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]
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I suppose they deserve half a clap for trying, if not for the rigour of argumentation. Crooked Timber, a leftish blog I read occasionally, tries to deny that flexible, relatively lightly regulated labour markets have fared better, or are superior to, the more heavily regulated, European ones, such as in France and Germany. Oh really? Let me quote a couple of lines:
“According to the latest Eurostat data, the unemployment rate in the US was equal to that in the EU-15 in March, and is now likely to be higher. Writing in the NY Times, Floyd Norris refers to the conventional wisdom that flexibility inherent in the American system — it is easier to both hire and fire workers than in many European countries implies that unemployment should be lower (at any given point in the business cycle) in the US than in Europe.”
It is “conventional wisdom” in the sense that it makes sense. Other things being equal – which they never are, of course – if you increase the cost, and hassle, of both hiring someone, and make it more expensive and difficult to fire someone if they fail to come up to scratch for any reason, then fewer people in general get hired. And it strikes me that that holds pretty robustly. Yes, unemployment may currently be as bad, percentage-wise, across the US as a whole as across the whole of the euro zone, although let it be noted that different parts of the US have differing rates of unemployment, as does the euro zone. But as the next paragraph demonstrates, it really will not do to try and claim that heaping labour markets with more costs and rules has few adverse effects:
Advocates of the US system make much of the deterrent to hiring associated with employment protection laws, but they ignore the other side of the coin. When the economy is contract, employment protection laws do in fact protect employment (if they did not, they would have no adverse effect on hiring either). On this basis there is nothing surprising in what we are seeing. EU unemployment rates should be higher in expansions and lower in contractions, which is exactly what is required for lower variance.
But – and it is a big but – if monetary policy is not run by idiots, thereby avoiding boom-bust cycles of great severity, then overall, the low-regulation labour market fares better, in the medium to long-run, than the alternative. If wage rates are allowed to fall in a recession, rather than be held up via artificial means, then yes, you will get, as America did in the early 1920s for example, a sharp, but short contraction, followed by a rapid recovery. But if you load lots of rules and regulations on, you get a 1930s-style decade of high, double-digit unemployment. And in measuring the impact of labour market laws, the duration of a period of high unemployment is as bad as, if not worse, than a period of high, but short-lived, unemployment.
And let’s not forget that in France, for instance, the country had high unemployment rates for much of the 1990s and early ‘Noughties, when much of the Western economy was booming on the back of cheap commodities, the rise of the BRICs, the dotcom boom, the Cold War “dividend”, and impact of partial free market advances in the US, the UK and some other countries. And yet hundreds of thousands, even millions, of Frenchmen and women, let it not be forgotten, languished on the dole or make-work projects. In 2005, for example, French unemployment was above 10 per cent.
Here is quite a balanced account of the benefits of a supposedly flexible labour market, including the pros and cons. This extensive study comes down pretty firmly on the side of the view that flexible labour markets are good overall.
In a way, what this comes down to is the trade-off between security for those who have a job already versus the freedoms of those who want to get another one or any job at all. To pretend that things such as regulations and costs of firing people will not influence behaviour is to deny that incentives matter, or that they affect welfare.
This article in the Independent articulates an argument that I summarise thus: North Korea is developing nukes, it is firing rockets and other stuff into the sky near or above its neighbours, but the country is a basket case; it is led by a nutcase and all this stuff is in fact it is a sign of weakness, not strength. In other words, nothing much to worry about, please move along, ManU are playing Barcelona in the Champions League, etc.
I actually accept that there is probably a great deal of truth in this “nothing to get overly worried about” line. There’d better be. There is not much, short of war, with all the terrible costs it would bring, that neighbouring countries such as South Korea, China or Japan can do to pressure North Korea that they have not done already. (Japan, by the way, has been busily expanding its naval forces). When in the past I have briefly mentioned North Korea, some commentators on Samizdata will point out that the West (ie, the US), should not, or has no need or business, to defend South Korea or indeed to act as if North Korea is a “problem” to be fixed. Let the locals sort it out, etc. Well up to a point, but there will be wider effects to think about if nuclear weapons are ever used, or threatened to be used, against what is, after all, a broadly free and friendly country like South Korea.
I think part of the problem is that as long as the US has kept significant armed forces in the region, it can create a sort of moral hazard problem, in that the countries thus protected fall out of the habit of learning to defend themselves, or understand its costs. I am not an expert on South Korean public opinion, but I cannot help but wonder what the impact of a long-running US presence will have on creating a possible false sense of security. One of the things that is clearly coming out of the current economic crisis, and the wrecked state of US public finances, is that there will now be enormous pressure on any US administration, even one led by more hawkish people than Mr Obama, to cut, or just limit, defence spending. South Korea has not escaped the impact of the credit crunch, and if it was not willing to shell out more money on defence five years ago, it is hard to see it doing that now, unless it is completely terrified of an attack. I am sure that the top brass in North Korea understand all this only too well.
