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In today’s newsletter:
The fall of the Berlin wall, 36 years later
Bank of England interest rates decision
A socialist Mayor in New York: What Zohran Mamdani’s victory says about the battle of ideas
Pre-Budget speech: what tax rises are ahead?
Today is not only Remembrance Sunday, but also the 36th anniversary of the fall of the Berlin Wall, an event which holds a special place in the hearts of many classical liberals, because it represents an epic victory of liberalism over socialism.
On the events of 9 November 1989 did not mean anything of that kind. The opening of the inner-German border merely meant that East German citizens could now travel to West Germany, in the same way that West German citizens had always been able to travel to e.g. Switzerland or Austria. Free movement between two countries does not in any way imply political or economic convergence. In principle, East and West Germany could have remained separate sovereign states, each with its own political and economic system.
But since socialist economies are so vastly inferior to market economies in every respect, the German Democratic Republic was never going to survive for long with an open border. Once the wall was open, the ruling Socialist Unity Party quickly realised that the game was up. A month later, the entire party leadership resigned, and another three months later, the GDR held its first-ever democratic general election.
Most parties that took part in that election agreed that the current system had failed, and that it had to be replaced by some form of market economy, alongside some form of merger with West Germany. But not all of them did. There were a handful of parties that presented a curious counternarrative. Socialism, they argued, had not failed at all. It had just not been properly tried yet. It had strayed from its own ideals, and it just had to be returned to those.
The idea was, rightly, laughed out of town. The pro-market, pro-reunification parties won the election with an overwhelming majority, and before the end of the year, the GDR was no more.
Yet today, those very same ideas are not just back: they are winning. This week, Zohran Mamdani, a self-described socialist, won the mayoral election in New York City hands down. Among Millennials and Zoomers – those who are too young to remember the fall of the Berlin Wall – he won an astonishing 70% of the vote [ [link removed] ].
Mamdani is a member of the Democratic Socialists of America (DSA), whose programme states [ [link removed] ]:
“Capitalism is a system designed by the owning class to exploit the rest of us for their own profit. We must replace it with democratic socialism […]
Our vision pushes further than historic social democracy and leaves behind authoritarian visions of socialism in the dustbin of history.”
That is exactly what those continuity-socialist East German parties were saying at the time. It is not ‘socialism’ which has failed, but just one specific version of it. So all we need to do is reject the ‘authoritarian visions of socialism’, and replace them with democratic ones instead. Job done. That’s how easy this is.
Why does Mamdani’s victory matter? He is a mayor, not a president or a prime minister, and a municipal role in a big city is still a municipal role. His job will be to oversee the fire department, the sanitation department and the department of city planning, not to collectivise the means of production.
The reason why it matters is that from now on, there will be two Mamdanis: Mamdani, the municipal administrator, and Mamdani, the cultural influencer. He will not establish the Socialist People’s Republic of New York, but he will give socialist ideas a big cultural boost; indeed, he has already done that.
The problem is just that those ideas are as wrong now as they were in 1989, and repackaging them as hip and youthful does not change that fact. The lessons of 1989 have been forgotten and need to be relearned. Let’s hope this can be done through educational work rather than experience.
Kristian Niemietz
Editorial Director
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IEA Podcast: Head of Media Reem Ibrahim, Managing Editor Daniel Freeman, and Editorial Director Kristian Niemietz discuss Rachel Reeves’s speech, whether Reform UK have gone Thatcherite, and Zohran Mamdani’s election victory — IEA YouTube [ [link removed] ]
David Frost, the Rt Hon Lord Frost of Allenton CMG, to become IEA Director General
I’m resigning the Tory whip to make the case for markets, [ [link removed] ] Incoming IEA Director General Lord David Frost, The Telegraph [ [link removed] ]
The IEA helped create the conditions for Britain’s revival in the 1980s by refusing to compromise on its principles, and by advocating them so clearly, and on such a sustained basis, that they entered into the political bloodstream. For a time no mainstream party could reject the principles of political and economic freedom. That is where we need to get to again. I say to those who agree: come and work with us.
Head of Media Reem Ibrahim interviews Lord David Frost, IEA YouTube [ [link removed] ]
Lord Frost to head up IEA think tank, [ [link removed] ] CityAM [ [link removed] ]
Lord Frost Appointed Director General of IEA, [ [link removed] ] GuidoFawkes [ [link removed] ]
Government policies keeping UK interest rates higher for longer
Commenting on the Bank of England’s decision to hold interest rates, Julian Jessop, Economics Fellow at the free market think tank the Institute of Economic Affairs, said:
“The Bank of England’s decision to leave interest rates on hold today reflects badly on Government policy choices which have fuelled inflation.
“Fortunately, borrowers may not have to wait much longer. Andrew Bailey appears to have been the swing voter this week. The Governor sided with the majority in keeping rates on hold, but was the least hawkish, and it may not take much more evidence to prompt him to switch. A December rate cut is therefore still very much in play.
“UK interest rates have still been cut five times since last year’s General Election, but this has been part of a global trend. The European Central Bank has cut rates eight times since June 2024.
