Wednesday
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(53)There is a lot of stuff about Dubai at the moment. The issue of Dubai Ports' purchase of P&O and the reaction by certain American Democrat and Republican politicians is a massive story Stateside, though it has not registered much in the UK, unless you are a reader of the business sections. There is a smell of protectionism in the air in Europe too, with a number of European states scratching each other's eyes out about merger and acquisitions involving banks and utilities. Plus ca change..
Dubai is now a major story on a number of fronts. The BBC recently ran a series of programmes about the incredible amount of construction happening there and the local magnates and immigrants who are driving the economy forward. A vast artificial archipelago of homes and estates has been built into the Gulf. Dubai is also a major business and media centre, a place where a lot of sporting and cultural events goes on. Dubai is also becoming one of the major venues for business conferences in areas such as finance.
So it seems to me that even with all the reservations one might have about that part of the world and the islamist threats not far away, Dubai's vibrancy is a sort of Good Thing. The place has, potentially, the capacity to exert the same impact on parts of the Middle East as Hong Kong did on mainland China. Perhaps it is all a bubble and will go up in smoke, as the Eyeores out there might think, but on the whole I am optimistic. Let's face it, pessimism is a sort of cop-out.
May the meme of liberty spread out from its borders and confound the naysayers. Meanwhile, this man is doing something highly admirable.
Sunday
The Oscars are nearly upon us. (Okay, please try to keep reading) One thought prompted by this circus and what goes on in films is how films can carry messages very different from the intentions of the film-maker. A classic example is the 1987 film, Wall Street, in which Michael Douglas gave what I thought was his greatest performance as Gordon Gekko. Gekko is what your average lefty Hollywood producer imagines is a capitalist: incredibly greedy, callous and crooked, stamping the lives of good honest hardworking people, blah, blah, blah. And yet we know that in the course of the speech, Gekko gives his tremendous "greed is good" speech, which I sometimes think reads like Ayn Rand on acid.
A friend of mine, Libertarian Alliance founder Chris Tame, once told me that during this stage of the movie, he burst into applause, much to the surprise of the other cinema-goers. I wonder how many other folk have had the same reaction to a speech or line in a film where without realising it, a pro-capitalist point has been made in a way the director probably had not intended? Has anyone got any examples?
Saturday
The ideal gift idea for that collectivist friend in need of enlightenment and help in doing maths. (Thanks to those clever folk at the von Mises Institute.)
Tuesday
Clive Davis approvingly quotes a book by a fellow called Rod Dreher, a "crunchy conservative" (whatever that is) who is, we are told, a passionate environmentalist, a disliker of suburban sprawl, shopping malls (oh, the vulgarity!), television (ditto), McMansions (huh?) and other regrettable features of consumerist, dollar-obsessed America. Instead, this fellow, who sounds rather like an American Roger Scruton (of whom I am an admirer, at least in parts) is a fan of government restrictions and regulations, and mentions the case of the U.S. Pacific Highway, left pristine and free of crass development by land-use regulations.
There is nothing actually all that new in conservatives embracing controls on development. The very word, conservative, is based on the desire to conserve and protect what exists from the new. During the Industrial Revolution, conservatives like the Poet Robert Southey railed against what they saw as the ugliness of industrialism and the associated sprawl. (Some of the dislike was also based on snobbery and fear of an pwardly mobile and undeferential middle class). The trend has continued. It was that perfect symbol of cuddly English fogeyism, Sir John Betjeman, who took potshots at suburbia, penning one of his most famous verses about that place to the west of London known as Slough. (The former Poet Laureate asked Hitler to bomb it).
What is so striking is how unoriginal and old-hat all this sort of thing is. More interesting to me, however, are those writers who do not imagine that shopping malls or mock-Tudor mansions in Surbiton deserve our scorn. Virginia Postrel has recently written approvingly of a book actually describing sprawl rather than automatically condemning it.
And let's face it, most of us, particularly those with children, live in suburbs or are moving there. It is a conceit, I reckon, of people who have no children, and who do not need the space, to take potshots at those who have decided to leave the supposedly hip inner city. It remains a mystery to me why the desire of people to live in a bit of space and comfort drives certain intellectuals nuts. Maybe it is the garden gnomes.
Wednesday
"There were Eastern men in felt hats with giant rims of rich gleaming fur, talking to long-bearded Jews about racks of animal pelts - the faces of small nasty critters gaping blankly at the sky. Chinese carrying crates of what he had to assume was China, coopers repairing busted casks, bakers hawking loaves, blonde maidens with piles of oranges, musicians everywhere, grinding hurdy-gurdys or plucking at mutant lutes with huge cantilevers projecting asymmetrically from their necks to support thumping bass halyards. Armenian coffee-sellers carrying bright steaming copper and brass tanks on their persons, bored guards with pikes or halberds, turbaned Turks attempting to buy back strange goods that (Jack realised with a shock) had also been looted from the Vienna siege-camp..."Quicksilver, by Neal Stephenson, page 420.
The above passage relates to when one of the central figures in Stephenson's marvellous Baroque Trilogy enters the-then famous Leipzig fair. What struck me about this section of the book was Stephenson's brilliant description of the sheer fun that markets can involve. (Yes, the curmudgeons out there will start muttering about the triviality of reducing market economics to fun, good heavens). His description even reminded me of a more modern market: the futures exchange in London's Cannon Street. I used to visit the LIFFE building and would look down from the gallery to look at the sea of men - not many women - trading odd-sounding things like short-sterling futures and options, gesticulating at each other in small groups, more often resembling folk on the verge of a pub brawl than a place where gazillions of pounds, dollars and euros were being transacted.
We are so used to critiques of capitalism from people who decry the supposed coldness and soulnessness of markets, unlike the supposedly warmer and more fulfilling communal lifestyles they claim to favour. And yet as Stephenson has reminded me, the market is that supreme example of social interaction and co-operation, often gaudy and loud, alarming even, but never dull.
Wednesday
One of the advantages of having a comments section is providing me with new ideas to write about, even when the comment in question is so flat-out wrong that it makes me gape with amazement at the screen. In my recent post about the economic fallacies surrounding immigration, a commenter opined that Indian immigrants into the UK were leeching money out of this country by not re-investing it in new businesses but merely writing cheques to "inactive" folks back in the old homeland.
It is a lousy argument on a number of levels, and I am not even going to dwell long on the obvious dangers of inciting distrust and hostility towards economically successful immigrant groups and accusing them of not being sufficiently "patriotic" by not spending all their profits in Britain. The argument also fails because it ignores the subjectivity of economic value. If a businessman earns a million pounds in profit from a drycleaning business in Birmingham and sends the odd cheque back to his aged relatives in Bombay, then how is economic value being destroyed? In the eyes of the businessman, helping his loved ones is worth more to him than investing that money in something else, even though other people might disagree with that decision and think him to be deluded. It is none of my business to force a change in that decision.
Also, that businessman is doing something that supporters of a liberal civil society have traditionally supported: philanthropy. How can it be wrong for a man to steer a portion of his wealth to his dependants, educate them, feed and house them? Who gives any entity the right, least of all the State, the power to say yay or nay to that decision? The argument that such transfers are wrong is an echo of the old Bethamite notion that the State is entitled to seize wealth if that maximises the "greatest happiness of the greatest number".
A final point. No doubt large sums of money are paid by immigrants and migrant workers back to the points of origin all the time. This has happened for centuries. These transfer often sustained people in great hardship.
I have come across some dubious economic arguments in my time, but the idea that immigrants paying money to their folks is some sort of parasitical waste has to be one of the weakest.
Saturday
Anthony Browne, writing the main feature article in this week's Spectator, says policymakers have underestimated, or quite possibly fibbed, about the scale of immigration into the United Kingdom from Eastern Europe. I do not want to get into all the cultural arguments that have been aired a lot here in recent months. Suffice to say that Browne makes some good, if slightly alarmist, points about the ability of a small crowded island like Britain to go on taking more and more people, never mind from often very different cultures.
He seems to make the mistake, however, when discussing the impact of immigration on wage rates, of what is known as the "lump of labour fallacy": the notion that there is a fixed amount of work to be performed in an economy. It seems a bit odd that Browne, who calls himself an economic liberal, should fall prey to this fallacy. After all, as surely the late economist Julian L. Simon pointed out, every additional person is not just another mouth to be fed, but another brain and pair of hands to create wealth.
Wednesday
Which British individual has done the most good for the world during the last half century or more since the Second World War? I nominate Sir John Cowperthwaite, Financial Secretary of Hong Kong from 1961 to 1971, who died last Saturday.
By applying laissez faire ideology to Hong Kong with greater inflexibility than anyone else was at that time even attempting, anywhere, he became, in Patrick Crozier's words, the father of Hong Kong's economic boom.
And that, if you think about it, makes Cowperthwaite the grandfather of the Chinese economic boom.
Without the shining example of Hong Kong, and the economically benign influence that Hong Kong has for a long time now had on nearby places still governed by Beijing, who knows what economic – and political – state China would be in now?
Cowperthwaite was criticised during his time in office for not taxing the people of Hong Kong more, and for ignoring, in particular, education. But has there ever been a more stupendous exercise in business education and everything-else-you-can-think-of education than Hong Kong? Hong Kong has been a University of How To Do It for millions upon millions of Chinese, Chinese who are now struggling to turn China itself from a suicidal and murderous world threat into a creative contributor to the world. The productive and trading templates now being followed in China were mostly devised in Hong Kong, and Hong Kong still provides a huge connection between China and the rest of the world.
So, there is at least a decent chance that China will emerge onto the world stage not as a belligerent superpower in the Soviet mold, but as a creative superpower more like nineteenth century Britain or nineteenth century USA.
Of course China still faces severe problems, as has been well explained here. It could all, and quite soon, go horribly wrong. China's creatively earned wealth and strength might yet – following some kind of economic melt-down – be cashed in to pay for the means to make only mischief on a huge scale.
But China's economic strength is not a total illusion, any more (well, maybe a bit more) than the USA's economic strength was wholly illusory in the late 1920s. (The worry about that comparison being that the USA proved that it could be the engine of world economic growth only after a huge depression and a huge world war.) And if, in a hundred years time, historians are able to look back on a century of (mostly) Chinese creativity and progress rather than of Chinese chaos and ghastliness, Sir John Cowperthwaite will arguably deserve more credit for that happy outcome than any other single individual.
The nightmare always was that the Chinese people would feel that they had to fight and to destroy to get the world's respect. Cowperthwaite's Hong Kong showed the Chinese people that they were capable of unleashing a better and more creative way to be respected, a way that the whole world is already benefiting from.
Patrick Crozier, to whom thanks for the link, picks out this particularly choice quote from the Telegraph obituary of the great man:
As for the paucity of economic statistics for the colony, Cowperthwaite explained that he resisted requests to provide any, lest they be used as ammunition by those who wanted more government intervention.
The state is not your friend. The less it knows, the better.
Tuesday
"We've taken the biggest surge in national income in years and squandered it. The punters are spending every cent they can and Canberra is encouraging that by handing back its share of the commodity price loot as tax cuts."
Who would say such a thing? Sounds like the rantings of some bleeding heart welfarist think tank, rather than Australia's leading economics consultancy, as Access Economics likes to describe itself.
Yes, Keynesian wannabes Access Economics released a report fretting about interest rate hikes, and it feels the answer is to remove the financial options of individuals and ensure that the government collects and hoards ever more of the people's income. I suppose one should look at it this way; some day soon you might benefit if you find yourself in a geographic or demographic sweet spot that the government needs to court come election time.
Talking about rum plans, this proposal from Deloitte floats an admirable (though not particularly original) idea - swapping tax deductions on work expenses for across-the-board tax cuts. Liberals will start to choke when they see Deloitte's adjustment of the progressive income tax rates:
The poorest tax payers would see their rate cut from 15 per cent to 4 per cent, with the 42 per cent tax rate paid by people earning $75,001-$125,000 falling to 33 per cent. The top 47 per cent rate paid by those earning more than $125,000 could be cut to 44 per cent.
Deloitte would surely have access to the masses of theoretical and empirical evidence showing the superior economic benefits of shrinking the gap between top marginal rates of income tax and the lower rates, not to mention the moral argument. Why this EC (and I do not mean European Community, though maybe I do...) drivel, then? Why do Deloitte believe they need to field a taxation proposal that is going to win elections?
Thankfully, the political party that prides itself on its fiscal responsibility and economic liberalism holds government in Australia. Yet we have a curmudgeonly treasurer (chancellor of the exchequer) who steadfastly refuses to budge over our absurdly high top marginal tax rate of 47%. He is more than happy to ladle out benefits to politically useful groups, however. Oddly named, the Liberal Party of Australia, when one considers it is run by big government conservatives.
Couple these few good men with the leading economics consultancies, who seem to be trying to outdo each other in the social crusading stakes.
Have these people never heard of the Chicago school? I despair.
Saturday
Jamie Whyte in The Times is a paragon of rational liberalism. Today he neatly skewers the fallacious thinking of those who impose their own heirarchy of values and risk aversion on the rest of us.
Doctors, he points out, will tend to overvalue health relative to other goods, such as pleasure. They "confound what is good for us with what is good for our health." And this analysis is readily applicable to the army of experts who struggle to control us and get use of our taxes to pursue their own preferences. They all fail to accept that other people have different tastes that in conditions of liberty are traded-off by those people.
Jamie Whyte again:
Politicians always claim that their safety regulations are motivated by concern for people in dangerous jobs. Yet the beneficiaries are always people who do not do dangerous jobs. Workplace health and safety meansures are a zero-sum game in which wealth is transferred from the brave to the timid.
And yet, I think Whyte here simplifies and understates the case. He concentrates on the loss of 'danger money' to workers if the market price of the safer jobs falls. That, adding in workplace costs, might look like a zero-sum game, but a business is not a closed isolated system linking effectively infinite reservoirs of labour and capital.
The cost of complying with regulations is not transferred between internal costs and neatly compensated by changes in the labour market. The costs must be borne by customers and workers and capital in an uncertain proportion, and may force the business to shrink or restructure. And some of those costs are transfers of wealth to new players: regulators, inspectors, compliance officers, policemen, lawyers, prison officers, and the businesses that spring up to sell advice, form-filling guides and special stationery to all of the other new players and the businesses trying to minimise their attentions.
I think Whyte is mistaken when he asserts later in the same article that "left to his own devices a profit-seeking employer would get workplace safety exactly right". Employers are often irrationally optimistic—in the modern world they need to be to become employers. But that does not change the fact that the imposition of any new form of compliance on an industry makes all its existing workers, businesses and customers collectively financially worse off, though it may change the balance between them.
The quantity of inspection, regulation and statutory record-keeping is a measure of how much worse off, in financial terms, we are than otherwise we would be. State intervention is never costless, never self-financing, though differing people may end up paying. A would be regulator ought therefore to adduce non-material benefits for what he wants to do sufficient to convince the people affected. Unfortunately it is more likely, as Whyte points out, that his choices will reflect his own preferences. And worse, his preferences when someone else is paying.
Tuesday
It is in the progressive state, while the society is advancing to the further acquisition, rather than when it has acquired its full complement of riches, that the condition of the labouring poor, of the great body of the people, seems to be the happiest the most comfortable. It is hard in the stationary, and miserable in the declining state.
- Adam Smith, The Wealth of Nations.
Friday
The article by one of our contributors yesterday about Russian on-line music business allofmp3.com raises all manner of fascinating issue that I think should be pondered.
It has been argued by some of the commentariat that "whether you approve of the morality of the western music business or not, the goods belong to them and the artists" and thus as "one of the driving principles of this site [Samizdata.net] is respect for property rights, not glorifying those who steal, whether it be the state or someone else", presumably we should be more critical of this. These are reasonable positions to take and certainly I would not want anyone to think Samizdata has anything less than complete enthusiasm for private property rights. However I also think with regard to this (which is to say the sale of music on-line in a manner which is against the wishes of the businesses who own/created the music) the view that property rights are being violated is not correct.
In fact I would say that notion is exactly the wrong way around. Like it or not, music is now a commodity that is traded by weight in an international market and therefore the creator has only residual rights to how that commodity is subsequently resold. The model allofmp3 uses does indeed pay something to the creators of the music and refusing to acknowledge that things have changed and that recorded music is no long a physical good is pointless.
It may not be the business model originally envisaged by the music creators but that is the only viable one that remains to them. The market price for their product is now about 12¢ a track and if that (or their cut of that) is not enough for the music's creators, well I guess they should stop producing music and go find something else more profitable to do, just as if the price of diamonds falls too low, De Beers should feel free to stop digging them up in Namibia. What they (and De Beers) should not feel free to do is demand governments force the price of music (or diamonds) up by insisting they can only be sold a certain way via approved technologies at higher prices. One of the driving principles behind Samizdata.net is trying to develop theories about the world that reflect reality. I am willing to hear other theories but it seems to me that the market has spoken (loudly) and using the state to prop up a business model that technology has made nonsensical is not really serving the cause of liberty.
Another issue raised by the commentariat is that companies like allofmp3.com are all involved with the 'Russian Mafia'. As no evidence has been offered, clearly that is baseless supposition. However it does raise some other interesting issues: I would say even if it was true that allofmp3 is paying 'protection' to the Russian Mafia and/or using their political influence to shield their business model, the Russian Mafia fulfils certain roles that in other countries are filled by governments and lobbyists to much the same effect, thus I am not sure it makes a company like allofmp3 any different to a company (say Sony) using the force of the state to enforce its business model.
There is really not that much difference and if you do not believe me, I suggest you try telling the state you no longer wish to follow their regulations and wish to make your own arrangements for 'protection' and therefore intend to withhold a portion of your taxes... and then see what happens to you.
Thursday
I have been wandering through the fascinating nation of China of late, so I have not had much time to peruse the blogosphere - I guess this means that for a month I had a life. I was fortunate enough to spend a few days in the beautiful city of Lijiang in Yun'nan province. This mid-sized Chinese town is famed for its wonderfully restored 'old city', a cobbled and confusing maze of shops, traditional inns with gorgeous courtyards and a grid of small canals filled with luminous fish and gushing clean water. A beautiful place to while away a few days, but Lijiang is not really known for its nightlife. So on the evening of the 25th of December, I got trawling through some of the past articles on Samizdata. Reading through the comments section on this post, I noticed that an article I wrote early in 2005 got a mention. It was a pity I was not around a computer regularly, because a debate raged in the comments section that I would have very much liked to have been a part of. For all my appreciation of China, I am one of the few Sino sceptics.
I should explain. I am not a sceptic of the aspirations of the billions of Chinese people who sense greatness in the Chinese identity. After all, I'm mentioning a deeply rich culture backed up by a vast talent pool on the mainland and in the diaspora that has the capacity to change the world radically in the future. I am, however, deeply pessimistic about China in its current nominally Communist incarnation, for reasons I have outlined in a previous post. I will not go into specifics; if you're curious, please read my rationale here.
