The new buccaneers

A curious piece, tongue-in-cheek, but neat, in a recent edition of The Economist.

‘Mr Johnson understood intuitively that the financial crisis had ended the neoliberal consensus…No mere Trumpian wrecking ball he is trying to reshape globalisation in the mould of Britain’s buccaneering maritime past, rather than in the European Union’s bureaucratic pettifoggery.’

Buccaneering. How do you ‘buccaneer’ these days?

Container ships could be the new buccaneers. Where once we had tea clippers and cargo ships. We’ll need a bit of the old aggression, against Chinese and indeed the Americans if we’re to capture markets, and of course against our old friends, the Europeans. Piracy would help. Conquest shouldn’t be ruled out.

Or if that’s beyond us, overseas markets will least welcome a bit of the old imperial chutzpah. It will be as if we’d never been away.

The EU’s ‘bureaucratic pettifoggery’. But isn’t it what successful free trade requires, a bit of pettifoggery? Small print. A few regulations, so we’re all on the same page. In olden times, we wrote our own. It was easier then. (Yes, regulations need to be reined it: it was always thus.)

You need the high seas and a big reach if you’re to buccaneer. But ‘big reach’, also known as globalisation, isn’t really that fashionable at the moment, beyond our shores. Buy American is the watchword over the pond. China is focusing more on its internal market, and on its Belt and Road for which there’s no equivalent here in the West. China on its doorstep bludgeons with overwhelming economic power. We negotiate as best we can.

We had our own strong internal market, just twenty miles away over the Channel, twenty-eight countries strong, but we gave it up, and put stop-gaps and confusion in its place. And hide our confusion with hyperbole.

Liz Truss’s article on the Politico website back in March is a fine example. A few quotes:

‘We will work together to reshape the rules of global trade to reflect our core values…The U.K.’s values-driven policy has already delivered successes in trade negotiations….Just as free trade made the U.K. great in the 19th century, we can be even greater still in the 21st by becoming a global hub for services and digital trade.’

We’re back to being … buccaneers. And nowadays the world’s awash with buccaneers. We could find ourselves with brief spells of comparative advantage, where we outperform our rivals, or corner a niche in the market, only to find we’re overtaken as other countries seek to build advantage for themselves in the same areas, which could be digital, medical or services. As a mature economy we specialise at the high end. As other economies mature, so will they.

Free trade in the highly fluid modern world can’t remotely be compared with the 19th century as a driver of community prosperity. That was built on certainty, and the confidence born of certainty, and it was even then a long, rocky, risky and highly uncertain road. Politics in the wrong hands deals in simplicities. History hits you hard with a reminder of just how extraordinarily complex is the reality.

Strong communities and long supply lines can be a poor mix, with little connection between businesses tucked away in business parks and nearby towns and villages. Community in its widest sense requires shorter, more guaranteed lines of supply, with industries which can sell strongly into local markets, or into UK-wide markets, or indeed into EU-wide markets. We need a different and wiser mindset, which focuses in developing our UK and European markets, and which, while promoting trade with China, Japan, India and the ASEAN countries, avoids obsession.

We’ve also had Johnson’s 15th July ‘levelling up’ speech.

‘We are turning this country into a science superpower, doubling public investment in R and D to £22 billion and we want to use that lead to trigger more private sector investment and to level up across the country so that we have hubs or research and innovation like the one we are in today which is actually driving battery technology.’

All this is admirable. But is this government competent to deliver? Have we any reason save their bluster to believe them? Our best hope lies in the local mayors of cities lie Manchester, Birmingham and Bristol, also Teesside. Labour and Tory – they do have the competence.

We simply have the wrong people in power to get close to addressing, let alone solving, the issues of our time. We’ve over the last twenty years seen the disappearance of men and women of calibre from our politics. Johnson has ensured that the old high-calibre politicians won’t touch his party. On the other side, Corbyn didn’t help. The way back isn’t proving easy.

Taking a break from politics

I am going to take a break from this blog for a while.  It will be hard to do. Blogging can be compulsive. (Two posts already today.) That’s why I must take a break. But before I do, I thought I’d sign off with a ‘where we are now’, ‘where I stand’ statement. With so many distractions, so much delay and prevarication, so many assertions, so much absurdity, it’s not a bad idea to put down a few thoughts.

How different this list from one I might have written ten years ago, when the outlook, recent financial crash notwithstanding, was somehow more rosy. You could, back then, at least trust the integrity of the protagonists.

