Britain’s Conservative Party may be moving against Inheritance Tax, largely because the 40% tax now affects many home-owners. The threshold of £263,000 has risen by only 32% since Labour took office, whereas house prices have risen 138%. Only Gerard’s Cross had an average house price above the threshold in 1997; now 86 towns and cities do, including London.

The tax, and its predecessor Death Duties, were conceived as a tax on "the rich," but now affect people on relatively modest means who happen to live in expensive areas. The tax seemed to owe more to envy than to revenue, since it has always generated so many economic distortions and tax-avoiding behaviour that its yield has probably always been negative. It breaks up businesses and capital pools, and causes assets to be liquidated only to pay it.

Some feel that inherited wealth, being "unearned" is somehow unjustified, and that it gives some an "unfair" start in life, which presumably takes place in an otherwise "fair" universe. Against this can be set the natural desire of parents to make provision for their children, and the gains to society if they create wealth to do so.

There is also the point that this represents wealth on which tax has already been paid. You earn it, pay taxes as you do so, and are then taxed again on what you have left at the end. And finally the house, which represents the larger part of what most people leave, is unrealized capital wealth which is not the best kind of tax. It looks like a death knell for the death tax.

The huge loss of life in the Indonesian tsunami disaster reminds us all of the terrible power of nature. The modest help we can give from afar looks sadly insufficient to the task of repairing the physical damage or relieving the human distress. All we can do is pause, reflect, and sympathize.

But no doubt the environmentalistas will soon be telling us that the whole world is open to coastal devastation like this unless we start doing more to enforce the Kyoto protocols and tackle global warming. But the lesson of Indonesia is the exact opposite.

The devastation was overpowering, yes. But the human cost is all the heavier because most of the countries affected are poor. Homes and workplaces weakly built; poor roads and telecommunications that make it hard to summon help or deliver it with speed and accuracy to where it is needed; inadequate medical and emergency services; too little education that could save lives.

It was the same in the Caribbean hurricanes earlier this year. Poor Haiti suffered enormous damage, with many killed and half its GNP wiped out. For rich Florida, hit by the same storm, it is basically an insurance claim. Homes and public infrastructure in Florida are more solidly built, storm planning is efficient, mobile phones are everywhere.

The real lesson is that we have to make the world richer. Because richer people can stand up to natural disasters better than poorer ones. We need trade, markets, peace, democracy, low taxes -- all the things that will deliver growth fast to the developing world. That is the way to save lives. Real lives that are being lost right now. Quite frankly, that will do more for the planet than the theoretical and far-off benefits of Kyoto.

UK Chancellor Gordon Brown believes the coming year offers a "once-in-a-generation" chance to eradicate global poverty. He stressed more debt relief plus "a very substantial increase in resources… akin to the Marshall Plan of the 1940s".

The goal is immensely worthwhile, but it is important to keep the following ideas in mind.
____

• There are no 'causes of poverty.' It happens naturally when you do nothing. It is wealth that has causes.

• Poor countries are not poor because others are rich, but because they are not rich themselves.

• Rich countries have created nearly all the wealth they enjoy, and poorer countries could do likewise.

• Humanitarian aid is a worthwhile way of helping to tackle such things as conquest of disease and access to clean water. By contrast development aid to invest in industry is less successful and less worthwhile, especially as it is usually directed by governments.

• The gap between rich and poor countries is less important than the attainment by poor ones of enough wealth to lift them from deprivation and give them access to sufficient food, water, healthcare and education.

• The wealth-generating process is robust enough to withstand many things done wrong in a country. It cannot, however, survive genocide, civil war and socialism.

• Corruption is endemic in many poorer countries because without a vigorous economy, political and bureaucratic careers are among the few avenues open to advancement.

• Trade barriers do more harm by rich countries than all of the good they try to do. We could help counties lift themselves from poverty by buying their goods.

• Foreign investment can greatly accelerate economic growth and development.
____

The idea that we could make poverty history is a noble and inspiring one. Let us be clear-headed about it, though. Cancel their debts (which were run up by a previous generation of predatory despots) and open our markets to their goods. Help them fight AIDS/HIV and Malaria. Help everyone gain access to clean water. Help them tackle corruption and predatory government. Buy their stuff.

Country by country, the Flat Tax is sweeping the world. Romania becomes the tenth country to introduce a Flat Tax on 1 January 2005.

Romania's bold decision to scrap progressive income taxes and introduce a flat rate of just 16% is a move which will further sharpen tax competition in Eastern and South-Eastern Europe still further. Russia, Estonia and Slovakia number among the Flat-Tax states. Already they have discovered that simpler, lower tax rates generate more revenues because they make avoidance and evasion less worthwhile. And lower rates encourage entrepreneurship, stimulate employment, and spur economic growth.

