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!

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.

Ambiguous Apples

The apple is one of the most accessible forms of food for human beings. It grows on smallish trees, and when it is picked up from the ground or plucked from the tree it is ready to eat. Apples of different varieties mature at different times from early summer to late autumn, and many varieties can also be stored well into the winter; though it is well known that if one apple in a barrel goes bad, it quickly causes the rest to rot: hence the phrase 'a rotten apple' applied to a disruptively antisocial person.

When people in the earliest stages of civilisation created their accounts of how society came into being, they built up a marvelous story of the creation of the world, of humanity being set into that context as a uniquely competent species, and how that species developed a power to be destructive as well as constructive. The tale that of the first woman, Eve, being tempted to eat the forbidden fruit - an apple - and leading her male partner to do the same is still fascinating as an insight into human nature. The idea that there are good and evil impulses in humanity, derived from the fatal decision of the first people to break the orders they had received from the universal creator, became well set in religion in the 'fertile crescent' in the middle east [the area now being devastated by 'Islamic State'] and thence globally. The humble apple remains a symbol of the power that human beings have to use their abilities constructively and creatively, or destructively in terms of how their actions impinge on other people.

Isaac Newton apparently really did get the idea that the force of gravity is universal by exercising his imagination on the simple question of why do apples - among all other terrestrial objects; and with the earth's moon - tend to descend towards the centre of the earth unless that progress is stayed by some intervening force or structure. Thus the apple is recorded as part of the origin of scientific thought.

Today the corporate results for Apple are due to be published, which are forecast to confirm that it has been consolidated as the biggest business in the world; by turnover, profits and the valuation of  its stock by the markets. The apple - with a human bite taken from it - was chosen as the logo of a business which was not a substantial processor or manufacturer of any material commodity. While the huge oil companies and motor manufacturers sold billions of dollarsworth of material commodities, many of which were processed into final products by the application of manifold patents and sold under copyright brand names, their ultimate dependence on material resources was unambiguous. Apple grew by franchising out the manufacturing processes, and thus the capital that had to be tied up in material manufacturing facilities came from other sources. Apple could incorporate products - some of them highly sophisticated - that were devised by other firms into the products that they sold, and thus maintain the momentum of their inventiveness without the burden of investment in factories or in the sort of human resources management that inevitably attaches to material production.  

Apple, Google and the other leading brands in what is [rather strangely] called the 'technology' sector of the economy are not dependent on the ownership of materially productive facilities. Most of the 'hardware' through which customers access their intellectual property are made by other corporations. The assets held by the tech companies include billions of dollarsworth of financial assets that have been accumulated from their past profits, alongside their ownership of the patents and copyrights and trademarks and brands that are defended at huge cost from 'piracy' by anyone who tries to make illicit use of their technology.

The essential difference between these 'tech' companies and those that trade in material assets is that the companies in the material sphere, exemplified by the big oil producers and by the firms that make the components of the iPhone [and assemble the final product], are selling products made from finite resources of which reserves are limited. Constant exploration has so far found enough new resources to meet foreseen demand into the medium-term future, but the material components of the planet are finite and a growing population is capable of exploiting them to the point of exhaustion.  The assets belonging to Apple are capable of indefinite expansion. New ideas can be implemented all the time, new experiences can be offered to customers, and there is no obvious limit to that expansion as the collective of human minds appears to be capable of delivering an infinite expansion of intellectual property. There is a potential limit to the physical facilities through which intellectual concepts and processes can be accessed, of course, when the human race destroys the resources of the planet on which our material existence depends. At some point in that final self-destruction of the human economy the material ability to generate electricity will fail, and then the 'technology' sector will be unable to operate; but that point will be well down the process of societal and economic decay.

I was privileged to know the mathematician who served as a professor of English Literature and who explored the capabilities and ambiguities of the human mind in an unusually profound way; who wrote a book entitled Seven Types of Ambiguity. He could have selected more than seven types but his message was that the expression of human thought is infinitely flexible, and ultimately all concepts are ambiguous. That is the basis on which the 'tech' sector has been founded, and from which its continuing productiveness will stem.

