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]

Laying a few myths to rest

The middle classes in the UK and America are getting richer again. Inequality is diminishing. There are many problems, of course, but they are primarily down to the fact that the impact of the Great Recession ended up dragging on for years, with the previous misallocation of resources and capital wiping out a decade’s worth of productivity gains.

Allister Heath

So why the rise of populism? While wages are finally improving, there has been no return to boom times. Millions of younger people are despairing at exploding housing costs, fuelled by government-created low supply and rock-bottom interest rates; older workers are facing a nightmarish pensions crisis, also created by ultra‑loose monetary policy.

Voters feel culturally disconnected; they rightly voted for Brexit because they realised that democratic control was being destroyed by technocratic unaccountability. The welfare state’s inherent defects mean that people feel caught up in a Hobbesian war for resources – school places, hospital beds – of all against all, especially with high levels of immigration. But the middle classes should direct their ire towards politicians and central bankers, not free markets or technology.

Trade does not require trade agreements

Douglas Carswell makes some excellent points about the perils of any post-Brexit trade agreements with the EU:

So let’s spell it out. Access to the single market means being able to trade with single-market countries. Membership means being bound by single-market rules.

Why is this difference so important?

Because access is consistent with the vote to leave the EU. Membership isn’t.

Access clearly doesn’t require membership. Countries around the world trade with the single market. Many do so freely, with no tariff barriers, via bilateral free-trade agreements. Britain can do the same. We don’t need to be part of the single market to trade freely with it.

In fact, we will have freer trade once we leave the single market. Because the single market doesn’t enable commerce, but rather restricts it.

The single market is a permission-based system. It stops suppliers from selling things people want to buy unless they conform to standards set by bureaucrats in Brussels. Rather than remove trade barriers, the single market creates them. Not between countries, but between producers and consumers.

The effect is to limit competition. Big corporations with expensive lobbyists rig the rules to shut out disruptive innovation from upstart rivals. Economic progress is impeded.

Indeed, and as Peter Lilly wrote not all that long ago:

How important are trade deals? As a former trade minister it pains me to admit – their importance is grossly exaggerated. Countries succeed, with or without trade deals, if they produce goods and services other countries want. Thanks to the Uruguay Round, tariffs between developed countries now average low single figures – small beer compared with recent movements in exchange rates. So the most worthwhile trade agreements are with fast growing developing countries which still have high tariffs.

Quite so. The sooner we are out of the EU the better.

Samizdata quote of the day

Globally, therefore, adoption of American farming techniques could increase agricultural productivity so much that a landmass the size of India could be returned to nature, without compromising the food supply to our apparently “peaking” global population – the world’s population is likely to peak at 8.7 billion in 2055 and then start to decline. Last, but not least, tens of millions of agricultural laborers in Africa and Asia will be freed from back-breaking labor, migrate to the cities and create wealth in other ways.

Marian L. Tupy & Chelsea Follett

Samizdata quote of the day

There is nothing new about this; it mostly started fifteen years ago, in 2001, and again the Irish were the main target. Ireland in the early 1990s had a high general corporation tax rate of 40%, but it introduced a special low 10% rate for finance companies in its Dublin-based International Financial Services Centre (IFSC). The Commission ruled that this was effectively an improper subsidy to the finance industry under the State Aid rules, and ordered its abolition.

That was really the root cause of the EU’s current row with Ireland, because the Irish response to the IFSC being declared illegal was to reduce all its corporation tax to 12.5%. Because that wasn’t targeted at a particular company or industry sector, it wasn’t illegal State Aid and so the EU Commission could do nothing to stop them, much as it wanted to.

So the EU Commission’s current action against Ireland over Apple is largely “Round Two”, a repeat of what it did fifteen years ago.

Richard Teather

Samizdata quote of the day

Private businesses very seldom mount a principled defence of their behaviour. This is why libertarians like to stress that they are pro-market and not pro-business. Business people, being self-interested like anybody else, will attempt to make the most of the circumstances and the majority of them won’t hesitate in accepting legal privilege; indeed many lobby aggressively for it.

Alberto Mingardi

Has Bean open day

I have been buying coffee beans from Has Bean for several years. Their unique selling point is they ship the beans on the same day they are roasted, so they are really fresh. They also cater to coffee geeks by letting us choose beans by country of origin, plant variety and processing method. And they do not roast the beans too much so it is possible to taste the difference all these things make.

A coffee roaster, complete with custom Has Bean modifications.

A coffee roaster, complete with custom Has Bean modifications.

On Sunday they had an open day at their facilities near Stafford. They simply opened the doors and did coffee cupping (i.e. tasting), brewing demonstrations, talks and tours. They threw in some real ale and nibbles for good measure. I went along.

The story goes that the boss, Steve Leighton, got fed up with his job as a prison guard and decided to turn his coffee roasting hobby into a business. After trying to sell coffee on Stafford market, he became exasperated when a customer came back to complain that the ground coffee would not dissolve in the water. It was after this that a friend suggested he tried selling coffee on the Internet.