Romania still has a lot to do in terms of strengthening the rule of law -- another key condition for creating a prosperous economy. Regulation and corruption still need to be cut back. But the experience of other Eastern European countries is that a simple Flat Tax system goes a long way in the fight against bureaucracy and corruption.

Michael Crichton's new thriller, State of Fear, is about eco-terrorists who plot a series of natural disasters - earthquakes, underwater landslides, a tsunami - to prove that global warming is a threat to humanity. A ragtag band of scientists and lawyers uncovers the scheme.

At the end of the book the author sets out a five-page summary of his take on global warming, plus a 14-page bibliography of works supporting his views. Here are just a few of the points he makes in that summary, emphasizing his own uncertainty as well as general ignorance:

Atmospheric carbon is increasing, and human activity is the probable cause.

We are also in the middle of a natural warming trend that began about 1850 as we emerged from a four-hundred-year old cold spell known as the "Little Ice Age."

Nobody knows how much the present warming trend might be a natural phenomenon.

Nobody knows how much of the present warming trend might be man-made.

Nobody knows how much warming will occur in the next century.

I suspect that part of the observed surface warming will ultimately be attributable to human activity. I suspect that the principal human effect will come from land use, and that the atmospheric component will be minor.

There are many reasons to shift away from fossil fuels, and we will do so in the next century without legislation, financial incentives, carbon-conservation programs, or the interminable yammering of fearmongers.

I suspect the people of 2100 will be richer than we are, consume more energy, have smaller global population, and enjoy more wilderness than we have today. I don’t think we have to worry about them.

The Copenhagen Consensus took the view that since we do not have infinite resources to spend on everything worthwhile, we should prioritize those where we can do more good more effectively. They identified such areas as HIV/AIDS, malnutrition, subsidies & trade liberalization, malaria, new agricultural technology, and water & sanitation projects. At sixteenth, under 'bad projects' came the Kyoto Protocol. In view of the good which could be achieved elsewhere with the money, it seems extraordinary that so much of it is being expended for such feeble results.

At the same time that the feeble Scottish Parliament is wasting taxpayers' money buying out the Skye Bridge consortium (see my earlier blog), it doesn't seem to be doing much to promote competition in the transport links to other islands.

The Argyll Group plc has been struggling for some time to run a competing ferry service to the Isle of Arran, for example. At present Caledonian MacBrayne has an effective monopoly on dozens of island crossings, thanks in good measure to juicy subsidies from the taxpayer (of course). Argyll want to take them on, starting with the busy Arran run, and say that they can do the trip for two-thirds of what Cal-Mac are charging - despite the fact that Cal-Mac is pocketing a £2m subsidy and Argyll will get nothing.

As I reported in the summer, Caledonian MacBrayne put one of its old ferry boats up for sale, but refused to sell it to Argyll. I wasn't impressed that a taxpayer-subsidized company should treat potential competitors like that.

Now it turns out that Cal-Mac have a restrictive monopoly on Arran's main pier. For the size of ship Argyll are proposing, Cal-Mac propose a fee in excess of £1,250,000 per annum - that is, £4,000 per day - for shared usage. Cal-Mac, of course, pays nothing like that - and after subsidies, effectively nothing - for its use of the pier.

Argyll's only hope is to go to the Office of Fair Trading, the UK's competition authority. It certainly won't get anywhere with the people who are supposed to represent the Scots - the Scottish Parliament, sitting in its £400m building in Holyrood.

Something of the scale of what Burt Rutan is attempting is revealed in a BBC story. Work is under way on SpaceShipTwo, the passenger-carrying suborbital vehicle which "will not look anything like its predecessor."

With the new vehicle Rutan is aiming for a top altitude of between 84 and 87 miles (135-140 km), rather than the 62.5 miles (100km) it took to win the Ansari X-Prize. The extra altitude will add about another 90 seconds of zero-g for passengers to enjoy. Passengers will be able to float around the cabin.

Instead of shoulder harnesses and tight seatbelts we want this roller coaster-type bar that you fold out of the way and you can float around. We think that's important. If you want the view, we have handles there so you can float over and put your nose right against your own window.

Richard Branson has ordered five vehicles based on SS2. Each will be capable of flying at least five and more likely around eight people per trip. Rutan and Branson plan a luxury service. SpaceShipTwo’s cabin will have about the same diameter as a Gulfstream V business jet, slightly over 6ft in height and 7ft in width.

Rutan wants his Mojave-based company, Scaled Composites, to create 3,000 new astronauts a year - for each departure point, Rutan adds, and for each ship. "Mojave is not going to be the only place in the world where there will be a place to buy tickets and fly a spaceflight," he says.

