Anatole Kaletsky is usually good value for his economic analysis. In a pretty scathing column today about the collapse of Brown's political reputation since becoming Prime Minister last year, Kaletsky tries to contrast Brown the bumbling PM with Brown the masterful Chancellor of the Exchequer. He writes:

Indeed, he was probably the most successful chancellor in modern history, notwithstanding his muddled tax reforms, his badly timed gold sales and the fatal damage he allowed the regulators and courts to inflict on Britain's pension funds. Mr Brown made the right decisions on monetary policy and the Bank of England. He kept Britain out of the euro. He reduced capital gains and corporation tax more radically than any Tory chancellor and he resisted populist demands to squeeze the rich.

Oh please. Sorry to rain on the parade here, but remember that in the early part of the current decade, Brown subtly shifted the way in which the BoE measures inflation. Without going into a lot of technical detail, he allowed the central bank to pursue a less stringent inflation target, and allowed it to loosen the strings of monetary policy. We are now - arguably - suffering some of the effects. Also - and it is frankly incredible that Kaletsky does not mention this - Brown has presided over a massive increase in the size of public spending and borrowing. During the supposedly fat years, the state of the public finances has actually got worse when it should have done the opposite. Hardly the mark of a good, prudent finance minister. The public sector payroll - no doubt expected to vote Labour - has swollen by up to 1 million since 1997, according to some estimates. That is a collossal increase and a large dead weight on the economy. Again, this burden is weighing more heavily on the economy now that the international environment has become more difficult.

By doing the British economy no serious harm during his long tenure at the Treasury, Mr Brown earned a distinction unique among postwar chancellors, with the possible exception of Kenneth Clarke.

Well, compared to some of the massive errors made by previous Labour and Tory chancellors, it is true that Brown's record has been quite reasonable, but Kaletsky ignores the substantial shift in the size and cost of government since becoming Chancellor; that amounts to "serious harm" and detracts badly from his record.

Do not misunderstand me. It is not necessary to believe that every move made by Brown has been bad and it is also important to realise that in the globalised financial markets of today, there is only so much - thank goodness - that a finance minister can do. But as we have seen from the continued flight of entrepreneurs and businesses from Britain, from the tax increases, from the poor productivity gains in the UK, and so forth, Brown has been a mediocre custodian of the economy at best. And even his prize achievement, the independent Bank of England, looks less impressive now after the BoE was unable to act swiftly, as it could in the past, over the Northern Rock fiasco.

Tim Worstall has interesting things to say about the difference between social status and economic inequality, pointing out that the two things only occasionally map onto each other, a fact which does rather undermine the egalitarian argument that reducing economic inequality will reduce differences in status. A good point indeed: in the former Soviet Union and in heavily statist countries today, for example, there was and is a gulf between the citizenry and the cliques that run the show. This exists to a lesser extent, however, in the mixed economies of much of the rest of the world, where 'new class' of people - bureaucrats, politicians, media folk, academics, quangocrats, etc, hold considerable power and influence, even though they may earn less than say, a Goldman Sachs bond dealer. The gap was arguably far harder to bridge than is the case in the more fluid situation one finds in a pure market order where the process of 'creative destruction', to quote the Austrian economist Joseph Schumpeter, destroys once-dominant businesses and dynasties and creates new ones in a never-ending cycle. Tim also makes the good point that having high status is often little to do with money at all. Fame, or having a prestigious job, or being an influential commentator, or whatever, often counts for far more than how much money one has in the bank. Ask yourself this: who has more status in British society - the editor of the Times or a hedge fund investor?

Another way of thinking about the difference between being rich and status is this: in some cultures, where acquiring wealth is sneered at or even suppressed, what counts is the accident of birth, or the ability to pull the levers of political power, or manipulate opinion in some way. As you will, gentle reader, no doubt guess, I think that one of the great things about the pursuit of wealth is that it is, in one of the deepest senses, profoundly egalitarian. Think about all those media commenters who sneer at 'ghastly chavs' messing up the view in the South of France or taking cheap flights to Malaga: what this point of view admits, in a way, that capitalism makes it possible for the masses to get on the same ladder as those dealt a good hand by accident of birth. I still think that part of the motivation for the Green movement or strict controls on immigration and population growth is a desire to cut off the ladder of opportunity for the masses (yes, I know this is a bit of ad hominem argument but I think it carries some validity).

For a great book on the subject of envy, which of course lurks beneath a lot of complaints about status and inequality, I recommend this classic study.

Anyway, as Tim rightly points out, people who think that ironing out economic inequality through such methods as steeply progressive income taxes will narrow gaps in status are liable to be disappointed. Humans are by nature a competitive species, and ranking folk according to some metric or other is ineradicable. Also, as the US writer George Gilder wrote in his masterful early 1980s defence of supply-side tax cuts and entrepreneurship, the folly of progressive taxes and other methods is that they do not eradicate inequality. Rather, they fossilise existing patterns of unequal wealth distribution and encourage the most ambitious people in a society to channel that aggression into less benign forms. Not an original insight, of course - Samuel Johnson, the 18th Century writer, made the same point - but one that needs to be rammed home from time to time.

Gordon Ramsay, the 'outspoken' celeb chief wants the state to outlaw out-of-season vegetables. I kid you not. That the man is an arrogant little shit has always been apparent from his TV shows but this sort of national socialist volkish crap really does mark him as truly authoritarian.

The TV chef said it was "fundamentally important" for chefs to provide locally-sourced food. "Fruit and veg should be seasonal," he said. "Chefs should be fined if they haven't got ingredients in season on their menu. I don't want to see asparagus on in the middle of December. I don't want to see strawberries from Kenya in the middle of March. I want to see it home grown."

The 'I am' does not want to see something and so thinks his views should be the force backed law of the land: the psychopathology of the expert that we so often see coming from doctors is at work again. The great unwashed must be forced to follow expert opinion, which means their opinion, naturally.

I like the idea of third world farmers pulling themselves out of poverty and selling me their products whenever I want to buy them and why should a loud mouthed self important chief and a bunch of fascistic green activists get to have a say in that? Their craving to impose their will on others should stop being socially acceptable and they need to be called authoritarian thugs to their faces.