The chief roaster, Roland Glew, after explaining exactly how the roasting is done by smell and sound of cracking, and how roasting for ten seconds too long can ruin the product, told us how speciality coffee buyers interact with farmers. Steve Leighton visits farms, gets invited into the farmers’ family homes and treated like family. Whereas once upon a time their coffee would be thrown into a bag labelled “coffee” and they would get a fixed price, Leighton can work with them to explain what people want, get them to change their methods, try new varieties of plant or different processing methods, divide up the farms differently, and generally get them to make better coffee because he is able to pay a premium for it. He is able to make assurances about how much coffee he will buy so they can safely make the needed investments, and continue to buy coffee if a farmer has a bad year because it is in his interests to keep the farm in business. Has Bean are even experimenting with what would otherwise be waste: cascara and coffee flowers.

Roland demonstrating the sample roaster.

Roland demonstrating the sample roaster.

This is what innovation leading to economic growth looks like. It is largely made possible by the dis-intermediation of the Internet. Geeks are all but buying coffee directly from farmers. The Internet also has a way of bringing people with weird hobbies, like getting all serious about coffee, together. An individual becomes part of a global buying market who otherwise might have been the only weirdo in town.

It is a completely different way of making poor people richer than Fair Trade, which a Department for International Development report found does not even work. Steve Leighton is not very impressed with Fair Trade, either.

Steve doing his party trick of telling a story about any coffee variety you point to.

Steve doing his party trick of telling a story about any coffee variety you point to.

I asked Steve how much import tariffs affect his business. He said not a lot. Thinking about it, this makes sense. Possibly one reason coffee prices are in general so low is that other things farmers could grow are hit by trade barriers. Only coffee is left. He was much more worried about the exchange rate movements since the Brexit vote.

Steve seems particularly fond of Bolivia. On the visit I heard a lot about how life is hard for Bolivian coffee farmers because the president Evo Morales is more interested in supporting coca farmers. He also told a great story about the Yungas Road, which he travels on. It was the most dangerous road in the world because vehicles would fall off of it. Then a bypass was built, but travelling on the bypass was expensive because bribes would need to be paid at checkpoints. So now Steve uses a company who run bicycle tours for tourists to get down the road.

More pictures from me, here. See and hear more from Steve in his fascinating “In My Mug” videos, like this latest one from Bolivia. You can hear more about his most recent trip to Bolivia in this Tamper Tantrum podcast.

Apple replies to the EU, and it is magnificent

In an astonishing EU ruling, Apple is being told the pay the Irish state €13 billion(!!!) in retrospective taxation that the Irish state never asked for. And the reply from Apple is very well crafted. It is clear they are not going to take this shakedown by the European Commission lying down.

When even ‘Communist’ China gets it…

I found this quite interesting:

On the face of it, China’s central bank has room to cut interest rates to try to lift the economy, but sources say evidence companies and banks are hoarding cash has reinforced policymakers’ view there is no major benefit in easing policy further.

The reluctance has also been shaped by the experience of Japan and the European Union. Despite much more aggressive easing policies than China, including negative interest rates, they have struggled to lift their economies out of the doldrums, these sources said.

And my reaction was to marvel… can it be true ‘Communist’ China is the only state to finally figure out the absurdity of modern mainstream thinking regarding interest rates? Every time Bank of England Governor Mark Carney opens his mouth, I am reminded of Albert Einstein’s purported definition of insanity. Is China really the only place the penny fen has finally dropped?

Samizdata quote of the day

And the idea that is the bedrock of all economics is the understanding that complex economic order emerges spontaneously, without central design or guidance, when private property is secure and markets are at least reasonably free – when, in short, there reigns what Adam Smith called the “the obvious and simple system of natural liberty.”

Too many economists today, busy mastering mathematical technique or striving to make their work relevant for current holders of political power, lamentably never learn – much less master – these and other foundational ideas. But no amount of mastery of the idea of the likes of Nash equilibrium or of the Stolper-Samuelson theorem is worth a damn without a mastery of these older, less sexy, yet foundational ideas.

Donald Boudreaux

Samizdata quote of the day

Whenever dismal scientists agree so passionately about the impact of a complex, one-off and multi-faceted event, alarm bells deserve to go off

Allister Heath

Samizdata quote of the day

If that sounds familiar, it’s because this amounts to Mr. Corbyn’s People’s Quantitative Easing concept in all but name. The idea much derided last year is becoming so mainstream that even a leadership candidate for Britain’s Conservative Party, Stephen Crabb, could recently propose a £100 billion ($130 billion) public-works investment fund that wasn’t so different from PQE. Mr. Corbyn’s PQE is essentially indistinguishable from the suggested 50-year Japanese bonds.

This probably says more about the central bankers’ desperation than Mr. Corbyn’s prescience. With government spending and borrowing constrained by slow growth and high debt, and supply-side reforms still politically far off in many economies, the pressure is mounting on central bankers to act as magicians pulling rabbits out of their hats. The longer this continues, the deeper they’ll have to rummage around for the next rabbit. It’s enough to make one wonder what will be the next extreme idea to follow the journey from crank to orthodoxy.

John Phelan

Samizdata quote of the day

For those that already have, Mark Carney is the gift that keeps on giving. Borrowed imprudently and struggling to make those interest payments ? Worry not; the Bank of England has your back. For those that don’t have, the Bank of England is taking away your chance of ever realistically saving anything, now that interest rates have been driven down to new historic lows of 0.25%, and may go lower yet. For the asset-rich, for the 1%, for property speculators, and for zombie companies and banks, Carney is your man. For the asset poor, or for savers, or pensioners, or insurance companies, or pension funds, the Bank of England has morphed from being anti-inflationary fireman to monetary arsonist.

Tim Price