“The MPC had settled into a pattern of cutting rates every three months alongside each new set of economic forecasts. However, the acceleration in inflation since last October’s Budget has now broken this cycle.
“Most independent observers agree that Government policies have added to inflation, mainly via the pass-through of higher labour costs.
“It is widely accepted that the increases in employers’ National Insurance contributions and in regulated prices, including energy bills and minimum wages, have kept UK inflation and interest rates higher for longer.
“Nonetheless, this month’s Budget offers an opportunity to reverse this trend. A credible plan to repair the public finances and improve productivity would reduce the Government’s cost of borrowing. It would also make it easier for the Bank of England to cut interest rates further, without crashing the economy.”
Bank Of England Holds Rates: What Experts Say It Means For Consumers And UK Economy, [ [link removed] ] TechRound [ [link removed] ]
Also quoted in the Daily Mail, BusinessMoney [ [link removed] ], Credit-Connect [ [link removed] ], PharmiWeb [ [link removed] ],
The IEA’s Shadow Monetary Policy Committee held its meeting in October, and voted to hold interest rates.
News and Views
Freedom or Welfare State? Deirdre McCloskey on the Liberal Choice | IEA Interview, [ [link removed] ] Head of Media Reem Ibrahim interviews Deirdre McCloskey, IEA YouTube [ [link removed] ]
Reem Ibrahim: The Chancellor needs to be bold, be brave, and do something she knows she should but won’t, [ [link removed] ] Head of Media Reem Ibrahim, ConservativeHome [ [link removed] ]
Unfortunately, I am afraid that no political party appears to be willing to promise to do what is actually needed to remedy the economic crisis we are facing because, whoever does, will not win an election. Politicians enjoy political popularity. We are going to end up in a situation where they do not have a choice.
It is time for politicians to be brave and do what must be done.
Capitalism Myths with Professor Donald Boudreaux | IEA Interview [ [link removed] ], [ [link removed] ] [ [link removed] ]Managing Editor Daniel Freeman interviews Professor Donald Boudreaux, IEA YouTube [ [link removed] ]
Why London’s housing market is the most confused in Britain, [ [link removed] ] Public Policy Fellow Matthew Lesh, The Telegraph [ [link removed] ]
Housing construction in London is grinding to a halt. This is a man-made catastrophe that can be reversed, but only through a rapid and radical change in approach.
The UK’s Speech Laws Are Absolutely Mental | Guest: Reem Ibrahim | Ep 359 [ [link removed] ], [ [link removed] ] Head of Media Reem Ibrahim appeared on the Kibbe on Liberty Podcast, Free the People [ [link removed] ]
Why Socialism Doesn’t Work | Rise & Fall of the Soviet Economy, [ [link removed] ] Managing Editor Daniel Freeman interviews Aymen Aulaiwi, IEA YouTube [ [link removed] ]
Rachel Reeves’s tax treachery will cost us all [ [link removed] ], [ [link removed] ] Head of Media Reem Ibrahim, CapX [ [link removed] ]
The key lesson taught by the ghost of Healey is this: as far as the markets are concerned, spending cuts are far more powerful at installing business confidence than tax hikes.
If Reeves ignores that lesson, she risks repeating one of Britain’s gravest economic mistakes. The path to prosperity does not lie in squeezing workers and businesses ever tighter, but in restoring confidence through reducing the size of the state. Britain can’t afford another 1976 moment, and this time, there may be no IMF waiting to bail us out.
Head of Media Reem Ibrahim appeared on TalkTV [ [link removed] ]
The Laffer Curve in Action: Britain’s Sin Tax Problem | IEA Briefing, [ [link removed] ] Director of Communications Callum Price interviews Dr. Christopher Snowdon, IEA YouTube [ [link removed] ]
The nightmare before Christmas? [ [link removed] ], Head of Media Reem Ibrahim appeared on GB News [ [link removed] ]
Clip available on X [ [link removed] ].
Why Zack Polanski is wrong about growth [ [link removed] ], Research Associate Mani Basharzad, CapX [ [link removed] ]
Are there things more important than money in life? Absolutely. But they can’t be easily quantified like GDP, which makes it a good thing for politicians to focus on rather than vague social goals. We should care about growth because, it is both progressive and necessary.
Rachel Reeves is panicking [ [link removed] ], [ [link removed] ] Head of Media Reem Ibrahim appeared on the Capitalist [ [link removed] ]
Is the NHS a failed project? [ [link removed] ], Head of Media Reem Ibrahim, GB News [ [link removed] ]
Clip available on X [ [link removed] ].
Zack Polanski Has Pledged to Legalise Drugs. So Should All Leftwing Leaders [ [link removed] ], [ [link removed] ] Head of Media Reem Ibrahim referenced in NovaraMedia [ [link removed] ]
Reem Ibrahim of the free-market think tank the Institute of Economic Affairs appeared on the same Jeremy Vine Show [ [link removed] ] later and said she supported Polanski’s policy, even though she resides on the opposite side of the political spectrum.
The British thirst for freedom | Last Orders [ [link removed] ], [ [link removed] ] Head of Lifestyle Economics Chris Snowdon, Last Orders [ [link removed] ]
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