One writer I rate pretty highly is Ross Clark. As well as being a regular newspaper and magazine columnist in places like The Times (of London) and The Spectator, he is also the author of several good books. He has written a fine piece, with deliberate echoes of George Orwell, about the current mania for surveillance in Britain. His liberal views seem to be pretty robust. He has also written a short satire on life in Britain in 2051, a dystopia, showing what the country became when industrialism, liberty and associated individualism, modern technology, medicine, commerce and mass travel and communications were destroyed by a mixture of forces. Unlike the dystopias of Huxley which attacked modern technology, Clark's dystopia very clearly shows that, with all its occasional shallowness and gaudiness, life as we now enjoy it is pretty wonderful and to turn our backs on it would be to miss things such as mass communications and information sources; techniques such as modern dentistry and keyhole surgery; cheap flights; fast, relatively safe transport, cuisine from around the world; downloadable music of any type available for a few cents, the prospect of DNA mapping to cure many diseases... the list rolls on. Our society is still pretty free, on the whole - though the losses of civil liberties and the associated nanny statist developments are a part of the trend towards a darker society that Clark writes about. But if you think, gentle reader, that Gordon Brown's Britain is bad in certain respects, then Clark's version is vastly worse still. He imagines a society, fractured into tiny tribal units lorded over by thugs and religious bigots, in which all these things and more are banished, loathed. His nightmare prediction is one of a world in which scientists, doctors, engineers and bankers are attacked, even murdered, for what they do. It is not a book to read if you are suffering from a bad depression and need a bit of cheering up.

A question that occurs to me about this book is that Clark seems to have written it with the partial object of satirising reactionary Greenery, religious fundamentalism and technophobia, hoping no doubt that the loathesomeness of the dystopia he presents will remind readers of the dangers of what the Greens/others have in store. My problem, though, is that other dystopian novels have often not had much of a salutary effect. As Perry of this parish remarked some time ago, our capacity for satire has been so sated by real-life lunacy that even a hit TV show called 'Big Brother', taking a line from Orwell's 1984, does not inspire the same intended feelings of loathing that Orwell's attack on totalitarianism was supposed to elicit. Fair enough, there are signs of a fightback against this trend.

But I wonder whether Clark is only really preaching to the converted. I hope not. I hope some stray Guardianista who thinks that John Gray or Bill McKibben are great sages will pick up this great little book and learn something from it. And for undecideds, I would hope that this dystopia warns them off from the anti-Enlightenment trend in which part of our society seems to be moving.

Perhaps a another way to think about winning arguments for technology, capitalism and so on is to portray positive fictional accounts of such things, rather than to portray the opposite. One way to win an argument to is be positive, to give examples of how things are improving, and improving the lives of millions of people. Grumpiness is not really a great sales pitch. Alas, avoiding the error of slipping into grumpiness is difficult when there is so much to be grumpy about, so it takes quite an effort to avoid it.

Environmentalists like to claim that the politicians should pursue their agenda because that is what the public wants. So free-marketeers will be cheered by a new poll that says that 67% of British people believe that the green agenda has been hijacked as a ploy to increase taxes. 72% of Brits would be unwilling to pay more in taxes, even if used for environmental purposes.

A couple of weeks ago I linked to a story about how the UK drugmaker Shire was planning to relocate offshore to avoid paying UK tax. The FT reports today that a large number of blue-chip firms are looking at following suit.

The problem, however, is that even if the UK government cuts corporate taxes to entice firms not to leave, a high-spending administration like this one is likely to recoup any loss of revenue by hiking taxes elsewhere. If it does, that will only encourage more people to leave.

Pah. Not only do I know of French Basque cheeses, I have eaten them with cider in a bar in St-Jean-Pied-de-Port while two tables of Basques on either side of me got on with serious drinking song competition, and I am presently in the Palermo district of Buenos Aires (which reminds me oddly of the French concession of Shanghai - slightly urbane areas in two cities with wide, leafy streets that were in their heydays around the same time, I suspect) while I decide in which of the many wonderful parillas I am going to wash down my evening steak with Mendoza Malbec. Americans are such provincial wimps.

And I don't go in for any of that "Good liberal while lingering over the Sunday New York Times" crap, either. It was just great burning so much carbon to get here.

Shane Greer reports on his attempt to get Westminster City Council to recycle business waste. It turns out that the council, while willing to collect his office's waste, will not recycle any of that waste - and will fine him if he puts his waste in recycling facilities aimed at domestic users. That sounds awfully like punishing businesses that try to be green.

The problem with councils running recycling services is that they are inefficient and fail to innovate. They use outdated methods that are expensive, and end up recycling in the same way as British Leyland used to make Austin Minis (at a loss).

In large parts of Ireland, a recent report by Gordon Hector points out, the state has let the free market deal with refuse collection: individual customers choose from private companies and pay directly, rather than through council tax. Competition has meant that technologies and methods unknown in the UK have been deployed. Greyhound, one of Ireland's larger waste companies, recycles 87% of the rubbish it receives (because recycling is good for its profits). The best-performing council in the UK only recycles 55% of waste; the lowest 11%.

This might not compute with environmental activists, but yet again we see that the free market is greener than state control.

Bill Emmott has a marvellously sane piece on food shortages, agriculture, the credit crisis and the case for GM crops. He's in favour of GM, wants free trade, and is unimpressed by the case for biofuels.

The comment thread attached to Emmott's article reveals considerable fear and hatred of GM foods. I would like to ask some of the commenters how they imagine most strains of wheat, barley, soybeans or rice that have been staples of diets for centuries came along. They are, albeit through trial and error over eons, just as 'modified' as a Monsanto crop. And that I think is the kicker: it is the speed of scientific change, not the change as such, that gives people the heeby-jeebies about genetic modification. I am not sure how that can be easily addressed without massive improvements in popular understanding of science.

It is wrong to make sweeping assumptions about certain media outlets. I came across what was actually a pretty decent defence of open borders and the benefits of allowing people to migrate between countries over at the Guardian's "Comment is Free" site, which in my experience often has decent columns but absolutely gobsmackingly bad comment threads, particularly if the subject of the Middle East and specifically, Israel, comes up.

Phillipe Legrain has this pretty good argument in defence of immigration, challenging the recent House of Lords report on the subject. It revives a few of the points I also made here. In that Samizdata thread, one issue that came out in the comments was the idea, which is weird if you think about it, that residents who are lucky enough to be born in a country X are entitled to tell outsiders that they are not entitled to move around. Take the logic further: am I, a British citizen, entitled to ban my fellow Brits from moving abroad if such people are, say, incredibly skilled or rich? What right do I have to do this? (None). But if we are entitled to use some sort of "quality of life" consideration or economic calculus to say that we should ban or cap immigration, then does not the same argument cut the other way when it comes to emigrants?

I ask this question because, like a good classical liberal, what ultimately counts is liberty. The ability to get out of a country is a crucial check on the ability of the rulers of such places to act badly.

By the way, if you read the CiF thread linked to here, it is hard not to be depressed at the sheer, groaning economic illiteracy in evidence. As I keep stating, there is no argument against the influx of immigrants that cannot be used to advocate strict population controls, shorter working weeks to "create jobs", and other lump-of-labour nonsense.

