Stop denying climate change and start showing how the answer to its challenges lies in markets not the state

This from Christiana Figueres, executive secretary of U.N.’s Framework Convention on Climate Change is pretty frightening:

“This is the first time in the history of mankind that we are setting ourselves the task of intentionally, within a defined period of time, to change the economic development model that has been reigning for at least 150 years, since the Industrial Revolution,”

It's unsurprising that, to use Deirdre McCloskey's term, The Clerisy want to overthrow the idea of enlightenment and the great betterment. But it presents an urgent task to those of us who would like poor Africans and Asians to have the benefits of free markets and an open bourgeois society: make a capitalist case for action on climate change. If we don't, the ideas of Ms Figueres will prevail and the baby will be chucked out with the bath water.

And the starting point, rather than denialism, is to accept the premise of climate change and then ask what we can change to allow markets to deliver a low carbon, sustainable economy. I know many of you see the climate change stuff as a fraud - and it just might be - but, right now, you've lost that argument and, worse, you're leaving the policy space to the anti-market technocrats and the idiot left who are setting an agenda of state control, suppression of choice and impoverishment for millions.

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Today's eternal truth - free markets reduce inequality

This can't be said too often - but too many folk from left, right and centre seem incapable of grasping the cause of inequality:

But extreme inequality is in fact caused by insufficient competition. Given that competition is the lifeblood of capitalism, it follows that inequality is the result, not of capitalism, but of a lack of capitalism.

This is why we need free markets (and why equal societies like Denmark and Sweden have them) - not so evil business people can make bigger profits but because they lead to fairer societies. Big business - you only have to look at the CBI's enthusiasm for mercantilist, protectionist policies - loves the sort of back-slapping, lobby-dominated, regulation-heavy arrangements that the US federal government and the EU are so keen on.

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Free market liberalism has never been popular - maybe it should be?

There's a sort of mythology about economic liberalism - for people on both left and right in politics it is the enemy, the thing that undermines workers rights, throws people on the scrap heap as their job migrates to Romania or India, the destroyer of community and the temptress of migration. We see the shock and fear of liberal ideas in the economic sphere in the attacks on the Institute of Economic Affairs, Adam Smith Institute, the Koch brothers and the Cato Institute.

Part of the myth is that nobody could possibly believe in free market liberalism without, in some way, being the paid shill of powerful corporate influences. This myth is, usually in the next breath, accompanied by the entirely contradictory argument that free market liberals are swivel-eyed, rigid ideologues so wedded to their dogma they can't see the real world. It's not helped by the (entirely admirable) preference of these organisations for keeping their donors names private.

The reality is that, however much left and right might hate free market liberalism, it has never (at least in the UK and USA) been an idea with either broad popular support or even a political party with a hope of governing that espouses these ideas. Other than in the Netherlands, no developed nation has a successful and powerful liberal party (for Canadians and Australians I mean a party that actually believes in free market liberalism not a party with that name).

Indeed, since the beginnings of free market liberalism - Adam Smith, David Riccardo, J S Mill - the ideas have always had to fight for political space. First from the resistance of slave owners, corn barons and owners of mercantilist monopolies, then from intellectual elites who disliked the idea that thick spoken blokes with brummie accents and rough hands were the equal of grand university types. Free market liberalism was attacked by trade unionists, by aristocrats, by lawyers and by the mandarins of everywhere's bureaucracy. Laws were passed, riots were fomented, strikes were called and farmers were protected - all to try and kill free market liberalism.

Through history there have been leaders who have pushed for free market ideas - Peel, Gladstone, Coolidge, Reagan and Thatcher - even Blair or Clinton. But each of them have had to work with parties and supporters who did not share the mission preferring the statist blandishments of what Deirdre McCloskey calls The Clerisy. Those supporters weren't just socialists, communists and fascists but include an abundance of capitalists - the sort of business leaders for who mercantilism, protectionism and licencing is an opportunity to carve out monopoly in the same way their predecessors did with salt, shrimps and corn. Free market liberalism isn't capitalism, it just suits many capitalists to pretend that their cosy little love-in with government is, in some way connected to liberty, choice and the betterment of everyone.

Despite all this free market liberalism - hidebound, tied up, limited, constrained and condemned as it is - has carried on doing what it does best: making everyone wealthier, healthier and happier. No political party dare promote the idea - it's a vote loser every time they fear - and putting limits on "unfettered free markets" is ever popular with the folk who think (wrongly near every time) that doing this will be in their economic interests.

In the end, the reason why Kohl and Chirac, Blair and Major, Clinton and Bush - most sane world leaders of the last fifty years - have ended up promoting a liberal world economic order is because they were persuaded by the evidence. More free markets, more liberal economic policies, open trade, easier movement round the globe - these things really do work, they really do make near everyone wealthier, healthier and happier. Free market liberalism persists because, when the counting is done and evidence is gathered, the most successful places are more open, property rights are upheld and most people with something to sell don't need permission from the government to find someone willing to buy. It's just a shame that nearly all these rich successful places are dominated by a politics that completely denies - from right and left - this essential truth.

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Ten more popular lies about free markets

It sounds good doesn't it...

Maybe we should look beyond the fatalistic, nihilistic and frankly quite dumb ideas of free market capitalism - they have failed - and look to build a better tomorrow together.

Now I'll leave aside the fact that free markets and capitalism have, in any meaningful way, 'failed' - we know that's a lie - and look at a few more of the commonplace little fibs about free markets.

"It's all about profit". I guess this is right in one respect since in a system of free exchange there has to be value or the exchange doesn't take place. But, using the more regular understanding of profit, this is simply a lie - free markets are about mutual advantage, co-operation and exchange not the exploitation implicit in saying "it's all about profit"

"Only shareholders benefit". Again this isn't true - for sure, in a capitalist business shareholders risk their cash in exchange for a return (in either a share of profits or an increase in the value of their share). But when you buy something, you get a benefit - thirty minutes with an advertising copywriter will tell you this as it's the basis for those "it's the sizzle not the sausage" comments such folk like. You buy things because you get value from having or using them - indeed levels of benefit to consumers vastly exceed the returns to entrepreneurs or to the providers of risk capital (aka shareholders)

"People aren't rational so free markets won't work". How often have you heard it explained that people are stupid, ignorant, ill-informed, misled and that this means free markets are exploitative? The odd thing is that the idea of people being 'rational' is an academic convenience - nobody at all believes people always behave rationally. This makes markets imperfect but not so imperfect that they don't or can't operate to the mutual benefit of participants. Look at the choice of bread and cheese in your local supermarket and then explain how such a range is possible other than in a market system where people risk their money, time and resources to provide goods or services they think you might like to purchase?

"There's too much choice - it confuses people". The bread and cheese observation applies here too - do you really believe we'd be better off if we only had a limited or prescribed choice of goods? Yes there's lots of choice but, in the end, we use heuristics - mental short cuts - as consumers (this is why fmcg manufacturers spend millions on brand marketing) to manage choices available in the marketplace.

