Why a 'hard' Brexit won't work (despite being right on nearly everything about trade theory)

Probably the most important single insight that an introductory course can convey about international economics is that it does not change the basics: trade is just another economic activity, subject to the same principles as anything else.

If you're going to write about trade (and don't want to start with David Riccardo) then Paul Krugman, who got his Nobel Prize for writing about trade, is as good a place as any to start. And Krugman's opening point is that international boundaries don't change the fundamentals of economic theory. There is no essential (economic) difference between me buying something from Basingstoke and me buying something from Beijing. As far as theory is concerned, therefore, making this comparison practically as well as theoretically true should be the point of trade policy. Any other approach would be against the interests of the buyer (and, therefore, by extension favouring the interests of the seller) and bad for the economy.

The problem with trade is that, as they say on Facebook, it's complicated. It's not complicated because Krugman is wrong, it's complicated because sellers - producers - in various nation states and groups of nation states have persuaded their government (quite often - as with US sugar producers - through the extensive use of cash money as a persuader) that their particular business is peculiar and it will not benefit consumers to have access to all the world's production of that good or service. These persuasive folk have spun the point of trade 180 degrees - it's all about national competition, a global race as David Cameron kept telling us. Britain is competing with China and India and the USA and Mexico - we must back our producers even if it means ordinary Brits having to pay more for stuff. Here's Krugman again:

After all, the rhetoric of competitiveness, the view that, in the words of President Clinton, each nation is “like a big corporation competing in the global marketplace”, has become pervasive among opinion leaders throughout the world. People who believe themselves to be sophisticated about the subject take it for granted that the economic problem facing any modern nation is essentially one of competing on world markets, that the United States and Japan are competitors in the same sense that Coca-Cola competes with Pepsi, and are unaware that anyone might seriously question that proposition.

Again, Krugman is right - the point of trade is imports, the stuff us consumers buy, not exports. For sure we need the exports so we can pay for the imports but if we're running a gap in favour of exports then this is simply money that UK consumers would otherwise have spent on buying stuff (this is one reason why China becoming a net importer of goods sometime in the next decade or so is a very significant event - we'll need to find a new set of folk to buy stuff off). So when you hear that familiar Brexit Ultra argument, "they export more to us than we do to them so they need us more", smile sweetly because they've entirely missed the whole point of trade.

The problem, however, is that this position on trade utterly dominates debate - far from us seeking a trade policy that makes buying from Peshawar more like buying from Penge, we seek instead a policy that ossifies difficulties in exchange by pretending that international trade follows a different set of economic rules (or, more to the point, a set of rules defined without reference to economic theory by lawyers and bureaucrats, often at the behest of well-connected lobbies for business interests) to national trade. Here Scott Sumner sums up all this:

Over the past 200 years, debates about trade have occurred on two levels. Academics insist that unilateral free trade is the best option. However the “very serious people” (VSP) who conduct real world trade negotiations act as if open markets are a “concession”. They act as if we were doing other countries a favor by letting them export goods to our market. They view the academic perspective as hopelessly idealistic, even as the VSPs have worked hard to gradually move the world toward the same goal of freer trade, one agreement at a time.

Sumner goes on to say that the VSPs' chickens are returning to roost as first Trump then the EU succumb to managed trade - mercantilist - arguments. The most striking thing about the Brexit debate isn't its economic illiteracy (on both sides) but rather that, in the real world, neither side seems remotely interested in open markets. Indeed many of the arguments should have been put to bed while Wellington's boot was used to describe the oppression of the Corn Laws. Trade is only possible because of incredibly complicated sets of rules contained in huge tomes that only a few are able to understand. It's sad that governments - because of the effectiveness of business lobbies and the delusion of competition between nations - have created the situation where this sclerotic, rules-bound system makes it possible that a willing buyer in the UK is unable to get her goods from a willing seller in France (or for that matter The Phillipines). Anyone who thinks such a system is a good idea is, in my view, the worst sort of deluded fool. And, you'd hope that intelligent people would be trying to make sure such a system didn't come to pass.

It is, depressingly, what we've got. And the lawyers and bureaucrats aren't about to let something like 200 years of solid evidence backing up the best of economic theory get in the way of their lovely rules (there's a whole new can filled with self-interested worms right here). So the job isn't served by doing the right thing in terms of the evidence (more free trade, more open markets, lower tariffs, fewer regulations) but by making sure that, in the case of Brexit, the UK can leave the EU without a bunch of rules merchants crashing our economy simply out of spite. This is the only reason why a "no deal" option should be avoided - international trade still operates in an essentially mercantilist manner with the interests of producers sat round the table alongside the lawyers and bureaucrats and this means any settlement will, wrongly, be concluded on the basis of 'competitiveness', 'export' and 'protection' rather than in the interests of consumers.

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Not only is business good for society but so are bosses.

Andy is a local businessman. Employs about twenty people. Works hard - pretty much non-stop. Pretty typical of his sort. I want to tell you about his sort by way of response to this piece of Marxist bigotry:

...neoliberal bosses have something in common with child molesters. Both lack restraint in the pursuit of their own self-gratification in situations where they think they can get away with it.

I'm not beating up on Chris Dillow here for the crass correlation of businessmen with paedophiles but rather with his perpetuating the myth that the operation of trade - business - is merely a matter of "the maximal pursuit of money".

Andy had an employee who was diagnosed with cancer. It turned out pretty soon that this young man wasn't going to make it and, more to the point, he wouldn't be able to do the job for which Andy employed him. In Chris Dillow's fantasy of the businessman as an exploitative, MaxU, utilitarian, Andy would see the employee onto sick pay and that's end of it. Let me tell you what actually happened.

The dying young man was kept on the payroll - full wages despite not being able to work - right up to the day he died. When Andy discovered he'd no life insurance, he organised a fundraiser to get some cash for his wife and young kids. And he spent the last days of this man's life helping his family deal with what was happening.

There is a common shtick among left-wing (and not-so-left-wing) commenters that trade - doing business - attracts the worst sort of people and is, you know, just a little mucky and common. Wherever we look - film, TV, literature - business people are portrayed as bad people. Yet the reality is that the typical businessman or woman is no better or worse than the typical social worker, academic or Marxist columnist. And this means that, every day, business people act without consideration of maximising profits because they want to do the right thing. It's not just high profile things like paying for a woman's cancer treatment but a whole host of little things made possible because the business people have made some cash - anybody who has worked raising money for something like building a new village hall know just how businesses, large and small, are willing to help out. As 'Secret Millionaire' showed us, the idea of giving back, of helping, of making a place better is as central to business life as deal-making.

