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Another Domino Falls: UK’s Leading Scientific Body Retreats on Climate Change

Politics / Climate Change Sep 30, 2010 - 10:49 AM GMT

By: Submissions


Best Financial Markets Analysis ArticlePatrick Henningsen writes: The UK’s leading scientific body has decided to rewrite its own definitive guide on climate change, now admitting that it is “not known” how much warmer the planet will become.

The Royal Society has released a new guide which outlines its retreat from its former vanguard stance on the threat of climate change and man-made global warming. The decision to update their scientific guide came after 43 of its members complained that the previous versions failed to take into account the opinion of climate change sceptics.

The new guide, entitled ‘Climate change: a summary of the science’, concedes that there are now major ‘uncertainties’ regarding the once sacred ‘scientific consensus’ behind man-made global warming theory, admitting that not only is it impossible to know for sure how the Earth’s climate will change in the future but it cannot possibly know what the effects may be. The 19-page guide states clearly, ’It is not possible to determine exactly how much the Earth will warm or exactly how the climate will change in the future, but careful estimates of potential changes and associated uncertainties have been made”.

The guide continues stating, “There is currently insufficient understanding of the enhanced melting and retreat of the ice sheets on Greenland and West Antarctica to predict exactly how much the rate of sea level rise will increase above that observed in the past century for a given temperature increase”.

In a recent article published in the UK Mail, Professor Antony Kelly explains, ”The previous guidance was discouraging debate rather than encouraging it among knowledgeable people. The new guidance is clearer and a very much better document”.

The decision to revise and tone down its alarmist position on climate change demonstrates a clear u-turn on its previous 2007 climate pamphlet, one which is said to have caused an internal rebellion by the 43 fellows of the Society, triggering a review and subsequent revision. The 2007 publication, which parroted the IPCC’s popular, but misleading impression that the ‘science is settled’ – making way for the new guide which accepts that important questions remain open and uncertainties unresolved. “The Royal Society now also agrees(with us) that the warming trend of the 1980s and 90s has come to a halt in the last 10 years,” said Dr Benny Peiser, the Director of Britain’s Global Warming Policy Foundation (GWPF).

This follows last week’s blow to the radical climatist agenda inside Britain, where the new Coalition Government announced it will be slashing its Climate Change Department’s budget and folding the former free-standing bureaucracy into the Treasury department.

Some analysts also believe that the Society’s new guide does not go far enough. Dr David Whitehouse, the science editor of the GWPF said: “The biggest failing of the new guide is that it dismisses temperature data prior to 1850 as limited and leaves it at that. It would cast a whole new light on today’s warming if the Medieval Warm Period, the Roman Warm Period and the Bronze Age Warm Period were as warm as today, possibility even warmer than today. A thorough discussion of the growing empirical evidence for the global existence of the Medieval Warm Period and its implications would have been a valuable addition to the new report.”

This new development has reinforced a very real trend in climate circles where political activism is now being replaced by a more sober assessment of the scientific evidence and ongoing climate debates.

The UN's "Hopenhagen" Summit ended in failure as no real binding agreement could be reached (PHOTO: Patrick Henningsen)

Economic realities and a marked shift in public opinion since last year’s Climategate scandal and the failure of the much-hyped UN Copenhagen Summit have triggered a series of falling dominos within the climate change and anthropogenic global warming (AGW) orthodoxy.

To date, the political activist engine powering climate change has been anchored by an elite circle of scientists, foundations, green journalists and carbon financiers. The fuel for this trend has been supplied by short-term economic opportunities, most of which has been supplied in the form of subsidies and feed-in tariffs by the State and supra-national bodies like the UN and the European Union. In the US, problems with Cap and Trade are more chronic, and North America’s sole carbon trading market, the Chicago Climate Exchange (CCX) is being scaled down following a decline in investment and the near complete collapse in carbon emission prices.

As formerly obedient IPCC scientists and insiders gradually break ranks and defect over to the common sense camp, and foundations like the Royal Society reverse their policies on the nature of the climate threat, politicians may lose the once reliable traction they enjoyed when promoting their green agendas. This is followed, of course, by the economic reality of any democracy whereby taxpayers cannot really back departments, much less policies, that do not deliver a measured benefit to the public welfare. The rising tide of scepticism and real scientific analysis will surely spell and end to the innumerable speculative policies and guesswork forecasting that has plagued the climate change movement to date.

As science continues to shift back into line with reality of real world observation, it follows that many of the climate bureaucracies erected since 2000 will stumble as a result. The reason for this phenomenon is spelled out in the laws of political physics; a collapse of the so-called “scientific consensus” comes into direct conflict with one of the main tenets of politics- plausible deniability. History states that when politicians can no longer use scientists as scapegoats, as in “it’s not our fault, they told us CO2 was heating up the planet…”, then the political agenda is dead.

The reality curve is certainly catching up to climate change now.





About the author: Patrick Henningsen is a writer, filmmaker, communications consultant and managing editor of 21st Century Wire.


© 2010 Copyright Patrick Henningsen - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2017 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


01 Oct 10, 07:05
"Free markets and "free trade" = elite propaganda"

"Free markets and "free trade" = elite propaganda"

Robert Henderson

1. Unquestioned ideas

2. The "Free Market" is a state regulated market

3. The "free market" as its proponents conceive it

4. How effective is anti-monopoly legislation?

5. Microsoft and Windows - a natural monopoly

6. The historical trend towards contraction of competition

7. "Free trade"

8. Has "free trade" ever been practised?

9. "Free trade" today

10. Does "free trade" deliver? The lessons of economic history

11. Is society materially enriched by "free markets" and "free trade?

12. What is meant by material enrichment?

13. How the market fails to provide what the customer wants

14. Relative poverty and wealth and happiness

15. Man does not live by bread alone

16. Geopolitics

17. The democratic deficit

18. The reality of our economic circumstances

19. Why elites are so keen on "free markets" and "free trade"

20. A sane alternative to globalism

21. Free trade as a religion

22. An elite ideology

1. Unquestioned ideas

Because they have the word free in them, the terms "Free markets" and

"free trade" have seduced those of all political colours to treat them

uncritically as ideas. They are considered good or bad but their

intellectual coherence is rarely questioned.