"Free markets are impossible because free choice is impossible". A variant on the 'too much choice' lie, this one is often used to argue for state direction or ownership. At times the argument is little more that saying "you can't make a perfect vacuum so Thermos flasks won't work" - because our choices are partly guided by socialisation, information and environment they are less than 'free'. But this sort of argument doesn't mean that more choice and more information don't make for more free markets and greater social benefit

"Markets have to be controlled or it would be chaos and anarchy!" Now here we've to make a distinction between a set of rules (very free market environments like stock exchanges have clear and enforced rules) and controlling or directing the market. Observing an old-fashioned, pre-Internet stock exchange looked like chaos as people rushed about shouting, waving paper and seemingly causing mayhem. But at the end of each day all the transactions were logged, all the prices agreed and the chaos looks like an orderly list of stock prices. Markets need rules but they don't need government-mandated orderliness or restrictions saying who can or can't participate in buying or selling good and services

"Free markets are unfair". Usually this refers to the fact that we can't all afford to buy all the things - there's a little bit of the green-eyed god in all of us after all. We look at the bloke with the nice jag or the woman flying first class and little 'it's not fair' particles trigger that jealousy. But it's not the market creating the unfairness or indeed causing the uneven distribution of resources and, at the level of transaction, markets are absolutely fair - there's a buyer and a seller who agree a mutually beneficial exchange. That some people are willing to pay a lot extra to get some perceived status advantage (a nicer car or a plusher seat) doesn't mean the markets for cars and seats are unfair

"Capitalism equals free markets". Well no. We're dealing with two entirely different ideas - how society manages exchange and how entrepreneurs secure the funding to run their business. Capitalism is, quite simply, a system where the small part of exchange benefit we call profit is returned to those who took the financial risk. It is possible - look at today's Russia or large parts of European agriculture - to have a capitalist system operating in markets that are anything but free. And, it's fair to say too that capitalists often like this arrangement since it means they can capture a larger part of that exchange benefit in the form of profit

"Social ownership requires socialism". Again no. There's plenty of social ownership in open market economies (mutuals, co-operatives, worker-owned, etc) and the best of these businesses compete successfully with orthodox capitalist forms of ownership - John Lewis, Ove Arup. There's no need for government to own or control any part of the economy to have a system where social ownership thrives.

Free markets - the ideology as much as the things themselves - are the main reason why we moved from most of us living in abject grinding poverty to today's cornucopia of goods and services. That ideology is about allowing everyone to participate in the market, to innovate and invent, to buy and sell, to take risks and to navigate the sometimes confusing world of choices, options and myriad varieties of cheese or bread. By all means criticise big business cosying up to big government, have a pop at rich people avoiding taxes the rest of us can't dodge and lay into corruption, exploitation and unethical practices wherever they occur. But don't kill the idea of the market as it's the best way we've got to carry on getting healthier, wealthier and happier.




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Free markets work really well - for everyone. We should stop trying to fix them.

When we were children, my Mum used to put up students from a nearby English school. These students came from all over - we had a Saudi colonel, a French jazz pianist, an Italian woman with the highest heels I'd ever seen. One such guest was from Ecuador - he was an agronomist.

I say this because, during one conversation with this Ecuadorian chap, he remarked about the supermarket as he'd had occasion to go into one. This was the 1970s when our supermarkets were less grand affairs than today's hyper-stores but our guest was still blown away with the experience. In this discussion the Ecuadorian asked "who sets the prices". To which we replied "the supermarket" or something similar. This wasn't good enough for our friend who insisted that there had to be an agency somewhere that decided on the price of, say, oranges or tea. This was what happened in Ecuador, we were told,

I recalled this story following another frustrating exchange with an intelligent person who simply could not see that free markets - indeed even slightly unfree markets - are a good thing. I'm told variously that there aren't any free markets, that it's all about the source of the capital, that free markets are exploitative and that direction is essential for reasons of fairness, equity or goodness. The problem is that, while these intelligent people are happy to pile into free markets (mostly for the simple reason that free markets are things right wing people like and are therefore bad) they are very reluctant to offer an alternative - other than, in effect, an unfree market liable to corruption.

The problem - you'll have spotted it - lies in the opinion of our Ecuadorian guest. The alternative is for some agency - typically, but not always, government - to decide on price, supply and who can take part in the process of buying and selling. This is, in the manner of things, the logical extension of Douglas Jay's case for socialism - the gentleman in Whitehall really does know best. And, as is shown time and time again, this really isn't the case at all. More importantly, why institute some planned system when markets do it so much better? And it's complicated - as Adam Smith explained:

Observe the accommodation of the most common artificer or day-labourer in a civilized and thriving country, and you will perceive that the number of people of whose industry a part, though but a small part, has been employed in procuring him this accommodation, exceeds all computation. The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country! How much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world! What a variety of labour too is necessary in order to produce the tools of the meanest of those workmen! To say nothing of such complicated machines as the ship of the sailor, the mill of the fuller, or even the loom of the weaver, let us consider only what a variety of labour is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brick-maker, the brick-layer, the workmen who attend the furnace, the mill-wright, the forger, the smith, must all of them join their different arts in order to produce them. Were we to examine, in the same manner, all the different parts of his dress and household furniture, the coarse linen shirt which he wears next his skin, the shoes which cover his feet, the bed which he lies on, and all the different parts which compose it, the kitchen-grate at which he prepares his victuals, the coals which he makes use of for that purpose, dug from the bowels of the earth, and brought to him perhaps by a long sea and a long land carriage, all the other utensils of his kitchen, all the furniture of his table, the knives and forks, the earthen or pewter plates upon which he serves up and divides his victuals, the different hands employed in preparing his bread and his beer, the glass window which lets in the heat and the light, and keeps out the wind and the rain, with all the knowledge and art requisite for preparing that beautiful and happy invention, without which these northern parts of the world could scarce have afforded a very comfortable habitation, together with the tools of all the different workmen employed in producing those different conveniencies; if we examine, I say, all these things, and consider what a variety of labour is employed about each of them, we shall be sensible that without the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided, even according to what we very falsely imagine, the easy and simple manner in which he is commonly accommodated.

Repeat that across everything in our complicated lives today and imagine - or try to imagine - the planning system that can organise all this better than a market? And then consider that the more that market is free, the more people can take part in trade without constraint, the better it is for everyone. To illustrate, I'll give you just one example - the 18 year old woman who rents a chair so she can cut hair, who after a year or two at that chair takes on a proper shop to serve the loyal customers she has secured in that two years. In that shop she can take on some trainees, maybe rent out chairs herself.

Imagine - and in some places this is the case - that a group of existing hairdresser, using the excuse of safety or quality, get together to persuade government that cutting hair should be licenced and that the number of licenses is limited. Who gains here? The market is limited - fettered as its opponents desire - ostensibly for good reason (safety, quality) but in reality we get more expensive haircuts, less innovation and less creativity.

If this fettering of markets extends everywhere, the result will always less innovation and less betterment for society. In some cases - we see this with energy - the result of government fettering of markets is high prices shortly followed by demands from the same government responsible for the problem that the firms cut their prices. Similarly, London has a housing problem because we've stopped people from building homes in the places where people want to live. The crisis is the direct result of government interference in the market, yet one proposed solution is to fix the rents - the state creates a problem then compounds it through price controls.

We haven't found a better way of organising the distribution of goods and services than a market (and it's not for want of trying) but then the same people who haven't found a better way screech about "market failure" as if this is a fault of the market rather than a fault of state intervention - most so-called market failures would be better entitled, "regulatory failure". Whether it's fuel poverty, housing shortages, too few doctors or a lack of school places, the cause of the problem is almost always governments - often along with producer interests like trade unions, business lobbies and professional associations - limiting or preventing the free operation of the market.




It is pretty much impossible to replicate a free market system through planning, however clever the people in Whitehall might be and however mighty their computers are. It really beats me why we try.

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Why I'm proud to be British - and why you should be too

There was one of those polls - not sure of its provenance or how its sample was constructed - that asked what things made people most proud to be British. The poll included assorted military victories (the Armada, Napoleon, WW2), having an Empire, the Magna Carta, Suffragettes and gay rights. Oh, plus the NHS.

Here's the result - unsurprisingly (and significantly) biased towards the more recent:





Now I'm not really convinced that creating the NHS is such a stellar achievement - it's notable that pretty much everywhere else in the world hasn't copied our system. Even the places with government services more-or-less designed by UK bureaucrats after WW2. But it does remind me of the extent to which the NHS is the most sacred of our sacred cows.

The thing, however, that bothers me isn't how the vote turned out but rather the huge - enormous and glaring - omission from the list. Not inventions or inventors - although we've plenty of those. Not social systems like the welfare state, for all their value and importance. Not sporting achievements (including inventing most of the sports we don't achieve in very much). Not education or research or literature (shouldn't Shakespeare, Austen, Dickens and Tolkien be on that list?) or music or art.

