Free trade – whatever the cost?

Free trade and a hard Brexit are all but synonymous. There’s an obsessive quality about free traders, men on a mission, who feel their time has come: seize the moment, lest it slip away.

Daniel Hannan and Boris Johnson recently helped launch the Institute of Free Trade, arguably duplicating the work of the long-established Institute of Economic Affairs. I’ve always had a sense of vast lacunae between argument and reality among free traders, and I turned to an article on the IEA website, by its chief economist, Julian Jessop, to check out whether this judgement was justified. For the full article see:  https://iea.org.uk/whos-afraid-of-free-trade/

Jessop expresses puzzlement as to why ‘the economics commentariat’ (i.e. most economists) had given a ‘sceptical, with some downright hostile’ response to two papers advocating a policy a free trade once the UK leaves the EU, by Professors Kevin Dowd and Patrick Minford.

It may be unfair to quote passages and not reproduce the whole article, but to my mind they do speak for themselves.

‘… it has been suggested that Prof Minford’s analysis shouldn’t be taken too seriously because his forecasts of the economic and market impacts of the vote itself were inaccurate. As it happens I don’t know what Prof Minford was forecasting in 2016. But nor, frankly, do I care….’

‘Professor Minford’s current and past work in this area has been challenged for using what some regard as a simplistic and out-dated model of world trade. But the ‘gravity models’ favoured by many of his critics also have their flaws. Even if Professor Minford’s numbers are only as good as his models (which is always the case) …’

The phrase, ‘the underlying principles are as sound as any’, is key: there is a millenarianist belief in free trade as a universal panacea, the UK’s adoption of which will open the eyes of the rest of the world, as Britain did once before, in the early 19th century. ‘Gravity models’ refers to the long-established and incontrovertible pattern of a much heavier weighting toward trade with one’s neighbours, than with more distant countries.

Nonetheless, whatever the correct interpretation here, these legal points do not weaken the more important economic argument that the UK would be better off lowering its own trade barriers regardless of how the rest of the EU responds.

Free trade it seems works because it works, regardless of circumstance. In what sense better off – who would be better off?

‘… of course, there would be some losers from free trade among consumers as well as producers …

‘….there would be some losers..’ The reality is that the disruption would be extraordinary.

Others have suggested that trade can never be fully ‘free’, because of non-tariff barriers. But this is tedious semantics. Even if unilateral free trade only results in freer trade, relative to the status quo, that would be an improvement.

‘…tedious semantics’? There’s an impatience here, a touch of the Gadarene swine.

What then about things that we do produce ourselves but where other countries have a genuine comparative advantage? Why should we subsidise domestic producers if consumers can buy better or cheaper products elsewhere?

A few suggestions as to why… Easily disrupted supply chains, sourcing expensively at long distance, security implications, quite apart from the disruption to urban and rural landscapes as industries close and new ones – we would hope – spring up elsewhere. But in the chaos, and the economic disruption, what certainty is there that new industries, competitive on the world stage, would rise up?

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Read the whole article: you may find you’re on his side, not mine.

Swift, clean victories

There’s an intriguing book just published by military historian, Lawrence Freedman, entitled The Future of War: A History: it focuses on (to quote the Economist review, 20th October) ‘how ideas about future wars could be fought have shaped the reality, with usually baleful results’.

‘Swift, clean victories’ have long been ‘baked into concepts of future war’, WW1 being a prime example. It would all be over by Christmas. In our own time we’ve civil wars rather than wars between nations, urban and guerrilla war, and hybrid, cyber warfare. Wars feed on themselves, self-perpetuate as they ever did.

Freedman’s message to policy-makers, the review concludes, is to beware those who tout ‘the ease and speed with which victory can be achieved while underestimating the resourcefulness of adversaries’.

I’m reminded of the current Brexit discussion. First create your adversary, as we’ve done, and then under-estimate his capabilities, and all the while assume that radical change, and even outright victory (and it would be seen as ‘victory’: we are combatants), can be achieved quickly.

I’ll bring in Richard Thaler here, recently-announced winner of the Nobel Prize for economics, and developer of ‘nudge’ theory. Thaler understand choices ‘as battles between two cognitive forces: a “doer” part of the brain focused on short-term rewards, and a “planner” focused on the long-term’. For Daniel Kahneman a related divide is exemplified in the title of his bestseller, ‘Thinking Fast and Thinking Slow’.

