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February 05, 2009

Righteous Indignation: Theodore Dalrymple on a tale of two newspaper headlines

Posted by Theodore Dalrymple

The Times and The Guardian have both recently had lead stories designed to make their readership indignant. Theodore Dalrymple explains why The Times's story resonated more strongly with him.

Public affairs vex no man, said Doctor Johnson, meaning that what makes us genuinely and sincerely angry is injustice or harm done to ourselves or to those about us, and not the supposedly great abstract questions of the day.

His dictum also suggests that there is frequently much humbug in the outrage that people express at political or social phenomena of which they disapprove. They want thereby to establish their reputation for virtue, compassion, good citizenship, and so forth; and so they exaggerate the strength of their feeling.

I am not sure how far Doctor Johnson was right in this. It is certainly true sometimes that the pleasures of indignation overwhelm both our sense of proportion and the still small voice at the back of our mind to the effect that we don't really care much about the whole business one way or the other, and that our lives will continue much the same whatever the outcome. Who has never become passionate during a discussion about a subject about which, until then, he hasn't given a moment's thought?

Yet even if we do not go to public affairs, they have the habit of coming to us. Our daily round may be all-important to us, but it can be as easily upset by the great events of the world as a tea party in a dol's house by a clumsy movement.

Nevertheless, different things in the public sphere make us angry. On 2 February, for example, I was most struck by the contrast in the headlines of The Guardian and The Times newspapers. The first's read as follows:

Firms' secret tax avoidance schemes cost UK billions
The second's, on the other hand, read:
18bn scandal as Whitehall's IT plans spin out of control
The first story concerned large companies that moved their operations, at least notionally, to other tax jurisdictions in order to pay little or no tax on their profits in the country or countries in which most of their economic activities occurred. The main example given was that of Diageo, owner of Johnny Walker Whisky (among other brands). It had transferred ownership of its brands to a Dutch offshore company to avoid UK tax.

The second story, by now a lamentably familiar one, concerned the cost overruns of government information technology projects (estimated by the newspaper at 18 billion), the great majority of which did not work even after the expenditure of many billions. In fact, the cost overruns are the least of it: to spend even a single penny on something that does not work is a waste of money.

I think it fair to say that different kinds of people would be angered by the two stories. In rough outline, the first would anger those who were dependent for their livelihood upon the public purse,and who regarded all sources of private wealth other than those derived from public service salaries with suspicion, if not as outright illegitimate; while the second would anger those who were dependent for their income upon the private sector and who considered themselves the economic source of the public purse in the first place and grossly overtaxed.

One can easily imagine the quivering anger with which the readers of The Guardian read about the conduct of Diageo and other companies. There are a couple of things that need to be pointed out, however. The first is that the principal duty of company directors is to their shareholders, not to the Exchequer; and if it is legally possible for them to increase their profits by tax avoidance (not evasion), then a case can be made that is their duty to do so. Nobody buys shares in a company that it may make the largest possible contributions to the Exchequer.

Second, there is an important admission in the article regarding Diageo:

A British tax concession allows such incorporation of existing foreign branches without the normal capital gains bill for selling the valuable asset overseas.
In other words, the responsibility for allowing this particular form of tax avoidance is that of the apparatus that would receive the revenues if the tax avoidance were not possible. This raises three
possibilities: incompetence, corruption, or a dispassionate estimate that, all things considered, it is better for the country to leave such tax loopholes open than to close them.

For my money and it is, after all my money, at least in part the second story is much the more alarming. I might as well say straight out what I believe, though cannot prove: that the cost overruns and failures to function are, in fact, vital to the main purpose of the government IT projects, and not some unfortunate side effect such as dizziness that you get from taking an otherwise life-saving drug.

The failures to work and cost overruns are by now so regular, so predictable and so constant that they cannot be ascribed to mere error. They are indispensable to the corporatist state that Britain has become, and that goes some way to explain our failure in the world.

Much more activity by privately-owned companies in this country resembles rent-seeking in a rigged market than profit-making in a genuinely open world market, such as that in which (for example) German manufacturers compete (and win).

I leave it to others to trace the personal connections, if any, between civil servants and various companies that have grown fat from preposterous government IT projects, in which there is no success like failure.

How are we somehow to unite the two newspaper stories (which ignore each other completely)? One solution that might satisfy The Guardian, but would not please me, would be a partial transfer of the profits from the shareholders of Diageo to those of the companies that have wasted billions on IT projects that do not, will not and were never intended to work. I seen no advantage in this.

The long-term solution is the creation of an efficient, diligent, honest - and therefore small - public administration. I see no prospect of this for (without wishing to be an economic determinist) there are too many vested interests against it.

Theodore Dalrymple is a writer and worked for many years as an inner city and prison doctor. He is the author of the author of Junk Medicine: Doctors, Lies and the Addiction Bureaucracy.


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