No. The thing that should make us Britons most proud is the thing that allows us to pay for the NHS. That supports our great education system. That provides for the welfare state. That funds our wonderful culture. The thing we've exported all around the world and which pays for other places health, welfare, culture and education. This thing also means most people - firstly in Britain, then in the USA and across Europe then Japan, now in China, India and a hundred other places - are no longer living in abject poverty scratting a meagre and short life from subsistence farming. This is what the British did first and that changed the world completely - for the better.

We call it free market capitalism and it is brilliant.

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Are free markets unjust?

A few days ago I posted a piece asking why The Left has such an issue with free markets. One commenter took me to task (ever so slightly patronisingly):

I care about the well-being of humans, and I care about reducing inequality (and lots of other things). I support, for instance, rights to gay marriage because these rights can massively improve quality of life for lots of individuals, without really harming anybody. I also oppose unrestricted free markets when they lead to relatively poor quality of life for lots of individuals.

The difference is that I do no believe that the outcome of a free market is just, per se. In other words, my morals and opinions about how society should operate are derived without consideration of markets. Markets are merely a tool to realize my goals.

At the core of this argument - at least as it seems to me - is a suggestion that the outcomes of free markets are, in some way, unjust. I'm going to put to one side the argument about "unrestricted free markets" leading to a "relatively poor quality of life" because it seems to me something of a nonsense.

Are free markets unjust? The post in question referenced the opening lines of Adam Smith's other book - "The Theory of Moral Sentiments" and this is, maybe, helpful in looking at justice because it is a central theme in Smith's book:

Society, however, cannot subsist among those who are at all times ready to hurt and injure one another. The moment that injury begins, the moment that mutual resentment and animosity take place, all the bands of it are broke asunder, and the different members of which it consisted are, as it were, dissipated and scattered abroad by the violence and opposition of their discordant affections. If there is any society among robbers and murderers, they must at least, according to the trite observation, abstain from robbing and murdering one another. Beneficence, therefore, is less essential to the existence of society than justice. Society may subsist, though not in the most comfortable state, without beneficence; but the prevalence of injustice must utterly destroy it.

So free marketers much have regard to justice as well as prudence and the most common criticism - seen above in Brian's comment - is that free markets are solely concerned with utility: "Markets are merely a tool to realize my goals". And Brian suggests that, if "unrestricted", those markets may deliver an unjust outcome - we much therefore manage markets so as their outcomes are just.

The problems here are twofold - firstly, are free market outcomes ever unjust? Should we prevent or limit people's freedom to exchange because we fear that some will receive no benefit - or actual harm - from the process of exchange? Secondly, is it right - just - to restrict someone's liberty so as to deliver, we hope, a more just outcome elsewhere?

The problem with Brian's argument (which I'm taking as archetypically left wing) is that he sees a just outcome as being an equal outcome - "I care about reducing inequality". But if the consequence of this equal outcome is that everybody is, on average, poorer, is that a just outcome? We have limited or directed exchange to secure equality of outcome and in doing so have removed value from that exchange - everyone is poorer: equally poorer but still poorer.

What is unjust about free exchange - about me seeking to purchase a second hand Land Rover? Is the injustice that not everyone has the wherewithal to buy a second hand Land Rovers? 4x4s for everyone! But isn't intervening in the market to make second hand Land Rovers cheaper - the outcome that delivers social justice - simply removing value from the people with second hand Land Rovers to sell? And isn't this equally unjust?

For Adam Smith, justice was primarily about how we behave:

The principle by which we naturally either approve or disapprove of our own conduct, seems to be altogether the same with that by which we exercise the like judgments concerning the conduct of other people. We either approve or disapprove of the conduct of another man according as we feel that, when we bring his case home to ourselves, we either can or cannot entirely sympathize with the sentiments and motives which directed it.

So if we behave honestly, honourably and fairly in our exchange - in the market - then justice is served. And, if the market does what markets do, the outcome will also be fair and just because both buyer and seller have obtained value from their exchange. Preventing this from happening or saying only certain parties can engage in exchange is not just. At the level of the individual, not only are markets just but limiting, managing or directing them - ending what Marx called the "anarchy of production" - is unjust.

The problem for The Left, however, is that they see poverty or, more commonly, inequality in society and ask whether - given we've a market society - this is just. Surely, they ask, there is some better way of organising exchange that will mean there isn't any poverty or, more likely, inequality. And this is a noble aim until you begin to ask what happens in a market. When I buy that second hand Land Rover I get a benefit - value - by having the off-road vehicle my heart desires. And the person selling that vehicle has the cash I've given him - value - to use elsewhere in the marketplace to meet his heart's desires. There is no point at which free exchange leads to "relatively poor quality of life for lots of individuals", quite the opposite.

None of this is an argument against regulation, laws - Smith is very definite about the consequences of injustice being punishment - but that those laws should be directed to ensuring that exchanges in the market are honest, honourable and fair. Nor is this a pro-capitalism argument - there's no reason at all why socialist forms of ownership shouldn't operate effectively in a free market. Rather it's an argument that justice and equality are not synonyms and that, if we want a fair society, a free market system is more honest, honourable and just than a system designed by government, however well-intentioned.

It is true, however, that without justice the market is not free but rather that "society of robbers" Adam Smith describes. But justice is not achieved through coercion, price-fixing, artificial monopoly or the damning of commerce. Free markets are just only if we act - through social mores, honour if you will, as much as through laws - to ensure that justice is served. As Smith put it:

If [justice] is removed, the great, the immense fabric of human society, that fabric which to raise and support seems in this world if I may say so has the peculiar and darling care of Nature, must in a moment crumble into atoms.

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It puzzles me why the left opposes free markets - they argue for most other forms of liberty

It's odd how many on the left, so keen on all sorts of social liberation, are adamantly opposed to the idea of people being economically liberated. It's hard to understand why, when the liberation of women, gay and lesbian people, and ethnic minorities get such prominence in left wing thinking, they seem unable to recognise that part of that liberation must be economic, must be the power to exchange, interact, co-operate and trade.

It seems, without conducting any sort of extensive survey, that the problem lies in two places - firstly, a sort of elitist belief that most people aren't bright enough to make their own economic decisions and therefore need guidance from experts, and secondly a sort of semi-comprehended Marxist reject of the market in preference for a wholly planned economy. In truth though, a lot of the opposition to free markets is pretty woolly - here's an example in a tweet to cabinet minister Liz Truss from Labour MP, Stella Creasey:

Except in a free market you aren’t free @trussliz because you will always end up picking up the tab for its failures - try reading the other half of adam smith about value of collaboration to securing freedom for us all …all money is after all a matter of belief

Now I'm not going to try and deconstruct Ms Creasey's Tweet (it is after all only a Tweet) except in so far as it contains several of those presumptions about free markets - they're not 'free', they 'fail', and they are exploitative. Ms Creasey also references (I assume) Adam Smith's 'other book', the Theory of Moral Sentiments. Here's a chunk from a commentary by Eamonn Butler:

As individuals, we have a natural tendency to look after ourselves. That is merely prudence. And yet as social creatures, explains Smith, we are also endowed with a natural sympathy – today we would say empathy – towards others. When we see others distressed or happy, we feel for them – albeit less strongly. Likewise, others seek our empathy and feel for us. When their feelings are particularly strong, empathy prompts them to restrain their emotions so as to bring them into line with our, less intense reactions. Gradually, as we grow from childhood to adulthood, we each learn what is and is not acceptable to other people. Morality stems from our social nature.