Some interesting developments have taken place between now and then, however. These merit further analysis. One or two of the commenters in the mentioned Samizdata piece stated that they were keeping abreast of banking developments in the Middle Kingdom. In 2002, Chinese officials admitted that 25% of the loans written by the state owned banks were non-performing. Standard and Poors and a number of others said it was closer to 50%, and possibly more. Within the space of four years, the Chinese administration has revised its estimation of the rate of non-performing loans down to an average of about 12%. How can this be done so fast? I'm not really sure. We are, of course, talking about the writing down or otherwise accounting for of many hundreds of billions of dollars of bad loans. I assume that it's due to the fact that most or all of the bad loans have been transferred to special "asset management" companies set up by the government. I suspect that the banks have been able to revise their non-performing loans (NPL) ratio down so quickly by performing a debt-to-equity swap with these holding companies. The article linked to immediately above believes the asset management companies have taken a chunk of the banks' loans and issued them with 10 year bonds in return.
This solution is clearly economic sophistry. At the end of the day, someone has to pay the tab - at some stage depositors are going to want their money. The equity in these holding companies is effectively (if not nominally for the time being) worthless - after all, their assets consist of a bunch of loans that will never be repaid. What is being done about the essentially state-owned industrial sector, which was - and most likely still is - the major recipient of these loans? There's a saying in China that goes something like "The mountains are high and the Emperor is far away". I have no doubt that this thinking pervades China's provincial administration and its state-owned industrial sector, and it explains the pervasive corruption that is, contrary to official publications, as rampant as ever. For every high-profile trial and execution of an apparently "senior" official on corruption charges, there are hundreds of thousands more who not only escape undetected, but are also politically untouchable into the bargain. Quite simply, the central government cannot be everywhere at once, and its reach is frequently limited by local powerbrokers. Consider this case in Guangdong, one of China's more prosperous provinces, where the central government could not exercise its will due to local political considerations, even though humiliating international media attention was beaming down. And who is to say that the central government is not as corrupt as its provincial counterparts? It is hardly unreasonable to say that corruption probes have a definite glass ceiling when it comes to the powers that be in Beijing.
I believe that the Chinese banking sector's dire straits constitute the gravest threat to global stability in the coming years. The Chinese government is always harping on about its "deepening" banking and state-owned industrial enterprise reforms, and this is a mantra is being repeated across the world. Unfortunately, the Chinese state is so opaque that it's impossible to verify the veracity of such claims, and the unrealistic numbers being thrown at us by the Communist party (like the drop of NPLs from 25% to 12% in less than five years) and the shonky juggling of bad debt from one insolvent bank to another woefully undercapitalised holding company do not inspire much confidence in the nature of the reforms. Frankly, I believe the banking sector is too far gone to reform without collapse. In international terms, the crisis in the Chinese banks and SOEs is an elephant that stands in the middle of the room, but everyone is either perceiving it as a mouse or trying to pass it off as a mouse. I believe the Australian government is in the latter category, as are a great many others around the world.
I speculate that governments like Australia's are acting as they are because they realise the Chinese state is very brittle and unlikely to withstand economic collapse. The massively stimulating US$50 billion or thereabouts annual injection of foreign direct investment is holding the Chinese state together for the time being. Thus, a number of states such as Australia have an interest in talking up Chinese economic reforms - and concealing the parlous nature of the Chinese economy - in the hope that investor confidence will not flag and the Chinese will trade and consume their way out of their problems. Our current economic health is due to huge demand in booming and resource-hungry China. Thus we see documents like this (pdf) that echo the "deepening reforms" mantra consistently spouted by the Chinese administration. Puff pieces like this create and sustain the irrational exuberance that swirls around the legend of the Chinese economic miracle, and inevitably amplifies economic pain when the collapse eventuates. The strategy of our governments may work, but it is an extremely high-risk gamble. The more investment in and commercial intertwinement with China increases, the more outsiders will suffer if the system unravels.
And perhaps the cracks are already becoming evident even to the man on the street. When I was in China in late 2005, ATMs were frequently out of order. I work in the banking sector in Australia, and when an ATM is out of order this nearly always means the machine has dispensed all its money. This was not a problem in late 2004 during my previous Chinese visit - ATM operations at that time were indiscernible to those in Australia. I am speculating here, because I'm not really an expert on this kind of money velocity issue, but perhaps the sudden patchiness of the ATM network is a sentinel of a solvency crisis.
And the collapse could come sooner than we think. In 2007, as per the agreement China entered into upon joining the WTO, it must open up its retail banking sector to foreign banks. This is a potential tripwire. Even if only a small number of Chinese are concerned about the health of their local banks (and thus their savings), when Citibank opens up next door the run on Chinese banks could easily spin out of control. I am assuming that the government is trying to spread the notion of confidence and stability in the retail banking sector. If the Chinese do not panic come 2007 or any time in the subsequent 20 years or so, the banks should be able to reduce their NPL rate to a "more manageable 5%". It wouldn't be the first time that people have left their money in a bank that is essentially insolvent because they believe the government will cover any losses incurred. This is a questionable assumption, however, and if I was Chinese I probably would not run the risk.
I am concerned by the consequences of a Chinese economic collapse, and these concerns reach far beyond any short to medium term economic pain. I fear a worldwide economic slump prompted by the collapse of China and its supposedly free market will provoke a popular backlash against globalisation and the liberal market reforms carried out in the 80s in the most successful economies of the West. Capitalism and liberalism will be blamed if people create a nexus between China's collapse, its market reforms and its intertwining with the greater world economy. There is no shortage of people who will quickly jump to the fallacious conclusion that the free market sunk China - those who protested in Hong Kong and other places would grab plenty of (misguided) ammunition from such a catastrophic event. Ask any one of those economic curmudgeons about post communist Russia's economy, and I will bet you penny to a pound that their standard response would be "capitalism failed Russia". This is about as sensible as saying that modesty failed Paris Hilton, for anyone who knows anything about post-Soviet "free market reforms" will know that they were in fact nothing of the sort. This type of thinking could very well gain traction because it makes sense prima facie. Policy reversals may follow and suddenly we're staring down the barrel of a neo-Keynesian revolution. Consider what the average person knows about China's economy. We're all told about China's free market reforms and its burgeoning capitalist class in the mainstream media - we're not told about the Chinese government's meddling in the economy and its mandating of compulsory totalitarian-style imposts on big private companies like internal "political cells", its retention of control over huge swathes of industry, its equity market (there is currently a ban on IPOs on Mainland bourses) which is stuffed with companies who are controlled by local governments and even the military, rather than shareholder, the board and a CEO. Most importantly, we're not told about the largely intractable problems with China's banking sector. Most people truly think China operates under a free market economic system. If the dog's breakfast that is China Inc fails with all the accompanying pain and fallout, there's a real danger that free market liberalism will be made the scapegoat internationally.
As I speculated above and in my previous article, Chinese economic collapse will probably preface political revolution. This is in itself an interesting, though disturbing proposition. What would post-communist China look like? Firstly, I should mention that a democratic revolution seems fanciful at best. There is no ANC-type shadow opposition waiting in the wings. The Party is the State, and the Party brooks no opposition. Here are what I consider to be the two most likely outcomes:
1) The military will overthrow the Party. If the banking sector collapses, so too will large chunks of the state-owned industrial sector that are afloat solely due to loans from the state-owned banks. Millions upon millions will be out of work - millions more will lose their pensions and benefits. Many tens - perhaps hundreds - of millions of people will pour onto the street to vigorously and violently protest their loss of savings and/or employment. In its death throes, the Communist Party will order a brutal military crackdown. Trouble is, a military is made up by people with aspirations, families, hopes etc. People who would have lost their savings, too. People whose parents, family and friends are suddenly out of work and without benefits. Most of the officers and soldiers will have no end of sympathy for their countrymen under such circumstances, and it's difficult to imagine the chain of command will survive under such conditions. The Communist top brass will lose control of the military, which will regroup under a new command. The old political order will be drawn and quartered, Mao will be evicted from his mausoleum and his portrait ripped down from the gate of the Forbidden City. There is no democratic tradition in China, however the country is steeped in a history of rule-by-decree. Expect this for many years to come. Perhaps the best outcome would be highly imperfect democratic elections in several years time.
2) The country breaks up along the lines of regional powerbrokers. Along with rule-by-decree, China also has a long history of warlordism and disunity. Due to the lack of any credible and widespread opposition movement in China, the possibility of a complete breakdown of central control is high if the Communists depart the scene and the military doesn't fill the vacuum. Hong Kong would almost certainly go its own way. Those provinces with large populations of non-Han citizens like Tibet and Xinjiang may declare their independence - perhaps bloodily ejecting the old order. Inner Mongolia may reunite with Mongolia. There is scope for large-scale dismemberment of the modern Chinese state. That left over will be fractured and ruled perhaps by the old regional party bosses reincarnated as warlords or whoever is able to wrest power from them and maintain it.
Some mention Taiwan as a wildcard that could be used as a distraction by the Central government. I think this unlikely. If the economy collapses, a war with Taiwan is not likely to distract anyone from their sudden poverty. Militarily, it seems unrealistic, too. The military will be stretched to breaking point in an attempt to reign in the chaos on the Mainland, so a massive invasion or attack on Taiwan looks unfeasible.
I truly hope that I am wrong about my bleak assessment, mainly due to the turmoil and potentially massive loss of life that would undoubtedly accompany such an event. I am also deeply concerned about the potential illiberal and protectionist measures that may be enacted in the West and elsewhere in the wake of a Chinese meltdown. The world has made a grave error of judgement in heavily backing an economy designed, constructed and administered by a group of ostensibly reformed Communists. This fact alone should have cooled the foreigners' ardour. As it stands, the potential for unprecedented economic losses from Chinese investments is enormous. I think we could be facing a very painful depression, which may very well be "cured" with a protectionist, welfarist New Deal-like solution. Scary times ahead.
Wednesday
The Swedish city of Stockholm - in which I spent an enjoyable short stay last year - has introduced congestion charges, much like those which now operate in central London. The supposed aim (supposed being the key word) is to reduce car use and get people to use public transport. Public transport is said to be very good in Sweden and I found it to be so, though it comes with a heavy tax bill.
The congestion charge issue is an interesting one because on one level, free marketeers can see a lot of merit in the idea of treating use of a road just like any other commodity. However, in today's world, road tolls tend to be more of a revenue-raising device than part of a free market approach to transport. Roads are not built with the consent of other property owners, but mostly built at the behest of public authorities using compulsory purchase powers (what is called eminent domain in the United States). So the idea of road pricing, nice though it may sound in some sort of capitalist utopia, is in reality bound to operate in a monopolistic environment.
And as the British police have found, the C-Charge has brought certain unintended consequences. Not a great surprise.
Monday
Putin is sending shivers through the world with his attempts to strong-arm the Ukraine back into the Kremlin's zone of influence and no doubt more and more column inches are going to be directed at this emerging crisis.
Yet it seems to me pretty obvious that that Russia, circa 2006, is almost hilariously weak to be throwing its weight around. The Russian economy is pathetic for a would-be imperial seat of power, running about half the size of India based on purchasing power. Its GDP per capita is about the same as such mighty global players as South Africa, Mexico and Trinidad. The antics of its kleptocratic and economically illiterate former KGB leadership makes the place less attractive to investors by the day. Frankly you would have to be crazy to put your money in Moscow. Even its military has repeatedly demonstrated that it is inept and corrupt in equal measure. All this talk of Russia's importance is vastly over-stated. In short, Russia needs to be treated with respect, but only the sort of respect you give a drunk with a knife as he staggers down the street.
The price of gas sold to the Ukraine is currently below market levels but the cackhanded way Russia has handled this makes it pretty obvious that markets are the last thing on Putin's mind. But perhaps he is to be applauded for massively strengthening the hand of pro-nuclear power advocates with his preposterous posturing. Even the turgid political class of western and eastern Europe can now have few illusions that it makes sense to rely on an unstable place with delusions of grandeur for their energy supplies. Methinks it might be time for those with some spare dosh to invest some of it in nuclear energy stocks.
Friday
As 2005 draws to its close it is customary to make some predictions about the following year. I won't do so. The world's stock markets are ending the year in better shape than I would have expected a year before, notwithstanding the impact of higher oil prices and the devastating hurricanes that hit the U.S. gulf coast. What is interesting to me though is how the market in making predictions has continued to accelerate, spawining exotic derivatives connected even to the weather.
More than two years ago in the United States, some policymakers toyed with the idea of a predictions market to help figure out terrorist threats. The idea was killed off, partly, so it was argued, due to some terrible PR for the idea as well as a cowardly refusal to embrace controversial ideas. Lawrence Lessig takes a different view here.
The market in making predictions has, of course, been around for decades, if one thinks about the commodity futures markets such as the great wheat futures markets in Chicago, for instance. This Wikipedia entry I linked to shows just how broad the prediction market now goes, such as people taking bets on future scientific innovations, and so on. And these markets can be harnessed to garner useful knowledge about where certain things may be headed as well as fund valuable research.
That's my prediction, anyway.
(Wikipedia link fixed. Thanks to a commenter for pointing out the error).
Thursday
As I sit in the Coffee&Co café in Bratislava (a town I am rather fond of visiting) taking advantage of its offer of free wireless broadband (ah, no more OWLS for me)...
...I am yet again struck by what changes are being wrought by the internet, and what amazing possibilities it opens up.
Although I studied Russian many years ago when the Cold War was steering me in certain directions, that knowledge has long since been flushed by my brain. Yet the other night just before I left London for Slovakia, I was exchanging e-mails with a chap in Moscow, translating (or more accurately transliterating) my Latin script English into Cyrillic Russian via a free on-line system and similarly translating his replies into English.
The results were rather crude and took a bit of smarts to interpret but we were able to conclude our business most satisfactorily. It really did bring home to me that even though we are only at the very start of the communications revolution (and revolution it is), the ways the internet will change everything are incalculable. The social, scientific, economic and political implications are so far reaching that I am sure the world twenty years from now will be hard to recognise.
Perhaps that is just stating the obvious but for me at least it is the very fact I am now so blasé about all the things the internet makes possible for me that makes it is useful to sometimes stand back and marvel at what an astonishing thing it is. Of course just as we take electric light as a given and only appreciate it when the power goes out, I might be unusually appreciative because at the moment I do not have my usual 24/7 broadband access and there is nothing like withdrawal to make you value getting a 'fix'.
Tuesday
The Chinese economy is set to be bigger in GDP terms than that of Britain by the end of this year, according to this report. Of course, raw statistics, such as aggregate economic numbers, do not tell the entire story, such as the degree of upward mobility, quality of life, extent of personal opportunity and so forth, but even so, China's growth remains for me the most compelling economic story of the past year. It is interesting to speculate just what the world economy would be like without the dynamo of China.
What remains to be seen, of course, is whether China's economic dynamism is eventually reflected in greater individual liberty. The jury is well and truly out on that question. Meanwhile, this article in Forbes is worth a look.
Monday
Tom Peters, who presumably found it in this piece, reports:
This banner, in Chinese, hangs in each room of the Hua Xin Li Dress Co., Ltd., amidst the Rongcheng Industry Zone, 100 miles from Beijing:"THE CUSTOMER IS GOD AND THE MARKET DECIDES EVERYTHING"
People say things like this from time to time, but they seldom mean them, and they never mean them when at all severely challenged
I mean, suppose you were to ring up the Hua Xin Li Dress Co., Ltd. and to say: "Hello, God speaking. I want you to design my daughter's wedding dress. It must be genuine silk, with genuine gold fiddly bits sewn into it, with miniature iPods for buttons, and must win numerous design awards. However, being God, I don't want to pay more than 50 pence. Got that did you? Fine. Tomorrow morning then. The wedding's tomorrow afternoon." I know, I know, God has no daughter, and if He did have a daughter, she would probably not get married. She would do altogether more dramatic things than that. Not my point. Which is: would the Hua Xin Li Dress Co., Ltd. knuckle under to such a demand? Would they obey God, the customer, you, and supply an expensive product at less than it costs them to produce it? I think not. They would surely respond instead with something more along the lines of: "Not quite our kind of job. If you want lots of cheap dresses to sell in your shop, maybe we can do business. Take a look at our website, and see if there is anything there that you like." God might not be satisfied with an answer like that, but you, a mere customer, would have to settle for that, or something like it.
Or to put all of the above another way, "the market" includes everyone, and everyone's desires and plans, consumers and producers. Customers are indeed sovereign, over themselves and what is rightfully theirs, but so are producers. Customers do not have to pay for things they do not want, and producers do not have to produce things they do not want to produce. The market is not some ghastly new tyrant who tells you what you must do, regardless of your rights or wishes. The market is not some hideous and only slightly nicer collective reincarnation of Chairman Mao. The market is the outcome of everyone's rights counting for something, and nobody's rights counting for everything.
So yes, the market does decide a lot of things, but the customer is not God.
This is an exaggeration for the sake of effect. The effect may, in a business sense, be good, but it is still an exaggeration, and that is putting mildly.
Tuesday
In search of things to write about for the Globalisation Institute blog, I came across this report, itself about a report issued by the International Labour Organisation.
Global economic growth is increasingly failing to translate into new and better jobs to reduce poverty, the International Labour Organisation (ILO) said in a report Friday.
As a summary of what follows in this report of the report, this turns out to be severely misleading. Globalisation, according to what follows, is cranking out new jobs, and it is cranking out better jobs. True, it is not cranking out "new and better" jobs, all in one go, if by that is meant people in dirt poor countries now being able to leap in their thousands from having no jobs to having nice jobs, but that is hardly surprising.
Half of the world's workers still do not earn enough to lift themselves and their families above the $2 a day poverty line, the fourth edition of Key Indicators of the Labour Market (KILM), said.
There is still a lot of poverty in the world, in other words. So?
"The key message is that up to now better jobs and income for the world's workers has not been a priority in policy-making", ILO Director-General Juan Somavia said.
This is, at best, thoughtless bluster, and probably a flat lie. If he thought at all about this claim, Juan Somavia would realise that it is false, but he makes it anyway. I believe that he assumes that only the spending of tax money in explicitly labelled better job creation schemes would count as the intention to create better jobs. But I support globalisation, and write regular contributions for the Globalisation Institute blog, because I believe that globalisation is creating and will continue to create "better jobs and income for people" all over the world. This is a big part of why I do this. And I am definitely not the only one who thinks thus. Does Juan Somavia sincerely believe that all of us who enthusiastically support globalisation are indifferent to "better jobs and income for people"? Maybe he really is that ignorant, but I doubt it.
"Globalisation has so far not led to the creation of sufficient and sustainable decent work opportunities around the world. That has to change, and as many leaders have already said, we must make decent work a central objective of all economic and social policies."
Once again, bad policies to achieve "decent work" - making indecent work illegal, and making it obligatory to perpetuate all decent work ("sustainable") indefinitely, I assume - are confused with wanting lots of decent work. I do want lots of decent work for people, but believe that making indecent work illegal, and all firing of people from decent work illegal, is the absolute worst possible way to achieve that outcome. Making indecent work illegal hurts the very poorest people in a downright lethal way, by taking away even the crap jobs that they do now have and can now get, and it kicks away a vital rung in the ladder from no work to indecent work to decent work, which guarantees that the lethality will continue indefinitely. Charming. Demanding that all decent work be "sustainable" is to demand the impossible, and to guarantee idleness for all.