With tickets starting at maybe $200,000 a ride, this is going to make space tourism into a whole new industry. Further down the road Rutan intends to develop vehicles to take fare-paying passengers into orbit. Thanks in part to one man’s vision and enterprise, large numbers of us will have the chance to take off-planet trips; including me. This is exciting stuff. As Rutan puts it:

Every kid who dreams, 'Wouldn't it be cool to fly in space?' will know that in your lifetime, you are going to go to orbit. You will know that, not just dream that. That is the neatest thing about the whole programme.

US citizens trying to holiday abroad can be forgiven for thinking the big economic story of 2004 was the falling dollar, which does not get you very far these days. Those involved in production and transport, including car drivers, might go for oil prices. It hit a high of $55.67 a barrel, raising doubts about world economic recovery.

The third candidate for big news story (and the winner) was China. Powering ahead with growth rates close to 10%, it has sucked in world energy and raw materials, and churned out finished goods. Fears of overheating have abated somewhat as the Chinese have struggled to control their runaway tiger.

China helped to push world growth to about 5%, a 30 year high. The UK’s 3% was quite respectable, especially compared to some of its sluggish eurozone partners. The US outturn might be 3.5%, also quite creditable. It is an awesome thing to watch wealth being created on such a scale. Hundreds of millions of people are being lifted clear of poverty, malnutrition, and maybe disease, which look set to become African rather than world problems.

The prediction: more of the same. Expect more growth, more wealth creation. And expect next Christmas to be marked by more pious sermons from church leaders, unable to see wealth being created on an unprecedented scale. Once again they will denounce rich countries for not 'sharing more of their resources' with poorer ones.

Here in Scotland there is much welcoming of the Scottish Parliament's decision to end tolls on the bridge from the mainland to the Isle of Skye. Islanders -- like First Minister Jack McConnell, who was born on the Isle of Arran -- know the importance of good transport links. But on that measure, the decision is wholly bad.

The Skye Bridge was one of the first projects built under Britain's Private Finance Initiative (PFI) -- where private consortia finance, build, maintain and (sometimes) operate major public infrastructure projects. Usually the state pays by usage, but on the bridge, users pay directly through tolls.

But tolls are unpopular -- islanders say that people on dry land don't have to pay for road links, so why should they? So the Scottish Parliament went for a sure vote-winner, and bought out the contract with the operators.

McConnell says that the Scots will end up paying only two-thirds of what they would have paid in tolls up to the end of the contract. But the trouble is that while the users of the bridge aren't paying, the rest of us are, through higher taxes. And since Scotland is hugely subsidized by England, English taxpayers five hundred miles away will end up paying too.

PFI makes sense because the state is very bad at building and funding new infrastructure projects. They prefer to spend the money on the (visible and politically sensitive) wages of teachers, doctors, and the rest, and let some future government worry about new roads and prisons. PFI has allowed a large number of new roads, prisons, schools and hospitals to be built -- not to mention bridges. Without it, things will revert to normal. Unless Scotland's remote communities can organize an important by-election in their constituency, they can kiss goodbye to new roads and bridges. If they were paying, they would get them. If they leave it to the state, they will be waiting a very long time indeed.

The UK’s Queen Elizabeth used her Christmas Day speech to make a powerful plea for tolerance, referring to the Biblical story of the Good Samaritan.

It is a timeless story of a victim of a mugging who was ignored by his own countrymen but helped by a foreigner, and a despised foreigner at that. The implication drawn by Jesus is clear. Everyone is our neighbour, no matter what race, creed or colour. The need to look after a fellow human being is far more important than any cultural or religious differences.

Adam Smith makes a strikingly similar point in his Theory of Moral Sentiments.

How selfish soever man maybe supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. Of this kind is pity or compassion, the emotion which we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner.

Smith says that while we cannot feel the passions of others directly, we can imagine how we would respond in similar circumstances, and thus feel 'sympathy' with their plight. We might today use 'empathy.'

Some suppose this sits at odds with the pursuit of their own interest which features more prominently in The Wealth of Nations, but the two works are not contradictory. The ‘self-love’ referred to is not to be equated with selfishness, but takes its place under prudence as one of the virtues, alongside justice and benevolence. It consists in a proper regard for our preservation, he says.

To use self-interest as a guide in economic activity is both appropriate and efficient, but those who feel no compassion for their fellow humans seem less than fully human themselves.

We wish all our readers a very merry Christmas. Have a great day, everyone!

The UK Culture Secretary Tessa Jowell MP is bidding hard for the title of Mrs Scrooge. Her contribution to the festive season is a proposed tax on fun. The Times reports her proposals to charge social events from music festivals to country shows "to cover the costs of health and safety checks by officials."

The charges are to apply to events which attract more than 6,000 people that involve temporary accommodation and serve alcohol or late-night refreshment. The minimum charge will be £5,000, rising to £50,000 for larger numbers. The future of charity pop concerts is threatened, as are the many country food shows and game fairs held in the grounds of historic houses. Literary and folk festivals and garden shows also face prohibitive extra costs.

