There is no such thing as the state
Financial Times 17/12/04
Margaret Thatcher aroused furious reactions when she said there was no such thing as society. I would prefer to say with the poet W. H. Auden: There is no such thing as the state / And no one exists alone.What is called "the state" is simply a mechanism by which citizens can provide collectively for items such as defence and security, which cannot readily be provided either through the market or through voluntary co-operation. It is also a mechanism for transferring claims to income or property from one citizen to another...more
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Brown's less than golden rule
Financial Times 02/12/04
When the great conjuror Houdini was in his prime, no one asked whether he would perform his next trick. The question was only how he would do it. The same applies to Gordon Brown's pre-Budget report. No one doubted that he would announce himself on track to fulfil his golden rule without overt tax increases...more
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A longer life is no reason for gloom
Financial Times 19/11/04
One populist reaction is to say that we will have to work until we drop. But this is rubbish if the dropping occurs later than before. On tentative evidence [the Interim Report of Adair Turner's Pensions Commission] judges that "for many people increasing life expectancy is associated with an increase in the number of years of healthy active life"...more |
My wish for the second term
Financial Times 05/11/04
If I had one wish for US policy in the next four years it would be a steep rise in taxes on petrol. It would promote cleaner air, reduce global warming, help cut the budget deficit and diminish political dependence on the Middle East. Any one of these benefits would be sufficient to justify a big increase in petrol prices. Taken together the case is overwhelming. A prescription of required treatment is helpful even when early implementation is unlikely...more
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Neoconservatism unmasked
Financial Times 22/10/04
Who exactly are those mysterious “neocons†who urge a hawkish foreign policy on the US? It does not help simply to use the word as a term of abuse, as monetarism was used in the 1980s. A new book, edited by Irwin Stelzer, a senior fellow of the Hudson Institute think-tank, will not necessarily make many converts but should at least help us to know what we are talking about...more
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Black or White Wednesday?
Financial Times 08/10/04
The mere mention of the ERM provokes a shudder among British politicians. Even those in all main parties most keen to join the euro are adamant that the formal requirement of a preliminary period inside the ERM, should not be implemented. What killed ERM membership was the way in which the Kohl Government carried out German unification after the fall of the Berlin Wall in 1989. But on the purely British economic side, does the ERM episode deserved the censure it has subsequently received? Sir Alan Budd who was then chief economic adviser to the government in his Wincott lecture delivered on Tuesday. begged to differ. He believes "the case can be made that it was an economic triumph and marked the turning point in our macro economic performance.â€...more |
A Comment on "Black Wednesday"
Samuel Brittan on the Wincott Lecture by Sir Alan Budd, 05/10/04
Norman Lamont once remarked that membership of the the ERM in 1990-92 was beneficial in bringing down rapidly the British inflation rate but that exit from the system was also beneficial in promoting recovery from recession. This is more or less the line taken by Sir Alan Budd now; and I agree with them. What I would like to do in this Comment is say a little about the European and British political background and then go on to a few implications of Sir Alan’s analysis. A common fault among both proponents and opponents of ERM membership was to see the system purely in terms of the British debate and not to examine how the ERM participants - the core members of the EU - themselves saw it. ..more
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UK's MPC still too complacent
Financial Times 27/09/04
We have had a bout of bizarre short term fluctuations in sentiments about the British economy in the last few months. Not so long ago the talk was of overheating and several further increases in "policy determined interest rates". Now the talk is of economic slowdown and of interest rates nearing a near a peak. Yet the world has not changed all that much. The most one can derive from recent housing market indicators is that the domestic property market would no longer be a good pretext for an increase in interest rates at the next meeting of the Bank of England Monetary Policy Committee in early October. But they are no justification for assertions that the housing market has turned decisively downwards. Moreover, while house price reasons for an official rate increase have for the time being faded, other justifications have been gathering force...more
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The right move for the Lib Dems
Financial Times 10/09/04
It has for some time been highly likely that some Lib Dems would conclude that the party had more to gain from going back to the free market roots of Liberalism. What has made this especially true is the Conservatives' clear lack of courage in this direction. In higher education, for instance, they are trying to bribe their middle class supporters by going back on fees for higher education. So much for their understanding of markets. This leaves their main distinguishing marks hostility to immigration and enthusiasm for prisons...more
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The not so obvious corporate task
Financial Times 27/08/04
Corporate Social Responsibility (CSR) has now become a major industry supporting a whole complex of speech writers, public relations specialists and networkers at large whom business leaders find it more expedient to appease than to take on. There are few willing to echo Milton Friedman's remarks of 40 years ago that the social responsibility of corporate officials was "to make as much money for their stockholders as possible"...more
