth of Nations, it becomes clear that Smith was not against governmental regulation. Quite the contrary.

Adam Smith argued that through the division of labour and specialisation, an industry could realise an enormous increase in productivity, and realise significant economic growth through an absolute advantage. However, the natural conclusion of an absolute advantage is a monopoly. Because a monopoly interferes with the ability of the invisible hand to find an equilibrium of prices, "the price of monopoly is upon every occasion the highest which can be got." Without the invisible hand, the free market could not exist and without government intervention, through anti-trust laws to prevent monopolies, the market would exist, but it would not be free.

Thus when we speak of government intervention in the markets, let us not speak of it as if it is some kind of taboo against nature, but judge each and every regulation on it's own merits as to whether it's purpose is justified.

Great Scot

The Daily Record and STV are seeking nominations for the greatest Scot, to be announced on STV on St. Andrews Day. Whilst the panel have included Edinburgh Festival director Jonathan Mills and Record editor Bruce Waddell, two people I've never heard of, they've chosen to leave out Mary Queen of Scots. However, regardless as to whether some of the people who are on the list actually belong there, for me the question of who was the greatest Scot does not require too much of an inquiry.

Adam Smith, who thankfully has been nominated onto the list, and as the founding father of capitalist economics is the Scot who has had the greatest effect in world history. Smith's promotion of the division of labour, an idea which was exported around the world, drove the industrial revolution. For without the division of labour, the industrial revolution could never have happened, and the raising of standards of living to the levels they are today, along with it.

It is Smith's an Inquiry into the Nature and Causes of the Wealth of Nations, which espoused the division of labour to maximise efficiency and criticised the corrupt system of govenment sanctioned monopolies within the mercantile system of the day, and not James Watt's steam engine that was the greatest driver of industrial growth. To Smith, an individual acting in their own interest and selling and buying freely, would lead to the most efficient economic system. Prices would reach an equilibrium, being led by the invisible hand of the market, through supply and demand, and competition between enterprises.

However Smith was not overly right wing, he saw Government regulation as necessary to prevent monopolies and conspiracies which would stifle competition. Furthermore he was, unlike many of his class of the day, concerned with the problems of poverty. Smith argued that it "is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion." An idea which most modern readers will subscribe to, but which, at the time, made his ideas, considering his target demographic, revolutionary to say the least.

Smith also espoused universal education as a bulwark against what Marx would later call alienation through the process of the division of labour, and it's soul destroying monotony. At the time of writing Scotland was unique in the world, in that every Church parish, under the reforms of John Knox, employed a teacher to educate boys of all classes, and the four Scottish universities of the time took educated young men of any class, with scholarships and charitable foundations to assist with the cost. Smith was uniquely placed therefore, to see the advantages to society of universal education first hand.

In short he is the Scot who has the greatest effect on world history, for there is not a corner of the world untouched by his ideas, and he deserves a good deal more credit than to be the first Scot to grace the back of an English banknote.

Al-Megrahi, Oil and the SNP

Jack Straw's admission that the Westminster government had opened a prisoner transfer agreement (PTA) with Libya to bring an oil deal on stream has lead to the SNP Government in Holyrood being tarred with the same brush. The inference that Kenny MacAskill's decision was based upon an oil deal with Libya is not only not based upon fact as the files will evidence, it is completely devoid of common sense.

Whilst Brown and Co. would apparently have happily handed over Abdelbasset Al-Megrahi for black gold, this was upset by circumstances in Holyrood, namely the election of the SNP administration in June 2007. The SNP have re-iterated that they would not agree to the PTA, and have continually stressed that they are happy for the files to be released detailing the decision making process. A Labour administration in contrast, would have been expected to tow the party line in honouring the PTA.

Instead Kenny MacAskill considered realeasing terminally ill Al-Megrahi on compassionate grounds, something which is enshrined in Scots law. This decision left him with nothing to gain politically, and was clearly a very difficult decision to make. Advice was sought from a number of officials including the Chief Inspector of Strathclyde Police, before coming to the decision.

Whilst personally I think that Al-Megrahi's conviction and the evidence used to secure it was highly suspect, and I question his guilt in the first place, see USS Vincennes. I don't think that this did play a part in the decision making process. The corrospondence is there for all to see. Neither do I think that it should have. Guilt or innocence are a matter for appeal. The likelihood that Libya would have given him a hero's welcome on his return to Tripoli should not have been a matter for consideration either. Assurances were made and these were not kept. MacAskill cannot be held responsible for that.

The idea that MacAskill was insensitive and inconsiderate in granting compassionate release does not take into account how strongly the sensitivity, of what is a very difficult issue, was considered. Advice was sought from the UK Government regarding agreements that were made with the US on where Al-Megrahi was to serve his prison sentence. Westminster regrettably decided not to issue this advice. In further support of the SNP administration's sensitive approach to the issue, Alex Salmond wrote a letter to Gordon Brown dated 25th October 2008, where he highlighted the sensitivity of inviting Colonel Gadaffi to an oil sumit 2 days before the 20th Anniversary of the disaster. If anyone is guilty of insensitivity therefore, it is the Labour government.

The inference that the SNP were involved in a shady energy deal is put simply proposterous. An SNP government, which would seek independence for what is an energy rich Scotland, would have little to gain out of a foreign oil deal, unlike London. Especially when you consider that a newly independent Scotland would find it most prudent to sell oil and gas to it's energy hungry neighbour south of the border.