The other thing to say about that weasely paragraph is that all that it really says is that poverty is not being got rid of as fast as it might be, and as fast as would be nice. My interpretation of that truism being that globalisation is not working as fast as it might to make all that decent work (some of it perhaps even somewhat sustainable), all that "better jobs and income for people", and my conclusion is that globalisation should be intensified, and that Juan Somavia and his ilk should get out the way and let that happen.
Coming ahead of the WTO talks in Hong Kong next week, the report said that while in some areas of Asia, economic expansion is fostering solid growth in jobs and improving living conditions, Africa and parts of Latin America are seeing increasing numbers of people working in less favourable conditions, especially in the agricultural zone.
Globalisation is working well in some areas, and not so well in others. How could it be otherwise? Some parts of the world are better at it than others. Astonishing. Once again, this absolutely does not show that globalisation should cease, anywhere, still less everywhere.
For millions of workers, new jobs often provide barely enough income to lift them above the poverty line, or are far below any adequate measure of satisfying and productive work, the KILM said.
What a revelation. Lots of jobs in the world are very badly paid, and are crap. Who would have guessed it? But what are you and your mates saying should be done about this, Juan? You imply, but dare not spell out: less globalisation. I say: more.
The total number of working women and men living on less than $2 a day has not fallen over the past decade although at 1.38 billion it is a smaller share of global employment at just below 50 percent, a decline from 57 percent in 1994.
The best take on that being that the population of the world is increasing quite fast, and the number of not totally crap jobs (jobs above $2 a day) is also rising quite fast. The number of crap jobs, paying less than $2 per day is static, but presumably with much coming and going. A mixed picture, but more good news than bad there, I would say.
The report emphasises that in many developing economies the problem is mainly lack of decent and productive work opportunities rather than outright unemployment.
In other words, there are now lots of jobs out there, but lots of them are crap. Again, a mixed picture, with the good news being just as clear there as the bad. And I repeat, what do you guys think should be done to make the news better? I say: more globalisation. What do you say?
Women and men are working long and hard for very little because their only alternative is to have no income at all.
Indeed. Which is why making long and hard work illegal would be so lethal. Are you proposing that? If you are not proposing it, what are you proposing?
The report points out that in recent years there has been a weakening relationship between economic growth and employment growth, meaning that growth is not automatically translating into new jobs.
But there still is such a relationship, right? Or has it vanished, and do you think growth does not matter, and should be done away with?
The biennial study found that for every percentage point of additional GDP growth, total global employment grew by only 0.30 percentage points between 1999 and 2003, a drop from 0.38 percentage points between 1995 and 1999.
Which is precisely the kind of thing I would expect if I thought, as I do think, that globalisation, having created crap jobs for lots of people, is now switching to making crap jobs a bit less crap, rather than just thrashing out more equally crap jobs for people who already have crap jobs.
With employment growing between 0.5 and 0.9 percentage points for each additional percentage point of GDP growth, the most employment-intensive growth has taken place in the Middle East and in northern and sub-Saharan Africa.
And your problem is? Again, the creation of crap jobs is going on faster in some places – the poorest places, the places where there used to be no jobs at all, even crap jobs – than in the places where they already have crap jobs and would like nicer ones. This is just what I would expect of a world heading in exactly the right direction.
A review of other indicators, however, . . .
Oh to hell with it. Read the whole thing, if you can be bothered.
What this report of a report shows is that our side is winning the argument about globalisation and winning it handsomely. The Juan Somavias of this world hate globalisation, but since they do not say why, we can only guess. My strongly held opinion is that Juan Somavia hates globalisation because it takes jobs away from his members, in rather small numbers, and gives jobs to millions of people who are not his members, in very big numbers, and he hates that. Plus he probably hates capitalism. He dare not say this, because it is too nasty and too stupid, but he thinks it.
However, hating globalisation as he does, he still cannot find anything really bad to say about it. Poverty is widespread, and is not nice. Poor people have crap jobs, which they do because they prefer having crap jobs to starving. In some places, crap jobs are being created fast, in others the crap jobs they already have are being improved. Blah blah blah, etc. etc. etc.., moan moan moan.
At no time did Juan Somavia, or the writers of this report, judging by this report of their report, say that globalisation is worse than their proposed alternative, for they propose no such alternative. Had they done so, and if they did do so without the report of the report mentioning this, that alternative would presumably be (presumably was) non-globalisation. More or less big gobs of: tariff barriers, laws against importing and exporting, subsidies for existing industries, etc. etc.., the whole discredited panoply of command-and-control, national socialist, bugger-the-damn-foreigners economic policy which, the last time it was seriously imposed, caused the Great Depression.
Juan Somavia and his cohorts moan about globalisation in the same feeble and pointless way that others moan about the price of beer or the bulkiness of SLR cameras or the noisiness of washing machines. Should beer be done away with? Should big clunky SLR cameras be illegal? Should laws be passed demanding silence of washing machines? Well, no, but, but, but, … it's just … not good enough!!! Idiots. Others may still be saying semi-plausible but stupid things against globalisation, but Juan Somavia and his mates have lost this argument. But because of all their futile grumbling, and because of the prominence that their futile grumbling still gets in news reports by people who would prefer them not to have lost, this defeat may only be clear to the practised eye, but a defeat it nevertheless is. They have lost, and we are winning.
Winning a mere argument does not automatically translate itself into immediately getting the right policies and dumping the wrong ones. It may well be, for example, that this report that this report reports on contains many detailed and evil anti-globalisation proposals, which the report of the report dares not mention because these anti-globalisation proposals are just too obviously evil, but which are still there, and which for all manner of less obviously evil reasons may still be acted upon. People may have no good reasons for opposing globalisation, but they still have plenty of bad ones. Like: wanting to keep their own non-crap jobs and to hell with the world. And like: wanting capitalism - which they took against in their youth - to be mucked up, and then wanting capitalism to get the blame for the resulting ruin, instead of accepting it themselves. Overcoming such ignoble interests and intellectually corrupt positions is tough work. But, at any rate if this particular report of this particular report is anything at all to go by, the argument about whether these interests and positions ought to be overcome is now over.
Tuesday
It is nice to see that a compatriot of mine is presently making the case for free trade at the WTO summit in Hong Kong, at which the usual bunch of vested interest and anti-globalisation protestors have shown up.
Seriously, that anyone can go to Hong Kong and then attempt to argue that free trade is against the interests of the poor just boggles the mind. But they do.
(link once again via Tim Blair).
Monday
Those smart fellows at the Marginal Revolution economics blog like to track all manner of strange and innovative ways in which Man engages in the age-old routine of truck and barter. Sport has spawned all manner of new business enterprises in recent years and now it is possible for investors to build assets by investing in the future market value of footballers.
Makes sense, really. These days football players, even quite mediocre ones - never mind great talents like Pele or George Best (RIP) - are paid enormous amounts of money in their careers. Rather like the bloodstock trade, I think. The idea of getting a financial stake in a player is also likely to bring investor pressure on players to be monitored off the field as well as on it (do we really want a potentially lucrative asset to be carousing down the pub?)
Personally, I am sticking to equities, bonds, cash and a bit of brick and mortar.
Friday
My first posting on the Globalization Institute's blog is about the almost hidden but massive transfers of cash by migrants workers to their families in under-developed countries. The following quote comes from Time magazine:
Mass migration has produced a giant worldwide economy all its own, which has accelerated so fast during the past few years that the figures have astounded the experts. This year, remittances - the cash that migrants send home - is set to exceed $232 billion, nearly 60% higher than the number just four years ago, according to the World Bank, which tracks the figures. Of that, about $166.9 billion goes to poor countries, nearly double the amount in 2000. In many of those countries, the money from migrants has now overshot exports, and exceeds direct foreign aid from other governments. "The way these numbers have increased is mind-boggling," says Dilip Ratha, a senior economist for the World Bank and co-author of a new Bank report on remittances. Ratha says he was so struck by the figures that he rechecked his research several times, wondering if he might have miscalculated. Indeed, he believes the true figure for remittances this year is probably closer to $350 billion, since migrants are estimated to send one-third of their money using unofficial methods, including taking it home by hand.
There are two things I especially like about this growing trend. One is that unlike other forms of aid (including private giving by Westerners), the money tends to be better spent, because the donor is immediately related to the recipient. The second is I think unique to migrant workers. Normally there is a dependency trap: the money coming in is for a set term and will only be renewed if the recipient pleads continuing poverty. But migrant workers who leave their families behind have a strong incentive to watch out for improving economic conditions back home. As families achieve a tolerable standard of living they tend to reduce the amount of migration. The whole bureaucracy of aid is bypassed.
Thinking about it, perhaps giving a Christmas bonus of £100 to the office cleaner from Ghana or the Ukraine does more to make the world a better place than £200 given to an aid charity. We often hear about the benefits of cutting taxes, but here's a new one. For each pound in taxes saved by low-income migrant workers, up to 40p will be transferred to a family in the developing world. That's got to be a better return than the government makes of our money.
Tuesday
The price of gold on the world commodities market is at the highest level since December 1987 (god that seems a long time ago). A number of reasons are given for why it is so strong, such as being a default resting place for investors who are shy of holding stocks, bonds or cash. Gold is also strong because commodity prices in general, such as nickel, zinc, iron ore and bauxite are being driven higher by the voracious appetite for metals and other goods by China.
There may be another factor, though, which ought to set off a few red lights in the central banks. Gold is often a hedge for people against inflation. It seems a long time ago when Britain endured double-digit inflation, but inflation is creeping higher, although that may be simply due to the temporary effects of higher oil prices. Anyway, the gold stuff may be issuing a gentle warning. Let's hope the Bank of England takes note of it.
Friday
From David Tebbutt:
This is the promise: "The Habitat JAM will gather your input and add it to thousands of others to identify actionable ideas for the Vancouver World Urban Forum agenda and influence the Forum's content. It will start conversations and build new networks that bring enormous potential to global problem solving."
It sounds more like a threat to me. At best, manipulated bullshit. Problem solving is a fine thing, but the fewer conversations and networks devoted to "global" problem solving, the better, I would say. This is, I think, because "global" bundles together lots of difficulties into one huge impossibility, which you then blame on global capitalism. But the way to actually solve problems is to do what actual capitalists actually do, which is break the problems up into solluble particles.
Still, "actionable" means that someone will at least be able to sue these people, yes? No. Non-responsibility for resulting chaos is of the essence of gatherings like this.
Wednesday
I have devoured pretty much most of John Le Carre's spy stories, such as The Spy Who Came in From the Cold, Tinker, Tailor, Soldier, Spy, A Small Town in Germany and Smiley's People. His novels have a chilly, grittily believable quality that stands in contrast to the sophisticated romps of Ian Fleming (Who is actually a pretty good read, as Anthony Burgess once said). More recently, Le Carre, bereft of a Cold War to provide his theme, has turned his attention in a different direction. He has turned it towards the supposed evil of global capitalism and big drug firms.
The Constant Gardener, a film which hammers the allegedly rapacious activities of drug companies, has now been turned into a film starring the British actor Ralph Fiennes (whom I once saw live giving a somewhat histrionic performance in London in the Ibsen play, Brand). The Social Affairs Blog, has a fine demolition job of the book and film here by UK academic Kenneth Minogue. Minogue's treatment of the film is brutal.
Now I can see why, as pointed out on this blog concerning the firm Pfizer, some drug companies get a deserved hammering. But what I don't quite understand is the sheer venom directed at drug firms in general by people who presumably must realise that developing and researching drugs can be highly expensive. If drug firms cannot be sure that their products won't be instantly copied by other manufacturers, who can be sure that drugs to combat AIDSand other killers would make it to the marketplace? The issue of intellectual property rights does of course remain a very tricky issue among libertarians, but do the opponents of any such property rights imagine that we can or should leave drug development to the State, given the experience of our own Soviet model of national health care? It seems as if the attacks on drug firms stems from a desire to seize the hard work and graft of others because one has a "right" to curative drugs.
But if, as Le Carre and others contend, we should give drugs to the poor of the Third World for nothing, the bill for this could be enormous. I don't really like the idea that the wealth creating capabilities of people should be held in partial ransom by the open-ended needs of billions of other people.
On the subject of AIDS, it is always worth reading Andrew Sullivan, who has HIV, on why he loves drug companies.
Thursday
Those strange-sounding financial entities known as hedge funds, which are sometimes depicted as the Darth Vaders of the modern market, often have rather odd or dull names. So I was glad to come across a firm in the United States with a name that proudly celebrates the free market with unabashed gusto.
The firm has a great merchandise selection, too.
Thursday
Hollywood Director James Orr points out some interesting factoids about how megacorporate movieland is seeing the game shifting before their very eyes.
The internet changes everything... we just do not know precisely how yet.
Sunday
It is often said by libertarians, or "radicals for capitalism", to coin Ayn Rand's phrase, that Big Business is often lousy at defending the market and in fact is only too happy to co-opt the State to make life hard for competitors. I was reminded of this fact when noted Libertarian Alliance author, Sean Gabb, made much of this point in a talk on Friday evening. It appears that the U.S. retailing giant WalMart may be guilty of this by lobbying for a rise in the U.S. minimum wage.
Debate continues as to what exactly is the impact of a minimum wage on the unemployment rate in a country, but in theory at any rate, raising the marginal cost of hiring a worker presumably makes it less likely that said persons will be hired, other things being equal. Marginal Revolution, the U.S. economics blog, has a take on the issue here. Other useful discussions at the Von Mises Institute here, and taking a more supportive view of such laws, is this paper here.
Even if one takes the assumption that minimum wage laws don't always raise unemployment overall, the businesses that lobby for them may think they do, or think that by raising their would-be competitors' costs, that it will strengthen their own market position. In short, there is nothing very altruistic about it.
And Walmart, to take this firm as an example, is also renowned as a beneficiary of eminent domain land-grabs. Funnily enough, this has become something of a cause celebre for parts of the left, who ironically, are relying on the same sorts of defences of property rights that I referred to a few days back on this site. It would be nice if the left embraced property rights as a cause. Stranger things have happened.
Tuesday
I went from Instapundit to this this presumably not-so-instant pundidtry by Glenn Reynolds called The old industrial state, and from there, via an eBay reference, to another Glenn Reynolds piece called Is small the new big?.
The idea here is that that new big businesses - eBay, Amazon – are getting big by helping the small guy to do his thing, unlike the old big business, which was an economically deluded tyrant.
But did not the big, bad old industrial system - which only became a "state" in the years of its dotage - also empower people? For as long as it was properly run, it did.
The Model T and the Sears Roebuck Catalogue empowered the little guy, just like eBay and Amazon now. The Model T was the basis of many a small business. Sears Roebuck made it possible for smaller operators outside the big cities to function on level terms with the city folks by letting them buy the same stuff and get their money back if not satisfied, just as if they were buying it from a big city store. Most of the USA still lives in small towns, I am constantly told. The old industrial "state" is what enabled them to do so, comfortably.
More recently, the personal computer industry - now dominated by big, bad, old Intel and Microsoft - has empowered millions of individuals, and made possible the growth of enterprises like eBay and Amazon. Empowering the little guy is not a new idea. I can still remember the thrill of empowerment that I felt from my first computer, an Osborne 1.
There are two quite distinct ideas rubbing together here. One is bigness, and its alleged badness. The other is the genuinely bad idea that it is both smart to try to - and actually possible to - insulate huge numbers of people from market pressures, indefinitely. J. K. Galbraith, quoted by Reynolds, thought that this could happen, and his big idea, if you can call it that, was that business bigness meant being above and beyond market realities. The truth is that a big business that ignores market realities is heading for a big fall.
But the little guy is just as prone to economic delusion as the big guy. That is often why he is so little. Like the guy making a small fortune in sport, he started out with a large fortune.
The ultimate embodiment of the Galbraith delusion was of course the USSR, which copied the bigness of US business without copying any of the market responsiveness that brought the USA's business bigness into being in the first place. The USSR just stole bigness from others, and eventually the loot ran out.
What is true is that formerly successful and still established ways of doing things can get into serious trouble, and because they once were so successful, they can last way beyond their days of success. There is a lot of ruin in them. Big and successful businesses become Galbraithian. They become, on a tiny scale, economically speaking, the USSR. But they cannot last, any longer than the USSR could. Not being able to murder all their rivals and critics, they last a lot less long.
Business bigness is the consequence of a new business idea becoming thoroughly understood by a few exceptional people, who proceed to organise it, and then to triumph over almost all of their rivals. Then, times change, and that kind of bigness needs to change too, but by then millions have got used to it and cling to it. That is the problem of the old "industrial state". What we are living through is neither the end of bigness nor the beginning of individual empowerment by bigness. It is a transitional period, between one lot of bignesses and other sorts of bigness. And these new bignesses will be just as like to give rise to new Galbraithian delusions as the earlier ones were.
And let us also give credit where credit is still due. Those big old businesses got big in the first place by doing lots of empowering of the little guy. To put it in Reynolds-ese: the old big also did small.
Saturday
Just over a year ago I spent a very happy few days in northern California, spending one very long and pleasant day in the state's Napa Valley wine region. The region boasts some of the best wines in the world, including the now-famous wineries of Robert Mondavi. Mondavi's wines caused a global sensation in the trade when, during a "blind tasting" in the early 1970s, wine critics rated his produce a notch above the competition from more exalted premises in Bordeaux and Burgundy. The horror!
This article very nicely draws out how the challenge of New World wines from California, Chile, Argentina (a magnificent producer of wine), South Africa, New Zealand and Australia has led to a fairly grumpy response from the traditional centres. This is perhaps understandable. The French produced some of the finest wines of all time, with only a bit of competition from the flowery Hocks and Moselles from Germany and the likeable Riojas in Spain and a few good ones from Italy. About 20-plus years ago, you could walk into a supermarket and choose from only a relatively limited range of wines, much of it fairly basic plonk. Globalisation has put some of the world's most far-flung wine producers into the reach of Joe Public.
All we need now is a similar global "race to the top" in the production of effective hangover cures.
Thursday
"It is a irresistible to note that nearly everyone, including the wealth creator, is inclined to see the world of inner being, of the heart and soul, as being at odds with the commercial. Wealth creators seem shy of their success. It is often said that the Englishman has always preferred to be seen as a gentleman than as a creative, industrious or commercial person."
Richard D. North, Rich is Beautiful, (page 199).
Monday
I have long defended an American corporation, much hated by anti-globalisation types, greens, leftists, even many conservatives. While many seem to think that the mission of said corporation is to destroy all that is good in the world and to act as a back door through which America can destroy local colour and local traditions, I have found it hard to fault a company that sells hamburgers to people who voluntarily choose to consume them, that has introduced the concept of the public toilet to many parts of the world where the idea was lacking, and generally provides excellent customer service to go with its slightly questionable food. I have found it hard to see anything sinister in that.
