We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

An independent Scotland will have to choose between the pound and Socialism

Whatever the “Yes” campaign claims, threatens or believes, here will be no currency union between an independent Scotland and the remainder of the United Kingdom. All three major parties plus UKIP have said this outright, and the voters back them up. Quite right too, unless you think it’s a good idea not to cancel the joint credit card after a bitter divorce.

(Just a reminder: there almost certainly will not be any divorce. All the polls point to Scotland choosing to remain part of the UK.)

So, to Plan B. Sterlingisation. The Guardian has flagged up a report from the Adam Smith Institute saying, correctly in my opinion, that for iScotland (OK, so I did just say “iScotland” and I cannot guarantee to resist “rUK” either – sue me) to use the pound as Panama uses the dollar would be the best option.

Under “sterlingisation”, Scotland would not be able to print its own currency and would lack a lender of last resort. But the ASI report said the experience of Panama pointed to this being an advantage because it would force lenders to be more prudent.

In contrast to the situation for a currency union, there would be nothing the rUK could do to stop iScotland simply deciding unilaterally to use the pound, and no reason it should care anyway. But it would be tough for Scotland at first. It would be the equivalent of gastric band surgery. No more splurging on welfare for you, Alba my love!

This is not the first time the Adam Smith Institute has said something like this. My post on currency options for an independent Scotland back in February was partly inspired by an article by Dr Eamonn Butler of the ASI.

You know my views. No surprise that a free-marketeer like me agrees with the ASI here. It does seem a little odd for the Yes campaign, spearheaded as it is by the Scottish National Party, backed by the Radical Independence Campaign and the National Collective, to be quite so keen.

Samizdata quote of the day

To be fair, Swiss agriculture is so heavily subsidised that it makes French agriculture look like a bastion of free market liberalism. If the Swiss were to expand it further to make more exports to Russia, that would make them poorer, not richer.

I see that places like Argentina do seem to be attempting to sell things to Russia in response to recent developments. I wish them luck with it, honestly, and this might be good for Russian consumers from the perspective that Argentina does, at least, produce some decent cheeses.

On the other hand, doing business with Russia is likely to be a nightmare. Just like doing business with Argentina. Possibly they deserve each other.

- Michael Jennings

Central planning causes empty shelves in Cuba, say BBC

Years after the collapse of the USSR, Cuba remains a bastion of communism, central planning… and shortages of basic goods.

I am not surprised that there are empty shelves in Cuba. I am surprised to be reading such things on the BBC.

despite Cuba’s proximity to the US, Washington’s 50-year-old trade embargo – which was designed to squeeze this island’s communist government from power – means there’s no American investment here. There’s no Starbucks, no Coca-Cola plant.

Some might see that as a good thing. But they might not find shopping for essentials quite so quaint. I once approached my big local supermarket full of optimism. I now know I’m likely to find a mixture of half-bare shelves and ones stacked with a single product: cheap ketchup, say, or adult incontinence pads.

Basic items disappear whenever Cuba struggles to meet its import bills. For weeks there was no toilet paper or cartons of milk. Now even the delicious local coffee is “lost,” as Cubans say – “esta perdido”.

Mind you there’s plenty of “partridge in brine,” should anyone fancy that. I’ve seen the same pile of cans on display for more than two years at $25 apiece. Perhaps a central planner ticked the wrong order box.

The story is even promoted from other stories under the banner “in today’s magazine”.

Anyone else get the ‘wry smile’ response from this?

I found this interesting:

Apple Inc has begun storing personal data for some Chinese users on servers provided by China Telecom, marking the first time that the company has stored user data on mainland Chinese soil. Apple attributed the move to an effort to improve the speed and reliability of its service. It also represents a departure from the policies of some technology companies, notably Google Inc, which has long refused to build data centres in China due to censorship and privacy concerns.

Now I can certainly see why making it easy for the ghastly Chinese authorities to spy on people would be undesirable, but I wonder… where to locate the data centres then? Presumably not in the USA or UK if state access to people’s data is the big problem right, right? ;-)

Samizdata quote of the day

To paraphrase Hayek, then, the curious task of the liberty movement is to persuade citizens that our opponents are the idealistic ones, because they believe in unicorns. They understand very little about the State that they imagine they can design.

- Michael Munger

Word of the day

And the word of the day today is… fungible…. قابل مبادله

Alex Salmond said what?

According to the Guardian, in a meeting with SNP backbenchers after his disappointing performance in the debate with Alistair Darling, this:

He [Salmond] said, using the pound without a formal pact – an option known as “sterlingisation” or the Panama option – was “quite attractive”, but insisted the Treasury would never allow that to happen because it would let Scotland walk away from more than £100bn in debt. “No UK chancellor would allow himself to be in a position where an independent Scotland gets away scot-free without the debt,” Salmond said.

Mr Salmond may have been misquoted. I may have misunderstood. But the notion that if an independent Scotland decides to use the pound in the manner that Panama or Ecuador uses the dollar (a quite sensible idea in itself, though it would require fiscal discipline), that somehow negates Scotland’s share of the UK national debt sounds delusional to me. At least, I suppose Scotland could default – Argentina does it all the time – but there are huge practical penalties to that. Lenders demand a high risk premium before they will lend to defaulters, particularly unrepentant defaulters.

