Sunday, July 08, 2007

Read Butler on Smith

Adam Smith’s An Inquiry into the Nature and Cause of the Wealth of Nations (The Wealth of Nations, TWoN) is one of those books that many people refer to, but few have actually read. Possibly not surprising, since the Penguin version consists of 522 packed pages. But, crucially, in contrast to another book that it seemed everyone owned, but no-one had actually read (Stephen Hawking’s A Brief History of Time) TWoN is actually extremely well written and easy to understand.

Most people who quote Smith tend to know little about him. For one thing, they are usually unaware that seventeen years before he published TWoN, he published another book, The Theory of Moral Sentiments. For anyone who claims that Smith’s invisible hand is the “unacceptable face of capitalism” (to quote Edward heath and mix the metaphors) this should be required reading. Sadly, they are unlikely to even think of picking it up.

Which is why it is excellent that Dr Eamonn Butler, Director of the Adam Smith Institute ( has published an IEA ( occasional paper called Adam Smith – A Primer.

Actually, Adam Smith is suddenly all the rage again. TWoN is being republished in hardcopy. The Adam Smith Institute has taken the initiative to a statue of Adam Smith to be unveiled soon in Edinburgh; and P J O’Rourke has published On The Wealth of Nations – a sort of TWoN for Dummies.

O’Rourke is funnier than Butler, but Butler is the better writer. Hence, for my money, Adam Smith – A Primer is by far the better work of the two.

Butler brings to the fore a number of Smith’s observations that are still highly relevant today: In addition to the importance of the distribution of labour, the revolutionising notion that money is not the same as wealth which lead to Smith’s rubbishing of mercantilism (the Chinese leadership could benefit from reading this); the harm done by protectionism and other impediments to trade (copies to be sent to the President of France as well as to a large number of US Senators) and possibly most importantly, the mutual gains from exchange. This idea, that exchange is not a zero-sum game should be broadcast by loudspeakers wherever demonstrators gather to protest against globalisation.

Crucially, none of this is due to the goodness of the people involved. Where the road to hell is frequently said to be paved with good intentions, Smith takes the opposite tack. The road to wealth is usually paved with bad or at least selfish intentions. But the result is still to the good (p. 43).

If there is one quote that all critics of capitalism know from Smith, it is this. “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” (TWoN, Book I, chapter X, part II, p232-233 in the Penguin edition.) This is frequently cited as a reason to involve supposedly altruistic politicians in the regulating and taming of the market. This was perhaps best put by a former Prime Minister of France, Edouard Balladur, who said “What is the market? It is the law of the jungle, the law of nature. And what is civilisation? It is the struggle against nature.”

However, Butler points out that Smith’s words are immediately followed by criticism of politicians, who he notes share the blame, since they pass and enforce regulations that make such collusion more likely and more effective (p. 49). This highlights another of Smith's overarching themes, namely the importance of freedom in maximising everybody's welfare and the constant threat to this from politicians and governments.

Butler's primer also performs sterling service in that it covers not only TWoN and The Theory of Moral Sentiments, but also goes into detail on Smith's lesser known works, including notes taken at his lectures. The primer finishes with a number of Smith's most famous quotes - excellent for those who vaguely recall a quote but, when needing to use it, cannot find the exact wording.

But the best thing with Eamonn Butler’s Adam Smith Primer is this: it makes you want to go back and reread the original works. And that is exactly what I intend to do. I recommend everyone else to do it too.

Monday, June 04, 2007

Take the side of the Persians and the Shi’a

The current Iranian president gives all the impression of being a madman. Iran’s quest for nuclear weapons threatens to inject a dangerous degree of instability in the Middle East (with potentially inestimable disaster as a result). However, taking a somewhat longer view, the question should possibly be asked whether “the West” – a loose term covering the United States, but also Western Europe – should take sides with anyone in the Middle East; and, if so, what side?One of the key assumptions in western analysis of the Middle East is that there is an Ur-issue (the word is coined by Amir Taheri in an article in Commentary in February 2007) and that this Ur-issue is the Israeli-Palestinian conflict. However, while this is indeed long-running, there are other fault-lines running through the Middle East, some of them equally deep and seemingly intractable. Among these are Arabs vs. non-Arabs, notably Turks, Kurds and above all Persians, but also as in Sudan against blacks; Muslim vs. non-Muslim (Jews in Israel, Christians in Lebanon, but also eg, against Christians in Palestine and now in Iraq); Shi’a vs. Sunni; religious vs. secular; and so on. Frequently, these overlap – eg, Persian & Shi’a vs. Arab & Sunni. But, equally, sometimes they do not. All Shi’a Arabs in Iraq are not happy to be lumped with or dominated by Shi’a Persians. All Shi’a are not religious – see eg, the difference between Amal and Hizbollah in Lebanon. And even within the seemingly same groups, amity is not guaranteed: the secular, Sunni, Arab and Socialist Syrian Baath party has long been a mortal (and lethal) enemy of the secular, Sunni, Arab and Socialist Iraqi Baath party.

