Admit the truth: We need Iran more than its leaders need us

The Have Your Say section of BBC Online can be a depressing place to spend one’s lunchtime, but rarely more so than when foreign affairs are in the news.

Statements condemning the 15 British naval personnel recently seized by Iran for not fighting to the death suggest a view of soldiers that bears no relation to the facts. Rather than being required to fight and die, they are bound by strict rules of engagement saying when they should and should not shoot, and anyway are entitled to surrender if heavily out-numbered. They may even have received orders to surrender. Yet one pompous idiot even had the gall to quote Churchill’s “never surrender” speech at former First Sea Lord Sir Alan West when he pointed out that our people were heavily out-gunned.

More depressing, however, is the desire to rescue the captives and punish Iran. A typical comment reads “why dont [sic.] we just wade in and get them out?”; another “Seize the next oil tanker out of Iran, then the next, then the next... They will soon yield when it comes down to loosing their revenue”; and a third “Enough is enough. Time for gunboat diplomacy. Unfortunately, it's the only thing these rogue states understand.” To be fair, there are no shortage of opposing voices, but the eagerness with which some would like to resolve this in the manner of a Tom Clancy book is depressing.

For one thing, the Iranians are wary of a rescue mission and have kept the location of the hostages a secret. This renders an extraction mission rather difficult. That being said, when the Iranians took 63 US diplomats and three other citizens hostage in 1979, President Jimmy Carter knew exactly where they were. The disaster that befell that mission should be a lesson to all armchair generals.

Back in the (good?) old days, if a British subject suffered at the hands of some foreign Johnny, the response would be a punitive expedition. We’d march a Brigade of the Black Watch up country, burning anything of value and salting the soil, and then return to the safety of home (or rather, to India) leaving nothing behind for the perpetrator to either enjoy or to take revenge upon. These days we don’t have a Black Watch. Instead we have the “surgical strike” and “sanctions”.

Do not rush out to subscribe to Newsweek just yet, however, for our response to this crisis will be far more symbolic than real. Sanctions are next to useless against Iran for three reasons: 1) the leadership are unconcerned by targeted sanctions, as they are not the types to do their Christmas shopping at Fayed’s; 2) broad-ranging sanctions would only drive the populous into the hands of their leaders, when we would really like to encourage domestic dissent rather than a Persian Dunkirk-spirit; 3) the only sanction that will really bite is oil sanctions, and at $66.10 a barrel, oil’s plenty pricey enough. In addition, we are already pushing the realistic limits of sanctions over Iranian plans to enrich uranium.

Military action is equally difficult. To my mind (he says, settling back into his armchair and imagining himself a general) a targeted military response would aim at the Iranian navy, striking at a few of its fast patrol boats. It would not need to be large; just symbolic. However, the consequences would be heavy. The population of Iran would be incensed by our response to what was the leadership’s (or part of its) crime; dissenting voices would fall silent as the population rallied round. British ships in the (narrow) Gulf would have to risk a response by surface-to-surface missiles. Shias Iraq would erupt. And the oil prices would escalate anyway.

The sad fact is that as long as Iran is not a democratic state, we need it more than its leaders need us. This is partly because we are in a weak position due to our Iraqi and Afghan commitments. But more significantly, it is because we are a democracy, and they are not. It is very easy for the Iranians to upset British public opinion – either oil prices or war casualties will put enormous pressure on our government. What is more, we are not united on this issue, and another military engagement or heavy sanctions regime would cause uproar in Britain. By comparison, it is hard for us to hurt the Iranian leadership directly, and public opinion has very little effect on their reasoning. Simply put, they have the advantage.

But as Robert Mugabe is beginning to learn, that advantage can slip away quickly. Tyranny usually leads to collapse: Iran’s economy is struggling despite its oil, and nearly half of its youth are unemployed. Iranians are already disaffected, and that disaffection will grow; many are undoubtedly ashamed by their governments contempt for the law, human dignity and Iran’s international reputation. In the long run, Britain and the West’s interests lie in encouraging that disaffection, not by attacking the symbols of Iran’s sovereignty, but by showing sympathy and support for the people while condemning their leaders.

Democracy is often criticised for leading to short-term planning: the “daily mandate” rather than the next generation. Yet autocracies, too, must constantly shore up their regime. In this instance, Britain can afford to play for time, to play the long game. Every effort must be made to get the hostages released quickly, of course, but gung-ho action will not hasten the end of the execrable Iranian regime.

Fortunately, the heads in charge of dealing with this crisis are cooler than those reading BBC Online.

If only everbody thought like an FT reader

The Financial Times is running an online poll on whether Gordon Brown would make a good Prime Minister.

So far the results are

Yes 17.8%
No 82.2%

Now, I know not everybody thinks like the readers of the FT, but I do wonder how many people nationally really do think that Gordon's fit for the job.

It seems we're getting a PM by default, because of his ability to bully his colleagues rather than woo the voters. I can only think it'll end in tears.

At last, some good news from Brussels

I have just transferred some money between two bank accounts, without leaving my desk, with just a few clicks of my mouse. It is called eBanking. It is not very exciting; indeed, it seems too prosaic to mention. Certainly, it should go without saying that it cost nothing to make the transfer. Why should it? It is just one computer telling another computer that it has reduced a number by a certain amount, and the other computer can add that amount to a number it stores. There is no marginal cost.

Add one more calculation, however, and a fee is charged. Lets say that the receiving computer has to take the first figure and pass it through a very simple formula before adding the figure to the number it stores. Let us call the first number “pounds” and the second number “Euros” and the formula the “exchange rate”. Since time immemorial banks have been telling us that this, for some reason, costs money. To transfer pounds from London to Scotland is free; to transfer them from London to Calais costs money.

I remember having a stand-up row with a bank clerk in Stockholm about this. Why, I demanded, was there a fee? What cost was I incurring? What was the difference between sending money to another Swedish bank and sending it to an English one (even one that had branches in Stockholm)? She was unable to answer the question, of course.

The answer is that there is no extra expense. It is a money-making ruse. It is not the bank’s fault as such, however: they are merely the beneficiaries of national legislation that has failed to inject competition into the banking industry. This may be about to change.

Yesterday, European finance ministers passed the Payment Services Directive. The aim of this is to create a “Single Payment Area, in which citizens and businesses can make cross-border payments as easily, safely and efficiently as they can within their own countries and subject to identical charges.” This means that one can have one’s salary paid into a foreign bank (handy if you are on a short-term contract), debit and credit card payments will be easier (though I’ve never had much difficulty) and those unnecessary bank charges should begin to disappear.