Neo-liberals believe in a childlike quasi-religious fashion in the

workings of Adam Smith's "invisible hand", which, moved by

enlightened self-interest, supposedly creates the best of all possible

material worlds through the operation of the market. Socialists see

"free markets" and "free trade" as economic "state of natures" which

must be ameliorated by the state before a civilised society can be

realised. Conservatives in the traditional sense no longer exist as a

recognisable political force in the West, but when they did exist they

opposed "free markets" and "free trade" primarily on the grounds of

national security and the general disruption to society that they caused.

Nationalists of the fascistic kind have traditionally opposed the ideas

because they see the nation as a single organism which can only be

strong if it is master of its own destiny, something which an only be

achieved (they believe) through state direction of both the internal

market and of external trade.

There are varying quantities of truth in all these ideological

responses, but their utility is seriously tainted by the lack of any

objective or even properly defined and permanent prescriptive truth in

the concepts of "free markets" or "free trade". The reality of these

ideas is that they are arbitrary chosen bundles of behaviours which

are excluded or included at the will of their proponents. Moreover, the

bundles of behaviours are not static.

The widespread negligence in examining the coherence of these ideas is

all the more remarkable because their incoherence as theories and the

arbitrary and dishonest nature of their practical realisation is not only

readily apparent but fundamentally undermining of the claims made for

them by their champions.

2. The "Free Market" is a state regulated market

There is a splendid irony in the objection of the self-defined "free

marketeers'" and "free traders" to state intervention for the natural end

of a truly free market is monopoly - or at least greatly reduced

competition resulting in oligopoly and the rule of cartels. All so-called

"free market" societies recognise this by passing anti-monopoly

laws. The "free market" is in fact a market controlled by the state in the

most fundamental way, that is, to prevent its natural workings. It is one

of the great propaganda triumphs of history that "free markets" have

been successfully sold as being what happens naturally without state

intervention. Call a spade a spade and substitute the truthful "state

regulated non-monopolistic market" for "free market" and the

psychological shape of the idea changes dramatically.

(Some casuistical "free marketeers"might argue that the "free" in free

market applies to the workings of the market rather than the market as a

natural phenomenon. That explanation falls because "free marketeers"

invariably make the blanket claim that markets only work efficiently

without government interference. Their honest position would be to

state that they want state regulated markets to prevent monopoly. They

will not do that because it would be an acknowledgement that state

regulation of the market is legitimate and hence remove any general

argument against regulation. That in turn would mean any form of

state regulation would be potentially reasonable and consequently each

form of regulation would have to be argued down individually on the

merits of the case, rather than simply empty-headedly dismissed on the

grounds of no regulation = good; regulation = bad.

The state regulated "Free Market" is not even a natural phenomenon

made somewhat artificial by rules to exaggerate the natural phenomenon

in the same way that we breed animals to exaggerate nature. Rather it is

just about as far from being a natural phenomenon as anything can be

for it goes against all Man's inclinations, both individual and social.

Economic history is overwhelmingly a catalogue of market regulation,

local and national, from guilds to governments. It would be

surprising if it were not because human beings, like all other

organisms, naturally behave to secure their own advantage or that of

their group. Extended to the nation state, this natural behaviour has

commonly resulted in domestic markets being protected against

foreign competition. Whether this is a good or a bad thing is another

matter - a question I shall deal with later - all I am concerned to do at

this point is to nail down that the fact that protectionist behaviour is

what is natural.

Historically, whether you were anything from a rich merchant to a

poor day labourer it was obviously not in your personal interest to allow

others free access to your markets to offer the goods or services

at a lower price or to work for lower wages. The merchant might be

driven to bankruptcy by competition, the labourer from his job.

History also tells us that whatever their previous economic station, such

people will probably not be able to find equivalent or better paid

employment and often may not be able to find any employment at all

where structural unemployment arises. What was historically true not

only remains true today, but its effect is much magnified because

the opportunities for competition are greatly increased by modern

communications and the ease of travel and cargo transportation.

Of course, any individual or sectional advantage causes strains in a

society and if the material privilege of any person or group becomes

excessive, sooner or later there will be a successful revolt and the

wealth in a society will either be shared more fairly through a change in

the way the society is structured, for example, through the abolition

of tolls, the ending of state monopolies or even through a removal of

the rich as a class without any increase in the wealth of the majority.

But wherever wealth distribution through social change has occurred it

has normally been done with the express intention of benefiting a

particular group or even an individual in the case of monarchs. The odd

thing about "free marketeers" is that what they ostensibly advocate is not

to privilege any particular individual or group but to benefit society as a

whole. Whether free markets do so is another matter, but that is their


The "free marketeer" says to a population, do what I say and in time

society will become richer. He does not say this person or that group will

become richer or even all will become richer, but merely that the society

as a whole will become richer. This is an extraordinary thing to ask

people to trust in. It is also the most wonderful blank cheque ever

written to a politician because not only does it absolve him or her of any

need to take the responsibility for regulating the economy, it also means

that he or she can never be held to account for dishonesty by any

individual if that individual is personally worse off. All a "free marketeer"

politician has ever claimed is that his economic way will make society

richer. Provided society overall is richer, he has met his met his


It is also telling for their intellectual credibility and honesty that "free

marketeers" will oppose government interference in such matters as

subsidies, quotas, embargoes, wage rates and working hours and

grumble about tax rates and public expenditure, but are generally

quite happy to see other gross distortions of the market deriving from

government action. They not only tolerate patents, copyright and

trademarks, but often defend them as property in themselves and as

devices which actually improve economic performance because they

encourage invention, investment and expansion. In addition, those who

constantly bleat about Adam Smith's "invisible hand" sorting out the

business wheat from the chaff insist that limited liability is

necessary. This of course is also a violent interference with the market

because it means that the individual shareholder never takes full

responsibility for their investment. (It is worth noting that the British

industrial revolution - the one and only bootstrapped industrial

revolution - took place before limited liability became legally possible

(Limited Companies Act 1862) and at a time when patent rights were

insecure and in practice limited to the domestic British market.)

