The not so noble Nobel Prize
Financial Times 19/12/03
The dispute about the value of the prize is still running. A former
Swedish finance minister, Kjell Olof Feldt, who himself subsequently became
head of the Riksbank, has advocated abolishing the economics prize. Some
members of the present generation of the Nobel family have done the same.
One is reminded of the disputes among the descendants of the composer
Richard Wagner, who still claim the right to decide the future of the
Festival Theatre he established in Bayreuth...more
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How to tackle Europe's baby blip
Financial Times 05/12/03
From the point of view of the recipient countries there are three arguments for immigration. First it would avoid an increase in pay for those who do dirty jobs. Such increases may complicate the conduct of fiscal policy and irritate middle-class voters who would have to pay more for public and domestic services. But this is not an argument for a civilised person. The second argument is that more immigrants will improve the dependency ratio for some decades to come. It has some force but cannot be the main reason for a more liberal immigration policy. The third and basic argument is that the movement of people is part of a global economy, just as is the free movement of goods and capital. Dare I add the claims of common humanity that apply to people in poor countries trying to better their lot, as well as refugees fleeing from torture and oppression?..more |
Brown will stick to his rules
Financial Times 21/1103
A good many financial commentators, together with the opposition parties, have worked themselves up into believing that Gordon Brown, the chancellor, will soon have to admit that he has failed to keep to his own rules for fiscal stability. I am sorry to disappoint, but he will not. The chancellor can be criticised on many counts, above all for his passion for micro-management and his unreconstructed belief - which few of his opponents dare challenge - that health and education must be free at the point of entry. But he is unlikely to throw away his reputation for "prudent" financial management...more
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An open letter to Michael Howard
Financial Times 07/1103
Dear Michael...A relation of yours, who happened to be the local rabbi in the days when I was forced to go to the synagogue, used to begin his sermons with: "What is my message to you today?" My message to you is simple: tell your colleagues to enjoy opposition and not to get too hung up on forming the next government, let alone agonising over whether it will be the next or the next but one...more
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This is not a time for Boy Scouts
Financial Times 24/10/03
George Kennan, the American diplomat and historian who developed the original cold war doctrine of deterrence, also made a vigorous onslaught on what he called the "moralistic, legalistic approach" to foreign policy. His strongest argument was that this approach brought more human hardship than a straightforward defence of national self-interest. He was reinforced in this belief by the work of Herbert Butterfield, the Cambridge historian. Writing from a Christian point of view, Butterfield warned fellow Christians of the dangers of rushing to make moralistic assumptions about international events that subsequently turned out to be wrong and inflicted more suffering than a more humble approach. This modest view is now being challenged by two misguided forces. One is known as neo-conservatism. The other is liberal imperialism...more
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Sometimes borrowers we must be
Financial Times 10/10/03
The biggest source of controversy in the Anglo-Saxon countries is, however, the rapid growth of consumer debt. It has been rising in the UK at an annual rate of 14 per cent and stands at a record of nearly 120 per cent of disposable income. A coalition of Cassandras warns that the apparent success of Gordon Brown, the chancellor, is based on an unsustainable mountain of debt. The coalition ranges from financial conservatives to left-leaning think- tanks, such as Open Democracy, which has voiced fears for "first world debt"...more |
The clue to Gordon Brown
Financial Times 26/09/03
If you want to know what the Blair government has been doing, as distinct from spinning, the best way into the subject is via the activities of the Chancellor, Gordon Brown, who has dominated the government's domestic agenda. Brown might not like to hear this, but it is doubtful if he could have achieved such domination if he had been Prime Minister. He would have been besieged by officials telling him that he must see the Ruritanian ambassador or fly to a conference in Montenegro and that he would have to accompany members of the royal family on key ceremonial visits. Even Brown would have been hard put to turn down all these requests in order to concentrate on "welfare to work"...more
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The free market case against arms promotion
New Statesman 18/09/03
I was tempted to begin this article by saying that if I were 20 years younger I would have joined the demonstrators against the government supported arms fair held this September in a closely guarded location in Docklands. But this would have been untrue. For 20 years ago I held very similar views to the ones I do today about government supported sales of arms to dubious regimes, but I did not have the courage to move away from cosy discussions of Treasury and Bank of England strategy and take the physical and career risks involved in such protest activity...more
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Recovery is taking hold
Financial Times 12/09/03
The US economy is expanding vigorously...China and India are already the growth leaders. A modest Japanese recovery is expected to continue; and even the eurozone is expected to pick itself up, despite the weak German upswing...What are the threats to this benign prospect? The first is debt; the second imbalances. The third is concern about the "consumer society", which was first raised in the 1960s and 1970s and has since resurfaced at regular intervals...more |
Europe needs another regime change
