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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“There is no doubting that materialism can be a cause of spiritual emptiness and no doubt there are a lot of people who “starve for want of luxuries.” But it is always easy to regard another man’s things as superficial and another man’s pursuits as greedy, while one’s own belongings have sentimental value and one’s own pursuits are profound (or at least harmless indulgences). It is even easier for self-righteous 30 year olds to regard older men with families as leading lives of desperation, while impressing themselves with the depth of their spiritual access.”
– Timothy Sandefur. He subjects Henry Thoreau, darling of the back-to-nature types, to a ferocious take-down. Read the whole thing.
Michael Caine, one of the UK’s best-known actors, is thinking of emigrating due to the UK government’s recent decision to impose a new, top-rate income tax of 50 per cent, which once other changes are taken into account, will be nearer 65 per cent. Iain Martin, writing in the Daily Telegraph story that I linked to, points out how Caine is just one of the more recognisable examples of the sort of person looking to hit the exits. It is often useful, if one’s constitution is strong enough, to read the Daily Telegraph comments sections these days, which are sometimes even worse than those of the Guardian. Several people moan about Iain Martin’s article that the 76-year-old actor has made his fortune so he should shut up and be grateful, etc. How lovely. The fact is that Caine, while he may not employ philosophical abstractions to denounce the looting intent of such a tax rise, is at root repelled not by the economic stupidity of such a tax hike, but its essential injustice. What a top-rate tax like this says, in effect, is that no-one should be allowed to rise above a certain level of wealth because it might make others envious. It makes a mockery of all that progressive-leftist talk about removing “glass ceilings” to advancement, etc.
Funnily enough, it was Caine, along with his UK film star buddy and working-class-boy-made-good pal, Sean Connery, who first legged it out of the UK back in the 1970s when the-then governments of Harold Wilson and James Callaghan introduced tax rates of more than 80 per cent on the “super rich”. He’s done it before, and he is quite prepared to leave again. Arsene Wenger, manager of Arsenal FC, has warned that many foreign footballers will think twice about playing in the English Premier League. No doubt football fans of a nationalistic bent may applaud this trend if it gives local players more of a chance to play for their clubs, but it arguably will roll back one of the benefits to domestic sport in having talented overseas players strut their stuff here in the UK.
It will be interesting to see whether the acting profession’s traditional love affair with the Left shows the strain. I remember reading that Ray Winstone, another English East End boy to have cracked Hollywood, is running out of patience with the tax situation in the UK. And a few years ago, I watched a chat show when David McCallum, who used to star in the 1960s Man From Uncle TV series, vowed that he would only return to the UK when it spurned socialism. And for whatever reason Peter Sellers or Richard Burton chose to live in the Switzerland, it was not for the cuckoo clocks.
There is an interesting feature article over at Reuters about how, as a result of the financial crisis and the rigid labour market laws of much of the continent, millions of young Europeans leaving school and college face a bleak future over the next few years. Even during the relatively prosperous period of the Nineties and much of the ‘Noughties, youth unemployment in nations such as France was shockingly high, sometimes into double figures. Europe’s failure to create a large number of private sector jobs remains one of the most damning facts about the continent’s economic record over the past quarter of a century.
“Even those who have never taken seriously utopias of classless societies and pure socialism have been seduced in the course of the last 100 years into falsely concluding that the critical role in society is the perogative of envious dispositions whom a single concession would supposedly placate…The time has surely come when we should stop behaving as though the envious man was the main criterion for social and economic policy.”
– Helmut Schoeck, Envy: A Theory of Social Behaviour, page 427. In the light of last week’s terrible UK budget and its levelling intent, his book repays reading. It often enrages egalitarians when they are told that much of their views are a rationalisation for envy, but that rage perhaps suggests that such a charge touches on a truth they would rather not contemplate for long.
Click on the link. You know you want to. (H/T: David Thompson).
Yes, it is Friday. I just cannot face writing about the UK economy/corrupt British government/Chicago Community Organiser for a few days. The sun is shining so enjoy the weekend, have a barbecue, drink chilled wine, etc.
Of course, it’s been half a century since Cuba has had a real new leader. This is one of the down sides to life extension.
– Rand Simberg
One of the few financial journalists who rumbled Gordon Brown years ago, Allister Heath, gives his verdict on yesterday’s UK budget. Devastating detail all the way through.
Allister is also pretty scathing about UK Liberal-Democrat economics spokesman, Vincent Cable, who tends to be deferred to as the “politician who talks sense on the economy”.