One caveat: Legrain makes a couple of bad points amid the good ones. He dismisses the House of Lords report on the grounds that it has some Tory members on the panel, such as Lord (Nigel) Lawson. Lawson is a pretty robust advocate of free trade and the descendant of immigrants himself, so Legrain made a cheap shot. Also, immigration may alleviate the coming pension problems by adding to the workforce, but ultimately, that problem will require a long-term rise in savings, and immigration is not a permanent fix for that.

Another writer who is good on the subject is Chris Dillow. He points out that if immigration is so terrible, why not take controls down to a local level, so that people in say, Essex are banned from moving to Hampshire, or Wales, or whatever? No doubt someone will claim this is a "straw man" argument, but it is not. If you believe national boundaries are in fact just lines on a map, then there are other lines, too.

Yesterday morning I posted, on my personal blog, some anodyne remarks about how economic trouble strikes. They included this:

Speaking of Paul Marks, ...

... as I was ...

... someone should really dig out him ranting away three or four years ago about the fact that the British economy is doomed, doomed. Now everybody is talking like this. They are merely telling us so, now. He told us so, years ago. With luck, it will be possible to find an entire Samizdata posting, from way back, in which this last week’s cursings are all there.

I scratched about for a while in the Samizdata back catalog, but could find nothing entirely suitable. I suspect that Paul may have posted a lot of his best doom-mongering in comments, both following up on his own postings, and on the postings of others. However, commenting at my posting this morning, Peter Briffa supplied a link to this posting at conservativehome.com, dated June 14th 2005. The posting itself concerns some fairly anodyne remarks from Shadow Chancellor George Osborne, about such things as a "modern, integrated transport infrastructure", a reduction of the regulatory burden, a "strong macroeconomic environment" and "simplification of taxes". But then, comment number two, quite long, turns out to be from a certain Paul Marks. It includes this:

On the Bank of England: Well the British money supply is expanding at least as fast as the Euro money supply (see the back pages of the "Economist" any week for the stats) - so even I would not make a jingoistic claim that all things in Britain are fine. Of course joining the Euro would mean even lower interest rates for central bank credit-money (hardly a good idea).

Sadly the notion that "expanding the money supply" is good for long term economic prosperity has been an article of faith for many decades (whenever there are problems the cry goes up "cut interest rates"). Once it was believed that this credit money expansion should be linked to the general "price level" (in order to prevent, horrors of horrors, falling prices), but at least since Keynes the doctrine has been to issue more money (by various clever means)as soon as there is trouble - whether the "price level" is going up, down or sideways.

I do not expect to convince anyone here that credit money expansion is the cause of the "boom-bust cycle", but for anyone who thinks (along with Mr Blair and Mr Brown) that this cycle has been "abolished" I would advise them to watch and see.

So, not only did Paul Marks predict the trouble ahead that we have now crashed into. He also predicted what would be wrongly said about how to deal with it when trouble did in due course strike. I'm sure that there is similar stuff to be found here. Paul? Anyone?

I have a lot of time for Chris Anderson, the top editor at Wired. His book, The Long Tail, ought to be on the reading list of anyone who wants to understand how the massive reduction in the costs of searching for stuff online has changed the economics of businesses as varied as retail to travel. But in his latest essay on how businesses are moving to give stuff away for free, he over-reaches.

Here's this paragraph:

Milton Friedman himself reminded us time and time again that "there's no such thing as a free lunch. But Friedman was wrong in two ways. First, a free lunch doesn't necessarily mean the food is being given away or that you'll pay for it later - it could just mean someone else is picking up the tab.

But if someone else pays for my lunch at my favourite pizza joint, it is not free. It has not mysteriously come out of the sky.

Of course, Anderson makes a lot of great points about how the structure of how things are paid for has been massively changed by technology. He is also right to emphasise how a lot of businesses "give away" goods and services for free as gifts, but they still charge for their output at some point. Otherwise, what Anderson is talking about is not business, but philanthropy.

Sorry, but Friedman's, or Robert Heinlein's logic is unbreakable. There is no such thing as a free lunch.

CityAm, the freesheet newspaper in London, has this cracking scoop:

Shire Pharmaceuticals, the FTSE 100 drugs giant that focuses on treatments for attention deficit hyperactivity disorder, is to re-register its head office outside the UK for tax reasons.

The group, which is valued at around £5bn, has been consulting the accounting group PriceWaterhouseCoopers on the merits of a move and is set to inform investors today. Shire’s headquarters are currently near Basingstoke. The news will come as a further blow to the UK economy.

The story ends with a quote from Matthew Elliott, head of the lobby group, The TaxPayers' Alliance:

“This disastrous news confirms that Britain’s competitiveness has suffered a series of blows from misguided tax hikes.”

I am glad to see that the influence of CityAm's newly-appointed editor, Allister Heath, who has written on the flat-tax issue in the past for the Taxpayer's Alliance and at the now-defunct weekly, The Business, is making itself felt. Far too many journalists at places such as the FT, for instance, seem to operate in a corporatist cocoon. Allister will not make that mistake.

I have linked to Tim Worstall quite a bit lately and make no excuses for doing so again. He has a good piece about the current economic issues and ponders whether the latest risk factor is that of carbon-reducing measures worsening the economic outlook. It is afactor to consider, for sure. If the EU or other groups of countries slap tariffs on "naughty" carbon emitters, it could have quite a severe impact.

Former UK Chancellor Nigel Lawson has a new book out on global warming issues. For all that he made some errors during his time at 11 Downing Street, his sharp analytical brain is rather more impressive than that of the current office-holder. This looks like a good study of the subject.

This commodity supercycle has led to an increase in the prices of wheat and rice. Governments have predictably undertaken a perverse policy of raising prices on the exports of crops to ensure their own supply (and take advantage of higher prices for revenue), removing incentives for farmers to cultivate more land or increase their productivity. Argentinian farmers on the pampas are now milchcows for Kirchner.

The reinforcing inflation of higher prices and bad policy leads inexorably to unrest amongst the poor. Was this not the overriding concerns of all elites in a subsistence economy? Now that age-old conundrum has returned?

Sir John [Sir John Holmes, the undersecretary general for humanitarian affairs and the UN's emergency relief co-ordinator] said: "The security implications should also not be underestimated as food riots are already being reported across the globe.

"Current food price trends are likely to increase sharply both the incidence and depth of food insecurity."

As well as the riots in Egypt, rising food costs have been blamed for violent unrest in Haiti, Ivory Coast, Cameroon, Mauritania, Mozambique and Senegal. Protests have also occurred in Uzbekistan, Yemen, Bolivia and Indonesia.