In addition, there are substantial territorial disputes, sometime spilling over into war, such as between Pakistan and India, Pakistan and China and Pakistan and Iran; between Iran and Iraq and between Iran and the UAE; between Saudi Arabia, the UAE and Oman, between Saudi Arabia and Qatar (fighting in 2000); between Bahrain and Qatar (most recent war fought in 2001; between Iraq and Turkey and between Syria and Turkey; Syria’s claims to Lebanon, the entirety of Palestine and Jordan; and – a major and long-running one – the feud between the Hashemite dynasty in Jordan (and previously Iraq) and its dispossessors, the al-Saud in Saudi Arabia.

There are plenty more, not least in North Africa. But the important point is that a resolution of one of them, even the Israeli-Palestinian one, would not, by itself, lead to a resolution of any of the others. In some cases, it could even destabilise matters, since it would leave one or more protagonists free to concentrate on its other troubles. This is not, by the way, an argument for not attempting to solve any of the outstanding issues. It is only a warning against excessive optimism and a belief in the Ur-issue – a common Western fallacy.

However, there is arguably also a case that if “the West” were to take sides in the Middle East the side we should take is in fact that of the Persians and of the Shi’a.

The case for siding with the Persians – ie, with Iran – is fairly straightforward. Iran is a large, populous country which has the capacity of acting as a stabiliser in the Middle East. Iran has emerged from recent events with a substantially enhanced position, rid of one enemy (Saddam Hussein) in the west and another (the Taleban) in the east. Moreover, Iran as Persian and Shi’a surrounded by Sunnis and by Arabs and Turks (in Central Asia) is more likely to be actively interested in allying itself with forces beyond its immediate circle of perceived hostile neighbours. At the moment, this is a very unlikely turn of events. However, it should be noted that this is very much what used to be the case under the late Shah and traditionally in earlier Persian modern history.

The case for the West siding with the Shi’a is somewhat different. This rests more on ideological grounds than on geopolitical. Although there is a widespread perception that Shi’a equals theocracy and violence/terrorism, this is in fact not entirely true. On the latter point, Muslim terrorism is more practiced by the Sunnis – against the Coalition forces in Iraq and in Afghanistan, by Hamas and Islamic Jihad against Israelis, by al-Qaeda against West and by various less-easy-to-classify groups (Britain’s home-grown Muslim terrorists are Sunni, as are the various groups plaguing the Philippines etc). There is Shi’a violence in Iraq – but it should be noted that the Shi’a rather quickly acquiesced in the occupation and accepted to work within the system. It was the Sunni who initiated inter-communal violence and are now reaping what they have sown (and continue to sow). There is also Hizbollah in Lebanon – but this is a somewhat special case in that it is a vehicle for Syrian and Iranian influence in that country.

Moreover, if one Western goal is to spread democracy in the Middle East, arguably, the Shi’a are closer to this ideal. Although there are greater or lesser elements of democracy in many Arab states (incidentally giving the lie to the canard that democracy somehow is not suited to the Arabs), ultimately, they are all authoritarian, ranging from very much so (eg, Saudi Arabia) to less so (eg, Jordan). This partly goes back to one of the deep fundamental differences between Eastern and Western culture. In Western culture, tyrannicide has frequently been praised ever since the brothers Harmodios and Aristogeiton killed the last king of Athens in 514 BCE. Although monarchs might claim to rule “by the Grace of God”, there has always been a strong counter-claim, sometimes (eg, Britain 1649 or France 1793) robustly expressed, that their rule must be just and under the laws.