As the faceless army of officialdom marches on, yet more of the innocent pleasures will be lost, and a little more fun taxed out of existence. Some might think it a better idea to allow such events to go ahead untaxed, with messages on their posters and tickets saying "this has not been inspected by government officials." It could become a badge of honour.

The cost of buying the traditional presents for the Twelve Days of Christmas is up by 1.6% report PNC Advisors. The three French hens posted the biggest hike, up 200%. The costs reflect changing economic conditions, as some goods become relatively more plentiful and others scarce. I might dispute some of their figures.

Gold had quite a good year as the greenback weakened, so those five rings cost more. If the law which bans fox-hunting in the UK is extended to bird-shooting as some seek, partridges will be hard to find. They only survive because sporting gamekeepers protect them from predators. The pear tree should become cheaper, though, since tree cover is increasing each year in the UK and US. If carbon dioxide is increasing, it could happen elsewhere, too.

Turtle doves and colley birds might thrive in the extra tree cover, but those French hens stand dangerously exposed to the EU’s common agricultural policy. UK swans are in greater supply thanks to an influx of rather beautiful black and white Russians ones, visiting unusually for the winter. Geese have recently made something of a comeback for people tired of turkey.

This is all well and good, but the problems come in the service industries. The fact is that drummers and pipers are skilled labour and command higher wages. Lords can be hired pretty cheaply, especially since Tony Blair created so many from Labour Party donors. Ladies who dance are difficult to outsource unless the recipient is happy with a Bollywood video of them, but the milking maids face an influx of competition from the new EU nations to the East (it is even rumoured that their visa applications may have been fast-tracked).

So, every year some of these prices are up, some down. And every year people are prepared to supply these goods and services not from benevolence, but from their regard to their own interest. Merry Christmas everyone.

The UK television company ITV is attempting to buy out its small US shareholders, according to the Times, in order to get their numbers below the 300 threshold which requires compliance with US stock exchange regulations. ITV estimates the cost of providing separate US accounts at £3m per year. Instead it plans to offer small US shareholders a $500 bounty and 15% above the share price.

Given that US courts have long had jurisdictional problems, and do not seem to recognize that independent countries prefer to make their own rules, the move seems prudent.

The broadcaster’s move reflects mounting criticism by European companies of US listing corporate governance rules, which they say are too onerous for many businesses whose primary listing is outside the US. In recent months Lastminute.com, the online travel company, and Autonomy, the software group, have sought to quit Nasdaq because of the mounting cost of regulation. Siemens, the German electrical group, and Intershop Communications, a German software company, have also threatened to delist from US exchanges.

Among the benefits of a global economy is the ability to move production to where costs and overheads are lower, and to a more sympathetic tax regime. To this must be added the ability to locate and be listed where regulation is more sensible and proportionate (the UK is not exactly a financial sweatshop).

There are excess regulators in the EU, too, and this ability to shop around is precisely what they would like to stop. Their over-the-top regulation is actually restrained by the ability of companies to locate beyond their jurisdiction. That ability enables firms to be more efficient by avoiding the excess costs of compliance with their pointless and burdensome rules. It means less costly goods and services, which is good for all of us.

Our blog of the week goes to Global Growth which is "a UK based non-governmental organisation (NGO) promoting free trade to raise living standards and reduce poverty worldwide. We focus on the advocacy of lasting solutions to the structural economic, political and cultural causes of poverty."

One of Global Growth's intellectual heroes is Richard Cobden, the 19th century classical liberal whose Anti-Corn Law League successfully defeated the immoral farming policies of the day. Today's Common Agricultural Policy - which kills 1 person every 13 seconds in developing countries - is one of Global Growth's main targets, and rightly so. This NGO is one to watch.

Tony Blair and his ministers like to quote from the British Crime Survey when they claim they have done well on crime. On the face of it, the British Crime Survey is the best source because it is based on interviews with a large sample of people - 40,000 - in their own homes. This gets rid of the problem with official recorded crime that the rate at which crimes are recorded a) varies from one crime to another and b) may vary over time. So, the BCS appears to be objective and realistic.

But Trevor Kavanagh in The Sun makes the point that the British Crime Survey is deficient is several key ways:

• It does not ask anyone under 18 about their experience as victims of crime
• It obviously cannot include murder (since the victims are not around to tell the tale).
• It does not include crimes against commercial property
• It does not include rape or other forms of sexual violence on the grounds that families are reluctant to talk about such things.

These are important omissions. A great many of the victims of crime are under 18. These are also often victims of violent crimes - the sort of crimes which the officially recorded crime figures suggest are rising dramatically. Murder, of course, is the ultimate violent crime.