It will also open up the retain banking market to more competition. This is good for everyone, and particularly good for the British. Everybody benefits from competition, and sometimes it does seem that things are a little cosy on the high street. But actually, the UK has a fairly competitive banking sector. Our European allies may get a bit of a shock when HSBC and the Royal Bank of Scotland open up branches in Paris and Munich. And it will make it even easier to pop to the cash machine for a few Euros without having to pay £1.50 for the privilege.

And things should be a bit calmer in SEB without an irate Englishman hectoring a poor Swedish bank clerk.

Cameron: Tosh on the telly

As a committed Liberal Democrat I have no natural affinity for David Cameron, and tonight's Dispatches on Channel 4 hardly elicited great sympathy. But it did not trigger much righteous indignation either. This is partly because it has all been said before, but also partly because it was a rather unnecessary hatchet job. I was unimpressed.

Cameron: Toff at the Top always threatened to be predictable. Peter Hitchens, the presenter, has form as a right-wing Cameron hater. However, I found the early part of his televised character assassination both distasteful and bemusing. On the one hand, I have little interest in David Cameron’s background. Though hardly likely to be invited to join the Bullingdon Set, I find the efforts of some to revise the tawdry class politics of the twentieth century both irritating and facile. Some of our better Prime Ministers attended Eton, and still more Oxford. If we do not expect prejudice against any one class, we should not encourage it against another. There are many things about David Cameron that one might criticise, but the fact that he is distantly related to the queen or that he went to public school should not be among them.

On the other hand, it seemed a rather strange line of attack for a man who openly described himself as a traditional conservative (with or without a capital C remained ambiguous). Peter Hitchens will do the Conservative Party no good by adding fuel to the fire of class division. One of John Major’s better aspirations was to create a classless society – understandable for a Brixton schoolboy. It may have contributed to the Conservative victory two years later, and it is certainly true that social mobility has declined under Labour. By dredging up this class-war nonsense, Peter Hitchens is undoubtedly doing great harm to the Conservatives, as well as cheapening the level of political debate in this country. One might expect better from a journalist on the Mail on Sunday!

It may be, of course, that this is his plan: either that it will require drastic surgery to get the party back on track; or that he feels that the party has betrayed its supporters so badly that it must be destroyed. Either way, this focus on class deserves little but contempt.

Other attacks in the programme at least had some substance. The antics of the Burlington Club (sic.) do sound distasteful, though the tone of high-minded disgust that Hitchens affects makes one wonder whether he spent his university years in the chapel choir. That Cameron used charm and contacts to climb to the top is hardly new in the Conservative Party, and other parties have probably witnessed such methods too. Cameron’s rise may have been undeserved, but this is not a concern because it is unfair so much as because it suggests he lacks the talent one would hope for in a future prime minister.

As for his ability to cut his cloth to fit the present mood of whomever he is addressing, it is an open goal for his opponents, and we will certainly use our boots to best effect.There is little doubt in my mind that David Cameron would be a sorry excuse for a Prime Minister. Peter Hitchens clearly agrees. Nonetheless his broadcast tonight added little that was new to a debate – and a British political landscape – that is in desperate need of more substance. It may not have done much for Cameron’s reputation, but neither did it do much for Hitchens’.

The Trap: Whatever happened to our dreams of freedom? (Conclusion)

In three previous posts I have outlined the three episodes of Adam Curtis’s television series The Trap: Whatever happened to our dreams of freedom?, in which he argued that a narrow view of freedom and a distrust of public authorities had led us into a dead-end, a morally vacuous society prey to the positive promises of tyrants and demagogues. In this post I will comment on Curtis’s conclusion that what is needed is a new form of progressive politics, the revival of the positive liberty that Isaiah Berlin and Friedrich Hayek told us would lead to tyranny.

Curtis was not shy in his conclusions. Isaiah Berlin was wrong, he said. The problem was not merely that the negative liberty that he had espoused had been mutated into its own form of positive liberty. Rather, it was Berlin’s very notion of negative liberty that was at fault. Positive liberty offers us a hopeful vision of a brighter and better future – it is a means to an end – whereas negative liberty offers no hope at all; it is nothing more than an end in itself. The world it conjured up was one without purpose. This narrow and limiting vision was a dangerous trap, offering nothing to counter the reactionary forces that would seek to sweep liberty aside by offering order and equality in place of freedom. A world of negative freedom was not inevitable, however, and Curtis ended with a paean for a rediscovery of a progressive politics, because positive freedom does not have to lead to tyranny.

It is ironic, then, that so much of this last programme demonstrated exactly the opposite. The positive liberty of the French and Algerian revolutionaries, of Sartre and his acolyte Pol Pot, of the Ayatollahs and all those other inspired revolutionaries – yes, even of Tony Blair’s attempt to marry the two kinds of liberty – had always led to tyranny. In its mildest and most Fabian form, socialism in Britain led to Government officials dictating what individuals might earn and what businesses might charge, and as a result of its mildness it was more incompetent than brutal. Where positive liberty was carried to its logical conclusion, however, absolute poverty ensued – no matter how much relative poverty was alleviated – and dissenters went to the gallows or the gulags or just disappeared during the night.

Curtis refuses to see this because of his bias towards socialism, exposed by his claim that “the redistribution of land and wealth” were essential aspects of democracy. This is nonsense. Democracy may be a means to affect social change, but social change is not integral to democracy. It is integral to positive liberty, however, for it is the vision of a better world and the use of the levers of power – be they autocratic or democratic – to achieve that better world that is at the heart of positive liberty.

In fact, Curtis is wrong on a far more fundamental level. The ideal of negative liberty is neither narrow nor limiting, and certainly does not offer a bleak vision of the future. On the contrary, it is offers the broadest and most enabling future imaginable, for what it recognises is that within each of us is the possibility of creating a better world, and that any one of us may chance upon a profound truth. Rather than be bound to follow the agreed path to progress – be it inspired by Marx or Mohammed or Mammon – we are each able to pursue a better world in our own way. If history is really the march of progress, its greatest lesson is that progress never came from societies agreeing in advance where the future lay and slavishly driving themselves to that goal. Progress came from a million tiny revolutions, from new ideas tried and new concepts espoused, from individuals free from the binding constraints of orthodoxy – or willing to risk pain and death to break those bonds. That progress is not achieved through shepherding society towards a cause, but through freeing men and women to act upon their own initiative.

Isaiah Berlin called this "negative liberty" because freedom came from the absence of something – power and constraint. It suffers from nomenclature: the two types of liberty have semantic connotations. But in fact they are counterintuitive, for it is “negative liberty” that offers a more positive image of the future: one without coercion or conformism or crushing convention. It really does "Let a hundred flowers bloom; let a hundred schools of thought contend". But even if Curtis were right, and the best that negative liberty could offer was freedom as an end in itself, is that so terrible? By being free, thinking individuals, seeking our own truth and looking to how we can improve the world in our own way, we become better people, more aware of ourselves and of those around us than we ever need do as followers of another’s path. If in the process we enjoy “Life, liberty and the pursuit of happiness”, then so much the better. It may be negative liberty, but it is offers a more positive and more progressive image of the future than any other I have heard described.