But alas, in the Praça da Liberdade in Porto on Saturday, I discovered that those brave battlers against corporate domination of the world were right. For the era of concealment is over. McDonald's restaurants are now established in most of the world, and they can finally allow their true ambitions and the true scope of their mission to become clear. The time for hiding is now, clearly, over.
I will confess that despite their obvious sinister ambitions, I quite like the new logo.
Friday
Well, I can not say this bad story came as a total surprise, given the near-total lack of respect for property rights and the rule of law in Africa:
South Africa says it will for the first time force a white farmer to sell his land under a redistribution plan.
The story goes on to say that the seizure is part of a drive to "redistribute" land to people who lost what was rightfully theirs as a result of the 20th Century apartheid regime. Hmmm. It seems to me that on an abstract level relating to rectification of previous injustices, there is some credibility to this idea. However, the big problem is that the people who will get chunks of this land are unlikely to have much to do with the people who were allegedly robbed of said land in the first place, assuming that such a claim can be validated. (Of course if there are people who could claim that they or their ancestors were robbed of what was rightly theirs, then I have no objection in principle to some restitution).
In practice, as we have seen all too clearly in nearby Zimbabwe, the spoils of any assault on white-owned farmland will go to the political hacks and cronies of the governing regime, and likely bring about a serious, possibly catastrophic loss of economic wealth and food in a part of the world, that is not, to put it mildly, greatly endowed with such things.
Perhaps the president of South Africa should put this book on his reading list. Or perhaps he should remember to heed his own words.
More than anything else, Africa needs stable, enforceable property rights, period, if it is clamber out of its current state. Sir Bob Geldolf and friends, please note.
Thursday
Allan M.R. MacRae of Calgary, Canada points out something rather interesting that seems to have gone largely unreported in the mainstream media.
Here are verbatim quotes by Tony Blair from the September 15, 2005 Plenary Session of the Clinton Global Initiative Conference.
Tony Blair seems to have let the cat out of the bag on his new energy policy at the Clinton Global Initiative Conference last week. Blair said:
"I would say probably I'm changing my thinking about this [Kyoto treaty] in the past two or three years......The truth is no country is going to cut its growth or consumption substantially in the light of a long-term environmental problem...
...There is no way we are going to tackle this problem unless we develop the science and technology...
...Some people have signed Kyoto, some people haven't signed Kyoto, right. That is a disagreement. It's there. It's not going to be resolved...
...I don't think people are going, at least in the short term, going to start negotiating another major treaty like Kyoto."
This must be a major disappointment to Kyoto enthusiasts, who say ten more Kyotos are needed for effective reduction of atmospheric CO2.
On July 12, 2005, on the subject of the Gleneagles Summit, I wrote the following to a number of colleagues:
"...we may now be at a point where many Euro politicians are realizing the science of Kyoto is bogus, but they are reluctant to admit they have been duped about global warming and have misled their public with scary stories for which there was no evidence - their new approach suggests a politically-correct "quiet exit" from Kyoto. We'll see..."
Allan M.R. MacRae
Wednesday
I love the internet. I went from this, which I posted here, to this, to this, to this, to this:
. . . to this:
. . . . which is the work of Ha Qiongwen. Of this particular poster, Stefan Landsberger says:
The design reproduced above was at the root of Ha's problems: why had he depicted a bourgeois woman instead of a female proletarian? Where was Chairman Mao? Why didn't the poster praise the Chairman more explicitly? Every time the literature and arts world held a criticism session, he was dragged out as an object of public abuse. As a result, Ha was publicly beaten and humiliated more than thirty times.
Personally I think the Red Guards were on to something. I think these delightful and amazing Chinese propaganda posters and China's current, rampantly aspirational and bourgeois rise towards superpowerdom are cause and effect.
I offered further thoughts along these lines in this ASI blog posting . This is the bit that is relevant:
I recently encountered, in a remainder shop, a big book containing hundreds of Chinese Communist propaganda posters, much like these ones. They depict a vivid and colourful fantasy world of industrial excellence and economic triumph, of collective progress and personal fulfilment, of joy. The people who now preside over China’s current economic miracle were teenagers when posters like these were at the height of their influence, and I think this is no coincidence. It makes perfect sense to me that the more imaginative and impressionable people brought up on imagery like this would turn away in disgust from the lumbering state centralism that these posters were intended to sell, once they realized that state centralism could never deliver such wonders, and instead switch to being enthusiastic pro-capitalists and even capitalist entrepreneurs. After all, only if China switched to capitalism could a real future like this be even hoped for, let alone rationally anticipated.
If you follow the link in that and scroll down to the bottom, you get to this:
Red Guards eat your hearts out.
(I now possess that book.)
Did Ayn Rand have anything to say about these Chinese posters? She should have.
Thursday
Well, sort of...
Actually I have long taken a similar view that without the distortions of the Common Agricultural Policy, many farm would and should go out of business or at least change what they do. My guess is that it would mostly be those who concentrate on the high end 'premium' end of the market (such as pandering to the demand for 'organic' food) who would survive.
Remove the barriers to trade and let the agricultural economies of less developed parts of the world feed us. Does it really make sense to artificially keep so much of the First World under cultivation?
Sunday
I have just moved into a new flat. As I am now living alone, and in my last arrangement I was not, I find that there are a lot of basic odds and ends that I need but which I don’t have already. I particularly need items for the kitchen.
One thing I needed was a microwave oven. While I did technically own a microwave oven already, that one is in Australia. So I went my local large Asda store, and looked for microwaves. They had a good, basic model of microwave oven on sale for £24.41. That is right, £24.41. (Excluding the VAT tax imposed by the British government, the price is even less - £20.77. That is well under 40 dollars). The prices of a great many electrical and electronic goods have collapsed over the last four or five years, but I still find it amazing. I can only have a modest meal in a London restaurant for that price, but somehow it is possible to make a microwave oven in China, ship it halfway round the world, bring it into a large London store, and sell it to me, while still making a profit, for such a miniscule price. The microwave oven I own that is still in Australia and that I bought in 1999 cost me more than three times as much. And through lower prices I am therefore more than $100 better off than I was in 1999, just through that one purchase.
There is not much to be said, other than:
Three cheers for free trade.
Three cheers for globalization.
Three cheers for the internet and other international communications networks, and the global supply chains and massive economies of scale that they bring.
Three cheers for container shipping, and the amazing logistical work that goes with it.
Three cheers for the industrialization of large swathes of Asia.
And, finally
Three cheers for Wal-Mart.
Sunday
Surfing the cable television channel briefly on Friday lunchtime, I came across a CNBC programme about oil prices, in which a couple of analysts fielded email questions from the public about why prices are so high. One guy claimed that the price of oil - currently about 70 dollars a barrel - was grossly inflated by those evil speculators and the "real" price of oil was more like 40 dollars.
Okaaay, said one of the analysts. If that is the case, maybe the emailer should quit his or her day job and take up oil speculation if the "real" price of oil was far lower. Armed with this insight, the correspondent would make a killing, said the clearly rather bemused analyst. It is rare on television to see this sort of nonsense smashed out of the park in such a fashion. Certainly not likely on the BBC.
While on the subject of nonsense about the role of speculators and prices, this is worth a read.
Friday
Gordon Brown has written an excellent article in today's Financial Times explaining why the old European Social Model is a relic of the past. He says that a new European Social Model needs to be created, one which is centred around free trade and flexible labour markets. He says that globalization is a race to the top and Europe has to be part of that race. Mr Brown's comments follow a speech given by Peter Mandelson earlier in the week in which Mandelson mocked the French economy. Mandelson said the French government was engaged in a futile effort to build an economic "Maginot Line".
It is great to have figures so associated with the Labour Party saying such good stuff, especially while the British have the Presidency of European Union.
Wednesday
Oh. My. God. I logged on to ePolitix.com this this morning and found this:
The Adam Smith Institute is working its magic yet again with the flat tax. Only last year it introduced the idea of a flat into the Westminster political sphere with the launch of Flat Tax: The British Case by Andrei Grecu, followed up by Flat tax for the UK. All the major parties have been looking at it: the Treasury censored their findings about the flat tax; the original said it would create a "mini-economic boom". Flat tax may be the most radical think tank proposal for a decade, but I have a distinct feeling this is going to be on the statute books quite soon.
Monday
The European Union has agreed an "equitable" outcome with China over the vexed issue of whether the Chinese should be allowed to sell textiles to us at those oh-so unfair low prices. It looks like a pretty fudged deal to me, possibly not as draconian as the original quotas demanded by protectionist lobbies in Europe, but still a slap in the face for principled free trade.
While I have my concerns about China - it has a lousy record on human rights for starters - the development of the country's economy along hopefully free market lines is surely one of the most positive developments of its kind in the world at the moment. Europe's economy can only benefit in the long run if China becomes prosperous and hence generates a large middle class with a keen appetite for consumer goods and services.
And some of the poorest people in Europe surely stand to gain if they can buy garments for far less than the amount they would otherwise pay. If the case for free trade is to succeed, it is vital that this point is rammed home time and again.
Let Adam Smith have the last word on this from his Wealth of Nations:
Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce
Wednesday
Drieu Godefridi, the Director of the Institut Hayek, looks at plans for a "new Marshall Plan" for a region of Belgium with incredulity
Politicians in Wallonia, the southern part of Belgium, think their region needs "a new Marshall Plan". Excuse me? The Marshall Plan was designed to help Europe rise from the ashes of World War II. Surely there has not been any war in Belgium since then. So what is the point?
This plan would benefit the socialists who govern Wallonia by helping their lagging economy to recover. But to recover from what? Basically, from sixty years of socialist governance.
Truth be told, Wallonia does need an urgent boost to its economy. With an unemployment rate of 18% and almost nil growth for years, Wallonia is now on the verge of being outclassed by Poland and Slovakia, countries that started from zero in terms of their economies just 15 years ago.
This "Marshall Plan" consists of massive public investments in some parts of the Walloon economy duly selected by the government. But it will not work any better than other plans the socialists have come up with over the last three decades. (Some years ago, the same socialists said that one of their plans at that time would turn Wallonia into a "Wallifornia").
What is comforting to learn is that the main goal of the Walloon government is now to encourage the creation of new businesses and to help to develop existing ones.
But these socialists need to understand that the creation and growth of companies are not only a question of political will. For businesses to be created and to grow, some basic conditions have to be put in place.
Probably the most important two conditions sine qua non for economic vitality currently do not exist in Wallonia: reasonable taxes and a reasonable level of regulation.
Belgian taxes are among the highest in the world, second only to France. Not every tax can be lowered by the Walloon government, but many of them could be. Unfortunately, Walloon politicians do not seem to understand the link between low taxes and economic prosperity. The Cour d’arbitrage, Belgium’s Supreme Court, recently struck down a Wallon law raising the rate of the inheritance tax at 90%.
The amount of regulation in Wallonia is ridiculously high. In every jurisdiction that it has inherited from the Belgian federal state, be it urbanism or environment, the Walloon Parliament and government have enacted several new regulations to restrict business, often developing new controls in new areas. The idea that the burden of such regulations should be measured, and compared with their merits, is foreign to the socialist elites.
That the politicians of French-speaking Belgium understand the need to create new businesses for their economy to thrive is good news. But to expect that anything like would happen without a plan that entails the drastic lowering of taxes and the abrogation of complete areas of nonsensical environmental and city planning regulations? That is just another Belgian joke.
Wednesday
Longevity in an office is no automatic guarantee of worth. So the fact that Dr Alan Greenspan, chairman of the U.S. Federal Reserve, has been in the post for 18 years and is shortly to step down, does not mean he must qualify for greatness. But even a sceptic of the need for central banking like me believes that Greenspan, who is nearly 80 years old, is a remarkable man. His career spans the financial crash of 1987, the recession of the early 90s, the long stock market boom, the Asian financial crisis, the Russian debt default and the rescue of hedge fund Long Term Capital Management, and of course, 9/11 and its aftermath.
I am not going to chart every nip and tuck of his tenure to state whether he was a monetary policy genius, a wise man who realised his limitations and that of his office, or just very lucky. I suspect that luck played a part but what jumps out at me, from reading articles like this, or this fine biography by Jerome Tuccille, is that Greenspan was a very wise operator indeed. America, and indeed most of the western industrialised world, has enjoyed a relatively long period of economic growth and low inflation. The United States has certainly done so. And Greenspan, being at heart a classical liberal, had the intelligence and humility to chalk up 99 percent of the credit to entrepreneurs and their employees rather than to the supposed fine arts of macro-economic policy.
I remain a sceptic, though, of the need for central banking. Greenspan has left no ideological or operative legacy that could be enshrined in doctrine and used as a clear guide to future policy. Although determined to protect price stability, he could be daring and flexible when required, far more so than the more conventionally monetarist European Central Bank. The problem though is that Greenspan's replacement could be made in a far different mould.
America, and indeed the world, has been very lucky to have a man as wise as Greenspan at the helm. But it is surely dangerous that an economy as big as that of the United States should allow so much economic power to be held, ultimately, in the hands of one man - even if he does have very smart folk working with him. Of course, the business of "doing monetary policy" has become better over the past decades. Britain's own central bank runs monetary policy with a studied approach unimaginable in the horror years of the 1970s when money was treated as a metaphysical abstraction. But things could go wrong. Sooner or later the men with the interest rate levers are going to make a big mistake and the results could last a while.
Meanwhile, this article scans possible successors to the clarinet-playing former disciple of Ayn Rand and gold-backed currency.
Tuesday
Brian recently wrote a piece about the importance and usefulness of mobile phones in poor countries, particularly in Africa. I couldn’t agree with him more, but there is another interesting story in just where the expertise and money to build these African networks are coming on, and it is an oddly positive story.
But first, a seeming digression. When mobile phones came along in the early to mid 1980s, there were generally two patterns of licensing. Firstly, there were countries (eg Australia) where the incumbent telephone monopoly was given a monopoly on the new technology. Secondly, there were countries (eg Britain) where two mobile companies were licensed. One of these was usually the incumbent telephone monopoly, and the second was usually a new company that was brought into being to provide the new service. It is worth remembering that few people at this point expected that there would be a large market for mobile phones, so often these second players were small start up companies that paid very little for the licences. (The US issued no national licences and instituted called party pays pricing, and its market thus evolved differently from the rest of the world. Discussing this is an article in its own right, and I won’t go into it further here). In both instances additional networks were licensed when second generation digital services came into being in around 1993. Even in 1993 nobody realised what a big deal mobile phones would be, and although it generally took pre-existing companies to raise the necessary capital, it was still possible for relatively small players to enter the market at this stage. In some instances the companies that took out these licenses were mobile companies that already had networks in other countries, but usually these were companies new to mobile telephony.
However, the market share of companies in various markets seems to depend very much on which choice was made in the early 1980s. In cases where the existing telecoms monopoly was given a mobile monopoly, that company is usually to this day the dominant player in that national market. In most such instances, that player has a market share of around 50%. Other players can be more profitable, have most of the premium customers, or be perceived as providing better service, but it has been difficult in such markets for the later players to gain large amounts of market share. (Australia is a good example of such a market. Telstra (formerly Telecom Australia) has a market share of around 50%, and Optus and Vodafone (which entered the market with 2G licences in around 1992) have about 30% and 15% respectively).
In markets where there were two operators licensed from the start, the incumbent was usually unable to entrench a large market share in this way. Often, although the start up competitor had much less in terms of resources, it made up for this by having a nimbleness and a better cost structure than the incumbent. When additional competitors entered the market in the early 1990s with the introduction of 2G phones, they were often able to challenge the incumbents more effectively than was the cases in markets that were previously monopolies. The classic example of this is the British market, from which Vodafone initially became the strongest player, but in which the later entrants were able to grow to similar sizes to the existing players. There are four networks in the UK, and all four presently have about 25% market share. (Although a powerful but dominant player in the UK, Vodafone was able to expand internationally to become the biggest player in Europe and the world).
In about 1999-2001, the strongest players in the various European markets went on an acquisition binge, generally buying the weaker operators in other European countries (and further afield), leading to cross-border brands in Europe. The three dominant players that came out of this were Vodafone (originally the second operator in the UK), T-Mobile (former German telecoms monopoly) and Orange (former French telecoms monopoly), all three of who own networks in many European countries, and elsewhere. Sadly, these companies have not grown into pan-European networks in a way that would be good for consumers. Although there might be a Vodafone network in Germany, it still costs a huge amount for a Vodafone customer from Britain to use it. International roaming is so expensive, and such a profit source for the mobile networks, that it is not in their interests to break it down and leave us with networks that appear international in scope to their users. This will happen eventually, but not until cellular networks face competition from vastly more operators or from other technologies. This may be happening - I have a PDA that runs the Voice over IP client Skype and from which I can make free calls whenever I can find a WiFi hotspot in a foreign country - but it is going to take a few years to really happen.
So that is where we are. We have brands that are international, and it is a truly miraculous thing that I can turn my mobile phone on almost anywhere in the world and it will just work, but pricing mechanisms and a regulatory environment that is are sadly far too subject to national borders.
But what does this have to do with Africa?
Well, as a general rule the big European mobile companies have not been terribly interested in African markets, due to the fact that African markets often have peculiar regulatory requirements (ie African governments and bureaucracies are horrible), the potential profits have been seen as small compared with developed world and Asian markets, and these companies just generally are not very imaginative. So where has the expertise and capital for these African mobile networks come from?
Well, there is one mobile phone market in Africa which did follow the European model, sort of. South Africa did not have analogue mobile phone services, due no doubt to a combination of the general incompetence of the apartheid regime and a lack of desire to introduce a technology that that very paranoid regime likely saw as potentially subversive. As it happened, the first mobile phone networks did not come into existence until 1993. The powers that be licensed two digital GSM licences - one was essentially given to the telecoms monopoly Telkom (which imported expertise and some capital from Vodafone, and ultimately launched a network under the name Vodacom), and one of those new startup mobile phone companies typical of Europe sprung up. This company was (and is) named MTN.
Like many of its counterparts, MTN was better run and nimbler than its monopoly owned counterpart, but in the South African market itself the monolithic advantages of Telkom won out in market share. Vodacom quickly gained and retains to this day the largest market share in South Africa - presently a little over 50 percent. MTN has a little under 40 percent, and a third operator that was licensed about ten years later now has around 10 percent.
While MTN was not quite as successful as Vodacom in the domestic market, where it did become aggressive was in other African markets. South African firms in consumer businesses usually do not try to compete in other developed markets- they are generally too small, too lacking in capital, and in truth levels of customer service in South Africa are often not high enough for the product to be good enough to succeed in America or Europe. There are exceptions (for instance the "Nandos" fast food chain) but not many.
The foreign markets South African companies can succeed in are other African markets. South Africans have experience in dealing with other African countries, customers are not as sophisticated as in America or Europe, and foreign competitors with better customer service are largely absent. In addition, there is one other crucial skill that South African companies have that is quite important and valuable. In the days of apartheid, many foreign companies would not do business in South Africa. Some South African businessmen became quite skilled at looking at successful businesses in the developed world, cloning them reasonably well, and then selling the resultant product in South Africa. In those days the resultant businesses could not be exported to the rest of Africa, but since the end of apartheid they have been able to do so. And in many cases they have done so.