Intellectual Property and Point Protection

Patents were invented in Europe, specifically in Monarchical France, and the concept was taken up enthusiastically around the continent. During the eighteenth century, France was way ahead of the UK in the number of patents registered; but by 1800 a clear difference was emerging: while most patents were never to make much money for their owners, some patents - notably British patents - were massively generative of wealth because they were fundamental to the change that was sweeping the United Kingdom into the predominant position in the process that was soon to be called 'the industrial revolution'. Then, into the nineteenth century, the process that led to the unification of Germany ran in parallel with the industrialisation of key areas in that territory; most notably in the Ruhr and Saxony, and around Hamburg and Bremen; and German industrialisation was accompanied by a flurry of patents that included an increasing proportion that were based on methodical research.

The United States developed as a group of former British and French colonies, with a significant proportion of German-speaking settlers helping to drive industrial growth in that vast continent. For a considerable period there was considerable piracy of European intellectual property in the emergent economy of the United States; and eventually the US legislature recognised the good sense of mutual protection of industrially valuable intellectual property [simply because, if the US stole from others, others could steal from them: and thus they could undermine each other]. But, even then, copyright in literature, drama and art seemed less important - especially in the context of US law which was designed to make the acquisition of information and education as cheap as possible - so such property was to be protected mutually much later; hence arose Charles Dickens' famous endeavours to get his new output into the hands of  American readers before all the revenue was lost to pirates.

There are pseudo-scientific explanations as to why the UK and Germany, in particular among European states, have been prolific in inventing useful things and processes; but those theories do not explain why the USA has been at least equal to the European leaders in invention and innovation. The Great Exhibition in London in 1851 was meant to show the British people and the rest of the world the range and brilliance of British industrial output, and [to a certain extent] it did: but it also shocked the British visitors to see how sophisticated and clever the French, German and American innovations were. Britain was still primarily an agricultural country in 1851, and most of the urban population had only recently moved into town and still had links to the countryside: so to a huge proportion of the million or so Brits who walked round the Exhibition the most amazing device on display was the McCormick Reaper from the USA. The great plains of the USA were beginning to be prepared to grow crops, and the sort of mechanisation that the reaper represented showed how the American farmers would be able to undercut labour-intensive European suppliers of the principal cereal crops without needing to wait for a mass of immigrant labourers. One of the bizarre side-issues to emerge from the conversations that were driven by the perceived shift in the balance of advantage from Europe to America [and, to a much lesser degree, to Australia] was that Russia remained a peasant economy: the development of that vast empire would have been utterly transformed if the same extensive mechanised farming were to be installed there as in the USA. Russian peasants were still enslaved as serfs in 1851, and the Cossacks roamed free over the future wheatlands. The potential short-cut to massive advancement and wealth was not taken up.

Over the decades since 1851, Britain, Germany and the USA have remained the global leaders in invention and innovation: France and the low countries have been in the league too, but the dominant three have remained in the lead. And now the UK is going through the throes of implementing the decision to leave the protectionism of the European Union; and there is frequent mention of the notion that Britain can 'go it alone' with a hotch-potch of free-trade agreements with other countries: notably China and India, and maybe Brazil, alongside the USA. As the strongly emerging economies develop their industrial capability, they know that the mutual protection of patents will become ever more important. Chinese goods can simply be frozen out of the US and the EU if they are produced in breach of patent: so it is in the interests of the Chinese economy that the state becomes more and more forthright in protecting foreign patents.

On quite different grounds, the major economic blocks can close their markets to specific Chinese exports - or slap punitive tariffs on them - if Chinese exporters try to 'dump' that output in export markets at less than the cost-price of making the equivalent in the receiving country. Raising such barriers is what I have called point protectionism. Big economies, or economic communities, can retaliate against each other if they believe that point protectionism is unfairly being applied against them. This is a powerful tool in the armoury of each major economy. An isolated Britain will not have adequate leverage to apply against the emerging mass economies that might infringe British patents or apply unfair point protectionism against the UK. This is the decisive reason why the crazy Tory Brexiteers must be exposed for what they are, now. The European Union stinks, from the Parliament to the Commission to the Court; the UK must get as far away from those institutions as is feasible; while remaining in the necessary protection of the economic community.

