I find it very pleasing that Bahrain's MPs have declared war on inflation because, for too long, there seems to have been an idea that the kingdom was almost unique in avoiding inflationary pressures.

It may not have seen the kind of price rises experienced by the UAE and Qatar, but there is little doubt that its peg to the US dollar forces it to go down a road of monetary policy which is totally out of sync with what the economy actually needs.

My problem with the announced battle against inflation is that the tactics suggested may well provide a safety net for the less well off on this island, but they will do next to nothing to prevent further inflation.

As an old Scottish lefty I think that subsidising basic food commodities is an excellent idea, as I also think subsidised energy and water are marvellous.

But from an economic point of view I would suggest that the majority of people who benefit from these subsidies are people who are well enough off to pay the going rate.

Subsidies like this end up costing a lot of cash to support the better off that could be better employed targeting people really in need.

I suppose the idea of charging expats more than Bahrainis when they go to the supermarkets and malls will find some populist support.

But economically it would not work. Administering such a system would cost a fortune and result in queues at the checkouts normally only seen here in front of bank tellers.

The real answer would be to adopt tried and tested policies to halt inflation, which include reducing demand in the economy.

And the way to fund the less well off in this situation is to create a national minimum wage for both public and private sector workers that reflects their financial needs.

To pay for this there is an obvious solution and it is one that most, if not all the GCC states, will have to come to terms with if they want to be modern players with diversified industrial and financial bases in a global economy. It's called taxation.

What I particularly liked about the local politicians reaction to inflationary pressures is that, while their reaction may not be wise in terms of classical economics, it is at least socially responsible and caring and on that level it has to be applauded.

Not so the reaction of the government party in the US where the Bush administration still sees cutting taxes for the most wealthy while reducing what limited social security and healthcare benefits exist for the needy as the policy that will boost the country's flagging economy.

Interestingly the most successful Republican candidate in the Iowa caucuses the other day, Mike Huckabee, was the only candidate standing for his party's presidential nomination who does not support the Bush tax cut benefit policies.

Even John McCain, who campaigned against the Bush tax regime in the last primaries is now on board as honouring the policy if he gets into office, which he won't.

The problem with Bush economics is not simply that it is divisive and makes the rich richer while the poor suffer, it just does not work because it is based on flawed economic thinking.

The Bush argument is that if you let the richest people in society and major corporations hang on to more of their cash then they will go on a spending spree which will boost sales, create jobs and with this increase in economic activity the poor will get richer and need less support while the total tax taken by the government will increase on the back of this boom.

The flaw in this non-economic argument is that the rich may send their cash overseas or use it to create inflation in luxury goods like art, yachts and luxury apartments.

The tax breaks would not necessarily go into the US economy and a high proportion of them would certainly not be as wealthy US consumers would be buying imported goods.

The second flaw is based on<