Mobile telephony is not perhaps a perfect example, but it is one. MTN has expanded into various other African markets - Nigeria, Rwanda, Swaziland, Cameroon and Uganda - and has been very successful in these markets. Nigeria and Uganda I am told are particularly profitable. The company has at times been a darling of the Johannesburg stock market, and it is for its African exposure that it gains a lot of its stock price. MTN has become sort of a pan-African Vodafone - powerful but not dominant at home, but the biggest player in Africa as a whole. Its domestic competitor Vodacom has been far less aggressive at expanding into Africa, being more content to take rich pickings in its home market. Vodacom does have one important network elsewhere in Africa, in Tanzania. (This does have the interesting distinction of providing the highest mobile phone service in the world. Alex will no doubt be delighted to know that his Blackberry will work on top of Mt. Kilimanjaro).
South Africa is a conduit for developed world skills and technologies to find their way into Africa, and this is good. South Africa is also a conduit for developed world market structures and business models to work their way into Africa, and this is also good. The present South African government is not a good government - it has an urge to tax and regulate everything, and puts far too strong an ideological bent on what it says and does - but there is quite a bit of entrepreneurial spirit of the right kind in the country. (The apartheid governments of South Africa were also dreadful, vile, protectionist things too, to be fair). This is an example. It is not the only South African company expanding into other African markets, but more are needed.
Obscure correction: A commenter on this article nitpicked and stated that South Africa did have a very small scale and unsuccessful analogue mobile phone system prior to 1993. This gave me enough information to do some research, in which I discovered that South Africa did have a small network using a technical standard that was unique to South Africa called C-450. (When I was researching the article I couldn't find South Africa on lists of countries that used any of the main analogue standards, which is why I assumed there was no network). This is not as unusual as it sounds - there were a multitude of different analogue mobile phone standards in use in the world, and one reason why Europe came up with a singe 2G standard (GSM) was because analogue mobile telephony in Europe had been a disaster due to there being a large number of incompatible standards in use - but clearly the reason that first generation analogue mobile phones failed in South Africa was because of a terrible technology choice, mixed in with a questionable regulatory choice in using the 450MHz band rather than the 850MHz band used in most places. (That said, quite a few other countries - many in Scandinavia and Eastern Europe - allocated 450MHz and produced networks that succeeded). The legacy of such a total failure when going it alone might explain why Telkom partnered with Vodafone for 2G, too.
So in fact South Africa corresponded to the Australian model - a monopoly in analogue technology, and then multiple licences for digital from 1993 - but the incumbent telco was even worse, which didn't stop it from still being able to use its size to gain a majority market share in 2G. Interesting.
Sunday
I do not really believe this, but it makes a good story:
The man who sparked the flat tax revolution is former Estonian Prime Minister Mart Laar. He governed his country from 1992 to 1995 and from 1999 to 2002. When the historian became Prime Minister in 1992 at the age of 32 he knew nothing about economy. Laar's area of expertise were Europe's 19th-century national movements. "It is very fortunate that I was not an economist," he says. "I had read only one book on economics – Milton Friedman’s "Free to Choose." I was so ignorant at the time that I thought that what Friedman wrote about the benefits of privatisation, the flat tax and the abolition of all customs rights, was the result of economic reforms that had been put into practice in the West. It seemed common sense to me and, as I thought it had already been done everywhere, I simply introduced it in Estonia, despite warnings from Estonian economists that it could not be done. They said it was as impossible as walking on water. We did it: we just walked on the water because we did not know that it was impossible."
Shrewd politicians often pretend to be dumber than they are, if only so that they can look well-meaningly sheepish instead of thoroughly ridiculous when things go wrong. So, I take Laar's claim to ignorance of economics and of economic policy outside Estonia with a pinch of salt. But what does not seem to be in doubt is the importance that a good book can have, and good ideas in general. If only the same did not apply to bad books and bad ideas.
I visited Estonia briefly in 1991, for a Libertarian International gathering in Tallin. I am not surprised that the Estonians are now doing well. They struck me as very level-headed and efficient people. They of course have a long mercantile tradition as a result of their proximity to and seaborne trade with Scandinavia. Those places are not called the "Baltic" states for nothing.
Friday
Is there anything, anything, now going on in what used to be called, either with delicate euphemism or with a sneer, the "developing world", but which now really is the developing world, that is more encouraging than the rapid spread throughout said world of portable telephones?
I have just done a piece for the ASI blog about this process in Africa, linking to this New York Times article. And the Private Sector Development blog (whom I have just added to my personal blogroll here), in addition to supplying the same link today, have also linked to of a recent Economist piece on the same subject. Pablo Halkyard also links to this Wall Street Journal piece.
It is not all good news. It never is. Governments all over the place are now demanding extortionate connection taxes, to the point where the tax bill is starting seriously to outweigh what would have been the regular cost. Sounds like those cheap European air tickets that I sometimes buy on the internet for peanuts, where the government then charges me peanuts times four. Nevertheless, even there the news is partly good, because at least some governments are learning that if they cut connection taxes down to something more in line with the extreme cheapness of the service itself, people are more ready to pay such taxes. That is because illegal phones are more likely to go wrong and harder to get mended if they do go wrong. Is the unwillingness of people to pay big taxes good news or is their willingness to pay small taxes bad news? You decide.
The portable phone quote that made me smile the most this morning was this, from the Economist piece:
(Oh, and the "digital divide" vanishes, too.)
I especially like the brackets.
Wednesday
Uber-blogger Andrew Sullivan, fresh back from his holidays, rages against Americans who drive big SUVs on the grounds that by doing so, they help swell the coffers of terror sponsoring states in the Middle East. Patriotic Americans, says the ahem, British Mr Sullivan, should drive smaller, more fuel-efficient vehicles. He does not like the habit of "soccer moms" driving their kids around in such vast vehicles, full of clobber he thinks is a waste of space and money.
Well Andrew, maybe. I would have thought that with the price of crude oil hitting the region of around $66 per barrel, that even the dimmest motorist is going to see the impact on a bank statement eventually and wonder about trading in the Hummer for something a tad smaller. I know it is crazy ideological talk but people do actually take account of prices.
If oil prices stay on their current trajectory, it won't need a scold like Sullivan to remind Americans, or indeed anyone else, to adjust their consumption. All it takes is the operation of prices. Some Scottish geezer called Adam Smith once wrote about this about 230 years ago, I think. It is such a shame that even bright folk like Andrew Sullivan take all this time to catch on.
Tuesday
Cameron Carswell discusses the role of the World Trade Organization in promoting free trade.
The World Trade Organization (WTO) draws wrath from people of all sides of the political spectrum. There are those supporters of globalization who oppose it on principle, saying that while free trade is a desirable goal such an organization implies it needs to be "managed". It makes sense to be sceptical of the idea that economic liberalism and free trade can be imposed from the top down - for an excellent and balanced view of this by Dr. Razeen Sally see here.
There are those who oppose globalization and see the WTO as advancing the very process others see it as hampering. The question is, does the WTO genuinely advance free trade (with all the associated benefits), or is it merely a vehicle for special interests and rent seeking?
There are some elements of the WTO rules which do seem at odds with the goal of free trade - Chinese clothing exports are currently limited under special WTO rules. However it could equally be argued that this was merely a practical measure to prevent further trade barriers being set up.
The WTO is designed to promote free trade but by its nature as an international organization is open to politicisation. If it is the case that trade barriers are reduced as a result of the pressure it exerts then all the better. On the other hand, unilateral moves toward freer trade are invariably good things, and it would appear that this is the most likely route for the goal of free trade, once again with China leading the way.
Tuesday
Via the Global Growth blog comes news of the recently (June of this year) launched Private Sector Development blog.
Says the Global Growth blog:
Its great to see that market approaches to development thinking are gaining traction, yet more evidence that a new paradigm is forming.
Indeed.
Although, I have already spotted one error in this new blog. In his June 29th posting, Pablo Halkyard says that Bill Nighy played the Chancellor of the Exchequer in The Girl in the Café (my opinion of The Girl in the Café is to be found here). No. Nighy played a mere civil servant. The Chancellor was played by the appropriately Scottish Ken Stott.
This is a small error. That the private sector is the way to go for enriching countries that are now poor is a great truth.
Tuesday
Anatole Kaletsky, the economics journalist who, despite a fondness for Keynsianism, is one of my favourite columnists, believes Italy's departure from the euro and possible re-creation of the lira is a real possibility, one that needs to be taken with deadly seriousness by financial markets. He says the financial fallout from an Italian divorce could be disastrous:
While detailed consideration of these arguments is probably premature, the practical implication is clear: If the possibility of an Italian withdrawal were ever taken seriously by the markets, foreign holders of Italy’s €1.5 trillion public debt would face enormous losses, big enough to endanger the solvency of many non-Italian banks. In other words, the Italian Government is now in a position to kill the euro and wreck the European banking system merely by threatening to withdraw.
I think he is correct. As I said in my last posting about Hayek's idea of competing currencies operating inside the same country, it is folly to imagine that the cult of the all-wise central banker will not come a cropper some time or later. Many Italian entrepreuneurs might be very glad indeed of an alternate store of value if that country does indeed pull the plug on the euro.
Some scare stories deserve to be ridiculed but I think Kaletsky is on to something. Between now and the Italian national polls next year, it would be smart to keep a very close eye on the euro zone financial markets indeed.
(Thanks to the Adam Smith Institute blog for the pointer. It reaches pretty similar conclusions).
Tuesday
Paul Staines says Sony should welcome Brits buying Playstations before their UK release.
European video-gamers who buy the Sony Playstation Portable (PSP) will be surprised to find out that Sony is suing the retailers who sold it to them.
Not yet formally launched in Europe, the eagerly awaited PSP can be bought online from Hong Kong dealer Lik-Sang.com, a leading online retailer for videogame systems. Sony, in an aggressive tactic borrowed from Big Pharma's lawyers, is suing the parallel trader for breach of trade mark and seeks a court order that would prevent Lik-Sang.com from selling or offering systems, games and accessories to customers in the UK and the European Economic Area (EEA). Sony claims "Lik-Sang's sales are an unlawful interference with Sony's economic interests."
Pascal Clarysse, Marketing Manager for Lik-Sang.com says:
This is the most aggressive move against its own customers that a console manufacturer has ever taken in the 30 year history of videogames. Sony wants to completely cut hardcore gamers away from items released in Japan or anywhere else outside their own country. A very active part of the gaming community has been enjoying Japanese gaming culture for over two decades, and that's what the Empire is now willing to destroy.
The lawsuit comes as a total surprise to Lik-Sang.com, given that the laws of Hong Kong are clear when it comes to parallel trade. Hong Kong's legislation is based on the fact that allowing parallel and free trade will restore natural competition and benefit consumers with lower prices. Hong Kong, one of the pioneering countries respecting worldwide exhaustion of trademark rights, allows free trade once an item has entered the market for sale.
Sony wants to control its products even after it has sold them, but that is not how the globalized world works today. Sony should be pleased that the demand from UK customers is so great. Instead of acting against its fans' interests, they should welcome the early demand.
Tuesday
Arnold Kling has brief thoughts here about the phenomenon of air miles. The "bonus" miles one accumulates due to air travel now equate to about $700 billion of value, according to a study that Kling cites. That is a lot of money. He is not very keen on air miles, largely it seems because he dislikes the way that dinner table companions go on about them. I know how he feels. An acquaintance of mine, who shall remain nameless, would constantly brag about how many air miles he got via Virgin or whatever... zzzzzz
On a more serious note however, one can see how some people might want to treat the air miles market as a sort of parallel currency. $700 billion dollars worth of air miles could buy one a lot of goods and services, conceivably, if exchanged by barter. Clearly they are highly restricted in terms of liquidity, the key advantage of money. But during a period of high inflationary stress, I could see how air miles could become quite popular as a medium of exchange.
The idea of competitive currencies is often rightly associated with the late F.A. Hayek. The idea seems to have gone rather quiet of late. Perhaps because we currently live in a period of relatively low inflation, the fears about the dangers of monopoly money and hubristic central banks have faded. It would be highly complacent, however, to assume that the current benign low-inflation environment will last forever. These things seldom do. Hayek's idea may be ready for a comeback.
Monday
I suppose most readers around these parts would reckon that actors should stick to acting, and keep their political opinions to themselves.
But what about these opinions?
"People think more aid will help, but it won't," said Ms. Driver, an actress who is working on her second music CD. "Trade is the surest way of decreasing the savage amount of poverty in our world. These countries have got to be able to trade fairly."
And the point is, by "fairly", she does not mean being paid artificially high prices; she means getting rid of agricultural subsidies in the rich countries.
It was never a practical project to silence the acting profession. These people are famous. Having acquired their fame, they then want to use their fame to do good, and in the process to become even more famous. This is only natural, especially when you consider that doing good and being heroic is what, according to the entertainments these people spend their lives making and acting in, life is all about. Trying to stop famous actors from expressing what they consider to be virtuous and heroic opinions in public is like trying to stop the wind from blowing or the sea from being wet.
No, the task that faces us is not to silence the acting profession from ever opining about goodness. That would be impossible, to say nothing of censorious and unpleasant. Rather is our task to change the definition of goodness that actors of sufficient fame to care about such things reach for when they get to the public virtue stage in their careers, and to make goodness really mean goodness.
Ms. Driver's pronouncements concerning the superiority of trade over aid as a means of rescuing the world's poorest people is evidence that some progress is being made along these lines.
Many actors surely already believe such things, on the quiet. But it is still a fine step forward when one of them feels able to say such things in public.
Wednesday
Anthony Batty asks if we really need the Competition Commission to promote competition between UK supermarkets.
In the news recently, the UK's Competition Commission has been flexing its muscles in the area of supermarkets. Somerfield may have to sell stores, after buying what Morrson's did not want after acquiring Safeway (a one-time subsidiary of the American supermarket company).
Do these people really feel that by virtue of the fact a supermarket has two stores within some arbitrary distance they have a monopoly? Or are able to raise prices and earn large profits? For starters the barriers to entry for say Iceland to open a new store are simply planning permission. If they feel customers would use the shop I am sure at least one of the major players would open up a store. Not to mention continuous competition from supermarket home delivery, local shops and the fact people may just drive another few miles if they do not like the selection they are offered. Supermarkets are one of the most competitive areas in the modern economy, if a company does not keep pace with the efficient supply chain, changing demand (such as the low carb craze that swept through the UK) it will find itself the target of a takeover bid, or in administration. This is not because of the work of government departments; rather it is the free market at work. Only through this competition can we find which stores give us what we want, at a price we are prepared to pay. If one firm is not performing we go elsewhere, if prices are too high we use an alternative retailer. There simply is no need for bureaucrats to be in charge.
I do agree however, with the basic premise of more competition. For this reason I find myself reverting to a point made by the late Screaming Lord Sutch, why is there only one Competition Commission? (In his day, the Monopolies and Mergers Commission.) Surely in the interests of competition we should have several. By allowing new entrants and getting rid of the protected monopoly that exists at present, firms can choose between different conclusions and suggestions. Lower administration costs and fewer worries about whether or not an action will be allowed, means lower prices for consumers. In that way we will have free and fair trade, without the diktats that are not in the interests of firms or consumers.
Saturday
It is easy, with all the terrible events going on in London at the moment, to let other significant stories slip under the radar. However, last week the UK senior finance minister, Chancellor of the Exchequer Gordon Brown, tweaked the rules of UK budget policy in an offhand manner that takes the breath away for sheer barefaced cheek.
Brown has a so-called "Golden Rule" that stipulates that the government's books must be in balance over the course of the economic cycle. The books are currently seriously in the red at the moment, which would appear alarming given that we have had a relatively decent period of economic growth recently. So what does the gloomy Scot do? He shifts the year in which a key part of the economic cycle is supposed to have started by two years, the effect of which is supposed to show that the Golden Rule has not been broken. This sleight of hand produced fairly scant coverage outside the business sections, but in its own little way illustrates the utter contempt this government has for the financial markets, or the general public.
Brown has done this sort of thing before. And it makes one wonder just how long Brown can go on before the economy, supposedly Labour's strongest card in the last election, turns south.
I never bought the argument that Brown was a great Chancellor, as, with all his faults, was Nigel Lawson, for example. Brown has been enormously lucky to inherit an economy left in fine fettle by the previous Conservative government, and apart from his wise move of making the Bank of England independent, has done precious little right since. He is an ardent meddler and micro-manager, making the tax code into a hideously complex morass that does precious little for growth apart from make lots of jobs for tax accountants.
How the world changes. A few weeks ago the political trainspotters were wondering how soon Brown would take over from Blair. I suspect the likelihood of that happening has been pushed away by quite a distance.
Wednesday
I attended the GI launch last night, and Alex Singleton turned me loose as the kind of semi-official photographer of the event, and has used some crowd shots I took, and also pictures I did of Bill Emmott and Alan Beattie (who is also quoted here).
Glad to be of use. But what really got my attention last night was the number of nice looking women who were present. Johnathan Pearce is fond of mentioning P. J. O'Rourke's Law of Babes, or whatever it is called, which goes something like: Wheresoever the Babes are, there shall also the Action be. Tom Wolfe's description of how the Babes managed to track down the men test flying jets in the top secret desert of western USA in the early 1950s, in The Right Stuff, is an earlier exposition of the same law.
Judged by this standard, the GI Institute is doing pretty well. Here are eight nice looking ladies, and one genuine baby type babe just for good luck, and because he/she was there. (Cranking out more of those being a lot of what this is all about, after all.)
And those are only the ones I got reasonably good photos of. I can recall at least two more ladies who only missed the cut because I did not get good photos of them. So if you are a fully certified Gorgeous Babe and you were there, please do not be offended. You just came out all blurry in all my photos, on account of my chin hanging down and hitting the focussing nob.
Click to get bigger pictures, some of which include extraneous males of the species. Cropping such photos is always a controversial matter.
Sunday
The pharmaceutical industry has been running an ad campaign in the United States saying that reimportation of drugs from Canada were allowed, those drugs might be counterfeit, unregulated and unsafe. This is simple propaganda and nothing more.
Pfizer's Chief Executive Officer Dr Hank McKinnell has come out and contradicted his industry's advertising. On page 69 of his new book, he says that: "Drugs from Canadian pharmacies are as safe as drugs from pharmacies in the United States." Pfizer vice-president Dr Peter Rost says that drug company lobbyists "know full well" that drug reimportation has "been done safely and cost-effectively... in Europe, for over twenty years... The German Federal Health Ministry has verified that not one single confirmed case of a counterfeit medicine has ever come through the parallel trade chain. The UK regulatory authority has described the level of pharmaceutical counterfeiting as 'virtually undetectable'."
They were not speaking on behalf of their employer.
Dr Rost's view is confirmed by Donald MacArthur of the European Association of Euro-Pharmaceutical Companies who in November 2003 testified at a US Senate committee. MacArthur said: "As far as can be ascertained there has never been a single, proven case of a counterfeit medicine leaving the parallel trade supply chain in Europe. Certainly, none has been reported in the two largest markets for incoming parallel trade - the UK and Germany; in the case of the latter, the government has recently verified this fact".