Let us hope it is a sign of a weak, not strong regime. But remember also that weak, or desperate countries can do desperate things, such as the Argentine Junta’s decision to invade the Falkland Islands in 1982. As we know, Argentina lost that conflict, and it helped destroy the regime. But Argentina did not have, or threaten to use, nukes.
“There is an almost universal assumption that the next government, of whatever stripe, will be imposing new taxes to avoid a junk-bond future. This easy option should not be allowed to run its course without challenge, because it ignores the risk of turning Britain into a junk economy of high taxes and low growth. It is no coincidence that the pressure to bring tax havens to heel has become intense over the past six months. So panicked were the finance ministers of the G20 nations about the risk of capital flight from the grabbing State that a campaign of bullying was launched against a small group of nations that refuse to accept that the State has the power to achieve absolute dominion over private wealth.”
Carl Mortished. He is writing about California, and the lessons of that indebted US state for the euro zone and Britain.
“I think in the U.S. and in most of the world the public understanding of economics is abysmal. But it’s one thing not to understand something. I don’t understand brain surgery. It’s another to want to form policies on things on which you are ignorant. I hear the wonderful phrase “I want to make a difference” when it comes to policy. I would be horrified if I wanted to make a difference in brain surgery. The only difference is more people would die on the operating table. The only encouraging thing about public reaction to the crisis is that going by polls citizens seem to have more misgivings about some of these policies than politicians or the media. Still, though there have been studies that indicate the New Deal prolonged the Great Depression by years, what is also clear is it was enormously popular. FDR was elected four straight times, and more than once without ever having brought unemployment down to single digits. An economic disaster does not necessarily mean a political disaster. If we could raise the average level of understanding of economics to what Alfred Marshall had in 1890, the vast majority of politicians would be voted out of office.”
Thomas Sowell, interviewed in Reason magazine.
“The readiness of politicians to relinquish power amazes me…..Take the European constitution, now rebranded as the Lisbon treaty. I read all the drafts of that document, spoke to lawyers and became convinced that its calculated opacity was a charter for the creeping takeover of national policy by bureaucrats and judges. There were brilliant MPs who could debate every inch of the detail – David Miliband, Gisela Stuart, David Heathcoat-Amory, Chris Huhne. But I met others who hadn’t even read the document and looked incredulous that I had. When the annual EU membership fee is £6.5 billion, when EU directives have driven almost half of the regulations passed here since 1998, and when implementing those regulations has cost £106 billion (according to a recent study by Open Europe), it is not surprising that people ask what MPs are doing.”
Camilla Cavendish.
As she points out in an excellent Times column, the contempt many of us feel for MPs is not just driven by their corruption. It is far more serious than that. It is that a group of people, either through apathy, venality, EU fanaticism or blind cowardice, have decided that they need to transfer powers away from the traditional cockpit of British politics. MPs are admitting they have little point other than to vote on minor, parish-pump matters. In which case, there is little case for paying them more than a local town councillor, or paying them anything at all.
The Times has a pretty good editorial on reforms that are needed. I have my quibbles, but it is generally on the right track. My main point of disagreement, however, is that none of the changes will significantly alter the balance between the state and the individual until the former is drastically reduced in size.
I love the headline on this piece in the Spectator by Matthew Lynn. I don’t think he is talking about our own Brian Micklethwait, but he could be.
Mr Lynn is talking about the risk, now rising, that the UK will have its sovereign debt ratings cut, a fact that means the UK government has to pay higher interest rates to investors wishing to hold UK gilts. I suspect the US could be headed for a similar fate.
Hopey-change!
Like many people, I thoroughly enjoyed the new Star Trek film, which seeks to “re-boot” the series by going back to the early days of Messrs Kirk, Spock, Scotty and the rest in much the way that the makers of Casino Royale tried with some success to do with 007. I liked the paciness, humour and action of the ST film a lot; some of the cast were great. I thought the fellow who played Spock stole the movie with such brio that he should be probably up before a court for grand larceny. But I have a reservation: I thought that the guy playing Kirk was often a total jerk, albeit with some redeeming qualities, and it was wildly improbable that a starship would have employed him as a commander at that point. Yes, I know that the very premise of the movie is fanciful, but there has to be enough credibility and character development to make it work at even the level of fantasy (that is why Lord of the Rings triumphed as a movie series, for instance).
And this guy thinks the same way. But even so, Stark Trek is well worth the money and far more enjoyable than a lot of SF films I have seen in recent years.
William Hill, the betting firm, is offering 5/2 odds that Gordon Brown leaves the office of Prime Minister this year. I guess if you want to finesse it, it would be worth knowing what are the odds that he has gone by the end of the party conference season in the autumn (ie, by the end of September in Labour’s case).
Dozens of MPs, such as from Labour and Conservative, could be de-selected by their own local party members over expense abuses that have come to light; it is likely that the issue will be one of the very top questions that a voter will have of a candidate who is up for re-election, whenever the polls are held. As far as I know, my local Pimlico MP, Mark Field, is a good guy in this expenses issue, but I’ll have to check. Here’s some data on him at the “They Work for You” website, an invaluable resource. Mr Field, is, by the way, sound as they come in opposing ID cards.
