Harry’s Place

“The Guardian reports that the vast scale of the emergency bail-out of the Royal Bank of Scotland and HBOS has, say Labour, the Tories and prominent unionist commentators, dramatically wounded Salmond’s case for taking Scotland out of the UK.”

Equally, the SNP could say that Scotland would have run the banking system better so that RBS and HBOS would not be in the position they are. There are a lot of “might haves” in this speculation. But I think it is wrong to suggest that small countries are necessarily more vulnerable to financial crisis than large ones. Slovenia, for instance, is doing quite well at the moment: http://www.forbes.com/afxnewslimited/feeds/afx/2008/10/14/afx5552028.html - considerably better than the UK or the US.

I know it’s paranoid - I KNOW - but I can’t help but wonder how come it was the RBS and HBOS that went belly-up and needed rescuing, especially as RBS was so strong beforehand. It’s remarkable how well it suits political agendas. HBOS I know had bought into the sub-prime mortgage fraud, so was going to have , but it was supposed to be well-capitalised and predicted to withstand it.

However, since I think Salmond is a dangerous shit, who is leading Scotland up the Caliphate, I must say I’m slightly relieved if it ‘puts his gas on a peep.

The economic case for Scottish independence has always been weak. Scotland receives net transfers from UK taxpayers of around 2% of UK GDP. The bailout of RBS and HBOS makes the case even weaker - as Gordon Brown diplomatically notes. There were some very long faces in Edinburgh on Monday - the longest being that of Sir George Mathewson, former RBS Chairman and a longtime supporter of Salmond and the SNP.

http://news.bbc.co.uk/1/hi/scotland/6456319.stm

Yet another example of England bailing out Scotland. Independence now!

Salmond and Swinney are great theoreticians to have after a disaster. This pleases me; not necessarily for pro-Union reasons (although I am pro-Union), but because this grubby little rabble-rouser has been thoroughly bitch-slapped and is left looking flustered and making garbled threats against Westminster.

There was a Superted story in which a planet was discovered in which one people had become so dependent on technology and assistance, and expactent of hand-outs, that they’d lost the ability to govern themselves.

The economic case for Scottish independence has always been weak with net transfers from the UK Treasury amounting to some 2% of UK GDP. The bailout of RBS and HBOS makes it even weaker, as Brown diplomatically notes. There are some very long faces in Edinburgh, the longest being that of Sir George Mathewson, former Chairman of RBS and (controversially) a longtime supporter of Salmond and the SNP.

http://news.bbc.co.uk/1/hi/scotland/6456319.stm

Mathewson/SNP

http://news.bbc.co.uk/1/hi/scotland/6456319.stm

http://news.bbc.co.uk/1/hi/scotland/6456319.stm

At a time when banking is increasing trans-national, is this debate at all relevant? If Scotland was independent and RBS and HBOS faced the wall, it is likely that both Scotland and England-Wales would seek to rectify the situation in some way or another. Co-operation and unity is possible between sovereign nations, as the EU’s response has demonstrated.

“If Scotland was independent and RBS and HBOS faced the wall, it is likely that both Scotland and England-Wales would seek to rectify the situation in some way or another”.

The obligation of the UK Treasury to bail out a bank in an independent Scotland would be no greater than its obligation was to bail out Fortis Bank of Belgium - that is, zero

Ireland is in no greater difficulty than the UK (cold comfort).
Both have had property booms based upon rates that were too low (in Ireland’s case due to the euro, in ours due to Brown’s exclusion of housing from the inflation target).
And what is the evidence that Norway went “cap in hand” to the Fed?
Norway is running both current account and budget surpluses equivalent to over 15% of GDP, nor are any Norwegian banks in any danger.

Still I agree - English independence (ideally zone one London independence) NOW!

Brown also rips up Salmond’s idea that a separate Scotland could form part of a Northern European “arc of prosperity” …

No, reality ripped up Salmond’s facile demagoguery. Brown has been following the plan used by Sweden in the 1990s, and recommended by the Tories.

It is now being called “the arc of insolvency”, though the Scandinavians have been a good deal more prudent than we have. It will also drive a horse and cart through Scotland’s 55% public spending, which will have to be cut back, and sharply. Much of Salmond’s largesse, upon which much of his popularity rests and which is funded by the Barnett formula, will vanish. Shall we see prescription charges, University fees and pensioners paying bus fares? Who will benefit from the collapse of the SNP bubble?

