Search This Blog

Wednesday, 20 December 2017

Trump's Triumph for Mercantilism

It is inevitable that the entire Economics establishment is critical of the new US tax regime that will [almost certainly] be approved by Congress today.

The package largely restores Mercantilism to fashion: that is, the idea that a country should build up its own commerce and industry, and only trade with others where there is an obvious advantage in doing so. It is significant that among the tax reductions there is a swingeing decrease in the tax on funds that are earned for the sale of intellectual property abroad. This can only strengthen the technology giants as exporters and earners, who will bring more of their overseas earnings into the USA for investment in new developments, the purchase of foreign intellectual property [UK beware!] and distribution in the USA as wages and dividend payments.

The Econocracy has been inculcated with the contrary view, that 'Free Trade' is an ideal to be pursued: as if any sane government would expose a country to imports from the rest of the world regardless of whether the prices charged are set deliberately to undercut - and ultimately to destroy - the native industry. The econocratic view has been prominent since 1766 [Adam Smith's year of publication] and predominant since 1890 [Alfred Marshall's Principles of Economics].  Britain's economic decline is pretty well coterminous with the adoption of Marshall's dogma in the universities between 1920 and 1940. That whole mindset needs to be swept away.

The great proof of the new Republican policies will be the extent to which the increasing US deficit supports growth of the US economy. If the economy is growing at a greater rate than the accumulated debt is growing, the ratio of debt to GDP will be declining, which will signify success and be the final proof of the extreme disutility of conventional Economics.

I am working slowly trough my text, and finding it a very depressing experience: the sheer pompousity of my style upsets me hugely: no wonder the last effort did not sell!

Monday, 11 December 2017

Bitcoin: the material costs

Bitcoin has no material substance; but it only exist in an environment of massive computer power which deploys energy to give effect to the complex algorithms and mathematical structures that it rests on, and the massive security networks that have been proven breachable at several points on various occasions.

The amount of brainpower that is included in the system and in its use has to be paid, fed and watered; as do all the traders and buyers who have now joined in the bubble. I have also seen massive estimates of the cost of the electric power that had been - and is being - consumed in the process.

The bitcoin bubble will burst: though the notional 'currency' may survive [as the South Sea Company survived the crash that ended that particular bubble]. More importantly, millions of people know a little about blockchain which will almost certainly develop as a massive set of tools of commerce very beneficially: but the costs of constructing and operating any such systems need carefully to be evaluated.

This is a very interesting phenomenon: but the bubble will end in tears for a lot of people.

Now I will return to the work that is preoccupying me at present. I will continue to blog occasionally so that i have a log of the dates on which I post comments.

Friday, 8 December 2017

A Great Day for the Irish

the Irish did win. Mrs May is now committed to defer the dual vetoes of the Dublin government and the DUP. The British have promised, in effect, to remain subject to the EU: indirectly.

Now we can expect to see little Mr Macron trying to grab some thousands of British banking jobs.

The rest is mere detail. Submission to Brussels is assured.

Tuesday, 5 December 2017

I Told You: The Irish Change the Question

There will never be a better example of Boris Johnson's unfitness for a responsible job than the Foreign Secretary's recent - disastrous - failure to recognise the importance of the Good Friday Agreement in the context of the Brexit negotiations. The Agreement is a full-scale international treaty, sponsored by the USA and registered with the United Nations. The idea that it could ever be buried in weasel words that slid over the crucial facts - let alone openly abrogated by unilateral decision by the UK [with or without the 'sanction' of a referendum] - shows a degree of lazy, slovenly negligence that is breathtaking.

It will be fascinating what twists and turns are now going to be enacted, in the full blaze of publicity.

Sunday, 3 December 2017

Further Disintegration: Mrs May's Government Shambles

I have met Damian Green a few times, mostly in his capacity [when the Tories were in opposition] as a director of his regional water company. I would be very surprised indeed if he wasted his time, or risked his reputation, using an office computer to spend 'many hours' watching soft porn. If his computer was used in that way, by one of the staff in Portcullis House or possibly by an intern, then it is no part of the role of the police to make accusations against Mr Green on national television. The fact that the credibility of the First Secretary is being challenged suggests that there are indeed dark forces at work, with the intention of bringing about the end to the agony of failure of this government.

The precarious state of our national politics is again emphasised by the letter to the Prime Minister [which has, of course, been released to the press] from Nigel Lawson, John Redwood, Jacob Rees-Mogg and others who seem to want the nation to be quite sure of their guilt if the economy hits the disaster to which their demands would drive it.

I find it difficult to concentrate on other issues - of which there are many - when the key elements of national sustenance and security are being knocked away. The people, whether the they voted to stay in or to leave the European Union, deserve a better politics than they are offered at present. The entire political class, including McDonnell and Corbyn no less than Mrs May and the Thatcherite dinosaurs who have just sent her a 'nudge' towards ruin, have forfeited the trust of the electorate; but we are left with no better choice, no alternative that could achieve any degree of visibility to the electorate before March, 2019.

If, in the coming days, there is real news about the economy or our society - or about Economics - I will not be able to restrain myself from blogging about it; otherwise, I shall go off-line for a period and try [yet again] to set out my current understanding in a longer piece of continuous text.

