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.
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Via Arnold Kling at the EconLog blog, is his plan to fix the US financial system. It applies with equal force to the UK, I think, apart from one or two specifics. It is not the sort of more radical measure that the likes of Kevin Dowd has favoured, but it is pretty good and it actually is something I could envisage being attempted. I even think it might be possible to contemplate a partial breakup of the banking system to avoid a “too big to fail” issue although I would caution that bigness, per se, is not the problem. What is the problem is the fractional banking system as it now operates under the moral hazard regime of a central bank, legal tender laws, and the rest.
Excerpt:
“The overarching principle I have is that we should try to make the financial system easy to fix. The more you try to make it harder to break, the more recklessly people will behave. By reducing the incentives for debt finance and for exotic finance, you help promote a financial system that breaks the way the Dotcom bubble broke, with much lesser secondary consequences.”
Anyway, something for the politicians to ponder.
Here is a related post of mine a few weeks ago about the need to push the case for free market banking even though the details can be sometimes overtaken by events.
Dominic Lawson draws out some perceptive conclusions about the recent volcanic ash problem for the airline industry:
Underlying all this, however, is something quite new, which, like the phrase “zero tolerance”, is from across the Atlantic. This is the idea that there is no such thing as an accident — a concept that is heaven on earth for litigators. On the basis of the so-called precautionary principle (which, if it had existed in prehistoric times, would have been bad news for the caveman who discovered fire) governments are expected to remove all possibility of risk from the field of human conduct. It was something akin to this sort of thinking that caused the British Medical Journal to state in 2001 that it would no longer use the word “accident” because even earthquakes, avalanches and volcanic eruptions were predictable events against which we could, and should, take precautions. We have just seen what happens when the authorities do have a fully fledged “precautionary” volcano safety policy. It does not survive the first encounter with reality.
The problem, alas, is that “reality” is something that many of those in power are uninterested in. As he notes, when the PP is applied to small groups – such as farmers – they lack the political and business clout to kick up a fuss. What really forced policymakers to back down on the airline travel restrictions was the fact that hundreds of thousands of travellers were faced with massive delays and thousands of businesses were affected.
I understand one blessing of the flight restrictions was that this whole kerfuffle prevented Tony Blair from playing more of a role in the election campaign. Silver linings and black clouds, etc. (Excuse the cloud pun). It would be nice to think that this globetrotting parasite could be permanently stuck in a departure lounge.
The leader of the Liberal Democrats, who has surged up the popularity charts in recent days after his supposedly slick performance in the recent TV political debates opposite David Cameron and Gordon Brown, made a remark – which I caught on the TV summaries this morning – that proves that behind all the supposedly “nice”, decent image he wants to present, that he is a man incapable of handling serious disagreement with the conventional wisdom. In his attack on Cameron’s decision to ally Tory MEPs with a certain grouping of right-of-centre European political parties, Clegg damned this grouping for being full of anti-semites and, wait for it, “climate change deniers”. So, let me get this right, as far as Clegg is concerned, someone who is unconvinced, or at least not fully convinced, of the AGW theory, is on a par with someone who hates Jews and wishes them ill. Riiiight.
There are two notable things about Clegg’s remark: that he made it and thought this would play with the audience, and that Cameron, trying still to be so much the “I am above all this grubby stuff” schtick, did not kneecap this insufferable toad for so doing. But then again, as David Cameron has bought into the AGW theory wholesale, he did not have it within him to call out Clegg for such a remark.
As has been noted already, this is a prime example of when political parties embrace the same, suffocating meta-context (as Samizdata’s own editorial El Supremo, Perry, would put it). It means that interesting, even deadly, debating points don’t enter the heads of those who could profit from actually using them. And yet I am sure that many Britons, who are not totally convinced of AGW, would have applauded Cameron had he had the sense to hammer Clegg for his oafish remark.