The late Barry Pettman, one of the founders of Emerald publishing, ran his other publishing businesses from his home at Patrington in Holderness. To make sure that the village post office kept open, Barry shipped everything to Patrington to go out through this little post office. For sure, Barry (who was born in a Hull council estate and was an academic economist) liked buying very expensive wine and grand cars (plus second and third homes in the USA and NZ), but his urge to make money was matched by his desire to see that money help the community where he lived. And what Barry did is repeated again and again across the world, business people are not soul-less Randian automata motivated solely by maximising utility but flesh and blood people with strong personal ethics, courage, faith and love. It's time we recognised this and put an end to the narrow "bosses are bad" perspective of people like Chris Dillow.

...

Marco, who owns around 150 properties internationally, including six in Preston, said he is willing to give extra support to the winning candidate as well as the keys to the top-floor flat, including footing the council tax bill for as long as necessary.

Read more at: https://www.lep.co.uk/news/millionaire-businessman-is-giving-away-a-flat-in-preston-for-free-1-8358210

Marco, who owns around 150 properties internationally, including six in Preston, said he is willing to give extra support to the winning candidate as well as the keys to the top-floor flat, including footing the council tax bill for as long as necessary.

Read more at: https://www.lep.co.uk/news/millionaire-businessman-is-giving-away-a-flat-in-preston-for-free-1-8358210

Quote of the day - faith and trade

Via Cafe Hayek comes this quote from Richard Cobden:

They who propose to influence by force the traffic of the world, forget that affairs of trade, like matters of conscience, change their very nature if touched by the hand of violence; for as faith, if forced, would no longer be religion, but hypocrisy, so commerce becomes robbery if coerced by warlike armaments.

It's a condemnation of trade warriors like Trump and those more gentle of sabre rattlers like David Cameron with his 'global race'. Trade isn't about wins, losses, victories or defeats. Trade is about mutual advantage, cooperation, collaboration and getting richer together. And the more free that trade the better.

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On the moral rightness of markets

This quotation comes, via Cafe Hayek, from Pope John Paul II's encyclical Centesimus Annus from 1991:

In this expanding economic community, the pope observed, a market system encourages the virtues of “diligence, industriousness, prudence in undertaking reasonable risks, reliability and fidelity in interpersonal relationships, as well as courage in carrying out decisions which are difficult and painful but necessary, both for the overall working of a business and in meeting possible set-backs.”

Too many people spend too much time trying to tell us that markets are some sort of moral vacuum and that, for all their usefulness, markets are essentially a necessary evil. Or even that they don't exist at all.

Truth be told markets are, as Pope John Paul II recognised, one way in which humans interact and for most exchanges in most markets the principle of the handshake applies. I recall a friend who provided legal support for the Showman's Guild describing a land deal between two showmen and how the seller, having spat on his hand and shaken with the buyer, would not even meet with another man who wanted to offer more money.

When I think of all the transactions and exchanges - whether or not money is involved - that rely on a high degree of trust in the other party (trust taken on faith not through some lawyer's contract), it seems to me that the market is a powerful force for goodness, for those virtues the late pope named. There are billions of exchanges and transactions every year, all taking place in a market, and a vanishingly small proportion of those events are corrupt, exploitative or unethical. It is, perhaps, this truth that we should focus on rather then the dry, utilitarian benefits of the market the economics text books speak of.

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The art of the possible - taking a pragmatic approach to trade and Brexit

“Politics is the art of the possible, the attainable — the art of the next best”

It's fair to say that Bismark was - as were many other 19th century politicians - pretty much a cynic. Or a pragmatist as a spin doctor might put it nowadays. Grand old Otto wasn't alone in this, Lord Palmerston, Benjamin Disraeli, Lord Salisbury all fit the same pattern. And set against them were a bunch of folk who had a vision of that shining city on the hill, a glorious future, an untroubled world - Chartists, socialists, liberals all approached politics as if man was perfectible and the ideological schematic they adhered to need only be implemented for us to reach Utopia.


The bad news is that mankind is not perfectible (something that the god-fearing have always know), human nature is not innately good, and what looks like the solution to life the universe and everything probably isn't.


So that's the end of it? We can dismiss ideology as simply the domain of Toryboys, Marxists and Libertarians can we? Get a solid broad-bottomed coalition of people who stress the practical, who are focused on action rather than thinking? Perhaps not for, in doing this, we abolish strategy in favour of a cavalcade of beautifully spun tactics - "what matters is what works", Tony Blair famously said without thinking about or defining what he meant by "works".


It seems to me that there are three possible responses to our vote to leave the European Union:

1. Ignore it and stay in

2. Implement some sort of Utopian dream of UK independence

3. Be pragmatic and practical - apply Bismark's dictum


One and two above are essentially ideological responses. I know that the Remainers want you to believe that they are somehow saving Britain from thick, stupid, xenophobic voters (and thereby saving 'law and democracy' from the 'extreme right'). There is no talking with such people since their position is immutable and absolutist - the referendum was 'advisory', parliament must 'vote', we need a second, presumably advisory, referendum, the law trumps democracy, and leaving is far to complicated. All of this is entirely ideological.


For the Brexit Absolutists there's a different obsession intended to rescue Britain from the arrogant, elitist, out-of-touch, anti-democratic establishment. As with the Remainers, there's no talking with such folk - Britain is full, Brexit means having nothing at all to do with the EU, problems in the NHS, social care and education are down to immigration, and we shouldn't wait but should leave now by repealing the 1972 European Communities Act.


One of the things that both Remainers and Brexit Ultras talk a lot about is trade. In the case of the former, we apparently had no trade at all with anywhere in Europe prior to 1972 and trade is entirely down to the granting of permissions by governments. The Brexit Ultras are divided on this between those who want a smaller, UK-only version of the EU's protectionist model and those who sign up to the 'Go Global' idea and talk a lot about free trade.

Now some people think all this talk of free trade is an ideological obsession bordering on a cult - introduce free trade and, alakazam, all will be well and everyone will be rich. And the logic of economic theory tells us these cultists are right - here's Don Boudreaux:

Put differently, the only economic reason for trade is that each of us produces some goods or services at costs lower than the costs that our trading partners would incur to produce those same goods or services. That is, each of us has a comparative advantage in supplying the goods or services that we sell to others, and a comparative disadvantage in supplying each of the many goods and services that we buy from others.

Any barriers placed by governments in the way of allowing this trade to happen - borders, tariffs, regulations and so forth - make that trade less likely and us all poorer (in purely economic terms). So when Brexit Ultras like John Redwood or Tim Worstall argue for absolute free trade they are doing so on the basis of a robust base of evidence. More open trade does make us all better off so, logic tells us, absolutely free trade is ideal since that would give the greatest chance of all being richer:

Edwards notes that past studies have suggested that countries that are more open to the rest of the world are better able to absorb the rapid technological advances of leading nations. If the costs of technological imitation are lower than the costs of internally developed innovations, then a poorer country will grow faster than a more developed one. This faster rate of growth will continue so long as that country remains open to capturing new ideas until, at some point, an equilibrium is reached and the rate of growth slows.