Our instinct for short-term success overpowers our planning instinct, we always want the quickest route, and we fool ourselves into thinking we have the wherewithal, the strategy, the materiel, to get us there.

There is, it seems, an inevitability about this process. There’s a quote from Steven Pinker, writing about Kahneman (Guardian, February 2014): ‘he gave me a comment that really sat with me: he noted that the idea of human nature with inherent flaws was consistent with a tragic view of the human condition and it’s a part of being human that we have to live with that tragedy.’  Pinker also argues that ‘we have the means to overcome some of our limitations, through education, through institutions, through enlightenment’.

I’ll take him at his word on ‘enlightenment’. There’s another side to human nature, as inherent as the flaws that Pinker alludes to, that takes us beyond  the ‘doer’ and the ‘planner’, the fast and the slow. Practised down the generations, put simply it’s self-awareness, living in the moment, bringing our reason, our planning instinct, to bear on our immediate or short-term actions.

In the spirit of zenpolitics,and in the absence of any apposite zen koans to hand, I’ll quote the 13th century Turkish (though born in Afghanistan) mystic, Rumi (I love the langauge): ‘…your inspired reason goes forward without obstacles/at the careful and measured pace of a camel’.

As for over-reliance on reason: ‘Discursive reason’s a vulture, my poor friend:/Its wings beat above a decaying corpse./The Saint’s reason is like the wings of Gabriel: …’

I’m touching on a vast subject here. Two Nobel prize winners on the one hand, three-millennia-old tradition and practice on the other. They don’t need to be in conflict, and both would warn against the pursuit of ‘swift, clean victories’.

 

The British press – a view from the Netherlands

I’m not claiming what follows is original in anyway. I’m quoting extensively from an article in the November edition of Prospect by a Dutch writer and journalist, Joris Luyendjik.

He writes with real insight on Britain in Europe, or Britain out of it, but it’s his comments on the British press that strike home. It’s what many of us in the UK think, but too few dare to say. If we do, we invite confrontation, and too many of us are too nice and too polite, and the press ride roughshod.

He and his family came to live in London ‘as fellow Europeans, but when we left this summer to return to the Netherlands we felt more like foreigners: people tolerated as long as they behave. At best we were “European Union nationals” whose rights would be subject to negotiations—bargaining chips in the eyes of politicians.’

He quotes a working-class mother, the day after the referendum:

‘She had used the referendum to try to smash that expensive middle-class toy called the EU and it had worked. At last, for the first time in decades, those who felt like life’s losers openly defied the winners, and carried an election. Now her country would have £350m a week to spend on the number one worry for people like her: the NHS…’

He continues:

‘…that scene on the morning after the referendum encapsulates my disappointment with the country. Not only the division, but also the way it had been inflamed. Why would you allow a handful of billionaires to poison your national conversation with disinformation—either directly through the tabloids they own, or indirectly, by using those newspapers to intimidate the public broadcaster? Why would you allow them to use their papers to build up and co-opt politicians peddling those lies? Why would you let them get away with this stuff about “foreign judges” and the need to “take back control” when Britain’s own public opinion is routinely manipulated by five or six unaccountable rich white men, themselves either foreigners or foreign-domiciled?

Before coming to Britain I had always thought that the tabloids were like a misanthropic counterpoint to Monty Python. Like many Europeans, I saw these newspapers as a kind of English folklore, laying it on thick in the way that theatrical British politicians conduct their debates in the House of Commons. Newspapers in the Netherlands would carry on their opinion pages articles by commentators such as Oxford scholar Timothy Garton Ash—giving the impression that such voices represented the mainstream in Britain. Watching QI before coming to the UK, I remember seeing Stephen Fry banter with Jeremy Clarkson and imagining the former was the rule, and the latter the exception. Living in London taught me that it is the other way around. George Orwell is still correct: England is a family with the wrong members in charge….

Until the tabloids are reformed and freed from editorial interference by their plutocratic owners, the rageful misunderstanding that I saw in the school playground will not go away. Tabloid readers will sometimes see through the bias on particular issues and against particular people, as many did when they voted for the demonised Labour leader Jeremy Corbyn in June. But when it comes to Europe and the world beyond, the campaign of chauvinism has been so unremitting, over so many decades, that it is much harder to resist. And as things stand, the journalists at those publications could never come out and admit that they have misjudged Brexit—that would mean not only losing face, but very likely losing their job. Indeed, where is the investigative reporting about the exact quid pro quo when Rupert Murdoch or Daily Mail editor Paul Dacre come out in support of, say, Theresa May? Most British journalists, with a few noble exceptions, are too terrified of the press barons to pursue such questions.’