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Redistribution yes, equality no
Financial Times 13/08/04
A subject which has been preoccupying those people who are still within access of newspapers this August is the hoary one of “inequalityâ€. The Institute for Public Policy Research has just published an investigation (The State of the Nation),which has elicited a predictable span of responses: ranging from left-wing commentators who are indignant that so much “inequality†remains, despite seven years of Labour government, to others who think the whole discussion misconceived and harmful...more |
Europe is not so backward after all
Financial Times 30/07/04
The history of successive British governments' attempts to close the productivity gap should make one cautious about any rush to emulate some fashionable model, whether that of Germany in the 1970s, Japan in the 1980s or the US today. It should also make the British government cautious about lecturing other EU countries about its supposedly superior economic performance...more
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Vanity among the statistics
Financial Times 16/07/04
I must add that I find the chancellor's fiscal statements not only boring - which may be a venial sin - but also increasingly off-putting. They are delivered in an unappetising mixture of Labour-speak and management consultant jargon. They have no grace or magnanimity towards predecessors, but assume that the world began in 1997. Then there is the continuing misuse of "investment" to describe spending. Above all, I wish somebody would tell the chancellor or his drafters that self-praise has a bad odour. It is one thing to praise prudence in general; it is another to praise oneself in every other sentence for having achieved it...more
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A dubious deal
Financial Times 02/07/04
What have the following news items in common? The first is the complaint by the British Engineering Employers' Federation that an abolition of fixed retirement ages would impair its member companies' competitiveness. The second comes from the frontier between Austria and the neighbouring German Land of Bavaria. Industry in the latter is complaining that Karl-Heinz Grasser, the free-market Austrian finance minister, is damaging German competitiveness by his low corporation tax rates and other business-friendly measures...more |
The threat of extreme events
Financial Times 18/06/04
It is difficult to escape the conclusion that central banks still practise "the pretence of knowledge". They believe they can estimate phenomena such as the output gap or the rate of inflation to be expected for any specified behaviour of real activity. The sooner they forget these pretensions and move back towards a neutral policy, the better they will be prepared to meet future threats from any direction...more
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Democracies can be warmongers too
Financial Times 04/06/04
The real problem is the propensity of human nature to divide the world into one's own group and strangers outside it. If I knew how to tackle this trait, I would deserve the Nobel peace prize. Meanwhile, one has to concentrate on deterrence, diplomacy and piecemeal efforts such as Daniel Barenboim's Arab-Israeli orchestra. But it will not help to pretend that the masses have superior self-restraint to those who try to lead them...more
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Time to give house prices a shock
Financial Times 21/05/04
The latest Bank of England Inflation Report was noteworthy for its clear hints of further interest rate increases. It suggested a high probability of inflation climbing from just over 1 per cent to nearly 2½ per cent over the next two years on the basis of the new consumer price index, and thus above the chancellor's 2 per cent target. But if you strip away the scholasticism the reason why interest rates both will and should rise is alarm over the UK housing boom...more |
Thank heavens for floating rates
Financial Times 07/05/04
I am not going to crystal-gaze about the severity of threats [to global growth] or how they will evolve. What is highly likely is that the world economy would already be in grave trouble if it had still been enmeshed in the Bretton Woods system of pegged exchange rates. If Maurice Chevalier were still with us today he might have adapted his famous hit from the film Gigi "Thanks Heavens for Little Girls" to "Thank Heavens for Floating Exchange Rates"...more
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Britain needs to say No
Financial Times 23/04/04
Mr Blair must not be allowed to get away with saying that opponents of the treaty are opponents of the EU as such. The wider achievements of the Union can be seen each time one walks through a dismantled frontier post or through a common European exit lobby at an airport. There is also a crude defensive point to be made. Despite what the anti-globalists fear, liberalised world trade is far from assured and could easily be victim of a protectionist backlash. The European single market will then be even more worth having as a fallback area where such barriers are less likely. A No vote will not destroy the EU but be a signal that over-centralisation has increased, is increasing and ought to be diminished...more
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The growth fetish exposed again
Financial Times 26/03/04
There is a saying about serving new wine in old bottles. There ought to be another one about serving good wine, whether new or old, in unattractive bottles. This is brought to mind by a book by the Australian left-wing environmentalist, Clive Hamilton, entitled Growth Fetish, about to be republished in the UK (Pluto Press, £13). He argues that the quest for maximum growth of GDP is a vulgarisation of sound economics -- what I call lumpeneconomics - even though 99 people out of 100 probably think that is what the subject is about. Hamilton's book is, however, written in the grating idiom of "left speaking to left"...more |
Brown's real budget challenge