China, India, Pakistan, Cambodia and Vietnam have curbed rice exports to ensure there is enough for their own people.

The phenomenon has even acquired its own term, 'food insecurity', though I prefer older and simpler terms: famine and starvation. Since the United Nations has stated the obvious, there is the unspoken assumption of "somthing must be done". When one looks at the speech, the outstretched hand appears:

But I fear we are also going to need more global resources to tackle these challenges, to find innovative ways of raising these vitally-needed additional funds, and to make sure that these extra resources are spread evenly across the sectors. Allocations must not be devoted exclusively to the most visible aspect of this new demand i.e. meeting immediate food needs, but also to health, emergency education, etc. So the UN, NGOs and donors – both public and private - must continue to work together to increase the level of resources coming from both new and broader sources of funding, not least from the private sector, and to set appropriate priorities. We also need to continue to work on the diversity of funding mechanisms, in addition to core contributions to agencies and NGOs.

Holmes was talking at a conference in Dubai and, despite the denial of scaremongering, painted a picture of crisis (including the usual bogeyman, climate change) to demand more resources co-ordinated and spent by the UN, presumably.

UN spots crisis and pleads cash is not such a good headline, though more truthful.

Obama’s speeches frequently include passages that flatter their listeners who aren’t quite intelligent enough to realize how shallow his thinking actually is into thinking that they are more intelligent than they are.

- Stephen Bainbridge. Ouch.

There has been a lot of comment this week about a House of Lords report on the benefits, or otherwise, of mass immigration to the UK as far as the economics is concerned. It did not address the cultural aspects, such as the influx of large numbers of people from fundamentalist Islamic states or people with other, very different traditions to those of the existing population. It talked about the impact on the economy. The general conclusion is that in the long run, there is a very small, positive impact on growth but no real impact overall on GDP per head. And for some parts of the existing workforce, the impact is bad: lower wages, or no work at all.

The Sunday Telegraph, in its leader column, broadly endorses this analysis. What bothers me, however, is this: if immigrants are 'taking' a certain number of jobs (our old friend, the Lump of Labour Fallacy, is at it again), why not recommend say, a drastic pro-emigration policy for say, 25 per cent of the population, or even half? I mean, if there are "too many" people in the UK, why not go for a massive reduction? Indeed, if you take the argument to extremes, you could argue that we would be fabulously rich if the population were reduced to say, 100,000 or one million.

But that would remove all the benefits of a large population, which the immigrant-bashers overlook: the skills, or 'human capital' that a large population makes available. The silliness of the complaints about all those foreigners 'taking' 'our' jobs is not just the Lump of Labour Fallacy, however, which by extension is part of the closed-system thinking one associates with socialism and many other collectivistic doctrines.. It is also the unspoken assumption, rarely explicitly spelled out, that there is some sort of optimum, or "just about right" level of population for a given geographic area. But how do the noble Lords or even a mere economist figure out how many people in a country is right or wrong? And as a commenter said, I believe on this site, some months ago, you do not hear about Tescos or Vodafone moaning about "too many customers" putting pressures on their services.

Of course, some commenters will insist that the cultural implications of mass immigration from the Islamic world, say, outweighs what economic benefits there might be, but that is a separate issue.

The recent scary share price fall in HBOS, the UK banking group, prompted alarm that hedge funds and other naughty speculators were deliberately bad-mouthing the company in order to make its shares drop, and profit from that fall. There may be some truth in this: the UK financial regulator, the Financial Services Authority, is checking this case, although my confidence that the FSA will find anything has not been improved by the watchdog's almost total uselessness over the Northern Rock affair. But as this article points out, the supposedly demonic practice of "shorting" a company is often a good thing. If investors can make a profit by a company they think is headed for trouble, it can light a fire under the complacent/useless/criminal/other executives of that company.

It all sounds a bit like witchcraft to the economic non-expert. What the bejeesus is shorting? Simply, it is the practice of borrowing something like a company's shares in the expectation they will fall in price, then selling them, repurchasing them at a cheaper price a couple of days later, and pocketing the difference. Short-selling used to be mainly done by hedge funds who borrowed shares, bonds and other things from banks. But through derivatives like spread-betting accounts, contracts for difference and warrants, even your average Joe Punter can do this, although they would be wise to realise the risks. Numero Uno risk is that the market will not fall as the punter expects, so the investor, be he Nobel Prize winner or retired executive trading stocks in Surrey, should limit their losses by buying a pre-arranged clause to close off a bet.

Making money when a market falls. How cool is that?

Here's this gem from Reuters:

Cuba seeks more user-friendly socialism

There is something almost pathetic about the following paragraph from Reuters, as if the ability of people to trade with one another is some sort of wonderful present given by Father Christmas, rather than an extension of the basic right of every human to sustain life and flourish happily:

Bans on the sale of computers, DVD players and other products have been lifted, and Cubans who can afford it can now stay at tourist hotels and buy a cellphone.

Agriculture is being decentralized, farmers can decide for themselves what supplies they need and the prices paid to them are rising to boost food production.

Seriously, these steps represent real progress. If the reforms are real, it clearly makes sense for the US and other countries to lift sanctions against the country. A sharp dose of free trade should put a stake in the heart of the failed Marxist experiment in that island for good.

Meanwhile, let's hope sanity eventually returns across the Atlantic in Zimbabwe. Surely, one of the great lessons of the 20th century, continuing to this day in Cuba, Zimbabwe or for that matter, Venezuela, is that state central planning is a disaster, whether applied to agriculture or anything else.

This priceless comment adorns the Financial Times comment pages this morning:

"Public funds are also not always well-directed"

Wow, alert the media!

This remark is contained in a remarkably wrong-headed piece of analysis as to the implications of a recent decision by 3i, the large UK investment firm, to pull out of financing early-stage companies, or what it is generically known as venture capital. Compared to other news events, this might seem like arcane stuff, but in its own way, tells us a lot about the rough environment that entrepreneurs face not just in Britain but in the continent. Venture capitalists typically will back dozens of fledgling businesses, hoping that a minority of them become Google-type successes to compensate for the inevitable failures and just-about-break-evens. VC is very much a long-term game: it can take up to 10 years or more for a portfolio of these investments to bear fruit. The epicentre of VC investing is in northern California; investment outfits like Sequoia Capital have helped to fuel the Silicon Valley startups that are now part of business folklore.

Yet the writer of the FT piece lamely argues that public - taxpayer's - money be used to encourage such businesses. Groan. It is vain to point out to this person that politicians should have rather more urgent things to do than risk public funds on highly speculative investments. Far better to get to the roots of why 3i and similar outfits have turned their backs on venture capital: a stifling tax and regulatory climate in Britain and elsewhere. If the rewards to success are not taxed at high marginal rates, then the money will flow in eventually, just as it has in the US.