Smith wasn't limiting free markets but rather making the observation - at considerable length - that human beings are not just motivated by prudence, by an overriding utilitarian urge. Rather our motivations are grounded in a set of ethics of which prudence is just one - justice, temperance, faith and courage are just as important. And since our motives in a marketplace are not just self-interest, the idea that free markets exploit is wrong. As Smith put it himself:

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”

I'm sure we can have an extensive discussion about whether or not we are ever truly free but, in more pragmatic terms, Ms Creasey's typically Fabian position is essentially that we don't have sufficient knowledge in the marketplace so are liable to manipulation and exploitation. We see such an argument put repeatedly in respect of advertising drawing on a variety of slightly sneering observers - Veblen, Packard, Klein - who argue that advertising is uniquely and corruptly persuasive especially for children and what might be called the lower orders of society. As a result, the first target of the prohibitionist is to limit, then ban, the advertising of the product they wish to ban - smoking, drinking, sugary food, gambling.

The problem with this argument is that it is, as with so many left wing critiques of classical liberalism, essentially a straw man. Nobody claims that free markets require perfect knowledge for all parties merely that there is no coercion and that the buyer and seller both secure benefit from the process of exchange. I do not need to know the price of every second hand Land Rover to be able to judge whether the price I pay to buy one provides me with a value in excess of that sum. If I'm wise, and most buyers, regardless of age or social class, are wise, then I will do more than simply buy the first of a product I encounter but even if I do this it doesn't stop the market being free.

To return to Ms Creasey, she argues that Smith's Theory of Moral Sentiments is about collaboration and I assume that, in making this assertion, Ms Creasey believes that collaboration is not a feature of a free market. Now, leaving aside Smith's position that human nature is not simply about self-interest, maximising utility, it does seem odd to consider that interactions in a free market do not feature collaboration or cooperation. Is the achievement of mutual benefit through exchange not the very essence of collaboration - two humans freely interacting to the advantage of both? Yet the Fabian socialist position seems blind to all this, preferring to fall back on the idea that exchange in a marketplace is exploitative and therefore not free.

It makes absolutely no sense at all for people on the left to be so dismissive of free markets, enterprise and trade - they ought to have the same enthusiasm for such things as they do for women's rights to control their bodies, for society to see gay and lesbian people as normal, and for ethnic minorities to be treated fairly. Instead the left seeks out things - often falsely - to suggest that free markets are wrong. Most often they point to failures in highly regulated markets - financial services, energy production, transport, housing - where powerful businesses work with government to limit innovation, create rents and prevent new entrants to that market. But even when they don't, the criticism of free markets is based on an entirely vague notion of an alternative (and I'm guessing that most on the left don't want a Soviet-style planned economy).

In the end, however, the alternative to a free market is a market that isn't free. And this means either that you do not have access to that market or else that your access to directed by another party. As I wrote a while ago:

Please explain which part of the word 'free' is a bad thing? If you don't like free markets, what you want is markets that aren't free. Markets where only some privileged people can trade. Markets where someone else (usually the government) sets the price. Markets where their effectiveness is determined not by the actions of those in the market but by who is most effective at lobbying - for which read bribing, corrupting - government. If you fetter free markets (which given you always go on about the free market being "unfettered" is what you want) what you create are winners and losers, privileged and unprivileged, rather than having a system where people seek co-operation and mutual benefit. Freedom is a good thing. Free markets are a good thing. So stop lying about this and undermining the liberty of your neighbour.

And it makes no sense, given its enthusiasm for other liberties, for the left to oppose this liberty.

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Why net neutrality is a daft idea...

And it's not because it hands governments control over the Internet (although that's cause enough to object to so-call net neutrality):

Except that it’s through prices and freely arrived at price signals that we achieve progress. Thank goodness for segregated pricing simply because this lack of neutrality is what will create the incentives among pipe owners to invest in wildly expensive advances that will only be offered to the big and rich. If so, great. As we know from cars, flat-screen tvs, air travel, along with everything else, what the rich enjoy is merely a preview of what we’ll all eventually enjoy if markets are free.

Yep. 

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It's not capitalism we need to defend, it's freedom

Every now and then I get asked about why I'm in politics and, once I've done the self-deprecating bit about how no other business would have me, I get to the crunch. I am involved because free speech, free markets, free trade and free enterprise need defending. The systems of government, the lobby groups, the business organisations, the voluntary sector and 'thinking people everywhere' all conspire to limit and restrict your and my freedom to act. Challenging this sad truth is essential.

And the problem isn't capitalism, it's government. This isn't to say that big business is innocent - the amounts spent by business on lobbying government for law changes, subsidy, new trade barriers and more regulation remind us that many large organisations really don't like the idea of freedom. So when Corbyn-loving students tell me capitalism is corrupting, I get their point - hardly a day passes without one or other example of a big business getting some sort of protectionist fix or some new regulation aimed at preventing market entry. We've known this for a long while - it's the central theme of Adam Smith's 'Wealth of Nations' - mercantilism, market fixing, cartels and protectionism, all those things the technocrats try to justify, prevent the growth of wealth, the opportunity for equality and the raising of people out of poverty.

I also understand how those young people are disgruntled at being 'Generation Rent', at having great fat student debt they probably won't pay off and at seeing my generation sitting snuggly on a pile of assets (but still moaning at having to use those assets to look after ourselves in our old age). But when Corbyn or other socialists try to say that these problems are some how a consequence of free markets, free trade or free enterprise, they are lying - even when they use the catch-all term of capitalism.

Housing in London is expensive because for sixty years we've run urban containment policies around the capital and for forty of those sixty years, London has generated more new jobs than it has new houses. And if you provide just six new homes for every ten new households, housing is going to get more expensive. This isn't the fault of the market, it's the fault of government for rationing the land we've got to build houses on. They call this planning and it's the basic building block of socialism - instead of having a free market, some folk in an office with a computer model decide what the price should be, how much should be made and how it should be distributed. It limits your freedom and it doesn't work.

Defending freedom is not, therefore, simply about the moral imperative of liberty but is justified for straightforward and practical reasons. Those freedoms - speech, trade, markets, enterprise - should be defended because they work, because they are the things that made us rich and, right now, are making poor people everywhere richer. The only places - North Korea, Cuba, Venezuela, Zimbabwe - where people are getting poorer are places where these freedoms are comprehensively rejected. Places where socialism - the planned economy - is the chosen model.

Everywhere I look freedom is under attack. Technocrats and business lobbyists saying import tariffs protect domestic business. Local councils saying limiting procurement options supports local economies. Planners saying the problem is the wrong plan not the planning itself. Farmers saying they couldn't operate without subsidy. Public health groups wanting to ban smoking in parks or to fix booze prices. Police forces calling for new powers to seemingly arrest anybody for almost anything. Housing lobbyists saying the solution is to fix rents not to build houses. Schools snatching sausage rolls from innocent children's lunchboxes. Mayors enforcing public morals by banning pretty women from advertising or drinking from the train.

And then we're told the problem is capitalism? It's not, the problem is that government - in cahoots with a bewildering lobby of charities, businesses and 'campaigners' - takes away freedoms. And we can't subdivide these freedoms - be cross about the loss of one freedom that's important to us while cheering on a ban on something we don't like. For sure some of these losses of freedom are less damaging than others but each loss - from daft rules on advertising vaping to 'Public Space Protection Orders' that make anything an official doesn't like a crime - represents a further restriction and another barrier to pleasure, enterprise or exchange.

I'm happy to defend capitalism - the idea that the rewards from business success goes to the people who put up the cash - but it's not as important as defending free markets, free trade, free enterprise and free speech. Those freedoms constrain the worst urges of business, protect us from the busybody and limit the oppressive instincts of government. We have become too glib about each new loss of freedom - even sometimes to the point of welcoming it because of the NHS or crime or community safety or, the favourite all-purpose reason, because of the children.

So let's get less hung up about whether something's owned by the people who invested, by the workforce or by the community and worry instead about those who want to take away your freedom to organise business how you want. Let's be bothered about government and business wanting to fix gas prices or food supply or where you can buy gin and lemonade. The good life we enjoy and that we'd like everyone to enjoy, was made possible by that free enterprise, by those free markets, and by that free trade. And underpinning all this is free speech - our right to speak what we see as truth, to promote our business and to challenge the assumptions and presumptions of those who govern us. Freedom matters - let's defend it.