“The trouble is that what the markets demand – a credible plan for getting debt back to sustainable levels – is the opposite of what the voters want to hear. Perhaps regrettably, when markets and politics collide, it is always the markets that end up winning. Today’s fantasy world of still-growing public expenditure can last only as long as markets are willing to lend on reasonable terms. Governments are perfectly happy to rely on bond markets to support their grandiose social ambitions when times are good, but when the going gets tough, they become a growing source of frustration and complaint. George Brown memorably blamed the gnomes of Zurich for the sterling crisis of 1964, never mind that it might have been solidly grounded in economic fundamentals. President Clinton’s campaign manager, James Carville, became so angry about the pressures for deficit reduction that he snapped that if there were such a thing as reincarnation, he would want to come back as the bond market, because it was more important than the Pope.”
– Jeremy Warner.
He seems to be taking the line that ultimately, “we get the governments we deserve”. Well maybe, maybe not. The problem with this sort of argument is it begs the question of what “we” is being discussed. It is a disheartening experience to watch as so many of my fellows seem willing to vote for a bunch of statist buffoons. I feel no sense of kinship, no sense of “duty”, to a country inhabited by those who seem to have given up on basic facts of reality. And so I repeat the point I made a few weeks ago here: for a genuine patriot, an obvious option is to get out of this country. My plan B is still very much on the cards.
Over at the Stumbling and Mumbling blog, the author asks this question, after watching an interesting TV programme about the sort of free market activities he sees going on in bits of Africa:
“Why is it that the societies that come closest to the libertarian ideal are poor ones, rather than rich? (It would, I think, be a stretch to argue that libertarianism causes poverty in this case). What is it about wealthier societies that brings with them bigger government?”
I think this can be fairly easily explained: as countries get richer, their voters think – naively – they can afford to have big government, at least until they start to hit those sort of problems that we have encountered in the West in recent decades with government overload. In the US, for example, the country became so rich, relatively, after the Second World War that things like the Great Society reforms, or the Space Program, were easier to contemplate and the risks and costs could be shrugged off, at least for a while. I guess what happens is that after a burst of wealth creation – as in the UK’s Industrial Revolution – part of the population that has made a lot of money wants to ease up, or wants to turn to the easier, and possibly more exciting, realm of politics.
I sometimes notice that some of the noisiest anti-libertarians, such as many academics in the universities, live in the US, the world’s richest nation, and I think the two things are in fact connected. If you have an incredibly wealthy country, it spawns a lot of folk who have the inherited wealth, the time, and the inclination, to make a living outside the immediate commercial system, and hence, will argue for something different. You can see this in certain family businesses: the Alpha Male type sets it up and makes a shedload of money; the son is sent to a posh school and starts to want to be part of the Establishment and is teased by his schoolfriends for being in “trade”. The next son may end up in the professions, and as such, will tend to be drawn towards the State, or at least take a more benign view of state power than granddad. And I think this is partly what happened in the UK in the second half of the 19th Century and into most of the 20th Century. Part of the “business class” that might be expected to form the backbone of a free market order got housetrained by a remarkably conservative, ruralist, anti-commerce establishment. (This book makes such a case, for example).
There is also the issue of “correlation is not causation”. Just because big government can sometimes be seen in wealthy societies in no way proves that the former helps bring about the latter, or vice versa. Stumbling and Mumbling implies that libertarianism, being what it thinks might be a simple-minded creed, cannot work in a sophisticated, wealthy society. In fact, I’d argue quite the reverse: the more complex a society is with a complex division of labour and profusion of individual tastes and demands, the less effectively big government tends to work. In fact, there are plenty of examples of rich societies with a relatively small government – perhaps Hong Kong being one of the best examples.
The CATO Institute’s annual index of freedom report also suggests a pretty close relationship between countries that are rich and where the government focuses on the core, minarchist roles of protecting life and property, enforcing contracts, preventing fraud, etc. That does rather undermine the point made in the comment I link to.