It is true that none of these things are actually part of what the

concept of a "free market" is and that they are inimical to such a

market, but the fact that almost all modern "free marketeers" have

tacitly incorporated them into their vision of what a "free market" is

demonstrates their intellectual confusion (or dishonesty if you prefer).

3. The "free market" as its proponents conceive it

Let us put aside for the moment the fact that "free markets" are state

regulated markets and ask the question what is a "free market" as it is

conceived by "free marketeers"? A jolly good question. Even if market

distortions which appear acceptable to "free marketeers" such as patents

and limited liability did not exist, that would leave many other things

which prevent unfettered domestic competition. In an advanced modern

economy these include:


Non tax fiscal measures, eg control of interest rates

The state of the currency

Exchange controls

Overall Government expenditure

State Subsidies

Industry and trading standards, official and otherwise

Public sector employment

Transport costs

Public ownership


Direct and indirect Government intervention

Copyright, trademarks and patents

The moral and social climate, eg, a tradition of Welfare The feeling of the

people, eg, the national feeling of Japanese Practical cultural barriers

such as the difficulty of a language


Transport costs

Working hours

Trading laws

Labour laws

Wage rates

Bureaucratic differences

Company laws - particularly the attitude towards foreign ownership

Banking laws

Banking system

Social policy - welfare, health etc

Physical infrastructure

Honesty of public servants

Foreign policy

National strategic considerations

Education - The amount spent, school leaving age, curriculum,

Limited Liability

Environmental laws

Some of these things such as subsidies, patents, quotas and limited

liability could be obviously and legitimately ruled out of order by a "free

marketeer" because they are deliberate state interferences with

competition, but what of items such as the provision by the state of

education or the physical infrastructure of a country? They are

undeniably distortions of competition at some level, but they are not

deliberate attempts by the state to distort competition. A purist "free

marketeer" could just about say such things were no business of the

state and still be intellectually coherent because it is possible to

conceive of a society without such state provision. But however

purist they might be, sooner or later the "free marketeer" will run into

features which undeniably restrict competition but which must exist

simply because they are an inescapable part of society. The most obvious

is tax.

Any modern state needs a large tax revenue to sustain itself, the only

questions to determine being how large should be the revenue and what

it should be spent on? Some things such as defence and policing are

inescapable expenditures for any state, although even there the

amounts to be spent are debatable and elastic. Items such as education

and welfare are more subject to variable expenditure. Nonetheless,

substantial amounts are as a matter of contingent fact invariably spent on

such items by all advanced states. Such countries also engage to a

lesser or greater degree in all the forms of regulation listed above.

In theory, and even more in practice, the notion of a "free market"

seems to rest on little more than anti-monopoly laws, wages and prices

set by the market (although in practice this does not happen purely

through the market because of welfare provision, tax regimes etc) and a

lack (or at least a minimum) of state interference in such areas as

health and safety, employment law and company law.

The inclusion of these narrow criteria are merely a subjective choice

made from a much larger menu of man-made distortions of the market.

Consequently, there is no objective coherence to the concept of the

"free market" as it is conceived by the "free marketeers". It is an

arbitrary ideology based on subjective choice.

4. How effective is anti-monopoly legislation?

Anti-monopoly laws operate within the constraints of the type of social

and economic circumstances described above. That alone means they

are severely limited in what they can do. They must, for example, tolerate

state granted monopolies in the form of patents and copyright.

Anti-monopoly legislation generally only effectively attacks the

problem from one end. A company can be prevented from growing its

market share by taking over other companies but there is normally no

meaningful restriction on a company growing its market share simply by

expanding the existing company. Microsoft and the domination of

Windows is a classic example.

Where companies try to expand by takeover, experience shows that

those charged with applying the legislation allow very large parts of a

market - 25% or more - to be held by a single company. The

consequence is that a market which would seem to be an obvious

candidate for competition, for example, food and domestic supplies

retailing, can easily come to be dominated by three or four major

players (as is the case in Britain).

There are also those products which are either natural monopolies

because of the physical location of their infrastructure - railways, roads,

the utilities such as gas - or which are inevitably going to have few

entrants in the field because of reasons of cost, for example, aerospace,

motor cars, ship building.

Finally, there are those rare markets which are dominated by one

company simply because of the nature of their business. The classic

example of this is Microsoft and their Windows operating system.

5. Microsoft and Windows - a natural monopoly

In South Park: The Movie, there is a glorious scene where, under

martial law, Bill Gates is executed for falsely promising that Windows 98

would be "faster, easier to use and more reliable". Many long-

suffering Windows users doubtless wish that life had imitated art in that

instance. Yet despite widespread dissatisfaction Windows remains

the overwhelming dominant operating system.

At first glance it might seem that operating systems should be just the

type of product which is open to fierce competition because software

is a market which potentially has low entry costs. It is true that most

areas of programming are competitive - within the constraint of the

dominant operating system (OS) - but operating systems are the odd

man out. The reason is simple. Once a single OS gained dominance,

the chances of any other system effectively competing were very

small. This is because the weight of programs available to run under

the dominant OS soon became much greater than those which could

be run under any other OS. Thus, it becomes inefficient to choose

any other OS. That in turn means most of the software is written in a

way to make in "friendly" to the dominant OS systems' users. This

further excludes OS competitors and the software to run under them

because users, especially employers, do not want to spend the time

training their employees on completely new systems, converting data


The consequence is that Microsoft still has a stranglehold on the pc

market. Moreover, if anyone wants to write any other software, they are

constrained by the practical need for it to run under the Microsoft OS if

they wish to reach the mass computer user market.

The near monopoly has lasted a long time. It has done this despite

considerable attempts by both rivals and the US government to diminish

their market position. Windows' dominance looks secure for the

foreseeable future.

6. The historical trend towards contraction of competition

As remarked previously, the logical end of a free market is monopoly.