Financial Times12/03/04
The real UK Budget will come not next Wednesday but with this summer's public expenditure review, which will set the government's fiscal plans for well into the next parliament. It is in this context that the big decisions will have to be taken, both on the composition of spending and on how it is to be financed...more
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A frank look at Labour's values
Financial Times 27/02/04
Some months ago I wrote a column on the harm done by party leaders concentrating on their so-called grassroots supporters instead of the broader electorate. At that time the main examples were of the harm done by misguided Conservative reforms introduced to give more say to constituency party members. In the period ahead we are more likely to hear of grassroots Labour values and it is time to take a look at them without red rose-tinted spectacles. What follows is a rule-of-thumb guide to policies and attitudes likely to meet with approval by Labour activists...more
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Ageing: The role of immigration
International Economy Winter 2004
The controversial question is what role immigration can play in
improving the denominator of the dependency ratio (that is the ratio of old
people to those of working age). Even if immigrants ultimately succumb to
the forces making for lower birth rates among the native population this
will take many decades and in the meanwhile the working age population is
replenished...more |
Governments and growth: The real threat to global recovery
International Economy Winter 2004
Nothing will prevent jerky rearrangements in the real world; but inevitable fluctuations are made a great deal worse by the efforts of governments to preside over and force the pace of change. Nor can coming elections be treated much longer as an excuse. The US has presidential and/or congressional elections every two years. There is scarcely ever a breathing space when electoral considerations are absent. It is not impossible for democratic governments to rise above them. Otherwise we would never have had the post-war multilateral trading system and the Gatt and its successor the WTO...more
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The bad old days of fine-tuning
Financial Times 13/02/04
There is now on the table a suggestion by the British Treasury that threatens to take us back to the fine-tuning of the 1970s, when high unemployment was combined with double-digit inflation...[It] originally arose in relation to the Treasury study of British euro membership. One of the biggest obstacles to this is that, as there is one single monetary policy for the whole of the euro area, an individual government would lack weapons for dealing with "asymmetric shocks" affecting its own country. This apparent deficiency has provided a re-entry route for advocates of fiscal fine-tuning who want governments to use it to supplement the monetary policies of the European Central Bank. My own view is that if member countries cannot live with ECB policies without such retrogression, they are not part of a natural monetary area and should not take part...more
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The dollar - the case for benign neglect
Financial Times 30/01/04
Ever since I have been in short trousers there has been a supposed problem about the dollar. A dollar shortage was the cry when I was being taught by Milton Friedman during his sabbatical in Cambridge. "Sure", he said. "Europeans suffer from a dollar shortage just like American citizens. They would both like to have more dollars." This time the "problem" is the weakness of the dollar. When the Group of Seven finance ministers and central bankers meet in Florida on February 6 and 7 they will be under pressure from European business interests to "do something" about it, as they fear it will slow down the modest European recovery...more
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Introduction to Bertrand Russell's Power: A New Social Analysis
Routledge 2004
When asked by the publishers to write an introduction to this new edition I agreed with alacrity. The request was not only an honour; it also stirred my curiosity. For although I have long been an unapologetic fan of Russell's later and less technical writings on political and social questions, I had not read this particular book; and to read something from Russell's pen for the first time was a source of pleasurable anticipation...more
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Inflation targets lose their glamour
Financial Times 16/01/04
Paul De Grauwe, the distinguished Belgian economist, wrote in the FT on January 8 that "central banking is not just about keeping inflation close to 2 per cent and praying the rest will be fine". There are many indications that establishment opinion, even in the eurozone, is gradually shifting in his direction. Jean-Claude Trichet, the new head of the European Central Bank, has deplored "exchange rate instability" - and not just for its possible effects on the eurozone price level. Mervyn King, the Bank of England governor, has suggested that it is "easier to measure the money value of spending and output in the economy than to split it into estimates of real output on the one hand and price indices on the other". The latest data revisions, which considerably altered the picture of UK growth, "left estimated money spending and output broadly unchanged"...more |
Do as I say, not as I do
Financial Times 02/01/04
What investment strategy should a person follow who does not believe that
he can beat the market? The conventional advice is to invest in a broadly
spread indexed fund. Indeed a pin would do as well so long as it pricked
often enough. Unfortunately even this modest advice is too optimistic. For
it supposes that the only assets are equities and that these fluctuate
around an upward trend. This feature dates back only to the 1950s when the
cult of the ordinary share began. In the previous half century US equities,
taking one decade with another, struggled to keep pace with inflation, and
in the UK they fell well behind it...more
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