It is very convenient that the BCS figures do not include rape and sexual assault, too. This is another category of crime which - according the officially recorded figures - is going up. The Government likes to claim that this is because women are more willing than before to report such things.

The Sun took the initiative of commissioning a Mori opinion poll to find out just how commonplace crime has become in Britain if you cut out the Government in the assessment of it. (The present Government's willingness to manipulate statistics and turn civil servants into its propagandists is another reason for wanting to do this.)

The sample used is regrettably only 1,001 but the results are grim. Of adults, 83 per cent have been victims of one crime or another. That might not seem too bad - on the basis that many of the crimes will have been minor and older adults have been around a long time during which to experience crimes. But the remarkable thing is that 81 per cent of 15 to 17 year-olds also say that they have been victims of crime. That suggests a phenomenally high incidence of crime among the young.

Again, of adults, 30 per cent have been victims in the past year. But of 15 to 17 year olds, 52 per cent have been victims. That is a truly enormous figure. Young people, according to this poll, are more likely to have endured a crime in the past year than not.

A UN international survey - not using official figures of any Government - has previously suggested that England and Wales had the equal highest crime rate out of 12 selected countries. Australia shared this very high crime rate. Countries including the United States, France and Switzerland had lower rates.

James Bartholomew is author of The Welfare State We're In. Read the blog of the book here.

The "man of system" is described by Adam Smith in his Theory of Moral Sentiments, Part VI, Section III, Chapter II

He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.

When debating about globalization, it often becomes obvious that (the ideological) supporters of 'trade justice' and 'fair trade' have a pretty modest vision of the perfect future for farmers in poor countries. They want them to be doing them exactly the same job in the future as they do today - but for more money. They look in horror at Brazil's coffee industry, where mechanization means that 5 people and a machine can do the same work as 500 workers in Guatemala. They look romantically at traditional farming techniques - where workers spend long days doing back-breaking toil - and think they should stay doing that.

This is why the Fairtrade scheme encourages farmers to keep in the market - rather than helping them to exit. By keeping the better-off coffee farmers who live in more open markets in the coffee market, they depress coffee prices and cause greater poverty among coffee farmers as a whole.

This is also why organizations like Christian Aid have opposed the repeal of the Multi Fibre Agreement because it will enable very poor countries to start producing textiles and encourage less poor countries to switch away from textiles.

The message of the 'trade justice' lobby: static economy good, dynamic economy bad.

"Some people will forever be chasing the chimera of better government. This shields them from the idea that the only option is less government."

- Prof. Peter Gordon, University of Southern California (via Samizdata.net)

This morning I appeared on BBC Asian Network, speaking against ID cards. One caller said that when she goes out on the town she often forgets to bring her mobile phone, and that it is entirely possible, therefore, to assume that she will forget her ID card. By 2012, when ID cards are made compulsory, she could be taken to court and fined, simply because she didn't have her ID card on her. The new legislation will turn law-abiding citizens into criminals, with the potential for bringing fear and resentment towards the police.

Many perpetrators of serious crimes will, of course, have forged ID cards. In Israel, where they have biometric identity cards, the government estimates that there are "hundreds of thousands" of fake ones. If stopped by the police, terrorists in the UK will be able to simply show their ID and be cleared of suspicion.

While David Hume exhibited admirable qualities of generosity and goodwill, his reputation as a skeptic meant that he was never described as pious. When he took up house in Edinburgh's New Town (1770), in a yet unfinished street one along from St Andrew's Street, a wag chalked up "St David's Street" on the corner to mark the great philosopher's presence. The name stuck, and I was reminded of the story last week when I stayed around the corner.

There are different versions of the story. Thomas Huxley tells one:

It was the first house in the street, and a frolicsome young lady chalked upon the wall "St. David's Street." Hume's servant complained to her master, who replied, "Never mind, lassie, many a better man has been made a saint of before," and the street retains its title to this day.

Another version has it that he remarked quietly, "Never mind - I am not the first man of sense that has been made a saint of."

Will 2005 be a year to worry about China? Growing at upwards of 9% per year since Deng Xiaoping’s economic reforms of the 1970s, China is already a world powerhouse, stimulating world growth by its demand for raw materials and selling us more of its finished goods. With a few years its economy will overtake those of Britain and Germany, and that of the US two or three decades later.

The worry is that China with its very cheap labour will make the world's goods, taking our jobs from the rest of us. Gary Duncan in a Times article is not worried. He says that:

Crucially though, such a proposition flies in the face of the basic economics of trade under the theory of comparative advantage first set out by David Ricardo. Comparative advantage means that countries are best off when they specialize in doing what they can do most cheaply, and then trade with others.