Edwards uses a new comparative dataset for 93 countries to analyze the relationship between openness and total factor productivity (TFP) growth. He notes that past limitations in appropriate comparative measures of openness have left studies on the relationship between openness and productivity open to question. To bolster his case, he uses nine alternative indexes of trade policy.

Edwards finds that more open countries indeed have experienced faster productivity growth, and that result holds true no matter which openness index he uses. He further finds that his results are not specific to a certain period, but apply generally throughout the decades 1960 to 1990.

One of the ironies the we can take from this fact is that the Brexit Ultras and Remainers are using the exact same argument on trade but coming to different conclusions. The latter tell us the UK will be poorer because we will leave the single market and lose the benefits of more open trade across the EU. And they are probably right. For the former, the EU is protectionist and leaving opens up new markets and new opportunities in fast growing parts of the world. Again they are probably right.


Indeed, it is true to say that the pragmatists - those seeking to find a way of squaring the circle implicit in the ideological positions of Remainers and Brexit Ultras - are supporting solutions that are less (in pure terms) economically advantageous. As ever the answer is that, even if we just use Adam Smith as our economics source book, the argument is not really rooted in classical liberal absolutism but is rather more subtle:

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value, every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

We are, Smith says, protectionists by preference so it isn't necessary for us to be made protectionists through fiat. The local preference that opponents of free market liberalism claim to support (and wish to enforce) is right there in the founding text of liberal economics - made possible by the 'invisible hand'. All other things being equal we prefer to deal with the bloke we know rather than the one we don't. Indeed making your business or product seem comfortable and familiar is one of the main purposes of brand advertising!

It seems that the ideologues are wrong. Not wrong in saying that mankind is enriched by trade and the more open the better, but wrong in suggesting that open trade creates a level playing field between Peoria and Penge, Peshawar and Peking.


I voted to leave the EU in the full knowledge that this could have a short-term negative impact on trade and, therefore, on our economic well-being. We would lose access to those currently important, (more-or-less) barrier-free EU markets more quickly than we could replace them with new open relationships elsewhere. This isn't an argument against leaving because we have to set that loss against a different set of economic problems - the train crash of the Euro, the collapse of political stability in Southern Europe, and the continuing slow growth across much of the continent.


It is, however, an argument for interim or transitional arrangements even if those arrangements result in a longer period during which the UK pays money 'to the EU' and in fewer domestic controls over immigration than we would prefer. We should always resist the blandishments of regulatory bodies - national or international - who tell us their purpose is to facilitate trade when this is seldom the case. But this doesn't mean those bodies that promote standardisation, encourage food safety, help control environmental risks and police fair dealing are somehow unwanted, merely that - for all their value in consumer protection - they do not enhance or promote trade.


The process between now and the point when the UK leaves the European Union is about these arrangements, about balancing between maintaining access to the EU and openness elsewhere, and about the UK deciding upon and implementing a trade strategy. It's not and never has been about there being some 'plan', a sort of ideological blueprint for leaving the EU. Such planning's main function is in allowing the testing of different scenarios and in exploring how UK domestic decisions play out internationally:

But this question also has a common sense answer that every trade policy practitioner knows: governments negotiate trade agreements not because they wish to reduce their own trade barriers but because they seek to reduce the trade barriers imposed by their trading partners, and they are willing to "pay" - with market access "concessions" of their own - for the enhanced access to foreign markets that lower foreign barriers would bring.

It is true, as some Brexit Ultras would argue, that governments can simply ignore this process and implement whatever they wish (this is, after all, the entire point of sovereignty as a concept) but the realpolitic of international trade is that the other side expect concessions. If we have nothing to concede then there is no trade negotiation and no trade deal. This was essentially the point made by Phillip Hammond in his interview with Welt am Sonntag - the discussions we will have with the EU are not one-directional meaning that the Union (or its individual member states) cannot dictate the terms and the consequences of demands from one side may not be helpful to a satisfactory conclusion.


In some respects the very loud argument between Remainers and Brexit Ultras (plus the Farageist protectionists) is helpful to the government. Not because it protects them politically but because it provides them with the means of controlling both sides - "look over there", they'll say, "that's what you'll get if you don't play the game our way." The result of this is very clear in the manner of concerns from both Keir Starmer as Labour lead on Brexit and the Brexit Select Committee of Parliament. Questions are asked, doubts are raised but there is a consistent message of "we won't prevent the referendum being implemented". This infers, however, that the 'deal' depends on the process complying with the pragmatic approach and derives philosophically from Bismark's dictum and Salisbury's doubt rather than from a predetermined ideological end-game.


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Hard or soft, eggs is eggs...the Brexit question

Except of course, just like your egg, there's not a clear line between hard and soft, a big range from barely cooked at all (very runny) to something you could use as a weapon (very hard). And everyone has an opinion - from grand economists and lawyers through to the last taxi driver you spoke with and the lady at the Co-op.

This is Simon's guide to making this decision. It's not definitive but it has the merits of being brief and information light.

1. You can make the egg harder, you can't make it softer. If a harder Brexit means removing ourselves from more of the entanglements we have with the EU then going back when we realise such a removal wasn't the best idea is more difficult.

2. The softest of soft eggs is still a cooked egg. The public voted to leave the EU - to put the egg into the boiling water. So barely cooked at all - the EEA option or similar - is still leaving the EU. And if we want it harder, we can always boil it a little more

So the logic here is to start soft - to step across the line that says "EU membership". This changes little (which is why some Brexit Ultras are opposed) but it has the merits of only ruling out things that are directly related to EU membership such as joining the Euro. Everything else remains available - from the 'semi-detached' situation inherent in being an EEA member through to the hardest of hard scenarios where our trade is determined by WTO rules alone and we have whopping great tariffs on imports (this is a really dumb idea and is why John Redwood shouldn't be allowed anywhere near trade policy).

What depresses me most is the persistence of Remain Absolutists who want to overturn the referendum result because "the people are stupid and lawyers are clever" (I summarise their position here but this is close enough - you can replace lawyers with academics, Guardian writers, bloggers, pundits or blokes who used to work at a bank). It would be rather more helpful if such folk accepted the result - ended the dreadful sophistry about it being 'advisory' - and argued for an initially soft Brexit achieved by stepping across that line.
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King Mongkut and the saving of Thailand's independence and monarchy.

Doesn't look anything like Yul Brunner

David Bassett who taught me South East Asian history at Hull in the early 1980s hated the musical The King and I. Dr Bassett was a mild mannered chap but when we began to look at how Thailand retained its monarchy and its independence, his hackles rose a little and he engaged in a gentle rant about the film's historical inaccuracy and, in particular, its portrayal of Thailand's saviour King Mongkut. The real problem is that the accounts of Anna Leonowens exaggerate her influence on both the King and on his son.