Some are slow to accept the new realities. One City spokesperson on the news this week was bellowing and blustering the old threats (remember the non dom ultimata? That was supposed to portend the end of the City- who knew) that if greater regulation was imposed the City would decamp and take its business elsewhere. Where in the world, I wondered, will this non regulated financial haven be located just now?

Or any of the companies listed in London. If anything happened, anti-terror legislation would have been used to seize English money.

Let’s see what hedge-fund ’spiv and speculator’, George Mathewson, thinks now.

“The obligation of the UK Treasury to bail out a bank in an independent Scotland would be no greater than its obligation was to bail out Fortis Bank of Belgium - that is, zero”

The ECB might. The UK has an interest in preventing the collapse of any major retailer of banking services in the UK, regardless of where they are based. Anyway, the SNP could argue that the problems are rooted south of the border, where the property boom - fuelled by reckless lending - has been concentrated, particularly in the southeast of England. The SNP may say that an independent Scotland would have had a stronger banking system better able to weather the crisis. Again, this is all hypothetical and pointless since no-one knows whether an independent Scotland would face the kind of disaster seen in Ireland or become as durable as Slovenia. The present situation does not support either the secessionist or Unionist positions in my mind.

Dan - The ECB does not do bailouts of specific banks. It lends to all banks, yes - but bank recapitalisations are the responsibility of national governments and supervisory authorities.

Yet another example of England bailing out Scotland. Independence now!

Independence for England from Scotland, yes indeed.

Dan: BoE would not bail out a bank in the UK if there were no UK …

Anyway, the SNP could argue that the problems are rooted south of the border, where the property boom - fuelled by reckless lending - has been concentrated, particularly in the southeast of England.

Don’t worry, they’re going to. Just like the vicious nationalism they tap into blames 1707 on the failure of London-based Scots to let Alex Salmond William Hamilton and Co. set up their overseas colony.

The SNP may say that an independent Scotland would have had a blockquote>stronger banking system better able to weather the crisis.

They will do, don’t worry. Whilst not providing a single shard of evidence that Salmond and Swinney had the slightest inkling of what was coming or concern as long as the good-times were there.

The SNP might

With all these mights and unfalsifiable statements, you should be writing speeches for them. I might like a date with Natalie Portman, but it ain’t going to happen.

Given the crooked machinations of the gang in power in this country over the past 11 years, I don’t think it’s paranoid at all to wonder about this amazing good fortune for McBean. The vast grin on his face at everybody else’s misfortune and his own personal political good fortune is quite sick - and very much in character.

I wonder if Salmond will still be going to Qatar, for sharia loans to finance his proposed Scottish Futures Trust?

“With all these mights and unfalsifiable statements”

Brown is basing his claim on the basis that Scottish banks would be in the same position today if Scotland was independent. My point is that there’s nothing to substantiate this claim either way and that the SNP would reasonably claim that an independent Scotland would be run differently. The financial crisis is not a killer blow for the cause of Scottish independence and I don’t think smaller countries are more vulnerable to crisis than larger ones. On the issue of Scotland’s independence, I am ambivalent since I am not led by emotional feelings of patriotism. Scotland and England would probably retain close ties and it would present an ideal opportunity to form a voting block at Eurovision.

I agree with ami. Brown has been reluctant to constrain the geese that laid his golden eggs by taxing them till they move away. I think the whole world will find that the geese have been laying golden bubbles, and that this financial “industry”, like our political elite, produces bugger all. Yet it is now 10% of our economy, and those who do not have a “vibrant” financial sector must now be thanking their lucky stars.

Salmond’s been claiming for years that rather than pumping money into scotland, England’s been ripping Scotland off, doubtless he’ll find some line of similar counterfactual spin this time.

… Though I’d expect that in times of crisis the scottish voters might become a bit more careful what they wish for.

Alcuin: A sector’s importance to the economy is not determined by its contribution to GDP. Agriculture contributes just 2% of the UK’s GDP, but if all the farms closed people would have far less disposable income since food prices would accelerate. A healthy financial sector is even more important, even though it employs a small proportion of the labour force. It is the basis of everything we do.

