There’s a lot of this about

Chancellor Philip Hammond is an “economic illiterate” and does not understand the benefits of free trade, according to veteran economist and former Treasury advisor Professor Patrick Minford.

Mr Minford published a new paper yesterday calling for unilateral free trade, with the immediate elimination of all taxes on imports into Britain.

Minford is correct of course.

“This is economic illiteracy. I don’t know how one deals with an economic illiterate other than to say ‘come to my lectures’,” the professor said, speaking at the launch of EFT.

21 comments on “There’s a lot of this about

  1. I doubt it is economic illiteracy. I would guess that he accepts the logic of the argument, it is just that other things come first. There are powerful lobbies to consider. And marginal electorates. The idea of negotiating in style like the great politicians of the past – and the joys of being lobbied by private interests.

    His is a Augustinian attitude – give me free trade, Lord, just not yet.

  2. Yeah but the Bank of England seems to have the same attitude as the remain crowd. At a seminar I went to one chap from there talked about loosing access to the single market and rather rowed back red faced when asked did he mean something else rather different. Of all people you would expect to be precise and get it right it would be them….

    The same guy even talked about higher *import* costs in EUROPE goods as a drag to the economy as the U.K. Would put tariffs on. And this was their base case.

    They imagine what others might do and pick the stupid option.

  3. If you want to influence someone, it’s probably a good idea not to insult him. Patrick Minford sounds like a graduate of the Richard Murphy school of charm.

    Otherwise, what SMFS said.

  4. “Unilateral free trade, with the immediate elimination of all taxes on imports into Britain” is probably not politically feasible, whatever the economic merits. (The most “common sense” argument against is “if we do that then we lose all leverage to negotiate with other countries to lower tariffs on us.”)

  5. I suspect that in most cases the effects of tariffs are dwarfed by Non Tariff Barriers, and that is where the Brexit negotiations will be long detailed impossibly boring and of vital importance.

  6. Theophrastus
    yes exactly. Never insult unless they’re beyond influencing and i would have thought hammond hasn’t got to that stage. But this has tipped me in the pessimist direction. We potentially have the worst of all worlds. Protectionist UK, loudly trumpeting and spinning ‘wins’ on various things amenable to being trumpeted and spun to voters, all the while people pay more, much more, than they need to for all their stuff which they can now afford less of.

  7. “not politically feasible, whatever the economic merits.”

    We need to start doing some proper education about the economic merit, so that the current “not politically feasible” argument starts to look as stupid and counter-productive as it is.

    A good start might be to equate the “not politically feasible” argument with similar “not politically feasible” things – “managed decline” in the 70s anyone?

  8. Is it a requirement for a chancellor to be economically literate? Or is it a requirement for his advisors to be economically literate?

  9. “Is it a requirement for a chancellor to be economically literate? Or is it a requirement for his advisors to be economically literate?”

    Given that McDonnell is the shadow, looks like the answer is ‘no’.

  10. Theo

    ‘If you want to influence someone, it’s probably a good idea not to insult him. Patrick Minford sounds like a graduate of the Richard Murphy school of charm.

    Otherwise, what SMFS said’.

    Harsh to compare anyone with Murphy, particularly someone as distinguished as Minford, but he does have a reputation for being caustic…..

  11. My response to your forbes article: Hammond’s arguments against unilateral free trade were all correct and fit what almost all economists would say.

    Every argument presented by the writer is false. Would imports become cheaper? No, because the pound would crash as imports rise and exports fall. Would our businesses compete more and become more productive? No, because the only way they would be able to compete with foreign products is by slashing wages and productivity is defined by income per worker per hour. We already have strong competition in quality and efficiency between British companies in the domestic market. For example, Vietnam doesn’t have a comparative advantage by being better at making clothes, it has an advantage by having cheap labour costs.

    Removing trade barriers can only seem a good thing if you ignore that industry barriers to entry and exit exist. If lots of British companies get forced out of business its not like all the workers are going to suddenly find high skilled jobs elsewhere. Billions in assets would be wiped out.

    Unilateral free trade would be a disaster. Imports rise, domestic consumption and GDP falls, wages fall, foreign debt/ownership increases.

  12. ” Imports rise, domestic consumption …falls,”

    It’s not really possible for both of those to happen at the same time, is it?

  13. DW

    the pound would crash as imports rise and exports fall.

    And at which point imports would then fall and exports rise?

    Would our businesses compete more and become more productive? No, because the only way they would be able to compete with foreign products is by slashing wages

    Didn’t the pound just fall?

    (assuming that imports did suddenly rise very considerably, and which would depend on what the new tariffs were the other way?)

  14. I’d like to see the UK leave WTO as well as leave the EU. Decent regulations and lowering barriers to trade are good but the desire for a managed global economy has brought with it a desire for managed global politics.

    MyBurningEars said: “(The most “common sense” argument against is “if we do that then we lose all leverage to negotiate with other countries to lower tariffs on us.”)”

    Minford’s way sounds like ‘unilateralism and be damned’. It might well be possible to negotiate a defined period of unilateralism instead. eg a decade and then return to the old tariffs. That way the leverage is not gone forever.

  15. That Philip Hammond is an economic illiterate is possible.

    That Patrick Minford is a political illiterate is certain. And the fact that he’d suggest unilateral free trade to be a good thing suggests that, at the very least, he’s a cocooned moron.

    There’s are reasons why I can’t take 99.99% of today’s economists seriously, and it’s not just because I took my degree in the subject.

  16. Talking of economic illiteracy, what, Tim, is your developed view about this latest effort re. Business rate? Cretinous is one word which springs to mind.

  17. I’d like to see the UK leave WTO as well as leave the EU.

    Not feasible.

    Would you be happy that any new invention in the UK would not be able to be copyrighted overseas? That all British films and music would be unprotected?

    As for the rest, you’d still be bound by WTO rules anyway, since all the countries you’d be dealing with aren’t going to just wave away their rules because the UK wants to be difficult.

  18. *Would you be happy that any new invention in the UK would not be able to be copyrighted overseas?*

    As I understand it you have to apply for patents and copyrights in individual markets anyway. Also places such as China with a 1.3 billion people market don’t enforce them fairly anyway.

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