I have just found this Anthony Makara article on ConservativeHome's Platform blog. Mr Makara writes:

"...we in Britain should stop importing goods that we can produce for ourselves...

Really? He claims that with free trade:

...we get cheaper goods, but we pay for that in other ways, with unemployment, and we pay for that with higher interest rates too. When we have an economy that is reliant on imports it means that we have to pursue a strong pound policy to ensure that the foreign goods stay cheap. To have a strong currency we have to have higher interest rates... This in turn will lead to inflation, which in turn will lead to higher wage-demands. Which in turn leads us back to the high interest rates that quell that inflation. "

Oh dear.

Daniel Hannan, writing on his Telegraph blog, gives a good example of how the free market is more environmentally-friendly than state ownership:

Kenya banned the killing of elephants in 1979, effectively nationalising its herd. At around the same time, Rhodesia (as it still was) made elephants the property of those whose land they were on. The result? Thirty years on, Kenyan elephants have been all but wiped out, while Zimbabwe’s are as numerous as ever.

People say that the market promotes selfishness, but it turns out that it is when things are owned collectively that greed thrives.

There are no causes of poverty. It is the rest state, that which happens when you don't do anything. If you want to experience poverty, just do nothing and it will come.

- Madsen Pirie explaining the folly of Common Error No. 61

It was always a mistake to think that the demise of UK mortgage lender Northern Rock, entailing a massive bailout of the bank by the UK taxpayer, would be the only major example of a financial institution getting into dire trouble. Investors have woken up this morning to the news that JP Morgan, the blue-blooded US bank, has bought US bank Bear Stearns for less than a tenth of what Bear was worth, based on its share price, late on Friday. Wow. Bear Stearns, which has been building a fancy new European HQ in London's Canary Wharf (that is a often a bad sign), was one of the earliest victims of the credit crunch. Two of its hedge funds were smashed last year by heavy losses linked to US mortgage-backed debt that has turned out to be worthless. The Fed has stepped into the JPMorgan/Bear Stearns deal with a £30 billion (don't you just love these big round numbers?) funding facility. The dollar is in free-fall, which might be great for US exporters, not so marvellous for Germany, France or other countries. There is a whiff of panic in the air.

One of the more thoughtful, if sobering, analyses comes from The Times (of London) columnist William Rees-Mogg. He points out that once again, the late Milton Friedman has been proven correct: we have been through a period, since the 1990s, of rapid monetary growth. The inflationary impact of that growth had been temporarily masked in the High Street and the labour market by the deflationary effect of cheap goods from China and elsewhere. But for those who wanted to look hard enough, the warning signals were plenty: asset price bubbles in property, gold, antiques, fine wine, equities, as well as the frenzy of mergers and takeovers, much of which was funded by cheap debt, as well of course as the heavy lending to sub-prime borrowers in the US, Britain and elsewhere.

The trouble, however, is whether central banks have, or ever had, the weapons to control runaway lending. Consider this: for much of the 1990s and "Noughties", Japan, the world's second-largest economy, operated a zero-interest rate policy. Its official interest rate today is 0.5%. Let me repeat: 0.5%. As a result, speculators have borrowed vast amounts of money from Japan and reinvested the proceeds in places like Britain, where rates have been over 5%, or the US, or Switzerland, or Australia, New Zealand, and the euro zone. This is what is called the "carry trade". These carry trades mean that to all intents and purposes, low-rate nations set the prevailing value of borrowing money.

Of course, old-style mercantilists might argue that this proves the need for exchange controls, capital controls and the like. I disagree, but I can understand the reactions. We live in a globalised market for money and credit, but without some sort of international "anchor" mechanism like the old gold standard, there is a dangerous vacumn in the system. Yes, I know all the arguments against tying currencies to gold (which is above $1,000 per ounce), but surely the finest minds of our economics profession need to figure out one of the key challenges of our time: how to ensure that the price of money is handled intelligently in today's global market place.

Update: Megan McArdle has thoughts.

It might seem strange that I would be saddened by the death of man who was supposed to have admired Lord Keynes, but Tony Dye knew a credit-money bubble when he saw one. What Tony Dye did not understand was politics. Every time he was certain that the crash must come, Alan Greenspan (and the mini me versions of him in charge of such institutions as the Bank of England) would just create more money to keep the credit boom going.

"But if he does that it will just make the crash worse when it does finally come" seemed to be Tony Dye's position, and he was right.

However, he did not understand that political types (and Greenspan was certainly a political type) do not care about the long term.

"In the long run we are all dead" was the position of Lord Keyes, and Tony Dye is now dead. However, he did care about the long term - and the people who are left to live in it.

Down in the dreary bowels of the Financial Times' website, which has a list of what we happy people can expect in today's budget, is this classic of FT understatement:

The chancellor will announce a delay in introducing international financial reporting standards to government.

No shit, Sherlock. In plain English, the vast debt bill incurred in the government's Private Finance Iniative will not be put on to the public balance sheet for a while yet. How jolly conveeenient. If the PFI debt was so accounted for, it would add tens of billions of pounds of debt to the public balance sheet, making the state of the UK public accounts look positively Italian.

As I have said before, this "off-balance-sheet" stuff is a curse of modern finance, and should be scrapped.

The following headline appeared in The Times (of London) this morning:

Greggs chief attacks speculators for driving up the price of wheat

The managing director of Greggs, the high street baker, has attacked speculators for driving up the price of wheat and fuelling famine in Africa.

Sir Michael Darrington, who yesterday announced that he would be stepping down after 24 years in charge, said commodity traders were more to blame for spiralling food price inflation than poor harvests or farmland given over to biofuels.

Ah, bash the speculators. Where would we be without those terrible people? It may be that some of the high price of wheat - now over $13 a bushell and up 118% in the past 12 months - is down to hordes of greedy, Gordon Gekkos bidding up prices for the stuff, but these people make a living by trying to correctly guess future prices and act on imperfect information. They cannot, however, defy the laws of economic gravity. If supplies increase, as is likely if prices are so high and there are big profits to be made growing the stuff, or if demand slackens, as people use wheat substitutes, then all that speculative mania will fall away. In any event, unless this business executive or other folk have looked at what happens when wheat is no longer traded as a commodity but handled by government regulations, they will realise the nonsensical nature of bashing speculators. In the 1980s, years of agricultural subsidies led to the infamous "wheat mountains" that were subsequently dumped onto the world market, hitting producers in the Third World.