So, China's pool of cheap, relatively unskilled labour means that its advantage lies in concentrating on light, labour-intensive manufacturing while importing high-tech, high-value-added goods made in the West. China is not only a big producer but also a vast market for Western-made, capital-intensive goods. By the end of the decade, projections suggest that 100 million Chinese will have incomes matching those in Western Europe.

Duncan points out that we used to share the same worry first about Japan, then about the Asian tigers including South Korea which followed. It didn't happen. In 1965, Japan and the Asian tigers accounted for about 4 per cent of world GDP; today they account for about 16 per cent. Similarly, from about 4 per cent of world output today, China may account for 11 per cent or more in 20 years' time. They followed similar paths of expansion.

The message is "don't worry." China is growing richer and creating wealth on a world scale. We can trade our high-value-added goods with that wealth and get richer ourselves. Millions will be lifted out of poverty there, and increased choices and opportunities here.

Quiz Time - Treat yourself a fine Havana cigar after naming the small island subject to intermittent blockades, military intimidation, and a constant barrage of economic and diplomatic pressure by a neighbouring superpower.

Light up that corona, senor, if you mentioned Taiwan. Okay, that or Cuba. Both were agricultural and desperately poor fifty and more years ago and both have faced pressure from superpowers - tiny, communist Cuba by the capitalist United States and tiny, capitalist Taiwan by the communist People's Republic of China. But the similarities stop there.

In 1960, Taiwan's per capita income was about a measly $150 while Cubans were more than twice as wealthy, estimated at almost $400. Today, Taiwan's per capita income is $23,500 and still growing, while Cuba's is only $2900. Why?

Taiwan always gave its citizens enormous economic freedom, then in the past 25 years made itself into a vibrant democracy. Cuba offers virtually no economic freedom and no democracy at all. So Taiwanese relax in the same holiday resorts that you visit, while the Cubans cannot go anywhere unless they steal a leaky boat and paddle toward Florida.

In other words, the Taiwanese are free to manufacture goods and provide services that the rest of the world wants (read the label on your microchip), and the world rewards them with well-deserved wealth. Meanwhile Cubans are pretty much serfs and vassals of Senor Castro and his communista bureaucrats, and an island full of poor, teenaged girls try to sell themselves to middle-aged French waiters on cheapo package holidays.

Next time the parlour-pinks and limousine-lefties whine about US-Cuban relations, ask them why Cuba isn't as rich as Taiwan.

Theodore Parker described democracy as 'a government of all the people, by all the people, for all the people'. Winston Churchill was perhaps more realistic when he called it 'the worst system of government except for all the rest'. Whichever definition is preferred (and they are not necessarily contradictory), most of us who have experienced democracy would not want to exchange it for any other system of government. But what kind of economic regime is best suited to real democracy? That question is too often ignored by economists.

Democracy assumes that ordinary people are wise enough to elect a government. If so, surely they are more than capable of deciding how best to spend their own money. And yet in the western European democracies people regularly vote for governments that take between 40 and 50 per cent of their incomes in taxation. In so doing they are saying that fallible politicians know better than they do themselves how to provide the health, education and other services that they need. The Adam Smith Institute has calculated that for the UK Tax Freedom Day falls on 30 May.

Even those on very low incomes are taxed to the hilt. For example workers on the minimum wage of £4.85 an hour start paying income tax after 19 hours work a week. By the time they have worked 27 hours, they are paying 33p in every extra pound in income tax and national insurance. Gordon Brown, with the agreement of the electorate, taxes the poor into greater poverty! How did we arrive at this crazy system?

In short, because we expect the government to do far too much for us. And as that attitude developed during the twentieth century our democracy gradually changed into what Ralph Harris has rightly called a 'demockery'. To reverse this trend will require radical, new thinking on the part of people and politicians and a very large reduction in taxation and government expenditure. If the government were to stick to its basic roles of defence, maintaining law and order and providing a temporary safety net for those who had fallen on hard times, taxation could be reduced to between 10 and 15 per cent of GDP and Tax Freedom Day would be in February. Many taxes could be abolished and others slashed. The UK would become the world's most dynamic economy as well as the truest democracy.

Today's Guardian has an article calling for ID cards to rejected. The author, Henry Porter, writes:

To be anonymous, to go privately, to move residence without telling the authorities is a fundamental liberty which is about to be taken from us. People may not choose to exercise this entitlement to privacy, or see the point of it, but once it's gone and a vast database is built, eventually to be accessed by every tentacle of the government machine, we will never be able to claw it back. We are about to surrender a right which is precious... and profoundly emblematic of our culture and civilisation...

We must not imagine that respect for individual liberty is innate to the British establishment. With this bill, the government is attempting to change for ever the relationship between the individual and the state in the state's favour. Those who treasure liberty must not let it pass.