It’s worth repeating that last line:

‘Most British journalists, with a few noble exceptions, are too terrified of the press barons to pursue such questions.’

Luyendijk also brings our entrenched inequalities into his argument, our class system, along with our adversarial culture (true of many, but not of all), our superiority complex… You don’t have to agree with everything he says – though there’s substance to his arguments.

But on the British press, he’s spot on.

Brexit – the new promised land

Buddhism has neither a god, nor a promised land – for many that is, but not for all:  adherents of the Pure Land teachings within the Mahayana tradition believe that by reciting the name of Amithaba Buddha they can achieve rebirth in a western ‘pure land’.

Deriving any kind of political conclusion from spiritual belief is always high risk. But there is a ‘promised land’ mentality abroad at the present time, and curiously it’s taken hold of the right of the political spectrum – the day-dreams, the political unrealities which typified the Left for so long are now the prerogative of the Right.

There is it seems a world out there, beyond the western horizon (beyond the sunset), where we can trade freely, without restriction, without regulation, where self-interest becomes the common interest, where supervisory bodies not least governments touch so lightly that we’re hardly aware they’re there. We in the UK, we’re free traders at heart. Once we set the example for the world by going it alone. Others followed. And they will do so again. We were, we still are, exceptional.

We achieve this by a simple stroke, a referendum, from which there is no turning back.

Our history, our unwritten constitution, is full of errors, U-turns, crises, but the parliamentary system has always allowed for corrections, changes of tack, a self-correction mechanism.

But true belief and true believers allow no compromise.

There is a rigidity to belief systems, and referenda are a classic way of embedding practices and beliefs. Cooperation and compromise become, as we’ve seen over last year, much harder. We are on dangerous ground.

Likewise the USA, where exceptionalism, of the American kind, is also closely woven into the debate. A continuing danger lies in the presidential control over appointments to the Supreme Court, and the way appointments can sway the Court in the ever-more-polarised national debate. The Citizens United decision in 2010 effectively allowed super-PACs to spend unlimited amounts in support of political parties or candidates, as long as the money wasn’t paid directly to the candidate. There is now no restriction on what money can buy in American politics, and no limit to the levels of vituperation, and with much of the press in the UK in the hands of over-wealthy men with overt political agendas we are running the same risks here.

The US Congress has many famous examples of cross-party cooperation, of a movement to consensus when the times require it.  The UK likewise. But money polarises, and likewise referenda. If one side dig deep to defame the other, if one side claim that a referendum has once and for all and forever decided an issue – what scope can there be for coming together?

The ‘pure land’ mentality belongs in the spiritual sphere. It is pace Dawkins, Dennett el al, a natural aspiration of mankind. But it has no place in politics.

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A brief coda. Paul Johnson (director of the Institute of Fiscal Studies), writing in The Times, reminds us how once a big government project (for example, the NHS IT system) is underway ‘its momentum can carry it through almost any amount of evidence it is not working’. He continues:

‘The serial inability of governments to define, manage and deliver big projects can only be sobering in the context of the attempt to deliver Brexit – the biggest project of them all.’

At what point does a promised land become a fool’s paradise?

The fantasies of free trade

Walking and swimming, conjuring turtles (see my last post) and building castles… since the Brexit vote politics have been more a burden, less a pleasure – how we (as country and individuals) might hold on to our sanity while others attempt to build castles in the air.

Brexit has many castles, most of them air-borne, from the immigrant threat to free trade. Closing down on one, on the free movement of labour, runs directly counter to a fully libertarian approach to free trade – if this was a board game, or a novel, I’d want to see how it all worked out. As political reality, I hope not to.

Focusing on free trade, last week we had ‘From Project fear to Project Prosperity’, a report from the free-trading supply-siders ‘Economists for Free Trade’, chaired by one-time Thatcher adviser, Patrick Minford. Matt Ridley in The Times (21st August) pours praise upon them. We hear the old shibboleth, ‘Fortress Europe’, curiously used to describe 28 countries which have taken down the barriers and practise the four freedoms – goods, capital, services, and labour. Ridley argues that ‘external barriers are pure self-harm’, and you’d have thought that he’d take the EU as a shining example. Instead he focuses on the tariffs the EU imposes on non-EU countries – apparently the tariff on unicycles is 15%. What he totally and wilfully fails to recognise is that free trade isn’t a level playing-field, but self-interested countries seeking common ground on which they can co-operate – not for another’s interest, but for their own. We hear from Brexiters about countries keen to reach trade agreements with the UK – but on whose terms? On ours, on the UK’s?