Now consider this headline:

Bread basket that is left to grow weeds

The item goes on to explain that large tracts of good, agricultural land in Eastern Europe are lying fallow, ie, un-planted, because of tariff barriers and other restrictions. The Times rightly hammers the EU's wretched Common Agricultural Policy, the USA's farm support system, and other regulatory controls on farm production, for contributing to this farce.

It is a joke to attack speculators, who after all bet their own or their banks' money on trying for forecast supply/demand trends, when it is politicians, who rarely, if ever suffer the consequences of bad investment decisions, who get to bugger up global agricultural markets in this way. At least if a bank or hedge fund gets a bet wrong, the principals in the fund get bankrupted, or executives are sacked. This does not always happen, of course, but generally the market is much tougher on mistaken bets than the political system is. As prices soar in the shops and hit poor consumers, the petty meddling of Chancellor Alistair Darling in today's budget statement is small beer indeed. Great former UK politicians like Robert Peel have put free trade front and centre of their economic philosophy. It would be a welcome step if western governments today did the same.

[A blogapotamus]

Mr Speaker,

Income tax is an evil. It is an evil not because it is a tax, but because of the way it works.

First, it takes from the citizen the choice of how to spend his money. Indirect taxation, though often in the past tweaked to show the state’s displeasure at certain choices, still leaves you a choice; to spend or save, and whether to have booze, burgers or broccoli for lunch.

Second, it requires the tax authorities to enquire how you obtain your money and how you spend it. The existence of exemptions and allowances, of deductible business expenses, returns and taxes management is essential to the operation of a system that would widely be seen as unfair if it fell as heavily on the pauper, the producer, and the rentier drone. But the existence of allowances and schedules, and latterly tax-credits, means people rightly use their rights, and the Revenue is incentivised to regard everyone as a cheat, to treat careful self-management as a form of fraud, and press for more powers and more bureaucracy. The system becomes ever more complicated, by special pleading and anti-avoidance; the complication allows for ever closer investigation of personal affairs, ever more complicated and impenetrable forms, and ever harsher treatment of the negligent, confused or exhausted taxpayer.

The result tends to a system of brigandage, where the law of collection is as uncertain as the Tax Inspector’s patience, where the small taxpayer is as much prey as he has fat on him, and only someone rich enough to fight a case as far as the House of Lords will ever find out what the law is. Having made the travellers empty their pockets, the suspicious highwayman will resort to strip searches, then to probing body orifices. Anyone who has made tax or tax-credit returns for a few years has had a similar experience.

Third through PAYE and deduction at source, it takes and spends your money before you get it. You may never notice it has gone. And if you do, and your financial knowledge is small, you may not realise how much of it has gone, nor make the connection between your vanishing money and state spending. That makes it easy for tens of millions of people to believe that it is always someone else who is paying for political promises.

Yes, income taxation is great evil. It tends to destroy liberty, privacy, and personal responsibility.

It may come as a surprise to the House and the country, therefore, that I, as the first Samizdatista Chancellor, am proposing to increase the rate of personal income tax.

There are worse things than high tax rates. My predecessors in this office have amply demonstrated what those are by their practice. They have each chased headlines by purportedly 'reducing' the rate of income tax from time to time. Meanwhile, inexorably, ineluctably, and invisibly to the average member of the general public, the burden of taxation has risen, with a few pauses and breathing spaces, for more than half a century.

This has been done in two ways. By the imposition of more 'invisible' taxation on the nation’s payrolls, and by the extension of the tax-man’s reach through complicating the system. My Right Honourable Friends have explained how we intend to slim the state; my task today is to reveal its weight, and start to reduce how heavily it rides the citizen.

Tax we must have both to pay for the necessary state and for the health-cure to sweat off the rest. Over the term of this parliament we will have much less state and much less tax. For now I content myself with trimming its girth, and taking away whip and curb.

Mr Chancellor Brown doubled the 'tax code' by one commonly used measure. It is less often noted that his predecessor, Mr Clarke, did the same. Calling British tax law a 'code' is to flatter it – HMIT will never, ever volunteer what the law is for fear that it may reduce his scope for manoeuvre. What tax you might owe is for him to know and for you, at your risk and expense to find out. But whatever it is we have four times more at least than we did a score of years ago. A radical simplification is in order; but also a structural change. I intend to reverse the malign spiral begun by Lloyd George, brilliantly augmented by Hugh Dalton, and capped by the last four living Chancellors. This government will uncloak the stealth taxes.

My predecessors have cut 'income tax' and pari passu increased 'National Insurance Contributions' paid by employees and employers alike. Staff cost their companies more than they think they do. Charities have been starved, as covenants from taxed income have attracted less recoverable income tax, but the donors have no more money to give. And there is a persistent legend that the 'stamp' has something to do with the National Health Service, whereas it actually has an obscure link to pensions. Mr Chancellor Brown created a minimum income guarantee for pensioners – provided they fill in a complex intrusive form – rendering the conditional element of the Old Age Pension nonsense built on nonsense. Nothing is insured by National Insurance except form-filling.

Let us have an end to that. From the start of the next financial year I am abolishing all classes of National Insurance Contributions, and increasing the basic and higher rates of income tax by 17% and 12% respectively. The Pension Credit will be scrapped. The Old Age Pension will be made unconditional and made up to Mr Brown’s minimum for all those who currently receive it. We will be announcing changes to future pensions provision in due course.

This will bring an immediate benefit to businesses through the simplification of payroll administration, and a reduction in total payroll costs. It will save the costs of administration and allow a substantial proportion of the HMRC and DWP establishment – the whole former Contributions Agency, and most of the Pensions Service – to be decommissioned. It will reduce the tax burden on everyone and the total tax-take on most employees.

However no tax change is without losers. I anticipate a baying for my blood from most parts of the house, when it sinks in to honourable members that this will hit the poorly paid, the very well paid and the self-employed hardest.

So before that can start, Mr Speaker, let me tell the House what I shall be doing for each of those groups to ameliorate the changes.

First the poor. Britain is extraordinary among advanced countries in levying income tax on those at or below on the official poverty line. Mr Brown’s tax credits, notionally counteracted that, but not only fudged the fiscal figures by appearing as negative taxation rather than benefit spending. It also ensured that marginally employed, perhaps marginally literate, people were expected to make a substantial part of their living by form filling and negotiating HMRC. However attractive that idea may seem to the statists opposite, most people would rather earn their money honestly in work they can understand. I am therefore raising the personal allowance to £12,000 and permitting those in declared civil partnerships to share their allowances. Family Tax Credit is also to be abolished. A Samizdatista government will not enquire into who you choose to live with or how, and as anyone can now undertake a civil partnership and marriage, gay or straight, is now just one form, this measure completes fiscally our withdrawal of the state from the bedroom. Other measures will increase employment opportunities for the poor, but this substantially reduces the poverty trap.

