Sunday, April 23, 2006

Taxpayers' Funding Political parties?

“It is no surprise that all three parties should favour state funding. No doubt a convention of farriers, if they thought they could get away with it, would demand the state funding of farriers. As Adam Smith observed, "people of the same trade seldom meet together… but it ends in a conspiracy against the public". Why, though, should the rest of us humour them?”

‘Paying for the Party’, Sunday Telegraph, Opinion 23 April.

The editorial makes a tenuous connection between Adam Smith on the monopolistic tendencies of ‘merchants and manufacturers in ‘corporation’ towns (i.e., those ran by local guilds of artisans and tradesmen for the benefit of the protected trades organised within them) and proposals floating around in the UK currently from cash strapped political parties.

The Labour Party was revealed to have accepted ‘loans’ from rich businessmen to run its election campaign, some of whom were subsequently made into ‘Lords’ and ‘Knights’. Subsequently, the Tories were also revealed to have accepted similar ‘loans’ (thus escaping the need to publicly declare them if they had been ‘donations’, though many loans are later declared as gifts when the dust settles). The Liberal democrats huffed and puffed quietly, but have had a major donor, an ex-pat UK businessmen, arrested for various alleged misdemeanours.

So, having been caught with dodging the legal rules about donations (which wise lawyer showed them how?), their latest proposal is to propose state funding for political parties. Hence, the conservative Daily Telegraph’s comments.

I suggest one major difference between what Adam Smith critiqued and the conduct of political parties in the ‘loans’ for ‘Honour’s’ fudge. The restrictive practices of the corporations and guilds in the 16th and 18th century in Britain were all perfectly legal. Their monopolistic powers were backed by law and were not hidden from public knowledge – that is why Smith critiqued them as part of his attack on mercantile political economy. He suggested the law was changed and monopolists exposed to competition.

In the cash for parties at the taxpayers’ expense proposal, having been caught out, all three parties want to replace private donations in the million pound range to be replaced with millions from the public. Whatever the sums start at and whatever the restrictions, the rules are bound to change (even be ‘bent’?) and the sums will get larger for the bigger parties.

How do I know? Well, eventually the monopolist guilds were broken in the UK, but the behaviour of ‘merchants and manufacturers’ and their successor business companies in the 19th and 20th centuries continued to meet secretly for ‘merriment and diversion’ and conspire against their customers to rig their markets, charge higher than competitive prices and act against the public interest in this area. This is why Smith did not approve of laissez faire.

[Read the article at:]


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