The Last Ditch by Tom Paine

I have just been listening to Anatole Kaletsky, the economist, journalist and "Editor at large" of The Times, talking to a conference about the global economy and its future. He attributes the economic stability of the past 15 years to four global economic trends:

1.    Globalisation
2.    Financial revolution
3.    Low inflation
4.    Emerging markets “3bn new capitalists”

Contrary to the hysterics of the unwashed anti-capitalists, he argues that globalisation has led to greater stability; what Ben Bernanke calls "the great moderation". It has led (as economists would always predict when markets become more open) to increased specialisation – an intensification of "the division of labour".

Western companies built on manufacturing expertise have offloaded that most volatile part of wealth-creation to companies in the emerging markets. Freed both from exposure to capital investment in production facilities and to having to deal with organised labour, their businesses have become more stable. Exposed to less volatility, they have been able to raise more funds, more cheaply, to grow their businesses. Multinational companies have become mere "platforms" on which products are developed, produced and marketed.

At the same time, the 1980’s deregulation of financial markets has allowed funds to find their best home more readily. Even individuals have been able to access debt more cheaply and easily. Kaletsky thinks the results of that have been wholly positive. I am not so sure, but I seem to be isolated in that view.

The collapse of communism has given the world "3 billion more capitalists" ready to play their part in all this. Paradoxically old-fashioned manufacturing is also less volatile than agriculture, so those emerging markets are now more stable too. Everyone has won. Kaletsky believes they will continue to do so for the foreseeable future.

I asked him to what extent current policy-makers were entitled to take the credit for this (in his view) rosy situation. His answer was direct. "They aren’t". He said that, possibly, some people might credit Thatcher and Reagan with contributing to the collapse of communism. He also thought praise was due to governments that had given central banks more independence. He doubted, though, that it made any significant difference to the overall trend.

So much for Gordon Brown’s contribution. I don’t share Kaletsky’s optimistic assessment of the world but, to the extent it is correct, Brown is just a witch doctor standing in the life-giving rain, claiming his dance caused it.