Review of European Integration, 1950-2003 FT 10/09/03
The great virtue of Gillingham's book is that, unlike many other works on the subject, it describes EU developments against the background of the European political economy. We can learn a great deal from it of the various crises and triumphs of the individual European countries, and indeed of the wider western economy...His book has already been hailed by hardline Eurosceptics; but I hope that the author, an American professor of history, will resist their embrace. Equally I hope that Europhiles will give the book a hearing and not dismiss it as a neoliberal tract...more
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Ticket touts are good for spectators
Financial Times 29/08/03
An unauthorised person who sells a ticket for a sporting occasion, concert or other public event at above the original price is often called a ticket tout or - in the US - a scalper. The words themselves are highly loaded. I do not think that there are many people who would like to be introduced as scalpers at a New York or even a Las Vegas dinner party. Yet the immediate instinct of a market economist is to regard his or her activity as prima facie beneficial...more
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Missing the point
Financial Times 15/08/03
A recent report from the Commons public administration select committee contained some horrifying examples of the blind pursuit of government targets at the expense of genuine service. "Blind" is unfortunately more than a metaphor. One example that attracted attention was the report from Bristol Eye Hospital that 25 patients had lost some vision in the last two years because follow-up appointments had been delayed or cancelled to achieve government waiting-time targets for new outpatient appointments...more |
Liberalism needs a louder voice
Financial Times 01/08/03
It is a tragedy that in Britain the cause of competitive market capitalism has had to be represented by a party with authoritarian moralistic tendencies, a xenophobic posture towards foreigners and an instinct to punish and condemn. If anyone thinks I am raking over the ashes of long-dead attitudes, they should think of the prejudiced reasons the Conservatives recently rejected both Michael Portillo and Kenneth Clarke for the party leadership...more |
The logic of the Baby Bond
Prospect 08/03
The media assumption was that [Gordon Brown's scheme for a Child Trust Fund] was a gimmick to disguise the fact that the Chancellor could afford few goodies in this particular Budget. What the pygmy commentators failed to notice was that for the first time a British government was committed to distribution of capital to citizens as distinct from welfare in kind, or social security payments. It was a first stab at distributing ownership of assets other than housing and pensions more widely. Asset distribution proposals were incorporated in the 2001 Labour election manifesto. But as they did not have the backing of any powerful lobby, it would have been easy for the Chancellor to have postponed the project indefinitely; and it is to his credit that he has not done so...more
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Higher inflation could hurt Germany
Financial Times 18/07/03
According to the old saying, "There's none so blind as those who will not see and none so deaf as those who will not hear". When I wrote in this column a fortnight ago about the danger of using "deflation" as a label for all the risks affecting the world economy, the response of some financial analysts was as though I had said that there were no dangers of any kind. It is as if a doctor were to doubt that a patient was suffering from tuberculosis and were immediately accused of pronouncing him free of all disease...more
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Take a razor to the deflation debate
Financial Times 04/07/03
The fashionable shock-horror word is now "deflation". The European Central Bank in particular is often accused of pursuing deflationary policies. Faithful readers will know that I was intensely suspicious of this language long before the bond market shake-out indicated second thoughts in the financial markets on the deflation spectre. ..more
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Norman Angell
Biographical Dictionary of British Economists 07/03
His lifelong sorrow was the frequent misrepresentation of The Great Illusion. He was alleged to have said that war was impossible because of its great expense, a misrepresentation still current in the 21st century. As he so often remarked, he would hardly have gone to the trouble to write and promote this book if he believed that war could not happen or would fizzle out very quickly. On the contrary the illusion which he tackled was that wars could be economically advantageous...more
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A good study and a bad proposal
Financial Times 20/06/03 (longer version)
Having heaped all this praise on the British Treasury's assessment of the government's five tests for euro membership, I come to the "but". For buried inside them is one suggestion which is, I believe profoundly mistaken, and has implications for many economies apart from the UK. The fact that this dangerous proposal emanates from one of the more sophisticated and better studies (Fiscal Stabilisation and EMU) makes it all the more worthy of attention...more |
Weapons exports: The bogus moral dilemma
World Economics April-June 2003
The belief of most heads of government, diplomats and business spokesmen is that it may be desirable to stop exports to dubious regimes; but that jobs and exports are at stake and that a practical compromise has to be drawn between supporting a major industry and doing the right thing in foreign policy. There are indeed many occasions when an ethical policy is costly. We cannot all be heroes and a frequent human response is to strike some compromise between doing what is right and what is personally beneficial. Tragedy arises when the costs of an ethical approach are small or even negative, but we refuse to carry them out of a mistaken belief that they are horrendous. Official support for arms sales in the main Western industrial economies is a prime example...more
