It cannot be said too often and it is especially pertinent right now, given the state of the world’s economy now, and in particular given how America’s Presidential candidates are talking now: The Great Depression was both caused by and then horribly prolonged by bad governmental and political decisions. The Great Depression was not caused by unfettered capitalism. Throughout this unfolding disaster, capitalism was very fettered indeed, and it was these ever-tightening fetters which proved to be so disastrous:
The genesis of the Great Depression lay in the inflationary monetary policies of the U.S. government in the 1920s. It was prolonged and exacerbated by a litany of political missteps: trade-crushing tariffs, incentive-sapping taxes, mind-numbing controls on production and competition, senseless destruction of crops and cattle, and coercive labor laws, to recount just a few. It was not the free market that produced twelve years of agony; rather, it was political bungling on a scale as grand as there ever was.
That is the final paragraph of Lawrence W. Reed’s demolition of Cliché of Progressivism #33 (that it was all the fault of “Unfettered Capitalism”) for FEE (the Foundation for Economic Education). I was steered towards this piece because of its Quotulatiousness. That blog quotulates a few of the early paragraphs of Reed’s piece. I say: read the whole thing.
Almost as important as how the Great Depression began and was prolonged is how it ended, just after World War 2, as Reed also explains very well.
If you want a bit more detail about that recovery, and in particular of its politics, try reading the chapter on mid-twentieth century America in JP Floru’s book Heavens on Earth (SQotD-ed here), which is about eight such happy episodes around the world in recent times. The world now knows, in the words of Floru’s final chapter heading (also the sub-title of his book), “How To Create Mass Prosperity”. Or rather, the sensible parts of it do. The only uncertainly about the free-market, non-interventionist policies that Reed and Floru recommend is in whether such policies will be applied in the first place, and whether they will then be persisted with.
See also this earlier posting here, which reports on, among other things, a ding-dong I had with Lord Skidelsky concerning this exact same point.
In the charged atmosphere in US and other countries’ politics at the moment, immigration, legal and illegal, is a hot topic, to put it mildly. As regulars here know, a key point is that immigration/emigration cannot be divorced from issues such as whether the chosen destination of a migrant has a welfare state, or not. It is worth, with all that in mind, to remind ourselves that on the whole, migrants tend to be highly motivated people, not the malevolent “snakes” that Donald Trump (whose ancestors were immigrants, and we don’t know how fully documented they might have been) might put it. Here is an item from the Wall Street Journal:
A new non-partisan study on entrepreneurship gives some credence to the tech industry’s stance that American innovation benefits from robust immigration.
The study from the National Foundation for American Policy, a non-partisan think tank based in Arlington, Va., shows that immigrants started more than half of the current crop of U.S.-based startups valued at $1 billion or more.
These 44 companies, the study says, are collectively valued at $168 billion and create an average of roughly 760 jobs per company in the U.S. The study also estimates that immigrants make up over 70% of key management or product development positions at these companies.
The foundation examined 87 U.S. companies valued at $1 billion or more as of Jan. 1, as tracked by the Journal’s Billion Dollar Startup Club. The authors of the study used public data and information from the companies to create biographies of the founders.
Of course, as I anticipate some commenters might say, these immigrants are, one assumes, legals, and they haven’t overstayed their visa terms or they did not jump over any fence. But for what it is worth, these achievements would be no less notable even if they had not been entirely legit as stands under existing law.
There is a lot of fear in Western politics at the moment, and it is all too easy to forget the many positives out there. Remember, politicians who want to expand the State usually thrive when people are scared, or made more scared.
NASA, via The Guardian (and other old media) is trumpeting catastrophe again. “February breaks global temperature records by ‘shocking’ amount” says the headline. “We are in a kind of climate emergency now,” says Stefan Rahmstorf, from Germany’s Potsdam Institute of Climate Impact Research.
On the other hand, towards the end of that article, they mention the El Niño. At Watts Up With That, Bob Tisdale provides some analysis and graphs. I think figure 6 provides the most useful overview, showing up to 0.17 degrees C per decade warming depending on who measures it. I suppose this might just be warming since the little ice age, or man-made but not terribly frightening.
A Guardian commenter wrote: “We spend so much time debating and arguing over things like benefits and the economy. Stories like this end up disregarded. The truth seems terrifying – this is the single biggest crisis facing all of humanity.”
I replied: “It’s either the single biggest crisis facing all of humanity, or an el Nino that fits in nicely with the between 0.12 and 0.17 degrees C per decade warming we’ve seen since satellite measurements began (which is what all this turned out to be back in 1998). Personally I hope the economy does well, because people with the wealth of middle-class westerners can cope better with a bit of bad weather than can subsistence farmers in the kinds of places that don’t have economic freedom.”
I found this article vastly entertaining.