Now the self-employed. The Revenue has traditionally treated them with suspicion, verging on hostility. We wish to encourage them. I am extending the range of allowable expenses to both incorporated and unincorporated businesses by moving to the American approach to deductions. The new Finance Bill provides for expenses to be allowable if they are incurred 'in the course of business and for a business purpose', rather than 'wholly and necessarily for business purposes'. Workers’ cooperatives and partnerships will also benefit from related changes.

We will also permit them to grow their businesses and incorporate them more freely. IR35 and the Construction Industry Scheme are to be abolished; we will not let the revenue arbitrarily pierce the veil of corporation or ignore valid contracts to increase its take. Mr Brown gave small companies a 0% corporation tax band for the first £10,000 of profit – then promptly took it away from them when they tried to use it. We will restore that, but at a slightly higher level, £12,000 to match the personal allowance.

I will also help small companies by scrapping the insane burden of P11D returns. Most honourable members will never have heard of these unless they are unusually curious about the content of the bundle of papers that appears from the parliamentary salaries office every summer while they are on fact-finding missions in tropical climes. However the incomprehensible regulations surrounding returns of benefits in kind for “directors and higher paid employees” have been around since the 70s, when marginal income tax was even higher than I have just made it, and the taxman was hot to hunt down perquisites of office used as avoidance. They are increasingly incomprehensible, which is especially hard small firms, and the fiscal function is now mainly to collect class 1A National Insurance Contributions. Which I have just abolished. A higher paid employee was someone on £8,500 or more when the return was introduced – equivalent to some £175,000 today – but the threshold remains the same. Bureaucracy endures. Or it did. We will introduce a simplified directors’ benefits return and stop putting a tax-price on a free cup of tea for the office girl.

Finally the rich. Unlike other parties, we do not believe in soaking the super-rich and driving them away from our shores. But we do think the treatment of non-domiciled residents is unfair to everyone else. That is a reason to treat others as well as non-doms, not probe and prod and fine the foreigners, however popular that may be with a certain xenophobic and envious section of the electorate. The whole situation is a consequence of Britain’s habit, shared with only a very few treasuries, of trying to tax individuals on their worldwide income. How would the British Empire have been built on trade and foreign investment had that rule run then, and the authorities hauled up Drake, Clive, or William Penn to produce accounts for their activities? Consistent with this administration’s policy of both repudiating extraterritoriality and ruling ourselves, the Bill before the house drops the purported power tax our residents, whatever their nationality, on overseas income that stays offshore. To the world’s wealthy, I say, "Come here, spend your money, enjoy our hospitality". To our wealthy I say, "Start businesses abroad, buy up the rest of the world, and bring home the loot when it suits you". We will be adding to this impression of hospitality by our institution of proper banking secrecy laws and our withdrawal from the OECD later this year.

For those thoroughly domesticated wealthy, well-off but not rich, the comfortable employed, this may not be enough, if they have heard my speech so far and imagine they will be paying 52% of their marginal income in tax. I sympathise. Some people will be. Even if it is not for long, while our expensive reconstruction of the public sector takes place, and we move towards our medium-term target of a state that consumes less than 15% of GDP, there will be losers. There always are.

However my last major changes will sugar the pill. They will benefit both those comfortable employed and provide unparalleled opportunities for employment in services, and maybe, even increase the revenue. I could see the articles in the broadsheet newspapers, when I proposed a marginal tax increase. "But how will I pay for nanny and for Tabitha’s and Johnny’s school fees now? It’s all out of taxed income and I make less than 300 a year from this column".

I do not want to be the cause of such anguish. I want nanny to stay in work, and the Priory Prep School to keep Tabitha and Johnny off the streets. I would quite like the Columbian cleaner on the books and making a market wage, rather than fearing deportation. And I am desperate for the 'coping classes' to shut up about how hard their lives are, what with only two more holidays a year than I have taken in my life...

All in good time. We will be reducing the tax-burden on everyone. But for now, I will gladden the shade of my auld acquaintance the late Auberon Waugh by putting one of his few budgetary suggestions into practice. I shall make the cost of employed domestic servants and private education allowable against income for tax purposes. This is not just a sweetie for the wealthy. It will make a big difference to those hard-working poor people, cleaners among them, who currently work and work and save and save to get their children an education of their choice outside the rotten state schools in the socialist rotten boroughs.

We will make more work for people to do – or rather, we will let them afford to do it – and it we will move money faster. This will have a positive effect on the fisc as more money is spent and some of it is taxed... (those economic asses braying from the benches opposite should consult the master they betrayed, John Maynard Keynes on the velocity of circulation) .

Having made the biggest changes to direct taxation in a century I do not propose to do a great deal to indirect taxation. Though there is a panoply of levies, stamps and excise duties that have each their own administrations, each making a minor contribution to the public purse and the misery of man, they are on warning: We will see to them in another budget.

The house will recognise that the changes in the criminal law my right honourable friend the Home Secretary [Mr Pearce] has made will have a substantial effect on revenue from indirect taxation, and from some direct taxation. It will also substantially decrease the cost to the taxpayer of prisons, probation, and the courts service. This government is content with the anticipated rise in VAT receipts from sexual services and recreational drugs from zero under previous administrations to a projected 30 to 50 billions a year within the next two fiscal years. We will have no “sin taxes” in addition. Sin is the province of ministers of religion, not ministers of the crown.

There is one other change. It is an end to the absurd pantomime where diesel for farmers is free of duties and died red, bio-diesel subject to another regime and died green, and ordinary derv yet another. We have had customs men sniffing exhaust pipes in order to prosecute people for the frugal green 'crime' of re-using chip fat. This administration has been justifiably rude about the puritans who call themselves conservationists. But we are not against conservation. Diesel engines are the most efficient we have in regular use. It is stupid to subsidise farmers. It is stupid to increase the cost of flexible road haulage. It is stupid to punish those who make good use of resources. From midnight tonight HM Customs will no longer take any interest in derv.

I commend this budget to the House.

Hysterical Guardian readers are getting absurdly upset. The reason? A member of the Samizdata team suggested that a new tax on prestige cars was more about the politics of envy than saving the planet.

Michael Totten's latest bloggage from Iraq is as informative as ever, but the thing that fascinated me most was a brief but interesting discursion into the use of the English word 'Supermarket' on a sign in a small town in Iraq.

What struck me about the sign on that store, and on many other stores in Iraq, was the English word “supermarket.” The only people in Saqlawiya who find English helpful are the Marines. And me.