In the US, where reimportation is illegal, counterfeiting is on the rise. The ban on reimportation has led many people who cannot afford the cost of drugs from their local pharmacy to use online shops they have never heard of to illegally get cheap drugs. Some of these websites, which are marketed through spam e-mail, claim to be in Canada but are based in developing countries and fail to deliver anything or supply counterfeit drugs.
If the US wants to fight counterfeit drugs, it should follow the European model and let legitimate, properly-regulated businesses, which consumers can trust, safely and securely reimport pharmaceuticals. That way, the drugs get imported from legitimate wholesalers in Canada and Europe. Contrary to claims of pharma's lobbyists, it is America's ban on reimportation that promotes counterfeiting. The US government should adopt free trade in pharmaceuticals not just to reduce prices but to reduce counterfeiting, too.
Crossposted from the Globalisation Institute Blog.
Wednesday
In the comments here, Andrew Duffin asserts that:
It's a lucky Pharma company indeed that gets seven years to recover the R&D costs of a successful product. Two or three is more like the real world figure.
But Chicago professor Richard Posner writes:
...I am skeptical about the length of the patent term for pharmaceuticals. Congress has tacked on to the normal 20-year patent term (which until 1995 was only 17 years) an additional term of up to 5 years for the time it takes a pharmaceutical manufacturer to get a new drug approved by the Food and Drug Administration. In addition, the expiration of a pharmaceutical patent does not extinguish the patentee's ability to obtain a higher price than the generic substitutes that come on line when his patent expires, because there may be substantial consumer and physician goodwill attached to the trademark of the patented drug...
Dr Marcia Angell, the former editor-in-chief of the New England Journal of Medicine, says in this book:
...the effective patent life of brand-name drugs increased from about eight years in 1980 to about fourteen years in 2000.
Sunday
The original Live Aid back in 1985 was something I supported. I watched it, gave them my money and continued to vote for Margaret Thatcher in the next election because, just like in Africa, extreme statism needed to be opposed in the country I lived in too. Back in those days the Tory party had at least some intellectual coherence.
Live Aid was a very specifically targeted project: there was a catastrophic famine in Ethiopia and regardless of the fact that it was the result of a war vastly exacerbating the effects of a drought, I felt at the time that specifically aiding civilians with emergency assistance was neither going to destroy the local economy (it had already collapsed to less that subsistence) nor would it significantly enrich the Marxists at the top who were in no small way responsible for that state of affairs. Most importantly, Live Aid was asking for private money, and as it was mine to give, I gave some.
This time things are rather different and far less straightforward. It is not all bad, mind you. The Live 8 extravaganza has quite a few people associated with it making demands for the developed world (of which Russia is not truly a member, it should be noted) to open their markets to the Third World... and this is rightly targeted at the G-8 leaders. Quite so. What the hellholes of the world need is more globalization, not less, if they are to lift themselves out of their dire conditions.
But alas the main thrust of what Live 8 seems to be about is to induce the governments of the G-8 to take money from their taxpayers and assign it to nebulous and frequently counter-productive projects in Africa, often in effect propping up the regimes who are the single biggest cause of their own nation's problems and directly responsible for local poverty.
As with any large gathering of the music illiterati, coherence and cogency are going to be as rare as pelicans in Perthshire. Yet some of the people listening to the streams of babble at this event will come away with the simple idea lodged in their brains that making trade freer is one of those things that would make the world a better place. So whilst I have no interest in supporting Live 8 myself and I had better things to do than watch it yesterday, perhaps some good will come from it in spite of the toxic statist message at this event's core.
Sunday
Next time you see a starving African child on the television, remember the culpability of Make Poverty History. MPH's will cause more poverty and more deaths than would otherwise have occurred.
Socialism is killing the third world and Make Poverty History is going to make it worse. In a report by the Globalization Institute called More Aid, Less Growth, we learn that "for every 1% increase in aid received by a developing country, there is a 3.65% drop in real GDP growth per person. Contrary to the conventional wisdom in the aid industry, the study finds that even where recipients have good governance, the effect is also negative."
So there you have it. The increase in aid prompted by Make Poverty History is going make things worse, not better.
Saturday
At Hyde Park, Dido just introduced as the "African Ambassador for Music from Senegal", Youssou N'Dour*, who she was "in awe" of, "not just because he has a wonderful voice, but because of his wonderful beliefs". He came on stage to say:
"The debt cancellation is OK. The aid is OK. But, please, open your markets."
There will be an awful lot of well-intentioned nonsense given unquestioning, reverential coverage today, with ignorance and platitudes dressed up as profundity. Maybe, however, for perhaps the first time at an event of this type and on this scale, a kernel of truth will wriggle its way onto TV.
I consider this a small but notable victory for the notion that, if you permit free speech and are prepared to tolerate every misguided and moronic idea, eventually the truth will out.
* [edit]: add correct spelling and link.
Friday
I have already mentioned the guy's robust views about the upcoming Live8 musical event about to hit central London and I make no apologies for following up by plugging a fine book by Richard D. North in which he defends affluence and modern industrial society in his book, Rich Is Beautiful. Written in a deliberately provocative tone of voice, North crushes one modern shibboleth after another in a style reminiscent of a British P.J. O'Rourke. First class.
Monday
It is good to see that some dissenting voices are being heard amidst the babble that is surrounding the G8 event.
I find it interesting to see that a moderate voice for the free market like Alex Singleton (who, unlike me, supports Third World debt cancellation) is being attacked by a neo-communist who describe him as a 'dangerous extremist', even though Alex's views on these particular issues are little different from the Department for International Development or that paragon of Thatcherite virtues, Clare Short. Well who knows, perhaps some of Alex's critics have pecuniary ties to large pharmaceutical companies? It is amazing the enemies you make when you stand up for free trade and against vested interests.
Alex is a splendid chap but frankly I do not find him nearly extreme enough when it comes to Africa, but perhaps that is my job.
Tuesday
Richard B. North has a terrific set of articles about the current focus on Africa, debt-relief and poverty brought about partly by the efforts of Sir Bob "keep it off eBay" Geldof. It is fair to summarise that North is not totally blown away with admiration by the scruffy former lead singer of the Boomtown Rats, or indeed with the grandstanding of our own wonderful PM, Tony Blair.
Definitely not the sort of articles one would expect to get on a college degree reading list. How I wish the weblog existed when studying for my degree back in the 80s.
Sunday
"I think that maybe -- just maybe -- anti-Wal Mart sentiment has more to do with an aversion to the white, rural ethnology the store sometimes represents than its labor practices. We can't have our Ethiopian restuarants and esoteric bookstores blighted by NASCAR culture."
- The always good American blogger Radley Balko, telling it like it is.
Friday
It was written as...
The US taxman, the internal revenue service, argues that KPMG's tax shelters between 1996 and 2002 cost the government $1.4bn in lost revenues.
But I prefer to see it as... "KPMG's tax shelters between 1996 and 2002 saved the public $1.4bn which was used to generate productive economic activity"
Wednesday
As I remarked in my previous post, Sir Bob Geldof is an annoying gentleman but capable of moments of lucidity. (I was a bit rude about him in my previous post. Sorry Bob). As an act of charity to the fellow, here is a quotation he might like to ponder:
"I see in the free trade principle that which will act on the moral world as the principle of gravitation in the universe- drawing men together, thrusting aside the antagonisms of race, and creeds and language, and uniting us in the bonds of eternal peace... I believe the effect will be to change the face of the world, so as to introduce a system of government entirely distinct from that which now prevails. I believe the desire and the motive for large and mighty empires and gigantic armies and great navies... will die away... when man becomes one family, and freely exchanges the fruits of his labor with his brother Man."
Those words were uttered by Richard Cobden about 150 years ago, a man who saw a congruence between the ideals of personal liberty, concern for the welfare of one's fellows, and the free market order. For him, like his great Victorian contemporaries like Sir Robert Peel, free trade was a progressive cause to be championed in the interests of the little guy, and not the cause of big powerful interests. It is a message that urgently needs to be understood by those who, no doubt from fine motives in a few cases, rail against global capitalism.
If the case for the free market is to be more widely advanced, we have to appeal to the sense of idealism and concern for the downtrodden that animated our ancestors and could still appeal to the decent folk on the left. It is worth a try, anyway.
Tuesday
Sir Bob "Make Poverty History" Geldof is getting the vapours over the fact that tickets for his various supposed poverty-relief events have been put up for sale on that symbol of dark, rampant capitalism, eBay. In particular, he seems all upset that a big corporation like eBay should make any money from such a highminded event.
Horsefeathers, is all I can say. eBay, in my view, contributes vastly more to the sum total of human happiness and welfare than that preening stage army of hasbeens, wannabees and well-intentioned nitwits that have clustered around Sir Bob. As has already been recounted in detail here, Sir Bob Geldof is a man of infuriating contradictions, able to talk with piercing clarity and lack of cant about the corruption of African governments and yet also willing and able to spout the cheap pieties that seem to accompany many a post-colonial guiltfest such as Live8.
If Africa's economy were run with the same brio, dash and entrepreneurial brilliance of eBay, Sir Bob and his ilk would have to spend a little more time on what they supposedly do best.
UPDATE: thinking this through in the light of watching Geldof on the television, I can certainly applaud his desire to steer as much revenue to the poor of the world as possible but there seems no awareness on the part of the Live 8 crowd that what Africa needs is precisely the sort of business acumen of which eBay is a modern example.
UPDATE 1: eBay has blocked sales of such tickets on its pages, according to the BBC.
Tuesday
Moeletsi Mbeki, the brother of South Africa's President, says that the private sector is key to modern economic development in Africa. But, he says, African leaders and Western donors are holding it back. On the website of his organization, the South African Institute of International Affairs, he argues that:
foreign donors could play a more constructive role than they are doing at present through their current efforts to sustain the political elites and African states with budgetary support and the like.
Instead of giving more money to African governments, Mbeki says donors should providing the expertise to help establish independent financial institutions like credit unions and savings banks and help shield them from political elites.
Moreover, African governments need less power and the private sector more:
Africa's private sector is predominantly made up of peasants and secondly, of subsidiaries of foreign-owned multinational corporations. Neither of these two groups have the complete freedom to operate in the market place because they are both politically dominated by others - non-producers who control the state. Herein lay the weakness of the private sector in Africa that explains its inability to become the engine of economic development. Africa's private sector lacks political power and is therefore not free to operate to maximize its objectives. Above all, it is not free to decide what happens to its savings.
African elites have prevented peasants from reinvesting their earnings in machinery to improve their productivity:
Fundamentally, the political elite uses its control of the state to extract the surplus or savings that if the peasant were free to retain they would have invested in improving their production techniques or to diversify into other economic activities. Through marketing boards, taxation systems and the like, the political elite diverts these savings to finance its own consumption and the strengthening of the repressive instruments of the state.
The economic looting of multinational companies after independence means that international investors are wary of investing in Africa:
When the colonialists retreated from the 1950s onwards, these colonial subsidiaries [Western companies] lost their key protector, the colonial state. Before long they, like the peasants, fell prey to the appetites and whims of the new African political elites who controlled the newly independent African states. The lucky ones were nationalized and their owners were therefore paid compensation; the not so lucky ones were 'privatized' [confiscated by individual politicians without compensation.]
Moeletsi Mbeki's comments are in stark contrast to those of Gordon Brown who thinks that simply throwing more at African governments is going to bring prosperity. Mbeki recognises that the West should be helping get more private investment into African and helping improve the institutions that enable business to thrive.
Crossposted from the Globalisation Institute Blog.
Saturday
The decision to write off billions of dollars in debt for various Third World nations is in effect a subsidy for bad governance. Oh sure, the debt relief is tied to various conditions aimed at improving the kleptocratic ways that are the norm in the world's various hellholes, but it is still just a way of saying that in the final analysis it is western taxpayers yet again who will be the ones picking up bill for the actions of various corrupt WaBenz bureaucrats.
And what of those poor nations who actually do repay their loans? What of those who keep corruption under control and who have a ruling class that does not see private businesses as a personal piggy bank to be raided as needed? What message is sent to them when they see the incompetent and corrupt rewarded with free money so that some celebrity activists can make economic illiterates feel good about themselves?
Which brings me to Geldof. I just cannot figure out this guy; on one hand he says self-evident sensible things like (emphasis added):
Bob Geldof admitted today no amount of aid to Africa could eradicate poverty on the continent while its Governments remain corrupt. The former singer was launching a 170-page compact summary of the Africa Commission's report which will be presented to the G8 summit this July.And the maverick Irishman repeated his call for 'hundreds of thousands' to converge on Edinburgh to coincide with the summit at Gleneagles. He said: "The issue governance is at the forefront of this compact. You can't give aid to countries when they return it to us in debt payment, especially if you don't allow them to trade with us. None of that will function unless there is a decent Government."
But then says something as preposterous as:
Fears over corrupt African regimes should not be used to delay aid to the poverty-stricken continent, Bob Geldof said yesterday. Less than 48 hours after both Tony Blair and George W Bush insisted that corrupt regimes had to be tackled to ensure that aid was not wasted, the Live 8 organiser told them to "get off the corruption thing" and deliver the promised help.
So what is one to make of that? By his own admission, Africa's appalling governance is a huge contributing factor to poverty and woe (not to mention the continent's horrific record regarding civil liberties) yet we are urged to "get off the corruption thing". So to use Geldof's sort of language... what the fuck?
If governance is perhaps the single biggest factor (amongst several) that makes the Third World so damn poor, surely the Western taxpayers whose money Geldof is to keen to give away should indeed be asking if they really want their money to end up in someone else's Swiss bank accounts via Kinshasa or Freetown.
Sadly for Africa, most of the things written about the causes and solutions of poverty in the Third World, or at least the articles that get serious column inches, are drivel by 'celebrity activists' who are ill-informed and arrogant in equal measure. A prime example being the mind numbingly ignorant Chris Martin for example, who thinks 'shareholders', the people who provide the capital to wealth creating businesses, which are the "great evil of this modern world" rather than, say, the governments of North Korea, Cuba and Burma. But then such folks do not concern themselves with actual benefits to poor people in various far off places but rather with pithy soundbites and causing emotional surges brought on by 'doing something', regardless of whether or not it actually improves anything for anyone other that a few Mercedes Benz dealers in sub-Saharan Africa and some portfolio managers in Zürich.
No, none of this really has anything to do with helping common people in the Third World.
Friday
Jonathan Wilde of the admirable libertarian group blog, Catallarchy, argues that poverty, rather than wealth, is "unnatural", in as much as it is the stupidity of governments, rather than some ineradicable feature of our world, that prevents humans from attaining the opulence (to use that lovely 18th Century word) that we are capable of attaining in co-operation with our fellows.
I am not so sure that Wilde is entirely right. Is it only the state that has in the past blocked the path to wealth? Surely the lack of scientific knowledge, limited division of labour and so forth played a part in poverty.
Don't misunderstand me - I think that Wilde makes a good point, but to say that wealth and happiness is the natural state of mankind begs as many questions as it may answer. All the more reason, of course, to ram home the fact that our capitalist civilisation should be regarded as a marvel to be celebrated and defended.
Tuesday
The usual collection of fabulously rich but economically illiterate show biz twits are going to assemble for Bob Geldof's Live 8 event timed to coincide with the impending G8 conference in Scotland on 6-8 July. Now God knows lampooning rock 'n' roll's A-list 'idiocracy' is fun and easy sport, but I must confess that I have always regarded Geldof as an intellectual cut above your typical gormless entertainer, so perhaps a closer look at what is going on is in order.
Live8 is going to be a freak show, that is for sure, surrounded by pro-poverty activists (by which I mean people who argue for a world structured in a way in which more people will be a great deal poorer) such as identity obsessed feminists, pro-Saddam communists, eco-luddites and all manner of other folks with very strange ideas about the nature of reality.
Yet unlike Live Aid, the objective of which was to raise money to mitigate a clear and present humanitarian disaster in Africa, Live 8 aims to raise political awareness on African poverty. Well that sounds like a splendid idea to me. Clearly the overwhelmingly largest cause of the destitution of large areas of sub-Saharan Africa is cause directly by corrupt African governments. So it would be fair to say that as the main obstacle to African prosperity and liberty is political, then the solution too will need to be political.
To his credit, Tony Blair has often said that it makes little sense to send aid money to corrupt regimes (which makes his infatuation with the UN all the more bizarre, given that it is an institution whose job it is to disburse money which mitigates the political cost of tyranny the world over) and so perhaps if the aim of Live8 is to work up support for the disintermediation of African government from the process of solving African problems, well, that is an idea I could certainly get behind, at least in principle.
Likewise I am all in favour of gathering political support for an end to all trade barriers that keep African products out of First World markets, empowering people at both ends of the trade relationship. Now this is something calculated to split the left in an interesting way as lefties who actually do care about doing something effective for the Third World inevitably succumb to the logic of Free Trade as opposed to the current system of subsidized Western agriculture and discriminated against Third World agriculture.
So it seems to me that although the din of idiotarian drum banging will be deafening, there is actually a fairly laudable message that might, just might, come out of this whole process. Perhaps it is time for some anti-idiotarian meme hacks? I certainly hope Bureaucrash are going to put in an appearance or two in Scotland...
Tuesday
And since we are on the subject of 'Star Wars' this evening, it appears that Our Glorious Leader has finally been seduced by the 'Dork Side':
They are the must-have fashion accessory for the socially aware - and now Tony Blair has got in on the craze.Whether worn to highlight racism, cancer research or poverty, coloured bands are a familiar sight on the wrists of footballers and pop stars.
Now the prime minister has been photographed wearing a white Make Poverty History wristband during a trip to a hospital in Edgware, north London.
Perhaps he wants to be in a filmy-wilmy with Gwynnie and Braddie?
[Furthermore, for a polished and forensic debunking of this cloth-headed, celebrity-driven codswallop, I recommend Stephen Pollard]
Monday
Last week, my friend Jonathan Pearce made some observations on the impending takeover of the Manchester United football club by Malcolm Glazer. This led to a lengthy comments thread that I was going to add to, but the comment in question got a little long, so I thought I would turn it into a post. In particular, I wanted to address the key question, which is simply is there any way Mr Glazer can get enough revenue from the club to pay of the large debt that has been accrued, and if so, how.
As I see it there are two sources of value in the club that the present management is not presently allowed to exploit, and to make a success of his bid Glazer needs to gain control of at least one of them. One is that television rights are sold collectively, and as a consequence the share of television money that is going to Manchester United as not comensurate with their popularity and fan base. The other is that Asian and particularly Chinese television markets are not presently competitive and as a consequence Asian television companies are paying far less for the right to show football than the matches are actually worth. I will address these two issues in turn.
