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]
|
I submitted a comment to this blog, “From Poverty To Power”, by Duncan Green, who is involved with the Oxfam International website. Oxfam International, I should point out, is a highly political non-government organisation that promotes what seems to be a distinctly anti-trade, anti-capitalist agenda. He supports the idea of a tax on global financial transactions, that has sometimes been dubbed a “Robin Hood tax” (rob the rich and give to the poor, geddit?). Samizdata readers will know the blogger, Tim Worstall, well, who leaves a typically well-argued comment on the piece I link to. I decided to have a pop myself. I have no idea if my comment made it on (I used a different ID). Here it is:
“I love the way that some here dismiss Tim. For those who don’t know, he is an entrepreneur and I suspect, knows more about economics and business than most of the folk on this board. His point seems to be unanswerable: taxes are a cost. Indeed, that is often their point.”
“For instance, we tax alcohol and tobacco, for example, to drive down consumption for health reasons. Policymakers support imposing tax “costs” on certain items of consumption to reduce turnover. Sometimes, it is argued by people that property should be taxed more to discourage speculation in property, etc.”
“So it seems fairly clear that taxing financial transactions will mean there will be fewer transactions overall, and that the volume will decline. This will, as Tim Worstall states, reduce liquidity, widen the bid-offer spreads in financial markets for things such as currencies, bonds, equities, commodities and so on. It will therefore be more expensive for people to obtain mortgages, buy currencies when on holiday, and so on. Of course, the tax will affect groups differently – that is another issue. But there will be considerable knock-on effects.”
“Alan Doran: It is no doubt true that some funds will migrate to “rogue” tax havens where FTT does not hold sway. Well, a less negative way of putting it is that people do business where it is cheaper to do so, ie, where there are lower taxes. That is what is meant by economic freedom.”
“An example of this is when, in the very late 60s, a change to the US tax treatment of bonds encouraged the development of an offshore eurodollar market in London. Capital migrates. If people want to stop or cut financial transactions and prevent trade, they should be more honest about it.”
The idea of a financial transaction tax, or “Tobin Tax” (named after the economist, James Tobin) has been knocking around for some time. The Economist had a good item on it back in 2001.
Separately, Oxfam’s socialist tilt has been noted for a long time.
“The boost to growth from more monetary easing and more deficit spending – naturally always transitory and the source of further misallocation of resources – will be ever more faint and short-lived. Instead of igniting a new false boom, a progressively larger share of the policy stimulus will simply evaporate in the service of maintaining the accumulated misallocations, of avoiding a correction of artificially raised asset prices and of bloated balance sheets. As the manufactured recoveries get weaker, fiscal deficits get larger as a result of the combination of ongoing welfare state outlays and futile Keynesian stimulus spending.”
(204-205)
“Given the theoretical analysis in this book and the consistently devastating historical record of state paper money, it is remarkable that those who advocate commodity money today are either marginalised as slightly eccentric or made to extensively explain their strange and atavistic-sounding proposals while the public readily accepts a system of book entry money in which the state can create money without limit. The global financial crisis that commenced in 2007 is a case in point. The crisis constitutes a thorough and illustrative indictment of the alliance of state and financial industry, of a system of expanding state paper money and government-supported fractional reserve banking. Yet, the political class and the media managed to put the blame on capitalism and on greedy bankers.”
Paper Money Collapse, page 243, by Detlev Schlichter. I single out these quotes for touching on two key issues: the declining effectiveness of Keynesian stimulus spending – assuming it was ever valid in the first place – and the fact that the public, aided by the political classes, have, with some exceptions, managed to completely misunderstand our present crisis.
This book is not comforting reading, nor is it always easy to read. You have to concentrate. But it is a “must-read”. For me, one of the most valuable insights of this book is how it explains how the general price level in an economy can appear to be stable but that injections of fiat money into the system can derange relative prices for consumption, intermediate and production goods. This point is vital. It explains why those central banks, such as the Bank of England, got dangerously complacent in the 90s and noughties when the inflation targets they had been set appeared to behave. But all the while, the surges in money supply growth created a bloated financial sector and property market bubble.