Reviews of part 1, part 2 and part 3 are available separately.

The Trap: Whatever happened to our dreams of freedom? (Part 3)

Last night saw the third and final episode of Adam Curtis’s television series, The Trap: Whatever happened to our dreams of freedom?.

As I outlined in my reviews of the first and second episodes, this series has argued that the past thirty years has been dominated by a narrow and depressing view of freedom based on an assumption that cold rationality and a distrust of political leadership. Mr. Curtis has sought to undermine this concept. However, in doing so he has demonstrated his own failure to understand both the nature of freedom and the gulf between what has been delivered by political leaders and what individuals cry out for.

In this third post I will outline the programme for those who did not see it. I will address his conclusions in a final post, and there I will argue that he is wrong not only in his analysis but also in his fundamental call for a new type of freedom. In my writing, below, I will limit my comments (in the last and third from last paragraphs) to Curtis’s description of the experiences in Russia and in Iraq. Here Curtis was deliberately disingenuous, attempting to conjure a biased picture and so make it appear that the concept of liberty he opposes is to blame for the problems those countries experienced.

In the final episode, entitled We will force you to be free, Curtis abandoned his focus on psychology and Public Choice Theory, turning instead to the philosophical underpinnings of liberalism in the twentieth century. The leading exponent of liberty was the political philosopher Isaiah Berlin. In his essay Two Concepts of Liberty he presented two different images of freedom, which he called “Negative” and “Positive” liberty. Both were born of the French Revolution, but where the former sought freedom from constraint, the latter sought to make the world a better place. Put crudely, these have been described as “freedom to” and “freedom from”: the freedom to act as one sees fit (as long as it does not curtail the freedom of others, as Mill and others stressed), or the freedom from want that came from a progressive society.

Berlin believed that negative liberty was a great prize, freeing us from coercion by others and tyranny by governments. Positive liberty, on the other hand, was a dangerous form of absolutism, for if there was only one ideal future, only one truth, then anything was justified to achieve that goal. “I object to paternalism,” Berlin explained, “to being told what to do.” His great fear was the tyranny of the Communist regimes that were at the time dominating Eastern Europe, but as his example he took the positive liberty preached by the Jacobins of the French Revolution: that the people were too stupid to appreciate freedom, so the state must “force them to be free”, using terror to force the changes necessary to make a better society. Negative liberty would protect us from this progressive tyranny. But Berlin also cautioned that the belief in negative liberty must never itself become an absolute destiny, for if it did it would morph into a form of positive liberty, with anything justified to achieve that end.

Having set out the philosophical battlefield, Curtis began to populate it. Positive liberty was very popular in the middle of the twentieth century. Jean-Paul Sartre suggested that freedom was shackled by society, and individuals had to break those shackles to be free. His views influenced Algerian revolutionaries who argued that the West controlled not by force of arms but of ideas, and that catharsis could be achieved by the cleansing fire of violence. Sartre also influenced Steve Biko, Che Guevara and Pol Pot. The views of these men fed back to Sartre, who advocated revolution to free society. This reached its apotheosis in the Khmer Rouge revolution in Cambodia, where revolutionaries sought to sweep aside the shackles that bound society by liquidating the entire middle class, even inviting the Cambodian Diaspora back to help rebuild society, only to butcher them on the runways as they stepped off the planes.

The US reaction to the spread of revolutionary fervour was to promote reactionary forces; the “Realpolitik” of Henry Kissinger. But the support of dictators such as Pinochet and Marcos disgusted others in America – later known as the Neoconservatives – who felt that America should be promoting its values abroad rather than supping with the devil. When Ronald Reagan was elected in 1980, his Secretary of State told congress that there “are things worth fighting for”, and the administration introduced Project Democracy, a plan to promote democracy abroad using four key tools:

• Public support for democratic politics (including dropping the old, discredited allies)
• Promoting democracy abroad – but only in its electoral form, and not what Curtis referred to as the “other aspects of democracy: the redistribution of land and wealth”
• Undermining communist governments abroad (e.g. in Nicaragua)
• The creation of an Office of Public Diplomacy to spread propaganda to the American public.

The result were two scandals: one contemporary and one held over for the future. The contemporary scandal was the Iran-Contra Affair. The scandal for the future was the precedent that was set for spinning intelligence to justify wars for which there was no clear and present danger. The problem, noted Curtis (though he later seemed to conveniently forget it) was that the Neocons had reified Berlin’s fear: they were advocating forms of negative liberty in a positivist way: they would force us to be free.

Nobody noticed, however, because in 1989 Communism collapsed and history ended. Liberal democracy had triumphed. Curtis chose to dwell on the results in Russia, where President Yeltsin followed Jeffrey Sachs advice and adopted a big bang approach to liberalising the economy, destroying elite institutions and freeing the people. To Curtis this was a disaster: prices shot up as soon as price controls were removed; people were issued with vouchers with which to buy stakes in privatising utilities, but they sold them for cash to the future Oligarchs who then snapped up the utilities for a windfall profit; objections in the Duma led Yeltsin to send in troops; finally there was a run on the banks and Russia defaulted on its debt. The results, argued Curtis, was that Russians turned their backs on the anarchy that had ensued and sought sanctuary in order. They willingly gave their freedoms away to President Putin, a reactionary autocrat who promised stability at the expense of liberty.

There is always a point in Curtis’s films where his bias is exposed. In this episode it was the Russian experience. His presentation of the Russian financial crisis crudely exploited time compression, disguising the five years that elapsed between the liberalisation and the financial difficulties. Nor did he mention the low price of commodities (on which Russia was dependent) in the late 1990s, or how much money would later flow into Russia as commodity prices rose. He ignored the knock-on effects from the Asian financial crisis, to which Russia was a sequel. And he said nothing of the Chechen War, surely a more effective tool in Putin’s armoury than the economy. Lastly, Curtis ignored the very different experience in much of Eastern Europe, where liberalisation has led to massive rises in living standards and where greater freedom has been welcomed. This analysis exposes Mr. Curtis as a partial and biased analyst. It does him no credit.