Manchester United gets a far smaller percentage of total TV rights money than it would be entitled to merely by the level of its popularity. Of the various competitions that Manchester United play in, the governing bodies of the two that matter (The Premier League and the UEFA Champions League) sell the television rights of the competitions collectively. The Premier League sells the rights to all its matches in bulk and then shares the money amongst its clubs. So does UEFA. If Manchester United were able to sell the television rights to its own home matches directly to television companies, the club would receive a lot more money than it does now. There have been some mentions in the press that Glazer might try to have this happen, but I chances of this happening strikes me as relatively low.
There have been lots of suggestions over the years that the biggest clubs in Europe might break away from their national leagues and form a super league where they control their own TV rights (and there have been more in recent weeks as the bid for Man U has gone on), but this is always a non-starter. National leagues have too much history and are too important to fans. It might be possible to argue that collective selling of TV rights is anti-competitive, but I don't think the courts would agree. (Membership of the Premier League is voluntary). And I think a court would probably be susceptible to the argument that the three or four top clubs in England are dominant enough already (whether or not this would have much to do with what the actual law says) . If clubs in the Premier League could sell their own rights, then I believe that about 75% of the total television money would go to the top four clubs, and I tend to think there would be legal and political objections to that, regardless of their merit. (Seriously, think about it. You are a television company. Once you have the rights to the home matches of Manchester United, Chelsea, Arsenal, and Liverpool, what else do you need?)
One might be able to make this argument more strongly in the case of the Champions League, but it wouldn't help quite as much, mainly because Manchester United aren't dominant in that competition, having only won it twice and only once in recent years, and not having looked like winning it in any other recent year. Of the 32 teams that play in that competition every year, probably ten have claims to be as big or nearly as big as Manchester United, and another ten are good enough to win it if things go their way. (And Manchester United's recent record of making the later stages of the tournament isn't that great). Inevitably, the television money of this competition would have to be divided up in more ways than for domestic football, even in a situation where clubs were permitted to sell their own television rights. (And in any event, bigger and more successful clubs get more money than smaller and less successful ones do now, although the means for dividing the money is perhaps a little eccentric, depending as it does on performance in national leagues).
Which is not to say that Manchester United's share would not increase considerably if they could sell their own television rights. It would, but not as much as it would if they could sell the rights to their own home matches in the Premier League. But in any event, once again I think the political and legal objections are likely to be too great for there to really be much chance of that happening. UEFA gains its power in the labyrinthine world of football politics largely through the television revenues of the Champions League,and saying it wouldn't give this up without a fight is a vast understatement. Of course, one possibility would be for the top European clubs to break away from the Champions League and instead form their own international competition, but if they did that UEFA would try very hard to prevent them from playing in national leagues as well. While I think if UEFA tried to do this and the clubs challenged it in court the clubs would win, it would be a dreadful fight, and at least ten of the top European clubs would have to act in concert in the first place for this to happen. And I think many of them would shy away from trying it because of the size of the fight that would be involved.
So, while I do see hidden value in England and Europe for Manchester United, I can't see any great way for Malcolm Glazer to extract it. My Samizdata and ubersportingpundit colleague Scott Wickstein commented on the Glazer takeover of Manchester United a week or so ago, and he observed that he thought that the takeover would have worked a decade ago, but that now is too late. His argument there was essentially that European television changed in the 1980s and 1990s with the rise of private television companies (particularly pay television companies) in competition with the traditional cozy state owned and state regulated television stations, which meant suddenly that football leagues and clubs could extract something like the fair value of their television rights, whereas previously they had been in markets where little money was paid for television rights due to a lack of competition due to state ownership and state regulation. (At the same time, football clubs and teams got a lot of media and marketing related expertise from the television companies in general, and this led to them marketing themselves better in other ways, such as getting more money from merchandising replica shirts and the like).
Scott's point is that there was lots of hidden value in Europe in 1985, and that there was money to be made by people who noticed this, but that this is now being extracted and this is priced in. And after considering the sort of stuff above, I tend to think that he is pretty much right.
But Europe isn't the whole world. The question is whether there is value outside Europe that can also be extracted. And that is the second point that I want to discuss. The popularity of football in East Asia (especially Japan and China) is often commented on, and it is certainly true that diehard fans in Manchester often do not realise this. As someone who is (a) a Manchester United supporter, although not a very avid one and (b) an Australian, I found myself discussing this with a few locals in a pub in Manchester last year. In particular they had no idea that a major reason why Manchester United games often kick off
around midday is that this is peak television viewing time in east Asia. (In the case of Saturdays, this also has to do with the FAs rules about what time live television broadcasts of matches are allowed in Britain).
So the Asian following is real, but the question that needs to be asked is whether clubs are actually making any or much money from fans in these markets. And the truthful answer to this, perhaps surprising given the level of exposure of the clubs in this markets, is actually "Not much". In terms of merchandising, the Asian market is far smaller than that of Europe, at least partly due to tremendous amount of counterfeit goods being in circulation. (This will change as certain markets get richer, but this will be over a longer timescale than Mr Glazer’s). In terms of media rights, things may happen faster. lack of competition in the Chinese TV market means that although lots of people watch Premier League football there, the rights are bought by state controlled television networks that do not face competition in bidding for the rights, and so which get them for close to nothing. The rights are probably worth quite a lot in terms of advertising that they generate - the Chinese middle class is at this point in the hundreds of millions, depending on how you measure it - but little of this is flowing through to the clubs. The question is whether it is possible to make some of it do so within a relatively small number of years. That means competitive auctions for rights in China.
This doesn't strike me as impossible. In India, multiple bidders now bid huge amounts of money for the rights to cricket matches. India is still a lot poorer than China. (Of course, India is also a lot freer than China, which means that the Chinese government is rather more concerned with controlling the media than is the Indian government). But in financial terms, if it can happen in India, then it can surely happen in China. And if it does, the money is potentially a lot more. But "a lot more" is still relative. The Chinese middle class is still a lot poorer on average than the population of Europe. The total amount of television money that could come from China in the immediate future, even in a free market, is a lot less than can come from Europe. Probably if the television rights were sold collectively in China and Asia, Manchester United's share would still not be enough to pay for Mr Glazer's debts, even if the rights were sold in a free auction.
But there is still another side to this. If we had a free market in television rights in China and Asia, and Manchester United and other British clubs were allowed to sell their television rights individually rather than collectively, then the total amount of money that Manchester United could gain might just compare favourably with their television income in Britain. There are quite a few big ifs in there, but if all this were to happen then I could see Manchester United's income increasing dramatically and the club being worth what Mr Glazer has paid and more. This does strike me as more feasible than the various other possibilities. The Premiership is more likely to be willing to give up collective selling of TV rights for Asian markets, because firstly it doesn't make much money now and it doesn't really know how much they are worth. Secondly, there is scope for competition between European Leagues here. If Real Madrid are free to sell their TV rights individually in China, then Manchester United can plead disadvantages against its European rivals as an argument as to why it should have similar freedom. There are relatively few short term losers in making such a change, which is why it is more possible.
But the question is whether this can all happen in a short period, that is within five years. If it can, Mr Glazer might make money - conceivably even a lot of money. He needs help from someone to free up the Chinese television market. The obvious person is actually Rupert Murdoch, who has extensive Hong Kong based Asian satellite television interests, and who has been sucking up to the butchers of Beijing for years now. Murdoch himself attempted to buy Manchester United a few years back but was foiled by British competition authorities. It may not be that Glazer and Murdoch like or even know each other, but now that Glazer owns the most valuable football club in the world, they certainly do have common interests.
Saturday
The United States has imposed new quotas on textile imports in order to protect American textiles manufacturers from competition. The move is bad news for American consumers and it is also bad news for the world's poorest. Some of the blame must be apportioned to the campaigns of protectionists like Britain's Christian Aid which have been claiming - incorrectly - that textiles liberalization is not in the interests of the poor. They have helped create a worldwide feeling of unease about the end of quotas.
The result is that America has now taken action, not to help producers in developing countries, but to protect uncompetitive American producers. America's move is unwarranted and unjustified. The former European trade commissioner and future WTO boss, Pascal Lamy, has attacked the new quotas:
Mr. Lamy said that the global trade body [WTO] had been easing out the quota system over the last decade and that all countries had been given ample opportunity to prepare for the changes."It is not the law of the jungle, and the W.T.O. rules were clearly set," he said. "Why are some politicians now not recognizing that fact?"
Fortunately, the new quotas will have to go by 2008. But in the meantime, America's move means that developing countries will have worse jobs, less wealth creation and less trade. Is this really what Christian Aid was aiming for?
Crossposted from the Globalisation Institute Blog.
Sunday
These are difficult times in Western car industry. The Economist magazine reports that dark clouds are gathering in parts of the world economy, pointing to a slowing of consumer spending, higher interest rates and large government budget deficits (facts which may start to really hit the re-elected UK Labour government). I hope the Economist is wrong since I have a mortgage to pay and bills to meet, but its arguments are quite convicing. And one possible harbinger of trouble right now is the car industry.
The recent demise of British carmmaker Rover is well known. Across the pond, however, two even bigger auto firms have hit trouble, and yet caused surprisingly scant news coverage outside the serious parts of the MsM and the business news pages: General Motors and Ford. GM and Ford have been downgraded to "junk" status by international credit rating agency Standard & Poor's. That means that as far as S&P is concerned, GM and Ford are risky debtors, and there is a relatively high chance that the rustbelt companies could default on their debt. The downgrade has sent shockwaves through the financial markets, forcing many big investors, like pension funds, to wonder about the wisdom of holding corporate bonds at all.
The problem may be confined to these firms. GM, for example, make a lot of the big SUVs that environmentalists get steamed about, and these monsters of the road are now proving more difficult to afford in a world of high oil prices. There is also a glut of cars on the world market and the industrial growth of China and India, and indeed of parts of Latin America, are a growing threat to GM and Ford's home market.
Britain's car industry has been through a torrid period since the 1960s, but even in the world's largest economy, making cars is proving increasingly tough.
Thursday
German's leftwing SPD politicians have been bashing those symbols of hated capitalist activity, private equity buyout funds which look out for distressed firms, sell off some of the assets and reconstruct the remainder in the hope of turning a business around, before selling it at a profit. How shameful. Such people are "locusts" destroying Germany's economy, scream the politicians (who of course have been doing a tremendous job on that score).
In fact, I find all this abuse rather encouraging. If entrepreneurs see value in the German economic landscape, and perceive there are rich profits to be made in turning around businesses and then flogging them off, it is very good news indeed for the country's economy. By releasing capital from uneconomic areas and focussing it on lucrative new bits, the overall pie gets bigger, jobs get created, and productivity is also increased.
In fact, one could almost create a new economic law: the amount of abuse raining down on entrepreneurs is directly proportional to the good they do. I haven't seen much reason to doubt this law yet.
Sunday
Globalisation does funny things:
Former Baywatch star David Hasselhoff has been named international star of the year at the Bollywood movie awards in Atlantic City in the US.He received the award because his shows, including Knight Rider, are among the most popular on Indian TV.
That is the BBC story. I also recommend this Reuters report on the event, which packs a lot of information into a small space. Such as, that:
Rani Mukherjee won the best actress award for her role "Hum Tum."
What does Hum Tum mean? Is it a medical condition? Or is that the name of Rani Mukherjee's character?
And I did not know that they have Bollywood awards in Atlantic City. What is that about?
Says Reuters:
The event was held in the old U.S. East Coast gambling resort of Atlantic City as part of Bollywood's bid to be a global force in cinema.
Interesting. And I did not know this either:
Bollywood churns out around 1,000 movies a year but despite a fan base that extends to the Middle East, Europe and Asia, few movies make money and the industry is under financial pressure. Bollywood films have not had much commercial success in America.But Shammi Kapoor, who was given a lifetime achievement award, said better technology was leading to more and better films. "They're getting to be more topical," he added. "They aren't the happy, happy movies of yesteryear."
Indians will soon be complaining that Bollywood is becoming a fifth column Frankenstein's laboratory Trojan Horse turncoat snakepit of anti-Indianism that panders to the global market and apes its worst excesses.
Tuesday
I am delighted to see that the Archbishop of Canterbury, Rowan Williams, has taken the time to read the GI's report, Trade Justice or Free Trade? and chose to discuss it in a sermon today at St Paul's Cathedral.
We have recently seen the publication of a very interesting report from the Globalisation Institute which is highly critical of the language of 'fair trade', arguing powerfully for free trade as the real engine of prosperity. There is a serious economic argument here - though it is worth mentioning that professional economists have expressed their scepticism about free trade as a mantra: it isn't only starry eyed religious activists. But surely the real issue is what the word 'free' means. Universal trade liberalisation may offer fresh markets and promise overall increases in wealth. It also forces choices on vulnerable countries, whose effects may be - in the short to medium term - very costly indeed to a whole generation of workers, to the environment, to political stability. As a number of economic surveys have made plain, you can have statistics that show a spectacular increase in national wealth alongside a reality of instability, increasing poverty in many areas and a loss of social cohesion. The Dutch development economist and politician Jan Pronk wrote recently that in the move to a liberalised economy, 'the losses are widely spread and cut deeply into the existence of people while the initial concrete benefits are concentrated in the hands of a new class'. His judgement is that in the long term 'free trade' promises greater benefits, but in the middle term its costs are immense unless there are clear mechanisms for compensation - unless the benefits are put to work for all. 'Freedom' in this context turns out to be a more complex matter than we might have thought.
I would like to make five points about his speech:
Firstly, I welcome his willingness to engage with both sides of the debate on trade. It is notable that he appears to accept the economic concept that trade is not simply about cutting up an existing pie differently, but about increasing the overall size of the pie.
Secondly, he was a lot more moderate than he could have been, and was presumably being sensitive to increasing concerns within the Church itself that a one-sided approach to trade justice is being put forward. He also, usefully, avoided the demonization of the term 'free trade' as practiced by some others.
Thirdly, he talks of the problems facing people when liberalization first happens. In the short term, of course, those who have to adapt may need help. But while transitions should be handled as smoothly as possible, the transition should not be used as an excuse for non-action. India's experience after independence shows that non-action on liberalization is totally opposed to the needs of the poorest. While protected companies benefited, the population as a whole got poorer, and many starved.
Fourthly, the Archbishop says: "As a number of economic surveys have made plain, you can have statistics that show a spectacular increase in national wealth alongside a reality of instability, increasing poverty in many areas and a loss of social cohesion."
The sermon was given at a service celebrating 60 years of Christian Aid, and Christian Aid is keen to refer to Ghana, so I am going to take it as my example. The graph below (which you can see in full size by clicking on it) shows what has happened. When they were not following World Bank advice in favour of liberalization, their economy was massively unstable. But, since 1983, they have pursued liberalization. Guess what? Their real GDP has increased every year since 1983. Not even Britain has such a stable economic record. And poverty, though high, has decreased.
Fifthly, he says: "Does a nation, a society, work for all its citizens? If pressure for trade liberalisation creates a situation where this looks more remote, there is a clear problem from the Christian perspective."
The whole point about free trade is that it treats all sections of society equally. As Richard Cobden said: "the inalienable right of every man freely to exchange the result of his labour for the productions of other people, and maintaining the practice of protecting one part of the community at the expense of all other classes to be unsound and unjustifiable". The losers from globalization are specific interests who previously were able to force others to buy expensive products, while the winners are societies as a whole.
As the British government has pointed out, Ghana over all benefits from cheap imports of food because it enables people to eat more. Britain faced the same issue in the 19th Century. The population found food too expensive as a result of the Corn Laws which aimed to protect farmers from unfair foreign competition. Farmers complained that they would not be able to survive without protection. But the repeal of the Corn Laws was a great victory, and profoundly pro-poor.
In conclusion, I think the Archbishop's speech was an encouraging move for the Church of England. It is good that the debate has moved beyond slogans and it will be interesting to see how things progress in the coming months.
Crossposted from the Globalisation Institute Blog.
Tuesday
This Friday, Michael Jennings will be doing my last-Friday-of-the-month talk, about China. Emergence of, economic miracle, impact on rest of world, and so on.
And, as if determined to assist me in my efforts to publicise this event, the European Union, in the person of Euro-Panjandrum Peter Mandelson, has been uttering anti-Chinese fatuities:
The European Union has called on China to reduce its clothing exports to Europe or else face enforced limits.That was the warning given by EU trade commissioner Peter Mandelson, as he launched an EU probe into nine categories of Chinese textile exports.
Exports of certain Chinese clothing items to Europe have surged by more than 500% since an international quota system came to an end on 1 January.
Heaven forbid that the people of Europe should be allowed to buy really cheap clothes, as much as they want. Clearly this is a retrograde step, and must be resisted.
"Europe" still lectures places like China as if places like China are the Third World, and Europe, obviously, is the first. But this has a very eighteenth century Asia feel to it, to me. Europe can no more prevent itself being swamped by, flooded with, etc. (although "sold" would be a better word) cheap clothes now than Asia could then prevent the incoming tide of pots and pans, cups and plates, and shirts, made in what was then the English workshop of the world.
This nonsense seems all to be based on some Agreement that was signed a few years ago. And it perfectly illustrates the folly of such agreements, which serve only to allow the supposedly protected industries to remain somnolent for a few more precious years, thereby to lose all touch with economic reality beyond the protections behind which they briefly shelter, to the point where the pressure of economic reality becomes so immense that it is impossible to resist, at which point the protection collapses and economic melt-down duly happens.
It also illustrates Public Choice Theory rather nicely. You can be sure that hundreds of desperate European shirt and trouser makers are even now busily conspiring to explain that Mandelson is talking sense rather than nonsense. Meanwhile the people whom Mandelson is trying to harm (everyone else in Europe plus many thousands of poor workers in China) will be too busy with other things to object very loudly. After all, each of us will only suffer a bit, and anyway, what can any of us do if the EU/Peter Mandelson has decided to harm us all, a bit. That is not news. That is Euro-business as usual.
In due course, the benefits to all of us of free trade with China will be concentrated into the hands of a few illegal clothes importers. But the clothes will not be quite so good or quite so cheap.
Reuters reports on the Chinese response here. My thanks to Alex Singleton of the Globalization Institute for the links, via this, which continues to happen at the ungodly hour that was originally promised. Tim Worstall comments on the same story at the Globalization Institute blog, making similar points to mine about the concentration of the (temporary) benefits associated with protection, but the dispersed nature of the costs, and about how previous restrictions have only stored up trouble.
Meanwhile, how else is "Europe" responding to the menace of people working too hard? By having a law against it.
Wednesday
I am due for a fascinating teleconference in 10 minutes, but I thought this Glenn Reynold's post nicely illustrated a real blind spot for libertarians. We tend to be market- and economics-oriented, and any concentration of attention in one area creates blind spots in others. One of those blind spots has to do with the economically irrational but irreducibly human craving for non-material benefits in the form of status, recognition, etc.
My historian-brother often says that one of the most interesting phenomena that he's observed is the cross-cultural willingness of people to trade away economic benefits for status. I suspect that this is one example of that. So, in a surprisingly similar way, is being a politician. That's an obviously poor economic move for most folks. But one of the drug dealers in Price's book talks about how he likes the way he becomes the center of attention when he enters a room full of junkies. Politicians, I think, get the same thing, especially in the bubble-environments of Washington, or state capitals. I suspect, in fact, that people are, to varying degrees, hardwired to get an endorphin rush from that sort of attention, just as they're hardwired in varying degrees to respond to drugs.As I say, I don't know if Levitt talks about that or not, but I think it's one possible explanation for a lot of stuff that looks economically counterproductive.
