4 years for incitement

In the aftermath of the England riots, British courts have been handing out tough custodial sentences to the rioters.  Two men were jailed for four years for inciting riots (albeit to no avail) on Facebook.  Offences that were committed during the riots, under normal circumstances, would only warrant community service orders.

The courts have got this wrong.  In the interests of justice, they need to be consistent with their sentencing.  Although I do not disapprove of harsher sentencing per se, I disapprove of harsher sentencing as a knee-jerk reaction to public anger.  The rule of law must be upheld - it must be applied equally and fairly.  Thus, the punishment should be the same for every person regardless of when the crime was committed.  Just because the offence was committed during the riots does not warrant a harsher sentence than if it were not.

There is a public appetite for harsher sentences - but there is also a public appetite for fairness and consistency.  The courts must heed this duty.

Squandering a blessing

The rich Western world faces difficult economic times.  The USA's credit rating has been downgraded and the future of the Euro has been called into question.  In these hard times, politicians often succumb to voter pressures.  We have seen this with Angela Merkel in Germany - who perhaps does not take the required action to stem to Euro-zone crisis due to the hostility of German voters to any such expansion of the bailout fund or Eurozone wide bond guarantees.

Now, political pressures seem to be cursing our immigration policy.  In tough times, voters rightly express their concerns about jobs in short supply.  However, politicians too often pander to voters' fears rather than allaying them.  People need to be reminded that immigration is counter-cyclical.  In a recession, many would-be immigrants do not want to come.  America has seen a sharp decline in Mexican immigrants and the same can be said for immigration generally in Europe.  Despite this, rich countries have been taking steps to discourage immigration over the past year.    The Danish, French and Italian have scrapped the Schengen passport-free zone and reintroduced border controls.  Australia and Canada have cut back on work permits.  The UK has imposed a migration cap for non-EU migrants.  Many other countries including Spain and Japan have created a "pay as you go" scheme which pays migrants to go home.

These measures are squandering a blessing.  Migrants are more flexible and willing to work than the current workforce and thus, can boost the country's productivity and encourage innovation.  By imposing more and more limits of their arrival, migrants are increasingly going to the East.  There is competition for migrants from China and the Middle East.  The rich world's restrictive measures reacting to voter's fears are myopic - migrants are the harbingers of long-term economic growth.

The unintended economic consequence of the one-child policy

China's controversial one-child policy has been criticised on many levels.  Amongst them, it has been blamed for an increased number of abortions, infanticide rates and the resulting gender imbalances.

But it can also be criticised for keeping Chinese household consumption at alarmingly low levels.  China has a huge domestic market yet the country is reliant on export-led growth.  Many families have a high propensity to save their extra income earned, rather than spend it.  This is because they cannot rely on the traditional old-age safety net - their children.  With one child supporting both parents (and potentially, both grandparents), this traditional method of financial support is no longer feasible.  Thus, parents choose to save their money for their old age.

China needs to improve its social security system.  This can bolster household spending - which is desperately needed - their low domestic consumption makes the country excessively reliant on foreign demand.  But even if they do successfully reform their social security system, it will take decadeds to have an effect.  For China's citizens, saving has become a habit - and old habits die hard.  It will prove difficult to change consumer habits - the Chinese have been trained to too prudent about spending.

What does the Hayekian have to offer?

Keynes once said that he wanted economists to be like dentists: competent and useful.  If you had a toothache, which dentist would you rather see - Dr Keynes who gives you some painkillers or Dr Hayek who just shakes his head and tells you that it's your fault for eating too many sweets?

I was at a talk recently at the LSE headlined by Robert Skidelsky on "Keynes vs Hayek".  I was particularly entised by this argument that Hayekians cannot offer any practical solution once a country is in recession.  Hayek would merely that say we shouldn't start another one.