In the final part, Curtis suggested that Tony Blair was quite taken with the principles of negative liberty, but lamented the loss of idealism that positive liberty conveyed. He wrote to Isaiah Berlin and asked whether it might be possible to synthesise the two, though the dying Berlin never replied. Blair went on to argue that it was the destiny of the West to spread liberty. Curtis argues that this was negative liberty as evangelism, but others might argue that it was not negative liberty at all. Blair was also aware that Public Choice Theory had undermined faith in politicians, so the only way to carry the people was – argued Curtis – to lie to them. Evidence for the Iraq war was spun, and Iraq was given a Russian-style dose of liberalising shock-therapy: everything was privatised and the Baath administrators were sacked.

The Iraq experience also encouraged distortion and bias from Curtis. He argued that the de-Baathification resulted from a liberal distrust of public officials. Not a word was said of the intellectual antecedent of this idea, the de-Nazification of Germany, or the fact that the vast majority of the Iraqi people were demanding the removal of their Baath tormentors. Even more unbelievably, Curtis claimed that it was the economic consequences of liberalisation and the lack of positive liberty at the heart of Iraqi democracy that triggered the insurgency, not a combination of Sunni ex-Baath rejectionists and Al Qaeda-inspired fanatics, as every other commentator and expert has agreed. It was fabrication on a grand scale.

He was right in one area, though. The emergence of Islamic terrorism in Western cities has been used – by both Blair and President Bush, among others – to justify massive extensions of state power in an attempt to pre-empt crime and terrorism. This has gone beyond terror, however, to seek pre-emptive powers to control possible criminal and even anti-social behaviour. The result is a return to the arbitrary power of the state and the end of the very civil liberties that the West is claiming to protect. It is a bitter irony.

I have separately reviewed part 2 and part 3. Curtis's conclusion and my analysis of it are discussed in a final post.

Zimbabwe in danger of becoming next DR Congo

The spiralling crisis in Zimbabwe is about to take an ominous turn. Until now the situation has been a tragic but domestic issues, but it appears on the verge of becoming an international crisis.
It seems a long time since President Mugabe began to use the coercive power of the state to confiscate land from white farmers and distribute it to the majority black population. The situation has long-since morphed from being an ethnic and class struggle among Zimbabweans to an unequal and often brutal conflict pitting a black-African government against a largely black-African opposition. Over the past few years this crisis has become increasingly tragic and violent.

But until now it has mercifully remained within the borders of Zimbabwe (if one ignores the millions of refugees that have now fled to neighbouring countries). The Mugabe regime has been ostracised internationally: Zimbabwe has been suspended from the Commonwealth, it is under an arms embargo, its assets in Europe have been frozen and its leaders are banned from travel to most of the civilised world (i.e. those bits that respect democracy and the rule of law). But this does not represent an internationalisation of the conflict. This is simply the refusal of civilised countries to have anything to do with kleptocrats and tyrants. Similarly, the criticism of the government by foreign countries is not intervention but interaction and – one would hope – influence. That influence would be more effective if it came from South Africa, but Thabo Mbeki has been pusillanimous in his criticism.

Fortunately, despite the one-sided nature of the conflict, spiralling inflation (the world’s highest rate, at 1,700 per cent), collapsing trade (those white farmers didn’t half sell a lot of tobacco!) and stupidly thuggish land-clearances have undermined the regime to such a degree that it is now struggling to pay its police force. Large numbers of police have resigned due to poor and unreliable wages; commentators are predicting that the situation is reaching its endgame.

Mugabe has one more ace up his sleeve, however. According to The Times he plans to draft in around 2,500 Angolan paramilitary police. Nicknamed “Ninjas” because of their black uniforms (from boots to balaclavas), they terrify the Angolan people. Now they are being lent to Mugabe to help crush dissent. “I doubt if any of them speak English” a police source told the Times. “They can only be here for riot control and to back up our own riot police.”

This is blatantly illegal and represents a dangerous escalation of the crisis. The principle of national sovereignty does not only exist to protect governments from external meddling; it exists as well to protect people from unpopular governments. The people of Zimbabwe know that with patience and resilience they will eventually prevail against Mugabe. But no people can guarantee to prevail against their government if that government relies on foreign troops to crush dissent. Indeed, it is a fine line between foreign support and foreign occupation, as the history of the Soviet Union makes clear.

Fortunately, the world is not powerless to affect this decision. Action is needed promptly, however. Firstly, it must be made plain to President José Eduardo dos Santos of Angola that intervening in the internal affairs of another country is unacceptable. He is welcome to give vocal support and continue to deal with the regime if he wishes – if he has no self-respect – but sending his shock-troops to help crack down on the opposition must not be tolerated. If he proves resistant to persuasion and obdurately sends in his thugs, he will be complicit in the violence and oppression that is taking place there, and must be punished alongside Mugabe and his henchmen. In the first instance, this should see an extension of the travel ban and arms embargo extended to Angola. If the intervention continues, Angolan assets in Europe and America should be frozen. Finally, if the situation escalates and Angolan troops commit murder or human rights abuses, charges should be filed before the International Criminal Court.

It is possible, however, that the situation may worsen. Violence begets violence, and there is a danger that foreign intervention may tip Zimbabwe over the edge into civil war. One need only look at the Democratic Republic of the Congo to see what that would mean. (Ironically, Angola and Zimbabwe intervened in the Congo, supporting the unpleasant regime of Laurent Kabila.)

However, there is danger here for Angola as well as Zimbabwe. One of the few clear cases where intervention in a foreign country is deemed legitimate is where it is an act of counter-intervention to drive out a foreign power that is upsetting the natural balance of political forces within a country. All things being equal, civil wars play themselves out: nobody had a right to intervene in the English or American civil wars. But when a party steps in to help one side – as Serbia did in Bosnia, for example, or Liberia in Sierra Leone – it is acceptable and perhaps even desirable to redress the balance and punish the meddling nation.

Angolan intervention in Zimbabwe would therefore open the door to an African or even Western military response that has until now had no justification. Jaded readers may point out that Iraq and Afghanistan raise doubts about the efficacy of Western military action. However, a Zimbabwean campaign would be more like Sierra Leone or East Timor. Mugabe’s backers would collapse and flee very quickly; what little support he has is bought with money that is rapidly losing its value. There is a strong and popular opposition that would unite the country – though it would have to contest open and fair elections with Zanu-PF and other parties so that there was no suggestion that a puppet government was being installed. And once the currency was stabilised and trade restored, Zimbabwe’s battered but naturally strong economy (it was once the bread basket of Africa) would begin to boom.

Military intervention should be a last resort, and considered only if another country sent troops to support Mugabe’s regime. Sadly, the alleged deployment of Angolan paramilitaries is the first stage of just such an intervention. The world must act now to forestall such a deployment if a humanitarian catastrophe – and perhaps warfare – are to be avoided.

BBC readers think Brown's budget is a disaster

As regular readers (or should that be "reader"!) will know, I am the first to point out that the BBC does not represent the views of the public, and its viewers/listeners/readers are not an acurate cross-section of the populous.