I have a niggling sense that there is a lot more to be said on this subject, but duty calls. Go read the Instapundit post, and as always, be sure to click the concluding "Indeed."
Tuesday
Yesterday I was out and about and spotted multiple front cover display of the latest Economist, with a headline which went: The flat-tax revolution.
I liked this, and took a photo of it, but it came out blurry, and before I could take a decent number to make blurriness less likely I was chased away by a security guard mumbling about copyright, etc. So here is the Economist version:
Final paragraph of the story:
It is true that the flat-tax revolutionaries of central and eastern Europe are more inclined to radicalism than their politically maturer neighbours to the west and across the Atlantic. Mobilising support for sensible change is far harder in those more advanced places – but not impossible. In tax reform, as 1986 showed, the radical programme can suddenly look easier to implement than the timid package of piecemeal changes. Now and then, the bigger the idea, and the simpler the idea, the easier it is to roll over the opposition. The flat-tax idea is big enough and simple enough to be worth taking seriously.
Portillo was wittering on yet again, on the telly last night, about how the Conservatives had to go for the "middle ground", and electorally speaking that may well now be true, if getting votes for whatever will get votes is all that you care about. Accordingly, I look forward to the time when a flat tax is middle of the road, and when flattening the damn tax into the road so that there is nothing left of it is the "extremism" that Portillo et al will then be warning us all against.
Tuesday
Sean Gabb now has a report up about his efforts to knock some freeness into the heads of those self-styled fair traders. And in Alex Singleton's Globalization Institute email this morning was a link to a write-up of the Globalization Institute in the Church press, although how significant this particular example of the Church press is I do not know. Still, it all helps. See also this posting.
In the comments on that earlier posting that flagged up the meeting in the Church last Friday night, puzzlement was expressed about why so many of these Fair Traders are in favour of free trade for the rich countries, especially in things like agriculture, yet opposed to free trade for poor countries. How come? Are they not being inconsistent?
I can suggest a possible answer that makes sense of such an apparent contradiction. Suppose that (a) you are an egalitarian, and that (b) you think free trade is harmful to whoever has it imposed upon them. That would explain it, I think. Trade freedom makes rich countries poorer, and trade unfreedom makes poor countries richer. Total bollocks of course. Egalitarianism is stupid, and the claim that trade freedom makes countries poorer and that trade unfreedom rescues poor countries is the opposite of the truth. But if that is what you are and what you think, it becomes reasonable. As in: a madman is someone who has lost everything except his reason. Impeccable logic, based on false axioms.
The result of such agitation is actually to make rich countries richer, and to keep the poor countries poor, which is the very thing these self-righteous morons spend their lives saying they object to. But there you go. There's one born every time a celebrity clicks his/her moronic finger on the telly.
For some further thoughts on these and related matters from me from way back, see this.
Monday
It seems a bit odd that the construction industry is going on a spending campaign to persuade smart young graduates to go into the trade. I am surprised that young people really need persuading. In this age of job offshoring, redundancies in the City and suchlike, it actually makes a lot of sense to get a skill in an area that cannot be easily outsourced. Many people in the construction, plumbing and electrical trades seem to be well off, far more so in fact than some young graduate toiling away in an office job. And thanks to new British regulations designed to prevent homeowners from performing any DIY activity more complex than install a shelf or rewire a plug - for their own good! - demand for construction and home maintenance professionals looks set to go on rising into the distance.
Anyone with a supposedly "secure" job ought to think about adding another, non-outsourceable, skill. One thing I always notice about British plumbers, for example, is that they all drive Jaguars or Mercedes. It is not rocket science to figure out why.
Saturday
Today I went for a wander around Camden in London, visiting Camden Market, Camden Lock and The Stables, contiguous areas filled to overflowing with small shops and open air stalls selling exotic Goth clothing, lampshades made out of old computer motherboards, Tibetan jackets, New Age crystals, Latex fetishware, fur-lined handcuffs, AC Milan supporters posters, weird furniture made out of tree stumps, flashing clothes with fibreoptic weaving, magic mushrooms to go, bongs, 'No one knows I'm a Lesbian!' tee-shirts, and food from West Africa, Morocco, Japan, Indonesia, Lebanon, Korea, Venezuela, France, Italy, China, Jamaica, Thailand, Holland, Scotland and even England.
The political content was endless racks of tee-shirts emblazoned with Che Guevara, Bush=Hitler and McShit Hamburger logos and stands owned the Socialist Worker's Party and various other fringe folk manned by quixotic and very earnest folks handing out "Bush is the biggest terrorist!" posters.
Now my guess is that 75% of the people who thronged around Camden (the crowds were dense over a very large area indeed) are more or less completely indifferent to those particular the messages and certainly 95% of the stalls and shops were not selling politically oriented things at all. Yet what was available was entirely of the left and almost all of it was either Communist (Che Guevara's image was widely seen) and/or anti-American.
Right in the centre of the large shopping area called The Stables is a Cuban Restaurant called rather unambiguously The Cuban. Giving it the benefit of the doubt, I stuck my head inside as for all I knew the place was owned by some Cuban refugee who had fled Castro's communist dictatorship. But no. The first thing I see is a large image of Che Guevara. The outside of the building has a sign saying this place brings "The Spirit of Havana in the heart of Camden"...
...which presumably means that criticizing the restaurant gets you dragged off to jail by uniformed thugs as that is truly the spirit of Havana.
Now if someone wants to portray a benign fantasy version of Cuba ("Castro chicken tenders!"), well that is entirely up to them. But the moment I see that Che image up on the walls, The Cuban takes a position on who 'the good guys' are and it becomes more than just a Cuban restaurant. Too harsh? Well imagine a German restaurant. Now put a picture of Himmler on the wall of that restaurant and suddenly the entire context of the place changes. I wonder how people would react to a Cambodian restaurant which offered a "Pol Pot Roast" or a "Killing Fields Kocktails!" whilst a smiling image of Pol Pot looked down on the gorging clientele. My goodness what fun that would be. Still, perhaps a closer examination of The Cuban's menu may reveal such dishes as "Jailed Journalist Jambalyah" or "Dead Dissident Daquiris" whereupon my views of the place would have to change somewhat. I have not looked but somehow I doubt it.
But it got me pondering. I wonder how many of the anti-globalisation activists who probably regard areas like Camden as 'home turf' and perhaps even eat at The Cuban realise how the area only looks the way it does because of the global movement of goods within a market economy. Do they seriously think that there is a place like Camden anywhere in Cuba? Do they think the new Age crystals, the fetish shops, the Goth gear purveyors, the mountain bike shops and, hell, even the clothes they wear, the mobile phones they all carry, the iPods they listen to, would all be available in a politically directed command economy? Please, show me such a place.
The thing is, their own lifestyles and environments are examples of the benefits of what they profess to reject. Quite funny really if you think about it.
Saturday
This "trade and cheap labour for manufacturing is the rich world exploiting the poor" argument is not precisely new to my ears. When I was a kid in the 1970s I heard the same thing about how we were taking advantage of poor world sweatshops. The only thing that has changed since then is the location of the sweatshops. In those days people talked about Taiwan, South Korea, Hong Kong, those kinds of places. And what do these places have in common? Well, today they are the rich world. Ten years ago we started seeing "Made in China" on our cheap imports. A lot of this stuff then came from Shenzhen, just over the border from Hong Kong. Well, today Shenzhen is for practical purposes a developed world city. The manufacturing has now moved inland. The process is getting faster, and the more of the world is rich, then it gets faster still for the rest.
- Michael Jennings, getting enraged at Christian Aid yesterday evening.
Friday
So that's it then. As Mark Steyn says at the start of this, the surprise is how long it lasted.
Here is how this guy sees it:
Thanks to Patrick for spotting this, but only in the original immobile version.
Friday
Mark Steyn with an extended meditation in the Spectator on globalization. Just go read it, already. Its worth the registration and annoying pop-ups.
Thursday
Paul Staines writes:
New data shows that the developing world's share of global trade has surged to a 50-year peak. Rising oil and commodity prices coupled with vigorous global trade growth meant developing countries saw their share in world merchandise trade rise sharply in 2004 to 31%, the highest since 1950, according to WTO figures released this morning.The data provides clear evidence that trade liberalisation continues to play a growing role in economic activity and is increasingly important for development and poverty alleviation. More countries are engaging in international trade and participating more actively in setting and negotiating trade rules.
Just like with India and Hong Kong, trade liberalisation is key to African prosperity. If we truly want to Make Poverty History, the world needs free trade - not protectionism.
Wednesday
I have started producing an early morning e-mail. Samizdata writers are not known for rising much before noon, so I know how shocking this may be to you. Nevertheless, before 8am each weekday, I send out a 'Daily Digest'. It features a minimum of five and a maximum of ten top articles from the world's news media. Each article featured is on the subject of globalization. It is an entirely opt-in list, but it is already read by top people at the BBC, The Business, The Guardian, The Independent and so on.
Today, for example, the e-mail featured a Kenyan newspaper's report that the head of Africa's Nepad Council had called for foreign aid to Africa to be stopped. Intead of aid, those wanting to help should "encourage their company and business leaders to invest in Africa". People on the Daily Digest list get the most interesting stories in their inboxes each day.
The e-mail is not long. Each article featured has a few lines quoted from it and a link. It is entirely free and you can unsubscribe at any time. This is a useful resource for bloggers and anyone interested in economic development. If you would like to receive the e-mail, just drop me a note at digest at globalizationinstitute dot org.
Monday
This week is the "Global Week of Action for Trade Justice". Not the best week for it in the UK given the General Election campaign. Apparently there are going to be thousands of people out on the streets of Westminster throughout the night on Friday doing a candelnight vigil against free trade (Christian Aid reckons that the Common Agricultural Policy is an example of free trade).
Not liking the debate to be one-sided, I have written a new Globalisation Institute report called Trade Justice or Free Trade?. It argues that supporters of trade justice are confused and mistaken. Instead of encouraging poor countries to keep their high tariffs, these tariffs should be lowered. The report points to how, in India, protectionism merely enabled the rich to profit at the expense of the poor. The report says that poor Chinese have as much right to sell textiles on the world markets and that the anti-China stance of Christian Aid is unfair. Finally, the report is critical of the way that the church - despite a diversity of views about Christian Economics - presents a one-sided approach to economic issues.
Saturday
I attended a one-day conference on the EU Constitution today, drawing together an eclectic mixture of people from all parts of the political spectrum, both British and foreign, and all united on the need to get a decisive No vote in the event that Mr Blair decides to hold a referendum on one (let's pray it is not done by postal vote, god help us). I attended the morning session and drifted home for lunch with my head still ringing with one of the best speeches by a politician I have heard for years.
The politician's name is Steve Radford and he is a Liberal Party councillor in England. His party is the bit that refused to merge with the old Social Democrats and decided to keep the flame of Gladstone, Richard Cobden and Joe Grimmond burning bright. Well, if Mr Radford's performance was a guide, the Liberal Party is a very interesting outfit indeed. He denounced the European Union's economic tariffs most effectively by holding up a bag of sugar and pointed out that the price of the bag is inflated fourfold by tariffs. He denounced the rampant corruption, cronyism and lack of democratic accountability of the EU, a situation which will get only worse if the EU Constitution becomes a fact. He was passionate in making the free market case - all too rare these days, and frequently very funny.
It is refreshing to hear an actual big-L Liberal refer to the anti-Corn Law League and the great campaign to promote free trade by the likes of Richard Cobden. I don't know about all his views on other subjects, but if every member of the Liberal Party were like this man, I'd very seriously consider voting for it.
I hope we haven't heard the last of this gentleman.
Friday
How long Economics in One Lesson has been available to read free, online, I have no idea, but since she only just heard about this, I feel entitled to say with similar lack of shame (unless of course a fellow Samizdatista has already flagged this up and I missed it) that her posting was how I finally found out about this myself.
It has been a while since I read this book. The bit I recall with the greatest vividness concerned the broken window fallacy. This fallacy says, fallaciously, that broken windows are good for the economy because they are good for the window-mending business. What the broken window fallacy neglects to mention is that broken windows are bad for all the businesses that the window mending money might have gone to instead, but now cannot.
The most extreme statement of this fallacy is the claim that the ultimate window breaker, war, is good for the economy, because that way lots of work is "created" in all the industries that subsequently set to work to repair the destruction. When Keynesian economics was in its pomp, you did hear people actually saying this. Maybe, if those are the kind of circles you still move in, you still do.
Yet war is creative, in a back-handed way, and provided that you lose. It destroys wealth, but it can also destroy certain impediments to future wealth creation. Mancur Olsen, in his book (alas not available on line so far as I know) The Rise and Decline of Nations (lots of five stars out of five reviews here), says that, yes of course, losing a war does destroy wealth, but that it also destroys what he calls "distributional coalitions". In plainer language, losing a war breaks up politically well-connected rackets, like state-enforced cartels and trade-unions. Thus the post-WW2 economic miracles of Germany and Japan.
This is what you would call a high risk strategy for achieving economic dynamism. I mean, just for starters, be careful who you lose your war to. Pick the wrong country to surrender to and you are liable to end up with an even huger, politically even better connected racket, in the form of your rapacious conquerors. In other words, broken windows followed by more broken windows, and nobody ever mending them.
Tuesday
My good friends who run the Big Blog Company do not like to use Samizdata to promote the Big Blog Company as much as they might, because this is not cool. It is not good blogging practice. But I am only doing this incidentally when I link to the latest posting on their blog. My main purpose is to promote myself, which I suppose is not all that cool either, but there you go.
Said I, here:
A new market is chaotic, and (and this is the point) ignorant. People do not, e.g., know how to spot cowboy operators, or bad products made in all sincerity but badly. Ignorance and foolishness abound, and so to start with, down goes the graph of achievement. . . .And, back from her tBBC promotional trip to LA, Jackie D said, this very morning, this:
Unfortunately, I wasn't making it up when I recounted to her how one PR flack we met in LA boasted of how his firm lies to big corporations and promises them good coverage on their "big traffic," fake blog. The blog itself has been set up by the PR company for the express purpose of scamming companies into paying out substantial amounts of cash for positive postings on it. Looking at the blog, it seems to be authored by an anonymous nobody . . . who just so happens to pepper his commentary with glowing mentions of the PR company's clients, and negative remarks about their competition.
That is a classic description of how a genuinely new market (as opposed to a made-to-sound-like-a-market governmental rearrangement of a non-market) starts out by working – i.e. not working.
Stay with it guys. In the long run, you will get rich. If you can still be there when the long run starts to run. Eventually all those corporations will start to really understand blogging, and to want help to do the real thing.
To continue my own quote:
. . . But then, if this really is a true market, things bottom out and start to improve and in the longer run the result is a market that is orders of magnitude better . . .
Or, to put it another way:
Tuesday
Anti-liberal NGOs like War on Want and the World Development Movement are using World Water Day (today) to campaign against private investment in water infrastructure. The World Development Movement says that water privatization is: "making it less likely that clean water will ever get to the poorest people."
Unfortunately the World Development Movement is mistaken. As Global Growth's development economist, Paul Staines, says (pdf file):
Practical and technological requirements for huge sanitation projects on a metropolis-wide scale require the resources of big enterprises to implement them, the private sector can not only provide the capability but also the capital required. 2 billion people thirst for clean water, Western antiglobalisation NGOs who arrogantly put their ideological interest ahead of the interests of the developing world are full of **it, and if they succeed in their campaign the fast growing cities of the developing world will be as well.
Private investment in water is expanding access to clean, running water. It contrasts strongly with nationalized water systems where politically-favoured groups receive below-cost water, starving off future investment so that unfavoured groups go without. Private investment offers the best plan for increasing access to water.
Crossposted from the Globalisation Institute Blog.
Tuesday
When a specific industry comes and puts itself forward as a special exception, the alarms bells should ring. Most industries - if they thought they could get away with it - would put the case for corporate welfare.
One industry claiming to be a special exception is the drug industry. They acknowledge that grey imports are good in general. It is just that in the drug industry, free trade is a bad idea. They have R&D costs, don't you know, and they would not be able to develop new drugs if, for example, Americans could buy drugs from Canada. For good measure, they say that drug reimportation is a bad idea because of safety. This argument is mere scaremongering.
Drug companies do invest a good amount of money on R&D, about 10% of their turnover. Then again, Microsoft invests 17.3% of its turnover on R&D. Drug companies enjoy the highest profit margins of any industry in the US, nearly four times the Fortune 500 average. The fact is that drug reimportation would not hinder drug companies' ability to invest in new drugs. Its effect would be to push drug companies to ensure they sell to rich countries at a price that happily covers R&D.
Being against drug reimportation is the easy option for drug companies. In reality, it lets them charge consumers in each market as much as they can get away with. Free trade threatens their market power. Here, the interests of drug companies are directly opposite the interests of the sick. Blocking drug reimportation is corporate welfare at its worst.
Readers may be interested in a Cato Institute report: Drug Reimportation: The Free Market Solution.
Crossposted from the Globalisation Institute Blog.
Sunday
So, on the one hand, you have cheap microwave ovens from Szechuan province. Wonderful.
But, on the other hand, you get this:
The world's first global health treaty - the Framework Convention on Tobacco Control - comes into force on Sunday.The anti-smoking pact has been signed by 168 countries, and ratified by 57 of them, which will now have to tighten their anti-tobacco laws.
Not so wonderful. Welcome to the globalized world.
Friday
My February last Friday has just ended, and it was definitely one of the better ones. Patrick Crozier spoke about libertarianism and private road ownership. Excellent talk, excellent discussion. The result of Patrick's time writing for and bossing the now only archived Transport Blog, which he has now ended. (He now writes this.)
Among those present was Alex Singleton, and he naturally talked about his newly launched Globalization Institute, which, of course, has a new blog.
It occurs to me that you might expect the word itself, 'globalisation' (I prefer an 's' in the middle there), to be the equivalent, at the global level, of 'nationalisation' at the national level. Yet, while nationalisation means the national government stealing things, globalisation means something quite different and much nicer. If globalisation was the same at the global level as nationalisation is at the national level, globalisation would mean a World Government stealing things.
Does this matter? Well, maybe it does, because we surely do need a word to describe the equivalent of nationalisation, but at the global level. I have been drinking and may have forgotten the obvious, but my impression is: we do not have such a word.
Surely the existence of the word 'nationalisation' made it far easier to oppose the thing itself. Not having a word for this other form of 'globalisation', predation by the government of the globe, makes it harder to oppose, I think.
Tuesday
Well it seems that today, short little link-pieces are okay, so here is a short little link piece, with links to these mealy-mouthed trimmers, arguing for a flat tax, and to me, arguing that mere flatness is not the point. Just having a flat roof to the graph is a hideous compromise. It must be flattened until it is zero-height roadkill. (Metaphor muddle there, but I hope