The Multi Fibre Agreement (MFA) expires this year. Graham Seargeant sheds no tears for it in his Times column, describing it as "the most notorious example of Western countries protecting their industries from the poor."

Many developing nations use textiles as their first springboard to economic growth, including Britain which led the way. Those who followed have faced rich countries anxious to protect their developed industries from cut-price competition. The MFA was a major instrument in closing their markets to these cheaper imports, and subsequently in keeping poorer counties to low-value unfinished goods. It has kept them from becoming richer. As Seargeant puts it:

The MFA allowed a fiendishly complex system of individual quotas to be imposed on low-cost exporting nations, perhaps the most damaging kind of trade barrier. It slowed import growth in a way that denied the price mechanism, set exporters against each other, invited ever more devious fiddling, encouraged corruption in distributing scarce quotas in exporting countries and subjected trade to bilateral political favours.

Not everyone takes relief at the MFA's exit from the scene. Christian Aid, reports Seargeant, "wants 'rich' retailers to stay loyal to suppliers and not go for the cheapest prices." Some of the would-be exporters also fear that developed counties, especially the USA, will use other tariff barriers to protect their struggling textile industries.

The real problem with the MFA was that it tried to manage and control an industry in which the world could have gained much more without such involvement. Free trade brings economic churn. Industries in developed countries have to keep moving as new nations compete against them. They have to move up-market, or switch to new products. The stability and comfort of settled jobs and permanent markets is not there. Nor should it be. The world gains from the progress and prosperity, and poor countries can lift themselves out of poverty.

Globalization and free trade cause dislocation and some pain, but the gains from them are immense. A managed protectionist system of tariffs, quotas and artificial prices denies us these benefits, and is ultimately unsustainable as well as undesirable. Goodbye MFA, and no parting tears.

Britain's elections quango, the Electoral Commission, has proposed tax relief on donations of less than £200 a year to political parties. This is a thoroughly bad idea.

First, the UK tax system is already groaning with complexity, and this just adds another one. Second, tax reliefs on small sums will require new bureaucracies and are disproportionately costly to administer and police. Third, donors will have time-consuming forms to fill in. Fourth, as tax cash is siphoned into political parties, those of us who do not want to give succour to prattling politicians will find ourselves paying more tax. Fifth, to get the relief your party will have to be registered somehow, so the large and established parties will benefit while independents and newcomers will not. Sixth, this idea is a stalking-horse for full state funding of political parties, which again will favour the status quo and disadvantage new parties.

You have to admire the skill of the Westminster village in coming up with ideas that will take money out of our pockets and line theirs. But that is not a proper use of state power.

Many people uneducated in economics argue that wealth, like energy, cannot be created or destroyed, but merely transformed from one form to another. The Gross Domestic Product of the world must remain at an exact level, and as people get richer, there must be others getting equally poorer in order that the level of wealth in the economy stays the same.

Economic Growth is the increase in the total wealth and therefore standard of living of an economy. It is measured in monetary terms by the percentage change in Gross Domestic Product, adjusted for inflation.

What economic growth therefore means is that either the average person within the economy is wealthier, or the population has increased. It is usually some combination of the two.

In the UK, the population growth is much lower than the economic growth, and therefore it can be assumed that the average and total wealth of the country has increased. The same can be said for the rest of the world as a whole. The GDP per capita and total GDP of the entire world rises every year. It is difficult to argue when faced with statistics showing an increase in world wealth that growing countries are simply getting richer at the expense of others.

Those of us who believe in a society that protects individuals obviously do not like oppressive regimes, such as those run by military dictators or communists. It is often argued that sanctions are a good way of opposing such regimes and help us show solidarity with those being oppressed.

The problem with sanctions is that they are rarely very effective. They tend to leave a country's elite in power. The elite remain wealthy, creaming wealth from the population. Overseas investment pulls out, and poverty and starvation grow among the population. In Iraq, sanctions were ineffective at removing Hussein or getting co-operation with the UN, but they did cause considerable suffering among the people.

Matthew Parris, in his autobiography Chance Witness, says that though his family opposed the policies of Ian Smith's Rhodesia (where they lived), their lives were made more difficult through sanctions. As a result, many liberal whites - who rightly opposed white-only rule - became more supportive of Smith because they now had a mutual foe: the sanctions. Smith remained in office for a decade and a half.

Particularly bizarre are the US's sanctions against Cuba, where the average income is $2900 a year. Since the rest of the world trades with Cuba, the sanctions are more about being seen to oppose Castro than about doing anything. But sanctions allow supporters of Castro to claim that the poverty in that country is caused by sanctions, rather than by the country's economic policies.

Some people argue that industries need protection from overseas competition because that is in the interests of the British economy. In reality, protectionism may be good for particular groups of people, but it is never good for an economy as a whole. How is this the case?