I think Salmond has a policy of not renewing Nuclear Power as well.
Is he going to replace it with anything?

Wave power in the Pentland Firth, Tim. The Saudi of renewable energy.

“Norway cap in hand to the US Federal Reserve for a £2.9 billion lifeline”.

Er, what are you on about? The Norwegian central bank has arranged at $5bn swap facility with the Federal Reserve in order to obtain dollar liquidity. This is hardly out of the ordinary, the Bank of England, presumably ‘cap in hand’ arranged a $50bn similar facility.

The obligation of the UK Treasury to bail out a bank in an independent Scotland would be no greater than its obligation was to bail out Fortis Bank of Belgium - that is, zero

You are obviously not aware that Fortis was bailed out by all the Benelux countries together.

Oh look, another “Gordon the He-Man” post at HP.

Let’s get a few things straight amid the swooning.

I very much doubt Norway is in any trouble at all. As for Norway’s tax rates, if Norwegian folk want them reduced they can vote for government to reduce them, but they clearly think they are of some use.

Scots would not have voted for independence anyway, even before the RBS thing, so I am not sure what the fuss is about.

It is not the Beneluk countries, Stephen.

I’m sorry I don’t know what you mean Alec??

Dan. What you say is true, money is the blood of the economy, and it needs a heart to pump it. But in the last 10 years this sector has grown from 4% to 10% of the UK economy, and what more has it delivered to the world apart from junk bonds of various denominations? Did the heart get stronger for all this? No, it just got fatter, and now needs a triple bypass.

The agricultural sector has shrunk from 60% in the 19th century to 2% due to massive efficiency savings. By your logic, the finance sector should be shrinking as it automates much of its services. In some senses it has, such as ATMs, Internet Banking, fast share dealing.

Banking is boring, and so it should be - the Swiss understand this. But clever people with little to do must invent new “products”. We don’t need “products” that require 100 page descriptions that only their originators understand, we just need a system that facilitates the exchange of goods and investment for industry (i.e. real industry). I believe that the world will come to realise this, and the prestige of London and New York will shrink significantly as a result.

Instead of our best physicists being lured out of Culham and Cambridge to create new “derivatives” in the City, we would be far better employing them to fix our energy supply and transport system.

One wonders whether words like “trend” or “change” subsist in Bejamin’s lexicon. I think I understand the Conservative view - that things SHOULD never change - but unlike Benjamin they dont appear to deny that they actually do - sometimes at least.

Anyway - right or wrong it WOULD BE SO nice to ee the smug smile wiped form ALex Salmond’s face.

“The agricultural sector has shrunk from 60% in the 19th century to 2% due to massive efficiency savings. By your logic, the finance sector should be shrinking as it automates much of its services. In some senses it has, such as ATMs, Internet Banking, fast share dealing.”

Umm, automation has nothing to do with it.

“Instead of our best physicists being lured out of Culham and Cambridge to create new “derivatives” in the City, we would be far better employing them to fix our energy supply and transport system.”

And how would you invest in infrastructure? Where would the money come from if you bypassed the financial markets?

The Benelux aggreement is reciprocal and voluntary, and came almost 150 years after the end of the UK of the Netherlands, Stephen. England and Wales would be under no obligation to provide an immediate safety net to an independent Scotland.

Braveheart, HBoS/RBS pre 2008: like the bacon ad, Salmond selects only the two best bits.

I was simply pointing out the errors in the post, and the fact that the RBS problems have nothing to with the likelihood or not of the independence of Scotland. Knockabout partisan post this. Not much to it.

And fuck off Benji.

That fuck off was in response to his first post. Allow me to say it again…

Umm, automation has nothing to do with it.

Don’t be obtuse. You get the point.

Where would the money come from if you bypassed the financial markets?

Your question implies that the financial markets make money. They don’t, they leverage our money, and the way they have been doing that has been to inflate it. That requires the correction we are now seeing.

In Britain, Industry has had to raise money by only two methods - equity and overdraft. Equity does not involve Banks, but does involve institutional shareholders, and overdrafts mean Banks can (and do) pull the rug out from viable companies at a moment’s notice because they get cold feet or because they don’t like, or don’t understand their business plans. Branson bought out his shares because he was fed up with the City always questioning his methods. German Banks are usually traditional family businesses and offer long term loans, which are much more useful to industry.