It is, of course, excellent news if it is true that parts of Africa are heading down the pro-market route. But using such examples to make a bit of a dig against the wider application of classical liberal ideas is unfounded.
“I think that one of the narrative themes of the progressive era that spawned our modern state is the deliberate smashing of the poor and, in particular, of the “petty capitalism” that sustained them. One of the things I get from reading through the hugely influential London Labour And The London Poor by the reformist activist Henry Mayhew is a horror of the poor, as he describes the costermongers and hawkers and small underclass production businesses which sustained them. The poor had to be done away with and replaced with something more acceptable to higher class tastes and, by all kinds of social activism and regulation they were, to a large extent, done away with as, their petty capitalism squeezed out by the State, they were dragooned into a compliant workforce for factories run by bewhiskered, interfering philanthropists who voted for Victorian Nick Cleggs. And in the end, they all got their council flats and a better wage, and all they had to give in return was their spirit.”
IanB, who has happily resurfaced over at Counting Cats after a period away from the blogging gig.
I’d add my two cents to this article by arguing that although some people want things like council houses, rent controls and minimum wage laws out of a naive but sincere belief that these are good, it has always struck me that part of the reformist zeal to do away with things like “cheap labour” is a sort of “yuck” factor. I sense a lot of this whenever I watch a programme about the downtrodden, poor workers of distant lands. It never seems to cross the minds of the do-gooders here that such folk face far worse alternatives to working for a relatively low wage to a Western one – not working at all. The poor child labourers of Asia do not have the alternative of spending much of their teens in a school and then off to college. And in any event, their best hope of escaping their plight is to have as much vulgar capitalism as possible.
IanB identifies puritanism – both of the religious and the secularised versions – as a key driver of the reformists’ zeal. I’d also add in a sort of aesthetic dislike, even hatred, for industry and trade. The Fabian movement that has had such a baleful effect on the past 100 years or so was inspired not just by the Evangelical “Great Awakening” of the 19th Century, but by the back-to-the-land movements inspired by the likes of John Ruskin and William Morris.
Read the whole article.
Update: It might be objected (and indeed it was, predictably, by an incredibly rude and now banned commenter) that religious puritanism has anything to do with the nanny statist trends of our time. But while there are some who argue, with Max Weber, that the “Protestant Work Ethic” was in some ways pro-market, the fact is that that ethic was double-sided. Sure, there was a striving, pro-enterprise side of it, but there was also a strong, anti-materialist side and a side that scorned pleasure, which provided some of the intellectual fuel for groups such as the “Christian socialists” of the 19th and early 20th Centuries. The teetotal movement, for example, found ready adherents. And consider the intellectual backgrounds of folk like RH Tawney, Arnold Toynbee, and so on. To deny that they had religious inspiration for their views is obtuse.
I like this article by Tim Cavanagh over at Reason’s Hit & Run blog:
This is the problem with the new declinism. With no compelling vision of the apocalypse that doesn’t involve zombies, cyborgs, or outlaw bikers, we tend to miss something obvious: The problem isn’t that things are collapsing. It’s that not enough things are collapsing. General Motors, AIG, and the government of California have committed enough errors to merit immediate extinction, but there they still are. Yet the political establishment continues to argue that the market needs to be prevented from delivering rough justice to sinners. President Obama, who one year ago gave us a worst-case scenario in which an unstimulated economy might hit 8 percent unemployment by this year, now presides over 10 percent unemployment but tries to bamboozle us with counterfactuals like this doozy from the 2010 State of the Union address: “If we had allowed the meltdown of the financial system, unemployment might be double what it is today.”
He’s making a good point. Much of the current mess has been caused by policymakers, such as Greenspan/Bernanke at the Fed, or our own benighted Gordon Brown, trying to “rescue” a failed system by throwing huge amounts of money into the system to prevent disaster, only to build up even greater woes in the future. Going bankrupt is never nice, but by freeing up resources and more to the point, by making people learn from their mistakes, it is a healthy process. To borrow from Karl Popper, if we don’t allow bad investment theories to be falsified by events, then the market will fall short in one of its most powerful functions, of generating valuable new information.