In no particular order (apologies to Strictly contestants), though the first two or three are fundamental:

# pride in nation, as a citizen of Britain, of Europe, of the world, the best way, the only effective way, to exercise influence – linked to the awareness, and self-awareness, I mentioned in a recent post on the Tory leadership contest

# the dangers of referenda, trying to tie down that which will not be tied, as opposed to the sovereignty of parliament, which allows flexibility – the right to change your mind as a core feature of democracy

# recognising a free trade agenda as a chimera – your closest neighbours are always your best partners, and the benefits of the EU will only be appreciated when withdrawn, when too late – you get ‘owt for nowt’ (no benefits if no contributions)

# you negotiate better as part of a trading bloc – the importance of being part of, and a key player in, one of the three big economic groupings of the planet, the benefits from membership over more than forty years (delusional to think we would have reached better agreements negotiating on our own)

# global capitalism, how best to influence, to rein it in, while retaining its benefits – hard enough anyway, impossible to have any significant impact if we are a ‘free-trading’, Singapore-style economy

# the importance of collective action on climate change and conservation, on migration – working with the EU, not out on our own, likewise, on automation, and changes in the workplace

# opposing false notions of sovereignty, rebutting claims that we have sacrificed too much power either to the European Commission or European courts – what we gain in influence far outweighs what we lose – remembering also that we in the UK are pioneers of human rights – our influence across Europe has been profound

# working within the power structures that now prevail – opposing any reversion to old ideas of British and latter-day imperial clout, not least notions of an ‘Anglosphere’

# misrepresentations (Boris Johnson-style) of EU practice and policy

# Brexit impeding the EU reform agenda – the EU needs reform, in some areas radical reform, and we could and should be driving that process

# too easy to forget, it seems, how the EU has guaranteed the peace since 1945, and how remarkable that is

# the alternative to the EU – throwing in our lot with Donald Trump, over whom we will have no influence, and signing up to trade deals on US terms

# the simple necessity of bringing our media back home, and making owners and editors publicly accountable, the importance of debate and the pursuit of truth – too many newspapers have become house journals of parties or factions

# the dangers of populism, fake news, alternative truths, post-truth, opinion masquerading as fact

# the delusional appeal of personality politics, where personality trumps policy, where the shouters drown out argument – Farage-style conspiracy theorists

# the dangers of authoritarian, illiberal capitalism – the downgrading of democracy whether it’s China, or Turkey, or Hungary

# Brexit as a knowingly false agenda – 1) claiming a no-risk, no-danger, all-benefit scenario against all evidence, 2) bringing in a free trade agenda, never a priority of the wider population, under the cover of anxiety over immigration

# the sidelining of social welfare, the removal of safeguards and regulations advocated by Dominic Raab and others – the irony that there are Labour supporters of a Brexit driven through by hard-line libertarians

# the real risk of a possible break-up of the UK – think yourself into the shoes of a Scottish nationalist or a Northern Irish Catholic, soon to be the majority religion

# and finally, the omnipresent danger of unintended consequences – as Daniel Hannan, said of the Brexit saga to date, ‘it hasn’t quite worked out as he expected’

 

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?

**

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

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.

The absurdities we’re living through…

Sometimes it’s hard to keep up. I’m about to head off walking the Cornish coast path… And not listening to Andrew Marr, or reading the …whatever it might be.

The world must go on.

But absurdities we’re living through still strike home.

The BBC’s James Robbins, on the subject of a meeting of European foreign ministers, with Boris Johnson present for the first time:’Today’s meetings are bound to be odd, when the man who compared the EU’s ambitions to create a super-state to those of Adolf Hitler, sits down with the 27 other ministers.’

I’ve been imagining Johnson meeting with John Kerry, more pertinently with Barrack Obama, more pertinently still with black African leaders. ‘Piccaninny’ has been a expression he’s used in the past.

Brexit Secretary David Davis: EU migrants who come to the UK as a departure date nears may not be given the right to stay… there might have to be a cut-off point if there were a ‘surge’ in new arrivals …

A comment calculated to disturb: hardly likely to give those already here any confidence. Or businesses who rely on immigrants for the EU, now or in the future.

Liam Fox looming over reports that Australia would like to sign a free-trade agreement with the U.K. As if we don’t have successful trade arrangements with the Australia already. Rejoicing it seems over starting all over again to get to the place we started from.

They are an unholy trio, and Theresa May has shown a perverse streak in promoting outsiders who Cameron wisely distrusted into the most public positions of all in her new government.

God help us all. Maybe Mrs May had that in mind on a recent Sunday at Sonning parish church.