The dominant Sunni attitude – which ultimately goes back to the Quran, where Sura 4:59 states “O you who believe, you shall obey GOD, and you shall obey the messenger, and those in charge among you. If you dispute in any matter, you shall refer it to GOD and the messenger, if you do believe in GOD and the Last Day. This is better for you, and provides you with the best solution.” – is that even a bad or evil ruler is preferable to the strife (fitna, redolent of the perceived chaos in pre-Prophet Arabia) that overthrowing him would entail. Even opposition to the bad ruler should only be expressed in private.

By contrast, the Shi’a – possibly because they believe in the return of an Imam to rule the faithful and that until this happens, no other ruler is fully legitimate – traditionally do not accept a bad ruler. Arguably, Iran is after Turkey and possibly Lebanon the most democratic country in the Muslim Middle East. And in countries where the Shi’a are a minority (or even majority, as in Bahrain) they have tended to be in the van of movements advocating parliamentary rule, constitutionalism and in general the just governance that a Westerner would associate with democracy.

It is true that Iran currently seems a bad example, not so much because of Mr Ahmadinejad, as because of the influence of the clergy. But the concept of velayat-e-faqih (guardianship of Islamic jurists) as practiced in Iran with its Supreme Leader, is actually non-mainstream Shi’a political thought.

It is still questionable whether the West should, in fact, take sides in the Middle East. But if it does, the issues clearly need to be thought through far more than the routine view that Sunni+Arab+conservative+monarchy/authoritarian dictatorship (after all, Saddam was once perceived as one of the good guys – or, at least, “our s-o-b”) equals commonality of interest, would mean.

Saturday, December 02, 2006

The double sell-out

Whether you supported the invasion of Iraq or not - and I did and still think it was the right thing to do - it now seems clear that the aftermath was handled abysmally badly by the US and UK governments. Now (winter 2006) they are desperate to get out of Iraq, with any reasonable face-saver accepted. Unfortunately, the face-saver they seem to be picking on is a double sell-out.

This is because the way the British and American governments hope to be able to stabilise Iraq, is by involving Syria and Iran in that country's future. But why should Syria and Iran wish to be so involved? Essentially, what can the West offer them? Or, to be more exact, what is it they want from the West?

In the case of Syria, three things: Coming in from the cold, not being treated like a pariah anymore. This is a necessary part of any deal and clearly on the table. Second, the Golan Heights. This, by contrast, is not something the West can deliver. It will be on the table as part of a peace with Israel – but only if the Israelis believe they can trust the Syrians. Third, Lebanon. In 2005, Lebanon almost managed to break free of its Syrian over-lord as part of the reaction to the Syrian assassination of the Lebanese Prime Minister Rafik Hariri. In return for Syrian help in stabilising Iraq, it is, however, all too easy to see the West acquiesce in a return to Syrian hegemony in Lebanon and a quiet burial of the investigation into Mr Hariri’s death. In this context, the assassination in late November of Industry Minister Pierre Gemayel – the same day that Syria and Iraq re-established diplomatic relations – seems very much like a first Syrian flexing of its muscles in Lebanon again. Notably as it was followed by concerted attempts to bring down the Siniora government and replace it with a set of Syrian puppets.

The involvement of Iran also involves another sell-out. The fundamental issue determining Iranian national interests is that it is Persian, not Arab. Shi’a was imposed on the Persians in the early 16th Century as a means of strengthening that feeling of difference from their Sunni Turkish (and Arab) foes. While Iran does support some of the Shi’a factions in Iraq, others are clearly not enthused by the idea of being dominated by the Persians. Yet involving Iran in stabilising Iraq, will by necessity mean giving Iran a dominant voice in the Iraqi Shi’a regions. It will almost certainly also involve acquiescence in Iran’s continued nuclear program, however phrased to save face.

It is in any case probably impossible to stop Iran from building an atomic bomb, assuming that this is what the Islamic Republic really is intent on doing – as certainly seems to be the case. Certainly, no one is going to go to war with Iran to stop it. The long-term question therefore becomes what Iran will do with its bomb. It is, of course, perfectly possible that Iran will use its atomic bomb to start a war with Israel. Since the Israelis will respond in kind, we will have the world’s first nuclear war. Not an attractive concept.

