Deepak Lal vs the meddling state

Lost Causes is a collection of pamphlets and articles written by the free-market economist Deepak Lal. Lal takes issue with much policy pursued today, particularly with what he sees as the ‘retreat from Classical Liberalism’. With writings spanning the 1980s to the present day, Lal tackles a wide range of subjects stretching from the state and taxation to the current wars on drugs and terror.

Lal charts the rise of the state and its ability to tax those who live under its thumb. The early monarchical states were akin, he says, to a Mafia racket, with the king demanding taxation from those he ‘protected’. However, with the advent of democracy, in a vague sense ‘we’ are the state. Lal finds this problematic as he sees democracy being used to elect leaders in order to tax those with greater wealth, with the aim of redistributing this wealth to what he terms ‘the median voter’.

What Lal doesn’t see, though, is that if voters are simply ticking next to the name on the ballot paper that offers the most generous family tax-credits or state pensions, this is more to do with the breakdown of politics itself. Politicians no longer inspire people with big ideas, nor do they try to. Politicians, rather than treat people as citizens whose interests they must represent, treat the public as consumers, who they must sell themselves to as candidates. Lal does, however, make the interesting point that politicians often pander to well-funded lobby groups with taxpayers’ money rather than working in the long-term interests of society.

Next Lal offers his views on the UK National Health Service (NHS). He charts the inefficiencies and problems of a completely nationalised provision of healthcare. He explains how such an industry favours producers (NHS employees) over consumers (those seeking NHS treatment). However, the NHS has become some sort of secular religion in modern Britain, with those attempting to change it branded as healthcare heretics. Consequently, the only solution politicians have for the NHS is to throw more money into what Lal sees as a bottomless pit.

The real solution, according to Lal, is to change to a National Health Insurance System. This, he explains, would entail a privatisation of the healthcare industry, but with the government providing payment for everyone’s insurance policy. The usual arguments about competition and maximising efficiency are deployed here. While Lal is correct that the hysterical denunciations that follow criticism of the NHS or exploration of possible alternatives are problematic, his proposal is not entirely convincing. The need for minimising costs and turning over a profit could lead to corners being cut. In most industries, that means an inferior product that no one wants; the results in a hospital would be more serious.

If each treatment is paid for, albeit in Lal’s case by a government-paid insurance policy, visits to the doctors become business transactions. Paid transactions usually require both parties to have roughly the same information about the product (which in the case of healthcare is treatment for a health problem). The nature of a visit to the doctor, however, means that only the doctor has a real understanding of the situation, leaving the possibility of patients being prescribed treatment they do not need to extract payment from insurance companies. The US experience, where ‘gold-plating’ of testing and treatment is a major and expensive problem, does not bode well for Lal’s proposal.

Lal is on stronger ground in his arguments against the invasion of the private sphere by health campaigns against smoking. Public health, he claims, has no business getting involved with interfering with a lifestyle choice, albeit a dangerous one. He concedes that the idea of public health can be useful in combating infectious diseases, whose nature means they are a threat to the wider public. Tobacco use, however, while causing disease, is not a disease in itself. Nor are conditions like lung cancer and heart disease contagious. Therefore, it is a private health issue for the individual who chooses to use tobacco, and no business of wider society.

Lal uses the analogy of the supposed link between HIV and anal sex. While it may be true, he argues, that anal sex increases the chances of contracting HIV (in the same way that smoking increases the likelihood of cancer developing), most people would not argue that anal sex itself is a disease and an issue of public interest that should be discouraged. Rather, the disease itself is identified, treated or prevented. Being the classical liberal he is, Lal rightly turns to John Stuart Mill to back up his points. Mill argued that in a liberal society the state preventing someone from pursuing an activity in order to protect the individual’s ‘own good, either physical or moral, is not a sufficient warrant’.

Two of America’s longest, and seemingly endless, ‘wars’ are the war on terror and the war on drugs. Lal believes the latter is undermining the former. The cultivation of poppies for heroin in Afghanistan is highly profitable for impoverished Afghan farmers, and the war on drugs necessitates destroying these profitable crops. As a result, the Taliban is able to offer farmers protection of their crops in exchange for tax – generating both support and much needed revenue for the Taliban. Therefore, Lal concludes, the only way to win the war on terror is to end the war on drugs, which is unwinnable in any case.

Beyond these tactical observations, Lal also offers some principled arguments against the war on drugs. By tracing the history of modern government anti-drug campaigns from Theodore Roosevelt onwards, he shows how the arguments in favour of restricting drugs was backed by the idea of ‘social rights’. The idea is that someone’s right to free moral and intellectual development is infringed upon by a society that is demoralised and sapped of intellect by the use of substances like drugs. Once again, Mill is used to counter this idea, with his claim that such a view ‘ascribes to all mankind a vested interest in each other’s moral, intellectual, and even physical perfection, to be defined by each claimant according to his own standard’.

Lal’s essays are, for the most part, worth reading. However, readers should be prepared to encounter many boring technical economic arguments about ‘social costs’ and ‘negative externalities’ between the good stuff. The book, being a collection of writings from the 1980s, also includes some seemingly irrelevant chapters, such as that on the higher-education reforms of the 1980s Thatcher government. Despite this, in a world with ever-increasing state regulation of private life and monitoring of speech, there are some invaluable contributions here for anyone interested in forging a more liberal society.

Tom Bailey is a history undergraduate at University College London. He is currently interning at spiked.