Having written the above, I’ve just found another link confirming that Mr Salmond was not misquoted. He really is claiming that the famous missing Plan B is, in the event of the remainder of the UK refusing a currency union, for newly independent Scotland to refuse to take its share of UK debt.

Alex Salmond defends Plan B currency stance after losing Scottish debate on TV.

“If the UK Government’s position is “‘thou shalt not be entitled to your own currency” then “of course we have no entitlement to take liabilities either,” Mr Salmond said.
“If we had a zero share of debt then Scotland would be in both balance of payments and budgetary surplus in the first year of independence. We wouldn’t be paying up to £5 billion in interest payments.
“That is the logical conclusion of the UK Government claiming all of the assets of the country – they end up with all the liabilities.”

Wow. To me, those words above look like a bigger misstep than anything he said in the debate.

Samizdata quote of the day

Keynesians were initially mystified by this dramatic breakdown in the supposedly stable and manageable relationship between growth (or employment) and inflation. Their models said it couldn’t happen, so they looked for an explanation to deflect mounting criticism and soon found one: The economy had been hit by a ‘shock’, namely sharply higher oil prices! Never mind that the sharp rise in oil prices followed the breakdown of Bretton-Woods and devaluation of the dollar: This brazen reversal of cause and effect was too politically convenient to ignore. Politicians could blame OPEC for the stagflation, rather than their own policies. But an objective look at history tells a far different story, that the great stagflation was in fact the culmination of years of Keynesian economic policies. To generalise and to paraphrase Friedman, stagflation is, always and everywhere, a Keynesian phenomenon.

- John Butler, on the Cobden Centre website.

Government is not the community

Local government wants to tax supermarkets where most people buy their food in the UK because:

In its submission, the council says that while supermarkets bring some benefits, they have an overall detrimental impact on the sustainability of local communities. “Research has shown that 95% of all the money spent in any large supermarket leaves the local economy for good, compared to just 50% from local independent retailers; this levy is a modest attempt to ensure more of that money re-circulates within and continues to contribute to local jobs and local trade,” its report states.

So apparently providing food to a community brings ‘some benefits’. Who knew?

The whole idea is based on a central fallacy: Increasing tax taken means “putting money back in the community”.

Government is not “the community”. The give-away phrase: “We’ll be able to improve public services.” In other words, we will increase the size of the state and increase the cost of food to the actual local community, which are the people who shop at the supermarket. Oh great.

Samizdata quote of the day

Large-scale deployment of synthetic fertilisers enabled the expansion and intensification of agricultural production, resulting in hitherto unprecedented surpluses and a steep decline in food prices that have made agricultural producers in the global North dependent on government subsidies.

- Dr Heike Schroeder, senior lecturer in climate change and international development at the School of International Development, University of East Anglia, whose revealing drivel is currently being ridiculed over at Bishop Hill. (Warning, contains the word “governance”.)

Just get rid of the goddam corporate tax

You can think of corporate taxation as a sort of long chess match: The government makes a move. Corporations move in response — sometimes literally, to another country where the tax burden is less onerous. This upsets the government greatly, and the Barack Obama administration in particular. Treasury Secretary Jack Lew has written a letter to Congress, urging it to make it stop by passing rules that make it harder to execute these “inversions.” I’ve got a better idea: What if we made our tax system so attractive to corporations that they would have no interest in moving themselves abroad?

- Megan McArdle.

I have actually read the letter sent by Lew to Congress, and right rollicking laugh it is too. It talks about a new sort of “economic patriotism” (which prompts me to think of Samuel Johnson’s famous line of patriotism being the last refuge of the scoundrel). Lew does actually admit in his letter that it would be preferable to go for root and branch reform and reduction of corporation tax. The US has one of the highest corp. tax rates in the industrialised world – 40 per cent – while the average for OECD members is in the mid-20s, and in the case of some countries such as Ireland, in the low teens. As a result of this system, US corporations have, according to figures I recently heard from JP Morgan, north of $700 billion held outside the US. The likes of Apple, Google and Pfizer, among others. This system is crazy; it is a sort of corporate twin of the equally mad US system of worldwide tax in which anyone born in the US, even if they have never set foot in Jefferson’s Republic in adulthood, have to file an IRS return. The situation in that respect has got worse with the enactment of the FATCA Act, a truly terrible piece of legislation.

If the Republicans want to seriously act as a party that represents business and holders of equities – such as those with 401(k) plans, a big cut to corp tax makes sense. Firms will bring their money back home, either returning it to shareholders, or investing it in the US, etc. Sure, some vested interests that benefit from the current state of affairs will bleat, but screw them. (This is the sort of reform – practical, worthwhile and beneficial, that should be a basic proposal on the GOP table.)

Withholding on payments to foreign persons

I asked my stockbroker why part of my dividend payments were being witheld, despite the fact that I had filled in form W-8 declaring that I am not a US citizen. It turns out that there is a tax witholding on certain payments to foreign persons, including dividends. I am lucky that the UK has a treaty with the US meaning this is a mere 15% instead of 30%.

I imagine this highway robbery marginally reduces foreign investments. I wonder what interesting forms of taxation will surprise me next.