Garvan Walshe on the Conservative Home website is helpful on the subject. (There is an awful lot of sanity still left in the Tory party – but the sane too often these days are the quiet and the cautious.) In trade between countries, ‘the distance relationship is paramount’.

The effect of that decision [the referendum]  is to forego [the EU’s] economic benefits, and they can’t be replaced by shallower trade agreements with other countries, because they are too far away. And while there could, as Minford suggests, be economic gains from deregulation, they won’t happen while Britain´s politics is moving leftwards … Far from bringing benefits through other trade deals, leaving the EU erects an enormous trade barrier with the rest of our continent. Economists for Brexit should have renamed themselves Economists for Protectionism.

Back to Matt Ridley: ‘…after Brexit, Britain should try unilateral free trade, no matter what everybody else does’. This would Economists for Free Trade argue benefit the British economy by as much as £135 billion a year. (Compare the NIESR – leaving would cut our total world trade by a quarter.) The Minford report assumes that we’d reach an agreement with the EU broadly comparable to what we have now, and a level of de-regulation which simply won’t, and shouldn’t, happen in the current climate.

Ridley is also guilty of a selective use of history, an old bete noire of mine. He quotes Sir Robert Peel in the 1846 Corn Law debate – ‘we should cease haggling with foreign countries about reciprocal concessions’. He argues that ‘the closer countries get to free trade, the more they thrive’ – and quotes Britain in the period 1846-80, and Hong Kong and Singapore today. In all three cases the circumstances are radically different – Britain in a period after 1846 when we could dictate the terms of world trade, and two city-states (treating Hong Kong a city state) operating as low-tariff entrepots.

Ridley also attempts a distinction between the Roman civil law ‘prescriptive, rules-based system’, and a ‘better’ common law (and distinctively English to his mind) approach, ‘which is principles-based, outcome-focused, consumer-friendly’. He continues: ‘Because of our history and the nature of our economy Britain can be an effective champion of this challenge.’

The risk is all ours.

We are back, happily for my argument, to ‘castles in the air’. There is no hard evidence that ‘free trade works’, no hard evidence that supply-side economics will deliver any of the benefits (above all increased tax revenues on higher output, and collective benefits deriving therefrom) it claims.

And finally… Adam Smith. Ridley tries to corral him into the Leave camp: ‘As Adam Smith put it, describing the European Union in advance, “in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer”.’

‘…describing the European Union in advance…’ – this is populist and emotive junk.

The founders of the Adam Smith Institute don’t do much better: ‘We both take the view that the UK now has the chance to trade freely with the rest of the world, since it will no longer be locked inside a protectionist bloc of diminishing economic and political significance.’

The EU isn’t doing too badly at the moment, and it carries political clout – the ‘diminishing economic and political influence’ will all be ours if Brexiters have their way.

Conservatism – selling out to the new right

I began this blog eight years ago in a mood of optimism. Obama’s ‘yes we can’. Maybe we could find common ground across the political divide, enough to take agendas of enterprise, economic growth, internationalism and social justice forward together. We knew of the new right’s machinations, but didn’t foresee how their path to power might work out. And how conservatism would be re-interpreted, and buy into the politics and the moral neutrality of post-truth. To take a few examples:

# Referenda: the idea seems to be abroad in some circles that referenda results are for all time. Referenda if used at all, and they are too easily manipulated (by money and media) to have any significant role in any serious democracy, must be reversible, in the way that parliamentary legislation is reversible. It is extraordinary and irrational to think otherwise. And against conservative tradition…

# Conservative vs radical: it is no less remarkable how the Tory party has moved so far right without realising it, mirroring the Barclay brothers Daily Telegraph agenda and adopting the manners and demeanour of the Paul Dacre Daily Mail. We could indict the Conservatives under the trade descriptions act. (Tory – from the old Gaelic toraidhe, meaning outlaw. Altogether a better description.) The old Tory party, going back to Macmillan, Heath, even Thatcher, believed in the great British unwritten constitution, the wheels turned slowly, radical change and revolution were disdained. We have now arguably the biggest leap in the dark outside of wartime in two hundred years.