Saturday, 2 December 2017

Spectacular Naivete

Jacob Rees-Mogg speaks slowly and clearly. He has a reputation for expressing clear ideas, some of which are out of kilter with contemporary fashion; notably his strictly orthodox Roman Catholic attitudes to homosexuality and the procreation of children. Yesterday lunchtime he excelled himself in a discussion of the Commons committee report on the Brexit situation on the BBC2 show, the daily politics.

He displayed an astonishing degree of ignorance about the realities of contemporary human aspiration and about the nature of world trade. In his view, the mass of the British people want cheap food and cheap clothes; therefore the UK should open its borders to imports from the countries that can supply the cheapest food and the cheapest clothes.

He did not mention the need to have countervailing exports of British goods and services to other countries, with which to earn the foreign exchange to buy the cheap imports. he did not seem to have any awareness that the countries - like Bangladesh - that are home to the cheapest clothes manufacture have the least capability to pay for the high-tech exports on which the future of the UK depends.

It is a recurrent theme of this blog that the most advanced country, the USA, will never grant to Britain [or to the EU] truly most-favoured access to their domestic market, because they are anxious to nurture their advanced economic sectors: which is best done by enabling their innovating firms to make big enough profits continue with the research and development programmes. Even before Trump, and certainly after Trump, they will be unashamed to prefer US technology, entertainment, financial services and other highly profitable areas of activity. It is part of the American culture to preserve, protect and defend their own firms and their intellectual property.

As the world's second economy, China is notoriously prone to require firms trading into China to share their intellectual assets with Chinese 'partners'. Japan has been closely chauvinistic throughout its modern economic history, and India is developing on similar lines.

Thus, if Brexit Britain went down the route prescribed by Mr Mogg there would be a monumental and rapidly expanding balance-of-payments deficit.

Even more significant, however, is the implicit ignorance shown by Mogg about the pattern of consumer aspirations that has developed all over the world. Yes, the class of hereditary paupers that was created by the Thatcher regime [and subsequently consolidated as part-salaried welfare dependants producing low levels of output per head under Blair, Brown and Cameron-Clegg-May] does want cheap food and clothing. But they also want smart phones, computer games, access to popular music and sports coverage. A major reason why they want cheap food is to have enough money [and access to credit] to buy the high-end products and services that are most fashionable. Such a living standard is accessible to the poorer members of an advanced-economy common market: it is not available on WTO terms to a rapidly-declining economy that is denied access for its exports to the richest countries in the world.

Mogg has revealed to me the extent to which the extreme Brexiteers live in cloud cuckooland.

Friday, 1 December 2017

The Future of Britain and Ireland; and the Relevance of Donald Trump

Five Tory MPs yesterday labelled themselves even more firmly as people who were willing to risk the economic future of the United Kingdom outside the carapace of the European Economic Area. They also accepted - whether or not they see it in those terms - the possibility of a recurrence of the 'war' waged over centuries by the IRA and its precursors. By refusing to recognise that the only secure way to carry forward the peace accords that have been achieved in Ireland since 1970 is for the UK and Ireland to remain integral to the the Common Market, these people have exposed the entire population of both islands to a very real danger.

I have repeatedly pointed out in this blog that by subsuming enough of the identities of the two states in a community it was made possible for Britain to put huge subsidies into Ireland [via various European funds] that were sufficient eventually to secure the Good Friday Agreement. It would be insanity to reverse that process; and it is fervently to be hoped that by remaining in the same economic space - even without the UK participating in the political European Union - the peace can be maintained. The majority of the Commons committee on Brexit sensibly agreed that the half-baked notions for a sham land border between the Irish Republic and the UK, secured by unachievable and unaffordable IT, would never be satisfactory. Unless the Tory party can formally decouple leaving the European Union from remaining in the European Economic Area, there is no 'cast iron' means of securing an open border in Ireland.

It is - literally - a matter of life or death for the DUP to insist that Northern Ireland is fully part of the UK [for as long as the present peace and constitutional status can be maintained]. They must oppose any half-witted pretence that anything else will do.

The Irish government and its 26 associates in the European Union would be wildly irresponsible not to make this point: and, if necessary, make it the sticking point in the upcoming EU summit. It is a moot point whether Mrs May understands this issue.

Meanwhile, the British political class has united to excoriate the US President for riding out his ego by quoting from a fringe right-wing political outfit in the UK, The publicity of this episode has apparently caused a rush of interest in the group [which I will avoid naming], including a rush of membership applications. That issue may have caused bad feeling in the egotist in the White House, and has certainly increased the misplaced contempt that the British Grauniadistas express for him; but it is not the most important nor the most relevant point. The election of Trump to the presidency was the consequence of a massively effective populist campaign. Trump promised to 'make America great again' and one of the preferred ways of doing that is to discriminate against imports. The UK is not a massive importer of goods into the US; but the UK is probably still second to the USA in the generation and worldwide diffusion of intellectual property, especially in fields of culture, entertainment and key areas of scientific innovation. Any idea that Britain will be pushed to the front of some queue for special access to US markets is dafter fantasy than the idea that some cosmetic 'solution' will resolve the Irish border question. If the UK economy is not within the European Common Market, it will be out in the cold. It will shrivel, living standards will collapse and any idea of renewing economic growth through investment will be an impossible dream.

We have very little time to 'get real'. The shortest route to sense is to separate the vote to 'leave the European Union' from the Tory minority's obsession that this rolls-in the ideas of leaving the Common Market and the economic area. No second referendum is necessary: just a dose of common sense.