However, after 3697 votes cast in a BBC poll on the budget, over 57% believe the budget has not been good for them, while barely 20% think that they have benefited. Over at Have Your Say, the commentators are furious!

The British people are clearly more perceptive than than the cheering Labour backbenches. Or is it simply that Gordon Brown is unlikely to offer them a job (or even make it easy for them to find one!).

Brown’s “sleight of hand” budget hurts the poor as well as the rich

It came as no surprise that Gordon Brown delivered a few headline-grabbing surprises in his last budget as Chancellor of the Exchequer. By far and away the most eye-catching (though not unpredicted) measure was the grand finale, the cut in the basic rate of income tax from 22p to 20p in the pound. It seems like the tax cut that Middle England has been waiting for, but in truth it is what Menzies Campbell called a “sleight of hand”, giving with one hand while taking away with the other.

Tax measures are never equal, however – there are always winners and losers – and this one appears to squeeze those on low incomes the hardest.

Without having the leisure to browse the Red Book, a brief analysis of the measures looks like this:

• The 10p lowest rate of income tax is abolished, applying the basic rate from the very beginning
• The basic rate is cut to 20p
• The upper rate allowance is set at £43,000 from 2008
• National Insurance is aligned with income tax
• Tax credits are increased

The effect of the first two measures is to take more income tax from the roughly £2,000 one earns after one’s personal allowance is used up, but less from the next £30,000 (or £35,000 from 2008). So an extra 10% of £2,000 but a saving of 2% on £35,000, which means that if you are earning around £40,000 you will pay slightly less income tax, but if you are earning just £10,000 you will pay a lot more.

Ed Balls, the Chancellor’s closes ally, admitted that it was “not a very big tax cut”. It was worse than that, however. The poor are squeezed to pay for an income tax cut for the rich. But the National Insurance changes undermine what benefit higher earners see. By applying the 11p rate of National Insurance on earnings up to £43,000, instead of £35,000, an extra 10% of that last £8,000 is taxed, undermining much of the gain from the income tax cut outlined above.

Thus those earning very little will end up paying more tax, as will those earning a goodly sum. Only those in the very middle appear to gain (though it is interesting to note that other commentators seem to have interpreted this differently, so I would welcome an explanation as to why others seem to think that it is those earning in the twenty thousands who will suffer most).

The budget raises taxes on low-income earners and so presumably raises the barriers to people leaving benefits and returning to work. Brown’s solution is to fall back on his tried-and-tested-and-frankly-failed Tax Credits. He promises to increase the amount of tax credits, but the tax credit system is already costing £16bn and requiring 8,000 civil servants to administer. Yet last year half of the awards were wrong. Furthermore, too many of the poorest do not even claim the benefits, so complicated and obscure are they.

In other budget news, Brown has raised taxes on small businesses while alleviating them on bigger firms. The latter a welcome measure if we are to compete with low-tax emerging economies, but to increase taxes on struggling small enterprises if frankly perverse and pernicious.

Public spending will remain at record highs of 42% – not far off a level where the state takes every other pound we generate to distribute in on our behalf – yet there has been precious little to show for it.

The environmental taxation remains both parlous and interventionist: while the overall level remains lower than under the Conservatives, the measures introduced are meddling (levied specifically at Tory-voting car owners, for example) rather than economically (which is not to say fiscally) neutral (taxing all carbon and so allowing people to decide how to cut back – the policy I have advocated).

Despite the bluster of the Chancellor and the raucous support of his party, this budget is a disappointment. The tax code remains more complex than anywhere but in India as Brown intervenes and meddles in ways that distort the economy and make work for civil servants. It may serve his personal goal of looking good as he moves next door to No. 10, Downing Street, but it does little to address the real problems in Britain: excessive and ineffective public spending, taxes (not just headline rates but overall burdens) that are too high, an over-regulated economy and an underclass of poor people increasingly struggling to provide for themselves and their loved ones.

As an exercise in Public Choice Theory it is exemplary: the politician serves his own interests rather than those of the nation. As an economic plan for Britain’s future it is a sham.

Cameron allies denigrate Conservative Home and Tory activists in general

A couple of interesting comments from David Cameron’s camp in Monday’s Times.

[T]hose close to Mr Cameron [pointed] out that the Conservative membership was not representative of the country as a whole. “A quarter of a million people are members of the Tory party. The important point is that’s less than one per cent of the electorate,” said a party source.

I seem to remember another party leader building his career by riding roughshod over his party. I agree that governments should answer to and respond to the electorate rather than just their activists. But leaders should not assume that they are more in tune with the masses than tens of thousands of party members. Otherwise we get policy-making by polling-agent and government by focus-group. That is where that other party leader ended up. Is there no end to how much Cameron will emulate Blair?

Then, for good measure, a spokesman decided to slag off Conservative Home (for which I have some sympathy!).

A senior Tory close to Mr Cameron said: “It’s 30 people talking to 30 people. People sometimes assume it represents a bigger slice of the party. But it represents a specific strand of thinking.”
True, but I would caution against attacking your own base too often!

The Trap: Whatever happened to our dreams of freedom? (part 2)

Last night BBC 2 showed the second episode of Adam Curtis’s new series, The Trap: Whatever happened to our dreams of freedom?

As I explained when I reviewed part 1, the general premise of the programmes is that over the past thirty years, trends in psychology and economics that viewed the people as a rational, selfish individuals interested only in personal gain have come to dominate public policy. Policy-makers have lost faith in the concept of public service and have instead applied market forces to public services in an attempt to give power to citizens (as consumers) and free them from the shackles of bureaucracy. However, Curtis argues that this has in fact backfired, leading to worsening inequality and a collapse in public services and political efficacy.

Part 2, subtitled The Lonely Robot, expanded on these themes with particular focus on the 1990s, and in so doing highlighted both the mistakes of what we call the Thatcherite Revolution and Mr. Curtis’s own erroneous analysis. I will explain these errors below, but first I will provide a synopsis of the programme. Those familiar with it may wish to skip the next six paragraphs and move on to my comments.

The programme began by returning to Buchanan’s Public Choice Theory, which argues that politicians and civil servants actually pursue their own rational interests rather than the public good. Curtis juxtaposed John Major’s efforts to create an internal market in public services that would use the rational interests of public servants to achieve public ends, with Bill Clinton’s interventionist presidential campaign, in which he publicly berated President Bush for his laissez faire approach, saying that if Bush would not use the powers of the presidency to improve America, he should stand aside for somebody who would. Clinton was elected, but before he took office was visited by Alan Greenspan and Gene Sperling, who explained to him that if he tried to intervene in the economy he would just worsen the economic crisis of the early 1990s. They convinced him that the power of governments to effect positive economic outcomes was a chimera; only the market could provide the prosperity America craved. Clinton accepted this advice and presided over one of the greatest economic booms in American history.

