Saturday, December 19, 2009

Terence Kealey: War is the Health of the State - How the British Government took over the British Universities

It's always puzzled me how the rabidly independent 19th century universities in Britain ended up within the claws of the state. It's a background question that's been galumphing around the back of my mind for some time, but this question finally found an answer for itself while watching the video below:

The whole thing is worth watching, but after 70 minutes, the debate turns to the very question posed above. (It's tricky to scroll through to 70 minutes, so just watch the whole video instead for lots of other great stuff! :-)

I'm paraphrasing, and I'm embellishing a little, but here's the answer:

Between 1815 and 1914, there was a 99-year period of deflation. As money continually increased in value for this entire period, backed solidly by gold, the most sensible investments were long-term highly-secure bonds paying fixed coupons. (For instance, by buying a 10-year 3% bond with 100 gold sovereigns, after 10 years you got your 100 sovereigns back, which because of deflation were worth more than when you started, and for each of the 10 years you also picked up another 3 sovereigns a year, with each year's 3 sovereigns being worth more than the previous year's set. It's a complete no-brainer, and such investments would be available today, if it weren't for the establishment of fiat currencies.)

This gold-based investment strategy went on for decade after glorious decade, with Victorian society becoming increasingly wealthy along the way, with perhaps the greatest century of growth in human history.

It was such a no-brainer investment strategy, that all the British universities had set up endowments to invest in exactly this way, seeded with students' private fees. The universities lived off the coupons, with the principal sums continuing to grow the whole time in the background. Praise be to peace, prosperity and freedom, plus private enterprise and the free market.

And then the First World War came along. This completely stuffed the British universities on two fronts. First of all, with all the money printing by the Bank of England to pay for increasing government control of the economy, plus all of the munitions being blown up in France, massive inflation took hold, with a quadrupling of the money supply. Fixed income investments lost most of their value, with billions of new British paper pounds chasing a limited amount of actual gold.

Just as with the US Ivy League universities recently, the British universities' endowment funds were wiped out by deliberate British government inflation (which also later was used as the excuse to come off the gold standard completely), hidden under the cover of fighting a preposterous bloody war over a few yards of turf in France.

George, a former British university student (and now an American doctor), is joined by two other uniformed bureaucrats to discuss the 'success' of capturing 17 square feet of French turf

The second whammy was that the students who had previously been paying healthy fees in gold coinage in a free passport-less society, were now all being blown up and killed in France by the same munitions that all of this wealth was being wasted on. So the universities lost virtually all of their endowment income and virtually all of their fees, in a financially disastrous four-year period.

Hence, by 1919 most of them were on the verge of bankruptcy. So guess what happened next? Yes, step forward the 'magnificent' British government to 'save' the universities, having destroyed them all in the first place through the waging of one of the most senseless wars of all time.

The previously powerful independent universities, filled with independently-funded scientists with independent views, were thus transformed overnight into subservient tax-eaters. Obviously, it took a long time for the culture of scientific independence to die down, but die down it did, to be replaced by the kind of attitude noted by Henry Bauer, here.

The corruption of the HadCRUT data by the tax-eaters in the University of East Anglia, is thus no mistake. It is a direct consequence of the instigation of World War I to massively grow the power of the British state at the expense of everyone else in Britain. You thought the Iraq war was utterly stupid. World War I was the blueprint.

War truly is the Health of the State.

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