The reason is obvious: competition tends to reduce the number of

competitors through the natural process of success and failure and the

takeover of one firm by another. In some trades this does not create an

obvious serious anti-competitive difficulty because the initial capital

investment is small and entry to the trade within the reach of many. But

entry to a considerable and growing number of areas of manufacturing

and service provision is too expensive for all but a few.

In a significant minority of trades starting a business from scratch is

practically impossible for any one individual or even a group of

private investors. The car industry is a first rate example, the number

of companies now being small (and becoming smaller) compared with

the number of even 40 years ago. Moreover, many of the car

companies which do still exist do so only because of state subsidy and


7. "Free trade"

"Free trade" is frequently treated as synonymous with international

trade. In principle it does not have to be restricted to international

dealings because the concept may be applied to any market, whether

that be within a global, regional, national or even a local context.

The United States for example displays considerable differences in

local tax rates between not only states but within localities within a

state, and, indeed, the ultimate aim of the "free trader" is to create a

single world market. However, there are considerable differences in

practice between domestic markets and international markets, not least

because the criteria which are deemed to fall within the concept of "free

trade" are not identical with those which are said to be a necessary

part of the concept of a "free market", for example, laws to prevent

monopoly are redundant when it comes to international trade because

one country will either supply or not supply goods and services to other

countries and a country with a monopoly of an important good or

service can as a matter of fact only be persuaded to supply the good

or service against its will by extra-legal action, ultimately force or

the threat of force. Consequently, it is convenient to treat "free trade"

as being economic intercourse between nation states and that is what I

shall do.

What does and does not constitute "free" international trading? In

times gone by, people would have pointed to those honest workhorses of

restriction: embargoes, quotas and tariffs and navigation laws and not

much else. But in the modern world things are much more

complicated as we discover almost daily during the seemingly

interminable EU squabbling and the GATT rounds.

Some things are obviously incompatible with "free trade" such as

embargoes or state subsidies, but what of different tax regimes,

welfare provision or labour regulations? Why should they be excluded

from the things which should not be tolerated in a "free trade"

regime? After all, a low company tax regime could be regarded as a

form of state subsidy to business and all welfare provision could be

regarded as a subsidy to wages.

But even such items are straightforward compared to others. What of

national sentiment which gives a preference to home produced goods

regardless of whether they represent the best value when judged purely

by price and quality? Should a country be forced to take the cheapest of

any particular equivalent good or service, regardless of the wishes of the

people of that country, on the grounds that not to purchase that which

gave "best value" constituted "unfair competition"? A reductio ad

absurdum? Well, consider the fact that public bodies within the EU

(which for these purposes includes any organisation drawing part of

their income from public funds) must allow any company within the EU to

bid for any work put out to contract, and if the lowest bid is not

accepted, the public body risks being fined for a breach of the Single

Market rules.

Even more problematic are things which are simply effects of economic

activity. Take true dumping, not the state subsidized export regimes

which often pass for such, but a simple economic practice to maximise


True dumping works like this. Imagine that a company can make 2,000

units a week. It covers its costs for all 2,000 units if each week it

produces and sells 1,000 units at œ1 each. The company finds it can

sell a maximum of 1,500 units in the home market at œ1. If it reduces

the unit price to 75 pence it could sell all 2,000 but that would only

produce the same amount of revenue as selling 1,500 at œ1 each.

Consequently, it sells 1500 in the domestic market at œ1 each and the

other 500 at 50 pence each (carriage paid by buyer) in foreign markets.

Total sales are œ1750 instead of œ1500.

That is a very simple model of dumping but something akin to it happens

regularly with differential pricing from country to country (the

European car market is a prime example of this). No state subsidy has

been given, no state intervention of any sort has occurred. Why should it

not be considered as reasonable a practice as the toleration of different

national wage rates? In fact, why should it not be considered more

reasonable because wage rates are directly linked to such hidden

subsidies as those of welfare and low company taxation? (in fairness,

the economic activity of the dumper would also be linked to wage and

tax subsidies, but the connection would be more remote.)

Most contentious perhaps is the question of immigration. Does "free

trade" require the movement of people as freely as goods and services?

This is generally accepted as self-evident by purist "free traders". Yet

there is no logic to the claim. Economic forms are made for men not

men for economic forms. We know as a matter of practical

experience it is possible to have the exchange of goods and services

without the mass movement of people. If a society decides that the

benefit gained from the free movement of people is outweighed by the

social disruption caused by such migration, it is a perfectly rational

decision. A people may decide that they will have or not have free

exchange or movement just as they may decide to have this or that level

of taxation or welfare provision. It makes no more sense to say a

society which restricts immigration - which all advanced states in

practice do - is not a "free trader" than to say they are not a "free trader"

because their income tax rate is higher or lower than that of their


The treatment of human labour as merely a factor of production (along

with land and capital) is also incompatible with the liberal

democratic tenets of the equal worth of each person and the rights

and obligations of citizens. Allowing mass immigration to reduce

wages or the exporting of jobs to cheaper labour overseas is treating

human beings as being of no more account than inanimate objects. It is


So what does "free trade" actually mean? Does it require merely that

countries may trade with one another without any formal barriers such

as tariffs and quotas? Or should it take into account all those items such

as national tax regimes, non-tax fiscal measures, wage rates (where

these are set by the state), standards of practice and manufacture

(official and otherwise), and the size of the public sector. All of these

are controllable either entirely or to some degree by men. In other words,

they could be removed or altered.

If a definition of "free trade" is accepted which includes these and other

non-traditional elements of market distortion, the ultimate logic of the

definition is that "free trade" as a global concept cannot exist until all

peoples and countries are reduced or elevated to the same general

economic condition.

Those who run the European Union would say that is precisely what is

required, at least within the EU. But the experience of trying to create

unified trading conditions at a supranational level in the most advanced

of supranational political and economic entities, demonstrates just

how difficult it is to create a supranational market in which there is a

broad uniformity in the trading conditions within its constituent national

parts. Despite nearly half a century of trying through treaty after treaty

and the covering of the EU members with an avalanche of EU

directives, there is no meaningful economic uniformity within the

EU, either in the circumstances of private enterprise competition or in

the function of the state. The introduction of the Euro has painfully

revealed exactly how disparate the economies of even the richer EU

states still are with Germany needing low interest rates to re-inflate

and Italy requiring high rates to control public spending and the

European Central Bank paralysed by their inability to square such an

economic circle.