Alec, whilst I think there are clear benefits to being part of larger economic union and to having banks with debts in your own currency (UK take note), if Scotland was independent and nothing else different (which is the assumption everyone is making), are you saying that the English government would just let its biggest mortgage lender (or maybe 2nd biggest) and largest provider of savings accounts collapse?

“Wave power in the Pentland Firth, Tim. The Saudi of renewable energy.”

Of course this would depend on the SNP actually *building* the relevant windmills/ wave machines/ tidal barriers. As far as I can see a large proportion of these get blocked- by the SNP. There is no renewable energy if you don’t have the machines to tap it…

Alcuin: I think you are confused.

Matthew, I agree it would be implausible. However, it would be reliant on a Scotland independnt before mass globalization of banks would have been permitted an open market down south. Maybe we could have attracted investment like Iceland or, the example de jure, the feudal hell-holes of the Channel Islands. And, assuming the alternative Westminster wouldn’t simply seize England based funds.

Such is the problem with speculative histories. One change, and it all goes.

(Tzimsces, he’s said precisely that.)

Dan, if you genuinely think that banks produce anything, least of all money, you are the one who is confused. Alcuin is entirely correct. The 4% 10 years ago worked just fine. 10% is absurd.

Now Galloway’s come out pro-Union. I’m confused.

There can’t be any money in the Scottish Futures Trust.

Dan, if you genuinely think that banks produce anything, least of all money, you are the one who is confused. Alcuin is entirely correct. The 4% 10 years ago worked just fine. 10% is absurd.

Down with capitalism? Quite an about face from such a rabid right-winger

There have always been right-wing anti-capitalists. There hasn’t always been the Internet.

Capitalism is not an ideology, and all countries use it, to a greater or lesser degree. It has also been around for a very long time, i.e. several thousand years. It is essentially an engine that delivers wealth, but one that needs a governor, maintenance and monitoring, or else it will overheat, wear out or run riot. Like fire, it is a good servant and a bad master, and we have let it run out of control.

In technical terms Capitalism is an emergent property of the decisions of millions of people acting in their own best interests - it has both their strengths and weaknesses, but can react faster to change than any “planned” economy. 99% of the time that is a good thing.

Obviously banks create things. A lot of things. Although mostly they contribute to other people creating things.

Dan

“A sector’s importance to the economy is not determined by its contribution to GDP. Agriculture contributes just 2% of the UK’s GDP, but if all the farms closed people would have far less disposable income since food prices would accelerate. A healthy financial sector is even more important, even though it employs a small proportion of the labour force. It is the basis of everything we do.”

A sector’s contribution is entirely measured by its proportion of GDP. British people spend 2 pence in the pound on agriculture. If all farms closed down they are not going to spend 20. Indeed we may be better off as the CAP makes food far more expensive than it need be. If you mean food cannot be substituted by foreign imports then you may have a case but of course it can. If we shut down the entire agricultural sector in the UK we would not be noticably worse off as long as we could trade with the world.

The Financial Sector produces massive wealth for the UK. It is one of the few industries where we are internationally competitive. It does produce wealth and it does produce assets. The problem here has been that mortgages, an asset by any definition, was poorly and comprehensively priced.

By the way, Britain’s manufacturing sector exports as much as it ever did and in absolutely terms may well be as big as it ever was. It is as a percentage of GDP that it has declined as other parts of the economy have grown around it.

“If we shut down the entire agricultural sector in the UK we would not be noticably worse off as long as we could trade with the world.”

You are a fool. If the agricultural sector shut down, you would not have fresh milk, bread would be twice the price and you’d pay a fortune for meat and fish. Onions, carrots and potatoes, which are so cheap that we barely notice them, would be as expensive per kg as tomatoes. We could not survive on legumes from Kenya and aubergines from Morocco.

The fact is that agriculture has to be subsidised and farmers are not our class enemies but our food providers - if it was not for our relatively self-sufficient agricultural sector, we would not have defeated Nazism. Agriculture is as important as having a good health service. We depend on it. The trouble is the prejudiced attitudes of those who rarely move beyond to a London zone with a higher number unless they are skiing in the Alps or getting pissed in Ibiza and Falariki.

