In today’s newsletter:
Why has Milei been politically successful?
The Fertility Gap
The Mansion Tax
A week ago, Argentina’s President Javier Milei underwent his first real, national test of popularity since his ascension to power. Since taking the wheel, Milei has been swift and radical in his action to cut the size of the state, slash government expenditure, and bear down on inflation. Ahead of the midterms last week, there was plenty of consternation about his chances. One piece in The Spectator claimed he was ‘on the brink of disaster’. Could a president who has taken such radical steps, and cut spending quite so much and so quickly, reallystill have the electorate onside?
Well, yes. Milei’s party won over 40% of the vote in what the BBC described as a landslide. I had the pleasure of interviewing Milei’s friend and adviser, Axel Kaiser, about how this came about and what it meant for Argentina for the IEA Podcast this week. One thing he said particularly struck me - that the culture in Argentine politics has now changed in favour of liberty. The ideas Milei advances are many of the same ones we do at the IEA; of Smith, Hayek and Friedman, among others. And Argentina has bought into them, particularly among the young. This is not just a case of an electorate voting for who will promise the biggest giveaways - quite the opposite, Argentina still has problems that need tough medicine. But Milei and his party have, at least for now, convinced the voters that liberty is that medicine. Kaiser was optimistic about the nation’s future because of it.
He was, unfortunately, far less optimistic about Britain and Europe. He did not see a way out of our current doom loop - and it is often hard to disagree with him. We are a long way away from debating the ideas of Milton Friedman on a national campaign trail. Increasingly, it seems like the UK is living in a fantasy land, with a populace that wants higher spending and lower taxes and a political class that is too willing to play along. The Chancellor is the unlucky one tasked with actually managing that. She will be more worried about the bond markets than anyone else, but she’s picking the wrong path. Instead of risking her political capital to raise taxes, she must prioritise spending cuts.
That is why this week at the IEA, we launched the British Afuera project, which you can read about below. We are re-igniting the work we did in 2011 with Sharper Axes, Lower Taxes for the modern day, with an Argentine spin. We will be discussing in these (virtual) pages over the coming weeks and months exactly where the Chancellor should be stripping back the state. Not looking for loose change down the back of the sofa, salami-slicing to make slim savings, but putting a stop to government action entirely in some areas. This is the Afuera approach. And while it remains to be seen what Milei will do next, and whether it will be the right course of action, he has proven one thing: radical change is possible. If you have the right plan, and are able to set it out clearly and credibly to the voters, even if the message is tough, you might just be rewarded.
Callum Price
Director of Communications
Introducing: British ¡Afuera!
British ¡Afuera! is a new series of pieces applying the principles of the IEA’s ‘Sharper Axes, Lower Taxes’ and Argentinian ¡Afuera! to Britain today.
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IEA Podcast: Director of Communications Callum Price, Managing Editor Daniel Freeman, and Editorial Director Kristian Niemietz discuss the Renters Rights Act, differing theories of growth, Milei, and the upcoming budget — IEA YouTube
Mind The Fertility Gap
British women are falling at least 0.4 children short of their own stated family goals, according to fertility data through 2011, with this gap likely widening as fertility now hits record lows of 1.44 while desired family size remains stable at 2.2
New report shows how pro-natal policies that focus on cash incentives, such as baby bonuses, subsidies, and maternity pay, may have some short-term effect but are often found wanting and prohibitively expensive
Evidence shows policies affecting economic freedom, including labour market, childcare and housing liberalisation, can have profound effects on fertility through their impact on work-family compatibility
Britain’s Demographic Future: The Fertility Gap, Managing Editor Daniel Freeman interviews report author Clara E. Piano, IEA YouTube
The real reason Britain stopped having babies, Head of Media Reem Ibrahim, CapX
Ultimately, the fertility crisis is a symptom of deeper economic malaise. A world where young people feel too financially constrained, and too overregulated, to start families. Government spending can’t buy more babies. But economic freedom can remove the barriers that stop people from having them.