Getting the institutions right matters. Many people simply don’t understand that issue. They don’t understand it because they still believe in magic. Few people believe that the chanting of magic words or incantations exercises power over the world. Most of us believe in cause and effect – in tracing out the effects to their causes. The scientific approach has been triumphant in such fields of enquiry as physics, chemistry, biology and geology. Unfortunately, when it comes to the science of human behaviour, many people – possibly most – still believe in magic, because they believe that a special class of wizards and magicians are called legislators, rulers, governors and presidents, and so most people believe, when they say such words as `It shall be the law that all shall have the right to good health care, or a good education, or a higher living standard,’ that those words carry the power to bring about the intentions behind them.”
– Tom G Palmer, Realising Freedom, page 207.
I strongly recommend this gem of a book.
Via Instapundit, is an academic paper on the issue of how merchant vessels can protect themselves from pirates. This will not break new ground for Samizdata regulars, of course, but I recommend it.
Talking of merchant shipping, if this volcanic ash problem continues to mess up air travel, then merchant shipping is likely to get a boost in the short run. Bring brack the transAtlantic ocean liners, maybe. Here’s a website where you can even buy such monsters of the sea. Bit out of my price range, alas.
Allister Heath, over at CityAM, the free daily newspaper with a strong financial twist, seems at times to be about the only journalist in London making a robust case for free market capitalism, limited government and low taxes. Given how such a message is almost deemed off limits these days in the Conservative Party, and even City types seem shy about doing so, Allister’s editorials are a rare blast of good sense. He’s on good form today with this:
“Economics is not always intuitive – and that is what makes it such a fascinating and important discipline. Take what economists call “incidence” – the study of who actually bears the burden of a particular tax. It is obvious enough that employees pay income tax. But it is much harder to actually work out who really ends up paying for other taxes; voters are often fooled into thinking that somebody else, usually big business, is being hit by higher taxes while in fact it is them who are picking up the tab, albeit in a way that is impossible to detect.”
Exactly. With a lot of economic arguments, such as law of comparative advantage, the insight is not immediately obvious. That is why, for example, protectionist politicians can win votes by claiming that those evil foreigners are “taking our jobs” – it takes a bit of understanding to see the fallacy in this. And the tax incidence issue that is highlighted here is a good one. There is not just a tax incidence effect where a tax on a sector, such as banks, hits everyone. There is also regulatory incidence too. I don’t know exact numbers, but all the various health, safety, equality, and other rules that are imposed on firms add greatly to the total cost of buying a product. Consider how much of the regulatory burden, for example, translates into the actual price you pay for a car, fridge, or even step-ladder.
So the Tories, in their bid for power, want to impose a tax on banks, and imagine that most voters will cheer and say, “good on yer iDave, give the banks a hard time!” and then fail to join the dots when they wonder why the interest on their accounts is so poor, or why it seems a bit harder to get a loan these days or why buying foreign exchange appears to be a rip-off.
A quick link from me today to a recent talk given by Dr Stephen Davies at the Oxford Libertarian Society. Excellent piece, well worth your time. He absolutely nails the silly idea, put about both by communitarians of the left and right, that individualism is the same as lack of interest in a strong civil society. Quite the reverse.
Here’s an interesting paper he wrote about crime and morality many years ago for the Libertarian Alliance. Also recommended. And he is giving the annual Chris R Tame memorial lecture for the Libertarian Alliance on 10 May in London. I’ll be there and hopefully, put up a review on what he has to say.
This headline caught my eye:
Alan Greenspan to Testify on Subprime Lending, Securitization, and GSEs, Wednesday, April 7
Shame he was not grilled a bit more about the Fed’s free-money policy that fuelled much of the credit crisis back in the days leading up to the housing bubble. Goodness knows what his old mentor would have made of this charade.
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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.
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