There is no doubt that – apart from some smart writers like Liam Halligan – not many people in the financial journalist profession saw the current crisis coming or predicted its full extent. Clive Davis, over at his blog, makes that point by linking to an article that goes into what is rather mysteriously called the “shadow banking” sector: ie, any institution that gets involved in trading in or holding credit, such as hedge fund. I wrote about misconceptions surrounding this issue the other day.
So why were financial journalists or many economists unaware of the gathering storms? Well, assuming that they were oblivious, my explanations are as follows. I’d be interested in the comments. Here goes:
First, over-specialisation in the economics profession. One of the great benefits to me in discovering those Austrian economists such as Ludwig von Mises and writers like Henry Hazlitt all those years ago as a callow youth was that it reintroduced me to the days when “political economy”, as it was known in the 19th Century, was not hung up on mathematical models or big, wooly macro-economic systems, but addressed the incentives, laws, and actions of man. I had the benefit of getting a good grounding in microeconomics, in understanding an economy as a dynamic process that changes through time, not a set of artificial “games” with nonsense such as models of “perfect competition”.
Second, I think that for many journalists who did learn economics, the sort of ideas that have given me and other classical liberals/libertarians some insight into the gathering storms are simply not on their intellectual radar, or if they are, they are led to believe that people with surnames such as Hayek, or von Mises, or Friedman, are somehow eccentric, even malevolent creatures. Most of them have either read their JK Galbraiths, or their Krugmans, and get their views from the still-powerful tradition of Keynesian economics. The idea that fiat, state-monopoly money and Big Government – the two are related issues – lie at the core of the issue just does not apply to a group of folk who generally tilt left in their politics (although this is far less the case than in other parts of journalism, in my experience).
Also, as a result of overspecialisation, a journalist who writes about, say, the government bond market may not always join the dots when it comes to information coming out in a different area of the economy. There is also the fact that as sectoral journalists covering their beats such as energy, retail, telecoms, etc, get involved in the day-to-day job of covering these things, that the broader trends get obscured because of the sheer volume of stuff that journalists deal with. Given how financial journalism has developed as a profession in the last two decades – I have some insight into this via my day job – I am not too sure how to deal with this. Part of the trouble may even be what I might call the “showbiz” trend in financial journalism: reporters at channels such as CNBC often talk about the market in a sort of sports-coverage way: who’s up, who’s down, etc.
There are reporters – the FT’s Gillian Tett springs to mind – who have been very good at trying to keep on top of how the credit markets have evolved and some of the risks associated with that. And there are commentators and investors such as Jim Rogers, for instance, who have been pretty astute at seeing the disaster and warning about it. But a lot of people, as Clive Davis says, have not been aware of the magnitude of what has hit us. Maybe, however, Mr Davis has to remember the flip-side of this coin: we may now be blind to the chances of a pretty rapid recovery, at least in some parts of the world.
The title of this article written some months ago by noted US economist, Arthur Laffer, has never been more apt after I finished reading through the UK government’s latest outrage, its annual budget statement.
A new, top rate of income tax of 50 per cent comes in from next year, applying to annual incomes of £150,000 and above. The government, which probably knows it is doomed anyway, has made the base calculation that the Tories won’t dare to repeal it. I actually am not too sure about that: while £150,000 a year is a lot of money, for many self-employed folk with lumpy income streams, such a new tax band will hit them very hard in marginal terms, encourage further emigration from the UK, deter anyone with any entrepreneurial brio from entering the UK, and probably reduce, not raise, revenues. It is also a boon to the tax-planning and accountancy profession, since anyone who can restructure their affairs to convert income into a capital gain – CGT is just 18 per cent in the UK – will do so.
Update: I share Guido’s reaction. No wonder, by the way, that the G20 nations – hypocritically – chose to attack “tax havens” and create a global tax cartel. If you are someone like Gordon Brown or The Community Organiser, the last thing you need is for your high earners to escape abroad. But I’d be willing to bet that there will be quite a rush now of people out of this country. Expect to read lots of stories about how “Mr X, who runs a small business in the Midlands, said he was heading off to Australia/Canada/wherever to get away from high-tax, high-crime Britain”. Expect there to be a relentless, drip-drip of such stories in the months ahead. (Mr Jennings snorts about my mention of Australia: yes but at least there are other benefits to moving there).
Update: Madsen Pirie of the Adam Smith Institute and some top wealth management folk give the budget a thorough hammering over at CNBC. The guy from Denton Wilde Sapte is particularly good.
Samizdata commenter Marc Sheffner (thanks Marc!), spotted this story in a thread comment about this.
Makes you so glad that all our precious details are going to be looked after by those clever political folk and their friends, does it not?