Deregulate to boost birth rates, new research suggests, Manchester TV, Lancashire Times, Cumbria Times
News and Views
Argentina’s Economic Revolution: Milei Wins | Axel Kaiser | IEA Interviews, Director of Communications Callum Price interviews Axel Kaiser, IEA YouTube
Brexit has pushed up inflation, claims Reeves, Economics Fellow Julian Jessop, The Telegraph
Julian Jessop of the Institute of Economic Affairs think thank said the reports were “(presumably) coming from Treasury/No10, not the OBR, so may well be some ‘expectations management’ here”.
He said: “Reeves is unlucky that the OBR has decided to make this (overdue?) change now, but it’s also telling that it doesn’t think the prospects have improved under Labour.”
Head of Media Reem Ibrahim appeared on GB News alongside Bev Turner and the Heritage Foundation’s Nile Gardiner, GB News
The Policies No One Voted For: The Nanny State Disaster, Director of Communications Callum Price chairs a panel with Charlie Dewhirst MP, Shadow Secretary of State for Business & Trade Andrew Griffith MP, and Head of Lifestyle Economics Christopher Snowdon, IEA YouTube
Reeves Mauled on Mansion Tax, Economics Fellow Julian Jessop, Daily Mail
Julian Jessop, from the Institute of Economic Affairs, warned that the tax could increase uncertainty and be complex to administer.
He said: ‘Many asset-rich but income-poor households might not be able to afford a large annual charge. This could be deferred until the house is sold, but that could discourage house sales and downsizing, in particular.’
Bet On It, Head of Lifestyle Economics Chris Snowdon, TalkTV
Head of Media Reem Ibrahim appeared on BBC 5Live with Stephen Nolan
British ¡Afuera! #1 - NHS and National Pay Scales
British ¡Afuera! is a new series of pieces applying the principles of the IEA’s ‘Sharper Axes, Lower Taxes’ and Argentinian ¡Afuera! to Britain today.
INVITATION: After the Budget - Where Will the Growth Come From?
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Once again a great podcast, very informative. The governments need to bill for Renters and Landlords is another concoction from a government who has no joined up view of governance. It seems to me it’s another waste of time effort and money making changes for change sake rather than a coherent plan or vision that needs certain changes to happen for it all to come to fruition.
As for your discussion on growth, it’s clear to me you see growth in the deep brain area of innovation and potential productivity that, that could increase our growth and profit line for an increase in our collective fortune? I think that’s a fair description??… I think you are over thinking it guys. It’s much more simple than that. Growth is an increase in SPENDING. With the ability to have money to spend!
Affluent areas are those where lots or more money is concentrated with a willingness or a need to spend it. That’s why poor areas are not affluent!
Yes, if you group companies together that thrive off one another, then increased productivity can grow. But not without money and a willingness to spend money!
Yes investors can encourage new production backing new and indicative ideas. But again, not without money and a willingness to SPEND it. The common denominator is money and money freely being spent. Investing is of course another word for SPENDING. So is credit (loan) another word(s) for SPENDING. But those represent different burdens on that SPENDING.
Credit is capital repayment plus interest. And investment is the same plus capture of future profits!
Do neither are the same as money being transferred free like SPENDING. A free exchange or rather a free and fair exchange of money. That’s my sort of SPENDING.
So if your asking about or trying to explain GROWTH then you have to concede that it’s not the chicken if the egg. It’s money snd SPENDING in that order that has to happen first. Ideas on their own change nothing. It’s the path to implementation or production that makes the grade, and that needs MONEY and it’s SPENDING and preferably a free SPENDING not one that attaches penalty conditions. As business can’t survive, nor any commerce survive without MONEY and SPENDING.
You are right, you need ideas and innovation in a real space a physical space.
So again I ask you all at the IEA. Tell me what GRIWTH is? It’s this illusive ‘Higgs Bosun particle’ that you snd every economist is talking about but, had yet to describe it?
Because if you could describe it then, of course you would be able to give the holy grail or indeed give the Higgs Bosun explanation everyone wants to know!
Admit it. You can’t explain what growth is let alone explain how to get it or how it happens? Indeed, growth is different things to different scenarios. And they don’t know the difference either!!
Let me try and explain again.