But that's a different story to the one I want to relate. For Mongkut did save Thailand and Thailand's monarchy. And on the day we hear of King Bhumipol's death, it's perhaps worth reflecting on the manner of that salvation. For when the Thais look at their closest neighbours - in Indo-China and in Burma - they see once proud nations that were cast into colonial slavery under the French and British. Moreover they can look more recently at the tragedies of independence for those places - at the impoverishment of Burma under Ne Win's lunatic Burmese Way to Socialism, at the millions dead and displaced by nearly thirty years of war in Vietnam and at the suicidal genocide Pol Pot visited on the Khmer.

Thailand - Siam - avoided this tragedy because it remained independent. And the members of Thailand's parliament stood for nine minutes in silence today because Mongkut saved the monarchy too. Far from the bumbling, lovestruck man of the film, Mongkut was an intelligent, wise, hard-working and effective monarch. Not the first or last victim of American historical revisionism but undoubtedly one of the more egregious cases of rewriting what happened to make it seem down to a Yankee.

In 1855 Mongkut - or rather his ministers led by (my favourite Thai of all) Somdet Chao Phraya Borom Maha Si Suriyawongse - signed a treaty with the Governor of Hong Kong, Sir John Bowring. Because we're western-centric, we usually refer to this as the Bowring Treaty:

Bowring Treaty, (1855), agreement between Siam (Thailand) and Britain that achieved commercial and political aims that earlier British missions had failed to gain and opened up Siam to Western influence and trade.

The treaty lifted many restrictions imposed by Thai kings on foreign trade. It set a 3 percent duty on all imports and permitted British subjects to trade in all Thai ports, to own land near Bangkok, and to move freely about the country.

Again we should appreciate that Mongkut and his advisors knew what was happening elsewhere - in China, in Vietnam and even in India. The Siamese negotiating position was not strong and Mongkut knew he had to arrange some sort of deal or see what had been done to the stronger and richer kingdom of Burma happen to his kingdom. Siam had some leverage from playing the British, French and Dutch off against each other but in the end a deal was concluded with Britain rather than with the corporate interests representing France and the Dutch. Sir John Bowring was an envoy of another monarch allowing Si Suryawong to get him in front of Mongkut so as to conclude the deal:

There shall henceforward be perpetual peace and friendship between Their Majesties the First and Second Kings of Siam and their successors, and Her Majesty the Queen of Great Britain and Ireland, and her successors. All British subjects coming to Siam shall receive from the Siamese Government full protection and assistance to enable them to reside in Siam in all security, and trade with every facility, free from oppression or injury on the part of the Siamese; and all Siamese subjects going to an English country shall receive from the British Government the same complete protection and assistance that shall be granted to British subjects by the Government of Siam.

For all that came afterwards, this moment in modern Thai history was central. In principle Siam was the equal of Britain (although everyone involved knew this was something of a conceit) and had kept its freedom at the cost of ending the Royal monopoly of trade, removing tariffs and allowing British - and subsequently through further treaties, American - merchants to operate freely within the kingdom.

So today I know Thailand will, while mourning the passing of King Bhumipol, nod to history and to the time when an earlier wise king secured peace and independence by signing a trade deal with the world's most powerful nation. Thailand is a great country because of Mongkut - it's a shame our view of him is of a bald, buffoon in a 1950s Hollywood musical. Dr Bassett was right, he deserves - and Thailand deserves - much better.

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Paul Krugman on the Pound (and how Brexit voters mightn't be so dumb after all)

Krugman knows his apples (or is it onions) on trade - it's what he got his Nobel Prize for after all. So this little comment on Brexit and the Pound is interesting:

Pre-Brexit, Britain was obviously experiencing a version of the so-called Dutch disease. In its traditional form, this referred to the way natural resource exports crowd out manufacturing by keeping the currency strong. In the UK case, the City’s financial exports play the same role. So their weakening helps British manufacturing – and, maybe, the incomes of people who live far from the City and still depend directly or indirectly on manufacturing for their incomes. It’s not completely incidental that these were the parts of England (not Scotland!) that voted for Brexit.

Rather questions the automatic presumption that people in Barnsley and Boston voting for Brexit were voting against their interests.

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Free exchange (that's trade folks) makes everyone richer...

Alright. I know. We don't like Paul Krugman. He's that snarky left-wing economist with a beard and a New York Times column. And he's levered his Nobel Prize in economics to become the poster boy of progressive economic commentary.

But we really should take note of what he says when what he says is the stuff he got a Nobel Prize for. This is like paying attention to Paul Nurse when he's talking about genetics and cancer research but treating him with contumely when he sounds off about climate change.

Paul Krugman's Nobel Prize is for trade economics. So when he writes an essay about comparative advantage we should listen. Certainly we should listen more to Krugman than to folk like the late Sir James Goldsmith. Here's Krugman:

What is different, according to Goldsmith, is that there are all these countries out there that pay wages that are much lower than those in the West -- and that, he claims, makes Ricardo's idea invalid. That's all there is to his argument; there is no hint of any more subtle content. In short, he offers us no more than the classic "pauper labor" fallacy, the fallacy that Ricardo dealt with when he first stated the idea, and which is a staple of even first-year courses in economics. In fact, one never teaches the Ricardian model without emphasizing precisely the way that model refutes the claim that competition from low-wage countries is necessarily a bad thing, that it shows how trade can be mutually beneficial regardless of differences in wage rates. The point is not that low-wage competition never poses a problem. Rather, what is significant is that despite ostentatiously citing Ricardo, Goldsmith completely misses one of the essential lessons of his argument.

Now you'll be familiar with Goldsmith's argument (it was - in the manner of Oolon Colluphid - the central premise of Sir James' book 'The Trap') as it now forms the core of the argument from Donald Trump, Nigel Farage, Marie le Pen and many others - either foreigners over there are doing us out of jobs and cash or else foreigners coming here are doing us out of jobs and cash. Sometimes this argument is fluffed up with fancy words, sometimes it has a dash of scientific racism (you know - black people are genetically thick but good at sports) but in the end it's the same - trade is bad.

I'd add here that this nativist argument makes common cause with the protectionist argument beloved of the anti-market, socialist left. Some of this anti-trade stuff is presented as wanting 'fair trade' or as protecting workers rights. A little bit of saving the planet is added in for good measure to created a sort of 'I'm all right Jack' autarky.

The thing that Krugman explained is that, while trade does have losers, these are vastly outweighed by the winners. Trade - free exchange between individuals - is mutally beneficial. It's not a competition between nations, it's not a 'global race', and it's not a winner-take-all game of international treaty poker. The whole bloody point is that both participants gain.

We sort of understand this in our daily lives. Most businesses aren't trying to take advantage of you - they've got stuff to sell you and you buy it because you think it will enhance your life (or fix a problem which amounts to the same hill of beans). And when it is boiled down this is all trade tells us - if we focus on doing the stuff we're good at and other folks do likewise then the whole world benefits from that specialisation. But only when we allow free trade.

The problem is that, as Kipling observed, we have small hearts so get stuck in the idea that somehow buying stuff made on the other side of the world is doing people here out of a living. What comparative advantage tells us is that, however much empathy tells us otherwise, this ain't so.

