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In his speech before the war in Iraq Tony Blair, the UK Prime Minister, argued that not intervening would send a message that tyrants would feel at liberty to act without consequence. By military action in Iraq, he argued, those who would perpetrate atrocities would think twice. There would not seem to be any evidence, before or since, that would back up that contention.
We now have David Cameron, the current Prime Minister, making essentially the same arguments – do politicians ever learn from history?
The best government can do is move wealth from individuals and business to those who serve government.
Politicians do not seem to be good at imagining unintended consequences. The cap on bankers’ bonuses, however popular, may be counter-productive in reducing risk.
If a smaller proportion of a trader’s income is at risk if a trade goes wrong they may pursue high-risk opportunities to get that big win. If it works they guarantee the full bonus and could also use it to negotiate a higher salary (and bonus) for the following year. If it fails the downside is limited by the capped bonus to a smaller part of overall income. At the end of the day traders are competitive and gamblers at heart so will they be more likely to pursue the big win when their own risk is limited?
If people are “good in a crisis” then everything they do tends to be a crisis; they turn the routine into a crisis. It seems that politicians of all stripes fall into this category. One can argue that most of the problems that governments have had to deal with have been politically created or at least facilitated.
Governments demand increasing transparency from companies, most recently: utilities banks and oil companies. That is fair enough, but perhaps consumers and business should demand similar transparency and reduced complexity from government. If governments will not do it then there is a way for business to increase pressure for less complex and more manageable tax systems.