Assuming, however, that this will not happen, it is clear that Iran will emerge from all this with greatly enhanced status in the region, with two enemies – the Taleban and Saddam Hussein – gone and with the United States humiliated. This means greater Iranian influence in the Persian Gulf – an old Persian sphere of influence, right from Cyrus the Great all through to the Pahlavi Shahs and the clerical regime. With Iran already ensconced on their northern border as well as eastern, the Gulf states will adjust to new realities – or move even closer to the United States (unpopular as that may be with their peoples, thus enhancing the fragility of their respective rules) – or both. If this scenario comes true, the Gulf area and the Middle East may be calmer – though not more stable. And oil prices are more likely to be near $100/barrel than $40.

Monday, August 14, 2006

The coming US current account surplus

The last time the US current account was in surplus for any sustained period of time was up to 1982. An America in hock to the rest of the world and dependent on daily inflows of – at the latest count - $2.4 billion per day is such an accepted part of the world scene that we no longer reflect on it.

Few of us pause to consider that the fact that the US has a current account deficit at all is truly remarkable. Although the US demographic profile is more benign than that of most European and Asian countries – by 2050, even China will have an older population than the United States – it is still a mature economy with an aging population. This kind of economy ought, in fact, to have a current account surplus. Domestic actors should save for their retirement, investing the money abroad where returns are higher. Eventually, as people begin to retire, they turn from savers to spenders and the country goes into a current account deficit. But not, apparently the United States.

Part of the reason why this is so, is because of the rest of the world. In April 2004, my colleague Charles Dumas showed that the reason the “unsustainable” US current account deficit sustained itself perfectly well, was because it was not necessarily a consequence of Americans being spendthrift wastrels. They may or may not be, but the main reason behind the US current account deficit was (and is) that the a large part of rest of the world, for reasons varying from country to country, is determined to maintain a current account surplus. In other words, there is a Eurasian savings surplus. This surplus needs to go somewhere and that somewhere is the United States. (This view was popularised about a year later by Ben Bernanke, who referred to the “Asian savings glut”.) Of course, lacking inward capital controls, the US is forced to borrow all that foreigners want to lend it (with the exception of funds to buy airlines or ports).

In addition, many US households feel that they are saving through the capital gains, initially on their shares and then, following the bursting of the dot-com bubble, on their houses. Hence, the household savings rate has been falling continuously for many years, finally going negative in 2005. As long as asset prices rise, that may not be a problem. But the US housing boom is now rapidly coming to an end. Although the Fed’s policy towards asset price bubbles is to let them inflate and then, if they burst, try to reflate somewhere else, it is now running out of balance sheets to trash.

Add to this two factors. The first, demographic. In five years’ time, the first cohort of baby-boomers is supposed to retire. ‘Supposed to’ – but unlikely to do so. The average private pension fund in the United States (i.e., the average of private pension funds among people who have them, as opposed to the average per total inhabitant) is allegedly in the region of $100,000. While this is a lot of money, it will not provide much of a pension – possibly $5-6,000 per annum.

At some stage between now and 2011, two things are therefore likely to happen. The first is that the 1946 cohort – the first baby-boomers – will realise that they cannot afford to retire at age 65 and will have to continue to work. That in itself is not so bad. Today’s 65-year olds are much stronger and healthier, physically and mentally, than their parents or grandparents were at the same age.

The second is less benign. That is that the decision to remain at work will be accompanied by a surge in savings. This is necessary since although the 1946 cohort can continue to work beyond 65, its remaining possible work span is still likely to be limited to a 5-10 year span. During this period, it will have to build up the savings on which it intends to retire. Of course, this is not a process taking place in steps. Once the cohort born 1946 draws this conclusion, then so too, and rather rapidly, will the cohorts born in 1947, 1948 and so on.

But increased US household savings have to be balanced by increased dis-saving by some other sector – corporate, public or foreign – as the sum of all sector’s financial balance by definition has to be zero. Looking realistically at the four sectors, the household sector’s long-term average financial balance (i.e. savings less investment) is ½% of GDP, against a current (Q1) balance of -7¼%. But we also have to assume that households will need to save more than their long-term average, given the short period in which the baby-boomers need to build up their savings. Meanwhile, housing investment is likely to weaken after the already visible end of the current housing boom.