However, Curtis criticised the underlying basis of this belief. He argued that the consumer society did not in fact reflect the economics of Adam Smith. Rather, its assumption of the rational individual pursuing self-interest ignored the sympathy and moral sentiment which Smith argued were essential to man’s role in society. Instead, the selfishness of the species stemmed from scientific theory. Curtis dwelt upon and later critiqued anthropological studies of the Yanomamö people of Central Brazil, and also noted the view (promoted by Richard Dawkins, among others) that animals – including man – were merely vehicles and tools for the promotion of their selfish genes. Meanwhile, the revolution in psychological diagnosis described in last week’s programme had led to around half the population reporting themselves as suffering psychological disorder. New drugs such as Prozac appeared to offer a cure. The result was that millions of people took drugs to “normalise” their behaviour and emotions – a practice that some interviewees believed threatened to create a static, stagnant society.

Back in the world of public policy, 1997 saw New Labour elected to govern Britain. Labour took the distrust of policy-making to a new level, as demonstrated by the granting of independent powers to the Bank of England. Labour’s means of “incentivising” public servants was to set centralised targets and reward or penalise them accordingly. Curtis cited some of the more ridiculous examples of targets set by the Labour government, including:

• A community vibrancy index
• The quantification of bird-song in the countryside
• A target to reduce world conflict by 6 per cent
• A target to reduce malnutrition in Africa by 48 per cent

The result was not driven and measurable success, but what a member of The Audit Commission called a systemic “gaming of the system”. The NHS would employ people who’s job it was to greet people on admission so that they met their targets of seeing patients within a certain time, though no treatment was given; wheels were removed from trolleys and corridors were renamed wards so that patients could be counted as being in a bed in a ward; the police reclassified crimes as “incidents” so that crime fell; schools taught easy subjects and concentrated on mediocre children so as to raise the number of children gaining GCSE grades A-C. The result was a decline is social mobility to the point where a child born in Hackney was twice as likely to die in its first year than one born in Bexley.

Curtis also critiqued the supposed boom in the US. The apparent rise in the financial markets was based increasingly on dodgy accounting practices rather than reality. Meanwhile the economic progress was increasingly one-sided: one interviewer highlighted three interesting comparative statistics:

• The real term after-tax income of a family in the lowest quintile fell between the 1970 and the 2000s
• The real term after-tax income of a family in the middle quintile rose only slight between the 1970 and the 2000s
• The real term after-tax income of a family in the top 1 per cent rose by an enormous amount between the 1970 and the 2000s

Thus Americans were not only becoming less equal; the poorest were getting poorer.

The result of the revolution of the last thirty years, concluded Curtis, was that politicians were weakened by a mistaken belief that they could not affect change or improve welfare. Politicians were emasculated and corrupted and felt powerless. Meanwhile, the masses were not fulfilled by either consumerism or politics, but were instead doping themselves up on psychiatric medicines. At the same time, scientific evidence was emerging that undermined the selfish-gene and anthropological evidence of the 1970s, John Nash – the father of game theory – had begun to repudiate much of his work, and the free market was under attack by economists who argued for greater intervention and critiqued the rational individual thesis.

So ended the second episode. The third promises to discuss the War on Terror and – I suspect – “spin”.

Sadly, the second programme lived up to all my expectations. Curtis is an excellent documentary maker, but while he highlights genuine and important crises within society and provides a plausible historic context, he tends to misinterpret the causes and thus advocate policies that would exacerbate rather than alleviate those problems.

For a start, Curtis is prone to simple mistakes. For example, his critique of the American economic experience in the 1990s made a schoolboy error, confusing the state of the financial markets with that of the economy. In fact, the eventual collapse in share prices as the Dot Com and dodgy-accounting bubbles both burst had almost no effect on the US economy – the 2001 recession was the shortest and least painful in American history. Similarly, the statistics about relative welfare did not explain how far this was a result of taxes undermining the incomes of the poor (the statistics being post-tax incomes which suffer from heavy taxation), or of the effects of immigrant labourers who generally take low-paid work at the bottom of the economic pile, thus lowering averages without adversely affecting anybody, while they are happy to make a new life for themselves and their families. Similarly, in comparing infant morality rates in two London boroughs, Curtis failed to clarify whether the widening gap was due to a decline in Hackney or an improvement in Bexley.

Other errors, however, are more substantial, and demonstrate that he has fundamentally misunderstood both the classical liberal case and the causes of Thatcherism’s failures. The fundamental example in The Trap is Curtis’s belief that market mechanisms have been injected into public services and have as a result created perverse incentives for deliverers to “game the system” by aiming at achieving targets rather than positive outcomes for citizens; that governments have acted upon the belief that bureaucracies serve their own interests first. This is a profound error. In fact, the supposedly-liberalising agenda of the three (soon to be four) Thatcherite Prime Ministers has been completely undermined by the distrust that both the Conservatives and Labour have for freedom and the market.

Instead of creating a true market, with individuals holding the power as consumers and using their power over the money to reward success and punish failure, the past thirty years has seen the greatest centralisation of power in Britain since the Stewarts attempted to introduce an absolute monarchy. Distrustful of what a true market might produce, successive governments have endeavoured to micromanage the public services from Whitehall. Thus, instead of eliminating the power of self-interested bureaucrats, they have made local authorities and public services answerable to central government, made delivery departments answerable to the Treasury, and made the Treasury answerable to a small coterie around the Prime Minister and the Chancellor. This has led not to liberty and a genuine market, but to an over-regulated, over-centralised, overly-bureaucratic system. This is not what either classical- or neo-liberal economists would have suggested.

A real market that genuinely empowered people and lifted the dead hand of bureaucracy from our shoulders would put citizens in control. Rather than being answerable to civil servants in Whitehall, deliverers would be answerable to citizens through the latter’s ability to allocate funding. As Friedman demonstrated in theory and Sweden demonstrated in practice, voucher schemes not only drive up standards but they are particularly beneficial to the poorest in society. Sweden – that paragon on Social Democracy – has similarly had a very positive experience with creating a healthcare market.

Sadly, this kind of freedom is not to Curtis’s taste. For him the volatility and unpredictability of the market is disturbing, and the freedom of the individual is a myth. He prefers the certainties of Statism and the comfort of the community. But with the lack of hindsight that only a shift of generation can provide, he ignores the bleakness of the last period of interventionist government and the abject failure of Statist solutions. One need not look to pre-1990 Eastern Europe for evidence of the failure of state planning; dirigiste France’s youth unemployment of 25 per cent and Germany’s stagnant economy are lessons enough for us. Governments are incapable of managing so complex and delicate a system as the economy, which rely on incalculable pieces of information. Economies are, in essence, merely a mirror of society as a whole, and efforts to manage economies are therefore efforts to manage society. Whether it is through dictating how many hours an employee may work or through confiscating a portion of their earnings for central distribution, such efforts are inherently illiberal and should be kept to a bare minimum.

