Monarchy’s extraordinary longevity is good for UK capitalism

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SO it is a boy, a Prince and our future King. It’s wonderful news for his parents, the Duke and Duchess of Cambridge, to whom we send our heartfelt congratulations; and an important moment for the country. The BBC and ITV interrupted their schedules; bankers’ toasted the Prince at a banquet in the City; town criers did their bit; an easel was erected in front of Buckingham Palace; Boris Johnson turned the fountains in Trafalgar Square blue; and the BT Tower announced, in massive illuminated characters, that “it’s a boy”.

The royal infant will be the third in line to the throne, after his grandfather Prince Charles and his father Prince William, replacing Prince Harry; it remains to be seen, however, how many readers of this newspaper will still be on this earth when the young Prince becomes King, which could be next century, given the longevity of the Royal Family. That is an extraordinary thought, one that embodies the beauty and extreme stability of the institution. Nobody else does succession planning and long-termism this brilliantly; one of the monarchy’s least well-understood but most important side-effects is that its survival helps ensure the protection of private property and hence capitalism.

Today’s monarchy is remarkably popular, far more so than it was a decade or two ago. The Queen’s 90 per cent satisfaction rating recorded by Ipsos Mori in November matched the record figure she achieved in June, during the Jubilee celebrations. Just seven per cent of respondents say they are dissatisfied with her performance. The most popular member of the Royal Family is the new Prince’s father, Prince William, picked by 62 per cent of the public and especially younger people. An overwhelming 79 per cent of the public favour retaining the monarchy; just 16 per cent are republicans; and 60 per cent believe the UK will still be a monarchy in 50 years’ time. Let us hope that the baby boy born yesterday, and his father and grandfather, prove them right.

SINGLE MARKET FAILURE
THERE it was, buried among a pile of boring, uninspiring official reports about the relationship between the EU and UK released yesterday. I almost missed it, a slim volume by Europe Economics, commissioned by the Department for Business, and the most interesting analysis of the EU I have read in a long time.  

In a successful single market, with the four freedoms – free trade in goods and services, the free movement of people and capital – we would expect to see convergence in prices (goods and services, wages and the cost of capital); trade and labour migration; and enhanced efficiency.

Yet the Europe Economics report finds that progress has been limited. Interest rates converged from the late 1990s – and then diverged again from 2008. A case study of the pharmaceuticals industry shows price dispersion declining steadily in the period 1992-2003 – but then increasing again subsequently. As to labour productivity, “for almost all sectors… there has either been very little convergence since the early 1980s or what convergence there has been has been less than or entirely explicable in terms of global convergence.” What convergence there has been has appeared to have been driven by the eastern European accession states. The dispersion in hourly wages decreased during the 1970s and 1980s, then in the 1990s the convergence process slowed down and even reversed for some sectors.

In its early days, the single market did often trigger increased integration – but in more recent years the effects have been much harder to detect, and in some cases have gone into reverse. When one starts to drill down into the detailed numbers, it is clear that the economic benefits of the single market are smaller than they are usually believed to be.

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