as a proportion of total costs — especially in manufacturing industry where the developed world is allegedly most vulnerable. (This is one beneficial result of the automation revolution, which poses problems in other respects.) And in both advanced manufacturing industry and in services, where the West also has a relative advantage, investment in human capital tends to be disproportionately important. Here, again, the West scores, since our unskilled labour tends to be more skilled than their unskilled labour — not to mention that developed countries produce many more scientists, technicians, engineers, economists, accountants, bankers and other professionals at the very highest level. Indeed, many of their ablest competitors in developing countries emigrate to Western countries when they are allowed to do so.
None of which is to say that the developed world will not fall behind the Pacific Rim countries if it continues to pursue policies which neglect or positively waste the talent available to us. Sir James himself argues vigorously, and I heartily concur, that well-intentioned policies of indiscriminate welfare ‘reduce the self-reliance of citizens and of their families by converting them into dependants of the state’. We are in danger in Britain and other European countries of following the example of the United States and creating a large permanent ‘underclass’ living off a combination of crime, welfare and the black economy. Such policies are increasingly under fire from informed opinion, but they are so entrenched politically and supported so stubbornly by special-interest lobbies that only the cold wind of economic reality will persuade us to reform them.
Sir James’s prescription — tariffs and quotas to protect European Union industries — would actually be a temporary barrier against this reality. It would reassure both management and workers that they need not significantly improve their efficiency, and government that it need not cut excessive benefits and regulations. At the same time, it would stimulate our Asian and other competitors to cut costs and improve their products precisely in order to leap over the barriers we had raised. A decade later we would be worse off as a result. Again, that is not to deny that there are real problems with which we have to deal. But to the extent that the jobs of unskilled workers in Western countries are jeopardized by low-cost competition, this requires still greater labour-market flexibility, well-directed training and retraining programmes and targeted help for the living standards of the poorest households of the sort given by Family Credit at present.
One must also ask why the dividing line between allegedly beneficial and non-beneficial trade should coincide with the external frontiers of the European Union. Within the Union itself there are large differences of development, of potential and of labour costs. The logical end of Sir James’s argument would be national, or even regional and sub-regional tariffs: yet it was precisely because such impediments to trade were removed that the conditions were created for the Industrial Revolution on which our prosperity was originally based. Tariffs and quotas have other undesirable consequences. As Brian Hindley points out, they discriminate against exporting industries by pushing up the exchange rate.[127] They also run the risk of provoking retaliatory action by other countries. And they contribute to international tensions to the extent that at a certain point it may be worthwhile for a poor (but militarily strong) power excluded from markets to break its way into them by force.
Welcoming as I do Sir James Goldsmith’s intervention in the debate about the future of Europe and agreeing with his support for sovereign nation states, I also find it ironic that he should be prepared to allow central European Union institutions so much power over trade and industrial policy. The decisions about which industries to protect or not are precisely those for which politicians and bureaucrats must be held tightly accountable. Such policies of discrimination encourage patronage, corruption and abuse of power. They would certainly be exploited to the full by the federalists of whom Sir James is rightly suspicious, and they have a long record of failure. So I disagree. But Sir James has forced me and other conservative free traders to re-examine our arguments in the vastly changed circumstances of the post-communist global economy.
This century has seen an unprecedented political and economic experiment. The centrally controlled model has been tried in various forms — ranging from the totalitarianism of communism and Nazism, through various brands of social democracy or democratic socialism, to an un-ideological technocratic corporatism. So has the decentralized liberal model — most notably in Britain and the United States in the 1980s. The balance sheet of the century which can now be drawn up conveys one irresistible message: whether judged on political, social or economic grounds, collectivism has failed. By contrast, the application of classical liberal principles has transformed countries and continents for the good.
The tragedy is, of course, that this great experiment was unnecessary. State monopoly and the command economy could never in the end mobilize human talent and energy. And nor could their milder coercive equivalents.
It would be nice to believe that these lessons had now been fully absorbed, that mankind will avoid these terrible errors in the future, and that in economic policy at least we will stick firmly to principles which experience has shown to be valid. Unfortunately, as one of our greatest poets reminds us:
Epilogue
In May 1993 I visited Warsaw as guest of honour at the reopening of the historic Bristol Hotel. It was, in its way, a significant occasion. The Bristol had been one of the great hotels of Europe. Opened in 1901, owned by a company whose principal shareholder was the pianist and Polish President Paderewski, famous for the highest standards of cuisine and elegance in the elegant society of pre-1914 Europe, the Bristol had fallen on evil days when Poland itself fell on evil days under first Nazism and then communism. It had closed its doors in the early eighties. Now it had been restored to its full splendour with the help of a British company, and I had the great pleasure of reopening it. One felt that it was another sign that a high style of life was returning to its natural home in Central Europe. I also formally opened the Warsaw offices of my Foundation which I hope will help to entrench democracy and the free economy in the post-communist world.
But my visit was memorable for a far deeper reason. It coincided with the fiftieth anniversary of the Warsaw Ghetto uprising. That Saturday afternoon I walked the perimeter of the now razed quarter with the oldest survivor of the uprising as my guide, after which I was taken to see still photographs of the Nazi destruction of the city’s Jewish community. It was a harrowing experience, especially so when I reflected that these terrible events had happened in my own lifetime when I was a young student enjoying Oxford.
The following morning I attended mass at the Church of the Holy Cross. The atmosphere was one of intense devotion and the ceremony elaborate, both very different from the restrained piety of Anglican services and the resolutely simple Methodism of Grantham. Every nook and cranny was packed. And the choral singing of unfamiliar Polish hymns was all the more uplifting because I could not understand the verses: it forced me to try to imagine from the music what the congregation was asking of God. Foreign though much of this experience was, it also gave me the comforting feeling that I was one soul among many in a fellowship of believers that crossed nations and denominations.
When the priest rose to give the sermon, however, I had a sense that I had suddenly become the focus of