Bankrolled by Sean Connery from his wee croft in Bermuda, the SNP should beware of what they wish for.

It’s almost as laughable as the Welsh separatist who said: one day my country will take its seat at the United Nations between Cuba and Cyprus.

Bankrolled by Sean Connery from his wee croft in Bermuda, the SNP should beware of what they wish for.

That makes it sound like Connery is the main funder of the SNP. It would certainly would be amusing if this was the case, yes.

Now Galloway’s come out pro-Union.

Hardly “coming out”, its very unsurprising, he always has been pro-union.

Stephen

“You are obviously not aware that Fortis was bailed out by all the Benelux countries together.”

Of course I am aware of that. It was because Fortis was too big to be dealt with by its home supervisor. But there was no *obligation* to do it. Just as there would be no *obligation* for England to bail out RBS and HBOS if Scotland was independent. I’m not ruling it out, though.

A couple of short points -

Dan, British agriculture wasn’t if it wasn’t ‘relatively self-sufficient’ in WW2; even after serious cutbacks in individual demand delivered by rationing, food importation was a major concern.

Michael, I think the ‘wee croft in Bermuda’ that Connery bankrolls the SNP from should be amended to become ‘the exclusive ex-pat Bahamian golf course’ that he agitates for Scottish independence from. Actually, it may be a Balearic golf course these days.

It’s almost as laughable as the Welsh separatist who said: one day my country will take its seat at the United Nations between Cuba and Cyprus.

Granted that the language situation is a bit more complicated for North Brits (erm…ha!) than for erm…nearly West Brits (erm…ha ha!), but if Scotland took that approach I suppose it could bags the second alphabetical place, between Afghanistan and Albania

“I value the Scottish banking tradition,” writes Brown.

As I have no doubt that he does.

He can prove it by guaranteeing that the merger including HBOS will be headquartered at Edinburgh (although it will be so huge that it will continue to employ just as many non-frontline staff elsewhere in the United Kingdom), that it will use Scottish (i.e., British) call centres rather than the overseas ones favoured by certain other participants, and that Her Britannic Majesty’s Government will always retain both its preference share and the controlling interest in the Royal Bank of Scotland, as safeguards of the Union.

Call centres, one might add, are a hugely important example of how utterly fallacious was the claim that we could survive as a “service economy” with no manufacturing base. Once we had sent our manufacturing sector to China and India, our service sector rapidly followed to India, and only not to China because there are not so many people there who can speak English, or at least who have certificates to say so. And the Chinese are learning quickly.

Meanwhile, what of the other institutions that the sort of middle-class Scots who wind up at Holyrood rather than Westminster hold in the same awe as they held the unquestionable Bank of Scotland and Royal Bank of Scotland: the Church of Scotland, the Scottish educational system, the Scottish legal system?

All the last are very dear to the heart of Dr Brown QC, son of the manse. And why not? But their problems would probably not be financial. The Edinburgh Establishment types, who (as has lately been shown so spectacularly) can’t really see the difference between affection for and over-deference to anything sufficiently bourgeois or aristocratic and with the word “Scottish” or “Scotland” in its name, will somehow find themselves on the brink of killing one or more of these institutions with kindness, by once again allowing it to have whatever it likes and asking no questions.

Then the hated London Scots will have to step in and save the real or purported essence of Scottishness. Again.

Herman, you are an idiot. First of all, I said ‘an inflated banking sector’. That’s not remotely the same as capitalism. There was capitalism when the banking sector was only 1% of the economy.

Secondly, I am not a ‘rabid right-winger’ because I am not a ‘right-winger’. You are a fool if you think that criticising dumb loony leftists from a centre-liberal position is being ‘right-wing’, never mind rabid.

Obviously banks create things. A lot of things.

Name one.

Dan has already answered your silly point about shutting down the agricultural sector.

It’s almost as laughable as the Welsh separatist who said: one day my country will take its seat at the United Nations between Cuba and Cyprus.

There is nothing remotely laughable about it. The idea of an independent Slovenia was regarded as ‘laughable’ by blinkered fools only 30 years ago.

Dan - “You are a fool. If the agricultural sector shut down, you would not have fresh milk, bread would be twice the price and you’d pay a fortune for meat and fish. Onions, carrots and potatoes, which are so cheap that we barely notice them, would be as expensive per kg as tomatoes. We could not survive on legumes from Kenya and aubergines from Morocco.”