In the end, free trade like free speech and free enterprise is what makes for our great world. We should not let up in making sure this isn't destroyed by powerful people pretending that somehow we'll be richer is we restrict trade. Trust me on this one, Corbyn, Trump, Farage, Le Pen and all the other opponents of free trade - they lie when they say their autarky will make us richer.

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Quote of the day - on Trumpish economics and free trade

Shared from Don Boudreaux at Cafe Hayek - the riposte to Peter Navarro, Trump's economics advisor from George Selgin, Professor of Economics at the University of Georgia:

Thank goodness that, being more enlightened than in the past, we no longer will tolerate, much less provide a public forum to, such uncouth bigots as still persist in accusing the Jews of trying to take over our economy and subvert our way of life by lending us money on better terms than our fellow gentiles can offer. No sir. We have advanced well beyond that. We now devote op-ed space in the New York Times to uncouth bigots who blame the Chinese for trying to take over our economy and subvert our way of life by selling goods to us for less than what our own manufacturers can offer.

There are two things I take from this 'neo-mercantilism': the first is that, from my experience at least, there are plenty of Trump supporters who still cling to that old Jews taking over the world shtick - this, as it happens, is something they share with a lot of Jeremy Corbyn supporters (up to the substituting of the word Jew with Rothschild or Zionist).

Secondly, we have got trapped in popular myth-making over imports. Popular opinion thinks it is a bad thing for places somewhere else in the world who can make stuff cheaper than us to be allowed to sell that stuff to us. The argument is wrapped up in stuff about protecting jobs, supporting "emerging industries", and supporting business. The idea of trade has become some sort of international sales push where we try to flog loads of our stuff to foreigners on the back of things called "trade deals". The idea that open trade is mutually beneficial seems to have been lost in our discussions. No-one is saying that trade isn't something negotiated by governments but something freely entered into by individual people and companies.

More than anything else, it is this lie- that trade is a zero-sum game at which we can win or lose - that allows for the malign politics of isolation, protectionism and import-substitution. As a result Trump, Farage, Corbyn and Le Pen are able to exploit a population stuffed by all the media with nationalist myths of sinister foreigners doing us out of our fair share. If we lose the idea of trade - open, free and fair - we risk moving to a new dark age where international power goes to the men with the biggest sticks and where the ordinary consumer pays more for lower quality goods because those men haven't finished waving those sticks yet.

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Interesting stuff I found down the back of the sofa (plus a comment on grammar schools)

Trade is good.

Clearing out my pockets - here's a few things (other than lint and misformed paperclips) I found:

Big cities are bad for health (this sort of reminds us what public health really is about):

Dr. Seth Berkley, CEO of the vaccine alliance Gavi, points to the recent increase in the scale of densely populated urban areas, many without adequate sanitation, as turning containable illnesses like Zika and Ebola into pandemics. Dense urbanization may not have created Zika, which causes newborns to have unusually small heads, he notes, but it has accelerated its spread from a mere handful to a current tally of 1.5 million cases this year.

Tokyo doesn't have a housing crisis - because it has sensible (aka laissez faire) planning rules:

Here is a startling fact: in 2014 there were 142,417 housing starts in the city of Tokyo (population 13.3m, no empty land), more than the 83,657 housing permits issued in the state of California (population 38.7m), or the 137,010 houses started in the entire country of England (population 54.3m).

Ideology presented as fact - the curse of economics (here's a good example of the genre):

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

And globalisation (meaning free trade and immigration since you asked) is good for the working class:

There isn't an economy in the world — now or ever — that could have endured such massive blows without a major hit to its people. But the worst that has happened in America is stagnant wages. Remarkably, our quality of life has continued to improve.

They never tell you how fast Africa is growing (or that it's down to capitalism - also socialism was what made Africa poor):

Some of Africa’s growth was driven by high commodity prices, but much of it, a McKinsey study found in 2010, was driven by economic reforms. To appreciate the latter, it is important to recall that for much of their post-colonial history, African governments have imposed central control over their economies. Inflationary monetary policies, price, wage and exchange rate controls, marketing boards that kept the prices of agricultural products artificially low and impoverished African farmers, and state-owned enterprises and monopolies were commonplace.

The rise of the far-right is down to the EU (prize for spotting the huge factual error in the article):

All “civilised” politicians in the founding EEC nations agreed nationalism must be overcome. Christian Democrats, Social Democrats, Socialists, Euro communists, all the mainstream Continental political groups agreed that old-style patriotism was at best embarrassing, at worst dangerous and wicked. This meant that ordinary Frenchmen, Germans, Dutchmen, Belgians who wanted to stay French, German, etc had no-one else to vote for but extreme nationalists. Anyone wishing to oppose ever-closer union had no other home than among the xenophobic fringe parties.

It's not just technology but finance that's changing car ownership:

With the rise of companies like Uber and Lyft, it’s clear that we will need to see advances in new ownership models to support tomorrow’s transportation landscape. In fact, Uber recently received a $1 billion credit facility led by Goldman Sachs to fund new car leases. Uber (and Wall Street) are also recognizing the need for more flexibility with this deal — especially at a time when Americans are making larger monthly payments than ever on their cars and taking out record-size auto loans.

The impact of Brexit on projections for housing requirements (sexy stuff I know):

In summary, the current basis for UK estimates of housing need are already predicated on a 45% drop to total net-in-migration by 2021, so for Brexit to have any downward pressure on planned housing targets in Local Plans, it would need to be assumed that Brexit resulted in European net-migration to the UK falling to virtually zero over the medium to long term. This seems unlikely.

A brilliant article - essentially a film review - on small town poverty and decline in the US mid-west (and a glimpse of why Trump):

In Medora we see not only poverty, but nearly complete social breakdown. I don’t recall a single player on the team raised in an intact family. Many of them lived in trailer parks. One kid had never even met his father. Others had mothers who themselves were alcoholics or barely functional individuals. They sometimes bounced around from home to home (grandmother, etc.) or dropped out of school to take care of a problematic mother.

Finally I can't resist a comment on grammar schools. They really aren't the answer to educational challenges but at least the Conservatives are looking at system reform rather than saying the solution is putting more money into institutions - big urban comprehensives - that are failing children.

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Trade deals are more likely to be about fruit and fungus than tariffs

Yesterday New Zealand suspended exports of Kiwi Fruit to China. Not because of some new form of vegetable-based trade war but for reasons of biosecurity:

New Zealand has suspended its lucrative kiwifruit exports to China after authorities there say that on some shipments they found a type of fungus that can cause the fruit to rot.

Kiwifruit exporter Zespri said in a statement Friday it hopes to have new pre-shipping protocols in place within days so it can resume exports.

