Terry Arthur: Economic Crap

There are two examples of Economic Crap on the same page of The Daily Telegraph of 31st July, by Peter Mandelson (no surprise there) and the Leader writer of the day, which is sad for a market-leaning newspaper.


Here’s Mandy, EU Commissioner for Trade:

"After seven years - and now faced with a long US electoral season - the Doha  round of talks, intended to introduce a new era of freer trade, with fewer  barriers between countries, now faces a very uncertain future....

But we can be sure of one thing: we would all have been winners from a Doha deal. Without one, we all lose."

Unless, Mandy, you simply declare unilateral free trade and get out of the way – just like Sir Robert Peel did in 1846 after he saw the light from Cobden and Bright. A trade is a trade and by definition both parties gain. Yes, trades may have fallout effects on third parties. So do all changes in consumer preferences. But that is true whether the trades cross borders or not. If another government misguidedly imposes trade restrictions across a border then retaliation in kind simply cuts off more noses to spite more faces – a double whammy instead of a single one.
The second instance, from a Telegraph leader, also concerns international trade but this one has a government in the woodpile as a participant:

"It is not just ethics that should make us hostile to bribery, but economic reality.  The payment of inducements skews the cost advantages of the lowest prices."

This crap concerns the BAE arms deal with the government of Saudi Arabia, which has seen widespread support for Lord Woolf’s review in which he remarked that “in order to be ethical the company will have to stop making facilitation payments – effectively bungs – to government officials in other countries”. I suggest that the good Lord is confusing ethics with the law, and the Telegraph leader writer is confusing economics with mumbo-jumbo. Nor does he or she appreciate that bribery needs a third party involvement. (BAE may not be confused at all – just caving in to the powers that be in agreeing to implement Lord Woolf’s “ethics”.) This whole issue is politicoism at its best.


If you and I as individuals agree a price for an exchange of goods or services then it matters not if we also agree that the price can be reduced or increased by the cost of a day at a Test Match (say).  Nothing “skewed” about that. It is perfectly ethical and nobody else’s business (indeed if it saves us a bit of Gordon Brown’s horrendous taxation then it is morally good!).  If instead of individuals we are company representatives, then yes, we must also know that our principals (shareholders) would approve.  But that is all there is to it.  There is no “bung”, no bribery, and no corruption. But if the recipient of the Test Match ticket does not know that his principals would go along with the arrangement, then the principals constitute a third party, wronged not by the host but by the ticket recipient.


Surely anybody but a politico must know that the corrupt participants in this case were the Saudi officials, who did not act as proper agents of their employer. I hold no brief for BAE or “defence” companies in general, but neither Lord Woolf’s nor The Telegraph’s remarks had anything to do with defence companies per se, nor with the UK government’s legislation in 2002 which outlawed BAE-type actions. Why did the government do this? I suggest that it wanted to pin any corruption charges on private enterprise instead of government, thus allowing the latter to impose fines rather than sit in the dock. (At the rate the UK is going with printing money and collecting fines, conventional taxes could soon become redundant!)


I don’t know the fate (or fête?) of those Saudi officials but I do know that a few weeks ago BAE’s chief executive along with a senior non-executive were detained (on this matter) in Houston by the US Department of Justice, which issued them with subpoenas and “asked” them to return for interviews at a future date. Lawful, perhaps. But justice?  Ethics? No sirree.

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