Cole also treats us to an extra lesson in economics. Impossible.com is saving civilisation, if not the planet itself. Literally.
“[Earth] can’t accommodate us all if we all consume resources like the Americans or British of today. We would need three planet Earths to support us… Jointly using what we have, sharing, is one of our best chances for survival.”
This isn’t actually true. Technological advances mean we now use less stuff to make more. We no longer need to chop down trees or kill whales for their blubber (once a vital fuel in Victorian times). GDP has risen, while the amount of stuff needed to make it has remained static or even fallen as Diane Coyle explained here (£). You could try and argue we’ve exported dirty work to emerging economies … until you see the figures for manufacturing-heavy Germany, where as GDP grew, the amount of stuff consumed to make it fell too. Opening access to underutilised resources via platforms like Uber may well, Coyle writes, create greater efficiencies. But Cole’s objection appears to be that money changes hands, and money is the incentive that makes the platforms work.
Money and ownership both seem toxic to Lily Cole, but if our ancestors hadn’t invented credit, and property rights, then today we’d still be standing in fields pointing slack-jawed at aeroplanes. We’re the survivors of a “gift economy” that, fortunately, was abandoned centuries ago.
Money doesn’t change hands (much) at Impossible.com, which may account for its failure. The Mail on Sunday reported that Impossible.com despite your generous taxpayer’s contribution is now £400,000 in debt.
Debit? Pah, Champagne lefties require only hugs as payment and presumably offer the same in return if the hapless taxpayers wants their £200,000 back.
Someone I know on Facebook, who turns out to be a fan of Bernie Sanders, the socialist running for the Democrat nomination in the US, defended this man’s idea of jacking up capital gains taxes (on all those evil capitalist exploiters). I contested the wisdom of this, and got this response. I haven’t edited for typos:
Top-down economics don’t work at all. Give a rich person $1,000 they don’t need to spend it. Give $1,000 to a middle class or a poor person and they will spend it because they have to.
So, the argument is that the State is entitled to use the violence-backed power it has to seize the wealth of supposedly less “needy” people and give it to persons presumed more likely to spend it. The presumption that the State is entitled to loot the wealth of persons who don’t “need” it is taken as self-evident, so deep have collectivist assumptions soaked in. An appallingly large number of people subscribe to this assumption and often don’t encounter a contrary view.
This nonsense also inverts the insight that to consume a service/product first entails producing it, which requires saving for that purpose by forgoing immediate consumption (resources have time value, which is why interest rates exist). The richer person’s wealth doesn’t simply vanish if he/she does not immediately spend it – that money is invested, and added to other factors of production (labour, mainly), which increases living standards in the longer term.
On a final note, it is worth pointing out that under the current tax system in countries such as the US (in my view, far too complicated), the rich pay a disproportionately high share of the total, which rather buggers the point made by people like Sanders.
Lord Mandelson sneered at Brexit supporters this week for failing to understand the complexities of modern trade and how leaving the EU would trigger years of renegotiations that would leave us with a far worse deal than we have inside the EU. Alas Lord Mandelson is a victim of the mandarin-centric fallacy that trade only happens after governments have arranged it in the best interests of their citizens.
– Patrick Minford. Sadly the article is behind the Times pay wall but I am sure you get where this is going.
“It turns out Lenin was wrong. Debauching the currency is actually the best way to destroy the socialist, not the capitalist, system.”
– Matt O’Brien, from the Washington Post. (The fact that such a comment can be made in a liberal-leaning publication such as the Post is interesting in itself.) Via Business Insider. He is talking about the disaster that is Venezuela.
…for the striking London black cab drivers whose hard won skills have been rendered obsolete by Uber and Addison Lee, just as we should remember with pity the thousands of drivers of hansom cabs whose hard-won skills with horses were rendered obsolete by the coming of the internal combustion engine. I am not being flippant or sarcastic. To lose one’s accustomed livelihood to new technology is a tough spot to be in, and there will be many reading this, some of them highly paid at present, who should look at Trevor Merralls’ situation and tremble.
But that pity should not extend to offering to keep Mr Merralls forever in the style to which he has become accustomed simply because he was born working class, or to stifling the opportunity for self-employment that Uber offers to its drivers (also working class), or to depriving Londoners who could not afford black cabs of the ability to take a cab at a reasonable price at any time day or night, and which will, as one of the Guardian commenters put it, “actually go to exotic destinations like Lewisham”.
I have been meaning to link to the excellent blog Oilfield Expat ever since I found it mentioned in a comment here a few weeks ago. There is so much goodness. You can start with its author’s comment on low oil prices below.
I particularly enjoyed this piece of prose, which I find a useful retort to doom-mongers. It is important because people need to realise that we have it good in order to understand why we have it good, lest they throw it all away, the risks of which the article it is taken from is partly about.