We should note that China has a bit of a dodgy track record on using health concerns and biosecurity issues as a weapon in trade battles - most notably over the cordyceps mushrooms (the weird parasitic fungus sometimes called Himalayan Viagra) - and there's a hint of some of this activity here:

New Zealand Trade Minister Todd McClay said last month he had been made aware of reports claiming China could take retaliatory trade action if New Zealand investigated allegations of steel dumping there.

But regardless of these issues, it's important that we appreciate how sensitive biosecurity is for many agricultural products. We laugh and joke about giant poisonous spiders in banana shipments but by far the biggest problem is the spread of fungal contamination. We should remember that fruit and vegetable production is often in a cloned, genetic monoculture - the starkest example of this is those bananas (with or without spiders):

A type of Fusarium wilt appeared this year in Australia’s main banana-growing state after spreading to Asia and Africa. While the fungus has been around since the 1990s and has yet to affect top exporter Ecuador, Fresh Del Monte Produce Inc. called it a potential “big nightmare.” The United Nations says the disease threatens supply, and Latin American growers are taking steps to limit the risk.

Every single banana is a clone of the same Cavandish banana plant - they are genetically identical and have no protection against Panama Disease, a fungal infection that is spread via contaminated soil. It is no joke for a multi-billion dollar industry (and don't give me any fair trade nonsense - those small plantations have worse biosecurity than big plantations) as it could be wiped out. As an aside here, it's worth noting that the EU's criminal opposition to GMOs might prevent a solution to the banana crisis that's being developed in East Africa.

To take a third example: Egypt is the world's biggest grain importer but has, until recently, consistently prevented imports with even the slightest trace of the fungus ergot. Without going into too much detail this makes it nearly impossible to import grain from anywhere with a damp climate. After a flurry of negotiations - and remember Egypt needs this grain to feed its huge urban population - a fix was found:

Egypt, which rejected several wheat cargoes this year for fungus contamination, is set to instruct officials to follow international standards that permit a small amount of the fungus known as ergot in imports.

The Cabinet on Tuesday backed allowing shipments containing 0.05 percent ergot and Agriculture Ministry spokesman Eid Hawash said an official decree ordering the quarantine office to accept that level may be issued Wednesday.

All this stuff has become - because of the Brexit vote - rather more significant for the UK. In the Egypt example, officials were applying a law (itself derived from UN FAO regulations) dating back to 2001 rather than more recent ones. And we should remember that the problem doesn't just relate to the exporting nations - in many ways imports matter just as much. The impact of grain shortages in Egypt would be higher food prices in Cairo and Alexandria - with all the dire possibilities this might bring.

If you're sad enough (like me) to have news alerts set for fungi then you'll see the concerns about spreading fungal infections - from ones killing bats or amphibians through worries like ash die-back to the concerns we see above about negative impacts on biosecurity and public health. When we talk about 'trade negotiations', we need to understand that these aren't about striking deals between one country and another (such 'deals' are just grandstanding for politicians). Negotiations are about agreeing rules that permit trade while protecting against the possible negative affects of that trade and getting consistent regulation on things like how much hallucinogenic mycotoxin it's OK to have in a bushel of wheat.

It also means that botanists - and mycologists - are as important as lawyers or economists in getting the best deals for the UK!

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An idiot's guide to why we should leave the EU (Pt 2) - Trade

Trade. Yeah that's ever so much to do with government. All government - local, regional, national, supra-national, world - does is prevent trade. The rules and regulation, controls and restrictions, barriers and prohibitions - everything (bar geography) that prevents trade has been imposed by government. So when those fans of the EU tell you that being a member of this bureaucratic, unaccountable, undemocratic club is 'good for trade' they are lying. No government of any sort, anywhere has been 'good for trade'. It's not what governments do. Governments find reason to stop trade. And then negotiate so-called "trade agreements" to pretend that somehow government is promoting or encouraging trade.

Trade is essential and fundamental to our humanity. It's not some sort of capitalist invention but the way by which we share, by which we add to the sum of human happiness, how we add value. The idea of free exchange - I swap my surplus goat for your excess corn - is what has raised us to the condition we are in today. Absolutely nothing at all to do with government, let alone the EU.

So when the folk that like the EU tell us that it would affect Britain's trade what they're giving you is a threat. The EU - a powerful government - will stop ordinary people who make ornate left-handed widgets or provide the horoscopes of Wu from selling said goods and services in the EU. Why would that powerful government do that? Mostly because it wants to protect the interests of widget makers and horoscope vendors who've employed besuited lobbyists to buy those unaccountable EU decision-makers food and wine in expensive Brussels restaurants.

Who loses out here (assuming that there has been a fix to protect those widget-maker or horoscope-crafter interests)? The EU consumer - they're poorer for that fix, they don't have high quality English made widgets or Welsh horoscopes. Forget about the numbers that EU fans peddle - they're nonsense. Ask a sensible question - why on earth would people in France, Germany, Spain or Poland not want to carry on buying those lovely left-handed widgets and Wu-ist horoscopes? The idea that, if we left the EU, customers in Slovakia and Austria would stop buying our stuff is plainly nonsense. Yet that's what they're scaring you with.

British companies trade everywhere - America, Africa, India, China, Japan - without there being the need for an EU equivalent. Yes it's difficult (this is why the directors of international trading companies get paid so well) but that's as much about culture, language and local knowledge as it is about dealing with the endless barriers that stupid governments put in the way of doing business. These companies don't need permission from government to do that trading, they just get on with it.

Ignore the macro-economic projections - this is just sympathetic magic not real science - and look at the truth. Trade is about the exchange between individual people and their businesses not the so-called deals of governments. Those deals are about monopolies, control and power which is why the grandees of big business and the their paid servants in 'public affairs' companies spend so much of their marketing budgets on getting regulations changed.

Look instead at Singapore, at Hong Kong, at Taiwan and ask why these places - rejected places - are among the richest places in the world. Their success is down to trade - no deals, no fear-mongering about economic blocs, no fixes. Just doing good business, making and selling things that people the world over want to buy. Do you really believe that somewhere as enterprising, creative, original and intelligent as Britain can't do the same? That the only way we can succeed in trade is through a fix, through protection and through the special deal?

Trade made Britain rich. And it will maintain our riches. But only if we see it as something done between free people rather than some favour of government. The EU - just consider the Transatlantic Trade and Investment Partnership (TTIP) - sees trade as something negotiated between rulers not as you or I buying things that we want from wherever in the world they're from. This isn't 'trade' it's the antithesis of trade, it's deciding where the boundaries of special interest and protectionism are placed. It makes the world poorer and the rent-seeker richer.

So when EU fans tell you it's about trade they mislead. What they mean is that the EU will make European consumers poorer so as to protect the interests of businesses who've paid - through their besuited lobbyists - to have their interests placed above yours and mine. It's not about trade. It never was about trade. It's about stopping trade, controlling trade and, in doing so, making you and I just that little bit poorer.