The 'Value' of Reputation

Christiano Ronaldo is the world's best-paid, and probably the world's best, footballer. He is currently in the headlines as a consequence of a pursuit by the taxman, who is challenging the amount that the footballer's accountants have declared to be his taxable income from sale of his 'image rights': the use of his name and his photographic [or sculptured] image. No doubt there will be an eventual settlement. The media are interested because their viewers and readers are almost all fascinated by the massive amount of money that is attracted to people with a huge 'image'.

In my book, advertised on this page, I stress that the utter failure of Economists to account for intellectual property [ik] - of which image is just one category - is one of the most significant demonstrations of the utter failure of their subject to explain the real world in which humans live. So long as the received wisdom of the Econocracy dominates the advice that governments receive on economic issues, questions like the appropriate taxation of image rights will be more contentious than they need be; and disputes about the eligibility of different streams of income for taxation will enrich accountants and lawyers, and benefit journalists.

Footballers, film stars and inventors keep the residue of their incomes that the taxmen leave for them: that taxation makes them a little less obscenely wealthy than they otherwise would be; and some of them dissipate their fortunes due to bad character or bad advice, but the resultant distribution of wealth is generally thought to be 'fair' once the due tax has been paid. A megastar like like Sir Paul McCartney is honoured because he has remained tax resident in the UK throughout his career.

Politicians who became prominent have the opportunity to make significant fortunes after their careers have ended in failure [as all political careers do, with relative degrees of failure]. Tony Blair is notorious for the wealth that he has acquired since leaving office. The loathed George Osborne has been offered lucrative contracts, and David Cameron and Barrack Obama are both 'working' on their memoirs, for which they have been paid massive advances. Gordon Brown, unusually, has stuck to his Presbyterian principles, allocating most of his post-premier earnings to charitable causes and deserves credit for this. Even Theresa May, who is currently dissipating what little political 'capital' she has ever had, will make a nice little pile of pennies when her career is terminated.

How long that career will last is currently being determined; and the outcome of the current discussions will ultimately define the reputation on which her inevitable failure will be judged. She is risking chaos in Northern Ireland by her proposed political alliance with the DUP, and strife within her own party as a result of having sided with Liam Fox, Boris Johnson and other apparent economic illiterates in planning to leave the European Economic Area. The division of the population in the 2016 Referendum was broadly one-third to stay, one-third to leave, and one-third with no answer: a sensible prime minister would take this as a guide to seek the best and broadest possible consensus - which is very clearly for a 'soft Brexit'. Mrs May seems to be ignoring those signs, just at present.

Perhaps she is reckoning that her memoirs will be worth more, the more spectacular is her coming failure and the damage that it does to the nation? Perish the thought!

Human Choice

A new book called Poor Economics - dealing with economic choices by the poor - has been published by an academic who works in the USA and has his ancestry in a new-emergent economy. The text unconsciously encapsulates a clear vindication of my concept of ik: the idea that people allocate any discretionary expenditure that they can afford on buying quons - copyrighted and trade-mark-protected entertainment, branded goods and services and other consumer experiences on which a charge could be levied for enjoying access to the input of intellectual property that makes the 'good' desirable to those who buy or hire it. Give a desperately poor person [who has just enough consumption to survive] a few extra pennies and she or he is more likely to to try to broaden their range of consumer experiences by accessing some ik than they are to buy more of the food that makes up their daily diet.