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We need to be more like Sweden (it's not what you think Corbynistas)

There's a picture we have of Sweden as, depending on our political prejudice, some sort of social democratic world of joy or else a sort of stifling, controlling, high tax dystopia. I suspect that we don't think of this:

Stockholm produces the second-highest number of billion-dollar tech companies per capita, after Silicon Valley, and in Sweden overall, there are 20 start-ups—here defined as companies of any size that have been around for at most three years—per 1,000 employees, compared to just five in the United States, according to data from the Organization for Economic Cooperation and Development (OECD). “What you see is that start-ups have a high survival rate in Sweden, and they have relatively fast growth,” Flavio Calvino, an OECD economist, told me. Sweden also ranks highest in the developed world when it comes to perceptions of opportunity: Around 65 percent of Swedes aged 18 to 64 think there are good opportunities to start a firm where they live...

Somehow the image of Sweden as a free-wheelin', creative place filled with start-up tech businesses runs counter to our stereotype of the socialist haven. So what's driving it?

Maybe this has something to do with it?

Sweden’s reforms were a response to a financial crisis in the 1990s, when GDP growth sank, unemployment spiked, and the government, in an effort to avoid devaluation of its currency, raised interest rates to 500 percent. To jump-start economic growth, the government deregulated industries including taxis, electricity, telecommunications, railways, and domestic air travel to increase competition, according to Persson.

Along with privatising primary schools, hospitals and old people's homes. And there's more:

The reforms of 1991 lowered corporate income taxes from 52 percent to 30 percent. (Sweden’s corporate tax rate today, at 22 percent, is much lower than the U.S.’s 39 percent, though few companies actually pay a rate that high.)

Gasp! It gets better too...

In the 2000s, Sweden also got rid of its inheritance tax and a tax on wealthy people, which further incentivized people to earn large sums of money and, often, invest it back into the economy. “There was more capital available, so angel investors started to appear,” Braunerhjelm said. Today, there are significant tax breaks for starting and owning a business; for example, entrepreneurs can now have a larger share of their income taxed as capital income, which has a lower tax rate.

So privatisation, deregulation, ending taxes on investment and cutting taxes on rich people seems to work. For sure there are other factors too - a strong welfare state, good education, high levels of technical literacy and the end of protectionism (joining the EU will have helped a bit here) - but it's a lesson that, if we want a successful, wealthy and open modern society that cares it's not done by attacking markets. Quite the reverse.

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Ten common lies about about free markets, capitalism and liberal society

Every day - in the papers, on the telly and all over social media - a bunch of people tell a pack of lies about free markets, capitalism and the liberal enlightenment that made us all rich, is still helping make the poor less poor and the rich happier. The Clerisy, as Deirdre McCloskey calls them, having got themselves secure, often tax-funded positions spend their time sneering at the things that made their comfortable lives possible. Hipsterish, right-on web-design consultants and the like go on about the evils of capitalism while plying their lucrative businesses in that capitalist world.

This makes me angry. It's not the hypocrisy, we've all a tendency that way. It's not the smugness, annoying though it often is. And it's not that, as my Dad was wont to say, "they can afford to be socialists". No, it's the lies. Here are ten of them.

The First Lie - Free markets are a bad thing.

Please explain which part of the word 'free' is a bad thing? If you don't like free markets, what you want is markets that aren't free. Markets where only some privileged people can trade. Markets where someone else (usually the government) sets the price. Markets where their effectiveness is determined not by the actions of those in the market but by who is most effective at lobbying - for which read bribing, corrupting - government. If you fetter free markets (which given you always go on about the free market being "unfettered" is what you want) what you create are winners and losers, privileged and unprivileged, rather than having a system where people seek co-operation and mutual benefit. Freedom is a good thing. Free markets are a good thing. So stop lying about this and undermining the liberty of your neighbour.

The Second Lie - Capitalism is exploitative

We hear this all the time. Whether it's about the planet, the workers or some vague and general exploitation. Well it ain't so. Capitalism is a simple concept where things are owned by the people who stump up the resources for those things to be there. Not just cash but ideas, innovation, skills and enthusiasm. No-one's being exploited here and capitalism delivers returns to investors - in doing so it helps make those innovations succeed and those free markets make us all richer.

The Third Lie - We are rich through exploiting other humans

Quite the reverse. The thing that the liberal enlightenment did was demonstrate that the best way to get rich is to help make other folks' lives better. That was Adam Smith's great insight, not the 'invisible hand' but rather the realisation that personal self-interest operating in a free system leads to social betterment. When people point, quite rightly, to the horrors of colonialism and imperialism they are wrong to see in them the reason for our wealth. Some people made money screwing over Africans and Indians but this money was - even at the height of Lord Clive's egregious pillage of India - marginal to England's wealth and economic growth.

The Fourth Lie - Government creates wealth

We need government to protect the liberal society that allows free markets and capitalism to work. The ancient - and it is ancient - system of contracts, laws and administration that protects property was turned (mostly but not always) away from protecting the landed and towards supporting that free society and its mundane trading transactions. But government doesn't create wealth - we had hundreds of years of contract law, the Magna Carta and all that jazz without seeing the transformation wrought by capitalism and free markets. And we had plenty of government inventions during that time - from gunpowder to haute cuisine - without those inventions making the mass of people rich.

The Fifth Lie - Capitalism kills people

All the time you're talking about 'capitalism's death toll' without ever pointing to the bit when liberal society, free markets and capitalism killed these people. Indeed quite the opposite. All the advances in medicine, sanitation and safety made possible by being richer - that's the fruit of capitalism even if we choose to organise these things through government. Since the millennium a billion people have been lifted out of extreme poverty because of those free markets, free trade and capitalism. Capitalism saves lives.

The Sixth Lie - Capitalists are greedy

Again quite the opposite is true. Capitalism expects that, instead of swimming backstroke in his gold pile, Scrooge McDuck invests his cash. Some of this is invested in boring old working capital and some in high risk, exciting, sexy, hipster innovation. You and I prefer the safe stuff because we've not much to spare let alone risk but Scrooge McDuck can take bigger risks because losing a bit is less of a big deal. Those filthy rich plutocrats (the anonymous pinstriped banker ones are the worst) you rile against are stumping up the investment needed to deliver economic growth, health, wealth and happiness. Moreover they're putting off having something now (spending all that gold) to take a risk hoping that they'll get a bigger return in the future. Because of this all those exciting, innovative businesses happen. This is not greed.

The Seventh Lie - Small businesses aren't capitalists

Now this lie is more inferred that explicit. Bad capitalism is about faceless, distant businesses not our friend's web design business or the trendy coffee shop where you meet to discuss revolution and the evils of free markets. Sorry to disappoint but you're all capitalists and it's in all your interests for that capitalist system to operate as openly and freely as possible.

The Eighth Lie - Trade is something permitted by government

This lie sits behind all the talk of trade deals and the nonsense about a 'global race' so loved by politicians and pundits. Trade is quite simply the process of exchange in a free market (or even in a not-so-free market). We want government to back up our exchange by protecting property rights, preventing theft and ensuring we can enforce a contract. But we don't want the government to say who can and cannot trade or when and where they can trade. Trade is more often prevented by government than enabled. If we want more growth, more riches, the way to go is less prevention and more enablement.

The Ninth Lie - The rich are rich because others are poor

Free markets prevent this from happening. It used to be so before we woke up and realised that posh folk owning all the land and getting peasants to scrat in it wasn't the best way to a wealthy, healthy and successful society. We used to have a system - called it feudalism, oikocracy, whatever - that meant some folk were rich because others were poor. It had lasted from the first cities in the middle east through to the Dutch Republic. Then some places realised (partly government, partly people thinking about a better world) that the way to get rich was to try and make everybody better off. And it worked. We call this system liberal capitalism.