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Why you can't buy French cheese in Norway (a case study in pro-EU ignorance)

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Some readers will recall the Great Norwegian Butter Crisis:

With the sense of national crisis deepening, the national daily Aftenposten ran a two-page spread with instructions on how to make your own butter. It's all a big disappointment for the domestic goddesses of the north for whom butter is a standard Christmas staple.

"I need butter today to make my lussekatt buns and my Christmas biscuits," grumbled one elderly Norwegian. "I brought up my four children under German occupation but this is nothing like that."

And the readers who got beyond having a great old laugh at the Norwegians will have learned that the reason for the butter crisis is Norway's deranged (this is genuinely the only way to describe them) agricultural protection policies:

"The problem is more to do with a lack of competition in the market," he said. "Tine is a monopolist in the market as a result of outdated postwar regulatory regimes in a concentrated market with high entry barriers."

Put simply Norway requires its milk producers to sell to one producer of dairy products and then slaps a complicated bunch of quotas, limited, controls and regulations of the industry. All this before lumping on a huge tariff on imports.

Hence the abject ignorance and stupidity of this remark (from the Director of Britain Stronger In Europe):




For, had Will Straw known about the Great Norwegian Butter Crisis, he would have been a little slower in suggesting that the lack of Camembert in Oslo was down to the French not wanting to sell the stuff to Norwegians:

Cheese imports from the EU that were hit by the tariff, including Gouda and cheddar, became almost three times more expensive when the tariffs took effect January 1, driving many brands out of the Norwegian market. EU politicians claim the punitive tariffs have damaged trade and not least Norwegian consumers, and kept European cheeses out of the Norwegian market at a time when Europe needs all the trade it can get because of its economic crisis.

So there you have it - the problem was caused by the decisions of idiot politicians in Norway rather than idiot politicians in Brussels. And, if Will Straw wants to make the case for staying in the EU, then he really ought to get his facts straight.

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Tim Montgomerie perhaps needs to learn the difference between business and markets

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Montgomerie is on about Donald Trump and, in the main his little article is pretty much spot on. Except for this bit:

Conservative Brits may look on in amazement — but it’s worth remembering that Trump does have a point. It wasn’t Karl Marx who accused leading business people of being ‘all for themselves, and nothing for other people’. It wasn’t Friedrich Engels who condemned the ‘mean rapacity’ and ‘sneaking arts’ of many merchants and manufacturers. It was Adam Smith. The father of modern economics wasn’t an uncritical defender of free enterprise. He knew that markets could lead to extraordinary selfishness.

Or rather the last bit. Markets, where they are allowed to operate freely, are not selfish because they depend on the mutual benefit to buyer and seller. Nor was Adam Smith against free markets or even critical of free markets. What Adam Smith hated was mercantilism and the cartel, the core economic position of what I call 'business conservatives'. Sometimes this gets called 'crony capitalism' (a term widely used to illustrate what goes on in the US system and in the EU but was first coined to describe the rapacious kleptocracies of Marcos in the Philippines and Suharto in Indonesia).

We should be now have learned the lesson Tony Blair taught conservatives - that the old adage of the business conservative, "what's good for business is good for the nation", doesn't apply. It is what is good for consumers - for the people - that matters and we know that, in economic terms, 'good for the people' almost always equates to free enterprise and free trade. What Smith railed against was that businesses clubbed together to fix markets, that they pressured governments to introduce protectionism, and that they supported regulations that prevented new competition from developing. For Smith free trade and free enterprise were the solution not the problem.

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How free exchange and the 'sharing economy' is the best route to peace, love and understanding

Trade - sharing, mutual benefit, fun and freedom

We're in the pub and run into a couple we know from the village. With this couple is another, French, couple who are staying. That's how it's described because the couple we know let out a room in their house through AirBnB. So we chat to them (and the French couple) about the experience - it's a new thing to us and, like Uber, something that's new and a little bit different. Both couples, in their different ways, describe it as a shared experience. Not just a cheap room in a Yorkshire village but a chance to share the wonders of the South Pennines with visitors keen on a different experience.

What this part of that new sharing economy isn't is:

"...the shabby economy, the frugal "make do and mend" society where no-one will buy anything unless they absolutely have to and everyone is running down their existing assets"

The couple we know have a lovely house. They've spent a lot on improving it - not so they can rent it out but so they can enjoy living there. And, while they've a young family, a little extra brass coming in from the rentals helps. And the French couple, they got to stay pretty cheaply in Yorkshire as well as getting lots of hints and tips about what to do and where to go. Plus - as our visit to the pub showed - the visitors are welcomed into a little bit of our community.

Apparently though, all this is wrong:

Indeed the whole idea of the "sharing economy" seems to be based not on the idea of working together to produce something for mutual benefit (the cooperative principle) but on millions of people scraping a living by selling services and renting assets to each other. How does this add value to the economy over the longer term? There is no production. It is entirely consumption.

Now, leaving aside that (unless I've misread all of my economics) the whole point of production is so we can consume, it strikes me that the little example above demonstrates the complete falsity of the argument. The two couples both gained something - part financial (a cheap holiday, a rented room) and part non-financial (the pleasure of a shared experience). It's true to describe this disintermediated economy as:

It's trading.

But the idea that there is not shared experience or mutual benefit in the process of exchange is completely wrong. Let me illustrate with another story.

We've just moved house and were in the market for some new lights. We found what we wanted in a great new shop in Bradford called Artzi. The lights are beautiful (and Turkish - I hope that's not too 'colonialist') but weren't cheap. Anyway, Kathryn goes into haggling mode - this is the woman who haggles with on-line exchange dealers for fun - and a gentle, smiling battle ensues with the shop owner. A deal is struck and, almost together Kathryn and the shop owners exclaimed "I enjoyed that". Trading is a pleasure, the route to mutual benefit - without that mutual benefit there is no exchange. And it doesn't matter whether it's selling a fancy bit of technology, renting a villa in Morocco or hiring a cab in London, without mutual benefit there is no market.

The big thing about the 'sharing economy' is that it opens up the opportunity to trade. In that controlled world of "advanced manufacturing and high-tech services" the masses really are just consumers. In the world of Ebay, AirBnB and Compare and Share, ordinary people are both producers and consumers - the result of the disintermediation these businesses bring is an explosion in that wonderful shared experience of trading. From millions of shuffling drones in 9-5 jobs, we've suddenly the chance to add a little bit to this that's ours not the bosses'.

Over the past few weeks we've been part of that world - as we downsized our home, we've been selling some things on Ebay, giving other stuff away via Keighley Freecycle and taking several car loads to the Sue Ryder shop in Haworth and the council tip at Sugden End. And this experience has introduced us to all sorts of interesting folk - the bloke from Nottingham helping his daughter furnish her first flat, the couple in Somerset buying a bathlift so they don't have to move, and the woman who buys tatty old furniture and paints it up in fancy colours for resale. To describe all this creativity as "shabby, unproductive, stagnant, mean and distrustful" is not just wrong, its really rather rude.