Actually I probably would have fresh milk. I doubt that milk from France would travel as far as some of the milk I drink. Explain the logic by which shutting down the CAP - the policy that makes bread more expensive - would make bread more expensive? Food is priced by the world market. How would Britain’s tiny production make a difference to that market?

Look I am going to be nice and assume you’re just a fool. Transport does not play a big role in prices. It is cheap and getting cheaper. If we have to fly beans in from Kenya, they are often still price competitive even with the EU’s restrictions. Shipping or trucking is cheaper still. Food is routinely trucked over longer distances in the US than we would from Morocco. I am really trying to be as nice as I can about this but you know fuck all and seem to think rudeness is an adequate subsitute. It is not, son, it is not.

“The fact is that agriculture has to be subsidised and farmers are not our class enemies but our food providers - if it was not for our relatively self-sufficient agricultural sector, we would not have defeated Nazism.”

Agriculture does not have to be subsidised unless, of course, you think we may be fighting the Nazis again some time soon? There is a case to do so on heritage grounds but not on defence grounds. As long as we have access to the sea, and control the sea lanes (ie don’t fight with the US) hunger is not really an option.

“Agriculture is as important as having a good health service. We depend on it.”

But we do not depend on our own. We depend on the market. We do not need to subsidise our own. Especially not through the useless CAP. Our agriculture depends entirely on oil anyway so there is no point keeping it alive for defence purposes unless you intend to keep horses down on the farm too.

“The trouble is the prejudiced attitudes of those who rarely move beyond to a London zone with a higher number unless they are skiing in the Alps or getting pissed in Ibiza and Falariki.”

He says to the farmer’s son. Amazing.

Nearly Oxfordian - “Name one.”

Derivatives. The Banks created a massive industry thanks to two physicists doodling about in their spare time. A derivative based on the weather by a Brazilian coffee farmer is an asset. If his coffee crop fails, the derivative pays out.

“Dan has already answered your silly point about shutting down the agricultural sector.”

For some definitions of answered. If transport played a big role in food prices, then the supermarkets would not be selling cheap South African apples. Are they in fact selling cheap South African apples? Britain is a nuclear power. It is not going to fight a War like WW2 again. And if it does having a vibrant agricultural sector amid the smoking radioactive ruins of the United Kingdom will not be much comfort.

“Explain the logic by which shutting down the CAP - the policy that makes bread more expensive - would make bread more expensive?”

Did I defend the CAP? I would favour radical reform of the system, which is heavily biased towards inefficient French smallholders. I said that shutting down the agricultural sector would make the price of staples more expension, in some cases a lot more. Just use your brain a little. The British agricultural sector provides the bulk of food consumption. If it stopped working, 65 million people will still need to be fed at a time when there are already shortfalls in global cereal production. Simple economics dictates that if supply contracts, prices rise. On the issue of fruit crops - English versus South African apples - there is no subsidy for fruit farmers, a situation that has led to some varieties coming out of commercial production altogether, which creates monocultures that come with their own set of long-term problems.

“Transport does not play a big role in prices. It is cheap and getting cheaper.”

I didn’t even mention transport. A greater problem, as I see it, is monopsonies dictating ever lower farmgate prices that push prices below costs. The market is highly distorted by monopsony power of the supermarkets and this should be addressed.

“Agriculture does not have to be subsidised unless, of course, you think we may be fighting the Nazis again some time soon?”

I said that agriculture saw us through hard times, which is a fact. Dependence on imports of any bare essentials - food, fuel, etc - makes an economy vulnerable to externalities: exchange rate movements, a drop in supply, war, etc. But, no, I didn’t say subsidies for agriculture should be justified on the grounds that we need food for war; you are attempting to put words in my mouth.

Derivatives. The Banks created a massive industry thanks to two physicists doodling about in their spare time. A derivative based on the weather by a Brazilian coffee farmer is an asset. If his coffee crop fails, the derivative pays out.

It’s simply a vastly overcomplicated form of insurance, one that involves more middlemen getting rich on the back of the farmer’s output. There is nothing productive generated by inventing this stuff.

For some definitions of answered

I love it. That’s just like a derivative form of a rejoinder - no added value at all, but sounds impressive as hell.