The Tenth Lie - Free marketeers don't care

How often to you say this? Every time something fails, most usually some or other government administrative system. This because of capitalism, we're told. Free markets did this. Because they don't care. If they cared nothing would ever fail. No-one would be poor. This is the biggest of these lies. Free marketers do care. That's why we're capitalists. We want everyone to be healthier, wealthier and happier. And because free markets work people in Britain are vastly healthier, wealthier and happier than our forebears.


By all means disagree. Feel free to stick with your faith that there is some sort of Utopia, some system - True Socialism maybe - that will give even more social benefit, wealth, health and happiness than free markets, capitalism and our liberal society. But stop lying about free markets, capitalism and that liberal society. Stop fibbing that it's anything other than the more successful, more effective and long-lasting means of bettering the lives of ordinary people.

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In all this trade talk let's not forget that we're rich because we're free

It starts like this:

At the end of last year, a news story was published with huge implications for ‘international development’: a drop-off in commodity prices through 2016 dashed hopes that the world’s poorest countries could escape extreme poverty by the end of the decade.

The story raises a critical question directly linked to what Brexit will mean for countries of the global South and the reality of what ‘free trade’ and protectionism mean in the context of economic development – a reality brought into sharper relief in recent weeks by a long-running spat over trade at the G20 and Liam Fox’s focus on signing tariff-free trade agreements around the world.

And then goes rapidly down hill. The thing that beats me is why people who tell me that they 'care' about the world's poorest are so trapped in the belief that more open trade is making the 'world's poorest countries' less well off. Let's start with the facts:

The world’s achievement in the field of poverty reduction is, by almost any measure, impressive. Although many of the original MDGs—such as cutting maternal mortality by three-quarters and child mortality by two-thirds—will not be met, the aim of halving global poverty between 1990 and 2015 was achieved five years early.

The main reason for this wonderful decline in world poverty is the recognition that open markets, more free trade, property rights and good economic governance are the necessary prerequisites for reducing poverty. Bear in mind that the natural state of humankind is grinding poverty. Up to around 1700 - a little earlier in Holland - nearly everyone lived and had always lived in what we'd describe today as absolute, abject poverty. Since that time, courtesy of us recognising that if you allow people to prosper by innovation the whole of society benefits, average incomes in the UK and other developed nations have risen - in cash terms - by a factor of at least sixteen. If we take account of what that innovation means - the thousands of things that make our everyday lives better ("dentistry" as P J O'Rourke put it) - then that factor of sixteen is truly much higher.

Now free trade isn't the reason for that growth in our living standards (nor, for that matter, is the shocking colonial exploitation of the 100 years from roughly 1850 to1950) but it is one of the things that contributes to the, sadly belated, opportunity for those countries that missed out on the first economic revolution to secure the sort of living standards even the poorest in Britain enjoy. And much of it will be about those institutional reforms, the list of things governments shouldn't do, enabling people to do business (again - property rights, good economic governance, free markets). But trade matters and the more free that trade the better.

So we don't want this sort of nonsense:

But the UK must go further. Brexit trade policies will do little for longer term economic change in the South unless poor countries can export processed or manufactured goods with similar preferential schemes, or, conversely, use tariffs to shield emerging industries from international competition. On top of this, the Northern-led agenda of using trade deals to privatise public services and grant corporations legal powers to sue states outside national jurisdictions offers little in the fight against poverty.

I agree the UK must go further and absolutely agree that the sort of protectionism that forces developing countries into exporting raw produce rather than processed goods (as I once asked, 'why aren't we eating Ghanaian chocolate bars?') is a bad idea all round. But the next part - tariffs and import substitution - is a return to the days before 1980, before the dramatic drop in the world's poverty, before the triumph of what's now called neoliberalism. And being able to go to an independent court for arbitration is a protection not an affront to liberty - without giving people and businesses the power to challenge government there is no check on arbitrary decisions by that government.

I also agree that 'trade deals' and especially bilateral trade deals are not free trade. Indeed the fact of the 'trade deal' between two governments (or groups of governments) is a reminder of the degree to which trade is not free. For sure a lot of so-called trade deals are really about regulatory harmonisation (sweetened by public procurement bungs in both directions) but they do not represent the ideal of allowing, in a well-governed economy, people to trade freely. This means, since trade is about consumption rather than production - imports not exports, allowing people to purchase the things they want with their own resources from whoever, wherever they wish.

Over the past 40 or so we've not talked much about trade. There has been occasional bits of political posturing about the 'balance of trade' and a great deal of macho talk about 'the global race' and 'competition' between nations but not much about actual trade. Or indeed the fact that it is nonsense to, for example, argue for a ban on live animal exports without realising that there's no difference between taking a truck load of sheep from Canterbury to Cannes or from Basingstoke to Aberdeen (at least not for the sheep). And a thousand other examples of how doing business - buying and selling, securing mutual benefit, adding value - shouldn't be different if the supplier is in Ulan Bator or Uttoxeter.

The result of us not talking about trade is that people begin to believe this sort of nonsense (completely unsupported by economic history):

...this obscures the fact that rich countries only pursued free trade after they ascended to the peak of the global economy; they used protectionism to ensure that domestic industries grew ahead of being exposed to competition, before “kicking away the ladder” they used to get to their dominant positions.

Not only does this line not make sense (if protectionism worked then there was no ladder to kick away) but it really isn't true. In the UK you only have to look at the 30 year long row over fixing grain prices with Corn Laws or the rows about 'Empire Preference' to see that there's nothing new at all about political arguments between mercantilists and free traders. And most of the time - witness steel, food, cars, even second-hand washing machines and old clothes - the protectionists, the mercantilists, win the argument.

Brexit really does mean a chance to do it differently. I appreciate that the absolutist position (remove all the tariffs on stuff we buy) may be correct in theory but we should remember it also removes the opportunity for reciprocity by governments - takes away a little of their power. Meaning it won't happen. But, since most of the barriers to trade are regulatory (or outright bans as is the case with much of European trade policy), the presence or otherwise of tariffs is pretty marginal - we lose a little by scrapping them but it allows us to get focused on improving economic governance in developing countries by helping them improve their standards of regulatory enforcement and compliance.

Free trade is a very good idea but the regime we have in world trade today is not free trade. We're a lot better than we used to be - the GATT Agreements and their child, the World Trade Organisation, helped make this the case as did the growth in international regulatory co-operation spawned by GATT - but the focus remains on the inter-governmental fix, on grand folk meeting in summits to decide whether or not some women somewhere will be allowed to sell you cocoa powder, knitted comfort blankets or large amounts of steel. If we can change this then we'll have a more free, more happy and above all richer world - all of it.

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What links Peter Hitchens, John McDonnell and Donald Trump?

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The answer is a hatred of free markets, free trade and free enterprise plus a belief that the solution to our supposed economic problems is economic nationalism. All these fine men promote nationalisation, speak of the evils of foreign investment, and play to the fears of workers about foreigners, big business and the bankers.

I considered heading this article with some like "In which Peter Hitchens goes full Fascist" but that would be a little polemical. Hitchens has, for over twenty years now, conducted a one man hate fest directed at the Conservative Party. On more than one occasion he has used his pulpit to pray for the Party's destruction so it must be a cause of deep and personal pain that this organisation he despises so much got it self elected with an overall majority in the UK parliament.

It shows:

I am so sorry now that I fell for the great Thatcher-Reagan promise. I can’t deny that I did. I believed all that stuff about privatisation and free trade and the unrestrained market. I think I may even have been taken in by the prophecies of a great share-owning democracy.

And more along these lines, not based on any actual facts or anything as mundane as research, just Hitchens' absolute belief that the Conservative Party and all its works is a thing of great evil. So what we get is an advert for Hitchen's Conservatism - one essentially indistinguishable from that of Donald Trump. It's a sort of admission of defeat, a belief that inside a cosy little barrier built from tariffs, bans and protections we will be reborn as a 'great nation' filled with horny-handed sons of toil bashing away making things. I can see the posters lifting the spirits of our nation now, images of those workers looking to a noble future arm in arm with their families.