Growth to Reeves is increased tax take. She needs more tax revenue do she doesn’t have to increase taxes and shouldn’t have to borrow or cut her spending. That’s her ‘growth’.
If the money supply is based on population then, for that position the more population the more money can be printed. That’s also growth. Maybe that’s our problem, there is not enough actual money out there to go around? Or maybe there is a formula that allows the BOE to provide more money when population increases, that may be why they are letting immigration rise? Maybe you have the answer to that?
Or is growth an increase in GDP? Maybe that’s the growth you say we need. More great ideas or innovation can give us that if more people spend money they don’t presently spend. So again we see money supply and its spending being the factors for a growth in GDP. As ideas and innovations alone can’t give that growth without money and it being spent first and last and in between.
Or is growth the increase in taxation that Reeves proposed? Is it more taxes?
Or is it growth from the cuts you are suggesting is done, similarly to Argentina. Is it the growth in balance sheet figures from cutting expenditure to have more money or growth of money to fight of the other side if the balance sheet money to pay the bills of state? Is that growth?
Or is it the growth of profits? Is it just a question of price rises that will bring the revenue up enough to grow that figure?
What is growth to the IEA?
You have attempted it but laughed at the idea of a one solution to get growth when ad I see it, you can’t yourselves explain this as it is to you a Higgs Bosun of unknown particles! Are you short if the ideas and innovation to collectively dismiss the shifts Bosun because it’s to difficult to get, it’s too much of a theory and not enough if evidence?
Can you see guys, I am trying to help you see, you are all unable to pin down the partial of growth. Especially as you haven’t got the hadron collider for which you need to see it?
Well here I am! I’m that hadron collider. Figuratively speaking of course.
I don’t think you should joke that there isn’t x simple way to get growth. There is. You just have to look for it. I have. And then work your way through it however counterintuitive it sounds.
Money is finite. Despite the ability of governments to print money in the main, money is more or less static at any one time.
There is a little difference with QE or Banks ability to leverage but in the main it’s a finite amount.
Now, because the rich and super rich snd mega rich individuals, companies or Countries can hold on to money sometimes for a very long time indeed then thus gives rise to an imbalance of money supply.
If all the money is not available then, the business of economies and commerce must make do with what there is in the pot rather than have the whole pot available to SPEND.
Commerce of economies businesses and governments alike need a ready supply of money and its movement via spending if that money preferably freely. Without the burden of debt, interest or future earnings of profits as attached penalties.
Now that all seems perfectly sensible. Until you see that the mega rich and super rich Banks individuals and companies, countries across the world have got so rich they don’t need to spend snd lose any money. Because they can attach such earnings to that money, no matter what taxes they pay or not pay no matter what they might spend themselves, the earnings from lending it back to us are so great they just get richer and richer. Like Musk or apple or Google or Amazon or Saudi Arabia. Most of our money will always flow down hill to these giants weighing down the balance of fairness. Let alone the really big earners of tech, guns, oil and drugs. These powerhouses of money receipts can always be relied upon to collect all our working money.
So what’s left? Not enough that’s the short answer.
We are left with a big hole where money once was. We are all devoid of it on a day to day basis.
This leaves us all devoid of it. It leaves us all desperately trying to claw it back. Working more for less. Making us all ill and unhappy.
But I say take back control of our money! That’s not a joke guys. But it will fire our growth problem, so maybe you should start to look again?
My simple vote is to let them all earn what they want. Including us. It makes no sense to stop the flow. But, once they get our money, we need it back! So impose a rule or framework to make it come back! So it’s now a democratic process to make sure money is spent back.
Now as I see it, we have the ability at last to do this. Make money have a spend by date digitally.
I suggest an exchange of old currency for new. Not asset. But money only. Exchange old for new. And keep all currencies in house. In their country of origin.
That way all money can be tracked and traced.
Put a spend by date on all money so it’s made to be spent. To give us all the freely spent money we need as a supply to run.
Unspent money goes to the government.
Just have one tax vat.
Thus is more than sufficient to bring in do much more taxes that s tsunami of flow will now follow.
Think it through guys. Think! Compare my view to your own views on growth. Then explain to us your thoughts. Debate it!