Friday, 27 July 2018

Tired old Propaganda

I studied economics at Oxford, taught it, helped introduce management science as a secondary school subject in Scotland and subsequently examined it.

However, there are considerably more eminent economists than me who support Brexit. Perhaps I might pray in aid the 2017 report by Patrick Minford, Professor of Economics at Cardiff University and Roger Bootle, Chairman of Capital Economics, Europe’s largest macroeconomics consultancy, among others. The group included six former economic advisers to government and eight university professors.

“Brexit could boost the UK economy by as much as £135 billion a is time to abandon the gloomy forecasts of Project Fear and embrace Project Prosperity – the mounting evidence that quitting the protectionist EU will transform Britain’s prospects over the next decade.”

Now you may not agree with the distinguished authors of this report, but isn’t it about time to ditch the tired old propaganda campaign that Brexit is exclusively the province of the ignorant? Rational discussion is not aided by abusing those who don’t agree with you, nor by hysterical prophecies of cataclysm.

It simply is not the case that all the evidence points one way. As Spinoza pointed out, it depends on the colour of the glass through which you view it in the first place. In this case, also, there is a decision to be made on the balance of probabilities and of risk versus reward.

Even if majority opinion amongst certain groups did point one way it’s not much of a guarantee. I’ve been here before, being called a xenophobe and a fool almost two decades ago, when I was one of the relatively few economists who held that the UK should not join the Euro because it was unsoundly structured, would not work properly and would damage several European economies severely. Strangely enough, nowadays I find far more people who remember agreeing with me back then than I ever noticed at the time.

Wednesday, 18 July 2018

The working class vote

One interpretation of the referendum result seems to go largely unchallenged.

Some (mercifully not all) Remainers keep on and on about polls showing them to be better educated than Leavers. Apparently, this proves that all you need is a good education and you immediately see the virtues of the EU. In my opinion, this judgement contains more than a whiff of condescension.

Since I’m no longer young, my views are, of course, worthless anyway, but back in the day, I did win an open scholarship that took me from a Sheffield Council estate to Oxford University. So here’s a small thought from the graveyard’s anteroom.

When I took “A” Level, about 8-10% of 200,000 candidates obtained grade A. Today about 25% of over 800,000 candidates obtain grade A. In the mid 20th century under 20,000 UK students per year were awarded degrees; in 2010 over 330,000 students were awarded degrees.

I, therefore, very tentatively, propose an alternative explanation for the correlation between an extended modern education and voting Remain.

The vast expansion of university places in the UK over relatively recent years produced both a significant reduction in average undergraduate standard and a much greater exposure of young people to the ‘progressive’ views that enjoy dominance among younger academic staff.

I am far from convinced that a mediocre graduate is intrinsically more qualified to pronounce on this question than an expert plumber who left school at sixteen.

I was born in a working class area of Sheffield, the son of a naval petty officer who left the service after the war but died of cancer within a couple of years. My grandfather’s family had been agricultural workers in Norfolk for centuries, moving to the big city in the late nineteenth century to find work in the steel mills like so many before them.

It so happened I was born with a good brain. I did nothing to earn that, and whenever I get too proud of what I’ve achieved or too downhearted over my failures, I remember the folk whence I came and remind myself that but for good fortune I’d probably have had far fewer opportunities to make such lifestyle choices, right or wrong, anyway. I should have been amongst the thousands of ordinary working people who lost their livelihoods with the collapse of the steel and cutlery industries and had to struggle so very hard to bring their city back to life again.

I cannot speak for them; I realise that. I am too far away from them now, in both time and distance. But I know one thing for certain. They are good people. They are sensible people. They know a great many things about life that you need no academic qualifications to know. They are as entitled to their view of how the EU affects them as any southern banker or stockbroker.

Not many people have been privileged to enjoy the sort of education I have. But neither I, nor anyone else, has earned the right to patronise the working class who voted Leave.

Saturday, 14 July 2018

Free Trade versus Protectionism

Any set of circumstances will advantage some and disadvantage others, likewise any changes in circumstances. We can always find examples of those who are disadvantaged by change, but we do not, if we are wise, attempt to ban the development of motor cars in order to protect the livelihoods of stablemen and wagon builders.

Protectionism is in no-one’s long-term interest. Even when it is the collective protectionism of a number of advanced economies it is ultimately damaging to the optimum allocation of resources and hence to standards of living. Free trade with as much of the world as possible is in the UK’s best interest.

Right now the EU’s protectionism does temporarily benefit some producers but most of them are not in the UK. This is why, as a mainly service-based economy, we buy manufactures and agricultural products expensively from the EU instead of cheaply elsewhere and have a major trade deficit with the EU which does not reciprocate with a genuinely-free market in services.

Already the EU accounts for a rapidly diminishing minority of our trade. We enjoy a surplus in our growing trade with the rest of the world. The EU is slow-growing by world standards. Can anyone explain why it is sensible on a macroeconomic basis to remain tied to the shrinking, deficit-returning section of our trade to the disadvantage of the growing, surplus-returning section? President Trump, for example, has correctly highlighted the problems the Chequers proposals present for a trade agreement with the USA, our largest single market.

The point is that tariffs, in general, are not very important today as barriers to trade, though there are always specific exceptions to the rule of course. However non-tariff barriers are important and it is this which is at the heart of the EU’s protectionism. The EU rulebook is process-driven, not standards-driven. In other words, it is backward-looking and hostile to innovation. Such rulebooks can never keep up with technology and in the EU’s case are actively pressed to resist change by reactionary lobbyists.