Talking of IT, the debut UK edition of Wired has a look at some of the folk that run Britain’s IT and other vital infrastructure systems.
I am not terribly convinced by this:
“…after decades and decades of instability in the 1800s and early 1900s, followed by the massive bank failures of the early 1930s, regulations were imposed to stabilize the banking system. The result was sixty years of calm in the financial sector. That’s hardly a failure of regulation. It wasn’t until the shadow banking system began growing outside of the regulatory umbrella that problems began to re-emerge. A central theme of the posts this week has been that bringing about another decades long period of relative stability will require the regulatory umbrella to be extended to cover all firms within both the traditional and non-traditional (or shadow) banking system, hedge funds included.”
That does rather ignore the fact that, in the early 1970s – in the period of “calm” that this writer talks about, we had stagflation, the collapse of the Bretton Woods banking system, etc. Hardly very calm. And if the system was calm, as claimed, how come it collapsed? (Hint: it was not the fault of evil private bankers or tax havens).
In the absence of a return to sound money and an end to fiat monetary systems, there may be something to be said for rules to at least limit some of the damage that monetary mistakes can cause. This is a second-best solution, I would say. I have heard it argued, even by some pretty ardent free market types, that there is a case for splitting the roles of risk-taking investment banks from those of more utility-like retail banks, as under the old US Glass-Stegall rules in the US. But had Glass-Stegall been in force today – it was abolished in the late 1990s – it would not have been possible for investment firms such as Morgan Stanley and Goldman Sachs to remodel their businesses as full-service banks, as happened in the autumn of last year when those firms were partly bailed out by the taxpayer. The ironies abound.
On this issue of the “shadow banking” system, the author and others need to understand how the business of securitising debt and selling it off to investors started, as well as why hedge funds and other non-bank institutions developed. This market, and the fiendishly complex derivative products that drove it, was given much of its early impetus by a banking regulation system, known as the Basel system, that told banks they had to set aside a certain portion of capital to one side to protect against risk.
It was, if you like, a partial acceptance that fractional reserve banking, if it is allowed without any “safeguards”, is dangerous. But what happened? Banks took out tradable insurance policies, such as credit default swaps, and used this insurance to get a better credit rating, and hence, reduce the amount of capital they set aside. The “shadow” banking system, then, and the derivatives market that gets so much heat, was partly driven by regulations, as well as by the application of sophisticated – if flawed – mathematical and scientific techniques to the business of finance.
The article does at least, in a backhanded sort of way, recognise that not everyone is signed up to the narrative that “unregulated capitalism” has failed. I am glad that has been noted. After all, it is a myth that supporters of capitalism, such as yours truly, oppose regulations per se: what I oppose is state-imposed, one-size-fits-all regulations. For example, if a privately run stock market wants to create its own listing rules to build and develop a reputation for high standards, it will be in its self interest to do so, since a track record for honesty, transparency and efficiency reduces the costs of capital because investors are more willing to hold equities traded in honest places rather than dodgy ones, and so on.
If the state has a role, it is that of going after thieves and fraudsters. And as we have seen in the case of US Ponzi scheme conman Bernard Madoff, the powerful US Securities & Exchange Commission did not act, despite certain suspicions about him, for years. By focusing on the basics, rather than trying to regulate everything under the sun, the state might even do some good.
Obama’s speciality is shaping up to be particularly dangerous because it’s hard to dispute given the average American’s sensibilities. No call for liberty and constitutional principle seems convincing when Obama is arguing that those relying on government giveaways should have to follow government-set rules. That is, once you’ve allowed them to go ahead with the handouts, the political game is almost over. Under the guise of “managing the taxpayers’ money”, Obama and his crew are rewriting mortgages, deciding executive compensation, tossing out CEO’s. And note carefully that his plans for where taxpayers’ money should go continue to swell, from healthcare to the environment to energy policy to expanded “national service” programs. When taxpayers’ money is everywhere – and Obama is doing his best to make sure it is – then Obama’s control is everywhere. The Octo-potus is claiming his space and flexing his grip. As far as he’s concerned, it’s Barack Obama’s country. We’re just living in it.
– Brian Doherty
If all those ‘libertarians’ who dallied with The Community Organiser had been reading our own Paul Marks, who was onto Mr Obama’s agenda months ago, they would have saved themselves a lot of buyer’s remorse.
Welcome, Instapundit readers. Some rather grumpy folk out there wondered where there was a link to one of Paul Marks’ comments (the archives on the side of this blog, so please use them!). Anyway, here is one reference.
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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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