This cannot be right.  If we let the free market run its own course, the toll will be far too high.  Recessions have a huge human impact - unemployment breeds so much more misery than we can possibly fathom.  If the UK government had let Lloyds and RBS fail, thousands would have lost their jobs and lives would have been destroyed.  This is far too important for any preservation of free market economic principles or a moral hazard argument.

Angela Merkel's big dilemma

Crisis summit after crisis summit - and still Europe's political leaders have yet to meaningfully calm the markets.  Perhaps their strong words and handful of measures mollified investors for a few weeks or days, but that's as far as it goes.

The European Financial Stability Facility (EFSF) needs to be expanded - many cite the figure at 1 trillion Euros.  The solution also requires more bond-buying by the European Central Bank.  Investors are even hoping for mutually guaranteed Eurobonds.

Europe's leaders have not provided this so far.  The big problem they face in solving this economic crisis is a political one.  Most governments do not have a mandate from voters to implement such drastic measures.  German voters, in particular, are very hostile towards further bail-outs and fiscal transfers to weaker euro-zone countries.  This is opposed on two grounds.  Firstly, put simply, they are not prepared to make such a sacrifice for profilgate countries.  Secondly, the solution constitutes a step towards greater political union - stronger countries providing support for the weaker ones.

To tie Angela Merkel's hand further is her coaltion partners.  They are reluctant to expand the EFST's powers and let it buy up government debt.  Further, Germany's constitutional court may rule that euro-zone bailouts are illegal.

The political leaders of Europe are admittedly in a difficult situation.  But the choice is clear.  They need to explain to the electorate that the sacrifices they have to make are a necessary evil.  The alternative is worse - even more economic turmoil and possibly even the split of the EU.

Should rioters lose their benefits?

The England riots led to several deaths, destroyed many more livelihoods and created fear in our communities.  Even leaving aside the economic cost as a result of the looting and fires, England has been left shaken.

Therefore, we have every right to be angry who those who rioted.  But disqualifying them from social security benefits would be a knee-jerk reaction (as the 200,000 who have signed the Parliamentary e-petition wish to see.)  It is unnecessary to take action beyond the remit of the judicial system.  Our justice system should deal with these thugs - that is its proper role and we should leave it to serve justice.  Besides, the courts have been serving harsh sentences in the aftermath of the rioting - consider the case of two young people sentenced to four years for attempting (but failing) to orchestrate rioting via Facebook.

Removing convicted rioters benefits is perhaps akin to taking the role of serving justice into our own hands.  We would dissaprove of a vigilante going out and attacking convicted rioters.  The same principle should apply to removing their benefits.  The rioters will receive their proper punishment through the courts - we should not act more than that.  In a time when emotions are running high, we should not react in a disproportionate manner.

 The e-petition raises an inconsistency.  Convicted rioters would loose their benefits but a convicted rapist would not?  This highlights that this petition is a knee-jerk reaction.

Besides, it may actually prove to be counter-productive to us.  If it is the case (we must be careful not to generalise here) that a rioter is on benefits, then disqualification can make the situation worse.  The rioter consequently has even less stake in their society - and even more reason to cause trouble.

Broken Britain - literally.

I was a helpless onlooker as I saw thugs smash in the windows of my local Natwest bank on East Ham High Street.  On the other side of the road, Barclays bank had been broken into - its computers dragged out on the pavement outside.   Further down the road, Argos was being ransacked - through the side entrance, dozens of people excitedly skipped into the stock room to emerge a few seconds later clasping onto their new possessions.  At one point, a young person emerged from the store with a trolley brimming with goods - he was met with cheering and laughter.  These scenes were repeated across London and other major cities.

David Cameron is wrong to label the England riots as "criminality, pure and simple."  Although the riots were not overtly political, they were fuelled by social and political causes.  As the riots ensued, we heard people ask why the rioters would harm their own community.  Well, the answer is, too many people don't feel part of that community.  They see themselves as separate and different to their community.  There is no sense of belonging or duty.  Thus, they have no qualms about looting and smashing windows - they have no stake in their local community.