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When the people should
decide
Financial Times 06/06/03 (longer version)
It is arguable that the European Union now emerging is sufficiently
different from anything approved in 1975 as to justify a fresh appeal
to the voter. A referendum has already been promised in several
European countries and is supported by M Giscard d'Estaing himself
and by the British ex-Minister Frank Field, neither of whom is a
creature of the eurosceptic Tory press...more
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A case for currency freedom
New Economy 06/03
The case I now wish to make is a positive one, not against the euro - still less against the European Union - but in favour of a floating exchange rate which the UK now enjoys and could not continue to have inside the euro. A floating exchange rate automatically balances a country's overseas payments - current and capital account taken together - without the need for cap-in-hand official overseas borrowing and without the need for inflationary or deflationary distortions of domestic policy...more
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The argument about the Brown miracle
Financial Times 23/05/03
More years ago than I like to think, I witnessed an entertaining dispute in
the Cambridge Economic Faculty. On the one side there was Sir Austin
Robinson, a disciple of Keynes and very much a numbers man, and on the
other Prof Milton Friedman, then on a sabbatical...These memories came to the fore during a recent meeting of a discussion
club devoted to Brown's record. The structuralist flag is now been flown by
Wynne Godley at Cambridge. The most interesting change since the earlier
debates is that a Labour chancellor, Gordon Brown is now to be counted
among those who, at least by implication, give emphasis to the price and
monetary incentives...more |
Why we should stick with sterling
Financial Times 09/05/03
We are on the verge of publication of the Treasury report on Gordon Brown's five euro tests. From then on discussion will be at two levels. There will be an esoteric debate on how to interpret the 2,000 pages of documentation that, like the Bible, will contain plenty of material for people of all persuasions to cite. There will also be much lower-level discussions of political tensions between Mr Brown and Tony Blair. Now is almost the last chance of commonsense discussion at an intermediate level...more
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UK anxieties about the public service
Paper given on 25/04/03
The UK is certainly not the only country to have suffered an undercurrent of anxiety over the performance of politicians, their advisers and the relations between them. But they have come into sharper focus here because we had for a long time a set of principles on the respective roles of the participants involved, which enjoyed cross-party consensus...more
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The awful lure of the grassroots
Financial Times 25/04/03
The trouble with the grassroots is not that they are undemocratic but that they represent beliefs which are too often outmoded, authoritarian or inhumane. One does not have to have a starry eyed view of the capacities of modern electorates to see that even they often judge better. It is mainly the activists who still take seriously the left-right political spectrum deriving from the seating of parties in the French Revolutionary Assembly of 1789. Labour activists are more suspicious of profits, more hostile to the price mechanism and more inclined to "soak the rich" than the mass of Labour voters. Tony Blair could never have weened his party away from old fashioned socialism if he had followed the grassroots instead of leading them, using as his weapon the supposed threat of never ending Tory governments...more
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Gladstone
Letter to The Spectator 16/04/03
Alastair Campbell (Spectator April 12) has performed a public service in reminding your readers of Gladstone's excellent principles of foreign policy, e.g. "The great duty of a government is… to soothe and tranquillise the minds of the people not set up false phantoms of glory"...more |
A Brown hole not a black one
Financial Times 11/04/03
Economic commentators will never lack for employment so long as popular comment treats the British government as a corner shop run on a cashflow basis. Before, during and after the Budget we were regaled with horror stories about "black holes": Gordon Brown is having to borrow an estimated £27bn in the 2003-04 financial year. This is reminiscent of the equally illiterate hysteria that prevailed when Norman Lamont had to borrow £46bn in the recession of the early 1990s. Then it was Labour that sneered whereas today it is being sneered at...more
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Capital in the wallets of babes
Financial Times 10/04/03
The potentially revolutionary measure in this year's Budget is one that costs relatively little. It is the provision for a child trust fund - inevitably christened "baby bonds". Under this initiative, each newborn infant would be provided with a small capital sum that would be invested in the financial markets and on which the bearers would be free to draw from the age of 18...The revolutionary aspect is that for the first time a British government is committed to distributing capital to citizens as distinct from welfare in kind or social security payments...more
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How to escape the liquidity trap
Financial Times 28/03/03
The hottest topic among highbrow financial analysts is: what can be done if official short term interest approach zero but are still not low enough to revive an economy? Have the central banks then "run out of ammunition"? The issue could arise if the end of the Iraq war is not sufficient to galvanise the animal spirits of business and world economies remain sluggish...more |
Small states are sometimes best
Financial Times 14/03/03