I’ve seen this far beyond Iraq. Even in small towns in Libya – one of the most closed societies in the world – I found store signs in English. The amount of English in a genuinely cosmopolitan city like Beirut is even more striking, though no longer surprising. Beirut, at least, has a huge tourist industry. Imagine how differently you would think about Arabic civilization if small towns in Kansas and Nebraska – not to mention large cities like New York and Chicago – had storefront signs in the Arabic language even though no Arabs live there. Perhaps the word “imperialism” wouldn't seem so much like a stretch. Of course no one forces Iraqis or Libyans to put English words on their signs, so it's telling that they do so anyway, and that they did not choose Chinese or Russian.

I disagree with Michael's use of the word 'imperialism' and I think he answers that point himself in the very next sentence. An even more demotic variation on the inexplicable prevalence of English puzzled me many years ago BB (Before Blogging). I spent some time in a few fairly rough parts of Croatia and one can hardly miss the prevalence of racist and sexist graffiti on the communist-era concrete tower blocks. The odd thing is that mixed in with the usually 'Jebi Se' varient epithets in Croatian, you will find floridly racist threats or extravagant anatomical references in more or less grammatically correct English. And this in an area that was not exactly a magnet for English speaking tourists, particularly in the middle of the then on-going war.

The huge number of people who speak English in Croatia can be easily explained by the ubiquity of satellite dishes, which is why I often referred to the local Croatian English dialect as MTV English. But that does not answer the question of why in a linguistically and ethnically homogeneous area (such as unlovely New Zagreb in Croatia or Saqlawiya in Iraq), people use written English when there is no commercial or political pressures to do so.

Interesting.

It sounds like one of those three decker jokes where part three brings you down to earth with a bump, which is presumably why it got written like that. Hedge your bet by hinting that the story could be all rubbish, and then tell it anyway. Because, maybe he's right:

BOSTON - He predicted the fall of the Soviet Union. He predicted the explosive spread of the Internet and wireless access.

Now futurist and inventor Ray Kurzweil is part of distinguished panel of engineers that says solar power will scale up to produce all the energy needs of Earth's people in 20 years.

There is 10,000 times more sunlight than we need to meet 100 percent of our energy needs, he says, and the technology needed for collecting and storing it is about to emerge as the field of solar energy is going to advance exponentially in accordance with Kurzweil's Law of Accelerating Returns. That law yields a doubling of price performance in information technologies every year.

Tell me more:

... advances in technology are about to expand with the introduction of nano-engineered materials for solar panels, making them far more efficient, lighter and easier to install. ...

Is anyone serious now interested in this, other than singularity prophets?

... Google has invested substantially in companies pioneering these approaches.

Okay, but I would have preferred an obscure venture capitalist with a boring name, rather than the overmighty corporation which is, for now, flavour of the decade, and which has, for now, more money than God, to the point where hundreds can have full-time jobs spending it, without making a visible dent in money mountain. How "substantially" has Google invested?

The reason why solar energy technologies will advance exponentially, Kurzweil said, is because it is an "information technology" (one for which we can measure the information content), and thereby subject to the Law of Accelerating Returns.

"We also see an exponential progression in the use of solar energy," he said. "It is doubling now every two years. Doubling every two years means multiplying by 1,000 in 20 years. At that rate we'll meet 100 percent of our energy needs in 20 years."

So, could any of this be true? If it is true, what follows, economically, politically etc.? Beyond the obvious in the shape of disconsolate arabs. Instapundit doesn't have comments, but we do. My first thought: batteries for laptops and mobile phones are going to be replaced by infinitely powerful black patches on the outside (that's already happened with calculators, has it not?). Second thought: will big black patches on the roof in due course be enough to power cars? Trains? Lorries? Airplanes? Spaceships?

Third thought: the greenies will absolutely hate this, because there's nothing they hate so much as technical fixes to their precious and previously unfixable problems. Predictions for what they will say: "The sun is a finite resource! It is running out! Stop consuming Our Fragile Sun! ..." And, suddenly they will fall in love with oil industry workers, because they won't be needed any more.

But, first things first. Is it true?

At first I was going to put this up as a Samizdata quote of the day. It is a paragraph from a piece by Mark Leonard in the latest issue of Prospect, about Chinese think tanks. The Chinese intelligentsia have their left and right, it seems, just like us.

The new right was at the heart of China's economic reforms in the 1980s and 1990s. Zhang Weiying has a favourite allegory to explain these reforms. He tells a story about a village that relied on horses to conduct its chores. Over time, the village elders realised that the neighbouring village, which relied on zebras, was doing better. So after years of hailing the virtues of the horse, they decided to embrace the zebra. The only obstacle was converting the villagers who had been brainwashed over decades into worshipping the horse. The elders developed an ingenious plan. Every night, while the villagers slept, they painted black stripes on the white horses. When the villagers awoke the leaders reassured them that the animals were not really zebras, just the same old horses adorned with a few harmless stripes. After a long interval the village leaders began to replace the painted horses with real zebras. These prodigious animals transformed the village's fortunes, increasing productivity and creating wealth all around. Only many years later - long after all the horses had been replaced with zebras and the village had benefited from many years of prosperity - did the elders summon the citizenry to proclaim that their community was a village of zebras, and that zebras were good and horses bad.

Nice story. But the problem, from the quote-of-the-day point of view, is that Zhang Weiying surely has the story upside down and entirely wrong. They did not start by painting stripes on horses. They introduced real zebras, but painted over the stripes and declared them to be horses just as usual. No change was occurring. No upheaval. It was still socialism. Only after the amazing production gains duly materialised were the authorities in a position to wash away the camouflage, and admit that the new and improved "horses" had been zebras all along. But - extra twist - the zebra stripes are still painted over. They still insist that they are horses.

Horse with stripes painted on them are what you introduce when you are trying to get rid of zebras.

There is a depressing article at Reason magazine about the protectionist instincts of both Hillary Clinton and Barack Obama. What the article does not tell us about much is whether McCain is much better (I honestly do not know, so I welcome comments about his voting record). And of course George W. Bush hardly made friends with Britain by slapping tariffs on steel imports - which also hurt American manufacturers and builders (but they lacked powerful friends in Congress). America is the largest economy in the world and despite what some of the more starry-eyed writers on China or the other 'Brics' might claim, is likely to remain so for the foreseeable future.

Basically, America matters. If the country goes down a more protectionist path, it will hit the world economy in general. For all his many flaws, Bill Clinton's signing of the NAFTA Treaty - admittedly when Congress was in Republican hands - was one of the few major achievements of his time in power. It has helped to fuel the ascent of the world economy, lifting millions into higher living standards: if any fans of trade restrictions out there want to contest that assertion, let them provide figures. Here are some official US ones that give some pretty