He also rebuts the argument, sometimes used by opponents of commodity, or “inelastic” money, that a growing economy needs a growing supply of money to ensure stability. Untrue. At most, an expanding economy, with growing innovation, division of labour and productivity growth, should see a mild deflation over time (which is good for people who want to save by holding cash). But as Schlichter explains, there is no reason in logic or evidence why a mild price deflation should hamper economic progress once people get used to the idea that their money will buy a rising stock of goods and services through time. He uses the analogy of computers. In recent times, the hourly wages needed to buy, say, a mobile phone have slumped. Has that stopped people from going out and buying these devices? Of course not.
Schlichter’s explanation of how fractional supply banking works is crystal clear and, in my view, he explains it slightly better than say, Murray Rothbard did in his The Mystery of Banking, although the latter book is still well worth reading. And Schlichter’s style is more sober and less brash in its tone than the approach adopted by Thomas E Woods in his book about the crash, although Woods’ explanation of Austrian business cycle theory is pretty good.
All these books are useful for driving home key points about how we have arrived in our current pass. Schlichter, precisely because he used to work in the investment management business for so long, speaks not as an ivory tower academic, but as someone who has been on the practical side of finance. He knows that much of what appears to be “free market banking” is anything but; in fact, as he describes it, much of what now goes on in Wall Street, the City or wherever is a hybrid of market and state planning. In its way, it is profoundly corrupt. Schlichter also mentions how such a large chunk of the economics profession is locked into the philosophy that drives the current system – without it, many of these people would have to do something else for a living.
Perhaps the scariest part of his book is when Schlichter points out that the derangement of the capital system in the West is worse than in the late 1970s, when the-then Fed chairman, Paul Volcker, pushed up interest rates to record highs to purge some of the malinvestment and rottenness from the system. The cigar-chomping Volcker was a brave man, and he had the support of the-then presidents Carter and Reagan (Carter sometimes needs more credit than he gets). I cannot see any such central banker now receiving such support for this sort of thing. Instead, we’ve got ourselves “Helicopter Ben”.
Paper Money Collapse is one of the best books to come out of the financial crisis, maybe the best so far.
“Nobody ever asked why Steve Jobs kept working after he was rich. Everyone understood.”
– Virginia Postrel, writing about the computer entrepreneur and business visionary, who died yesterday.
Peter Thiel, the founding CEO of PayPal, has an essay up that makes the contention that the pace of technological innovation in the West, for various reasons, has slowed. He argues that this paradoxically may explain why, in the absence of serious tech change, investors are instead drawn to the dangerous finangling of asset markets such as property, and have fallen prey to the easy charms of high leverage. It is quite an interesting idea.
Here is an interesting couple of paragraphs:
“The most common name for a misplaced emphasis on macroeconomic policy is “Keynesianism.” Despite his brilliance, John Maynard Keynes was always a bit of a fraud, and there is always a bit of clever trickery in massive fiscal stimulus and the related printing of paper money. But we must acknowledge that this fraud strangely seemed to work for many decades. (The great scientific and technological tailwind of the 20th century powered many economically delusional ideas.) Even during the Great Depression of the 1930s, innovation expanded new and emerging fields as divergent as radio, movies, aeronautics, household appliances, polymer chemistry, and secondary oil recovery. In spite of their many mistakes, the New Dealers pushed technological innovation very hard.”
“The New Deal deficits, however misguided, were easily repaid by the growth of subsequent decades. During the Great Recession of the 2010s, by contrast, our policy leaders narrowly debate fiscal and monetary questions with much greater erudition, but have adopted a cargo-cult mentality with respect to the question of future innovation. As the years pass and the cargo fails to arrive, we eventually may doubt whether it will ever return. The age of monetary bubbles naturally ends in real austerity.”
It does rather go against the ideas of Matt Ridley about whom Brian Micklethwait writes below on this blog. Ridley’s take on the pace of events is far more optimistic: he does not, for instance, share the gloomy outlook on food production that Thiel makes.
This rather gloomy “are the easy economic gains gone for good?” theme was also made recently in the Tyler Cowen book, called The Great Stagnation. Here is a somewhat critical review by Brink Lindsey.
Dale Halling, an entrepreneur and scourge of things such as the Sarbanes-Oxley Act and anti-patent campaigners, has his own take on why the pace of innovation in the US may have slowed.
I can see why a certain gloom might set in. Many of the innovations we see today, especially in things such as consumer electronics and mobile phones, don’t have the majestic appeal of a space rocket, tall building or breakthrough in medicine. But these things are continuing: materials science, for example, which is an area that is not very “sexy” (to use one of my least favourite epithets) is full of innovation. And there are the developments in biotech and nanotechnology, to take other cases. And let’s not forget that even in the midst of the Industrial Revolution, some people claimed that all that could be invented had been.