If, therefore, we assume that the household sector’s financial balance will go to +1% of GDP over the next five years, which sector can give? The corporate sector’s current surplus of 3½% could possibly be narrowed to 2% before businesses start their self-defence mechanism – no more hiring, no more cap-ex. The public sector has a deficit of 3% - already the subject of much debate, even though this is narrower than the 5% seen three years ago. But it is unlikely that Americans will stand for a budget deficit widening to Japanese proportions. More likely, there will be continued efforts to narrow the deficit – meaning that the current level probably is the best attainable. This leaves the foreign sector surplus, i.e., the US current account deficit. But turning the household sector from a deficit of 7¼% of GDP to a surplus of 1%, with only 1½% narrowing of the business sector surplus therefore requires a 6¾% narrowing of the foreign sector’s surplus – as it happens, exactly its current size. The conclusion is therefore that the US over the next five years is likely to move into a current account balance or even surplus and remain there for a considerable period of time (until the baby-boomers do stop working and begin to retire).

Mathematically and logically, this is an easy, almost clinical, conclusion to draw. But in practice, what this will mean is a prolonged period of much slower growth in the United States than we have been used to. Initially good for bonds, bad for shares. Caveat emptor.

This is an article originally published in Fund Strategy. I develop this argument at much greater length in the Lombard Street Research Economic Review 204 "The coming US current account surplus and other stories".

Monday, July 17, 2006

The utter uselessness of G8 meetings

Another G8 meeting has come and gone. There was a massive build-up, occasioned by events – Iraq War, renewed warfare between Israel and its neighbours, high oil prices – as well as, in this case, by the host. For the first time Russia was hosting a G8 meeting, raising the question whether Russia in any case should be a member of the group. Its economy is smaller than that of the Netherlands, whom no-one is seriously proposing for membership. Moreover, the G8 is supposedly a group of democracies, while Russia is showing ever greater signs of moving back towards authoritarianism and intolerance of dissent. And if, in spite of its tiny economy and its undemocratic tendencies, Russia is perceived to be an obvious member of the group, why not China? India? Brazil? And so on.

But there seems to be very little questioning of the annual G8 summits themselves. Do they actually do any good? Or are they, by chance, completely useless.

There are certainly reasons to assume the latter.

Take first the view that these meetings are able useful when it comes to affecting events in the world economy – or in global politics. This is highly doubtful. Most G8 (or previously G7 and before that G6) communiqués are vapid statements of general principles. This is not surprising, as the members will look primarily to their own interests, which usually diverge. On the few occasions when the group has had an effect, such as the Plaza (1985) and Louvre (1987) Accords concerning the strength of the dollar, it can be argued that they simply strengthened already existing trends. Similarly, geopolitical actors tend to take little notice of the G8 on those rare occasions when they agree, unless it anyway suits their own interests.

Moreover, it can be argued that by pandering to the fantasy that politicians can affect world events – economic and political, not to mention climatological and others – the G8 meetings feed politicians’ egos and increase their desire to meddle and micromanage everything in the belief that they can solve global problems. As this is emphatically not true it can be and often is rather harmful.

Moreover, the G8 meetings have grown huge, both in numbers – originally they really were just supposed to be informal meetings of heads of state/government – but also in membership. In addition to the “official” G8 – The United States, Japan, Germany, the United Kingdom, France, Italy, Canada and Russia – the meetings are now also attended at least in part by the European Union, China, Mexico, Brazil and South Africa. Since there is substantial pressure in advance that the group will issue a suitably unanimous communiqué, this not only ends up being a bland, pre-agreed and meaningless statement. And even for that, it rewards the most intransigent member, who can hold out until its gets its way on whatever issue.

But there is a further issue. Namely, should heads of state/government actually meet each other at all? Philippe de Commynes, advisor first to Duke Charles the Rash of Burgundy and then to his opponent King Louis XI of France (second half of the 15th Century) addresses this issue at length in his Memoirs. His conclusion is that Princes who want to remain friends should not meet. Far better to remain friends from afar and conduct negotiations through intermediaries (who, if necessary, can be disavowed).

There is a great deal of truth in this. Political summits are necessarily brief. The idea that at one of these you can get to know your opponents/colleagues must be one of the more dangerous in politicians’ armoury of swollen egos. Occasionally it may be true. But for every Margaret Thatcher who realises that she could “do business” with Mikhail Gorbachev, there is a George W Bush who says of President Putin “I looked the man in the eye. I found him to be very straightforward and trustworthy.” Not to mention a Neville Chamberlain bringing back “peace for our time” from Munich. Few would, I believe, dispute the view that Winston Churchill, who never met Hitler, had a far better knowledge of him than did Neville Chamberlain – in spite of meeting him. Or, to take a less recent example: historians now tend to agree that a major reason why the Versailles Treaty turned out to be such a disaster, is that President Wilson did not stay aloof in Washington and enforce a treaty based on his 14 Points – which he could have done. By insisting on travelling to Europe to take part in the negotiations, he descended to the same level as Lloyd George, Clemenceau, Orlando et al and lost the moral dominance he previously was perceived to have.