Britain, for the Hitchens of this world, is crying out for a new direction - a New Party - that rejects globalisation, foreign investment, free trade and the idea that running a restaurant is as noble a pursuit as pouring molten steel from British blast furnaces. The world conjured up by Hitchens and Trump is a dystopia where foreigners, drug dealers, shadowy businessmen and venal politicians conspire to do down the decent, honest working men of Britain and America. It is a fearful place where only a powerful state with a strong leader can protect what little is left of our greatness.

This is the dark side of conservatism, the place where nationalism and a sense of national injustice push aside the hopeful and aspirational conservatism that yearns for people to be free, for them to be able to make their own choices and live their own lives. This is the consequence of an obsession with security - national security, community safety, energy security, food security, local resilience - that acts only to justify the longer reach of the state, that fools people again into thinking that our telephone services before privatisation was in any way at all better than the service we enjoy today.

This is the world where the intervention of government in industry, supposedly driven by some sort of 'industrial strategy', is determined by political considerations, by the imminence of elections and the influence of union barons or the media. Billions of our taxes are splurged on bailing out industries, mountains of tariffs are built and, before we know it, prices are being fixed and markets set in stasis with the result being decline, poverty and economic collapse.

It'll look so fine at the start as Hitchens' New Party winds back the liberalisation of the Thatcher years. Vital national industries are defined, plans and strategies are written, solid, broad-bottomed men are set onto the boards of the industries - Great Britain is reborn. And then it doesn't work - small exporting manufacturers close because they can't compete, the higher taxes needed to pay for the intervention mean less investment and billions of foreign investment gets relocated to places that are more friendly, more likely to provide a return on those billions.

It's easy to talk of a lost age of 'making':

A journey across the heart of England, once an exhilarating vista of muscular manufacturing, especially glorious by night, turned into archaeology. Now, if it looked like a factory, it was really a ruin.

But this covers over the deeper truth - that we are so much richer and happier than we were when those industries were booming. It's a myth that we are poorer for the loss of dirty, unpleasant dangerous jobs down mines, in foundries and in factories. We are not poorer - the children of those workers are mostly doing better paid and safer jobs of offices and will live to be 80 or older rather than dying painfully in their sixties of industrial diseases. Even Hitchens reluctantly hints at this betterment with his talk of luxuries, better coffee and better restaurants.

These are not fripperies but things that - in Hitchens' golden age - used only to be there for the rich and powerful. The miners, steel workers and factory hands of that age of glory didn't have a decent car (if at all), never went to restaurants and couldn't afford a foreign holiday. Today's equivalent worker has all those things plus a bewildering array of new stuff - smartphones, digital TVs, ice-makers, microwave ovens, power tools and fridge freezers. And their children - our children - will be even richer, having things we can only imagine right now.

But we'll only get those things if we cling to the revolution for which Ronald Reagan and Margaret Thatcher are rightly praised - free trade, free markets and the celebration of free enterprise. Building walls - real or regulatory - isn't a route to poverty not a salvation. And economic nationalism - whether it's sold to us a 'socialist' by a Labour shadow chancellor or 'conservative' by a Daily Mail columnist - always, everywhere, gets worse results than the free trade it forces out.

The evidence from approaching four decades of neoliberalism, of our embracing a global economy, is that it has led to the biggest, sustained improvement of well-being in human history. To throw all this aside to indulge in an orgy of self-pitying nationalism would be an act of monumental folly. Yet that folly is just what Peter Hitchens, John McDonnell and Donald Trump are offering.

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Why Australia doesn't have California's problems with water - free markets

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Lots of angry lefties tweet that slightly crass quote about water rights from the boss of Nestlé. They do this because they care about people having the water they need, something we can all agree with. However, the transfer of this concern from rhetoric into public policy is a problem. Quite simply because, as Californians have discovered, the supply of water is a really big deal. And it's down to the weather (you can all argue the toss about whether it's climate change or not if you like but that won't change a thing):

California has a history of droughts lasting as long as 200 years.  You can dam every canyon in California and line the coast with desalination plants, and you won’t solve the water shortage in a 200-year drought, or even a ten-year drought.  Under the current allocation and pricing system, California will simply consume every new drop of water produced. We will have a water shortage all the same. 

So the question is what to do to ensure that the need for water in the Sunshine State is met. And most solutions offered are either stupid (ban the extraction of water for bottling) or totalitarian (rationing the supply of water). The right approach is (and this is why the Nestlé chap has a point) about ownership of the source and pricing.

By way of contrast, Australia - just as dry and drought-prone as California - doesn't have the same supply problems:

Water markets equipped Australia to endure the 1995-2009 Millennium Drought. This was the worst Australian drought since European settlement. Total water stored declined to just 27 percent of capacity. Yet water trading allowed Australian cities to avoid the most severe water restrictions. It protected agricultural businesses, and it ensured that the country’s endangered habitats and species received adequate water.

Remarkably, in an end-of-drought survey, over 90 percent of Australian farmers reported that water markets were important to their businesses’ survival. There are many lessons for California here. A key one is that the tension between water users is completely the creation of policy. There is no need for the tensions between the agricultural industry and California’s cities, between growers and endangered fish, between Hillsborough and Westborough, between neighbors. Water markets can balance competing uses in a way that benefits all.

To work, markets need something to trade. The basis for trade in a functioning water market is exclusive access to a share of water from a specific body. Australian water laws provide this. California’s water laws do not.

Sadly the article concludes that politicians in California are unlikely to be liberalising water markets. Just goes to show how stupid us politicians are really.

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Allen Patterson's New Year Prayer...

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Or is it a charm? Whatever it's an evocation of that free market we all love:

No heads were bowed.  No eyes were closed.  I wasn't talking to god or gods.  It's just what I wanted people to know, and what I hoped they all felt:

"We're grateful for this food.  For the farmers who grew it, for the cattlemen who fed it, and for the workers who harvested it. 

Let us not forget the factory owners who processed it, none of whom knew that we would be here eating today.  May we always remember to be grateful for the truckers and warehouse workers who handled the logistics, despite them not even knowing our names.

May we never forget the tremendous risk undertaken by anyone who tries to open and run a restaurant.  And we are grateful for the cooks, the wait staff, the bus boys, and the cleaning crew.

All of those hard-working wonderful people accomplished this miracle on our behalf for the price of $10.95 each. 

May we all be free from rent-seekers who would interject themselves, uninvited, into this process.

May everyone involved in our exchanges believe that he has gotten the best of every deal."

- Amen

Definitely Amen to that...

Values? The one that really matters is freedom...

Queueing for bread - socialist values in action

This is a pretty typical framing of a left wing values statement - from Julian Dobson:

And that brings us back to values. Do we want a society that turns competitiveness into a totem, blames individuals for social problems and judges success on earnings and rates of return? Or are we looking for something more inclusive and creative, places that recognise the value generated by people’s imagination and relationships and passion for the common good? 

And the typical slightly green, middle-class leftie will feel a little shudder of affirmation through the bones at this statement. Absolutely, our lefty might say, this statement clearly separates the uncaring, individualist from the caring, sharing collectivist. They might add little mutterings about 'trickle down' or 'profits' before smiling again as the high plateau of collaborative, cooperative glory comes into view.

The problem with all this is that it is a delusion, a deliberate self-deception. All this enthusiasts for ending the dark and evil neo-liberal world and ignorant of its central truth - that far more than the state-directed, protectionist systems our caring lefties aspire to create, free market systems are absolutely about inclusion, creativity, passion value generation, imagination and mutual benefit. The secret lies in that magic word 'free' and it is all that freedom that gave us the wealth to ponder such matters as 'values'.

Once the matter of values was something for priests and philosophers. Most ordinary people - and this still stands for a great deal of today's world - were way too busy keeping body and soul together to bother about what it all meant. Then something happened. It wasn't a planned economy, it was a spark of liberty that set us free. And we became free because the trap of subsistence was removed, we could lift our head up from the daily drudge and think about those values, about what we thought the world should be like.