The Holy Grail of "free traders" is comparative advantage. This is a first

rate example of a neat and emotionally satisfying (to a certain type of

mind) intellectual idea which bears little relation to reality. The idea is that

every country concentrates on making what it is best at and the

overall global product rises because of increased efficiency. Even in

theory this is rather dubious because it ignores every other aspect of

society than a narrow view of economic relationships and assumes

tacitly that a comparative advantage will last. David Landes in his The

Wealth and Poverty of Nations (Little, Brown and Co 1998) cites the

instance of the Englishman John Borrow, who in 1840 urged the states

of the German Zollverin to concentrate on growing wheat, and sell it to

buy British manufactures and comments: "This was a sublime example

of economic good sense: but Germany would have been the poorer for it.

Today's comparative advantage...may not be tomorrow's."

The truth is that any definition of "free trade" is as subjective as that of

a "free market". It has no natural boundaries because the implications

of both ultimately embrace the whole of human material endeavour

and there are no true natural variables on which to base a definition -

even those which might at first glance appear to be objectively and

naturally set, such as wages and prices, are determined by matters other

than the market, for example tax regimes and welfare provision.

8. Has "free trade" ever been practised?

Between 1860 and 1914 Britain operated the best approximation to

"free-trade" the world has seen. In the period 1840-1870 not only did

she by degrees open her markets to all regardless of whether other

countries reciprocated, but the size of the British state was so tiny that

the distortions of government expenditure and taxation were

minuscule compared with the present day. But achieving the best

approximation to "free trade" was not difficult to achieve because no

other country of any size has ever seriously attempted it for any

length of time.

For a quarter or a century or so, Britain got away with the ill-effects of

being a reckless "free trader" whilst other major countries remained

protectionist to varying degrees. She escaped the consequences for three

prime reasons: Britain's industrial dominance, long distance transport of

bulk goods remained cumbersome and expensive and the fact that

America and Europe were strangely slow to follow Britain's example and


That all changed in the 1870s. Bulk transport was becoming much

easier and cheaper. Railways - ironically more often than not built with

British capital and technical expertise - had begun to have a

considerable influence on the continent and in America and were

beginning to snake across Australia and South America. Perhaps most

importantly the age of the practical steamship and refrigeration

arrived. Manufactured goods, food and raw materials could now move

around the world in volumes which dwarfed anything which had gone

before. British farmers were especially badly hit when the Americas

and Australasia flooded the British market with food and wool.

To these developments, and arguably in part as a consequence of

them, there was a widespread retreat into a deep protectionism in the

1870s, most notably by the USA and Germany. Britain failed to respond

to these developments by guarding her own markets.

The period of 1870-1914 saw the predictable results of Britain's

quixotic refusal to guard her markets when all about her were

assiduously doing so: she lost her general industrial predominance,

well nigh destroyed her farmers and failed to dominate vital new

industries, such as the chemical, which at one time she had led -

Britain produced the first synthetic dye (Perkin 1856) and the first

synthetic plastic (Parkes 1855). Two of the most enthusiastic

protectionists, the USA and Germany, became the first to exceed

Britain's GDP.

Bismarck summed up what had happened in a speech in 1882 when

he said:"I believe the whole theory of free trade to be wrong...England

abolished protection after she had benefited from it to the fullest

extent. That country used to have the strongest protective tariffs until it

became so powerful under their protection that it could step out of those

barriers like a gigantic athlete and challenge the world. Free trade is

the weapon of the strongest nation, and England has become the

strongest nation in the world owing to her capital, her iron, her coal,

and her harbours and owing to her favourable geographically

position. Nevertheless, she protected herself against foreign

competition with her exorbitant protective tariffs until her industries

became so powerful."

But even the "free-trade" Britain practised was far from complete.

Government contracts were generally given to British companies. Ditto

municipal contracts. Moreover, there was a strong sense of patriotism in

the country which, as with the present day Japanese, mitigated the

effects of free-trade. Nor, of course, was there a WTO, EU or any

other body to question and interfere with the internal economic

workings of Britain such as taxation, interest rates or working


British "free trade" was further complicated by the existence of the

Empire and a widespread imperial sentiment which created the

opportunity and the desire to trade with members of the Empire rather

than the rest of the world. It does not do to over-egg the effects of this

because British trade with the world outside the Empire, especially

the USA, always remained strong, but it undoubtedly significantly

distorted British trade.

9. "Free trade" today

If "free trade" was a gigantic gamble for an industrially, commercially and

politically dominant Britain in 1850, it is vastly riskier for any country

now. Transport even after the arrival of railways and the steamship was

still expensive, slow and cumbersome compared with now. The electric

telegraph was the height of sophistication. Most parts of the world could

not engage in international trade on their own terms because they were

colonies, under the practical control of foreign powers or


Today physical transport is fast and cheap. In place of the telegraph, we

have the internet. Many countries have industrialised. The age of formal

empires is over.

But there is more than political and technological change which makes a

difference between our own time and the last outbreak of "free trade"

mania. The "free trade" being advocated now is doctrinaire to the

point of idiocy, namely the god of comparative advantage (the idea that

each nation should concentrate on those products which are most

profitable and forget the rest) is to be applied to everything, even (in

the EU) to all public contracts, including those for weaponry. Childishly

doctrinaire as they were as they played with their untried intellectual toy,

even the most extreme "free traders" in the 1830s and 1840s saw that

some parts of the economy could not be reasonably opened to

competition for strategic reasons, military supplies being the prime


Let us suppose that we had a perfect "free trade" world now, a world in

which there were no tariffs or quotas or embargoes or "standards" to

meet; that all the artificial restraints on trade were removed; that no

government subsidized productive employment in any way and all that

remained to differentiate countries were market decided labour rates,

carriage costs and the cost of nonproductive public works such as

justice and the army. What then?