Historical experience, logic and common sense all point in the same direction. The G8 meetings are an expensive and useless, potentially harmful talking shop. They should be abolished.

Wednesday, June 14, 2006

Ought Germany to remain the sick man of Europe?

The German economy is finally picking up. Part of this strength comes from exports. Despite all the hype about China, Germany is still the world's largest expoerter in absolute terms. But there is also a clear recovery in domestic demand.

You would have thought that this should be greeted with joy by Germany's euro partners. After all, a strong German economy is in the interests of the euro-zone. No way! Instead, Germany is attacked - notably by people such as Paul de Grawe and Wolfgang Munchau, both writing in the Financial Times - for pursuing a beggar-thy-neighbour policy, starving its own workers and so making other Euroland countries uncompetitive.

This is complete rubbish. German labour cost levels are the second-highest in Europe (after Belgian). German workers are hardly starved. What is true is that German labour costs have risen less rapidly than those of other countries.

But remember that Germany entered the euro at a rate vastly overvalued vis-a-vis its partners - about 20% overvalued against the French franc, for instance. Add to that the impact of globalisation and Germany's own structural problems. Moreover, by joining the single currency, Germany abdicated both monetary and (de facto) fiscal policy. The only way Germany could restore competitiveness was through reforms - which have taken place, even if possibly less than we would like - and through lower relative labour cost inflation.

But both of these methods are demand deflationary and painful. For the other Euroland countries, it would, of course, be much easier if the Germans could remain content to be the sick man of Europe, with permanently slower growth than anyone else. Then places like Belgium would not have to worry about trying to become more competitive. Hence the attacks on Germany.

Somehow, I don't think this is seen in quite the same way in Germany.

This is an abridged version of an article I've written for International Economy.

Wednesday, June 07, 2006

Laws of economics

I have formulated three laws of economics. Like many such laws, they may appear obvious. But I don't think this detracts from their truth.

Stein's first law of economics:

When someone tells you, this time it's different, sell. If they advance esoteric theories to back up their statement, sell at once!

Stein's second law of economics:

When a government starts talking about repaying the entire national debt in the immediate future, budget deficits are just around the corner.

Stein's law on the motivation of human behaviour:

We want more, better and free!

For more laws, check out the Murphy's Laws site.

Happy Tax Freedom Day

Last Saturday (3rd June, 2006) was Tax Freedom Day (TFD) for the UK. I take a certain interest in this, as I actually calculate TFD for the United Kingdom. For those of you who don't know what TFD is, here is a brief explanation.

Assume that from 1st January every year, all the money everyone earns is paid over to the government. When have we all paid off our taxes and can start keeping some money for ourselves? In the UK and in 2006, this is 3rd June - Tax Freedom Day. (If you want a technical version, how about: Tax Freedom Day takes the sum of all taxes in an economy - direct, indirect, corporate and so on - and relates them to a measure of national income, in this case net national income or NNI. The resulting percentage is then expressed as days of the year.)

The main point about TFD is that it is a very easy and attractive way of illustrating the tax burden. In other words, it is a gimmick. This is why it is hated by finance ministries and revenue departments everywhere. Here in Britain, the Treasury has taken to trotting out a spokesman who every ear huffily declares that the Treasury does not recognise the concept of Tax Freedom Day and that everyone is much better off since 1997.

That the Treasury doesn't like TFD is its prerogative. But to cclaim thate veryone is much better off is a non sequitur. If, for instance, the tax burden had doubled over the past nine years, but wages had risen, everyone would indeed be better off - but they would be paying twice as much tax relative to income as before!

The Tories have said that they will make Tax Freedom Day a public holiday. That is nice. But it would be far better if they committed themselves to making sure that Tax Freedom Day falls earlier and earlier in the calendar.

In the United States, Tax Freedom Day fell on 26th April. In Canada it falls in late June. In Israel (originally calculated by your truly) it is in early August. And in my native Sweden, it will be 8 August. Taxes are not the reason why I moved to Britain, but they would have been a very good one.