This behaviour is not what typical Grauniad readers expect, and it is 'irrational'  in terms of formal Economics; but it is what the evidence clearly shows. It is also the basis on which governments [from the earliest human societies] have taxed transactions in markets. While income taxes are fashionably considered 'fair' in the degenerate cisatlantic democracies, History shows that expenditure taxes come closest to being 'discretionary' in that people opt to buy things even though they know that in doing so they are paying a tax [indeed, the majority of the price of cigarettes, alcoholic drinks and motor fuel is tax in many countries]. People are more likely to opt not to earn more taxable income than they are to refuse to purchase highly desired items because of the tax imposed on the transaction.

This experience shows clearly the irrationality of formal Economics, as it has been developed since the eighteen-sixties. Economics as presented in universities and in advice to governments is not based on evidence - it is based on assumptions as to what an ideal or 'perfect' economy might look like. The aim of Economists is to make human life conform to their models: which is a fundamentally inhumane objective. There is no reason for surprise that Economics solutions to real-world issues do not 'work'. The alternative has existed for longer than Economics has been in existence: the science of Political Economy was well-developed, and realistic, well before the pioneers of modern Economics decided to create their own academic dreamland. Lord Keynes - who never bothered with a doctorate in Economics and never held a professorial chair - was deeply learned in Political Economy, and although he was loyal to the memory of his teachers [his father, John Neville Keynes and the family friend Alfred Marshall] his work was anything but mainstream Economics: which is why Economists have so imperfectly understood it, and why so many of them have tried to push it out of consideration

My simple objective is the restore Political Economy as a science that is relevant to the human condition, and perhaps to .take some aspects of the science a small step forwards. Anyone interested in this question should open the link from this blog to my text PPE: Personal Political Economy.

Boxed Patents

One of the good things that the Gordon Brown government did in the UK was partially to recognise that the economy has no hope of getting out of the hole that the political class has made for it unless the state recognises and rewards the creation of 'intellectual property'. Unsurprisingly, they did not understand the simple basic nature of  ik, as explained in my PPE [see link from this site], but this was a step on the road to rational management of the most important of national resources.

Under the coalition the grasping hand of the Treasury has been allowed to influence the deign of the concept for protecting British intellectual property, and consequently the government announced their intention to create a 'patent box' . Under this category a company [or possibly a high-net-worth individual] would be able to secure a patent, and to implement it into production, and get tax exemptions and reductions at various stages in the process. The 2010 Coalition government declared that they would implement the plan and a few companies, including Glaxo, entered discussion with the government about using the process. Glaxo planned to extend their UK factories under a Box agreement specifically to exploit a new product for which it was in process of securing a patent. The company announced its decision to invest in the UK on Budget Day 2012 [as featured in the previous Post here], to accommodate the squalid spin doctoring of sad politicians who would seek any propaganda point in the absence of evidence of real economic progress.  In this case, there was real potential in the investment. But [as already noted] the Patent Box is not the only inducement to locate industrial plant in the UK. British labour is becoming relatively cheaper as Chinese workers begin to enjoy consumerism with larger wages, and the tax system in the UK is becoming a little less oppressive. UK and EU Labour law and the omnipresent intrusion of inept and officious 'health and safety' regulations are still deterrents to investment, especially in physical production. But steps are being taken in the right direction, albeit they are hesitant and indecisive.

The bigger issue that is disclosed by the Glaxo announcement is that safeguarding intellectual property is becoming the most important consideration of companies in the global economy: and while the US government has become obsessive about China's 'theft' of such property the EU and European governments have still not grasped the heart of this issue. The leading British ministry, BIS, has focussed on reducing the period between the filing of a patent application and the manufacture of the product; which is a good thing if it can be achieved while maintaining the secret.

But the entire positive story is yet to be told: that Brits, including Glaxo research teams, are unusually fecund in producing both patentable inventions and marketable concepts. The world's leading advertising agents are British, and several of the world's best-known and highest-regarded brands are British: yet a major feature of British business is the sad fact that while ideas continue to bubble up, and patents are registered, there is a dearth of funding to develop products fast enough. Firms  are sold in their infancy, usually to foreign owners who then reap the rewards for developing the product and its marketplace. To concentrate exclusively on implementing patents is to miss the point.

