Allister Heath

For a man who has been Chancellor of the Exchequer for just over four months, Alistair Darling has certainly made some powerful enemies. In fact, it’s hard to think of anybody important with whom he hasn’t fallen out. Sir Ronald Cohen, the private equity king who is one of Labour’s most prominent business supporters, has criticised Darling’s proposed increase in capital gains tax. Cohen is not alone: Darling has managed the unprecedented feat of uniting all of Britain’s business lobby groups against this destructive, ill-thought-out measure. He has been chided by Mervyn King of the Bank of England over his mishandling of Northern Rock. And there is no love lost between Darling and Baroness Vadera, the Prime Minister’s most trusted adviser.

Gordon Brown can’t stop himself from meddling, even with his own good ideas. Soon after he moved into No 11 Downing Street, he introduced one of the best pro-growth capital gains tax regimes in the world. Last week his Chancellor Alistair Darling, with Brown grinning approval beside him, undid much of that good work in one fell swoop. Their primary target was the City’s private equity industry; but their destructive 80 per cent tax hike will also ensnare farmers, entrepreneurs, small companies quoted on the Aim market, life assurance companies, 1.7 million employees who participate in company share schemes, business angels and venture capital funds, to name but a few.

First we heard about ‘sub-prime mortgages’; then it was ‘collateralised debt obligations’; now it’s the turn of ‘moral hazard’ to appear on the Ten O’Clock News. Jolted out of prosperous complacency by market turmoil, the public has started to care about economics: strange jargon and obscure concepts previously familiar only to investment bankers are going mainstream. The best way to understand moral hazard is to reflect on how taking out insurance changes our behaviour, encouraging us to take greater risks and less care of our possessions. A holidaymaker without travel insurance is more likely to keep an eye on his baggage than one who can claim compensation if it’s lost or stolen.

If only Alan Greenspan had read John Locke more attentively. The 17th-century philosopher, who doubled as a brilliant economist, was among the earliest exponents of the law of unintended consequences. It is one of the most powerful lessons economics has to teach, yet one the former US Federal Reserve chairman conspicuously failed to heed. To understand why hedge-fund whizz-kids have spent the past few weeks tearing their hair out, and why Greenspan is largely to blame, let us take a trip back to 1692. That year, Locke wrote with passion against a parliamentary bill that proposed to cut interest rates. Its supporters wanted to help the poor; but Locke realised that government intervention would be worse than doing nothing.

It will be terribly painful for those of us with mortgages but the Bank of England has done the right thing. Interest rates in the UK are now 5.75%; and they will almost certainly hit 6% before the end of the year. The real question is why the Bank didn’t act any sooner. Inflation has remained far too high for too long: the broadest measure, the retail price index, shows that prices are up 4.3% over the past year. For many people, especially middle class consumers with children and who live in big cities, the real rate of inflation is far higher, as Martin pointed out recently. Even on Gordon Brown’s debased measure of inflation, the consumer price index, Britain’s record is poor compared to that of other large European countries. CPI inflation is 2.

It’s official: Sarkozy has won, probably by around 53.5%-46.5%. In the earliest ever concession speech in a French election, it took only until 8:03 French time for Sego to concede defeat. It sounded almost like a victory speech – although Sego’s fake smile and especially the look in her eyes gave the game away. But a very combative performance nevertheless, where, a little like Arnie, she pledged to be back.

When I first moved to Britain in 1995, after a misspent youth in France, there were few Gallic accents to be heard outside the tourist hotspots. The long-established community in South Kensington had been joined by a growing number of French students at institutions such as the London School of Economics, but that was about it.  These days the French are everywhere. Tens of thousands of entrepreneurial, ambitious young graduates have moved to London and the south-east of England, fleeing sky-high levels of youth unemployment and a society obsessed with the preservation of the status quo. It’s not just that the 35-hour working week combined with huge social security costs means that it makes little sense for companies to give young, inexperienced workers a try.

Gordon Brown’s 11th and final Budget was a masterpiece of spin and obfuscation, with his headline-grabbing reductions in the basic rate of income tax and corporation tax more than made up for by a series of stealth tax raids. On that point, my friends and I are in complete agreement. But for the first time since I began writing about the British economy, some of the economists and think-tankers I most respect have broken ranks with the rest of the Chancellor’s critics. To many free-market policy wonks, the fact that Brown has dared to break a central taboo of modern British politics by cutting direct tax rates easily makes up for the odd stealth tax. They also applaud what they see as a move towards flatter and simpler taxes.

It was Ronald Reagan who warned that ‘inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man’. Having just worked out that my personal rate of inflation is running at a scary 6.6 per cent, I know exactly what he meant. A few months ago Britain’s official statisticians began to panic. They had realised that nobody believed their figures any more. With school fees, gas bills and the cost of car insurance soaring, many people — especially pensioners and middle-class consumers — laughed through gritted teeth when told that inflation remained at rock-bottom.

Here’s a provocative thought for Christmas. Instead of buying your nearest and dearest one of those charity goat-for-Africa cards, it would make far more economic sense to buy them a few shares in a multinational corporation which is going to help boost the African economy. It may be deeply unfashionable to say so, but the much-demonised multinationals do far more for the poor than all the world’s charities put together. Charity workers should not take this personally. They are doing their best in appalling conditions, and have saved or improved millions of lives. But however hard they work, and however many goats they provide, there is a limit to what they can do.

For billions of people around the world, these are the best of times to be alive. From Beijing to Bratislava, more of us are living longer, healthier and more comfortable lives than at any time in history; fewer of us are suffering from poverty, hunger or illiteracy. Pestilence, famine, death and even war, the Four Horsemen of the Apocalypse, are in retreat, thanks to the liberating forces of capitalism and technology. If you believe that such apparently outlandish claims cannot possibly be true, think again.

Once synonymous with men in red braces peddling junk bonds, the leveraged buy-out industry has become almost respectable. This is in large part thanks to some clever rebranding that would make even David Cameron blush; now invariably described as ‘private equity’, which sounds a lot cuddlier, the industry has even enticed that holier-than-thou old rock star Bono to hop on to its gravy train. Private equity companies, such as the former U2 star’s $1.9 billion Elevation Partners, are investment funds that borrow money to buy companies, manage them for a few years and then sell them on, ideally at a huge profit.

Narrow nationalism, hatred of Jews, and chauvinism find their meeting place in anti-Americanism, the acclaimed French thinker Bernard-Henri Lévy tells Allister Heath What is most unusual about Bernard-Henri Lévy is not that he wears his white shirts open almost all the way down to his bellybutton; one would expect little else of a French philosopher who grew up hooked on the deconstructionist theories of Jacques Derrida. Far more intriguing is that the top half of his shirts are entirely and deliberately devoid of buttons â” and have clearly been expensively and carefully tailored, manufacturing the ‘noble savage’ look for which he is renowned.