The consequences would be extremely dangerous for the West. Farmers

in the First World would be on their knees and mass production of

virtually anything in general demand would quickly become impossible

because whatever a company's efficiency, it simply would not be able to

compete with labour which was a tenth or less of the cost of its own

native workforce. All such countries could do is try to make high-value


Even if the redundant working populations of the First World could find

alternative employment, which is dubious, their countries would be left

utterly at the mercy of those who now produced their food and most of

the manufactured goods they consumed.

10. Does "free trade" deliver? The lessons of economic history

Free traders base their case primarily on the increase in prosperity

which they believe will only come through increased global trade. The

general answer to that claim is that Man does not live by bread alone.

Moreover, even if there is a general rise in the global product at

present, it does not necessarily follow that the same or better result could

not be achieved by other means. The experience of all

industrialised countries to date is that industrialisation is best achieved

- perhaps can only be achieved by protecting the national economy.

Indeed, there is a powerful logic in the idea that developing nations

today require protection more than the early industrialising states

because the early industrialising nations had little competition.

But even if it could be shown indubitably that the global product is

increased more by "free trade" than by protection, it does not follow that

it is in a particular country's interest to adopt free trade. Consider the

position in a national market which operates "free trade" within that

market, but protects its trade and industry from foreign competition.

Companies go bust if they do not compete. But successful companies

take their place and continue to provide employment at broadly

similar rates of pay. The logic of global "free trade" is that countries

which cannot compete will go bust and not be replaced by others in the

domestic market. There will be no replacement jobs within the bankrupt

country because the successful competitor is abroad.

The most lethal ammunition to discharge at "free traders" is the fact

that no country in the history of the world has industrialised

successfully without very strong protectionist measures being in place.

That includes the first industrial nation, Britain, which spent a couple

of cosy centuries behind the Navigation Acts, the first of which was

passed in 1651, before becoming a free trader. Not only that, but Britain

only adopted "free trade" principles after she had become heavily

industrialised and did so at a time when the country was still the

dominant industrial power in the world by a long chalk and her exports

were more or less guaranteed to sell in foreign markets.

Before Britain dropped her old colonial protectionist system in the mid

19th Century, she had industrialised in the modern sense from scratch

and expanded her GDP massively. Perhaps most impressively she had

managed to continue to largely feed herself without the price of corn

going sky high, despite the fact that the UK population almost doubled

between 1801 (the first Census) and the repeal of the Corn Laws in


As described above, Britain's experience during her most committed

"free trading" period was one of declining market share and commercial

and industrial dominance while rigid protectionists such as Germany and

the USA experienced massive growth. Of course, Britain could not hope

to remain so dominant but her decline was remarkably rapid. In 1870

Britain was the richest country by GDP in the world: by 1914 both

Germany and the USA had larger GDPs. Moreover, by religiously

adopting open markets, for capital as well as goods and services,

Britain seriously distorted her economy. Vast capital exports resulted in

underinvestment in Britain and foreigners manufacturers and traders

took full advantage of Britain's open doors. The result was that by the

Great War in 1914 her farmers were on their knees and modern

industries such as the chemical and pharmaceutical were sadly

undeveloped because of foreign competition (this distortion of the

economy was soon to be a great national embarrassment during

wartime when many industries were found to be inadequate to replace

imported goods).

Here is a German voice from 1913: "By its free trade policy England

has been more useful to us than its numerous political machinations

have been harmful to us. Where would our sugar industry - one of the

first items to help us in our economical rise - have been today, or our

textile and iron industries, had it not been for the free markets of

England? Nowhere: we should have been entirely without our new

German capital, our financial resources. On the back of free trade

England we grasped at and secured our economical

world-power....Industrial and political supremacy go together. Warships

are machines, and the nation which succeeds in attracting the centre of

capital is the nation that can afford to build most. The present rulers of

England represent the fourth generation of dictators to the world. It will

not be easy for them to give up the role of 'primus inter pares'". (Prof

von Schulze-Gaevernitz quoted - p347 -in The fall of protection 1840-50

by Bernard Holland)

Britain limped on with "free trade" after the Great War until 1931 when

the secular religion was abjured, at least temporarily, during the Great

Depression. Although unemployment remained high by historical British

standards until WW2, the British economy behind protectionist barriers

recovered quickly compared with most of the rest of the world. Most

interestingly, the newer high-tec industries such as the motor, chemical

and electrical recovered and grew fastest following their protection.

From 1945 to the mid eighties of the last century at least, Britain

continued in an essentially protectionist system, as did the rest of the

world. The world economy grew strongly during the period despite the

protection. Even within the EU the "free market" mania did not really

get under way until the Single European Act of 1985.

It is true that since protectionist barriers have come down over the past

20 years economic growth has been strong in the First World, but then

it has been strong behind protectionist barriers and, indeed, with state

direction of the domestic market. Germany under Hitler in the 1930s

recovered amazingly quickly, despite the fact that the Nazis pursued an

economic course which was probably as close to autarky as it is

possible for a major modern state to bear. Imports and exports were

regulated according to what was perceived to be necessary to make

Germany strong through self-sufficiency. What Hitler did not do was

attempt to run industry directly. Instead, the Nazis allowed private

enterprise to run commerce and industry whilst directing what was

produced and supplied.

All that tells us three things: that "free trade" is not necessary for rapid

economic growth, that state regulation of the domestic market and

international trade is not a recipe for disaster and that being a "free

trader" when the rest of the world is not reciprocating is a mug's game.

11. Is society materially enriched by "free markets" and "free trade?

This is an impossible question to answer categorically because there is

no way knowing what would have happened if protectionism had

remained full blooded throughout the last century and a half. One can

compare growth rates under stronger or looser protection regimes, but

they really say little because the other determining factors such as

public expenditure have varied so greatly. These variables also blur

judgement about the comparative merits of controlled and "free"

domestic markets.

The most certain thing one can say from the economic experience of the

developed world is that governments running commercial industries such

as coal and steel directly is generally a mistake. (Governments are the

natural suppliers of universal services such as healthcare only because

private provision of such things is never adequate.)