And the match that ignited those flames of freedom wasn't a law, it was capitalism, the liberal enlightenment that opened up trade and allowed business to innovate, to create and to transform - in just a few decades - the entire world.When the likes of Julian Dobson paint free markets in negative terms, when they demonise the idea of choice by talking about competition as a negative, and when they dismiss individual material success as somehow distasteful or exploitative, what these people do is build a mighty man of straw, a grand lie.

This lie is essential to socialism - without that mighty straw man representing capitalism's sins the logic of the left collapses into the terrible reality of a place where people queue for seven hours to buy some flour and some milk. This, rather than sunlit uplands, is the consequence of that focus on the "common good" - for there is no common good other than that determined by the interactions, transactions and exchanges of the people. And the best way to get those mutual benefits isn't through committees, co-operatives and regulations but through free exchanges in a free market. That is why the left must make a demon of liberty because they can't admit that free choice, free exchange and free speech is the best road to a good society, to a place where those values they prattle on about are met for everyone.

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The case for cheap food...

The map above (you can view a bigger version here) shows the proportion of household income spent on food and the incidence of malnutrition in those countries. As a visual guide to the politics and economics of food it's pretty telling - simply put, places with the highest proportion of income spent on food are the places with the highest incidence of malnutrition.

The other stand out feature is just how little the UK and USA spend on food - less than 10% of household income (the difference between the UK and Scandinavia, however, can probably be explained by the latter countries taxing food). This is one of the greatest achievements of the past hundred years - from a situation where a third or more of income was spent putting food on the table to one where it costs less than a tenth of income. From a time when the diseases of malnutrition were commonplace to one where they are very rare.

There are two central features to this achievement. The most important is that we are, by every measure, significantly better off. The richest tenth of 100 years ago would be blown away by the wonders that are available to the poorest tenth today - things that we so take for granted we consider them essentials. This is what capitalism and free markets have brought - not just higher incomes but a bewildering variety of goods and services on which to spend those incomes. So when high-income left-wing writers attack neo-liberalism or 'market fundamentalism' they wish that future generations won't see progress and improvement. Worse George Monbiot and his sort would condemn billions living in those purple and brown circles above to a life of poverty with no prospect of escape. The choice for me is simple, you have free markets or you have permanent poverty for the mass of people.

The second feature behind us only spending a tenth of our income on food is the industry that makes and distributes the food. Those same high income left-wing writers will quickly condemn high volume food processing and sophisticated distribution for the terrible sin of bringing cheap food to people with less income. For that is what this industry does and it does it efficiently and effectively. When we look at nations with price fixing, over-regulated food retail and nationalised distribution we see people spending more of their income on food and many there being unable to get enough to stave off malnutrition. Think of India with its high skill industries, its space programme and it nuclear bombs, plus over 40% of its population suffering from malnutrition in some form. While levels of income partly explain this, the sclerotic and over-regulated retail distribution sector also drives up food prices for the poorest.

Perhaps in the UK we can afford food snobbery and the indulgence of expensive food but for much of the world the mass production of protein dense cheap food is essential. And this means a system of free markets and trade. The approach preferred by development organisations (and too many governments) of using subsidy to sustain subsistence farmers just above starvation is morally indefensible. Indeed, Oxfam and other development NGOs should be at the forefront of calling for more open trade, more free markets and less regulation. That these organisations aren't champions of neoliberalism represents a complete failure to meet their mission of alleviating poverty.

We do not get cheap food by digging wells for subsistence farmers, we get it by opening up markets to a sophisticated industry able to grow, process and distribute high quality food at a fraction of the cost the local, controlled and officious systems that dominate the sector across the parts of the world with the highest proportion of income spent on food. If you want less starvation, less poverty and healthier people everywhere then you want cheap food - and cheap food comes from free markets.

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Can we stop getting so hysterical about migration. Mostly it's a good thing.

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It is the end of days. As the hangovers fade in the New Year it will be to witness the spectacle of vast hordes trooping off planes, trains and boats clasping evidence of EU citizenship as proof they can work in our fine nation.

Under “transitional” rules introduced when Romania and Bulgaria joined the EU in 2007, migrants from these two countries can only work in the UK in seasonal jobs such as fruit picking, or if they are self-employed.

These restrictions end on January 1, 2014, and all Romanians and Bulgarians will then have the same rights to work in the UK as British citizens.

The model predicts that over the next five years from January 1 at least 385,000 migrants will move from Bulgaria and Romania – more than the population of Coventry. 

Swamped! Swamped I tell you - the pressures on our creaking public services will be too great, the schools won't have the places, the hospitals will be filled with the grannies of Roma and Bulgar migrants and we'll spend our lives speaking some sort of pidgin English.

Even if I was to accept that there'll be 385,000 arrivals from Bulgaria and Romania, I really don't believe that a country with 70 million people - 200 times that number - can't welcome some new arrivals. For sure, I want to know who is coming in and that they're doing something constructive. I'm all for putting them on a plane back home if they misbehave. But can we have a little less hysteria please?

If we want to challenge in that big bad ugly world - to compete in that ghastly "global race" some folk want to believe in - then we need migration. We need Brits to go an work in France, in Dubai and in Hong Kong. And to retire to Spain, Ireland or Florida. These international connections, the British diaspora is a vital component in our economy, in creating the links with the rest of the world we'll need for future trade and prosperity.

This works both ways. Those Romanians, Bulgarians, Pakistanis, Chinese, Russians, Somalis - all those immigrants we're so rude about - their links home generate new economic activity and benefit our nation. Not because of cheap labour or a willingness to accept the bending of employment rules but because diversity is essential to economic growth:

It is important to note how this ‘[population] churn’ helps cities. Knowledge-based economies run on the quality of ideas. Ideas are not only a function of intelligence or education, but also the depth of information a person, or a city, receives.

London is successful because it is diverse. And it has always been diverse.

So I'm with Sam Bowman from the Adam Smith Institute on this - more free movement is a benefit not a curse:

There are lots and lots of bad things governments do that ruin people’s lives. But few cause as much harm to the poorest people as the state controls of where people can work and live that we call ‘migration policy’. Even a marginal step towards a more liberal immigration policy would allow people to create an enormous amount of wealth, and probably do more good than almost any other possible policy. 

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A billion fewer poor people tells me the Pope is wrong about free markets

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The Pope has the biggest bully pulpit of the lot, millions of people believe his word is divinely-inspired and even less god-bothering folk in the western media give his pronouncements loads of coverage. So expect to hear a lot of this comment:

"... some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting." 

It contains those familiar nonsenses loved by left-liberal people - trickle-down, justice, power, inclusion. The Holy Father goes on to have a good pop at "consumerism" and then defends state intervention.

Now this is all well and good but the problem is that the Pope is wrong. Wrong about markets. Wrong about speculation. Wrong about state intervention. And above all wrong about what free market capitalism, that dreaded neoliberalism, means for the poor.

In simple terms that neoliberalism has, where governments have allowed it to work, delivered for the poorest in the world. Not just one or two of them but over a billion of the poor.

In 1981, 52% of the world's population lived on $1.25 a day or less. By 2008 that figure had fallen to 22%. Half of the world's poor people were no longer poor. Why? Because of capitalism, free markets, self-interest - those very things the Pope rails against in his ignorance.

We've still a long way to go - there are still over a billion people living in extreme poverty and that's a billion too many. But why scrap the system - that neoliberalism, those free markets - that has already more than halved the number of people in abject poverty? Economic growth, encouraged by a free market may not bring "justice" but it sure as hell will bring wealth, income and an end to poverty for those poorest people.

And the alternative? The alternative is this. Or, even worse, this.

The Pope is not just wrong but his wrongness may mean more people die in poverty. I'd find that hard to excuse in a man named for St Francis.

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