The Economist

The Economist just published its suicide note. Unusually, it has done it well in advance, in the full flush of health and optimism. But it has nevertheless committed itself fully to a course that guarantees its eventual demise, or at least irrelevance and circulation-collapse.

It has been the corporatists' bible and the managerialists' handbook for some time. But it maintained a veneer of commitment to free markets. Its leader this week, however ("Big is back" in praise of a new era of corporate giants), nailed its colours firmly to the wall. In the immediate aftermath of an economic collapse caused by irresponsible big government allied with irresponsible big corporations, exacerbated by one bailing the other out on the basis that they were Too Big To Fail, The Economist has hailed the revival of big corporations from a supposed slump in recent decades. Of course they are going from strength to strength - big government wants to work with big corporations, because it is difficult to centrally-plan and micro-manage an economy of small, competing organisations each with a different vision. Big government therefore provides explicit or implicit guarantees, and endless competitive advantages, to its corporate friends, just as it did previously for nationalized industries (many of them the same companies, but in privatized form nowadays). This isn't something new, it is a continuation of a long-term trend. And it isn't something to be celebrated, but to be feared. It is another step along the progression towards big-block National Socialism. But that doesn't stop The Economist from rubbing its hands in glee.

In the short term, they are backing a winning horse. Of course governments faced with increasing economic difficulties will look to their corporate friends to help them out, and vice versa. We can look forward to a decade or more of increasing corporatism as the signature of our economic decline, to parallel the decade of increasing state-socialism and trades-union power of the 70s. But people will eventually come to understand the harm that this symbiotic relationship causes, just as they came to understand the harm that the "beer and sandwiches" symbiosis between state-socialist governments and the unions caused in the 70s. And at that point, The Economist, the voice of corporatism, will become as relevant and loved as Tribune and The Morning Star.

I look forward to the day. The Economist represents all that is bad about twentieth-century, mainstream, mathematical economics. The day it dies will be the day that people have realised that the purpose of economics is not to calculate outcomes in order to obviate the need for markets, but to teach us that such calculation does not work.

For those looking for the modern equivalent of what The Economist once represented, try MoneyWeek instead.

There are lots of good arguments for a carbon tax. Trust The Economist to come up with a bad one.

"A tax on carbon is hardly going to stop the lights going out in a few years, but it would provide a floor price for power, giving investors a clearer sense of likely profits."

Is that just a typo? Did they mean "a floor price for carbon"?

If not, they are confused. A carbon tax will only give investors a clearer sense of likely profits by removing one component of their costs that has a volatile price - the cost of carbon, particularly under the EU-ETS (if they replace these mechanisms with a carbon tax, rather than supplement them as companies like EDF would prefer). To the extent that it increased the minimum price at which power could be produced from the cheaper, fossil-fired technologies, it would increase the confidence of producers of low-carbon energy, but not the confidence of those who must pay the carbon tax, who would have to raise their prices accordingly, aiming to retain similar margins, but more exposed to competition from volatile producers like wind energy, and just as exposed to other inherently volatile components, such as fuel costs and demand.

What a carbon tax would do would be to make alternatives to fossil fuels relatively more competitive, displacing the use of fossil fuels in the most marginal applications, reducing demand, prices and dependence on imports of fossil fuels. That is all good and wise, but it is related only peripherally to a floor price for power and greater certainty about profits, other than for low-carbon producers.