And here is another example of the sort of concern that gets aired about where all the big inventions have gone, taken from The Money Illusion blog:
“My grandmother died at age 79 on the very week they landed on the moon. I believe that when she was young she lived in a small town or farm in Wisconsin. There was probably no indoor plumbing, car, home appliances, TV, radio, electric lights, telephone, etc. Her life saw more change than any other generation in world history, before or since. I’m already almost 55, and by comparison have seen only trivial changes during my life. That’s not to say I haven’t seen significant changes, but relative to my grandma, my life has been fairly static. Even when I was a small boy we had a car, indoor plumbing, appliances, telephone, TV, modern medicine, and occasional trips in airplanes.”
The worry is, of course, that in a world of low innovation and weak genuine economic growth, political fighting over the economic pie becomes nastier, and certain groups find life becomes very uncomfortable. Not a happy thought.
The principal argument I used to put which the pro Euro Labour, Liberal Democrat, CBI and TUC forces found difficult to counter was the simple proposition that joining the Euro was like taking out a joint bank account with the neighbours. You were likely to ruin a good friendship with them, when you fell to arguing over the size and use of the overdraft. This unfortunately sums up the Euro crisis. Greece, Spain, Italy and Portugal want to use the common overdraft or borrowing ability to excess. The Germans do not want to help pay the interest and sustain the joint credit rating, but they are being drawn more and more into doing just that.
– John Redwood.
I like the joint bank account analogy.
Virginia Postrel, over at her Deep Glamour blog, has interesting brief thoughts about how British Airways is attempting to revive its image by being glamorous. The video linked into here has shots of BA aircraft past and present, including that ultimate piece of aviation coolness, Concorde. The new billboard ads I see on the side of the London Underground go for this sort of feel, too. But as always with glamour, the trick is being able to achieve a certain willing suspension of disbelief, rather in the way that, as Postrel has noted elsewhere, people regarded Barack Obama as a glamorous politician. (So was JFK, unlike, say, Eisenhower, Truman or even Ronald Reagan, despite the latter’s Hollywood back-story).
BA is not the only airline to try for the glamour approach in its marketing. The new adverts by Virgin go for a slightly more raucous, fun-fun-fun! approach and it makes me wonder how some feminists must think of it as the ads are full of young, sexy-looking women in killer heels, slinky red uniforms and so on, while the pilots and other crew are all winking in a naughty fashion at the camera. The message seems to be: “Fly Virgin and you might just get away with a hangover or a phone number!” On the positive side, it certainly seems to be at odds with the neo-puritan killjoy mood of the moment, so kudos to Sir Richard Branson for that.
And these thoughts take us to the collision between the desire to project hopes and dreams onto something (an airline or a politician or actor) and the reality. Consider how the vacuous Obama sound-bite “Hope and Change” has now become an ironic tagline for many an Instapundit post, for example. And Postrel has given several talks, including this one at TED, about the glamour issue more broadly. (She also has a book coming out.)
This issue of aviation glamour reminds of something I wrote a while ago about the movie, The Aviator, based on the life of Howard Hughes. He played a huge part in the airline industry, of course. And here is another chance for me to talk about Aerotropolis, a fascinating book about aviation and the modern world.
“He just kept on trucking. When unable to get a haircut because the barber would not cut the hair of black people, he bought himself a pair of clippers and cut his own hair. He does so to this day. (Take that, John Edwards!) This is the same man who put himself through Morehouse College majoring in math, got a masters in computer science from Purdue (while improving academically), plotted rocket guidance for the Navy, started in business at Coca-Cola, then went on to turn around the fortunes of Philadelphia’s Burger King franchise, take over the aforementioned Godfather’s Pizza chain, become the head of the National Restaurant Association, be appointed to the Federal Reserve Bank of Kansas City, and host a radio show into the bargain. And, of course, he defeated the Big C.”
Roger L Simon
I cannot see him in David Cameron’s inner circle, somehow. For all my worries about where it is headed, the fact that someone like Mr Cain (has to be one of the best surnames in politics) can reach such levels says a lot about what the US is in terms of how people can surmount obstacles to build a successful business despite prejudice and the rest.