We do not yet know the shape of Iraq after Saddam Hussein's regime has been ended, or had its pretensions shorn away. But every attempt until now by bodies such as the US State Department and the British Foreign Office to draw maps and constitutions for the rest of the world has ended in disaster. The west has neither the right nor the knowledge to tell other people how to govern their affairs, or what their boundaries should be. Its primary object should be its own self-defence, which was achieved by Nato in its heyday...more
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A different view of euro-sclerosis
Financial Times 28/02/03
According to the conventional wisdom, Europe has been growing more slowly than the US for 20 years as a result of structural "rigidities". European Union leaders have themselves signed up to reform declarations, starting with one at Lisbon in 2000. Doubt is cast on this diagnosis in a recent paper, What's Wrong with Europe's Economy?, by Adair Turner, a former head of the Confederation of British Industry...more
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Brown's market imperfections
Financial Times 14/02/03
Anyone who regards Gordon Brown, UK chancellor of the exchequer, as an Old Labour wolf in New Labour sheep's clothing should read the full text of his landmark speech to the Social Market Foundation on February 3. It is many years since we have had from a serving minister such a good exposition of the role and limits of markets and how their deficiencies can often be remedied by more competition rather than state ownership and control...more |
A peculiar virtue
Times Literary Supplement 09/02/03
Toleration is a peculiar virtue. It involves what Professor Galeotti calls a double negation: first a negative appraisal of some form of behaviour or practice of others; and second, a decision not to interfere with it. It thus comes into conflict with the extreme moralism which has so often been prevalent in history. One reason for being tolerant is simply indifference. If we do not care what other people do or what they say then toleration comes easily. If we have however strong opinions that certain beliefs or ways of life are right and others are wrong, then toleration only comes with a great effort and in the face of other deeply held convictions...more
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The myth of British influence
Financial Times 31/01/03
Many British leaders believe that the political case for British membership of the euro has been made; the only question is whether economic obstacles stand in the way. In fact, the political case is usually just asserted. What then, would equivalent political tests look like?..more |
Blair's lack of "process"
Review of Rationality and Freedom in The Spectator 17/01/03
What is really wrong with the Blair government? The unease it excites is at least as strong on the articulate political Left as on the Right. Indeed the grounds for anxiety may overlap across the political spectrum. Until now it has been difficult to verbalise this sense of malaise. The citation of particular policies that are disliked, or even of the Downing Street style, is not sufficient. It is only after looking at Amartya Sen's new book of essays that the penny suddenly dropped for me...more
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Time to index the retirement age
Financial Times 17/01/03
Those whom the gods wish to destroy they first make mad. Most western countries face an ageing population. One would suppose that in these conditions governments would do their best to minimise the dependency ratio - that is, the ratio of dependants to the working population. In fact, they have done the opposite. Retirement ages have fallen. The proportion of younger people being "educated" has risen and labour participation rates fallen...more
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The naked economic forecaster
Financial Times 03/01/03
New year is the time for crystal-gazing about the future and for spoilsports to have fun in exposing the abject failure of past prophecies. I should like to do something more modest, which is to examine, in all its nakedness, the basis of the short- to medium-term forecasts of the whole economy that - whether we like it or not - lie at the heart of economic policymaking. Such forecasts are neither mumbo-jumbo nor science but have a simple core that is disguised by all the mathematics...more |
Why does the world hate America?
Contribution to International Economy Symposium 01/03
"Are you not satisfied to be doing an important and useful job, and one for which you are not badly paid. Do you need to be loved as well?"
These words were uttered some time ago by the late Harold Lever, a British financial guru and former member of the Wilson Labour cabinet. He was talking to bankers in London.
But his remarks could equally apply to the US political and business elite...more
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Government's changing economic role
Contribution to 50th Anniversary Vol. Soc. of Bus. Economists 2003
At the risk of undermining my own subject, I will risk saying that the half century since 1953 has been excessively preoccupied with the economic role of government.
We were at all times in danger of forgetting - until rudely awoken by the attack on the New York Twin Towers of September 11 2001 - that the primary role of government is to look after the physical security of the population and that all else is secondary.
But even if we confine ourselves to traditional economic variables, the most impressive feature of British growth performance is how stable the underlying trend has been and how little affected by the huffing and puffing of governments...more |
A subject not in equilibrium
Review of The Ordinary Business of Life in Jnl. of Econ. Lit. 03/03
There is no need to justify a study of the history of economic ideas. It is a branch of history and will always be necessary so long as human beings are interested in their own past. But there are peculiarities about the subject which creates special problems. An author who regards economics as a well developed science, albeit with an ongoing research agenda, will approach it in a different way from someone who regards it as still inherently contestable. Roger Backhouse's book is a blend of the above
approaches. Its merit is its comprehensiveness. Its demerit is that it is sometimes difficulty to see the wood for the trees...more
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