The desire of recent governments to end the old bureaucratic tyranny is laudable, but their efforts have been risible and their methods misguided and ultimately counter-productive. Only by genuinely empowering citizens through giving them the power to allocate their resources – be they those they earn or those transferred to them by a welfare state – and allowing the consequences of those decisions to have their effect, will we improve the quality of public services and benefit society more generally. Into the bargain we will re-invigorate the population who, being now in control of their own destiny and no longer supplicants at the mercy of the state, will rediscover the moral sentiments that Smith and Mill thought vital elements of a fully rounded person.

I have separately reviewed part1 and part 3. Curtis's conclusion and my analysis of it are discussed in a final post.

More heat than light in global warming debate

Last week I reported on The Great Global Warming Swindle, Martin Durkin’s documentary claiming that the “climate change consensus” was a conspiracy of bad science, protected because it justifies massive research grants, that will ultimately retard the development of desperate Third World nations. My original article contains a précis of the programme and is followed by comments providing links to some counter-arguments.

Whatever the rights and wrongs of the various arguments, I was at least glad that a debate was taking place. I had been aware for some time that there the so-called consensus was actually a widely-held prevailing belief, and that there were scientists out there that demurred. I was also aware that there has been a lot of vitriol directed at those who do not accept the orthodox view (and, to be fair, vice versa). As a liberal I find that uncomfortable; I believe that open and honest debate both uncovers lies and strengthens the truth. I had hoped that this programme would stir up such a debate.

Sadly, it seems that the elevated tone I had hoped for was a façade. The Times reported yesterday that Dr. Armand Leroi of Imperial College, London, wrote to Mr. Durkin to point out that the correlation between solar radiation and global temperature, posited in an article in Science in 1991, had been subsequently disproved. Mr. Durkin responded to this by explaining that Dr. Leroi was “a big daft cock”. Dr. Leroi was rather shocked by this: so much so that he has since withdrawn from a project that he was planning to work on with Mr. Durkin that was to discuss race. Race “is such a sensitive topic that it requires great care and great balance,” explained Dr. Leroi.

Simon Singh, a scientific author who had been copied into the exchange, intervened by writing “I suspect that you will have upset many people [Mr. Durkin]… so it would be great if you could engage in the debate rather than just resorting to one-line replies. That way we can figure out what went wrong/right and how do [sic.] things better/even better in the future”.

Mr. Durkin’s response concluded with the suggestion that Mr. Singh “Go and f*** yourself.”

Mr. Durkin has since apologised (via the Times, it seems), saying that “I regret the use of intemperate language. It is so unlike me.” That seems unlikely considering he originally considered calling his programme Apocalypse My Arse.

I am disappointed that the debate has so quickly degenerated to this level. However, I am encouraged by one comment from Mr. Durkin that the Times reported, that he has asked Channel 4 to stage a live debate on the issue. However, I wonder whether this is really the debate we need to have. Ultimately, global warming is just a scientific curio until it intersects with public policy. It is for scientists to argue and debate about the truth of the problem; us mere mortals must merely accept what wisdom filters down (though there is undoubtedly a question mark over government funding being directed towards research supporting the status quo). Policy-makers must act on the prevailing scientific evidence, even if there is still some doubt; I can think of at least one government that lost an enormous amount of power and influence because it resisted the prevailing view of science.

What is needed, therefore, is not a public debate on the science, but a public debate on our response to the prevailing evidence. Too much of the environmental policy debate is dominated by socialists and Gaiaists, those who believe that the solution rests in a massive expansion of state power and those who think that man is a blight on the planet. Too often have I heard otherwise rational people peddle the lie that there are too many people on Earth; that we need to reduce the human population to a “sustainable” level. Even more often the solutions offered seem strangely reminiscent of the state-planning consensus of the post-war world.

I believe that we can have a sustainable environment and a tolerable climate, with room for humans and polar bears alike, without giving up our freedom or our right to have children. But if that is to be achieved liberals must wrest control of the debate from the crypto-socialists and enviro-fascists, and offer a liberal alternative. The debate is more urgent than ever.

And to CAP it all…

Is there anything worse than subsidising First World farmers to produce crops so that they can undercut the prices that Third World farmers would charge, were they not also excluded from our markets by tariffs? The European Union found a way a couple of years ago when it decoupled subsidies from production. Farmers are now paid whether or not they produce food. Nothing could be more execrable than paying farmers not to farm, surely.

Well, the EU has found a way. Not content with paying farmers not to farm, it now transpires that the EU is paying non-farmers not to farm.

As Richard Howard at the Globalisation Institute notes, “Technically, the subsidies can only go to farmers, however, the definition of farmer has been relaxed so greatly over the years that to be classified as one, you now only need to own 1.7 hectares of land for a ten month period and you never even need to visit it.” Clever speculators that own a few acres of land are buying the rights to receive payments under the Common Agricultural Policy, which are tradable and which can yield returns ten times as great as a bank deposit.

As regular readers will have guessed, I admire speculation – taking a punt in the hope that it may prove profitable. But I abhor rent-seeking, exploiting the legal and regulatory system to extract money that is not earned and would not exist if bureaucrats were not meddling. The bad-guys in this scenario are not the speculators, however: they are making a perfectly legal and sensible investment. Nor is it the farmers, who are often selling their rights to fund their retirement or even to invest in their farms (thus, presumably, boosting production – the opposite of what was intended). It is the Eurocrats and their political masters in the European capitals that have enabled this ridiculous system to develop.

The CAP is an inexcusable misuse of billions of Euros of taxpayers money. It keeps in business farmers that should not still be trading; it excludes Third World farmers from access to markets that would lift them out of poverty; it milks First World consumers by forcing them to pay over the odds for basic commodities; and it feeds a massive, pointless bureaucracy. Now it is paying non-farmers not to farm. As Neil O'Brien, the director of Open Europe, told the Times, “This is the final reduction to absurdity of the Common Agricultural Policy.”

A spokesman for the National Farmers’ Union told the Times “Farmers couldn’t survive without subsidies.” The same could be said for the Coal Miners or the workers at MG Rover, but nobody bailed them out to the tune of billions. There was a time when Britain’s farmers were some of the most efficient in the world. Without the molly-coddling of the CAP, many of them could be again, and so would thrive in a market where local produce and niche production is ever-more popular. Meanwhile, producers in Africa and consumers in Britain would benefit from free trade in agriculture, across Europe tax burdens would fall, and urbanites like me would have to not farm on our own time.