Here is a good column slating the idea of a Tobin Tax. The key issue that people need to understand is the issue of tax incidence. To put it another way, taxes are a cost (indeed, for some things, such as taxes on tobacco, policymakers stress this point). Costs get passed on. If we tax financial transactions, it will be passed on in the form of lower profits, job cuts, lower savings rates, higher borrowing costs. The tax, of course, will weigh disproportionately on London, given the far smaller turnover of rival European centres such as Paris.
As the saying goes, can we leave yet?
“For as long as the culture of business has been an integral part of American life, it has also been frowned upon by important sectors of our society. Among our intellectuals especially, the business world has been the subject of many brutal caricatures, portraying corporations large and small, and the people who run them, as heartless, soulless agents of greed. These caricatures have shaped our implicit understanding of the nature of the business world, so much that they have come to pass for conventional wisdom.”
– Algis Valiunas
An interesting piece, although its caricature of Ayn Rand is a duff note.
I live in the Westminster area of central London – Pimlico to be exact – and I am planning to get out of London next year when the Olympic Games are on and spend some time with my Dad and also travel abroad to get away from the mayhem. Luckily, my job enables me to work remotely for a while.
Sometimes, when friends ask me about this, they ask if I am thinking of letting out my property for a couple of weeks or whatever, and earn a bit of extra cash to compensate for the cost of paying for the Games and the associated hassles. In general, I am against the idea of letting my place to strangers, and would only consider letting it to people I know and trust. (I am worried about strangers stealing my entire Robert Heinlein collection, 50th anniversary Playboy album and cufflinks. You know how it is). However, it turns out that Westminster City Council has decided to kill the idea anyway – people who let properties for short periods without permission will, it says, be fined. Other London boroughs are taking a more liberal line.
I was not aware that to let out my property for a few days or weeks was something that the council had any power to prevent. Now we know better, alas.
Suppose I decide to let my Dad house-sit my place for a few days, or let other relatives use my place and possibly reimburse me for the electricity, gas and water bills. It appears that the council officials are entitled to check who is in properties during the Games and make sure they are not being used illegally as rentals.
Of course, some people will chance it and let their places out. I must say, Britain is becoming more like East Germany. That country liked its Olympics, if I recall.
The next time anyone talks about the UK and property ownership, please try not to laugh.
Update: The commenter Laird asks if we could legally challenge this edict. I suppose it is possible.
“…Journalism is a trade, not a profession; the idea that its practitioners should be licensed, that it should be a closed shop that only people who have passed a test can enter; and that a politically created quango can determine who is “right” and who is “wrong” and should therefore be banned is appalling and dangerous. It is a sure route to eliminating free speech and ensuring that only “approved” views can be aired. These days, there is a continuum between a lone tweeter or blogger with a dozen followers to a star broadcaster who speaks to 10m people every day. One cannot arbitrarily draw a line between journalism and non-journalism any more. All should be protected by free speech; all should be held responsible for what they write or say.”
Allister Heath, talking about the disgusting idea of a UK Labour Party shadow cabinet member to licence journalism. It is important to note – as Samizdata regular Guy Herbert has from a Facebook comment I saw, that the sins of someone like Johann Hari would not have been picked up had he ticked all the right boxes by attending a J-school.
As Brian Micklethwait notes below, it appears the Labour leadership has disowned the idea – so far. You know how it goes: an idea is floated, is immediately rejected by the senior folk, but gradually keeps getting more and more traction.
I cannot overstate my loathing for the political class in this country. Glenn Reynolds says of the US equivalent that it is the worst political class since before the US Civil War (not exactly an encouraging thought). God knows what sort of epoch we can compare this lot to in the UK.
“The great problem of recycling anything is that whatever it is that you’re after might be extremely dispersed. You can end up epending more energy, more labour, in trying to oncentrate it enough to recycle it than you would expend by simply digging up some new stuff.”
Tim Worstall on the issue of recycling rare metals. The point he makes very well, in my view, is the issue about the scarcity of time. It takes oodles of time for people, even in their own households, to recycle stuff and sort it out, as opposed to acquiring material elsewhere. Now, if the value of the recycled stuff rises sufficiently to make it worth the while of people to recycle it, or the availability of dumping grounds for unwanted stuff declines sharply, the of course recycling will increase.
Everything has a cost. And time is one of the costs that legislators frequently don’t stop to address.
|
Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
|