As a side-issue, I hope, as Guido says, that Douglas Carswell gets re-elected for his East Anglian seat with a good majority. He’s been one of the undoubted good guys of this whole sorry process, not something you will usually read at Samizdata. Here is Mr Carswell’s blog.
And thanks Samizdata readers! It turns out that there has been a fair amount of foreign coverage of this saga. The reports generally do not address what is the 800 lb gorilla in the drawing room: the fact that Parliament is as ineffectual as it is in large part due to the transfer of great powers to the EU. And the expenses of European MPs in Strasbourg will no doubt make for fascinating reading.
Very smart article by Niall Ferguson on the lessons to be drawn from the financial crisis. As one would expect, many of the wrong lessons have been learned by policymakers. As he says, the 1970s was a period of relatively heavy financial regulation and state controls over part of the banking system, and yet it was a grim period economically (unless you happened to be an OPEC oil producer). He also picks up on the point that Canada, which operates a broadly free market banking system, has not suffered anything like so badly as its neighbour, or indeed the UK. That’s mightily inconvenient for our own Gordon Brown in claiming that the crisis was like swine flu or a meteorite impact from outer space, rather than something that was caused in many cases right on his doorstep.
It is often a useful question to ask: who benefits from this? Senior Libertarian Alliance honcho Sean Gabb, who not surprisingly is grimly satisfied at seeing the discomfiture of this partly corrupt, oppressive and pointless bunch of political boobies, asks whether his one-time adversary, a certain Boris Johnson, might be a prime long-term beneficiary from the current expenses crisis. Mr Johnson, a former editor of the Spectator, a Daily Telegraph journalist and former member for the safe Tory seat of Henley-on-Thames, is now Mayor of London. Being outside the House of Commons, Mr Gabb argues, confers upon the colourful Mr Johnson the chance to pose as a man untainted. Quite possibly so.
But maybe Mr Gabb is in danger of being caught up in his own cynicism, understandable thought that may be (full disclosure: I am an old friend of Sean Gabb whom I have known for more than 20 years). Mr Johnson, does, of course, have other potential skeletons rattling in his cupboard, as do many of us mere mortals who do not happen to be moral saints. But right now, all that I want is a politician with the sense to roll back the state to the extent that Sean Gabb and I share. In other words, roll it back a long, long way. That surely has to remain the prime focus of our energies, long after stories about expense fiddling have faded from view.
The Speaker of the House of Commons, Michael Martin, is due to speak about his position at 3:30 pm today (about an hour from when I am now writing this). There is a high chance he will resign in disgrace, rather than risk the even greater ignomy of being forced out by a vote of no-confidence from MPs. It appears that even fellow Scot Gordon Brown will not explicitly back him. The scandals over the outrageous arrest of Tory MP Damian Green, and now the relentless series of stories of MPs abusing expenses for things like mortgages on second homes, has damaged confidence in Parliament so badly that fringe parties such as UKIP and the British National Party – a party of hard-left economic views, let it be noted – may do relatively well in the upcoming June European Union elections.
This whole saga demonstrates the truth of the thesis that politicians increasingly have come to regard their own interests as set apart from the country as a whole. It adds to the notion, put forward by Sean Gabb, of an “Enemy Class” that is quite consciously at odds with the more conservative (small – c) values of the country. Of course, there has always been an element of this – it is naive to imagine that Parliament ever quite met some Greek ideal – but it is now in a particularly bad way.
Let’s hope Mr Martin sees sense and takes the proverbial bottle of whisky and the loaded revolver into his study. He will be the first Speaker to be ejected from his role in more than 300 years. Not a record to be proud of.
As an aside, it surprises me still how little this whole saga is registering in the foreign media. Anyone got any examples of US, French, German etc coverage of this? It might be nice if even Instapundit mentioned it.
Outside the Westminster Bubble of bent MPs and Brownite thugs, other political developments take place. And few of them are likely to be more important for the state of the world than the Indian polls, now concluded. This report says the Congress party, the party of Nehru and Gandhi, has won. Congress, if my memory is accurate, was associated for a long time with a centre-leftist sort of nationalism. However, it may have moved on a bit from that – India certainly has. Despite the 2008 stock market crash, the ascent of the Indian economy, due in large part to some of the deregulation that has taken place, has been one of the bright spots of the world economy over the past decade or more. It is arguably more sustainable over the long term than in the case of China. Britain, with its post-Empire connections to India, should certainly pay close attention. And given India’s proximity to Pakistan, a nuclear power now in a deadly confrontation with the Taliban, it cannot be emphasised often enough how this “Anglosphere” power matters. India should, for example, be taking a lead role in helping to suppress piracy in the Indian Ocean, a subject about which I have written from time to time.
So these elections matter. It is not all about the Chicago Community Organiser or the One-Eyed Nutter With the Stutter, otherwise known as the UK prime minister. Let’s remember that.
Update: Guido seems very enthused by the result. The Indian stock market has rallied strongly today.
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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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