The negotiations with the EU have long since passed the point where a deal could be mutually advantageous. It’s now all about preserving the EU by holding back the progress which the UK would be able to show once freed from the shackles. It is not in the UK’s interest to pursue the Chequers proposals or anything likely to flow from them.

Protectionism always has its advocates because it can yield temporary political gains to the protector. Free trade, by contrast, can yield mutual economic benefits to all participants. We will get good deals because it’s in the interests of other countries to give us good deals. It would even be in the interests of the EU, except that they prefer to protect their federalist agenda over their citizens’ welfare.

Remember that the UK is a service-based economy and the EU 27 are mostly not. The EU has been spectacularly unsuccessful in negotiating service trade deals, probably because its negotiators neither understand nor care what is needed. Switzerland etc. do perfectly well as standalone negotiators. This is because they do understand the needs of service-based economies, i.e. their own! The UK is the world’s sixth economy. Why can we not do what these other independent countries can do?

Tuesday, 10 July 2018

The wicked flee where no man pursueth

The Prime Minister’s latest Brexit proposal is already well on the way to Brexit In Name Only and, by the time Brussels has finished demanding even more concessions and the government has finished rolling over, the UK is likely to be in the limbo I have consistently described as the worst of all possible worlds.

Let us be clear: BRINO is not only worse than Brexit it is worse than Remain. The future envisaged by the Chequers proposals appears to be a UK permanently held hostage in the EU’s anteroom. We shall be obliged to accept all rules on goods etc. without any say in drawing them up. In practice, we shall have to implement the ECJ’s decisions on those rules. We shall lack the flexibility to foster innovation in new industries such as biotechnology, where we have a comparative advantage. We shall not be able to negotiate any goods trade deals with third parties that depart from EU rules; hence it seems unlikely that we shall be able to agree a deal with the USA, our largest single market. We shall be obliged to accept a permanent deficit with the EU in goods trade.

For the privilege of this absurdly disadvantageous arrangement, we shall pay the EU £37 billion pounds. By the end of the negotiations, I don’t doubt we shall also be paying annual fees too, so the point of making a divorce settlement payment at all escapes me utterly.

Meanwhile, Brussels will ensure that we cannot participate in any of the ongoing EU projects such as Galileo, though, in a magnanimous gesture, they will allow us to continue paying for them in our settlement bill.

Any sensible government would have held off triggering article 50 until it was sure that preparations for ‘no deal’ could be completed in two years. This government has allowed itself to be backed into a corner by assuming goodwill on the part of the EU, even when it was evident that none was forthcoming. Failure to plan for ‘no deal’ fatally undermined the UK negotiating position. The nearer the deadline approached without any plan for ‘no deal’, the more obvious it became in Brussels that the UK would take any (bad) deal rather than ‘no deal’.

The arrangement now proposed is so bad that one is tempted to suspect it was never the intention to allow Brexit actually to take place. If you had set out to secure the worst possible deal you could scarcely have done a better job.

I now suspect a second referendum was refused not because the establishment expected a different answer but because it feared the same answer. A confirmation of the public’s desire for Brexit would have made it that much harder to deliver the non-Brexit-dressed-up-as-Brexit which we now see is intended.

Naive ingenu that I am, I actually trusted the official government statement that the government would implement what the electorate decided. I should have known better. It was, after all, a promise made by politicians.

Truly, the wicked flee where no man pursueth. The pass defending UK democracy has been yielded without a struggle.

Friday, 6 July 2018

The Douro

The Douro is the third longest river in the Iberian peninsula and for seventy miles it winds through narrow canyons, demarcating the border between Spain and Portugal.

The entire Portuguese length of the river is now navigable, from Vila Nova de Gaia, at the estuary mouth opposite, Porto to the confluence with the River Agueda at the Spanish border. To make navigation possible many miles of artificial banks and five enormous dams / locks have been constructed. Carrapatelo, the largest of these locks, involves a single lift / drop of 114 feet.

Vessels of up to 272 feet long and 37 feet wide can pass these locks and entertaining cruises of one to two weeks can be arranged along the river. The ship on which we travelled, the Douro Elegance is only a year old and offers luxurious accommodation and facilities aboard.

The Douro has the world’s oldest demarcated wine producing area, as well as numerous groves of olives and almonds clinging to the rocky slopes on either bank. The quintas or wine estates are the centre of Port wine production.

Here, the shallow, rocky schist soil of the steep hillsides retains the day’s heat and radiates it back to the vines at night, preserving an even temperature. It also stresses the vines, forcing their roots deep and encouraging the production of grapes rather than excessive leaf.

I have to confess I was not previously aware of the existence of white port, which is a sweet aperitif. Ruby and tawny varieties of port I had encountered, but I was surprised to learn that only certain exceptional years are designated vintage and carry the date of the harvest. There are only one or two per decade. For other years the crucial thing is how long the wine matures in oak barrels (longer for tawny than ruby) and what year bottling takes place. Worth noting is that ten year old tawny is always ten years old, no matter how long you keep it in your cellar.  

Wednesday, 4 July 2018

Griffon Vulture

Weighing up to 25 lb, and with a wingspan of 8 or 9 feet, the Eurasian Griffon (Gyps fulvus) is an inhabitant of crags such as these near Castelo Rodrigo in Portugal.

We were lucky enough to see both these birds and some Egyptian vultures (Neophron percnopterus), on our way back from visiting the fortified village itself.

Unfortunately, it took me a while to figure out how to photograph them properly and the Egyptians were gone by the time I achieved some degree of competence. 

This is the first report from our holiday in Portugal. We had some problems in getting there, but once we finally caught up with the ship, almost a day late, we had a great time cruising the Douro and later in Lisbon.

More reports to follow.