New patents can improve existing brands, or can be the basis for a new creation of brand value. The establishment of a new brand partly depends on marketing, partly on spontaneous shifts in fashion, partly on consumers' incomes increasing enough to embrace the new  consumer experience in addition to the existing standard of living. Investment must be made, often over a series of years, in the development of brand reputation as well as in the technicalities of material manufacture. Investment in systems patents and copyrights, brand-names and trademarks, is needed: these aspects can be more costly than the technical patents that are embodied in a material patent. The total suite of investments is needed to build a brand; otherwise patent-owners who are discouraged from developing their firms and their brands by lack of investments will still be tempted to cash-in their assets and sell the firm and its intellectual property to be developed in foreign hands. The British government needs to move a lot further to meet the need!

Back to Basics: Political Economy 2: Maribou Weed

The Maribou weed was introduced to Cuba for use as a hedgerow plant: to mark the boundaries of fields and gardens. The plant thrived excessively, it has spread wildly over the landscape. It is a very hardy growth with woody stems: and it has proved very hard to eradicate. The story has been unrelievedly depressing for several decades.

However, very recently, researchers from the University of Strathclyde [in Glasgow] have found that when it has been burned to produce charcoal the wood forms an amazing form of carbon. On early examination it appears to have the capacity to store electricity more effectively than Lithium batteries - at a fraction of the cost. The discovery will take a considerable time to verify, and applications can be developed only step-by-step; but it is so far an extremely promising concept. A huge range of applications, not least more practicable electrically-powered vehicles, can quickly be envisaged for new cheap super-batteries and by exploiting the carbon's high conductivity. .

Such an example shows that no possibility should be ignored in looking for uses for the most unattractive forms of waste and for the most damaging weeds [a weed having been described as any plant that is in the wrong place]. Innovative experimentalists must be allowed - and, where feasible, funded - to pursue hunches. For many centuries British innovators [often solitary part-time inventors] have produced new products and concepts in profusion: yet nowadays only a very small proportion of the new ideas are funded in a way that enables the product to be sold to the world as a British-made quon [defined in my book, PPE, accessible via the link] that purchasing managers all over the world will need to buy. Many new concepts are stillborn because the inventor lacks capital to implement them. In other cases inventors and their families and friends invest in the development of the product but do not generate enough revenue and publicity to fund viable growth so that their investment is lost, the idea is shelved and the family and friends are worse off than they were when the business was started. Not infrequently, bold risk-takers lose the homes that they have pledged against business loans. Almost equally dispiriting from the perspective of the national economy are instances where a new concept attracts sufficient publicity to interest overseas investors who buy the intellectual property vested in the concept: which takes the potential profits into another state's balance of payments. Athough the inventor  who sells her patents may be left with a pot of money to spend within their home economy the major part of the benefit from the invention is lost; and demand may develop so that importing the product becomes another strain on the national blance of payments.

The political class frequently say that they have got the message: that investment in new products must be encouraged. Modest tax concessions are offered for investors in start-up businesses. But the prospect of some future tax relief might not be enough to encourage an innovator to risk his family's comfort by depositing his house deeds with a capricious bank in order to secure a short-term business loan. Attempts by politicians to force banks to lend money to small and start-up enterprises invariably fail, because the banks' responsibility to avoid excessively risky lending is paramount in the perception of the bank's owners and of its regulators. This inhibition applies especially in the current circumstances when all banks have been ordered to build up secure reserves to meet  tightening regulatory standards. In addition to that general limitation on banks' lending there is the structural factor that banks no longer employ authoritative local managers who could make lending decisions on the basis of the family history, career record and reputation of customers requesting business loans. The majority of lending to small and medium-sized businesses in Britain in recent years has been to roll forward existing loans to firms that have shown themselves reliable in servicing their debt, often from a lacklustre but solid performance in distributing imported brands or in providing entertainment, catering and other leisure services.