I have long subscribed to the view that, in the developed Western nations, we solved the major issues facing mankind several decades ago: infant mortality, hunger, disease, poverty (the genuine kind, not the SJW “relative poverty”), and deadly violence. Nobody of my generation died of malnutrition, treatable disease, or sectarian violence outside of a (statistically) few extreme cases. By historical standards, those who were born in the West after about 1960-70 were the wealthiest, safest, and most fortunate people ever to have lived. Several factors contributed to this situation. The guns falling silent after WWII followed by a Cold War which thankfully never got hot was probably the most important. The Western nations becoming wealthy was probably the second most important.
three successive generations of Westerners who have found themselves fully fed, clothed, housed, healthy, educated, and blessed with luxuries unseen by anyone else in history (one word to those who doubt this: dentistry). Spoiled rotten, in other words.
Having never seen wholesale malnutrition, destitution, and death, the populations of Western nations believe their standard of living is inevitable, as irrevocable as being born. Fewer and fewer grasp the mechanism by which their standard of living is a result of a section of the population spending their time, efforts, and capital to produce something of value, something that people want to buy with their own money.
They lead lives of such wealth and luxury that pontificating over a potential rise in global average temperatures is considered a more worthy and valuable activity than generating the electricity that powers their entire way of life, and without which most would almost certainly die within weeks.
The blog is robust and straightforward. On concerns about population: “it isn’t condoms that the poor need to start having smaller families, it is 1) increased wealth and 2) reliable, cheap electricity”.
On “those jumped-up tossers in places like Aberdeen”: “A cruise past the offices of the oil and gas companies, the engineering companies, and service providers would show the car parks full of Audis, BMWs, Mercedes, Porsches, Jags, and Bentleys, enabled by soaring wages and full employment of those who work in the oil industry. And now they need a bailout? Fuck them.”
On architects: “Fordham is your run-of-the-mill statist, authoritarian rent-seeker who has amassed a veritable fortune of taxpayers’ cash by preaching to governments from the environmental pulpit (naturally, his grubby mitts can be found all over the London Olympic 2012 facilities). The world would have been better off if he’d stayed in his spare bedroom the past 50 years.”
On the Hubbert curve: “In other words, the curve is subject to change at any point due to unlimited external factors and therefore utterly useless save for an object over which academics can while away the hours pontificating.”
There is technical insight into how to invest in oil in the face of low prices. There is discussion of how well-run Netflix seems to be. There is good, old fashioned Fisking.
I am not even having to drill deep for this quality. It is lying about on the surface in plain sight.
The continuing plunge in the price of oil from $115 a barrel in mid-2014 to $30 today is really, really good news. I know just about every economic commentator says otherwise, predicting bankruptcies, stock market crashes, deflation, political turmoil and a return to gas guzzling. But that is because they are mostly paid to see the world from the point of view of producers, not consumers.
– Matt Ridley.
I receive emails from Google about, among other things, 3D printing. These 3D printing emails link to pieces that mostly confirm my current prejudice about 3D printing, which is that it is an addition to the technological armoury of current manufacturers rather than any sort of domesticated challenge to the conventional idea of manufacturing being done by manufacturers. Far from making manufacturing less skilled, 3D printing is, as of now, making manufacturing more skilled. Which is good news for all rich countries whose economic edge is provided by being able to deploy an educated rather than merely industrious workforce.
Here is the kind of story that these emails link to:
… my colleagues and I have found a way to print composite material by making a relatively simple addition to a cheap, off-the-shelf 3D printer. The breakthrough was based on the simple idea of printing using a liquid polymer mixed with millions of tiny fibres. This makes a readily printable material that can, for example, be pushed through a tiny nozzle into the desired location. The final object can then be printed layer by layer, as with many other 3D printing processes.
The big challenge was working out how to reassemble the tiny fibres into the carefully arranged patterns needed to generate the superior strength we expect from composites. The innovation we developed was to use ultrasonic waves to form the fibres into patterns within the polymer while it’s still in its liquid state.
The ultrasound effectively creates a patterned force field in the liquid plastic and the fibres move to and align with low pressure regions in the field called nodes. The fibres are then fixed in place using a tightly focused laser beam that cures (sets) the polymer. …
The patterned fibres can be thought of as a reinforcement network, just like the steel reinforcing bars that are routinely placed in concrete structures …
In earlier pieces I have done here about 3D printing, commenters have compared the current state of domestic 3D printing with the state that domestic 2D printing had reached in the days of the dot matrix printer. Remember those? Maybe not. They disappeared from common view quite a while ago now.
The above description of miniature reinforcing rods makes me think that something like a 3D printing analogue to the 2D domestic laser printer may be about to emerge. Laser printers supplied, once their price had fallen to something domestically tolerable, unprecedented clarity and flexibility to domestic computer users. The process described above, and all the other 3D printing advances that those google emails tell me about, will, if all develops well, supply unprecedented internal strength, and hence just all-round quality, to cheaply printed 3D objects.