The main value of farming is not just in time of war, but also in time of all kinds of uncertainties not involving a shooting war: economic instability (unstable prices in other countries), environmental instability (plummeting production in other countries), political instability in foreign countries leading to the severing of economic links (ever heard of embargoes and punitive export tariffs?).

The cost of transport is highly variable over time - and is likely to increase. This is exactly why many large Western companies are now moving their new capital investments from the (originally scheduled) Far Eastern locations to Eastern Europe: true, labour costs in the Far East have risen by a certain %, but the cost of transport is the main incentive. Look it up.

Nearly Oxfordian: The shift to Eastern Europe is also encouraged by strong growth in Russia and the CIS, better regulation in the EU states and a high level of skills. Establishing a plant in India or China is fraught with political, infrastructural and bureaucratic complications, whereas Poland or Russia are easier places to do business. Certainly, if I was an investor, I would choose Poland over India any time, even with the higher labour costs. But I don’t see much shift from Thailand, Vietnam or Malaysia to Europe.

I agree with you on farming. I wish more was done to boost investment in agriculture in Eastern Europe. Poland, Ukraine, Belarus, the Balkans, etc, could all perform far better in terms of agriculture if they had the best technology and inputs. I don’t think we’d need to import so much from Africa or even further afield if more effort was put into improving their cash crop production. At present, many farmers in these states are decades behind and are really struggling.

Dan - “Did I defend the CAP? I would favour radical reform of the system, which is heavily biased towards inefficient French smallholders.”

Well yes you did - you defended the status quo and said changing it would push up the cost of bread. I don’t see what else you meant. I think the problem with the CAP is that it is biased towards large agro-businesses. We want to preserve smallholders - but not at the cost of more expensive food. But that is another argument.

“I said that shutting down the agricultural sector would make the price of staples more expension, in some cases a lot more. Just use your brain a little. The British agricultural sector provides the bulk of food consumption. If it stopped working, 65 million people will still need to be fed at a time when there are already shortfalls in global cereal production. Simple economics dictates that if supply contracts, prices rise.”

6+ billion people eat food on a regular basis. If 1% of those had a larger demand for food I fail to see how that would have the dramatic impact on food prices you suggested. It is true that prices would rise. A little. But then so would production in other markets. A short term blip at best.

“I didn’t even mention transport.”

My mistake. Obviously I read a logical basis into your article that was not there. Why can’t we survive on legumes from Morocco then, if, of course, transport is not a problem?

“A greater problem, as I see it, is monopsonies dictating ever lower farmgate prices that push prices below costs. The market is highly distorted by monopsony power of the supermarkets and this should be addressed.”

The bastards! Imagine giving me cheap food.

“I said that agriculture saw us through hard times, which is a fact. Dependence on imports of any bare essentials - food, fuel, etc - makes an economy vulnerable to externalities: exchange rate movements, a drop in supply, war, etc.”

Fuel. Hard to avoid that import isn’t it? And no, it does not mae us vulnerable. It depends on the market. Oil is a problem because we have to deal with a large proportion of the market forming OPEC. But food does not have its own equivalent. We can and do buy food from a vast global marketplace. Which means that food supply is more stable than oil - and more stable than our own supplies. If Britain were hit by a drought, it would be a problem for us under your model. If Australia was, it would not be a problem under mine. As for exchange rates, the purpose of those shifting is to address imbalanced in the economy - if we import little they have to be larger and last for longer. If we import food as well, they will be over faster.

“But, no, I didn’t say subsidies for agriculture should be justified on the grounds that we need food for war; you are attempting to put words in my mouth.”

So you’re saying that was an utterly gratuitous reference to the Nazis then?

Nearly Oxfordian - “It’s simply a vastly overcomplicated form of insurance, one that involves more middlemen getting rich on the back of the farmer’s output. There is nothing productive generated by inventing this stuff.”

Actually it is quite a simple form of insurance and no one is getting rich off the farmer’s output. Rather they are bringing market stability and security to the farmer - from which he benefits and for which he is willing, usually, to pay. Of course it is productive. The farmer can take out more bank loans and increase production, the banks will lend, everyone benefits.

“The main value of farming is not just in time of war, but also in time of all kinds of uncertainties not involving a shooting war: economic instability (unstable prices in other