The discoveries about Maribou weed by the Strathclyde team have relatively good chances of attracting investment, compared to inventions or discoveries by English individuals, for a clutch of special reasons. The University in question is a mature and respected research institution with special strength in applied sciences and engineering: and as such it is geared up for providing 'seed corn' funding for promising innovations. Universities are also sufficiently media-savvy  to publicise discoveries, after the crucial itellectual property has been secured. Secondly the Scottish government is willing to use its powers to provide extra resources for Scottish innovation, over and above those that are available for regional development throughout the UK. The essential task facing the university is to create some product or process that can quickly become the subject of a patent application. The wood is found in Cuba, and other countries but not the UK. Therefore the way a British academic team can turn the discovery into a marketable asset is by creating intellectual property in the means of converting the raw material into desirable products that can be protected from competitors.Thus there is going to be a period of stressful competition between scientific teams trying to capture the potentially huge value of the patents that may be capable of development.

What has this tale to do with the basic facts of Political Economy?

As has been stated often in this series of blogs, one of the two Laws of Political Economy is the Iron Law of  Wages: the proposition that a nation cannot distribute for consumption more than the net output of the economy, after allowing appropriately for capital investment and the legitimate costs of government. Imports must be balanced by exports. If the country owes debts accrued in past years, these must be repaid and the cost of doing that is automatically deducted from the amount of wealth that is available for distribution to the population in the years while repayment is going on. If the country cuts investment in order to maintain or increase consumption that inescapably results  in the national product being lower than it should have been in subsequent years.

Higher technology products and  highly fashionable brands earn the most income to the companies that supply them, compared to the material costs incurred in producing the goods. So a country that exports highly priced goods and services, and imports only cheap commodities and products, is most likely to be able to repay debts [or to avoid becoming indebted] to foreigners. The potential earning power of technologies exploiting maribou carbon is immense, and could give a significant fillip to the balance of payments of a country that was able to enforce the exclusivity of its ownership of the relevant ik or intellectual property. A constant flow of highly valued inventions was the basis on which Britain gained global economic leadership between 1780 and 1850: since 1870 there has been a pattern of relative decline that has now reached its nadir. 1870 was the marker year for the replacement of Political Economy by Economics, which marked the beginning of the obfuscation of the basic truths that formed the core of the older [and sounder] subject. The truth must now be confronted, as the central concept on which economic recovery can be based; and opportunities such as may be offered by maribou carbon must be optimised. By such means, real economic growth can be consolidated.

Work and Wages

With total unemployment in the United Kingdom well in excess of six million, including one in five of under-twenty-fives, the cost of maintaining them all - even at a low standard of living - is a major cause of the still-growing budget deficit. It is highly desirable that at least two million of those people should get jobs, raising their standard of living and paying taxes. There is much talk of creating those jobs; but staff are being shed from the civil service, the armed services and the health service, so it is hoped that other sectors of the economy should generate employment. The private sector - business - is showing little sign of major job creation. In the few segments of the market where there is opportunity for employment there is an evident employer preference for immigrant labour. The available jobs are mostly in entertainment, hospitality and services, where emphasis is placed on personal attributes of clean appearance and willingness to work hard at peak periods. Native British unemployed products of comprehensive schools are perceived by employers not to possess these characteristics. It is even reported that many graduates do not meet employers' requirements for literacy, articulateness. smartness and diligence.

Manufacturing industry has been through half a century of decline: many skills have died out and 'habits of industry' that used to be cited as a great attribute of British artisans have become extinct. There is a fashion for people to be given 'apprenticeships'. For many centuries apprentices used to work alongside craftsmen and learn skills on the job. In the twentieth century industrial apprenticeship took on a more institutional form, where apprentices [including graduate apprentices] were put through a sequence of jobs in the works in parallel with study part-time of relevant technical subjects. As industry diminished the good schemes attracted more applicants and now the few surviving exemplars [like that at Rolls-Royce] stand out as remarkable opportunities for employment. The 'real' schemes are highly competitive and attract excellent candidates: they bear no relationship - other than the use of the word apprentice - with the charade that is in mind for the masses. Without access to the appropriate industrial plant, or to experienced trainers, or to skilled supervisors the new apprenticeships will largely be classroom based, with simulated work situations and rare factory visits. Candidates will recognise it as a sham, and there is no chance of such a scheme creating a mass supply of skilled women and men who could operate new factories: even if the necessary capital and desirable patented product concepts could be conjured into existence.