What is certain is the fact that the material effects of "free trade" are far

from uniform. It is no consolation to those who suffer along the way

that others may benefit from their disadvantage. The next generation or

the generation after that may be richer but why should their benefit be

brought at the cost of disadvantaging a prior generation? Certainly

no politician or political party standing at an election would dare to do so

on a platform of "we shall make many of

you poorer to make future generations richer." Those living at any

point in time have their own moral context and needs.

The constant economic turmoil caused by "free trade" and its inevitable

concomitant, the supranational corporation, undeniably leads to

circumstances which greatly disadvantage large swathes of the

population in the First World through the removal of First World jobs to

the rest of the world. At worst, these people become the perpetual

victims of structural unemployment (try getting a job in an area where the

main employer closes and you have no scarce or easily transferable

skills or you are middle-aged or, indeed, try opening a new business or

becoming self-employed in a depressed economy): at best they are

driven into ill-paid and uncertain employment.

12. What is meant by material enrichment? Britain as a case study

The assumption is that the material conditions for most have improved

considerably over the past two hundred years. Any economics textbook

will plot economic improvement in terms of rising real wages. But

those supposedly rising real wages are based on measures which are

often questionable, incomplete or derived from very narrow data

such as corn prices. Even modern measures such as the Retail Price

Index (RPI) are not static, their content and weighting being

regularly revised. Nor do such measures fully represent the true costs of

necessities, the most notable distortion in Britain being the failure of

the Retail Price Index (and its successor index the Consumer Price

Index) to reflect housing costs fully. Any comparison between different

times based on such measures needs to be treated with caution.

Of course no one in their right sense would question whether there has

been massive material advance in the past two centuries. A more

interesting question in our context is whether most people are

materially better off now than they were in 1960s, by which time a fully

fledged welfare state was bedded in, housing, both owned and

rented, was reasonably priced, social housing was being built in

massive quantities, university education was not merely free but

students subsidized with grants, unemployment was tiny and inflation


Today the welfare state is constantly under attack by the British

political elite and in some areas such as NHS dentistry already

seriously inadequate, while the state pension is much reduced as a

fraction of the average wage following two decades of increases linked to

the cost-of-living pegging rather than increases linked to the average

national wage.

Housing of all sorts in most parts of the country is presently

absurdly costly and social housing is greatly reduced through

Right-To-Buy and minimal new building since the 1980s.

The cost of university education is rocketing and grants are a

distant memory.

Unemployment remains high today (2005) even by the official figures -

approximately 950,000 by the claimant count and around 1.5 million by

the most widely used international measure - figures which most

probably severely understate the real unemployment level because it

ignores the considerable disguised unemployment within the 2 to 3

million people currently on long term sick benefit payments (the 1980

figure for such people was 600,000). The increase in those staying on at

school after the age of 16 and going on to university has also reduced

the present figures by taking hundreds of thousands out of the jobs

market for years. From 1945 to the late seventies unemployment never

rose above a million on the official claimant count and for most of the

time was considerably lower even with little disguised

unemployment and far fewer people staying in education after the

school-leaving age (which was only 15 until the mid sixties).

There are other fundamental social changes which bear upon the

material state of the nation. Many more people today have to travel

long distances to work than they did forty or fifty years ago. That is

costly both in terms of fares and time. More generally, it is increasingly

difficult for someone on the average wage to support a family on that

wage. That often means both parents have to work not from choice but


Taxation bears much more heavily on the poorer part of the population

now than it did in the past. Direct taxation - income tax, national

insurance, inheritance duty - applies to many more people now than it

did in 1960, primarily because a failure to maintain personal

allowances and tax bands at a reasonable level. Direct taxation is also

broader in scope, for example VAT compared to purchase tax. Such

taxation takes proportionately more of the income of the poor than the


It is a moot point whether overall people are generally materially better

off than they in 1960. They may own more trinkets such as TVs and

computers and some imported goods such as clothes may be at least

much cheaper, but those are small advantages to set against the great

increase in housing costs and commuting fares and the diminishment in

social provision. Doubtless a section of society has benefited, but it

would be a brave man who wanted to argue that the condition of the vats

majority has improved, especially the poorest third of the population.

Many will read this with astonishment, saying but we have so much

more today, dazzled as they are by the many new products. It is

important not to confuse technological advance with "free markets" and

"free trade" or general material wellbeing. People are undoubtedly

better off in 2005 in terms of being able to purchase such things as cars

or electronic goods then they were in 1960. But people in 1975 were

also better off in those respects than those who had lived fifteen

years before. That improvement was long before "free markets" and

"free trade" had become the elite ideology. It is worth adding that new

products often result in additional expenditure regardless of whether the

individual really wants the product - any product which becomes widely

used is difficult to resist. Technological innovations are particularly prone

to induce reluctant purchases.

13. How the market fails to provide what the customer wants

There is no better modern example of the market failing to provide

what the customer both needs and wants than the computer industry.

If it was driven by the customer, the computer industry would produce

hardware and software which was easy to install, had continuity of

use, was simple to use and was supported by adequate help lines and

manuals. The industry signally fails to do any of these things.

Hardware and software are of course purchased in ever greater volume

and computer services, including maintenance, continue to swell. But

that is not an indication of customer satisfaction. Rather, it is simply a

reflection of how computers have become an inescapable part of our

lives, not only as obvious computers but also in the guise of so many of

the other machines we use - everything from phones to intelligent

clothes. Business and public administration have become so dependent

on their use that they cannot do without them. That being so, whatever is

on offer, however unsatisfactory, is bought out of sheer necessity.

The computer companies have the modern world over a barrel.

It might be objected that although most people cannot completely escape

computers at their work, they do not have to bring them into their

private lives. Yet increasing numbers buy computers for private use.

Why do they do that if the machines are so unreliable and demanding?

Simple: once a significant minority have private computers and business

uses them very widely, it becomes very difficult for the rest to resist,

not least because businesses and government increasingly require

those dealing with them to do so by computer. But there are other

pressures as well.

We have long passed the point where a handwritten document is likely

to be read by most people in business unless it is an order or payment.

Now, except between social contacts, everything must be

wordprocessed to be acceptable. A word processor or access to one has

become a sine qua non for anyone who wishes to be taken seriously.

