Tim Congdon

Saturday

Tim Congdon

Bank-bashing with a vengeance

Over the decades of (relative) macroeconomic stab- ility in the second half of the 20th century, profit-seeking com- mercial banks and state-owned central banks worked together to lower the cash-to-asset ratios in the banking industry. An understanding grew that profitable and well-capitalised commercial banks should be able to borrow cash from the central bank if they had trouble maintaining a positive cash reserve balance. The associated arrangements were technical and complex, and were of no interest whatever to politicians and journalists. Fashionable economic commentators regarded them, or rather ignored them, as the municipal drainage of the financial system.

Wednesday

Tim Congdon

Rural romanticism

The bibliography to Zac Goldsmith’s The Constant Economy includes The Trap by his father, Jimmy Goldsmith. The bibliography to Zac Goldsmith’s The Constant Economy includes The Trap by his father, Jimmy Goldsmith. When it was published in 1993, The Trap caused a bit of a stir because it challenged the consensus that free trade and globalisation were good for mankind. But it also contained a deeper theme, that the world had become falsely enamoured of the commercialisation of science and technology. Goldsmith père protested not just that economic orthodoxy was wrong, but that society had become too materialistic and complex, too far from nature. Since the early 1990s these anxieties have been given a new focus.

Saturday

Tim Congdon

There is nothing magic about this Keynesian fad

Mr Brown’s bank recapitalisation exercise has been portrayed in the British media as a financial and political coup. The Financial Times has been particularly enthusiastic, describing it as ‘a global template’. Mr Brown’s admirers apparently believe that the British government’s programme is both intellectually original and a real-world success, and is therefore being copied in other leading nations. The truth is very different. The government’s policy is not intellectually original, it will not be fully implemented in practice and, to the extent that it is implemented, it will be a disaster. Further, no other country is copying Brown’s plan or behaving as vindictively as Britain towards its financial system.

Saturday

Tim Congdon

A load of hot air

Jeffrey Sachs, the director of the New York based Earth Institute, has established a formidable reputation as someone who thinks hard, and worries even harder, about the future of the planet. His latest book, Common Wealth, like its predecessor, The End of Poverty, reviews the major issues of international economic development in the early 21st century. But Common Wealth tries to go further than The End of Poverty, and raises the argument to a higher level of moral concern and practical difficulty. The defeat of poverty would be challenging in the best of circumstances, but global conditions in the early 21st century will be particularly hostile. Sachs identifies a conjunction of new problems, most of them arising from mankind’s pressure on the earth’s limited resources.

Saturday

Tim Congdon

Guru to five presidents

Seated next to her at dinner, I was prepared for a dull evening with a politician. ‘Tell me, Chairman Greenspan,’ she asked, ‘why is it that we in Britain cannot calculate M3?’. I awoke. M3 is an arcane measure of money supply embraced by followers of Milton Friedman. We spent the evening discussing market economics and the problems confronting the British economy. Thus , according to Alan Greenspan’s semi-autobiographical The Age of Turbulence, began the first meeting between Alan Greenspan and Margaret Thatcher, at a September 1975 British embassy function in Washington. Greenspan evidently developed a great liking and respect for Thatcher, because, apart from anything else, she wished to conceptualise major issues of public policy.

Saturday

Tim Congdon

Two giants and wizards

‘Investigation favourable except conceited, egotistical and snobbish.’ The outcome of the Federal Bureau of Investig- ation’s 1955 enquiry into John Kenneth Galbraith was eventually revealed to him under the USA’s Freedom of Inform- ation Act. It added to his already immense store of anecdotes about the richness and variety of American public life. The FBI was not quite right. Other economists resented Galbraith as if he were conceited, egotistical and snobbish, but his actual or alleged vanity was not the reason. Instead Galbraith’s problem was that he was incapable of writing a dull paragraph.

Saturday

Tim Congdon

Charity hopeth all things

Should rich nations give to poor nations? Put bluntly like that, the question of international aid demands the answer ‘yes’. Anyone who tries to qualify the ‘yes’ is liable to be criticised as selfish, unfeeling and inhuman. In his The End of Poverty Jeffrey Sachs sharpens the question. Should very rich people in very rich nations give to very poor nations, especially to the nations of sub-Saharan Africa? His answer is an unqualified ‘yes’. He urges all the leading industrial nations and, in particular, the USA to raise official development assistance to 0.7 per cent of gross domestic product in order to meet the Millennium Development Goals proposed at the United Nations by Secretary-General Kofi Annan in September 2000.

Saturday

Tim Congdon

A dove with a touch of hawk

Sir Samuel Brittan has long been a national institution. As economics editor of the Observer in the early 1960s and the principal economic commentator on the Financial Times from 1966 to his retirement in 1998, he wrote an influential weekly newspaper column for almost 40 years. He still contributes to the Financial Times, often to great effect. Consistent themes in his writing have been support for free markets over state planning, and the advocacy of open- ness towards other countries in trade, investment and migration. He has managed to keep his own party-political preferences shrouded in enough uncertainty to have influenced all three main parties.

Saturday

Tim Congdon

Not such a low and dishonest decade

If it is to be interesting, contemporary history has to be a battle between good guys and bad guys. In his The Roaring Nineties Professor Joseph Stiglitz lets the reader know at an early stage in the proceedings that he is a good guy. As he says in the preface, when he first fell in love with economics, I wanted to understand what caused the poverty, unemployment and discrimination that I had seen all around me growing up, and I wanted to do something about these problems. Stiglitz spent much of his early career in universities and made important advances in such highly theoretical areas of economics as the understanding of ‘information asymmetries’, which led to his being awarded the Nobel prize for economics.

Saturday

Tim Congdon

The dawning of a new Europe

By accident the war in Iraq has given Britain the opportunity to rethink and to recast its relationship with Europe. It has shown that an understanding between two nations provides and, since the mid-1950s, always has provided the emotional core of the European Union. This is an understanding between its two leading original members – France and Germany – to create a new power with a distinctive voice in world affairs. For most of the last 45 years France and Germany have had the good sense to play second fiddle in world affairs to the United States of America and its close diplomatic and intelligence partner, the United Kingdom. But Chirac and Schröder, and their foreign ministers de Villepin and Fischer, have now committed a blunder of the first order.