The present government is following its predecessor in looking to 'the third sector' - not-for-profit firms, and charities - to create jobs, with financial assistance from the government. At a cost of billions of pounds, this will enable a few people to get useful job experience; and it will condemn hundreds of thousands to disillusion and cynicism. Unemployment is a horrible experience, even for a few months: when it lasts for years its psychologically and morally destructive. If the surrounding circumstances include fake apprenticeships, subsidised non-jobs in charity and a penal attitude by the state to claimants for benefits, the destructive impact of unemployment is enhanced. Only 'real' jobs in 'real' industry and commerce - and genuinely useful roles in charity and the public services - give job satisfaction. Such jobs are only created by the investment of capital and the engagement of protected intellectual property ik as defined in Personal Political Economy. Tragically, there is no sign that this is in the offing for the British people.

The USA also has a huge problem of unemployment, and many failed schools. Hundreds of thousands of the unemployed are dysfunctional from an employer perspective. But most of the employed in the USA work hard: and those who are seeking employment expect to work hard. The average US employee has many fewer days per years of annual holiday than do Britons or continental Europeans; and the torrent of Latino immigration ensures that employers can expect to get a full days work for the pay that they offer. Despite very significant de-industrialisation, the US remains a formidable centre of manufacturing, especially in high-value-added sectors. Nobody on the eastern shores of the Atlantic should read into America's unemployment statistics the same dire picture as is to be inferred from British data. The relationship of work to wages in the USA is an example from which Britain can learn beneficial lessons: any idea that 'they are in the same boat as we are' is deeply mistaken. Americans are right to be deeply concerned about the current state of  work in their country; but they have the means to ameliorate their relatively benign situation far more readily than we do in Britain.

Straws in the Wind

The situation in the Eurozone is no different from last week, but the mood has become much lighter following the latest agreement on support for the weaker countries.

Now a Eurozone official is in China, asking for a contribution to the support fund. The Chinese government will agree, with published conditions and a hidden agenda. China has a highly intelligent population, with a huge output of graduates in science and technology; but China remains keen to buy western intellectual property - especially when this can be done at knock-down prices. So we can expect the covert agreement to include the concession that European governments will be less resistant to Chinese takeovers of old brands and new technologies. How this pans out will be a wonderful indicator of China's  plans for the introduction of a wider range of consumer goods in their home market.

Dim politicians talk of Britain's need for more 'manufacturing' and more exports of manufactures; but in reality - as the Chinese well know - it is not the process of manufacturing that adds 'value' to the raw materials but the amount that can be added to the material cost of production as the premium that is charged for access to the brand and the patented technology that is embedded in it. Prices for branded, patented goods and services in very many cases owe far more to the intellectual property than to the the quality of the components and the process by which they are assembled.

 China will quickly recover more than they risk from this deal with Europe, in the form of intellectual property ownership that they will be enabled to acquire. Since the appointment of Thatcher as Prime Minister, Britain has sold off intellectual property to foreign firms on a massive scale to make a small contribution to the current balance of payments of the year. That immeasurable loss can only be compensated by hard work over many years, and by austerity in living standards to make the necessary funds available for investment in the new technologies that Britain has continued to invent: and has largely sold off in its infant stages over the past thirty years.

And it is going to be very hard to compel people to accept austerity when they hear that employeees' average salary rise in the past year was 2.5%, while Chief Executives' 'compensation' has increased by 45% [on million-pound-plus packages]. Any simple sense of fairness must be repelled by such data.

 If they were capable of profound thought and clear communication skills, the Saint Paul's 'protesters' would have pointed to the inequality of incomes across the whole of society rather than keeping to the well-worn attacks on bankers and the stock exchange. But they clearly have no such capabilities. They should be moved on pronto.