Even amongst private individuals a letter is increasingly seen as unusual

or even quaint.

With emails, we have not come to the stage that telephone ownership

reached a quarter of a century ago when not to have a phone became

considered eccentric, but we are rapidly moving towards it.

Employers increasingly wish to contact employees by email wherever

they are and this means the choice is often between having a computer

and email at home or not having a job.

Those with school age children, whatever they think of computers, find it

next to impossible to deny their children not only a computer but access

to the internet, both because the children want it to match their peers

and because they have been brainwashed into believing that a computer

is a necessary educational tool.

In short, people are increasingly being driven to become computer

owners and users not because they actively want to, but because

they feel isolated and excluded if they remain computerless. Again, as

with the analogy between telephones and emails, within the foreseeable

future, someone without a computer is in danger of becoming in the

eyes of the majority as much as an oddity as someone without a TV is

now considered.

14. Relative poverty, wealth and power

Even if most people or even all people were in absolute terms better off

as a consequence "free trade", that does not mean that their general

situation has improved in power terms.

Wealth is not merely an advantage for what it can directly buy but also for

the power it brings. The poor are doubly disadvantaged by their poverty

by their restricted ability to purchase what they want and their

subordination to those who can purchase anything they desire.

Consequently, the ordinary man or woman may well be happier and

freer in a society which is materially poorer overall but which is less

oppressive through the absence of great differences in wealth. Charles

Darwin in the Voyage of the Beagle describes a port in South America

which suffered an earthquake while the Beagle was there in harbour.

The town attached to the port was virtually destroyed and its

inhabitants were reduced at least temporarily to the same material

level. Darwin noted the happiness, almost gaiety, of the population

after this happened.

The example of Britain is instructive when it comes to relative wealth. Until

the 1970s inequalities in wealth were narrowing. Despite all the puffing of

the "trickle down" of wealth which supposedly results from Thatcherite

"free market" practices, wealth distribution has not changed

dramatically over the past quarter century of "free market" policies by

successive British governments.

A Royal Commission (1976-79) on the distribution of income and wealth

found that in 1976 the top 1 per cent of the population owned 25% of all

personal wealth, the top ten percent raked in 60% and the bottom

eighty per cent had a measly 23% (Penguin Dictionary of Sociology

p72). The Inland Revenue figures for wealth distribution in 2002

are show the top 1 per cent own 23% of national wealth and the

bottom fifty per cent of the population have a staggeringly small 6%

(Office of National Statistics (ONS) website - published 2004). Those

figures, eye-opening as they are, conceal the fact that wealth inequality

in 2002 would be much greater than 1976 were it not for the increase in

home ownership and the rise in house prices.

Another ONS report (2005) entitled "The long shadow of childhood"

(TLSOC) based on research by the London School of Economics

concludes that there has been remarkably little change in social

mobility in Britain over the past 30 years. The study was based on

census records between 1971 and 2001.

TLSOC also demonstrated how the social and economic status of

children is very much tied to that of the parents. For example, more than

two thirds of those with parents in professional or managerial jobs

managed to take a degree: of those with semi-skilled/unskilled

parents, 14 per cent had a degree.

Another study

15. Man does not live by bread alone

Even if the "free traders'" claims of an overall increase in the wealth

of a society were true, there would still be strong arguments against the

policy because a society is more than its crude economic relationships.

Human beings do not like too much uncertainty. A certain amount of

stress is good for them, but only so much. Like masochists and physical

pain, human beings are comfortable with stress only in so far as they

feel it is within their control. Manifestly, for many people the

uncertainty they experience is utterly outside their control. This

widespread insecurity leads not merely to individual suffering but

damages the social fabric by generally diminishing confidence in the

future and the ability to cope in the here and now.

A 2005 study (Molly Watson Western Mail 31 9 2005) by a Cardiff

University Department of Psychology team led by Prof Aylward Mansel

suggests that the general level of happiness in the Depression was

greater than it is now (the team analysed data from surveys of

assessing happiness and contentment from the past 70 years.) This

conclusion might seem absurd to most people living today who, if they

have any conception of the Depression, it is one of a dire time packed

with the most horrendous stress. Yet the findings of the report have a

certain plausibility because in the 1930s there was undoubtedly a

greater sense of social solidarity, especially amongst the working

class, than there is now and civil society was far stronger then - the

working class not only lived in close-knit communities which offered

support to those who fell on hard times, but they were woven into

supportive institutions such as the co-operative movement and unions.

They were anything but socially isolated whereas today people are

often isolated. Social involvement, the Cardiff University study found, was

the single most important cause of happiness or unhappiness.

One must be cautious with such studies because however scrupulous

the researchers a degree of subjectivity is inevitable. Nonetheless the

equation of isolation with unhappiness will, I think, strike a strong chord

with most.

There is also the question of a people's self-confidence. If a nation's

visible and everyday manufactures are predominantly foreign, it tends to

produce a sense of dependence in the individual. A man looks around

and can find next to nothing he can identify as produced either in his

own country or made by companies owned by his countrymen. Not

unnaturally he begins to lose confidence in the ability of his own

country to stand alone. Peoples throughout history have allowed

themselves to be conquered simply because they believed themselves

to be generally inferior to those who confronted them and slaves have

been routinely controlled by owners who deliberately attempted to

reinforce their sense of inferiority.

16. Geopolitics

Free trade is postulated on an absurdity, namely that the world will no

longer see wars which will significantly disrupt trade, or at least the trade

of the First World. It is a fool's paradise.

Those with memories greater than that of a goldfish may recall the help

and support Britain received from her supposed EU "partners" in the

Falklands. Remember how France supplied military equipment in the

form of missiles to the Argentine during that war. Imagine what would

have happened if Britain at the time had relied largely on equipment

which was either wholly or partly produced abroad. Suppose, for

example, her main fighter aircraft had been produced by an EU

consortium (as it soon will be), what guarantee could Britain have had of

fresh supplies of spare parts and weapons during the Falklands war?.

The dependence on foreign suppliers affects ev

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Catching a Falling Financial Knife