Consumers buy goods from another country because they are better in quality or price than the goods available domestically. Sometimes it is because the good is only produced overseas. Being 'better in quality' should be taken in a broad sense, as some people regard British real ale as the best quality beer, while others regard Belgium beer as the best. Consumers have different tastes and imported beer from countries like Belgium enables different tastes to be catered for.

Odd though it might sound, trade would be beneficial even in the implausibly extreme case of Belgium being better than the UK at producing everything. This is because it is Belgium's interest to specialize in those products that it can make most money on, and to use money they make to buy in the other things they need. So Britain and Belgium - even in this example - would benefit from some specialization and then trading their excess goods with the other. This is what is referred to as the Law of Comparative Advantage.

Trading allows more goods to be produced in total for the same amount of inputs, and therefore is more efficient. It is for this reason that protectionism and subsidies harm consumers and businesses alike. They prevent consumers from buying the goods they want at the prices they want and they prevent businesses from taking advantage of their relative low costs and selling cheaply abroad.

Christian Wignall in San Francisco writes in to say:

My local bus stop has just been emblazoned with a poster advert for St Mary's hospital. It shows a man tumbling from a ladder 'Ooopppss!! - Thank goodness for St Mary's Hospital, emergency room care in under thirty minutes" I don't know whether such adverts exist in England, but it struck me as a telling example of how competition among health providers means they reach out to serve the customer.

In Britain there are no advertisements for such things. There is no need. Many of us already know that there is a Government target that patients should spend no longer than four hours in accident and emergency. That target was imposed because there were so many scandals in the newspapers of people being kept on trolleys for 12 hours and more. There is a shortage of nurses in four out of five accident and emergency departments. And many such departments have been closed down over the years, so many of us - perhaps most of us - are now further away from one now than we would have been 50 years ago.

James Bartholomew is author of The Welfare State We're In.

Michael Crichton’s new book Climate of Fear is about global warming. The author of Jurassic Park and The Andromeda Strain turns his attention to what he describes as a political, not a scientific, agenda. CNN reports that although:

"State of Fear" sounds like a typical Crichton thriller, but this time he's using the novel as a platform, tacking on a five-page message stating his notion that the theory of global warming is speculative at best, and a 14-page bibliography of works supporting his views.

Crichton's author's statement is new even for Crichton. In it, he argues that a political agenda, not scientific evidence, is the foundation for predictions that the planet's climate will warm by 4 to 9 degrees Fahrenheit over the next century. World powers, he says, use global warming to keep citizens in a state of fear, just as they did with the Cold War.

Crichton started, rather like Bjorn Lomborg, with the view that global warming is a threat. He began to study climate data and charts, expecting to find proof. However, the more he hunted, the more unsatisfied he became with the evaluations and speculations. Like Lomborg, he thinks resources are being diverted to the more fashionable "threat" and away from areas where they could do more good more immediately.

"Why are we not feeding people in this world who are hungry? Why are we not giving clean water to the almost billion people who don't have clean water? The greatest sources of environmental degradation is poverty. Why aren't we cleaning up poverty?"

Douglas Mason died yesterday. He was an Adam Smith Institute author and a good friend. A thoroughgoing believer in the free economy and free society, he will be remembered as the originator of the 'poll tax' - the idea of replacing the UK's local property taxes with a uniform per-capita charge for local services. But he also produced papers from the 1970s onward, calling for the liberalization of alcohol licensing, the sale of state forestry, winding up local-government quangos, privatizing the Royal Mail, getting the state out of libraries, abolishing state housing subsidies, and much more.

Everyone liked him, and enjoyed discussing aspects of liberty with him. This even included those who disagreed. His engaging, modest and unassuming character put him on easy, first-name terms not just with political leaders, but even with the humblest cleaner or doorkeeper in the House of Commons, where he worked as an assistant and speechwriter to leading Thatcherite ministers.

Douglas lived quietly, and rarely lost his temper or created a fuss, except when he thought that politicians were ignoring or disrespecting the rights of ordinary people, of whom he counted himself one. He was an inspirational thinker and writer, and his influence on events was very much wider and more lasting than many people suppose.

A number of obituaries has appeared in the leading UK newspapers: The Daily Telegraph, The Independent, The Times, The Herald, The Scotsman, and The Guardian.

The first national survey of religious affiliation derived from the last census is published on the Office of National Statistics website (and reported by Jonathan Petre in the Telegraph). It shows the UK to be 71.1% Christian.

The Jedi, at nearly 400,000, outnumber those who answered Sikh, Jewish or Buddhist. Many who were offended that the state should ask so personal a question undoubtedly gave an impertinent response. It is one thing for opinion polls to ask such things, but quite another when the government seeks to know such detail about us.

However, all Jedi Masters will find it satisfying that due recognition has at last been given to that ancient religion with its sorcerers' ways…