It is high time the CAP was dismantled. In the meantime, I wonder if my wife’s allotment covers 1.7 hectares!

It ain’t easy, being green

Two interesting articles show just how hard it is to be environmentally friendly, especially if you are trying to ameliorate your carbon footprint by offsetting the carbon you produce.

Carbon offsets are a popular form of conscience-salving, practiced by Oscar-winning environmentalists and vote-seeking political parties alike. Yet the economics of carbon offsetting leaves a lot to be desired.

An article on the Economist blog explains that carbon offsets may have exactly the opposite effect from that desired. On the one hand, by alleviating us of our sense of guilt, we may continue to consume and even expand our consumption of (now offset) carbon-intensive fuels. Even if we do consume less, carbon-intensive power stations tend to have low marginal- and high fixed-costs, so if the reduced demand leads to falling revenues, the power supplier need merely lower prices to stimulate more consumption, thus maintaining profits but at the cost of higher output. Meanwhile, the offsets act as subsidies to low-carbon power producers, enabling them to lower their prices, thus sending out a signal to the consumers that energy is cheap, and thus stimulating more consumption. The result, therefore, is that carbon offsets may actually increase energy use.

Furthermore, wind farms (the most common and so far most successful form of renewable energy) and solar power tend to compete not with coal-fired power stations, those dirty smokestacks that provide us with the base-load that we need to ensure all-round supply, but with cleaner power stations (such as gas-fired) that are more easily switched on and off.

In a separate article, Arnold Kling argues – in what is that rare piece, an article on the environment by an American from the liberal right that does not cast doubt upon the actual fact of climate change – that subsidies to green energy are nothing more than “pork”, rewarding good lobbying or financing investment where politicians think it should go.

Kling also condemns “cap and trade” systems as subsidies to energy firms. In this, he is right in practice though not in theory. The European market is carbon has been undermined by the decision to hand out permits to energy producers rather than selling them on the market. By giving away what is a tradable commodity, European governments effectively handed out a licence to print money.

However, all is not lost. What we have here is not proof that nothing can be done – let alone that nothing should be done – about global warming. Rather, we have a good case study in how governments tend to play into the hands of special interests, and another for how empty gestures are no substitute for real solutions.

Cap and trade systems fail because they are missing one simple element; the correct system is cap, auction and trade. Rather than giving away carbon quotas, governments should sell them in an open market – much as they sell bandwidth to telephone and broadcasting companies. Even non-energy producers may buy them, gambling (but not knowing) that they will be able to sell them on at a profit. Thus government both controls emissions and get a return for the nation’s precious asset (its atmosphere) while the power companies get a working market to provide incentives to environmentalism, while not enjoying vast and unwarranted windfalls.

Even better, governments could abandon the whole quota system and impose a uniform carbon tax. This would require those who emit carbon dioxide (and other greenhouse gasses) to pay a pollution charge, which could then be passed on to consumers, thus encouraging energy efficiency. This would provide no subsidies to special interests – even wind-powered ones. They would not be necessary. As the taxes pushed up the price of “dirty” energy, “clean” energy would become economically viable, but the rewards would go not to those energy producers whose lobbyists were most effective, but to whomever was able to produce the cheapest energy after carbon-output was factored into their costs.

So maybe its easy being green after all, as long as we don’t buy piece of mind with a donation to Al Gore.

Halfway to paradise

Like children wearing their ASBOs as a badge of honour, liberal activists are struggling to get their websites banned by Chinese officials who fear that their poor, ignorant people cannot cope with all these freely-exchanged ideas. So what better time to write a story critical of the Chinese Government.

This is not going to be the usual anti-Chinese tirade, however, for the policy that I am concerned with today is in essence a good one. China’s new law on property rights is a clear step in the right direction. However, it does not go far enough nor protect enough of the population, crucially the poorest – the rural masses – who remain mired in the misery of collectivism.

Despite its embrace of capitalism, China still has many vestiges of its communist past. One of these is its attitude to individual property. Traditionally all land has been owned either by the state or by collectives (generally farms) which in practice were the play-things of local party officials. As the Economist reports, this is beginning to change. Three years ago the constitution was changed to declare that private property was “not to be encroached upon”. Now a law has been brought in to give that proviso teeth.

The private exchange of housing has become increasingly common in a country that used to allocate housing by official fiat, and these private owners wish to enshrine their possessions in law. Similarly, private enterprises need legal protection for their businesses and premises. The middle class’s fear of expropriation by pubic authorities is more real than one might imagine: in China, whole cities are built on farmland for which the former occupants received little or no compensation, sometimes living as homeless people on the site of their former farms, surrounded by factories and shops.

Yet it is the poor that have most to gain from the allocation of land ownership certificates and protection of their rights, a fact to which both the Communist Party’s collectivist and socialist wing, that opposes the new law – including many academics –, and the market-oriented leadership that proposed it, seem blind.

A couple of Sunday’s ago I read Hernando de Soto’s Mystery of Capital (the joys of long plane journeys being that one can read a book in a day). De Soto is a Peruvian economist who sought to explain Why Capitalism Triumphs in the West and Fails Everywhere Else. His answer is that it is only in Europe and its largely-European colonies that individual property rights are protected in law that is upheld by the authorities. In the rest of the world, billions of people live on land to which they have no legal claim, and from which they may be expelled at any time. This leads on the one hand to a rapacious approach to resources (the slash-and-burn farming of Brazilian farmers) and on the other to under-investment (as people are reluctant to improve property that they may lose at any time). Thus it is not unusual to see nice cars parked outside miserable shanties in South Africa; moveable property is more clearly “owned” – and easier to take with you if you are moved on.

The problem goes deeper than bad housing and the fear of expropriation, however. Even in countries where governments do not arbitrarily evict people to build cities, one cannot leverage the capital locked up in property that one does not own; to put it simply, nobody will lend money if one can only offer as security property that is not secure. This is the “mystery of capital”: that because poor people in the Third World cannot borrow against or sell their houses and land, they can neither borrow to invest nor realise their capital. Thus they are obliged either to continue to work in primitive conditions that they cannot afford to improve, or to abandon the land – and any capital they have invested therein – and go penniless to the city, where rather than buy a business or study for qualifications, the best they can hope for is a menial job.

So it is good that China is beginning to realise that private property is essential to successful and equitable development. It is also at the core of liberty (though that’s probably something the Chinese Government does not want to unleash). The Chinese should be applauded for this single step, but they must expand these rights across the whole population if their people are to prosper and their society not become divided between an ever-wealthier class of owners and a rural poor, condemned to the misery of uncertainty on the collective farms.