None of which means that specialised 3D printing by specialisers in all the various different sorts of 3D printing that are now coming on stream will cease to be a way to make a living, any more than specialised 2D printing experts have all now been run out of business by amateurs in their homes. (Quite the opposite – that link being just one for-instance of a hundred that I might have picked – I just happen to have particularly noticed taxis covered in adverts.) It is merely that, in the not too distant future, domesticated 3D printing may actually become seriously useful to people other than hobbyists and 3D printing self-educators.
However, even as supply gets ever cleverer, when it comes to domestic 3D printing there remains the problem of demand. As I asked in this earlier posting here (commenter Shirley Knott agreed): What 3D printed objects will be demanded domestically in sufficient quantities, again and again with only superficial variations (in the way that black-on-white messages on paper are now demanded) to make domestic 3D printing make any sense? No answer was supplied in those comments three years ago, and I have heard no answer since. So the above ultrasound-arranged reinforcing rods trick will almost certainly turn into just another manufacturing technique for old-school manufacturers to apply to their old-school specialist manufacturing businesses. Which means that this posting becomes just another Samizdata Ain’t Capitalism Great? postings. Which is fine. On the other hand, few can see killer apps coming, until suddenly they come. So maybe a future beckons, which sees us all eating out, but making other, inedible stuff in our kitchens.
The reinforced concrete reference also makes me even more eager than I long have been to see how 3D printing impacts on the world of architecture, architecture being another enthusiasm of mine. Postings like this one at Dezeen make it clear that this is a question that lots of others are wondering about also.
Normally I would not bother to unpick the economic nonsense of Corbynista Owen Jones, but he has the sort of article up on the Guardian that passes for conventional thinking among a sizeable chunk of the population, so I am going to quickly have a pop at it:
Travel outside London….Britain’s deregulated bus system reveals itself as the source of widespread, justified disgruntlement – an overpriced, inefficient, poor-quality mess. According to a report to be published this week, since deregulation in 1986 – unleashed with the promise that “more people would travel” – bus trips in big cities outside London have collapsed from 2bn to 1bn a year. In London, on the other hand, where everything from how much we pay to which routes exist is decided by the mayor and Transport for London, bus use since the 1980s has gone in the opposite direction: from around 1bn to more than 2bn trips a year. Britain’s bus privatisation disaster is a story of profit before need, and a discomfiting tale for those who believe the private sector automatically trumps the public realm.
Jones doesn’t use the term, but he presumably thinks that the fact of there being far fewer bus services in the UK than a certain period in the past is a case of what economists call “market failure” – where there is a lot of supposed demand for X, but and under-supply of it, which needs to be fixed by, you guessed, the State (supported by the taxpayer, the very same people who are supposedly unable to pay for the under-supplied service). There are several issues here. First of all, services run by a municipality (ie, a monopoly with no competition) typically don’t lend themselves to good consumer service. Second, in a large metropolis such as London, where an organisation such as Transport for London runs things, there is still quite a lot of competition (cycling, walking, cars, etc) the abuse that any monopoly power has is constrained, although the situation is far from ideal. Funnily enough, the other day TFL, which had been lobbied by taxi drivers to go after Uber, seems to have decided against it, which is good news.
In the countryside, it may well be true that there are a dearth of buses. It may not be profitable to run them on certain routes, but is that an argument against private provision and for state control? In very sparsely populated parts of the country, it is a serious mis-allocation of scarce resources to provide such things when there are more urgent requirements instead for the resources in question. Second, if a person goes to live in the country, part of the pro/con of living in the back of beyond is that you don’t have lots of rapid-transit transport nearby. You may have to rely on having a car, driven by either you, or by a neighbour, partner, etc. That is part of the trade-off that comes from choosing to live in the sticks, rather than in the city. Why should those who have chosen the option to live in the country, or to stay there, be subsidised in transport terms by those who do not? In some cases, the persons paying for the subsidy will be far less well off than those taking advantage of it. That is the sort of regressive transfer of wealth that I assumed a lefty such as Jones would be against. This sort of issue also explains why, other things being equal, the cost of buying a home in central London is far higher than, say, the middle of Norfolk or Yorkshire.
Jones states that because, in his view, people “need” X that it is the responsibility, in the event of some alleged market failure, for the State to step in. But leaving aside whether the need is real or a figment of Jones’ socialist imagination, consider a basic example of a human need: food. Food is, despite some interventions and distortions created by the State, such as import tariffs and subsidies for farmers, largely handled in the private sector here. Ask yourself whether we would be better off in having food supplied by something such as Transport for London, or Sainsbury’s, Tesco’s or Asda. It does not even come close, does it?