What the 'world wide web', the Smartphone and the innovation of people making use of them is doing is opening up closed corners of the world, spreading the opportunity to trade and doing the thing mutual exchange does - spreading peace, love and understanding (plus a little cash). Long may it grow and succeed.
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On international aid...

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I wrote this a while ago - still stands and is relevent as we debate whether to set an arbitrary requirement that we spend 0.7% of GDP on international aid:

I really don’t care whether the UK spends 0.5% or 0.7% of GDP on aid – what I care is that the money actually does some good.

Taking this view doesn’t make me some kind of moral leper, someone who doesn’t care about the development of Africa or the suffering of the world’s poor. Indeed, those who advocate increased aid budgets but support the subsidising of western agriculture should look to their own contradictions – the Common Agricultural Policy does more damage to Africa than our aid programmes do good. And much the same can be said for other market distorting actions of the developed world – the structure of financial regulation (making it ever more difficult for developing countries to build a financial sector – even massive countries like India), the subsidising of basic industries, the dumping of production surpluses in the name of “aid” and much else besides.

If we really cared about helping Africa transform we would start removing these barriers, we would concentrate on opening up our home markets to the products of poorer countries, we would incentivise moving production upstream (processing and packaging the coffee in Ethiopia rather than Banbury maybe) and we would concentrate our aid on disaster relief, educating women and disease prevention.

Instead we choose to wave and shout about how good we are and how much money we spend. I find this sad.

 

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"Oh them? They're trade." Thoughts on who the Conservative Party is 'for'...

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This post is a bit of a mish-mash - partly it bounces off Chris Dillow's idle considering of who the Tory Party is 'for' and partly it extends on my own musings about the continued disdain - from professionals and increasingly from public servants - for people who make their living running private businesses. A while ago I wrote about my mum having to use the 'tradesman's entrance' to deliver meals-on-wheels to the relicts of vice-admirals:

So mum delivered the dinners to these very posh ladies, so posh that, for one, mum had to go through the kitchen door. The front door was only opened for visitors and mum, for all that she was bringing the only hot meal that lady would get that day, didn't qualify as a visitor. Mum was trade. And trade used the kitchen door.

This was pretty typical of a 'certain sort' - there was something slightly grubby about the mundane business of producing and delivering the goods or services people need. And front doors weren't for that sort of thing. However, we should be more concerned by the constant drip of 'profit is bad' arguments emanating from the publicly-employed middle classes.  Partly this argument is a response to the perceived (wrongly perceived, I would judge) threat to these comfortable public servants that comes from the disruption of public monopoly - either by fiat through outsourcing and competitive tender or else through technology throwing up different approaches to the services those public monopolies deliver.

However, I was struck by this extract from an essay by Don Boudreaux about the work of Deirdre McCloskey on the reasons for capitalism's success:

Until the 17th century, those who earned their living through trade were the Rodney Dangerfields of their eras: they got no respect.  Merchants and other people operating on the supply side of commercial activities and transactions were tolerated.  But they were viewed and spoken of with contempt.  Unlike warriors who dirtied their hands honorably (namely, with blood), traders dirtied their hands dishonorably (namely, with profit).  Unlike the nobility who got their riches honorably (namely, by idly collecting land rents), merchants got their riches dishonorably (namely, by actively trading).  Unlike the clergy who won their rewards honorably (namely, by pondering the eternal), the bourgeoisie won their rewards dishonorably (namely, by responding to what Hayek later called “the particular circumstances of time and place”).

I would suggest the 'profit-is-bad' argument justifying public monopolies (and indeed justifying creating new public monopolies) still echoes what Boudreaux is saying - not simply the view that such a public monopoly in say transport systems is a better way to run those systems but that, by removing profit, the system is morally better regardless of whether the service it provides is improved.

We see, in the ever more shrill and strident verbal assaults on News Corp and the Daily Mail, another echo. Indeed, the attack on free speech implicit in the Leveson witch hunt should remind us that the target wasn't the press in general but the for-profit press and especially the part of the press making profits for Rupert Murdoch. The behaviour of The Guardian (owned by a trust) or the BBC (a public sector body) was not under scrutiny in this process because these are noble undertakings whereas Rupert and Paul are merely trade. Indeed the sneering dismissal of Rebekah Brooks on the basis of her working-class - 'trade' - roots amplifies the echoes of the time when business was grubby. Reading some pieces you can almost hear the shock at hearing Rebekah, the daughter of a 'tug-boat captain', was allowed in through the front door.

So when Chris Dillow observes in stumbling around the target audience of the Conservative party comments that:

Now, you might reply that this merely shows that Tories are the party not of big business but of economically illiterate little Englanders - hence its vulnerability to Ukip.

Even this, though, isn't wholly clear. Austerity has clobbered a lot of traditional Tory voters - older, wealthier people who have suffered from low returns on their savings. This makes me wonder whether our (OK my) longstanding prejudice is actually true. Maybe the Tories are not any longer the party of big vested interests in general.

...I am struck by the realisation that the Conservative party is 'for' (if that means much these days) people who work in the world of making goods and producing services that are sold in markets, some of which might be free and open. And the Conservative Party isn't just 'for' the owners and directors of these free enterprises but it is 'for' all the people who work in those businesses - from the boss to the tea boy, from the financier to the cleaner. In the broadest sense of the word, embracing the sneering meaning 'trade' held for many in the traditional elite and in the professions of law and medicine, the Conservative Party is 'for' trade and 'for' the people who engage in trade.

And I would like to think, against those people who literally or metaphorically make people like my Mum use the kitchen door.

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Plain packaging is anti-capitalist complains Cuba...

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Odd bedfellows! But I guess that when one of Cuba's top export industries is threatened all those socialist principles get dumped sharpish:

Cuba’s letter to the WTO’s Committee to Technical Barriers on Trade concluded: “Cuba expresses great concern over the UK Parliament’s decision to move ahead with the process of implementation of plain packaging of tobacco products, without waiting for a settlement of the complaint against Australia before the WTO Dispute Settlement Body.”

Still it made me smile.

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The good of community and the bad of government - in one paragraph

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From a blog post entitled  "How Africa Works":

This is Ronald Ngala Street Nairobi, it 6.00 in the evening, multitudes on their way home, buses honking their way through the city. The hawkers in coordinated chirrups as they sell their wares, from; vests to Chinese watches, handkerchiefs to exotic Kiwi fruits, they trade their ways. All of a sudden hell breaks loose, the hawkers dis-assemble their small table top shops within seconds and run, run they must from the dreaded City council police. Some hawkers with their tiny toddlers, some pregnant they disappear among the multitudes, they will be back. Much, much later in the night they will sit together, each will contribute to the benevolent fund and each will contribute their savings and credit scheme, one of them will walk with five thousand shillings today.

Community and freedom works, government tries to stop it working. Sadly 'twas ever and everywhere thus.

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