I am now the conservative. I’m not sure I like my new role too much – there’s too much in the world to be radical about.

# Economic forecasts from outlier economists such as Patrick Minford, given press and media coverage as if mainstream. Compare the wiser counsels of the FT and the Economist. Curious now how many rely on the Telegraph City pages: that’s a subject in itself.

# Assumptions that post-Brexit we will dispense with the ECJ – the European Court of Justice – and still achieve some kind of trade deal. Set up a separate quasi-judicial body? Are the EU for a moment likely to acquiesce in that?

# ‘Recent’ poll data suggesting wide support for a hard Brexit – quoted as fact in the media (including The Week) – when the data dates back to April and has been wilfully misinterpreted.

# Finally – diversion away from the issues which should be engaging us. Not least the tragedy (see recent reporting in The Times, and all power to them ) almost on our doorstep in Libya. 700,000 migrants camped and waiting. This is a crisis for all Europeans, and one so far which the EU, 28 countries with clamorous electorates, has simply failed to come to terms with.

Here in the UK we are obsessed by Brexit, preferring to close our borders physically, morally and politically. Rather, we should be in there, facing up to the crisis, putting forward proposals. Advocates within Europe, within the EU.

Suggestions, for example, for a wall across southern Libya, or funding repatriations… maybe or maybe not viable … but where are we?

Sidelined, irrelevant.

Dare we be optimistic?

We’ve few political role models in this day and age, people who’ve been through it all, and suffered all the slings and arrows, and opprobrium, but somehow now stand above the fray – and we listen to them. In Tony Benn’s case we might not agree. But we listened. Michael Heseltine is another, and I often agree.

John Major – we wonder how he stuck it out.  As for Chris Patten, after losing his seat in 1992, he escaped. And one hell of an escape – to be governor-general of Hong Kong in its last years as a colony. He’s now written a biography, ‘First Confession: A Sort of Memoir’.

There’s a phrase, a summary of his life and aspiration, which I love, his ‘immoderate defence of liberal order [as] a counter to the violence of narrow identity’.

‘Immoderate defence’ – there needs to be, there can be, no holding back.

To quote Jonathan Fenby in the FT Weekend, Patten ‘ is aghast at Britain’s decision to leave the European Union’. He ‘worries about a prime minister who “seems to doubt whether you can be both a British citizen and a citizen of the world” – both of which he clearly sees himself as being’.

‘His greatest admiration is reserved for …John Major, who shouldered the problems of the Thatcher inheritance… and “on one issue after another has been shown to have taken the right decisions and to have been on the right side”’.

Too often we hedge, prevaricate, tread gently… worry we’re going too much out on a limb in opposing Brexit. Witness all the Tory MP s who supported, and still support, remaining in the EU.  There’s a uniquely Tory hypocrisy about all this.

Patten is another kind of Tory. I’d love to have his comments on the recent election. We could with Brexit and especially a hard Brexit be seeing the biggest shift in British politics since the war. But, Fenby speculates, and I think Patten might just agree, that ‘the die may not be cast’. And here he picks up on the optimism I’ve felt, and spoken about, in the weeks since the election.

Optimism – being optimistic has worried me.  Terrible things shave happened since 8th June, but the post-referendum certainties have been shaken. Events could yet, in Fenby’s words, ‘lead to a more reasonable path than appeared likely a year ago’.

Macron, the likely re-election of Merkel, the (still tentative) rolling back of the populist tide in Europe, positive signs from mainland European economies….

Trump on the other hand is still there as a terrible reminder of how asinine politics has become in the USA. So too May, Davis, Johnson, Gove, Fox…

But I’ve long argued that that there are no certainties in politics. (Or life!) Policy goals are all too often for the birds. Apparent sea changes forget that there are tides and seasons.  Where we can have more influence is the direction of travel.

God knows where Corbyn would take us if elected. Into a frenzy of nationalisation and anti-global action… or a frenzy of rhetoric. I think we’d survive a short spell of Corbyn, whether he pushes to the extremes or no. I don’t have that confidence about Brexit – there’s a will to destroy our prosperity and reputation, and a seeking of finalities which won’t easily be pulled back.

I think the direction of travel has shifted in the last month.  We have some small cause for greater optimism. But there remains a mighty struggle ahead.