Blogging from the Highlands of Scotland
'From fanaticism to barbarism is only one step' - Diderot

Tuesday 3 February 2009

Boris Johnson on the merits of 'Free Trade'

... and the real danger that we are sliding into protectionism, as he worries here:

What kind of British industry do the protectionists think would emerge? Some sort of crazy autarkic system in which we tried to substitute imports with home-made PlayStations and home-made shoes and brassieres once again produced in the cotton mills of Lancashire? We would not only be forcing British consumers to accept second-rate goods; we would be impoverishing them by obliging them to pay more. It is terrifying that some serious politicians – including members of the Labour Cabinet – seem prepared to support these strikes, and to side with the Luddite trades unions and the far-Right BNP. Now is the time to stick up for free trade, and the huge benefits it has brought.

Remember what happened in the Thirties, when they had exactly the same instinctive and panic-stricken reaction, and a recession was turned into a slump. Remember the old truth, that when goods, people and services are not allowed to cross borders, soldiers eventually force the way. It is vital now that we complete the Doha round of world trade talks, not so much because it will liberate a great pent-up wave of trade, but because without it a signal will have been sent around the world that protectionism is winning.

- it is worth a few moments of anyone's time to read the whole article. Note particularly the date in the footnote to the article; a 'typo', or simply someone foretelling where current actions in the US (the 'Buy American Act') and in the UK (the 'British Jobs for British Workers' strikes) are likely to lead? I'm pretty sure it's the latter - an all too believable scenario, unfortunately. I don't believe that history is likely to repeat itself exactly, but there are worrying similarities to the 1930s and the sense that governments now seem to be completely losing control of the situation is a very worrying development, not masked in any way by their frenetic activity.

PS/ There is a useful article, based on the same kinds of premises, in John Redwood's blog here.


  1. Clearly part of the reason for the perception of loss of control and frenetic activity is that the situation requires urgent attention and this is compounded by the fact that the economic problem is a bit different from the usual scenario, hence to some extent the search for the best course of action is, of necessity, fluid.

    While I'm not trying to defend everything that the Govt's doing, on the other hand I would prefer it to be doing something rather than the 'cold turkey' option, as discussed in your Davos thread.

    And in response to your final comment on that thread, Bill, (might as well just post it here now) I agree that we can't go back to the way things were pre-Lehman etc, but on the other hand I think doing something in the short-term will be to the long-term benefit; for example, and in the context of the protectionism cum xenophobia debate, that would surley only get worse if the economy was left to sort itself out.

  2. I would prefer it to be doing something rather than the 'cold turkey' option, as discussed in your Davos thread.

    That's all very well, Stuart, but unless you have a very clear idea what such 'frenetic activity' is designed to achieve then I see it as mere panic reaction. It was quite clear the government's actions last October, and since then, were not going to have the desired effect, other than to get the PM and his colleagues to the top of the news agenda and keep them there. More recently the nominal temporary VAT rate cut, at the same time as traders were already discounting heavily in order to get people thru their doors and money thru their tills, has proved an almost complete waste of public resources - as predicted.

    Finally it is a lazy analysis, amounting to a travesty, to equate what I want to see happen as the 'cold turkey' option; frankly for one who prides himself on being 'neutral' that lazy old canard could have come straight out of a Labour Party press release. What I want to see happen is for the bank of England to have restored to it the regulatory powers it lost when it was given power to set interest rates in 1997, and for it to keep interest rates low and to act as 'lender of last resort', period. It is not 'cold turkey' to allow banks and investors (whether in shares or property, for example) to share in the consequences of their own decisions, rather than to use tax money to prop up a system which requires a fundamental reboot. When people know they will have to live with the consequences of their own decisions then they tend to make better decisions in the first place.


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