Dead Economist of the Day

Adam Smith once pointed out that all that was necessary to raise a nation from barbarism to opulence was "peace, easy taxes and a tolerable administration of justice".

Part and parcel of that tolerable administration is legislative certainty. That you know what the law is and that it won't be randomly changed upon you. Some seem either to have forgotten this or didn't know it in the first place.

The Kremlin has a choice. Either make Russia a place where foreign investment grows, the oil runs more profitably, democracy thrives and your people get richer - or condemn your country to pariah status, where your machinery reverts to Soviet obsolescence, your infrastructure rots and foreigners approach with dread. In the long run, being feared rarely makes you rich - that comes with cooperation.

If the rules are changed so that your staff can't work there then you've got something of a problem, yes?

In all, 148 BP secondees to TNK-BP have been forced to leave following a dispute over the renewal of visas that started in March.

It's not just Russia of course:

Cadogan Petroleum has suspended trading in its shares only five weeks after raising £153m from investors in a London float.

The Ukraine-focused oil group, which was brought to the market by investment bank UBS at 230p a share, halted trading at 147½p after the validity of its exploration licences was called into question.

Mark Tolley, chief executive, took the decision to suspend dealings after reports in the Ukraine media of an alleged ruling by a local court.

Nor is it only the wild east: the colonial cousins have recently shown the effects of legislative uncertainty.

And it's not just Johnny Foreigner either:

In addition to a surprising willingness to admit to self-inflicted problems, such as executive greed, almost all the financiers and lawyers cited more regulation and sneaky taxation as possible catalysts of the City's decline, especially when they are exacerbated by uncertainty.

The Chancellor's contribution to the if-but-and-maybe school of government can hardly be over-stated. Taxes have been proposed, then scrapped. Levies have been introduced, then watered down. Rules have been set in stone, then crushed by political expediency. Policies suffer the same fate as Child Benefit data in Mr Darling's department: here one minute, gone the next.

All of these different actions might bring short term benefits to those undertaking them: but in the long term the absence of legislative certainty will cause greater damage to each of those economies.

Ho hum, looks like not enough people (still, after 232 years!) have read Wealth of Nations.

Sigh.

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