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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One of the recent themes of this blog’s authors has been to challenge, and hopefully demolish, the “narrative” of how the current crisis proves the weaknesses of “unregulated capitalism” (I could be far ruder than that but I am not a swearblogger). Another, related theme that we try to plug away at is to show how previous acts of interventionism, with politicians playing the role of strong hero on a big white horse, have failed or if they have “worked”, been by-products of massive state mobilisation for war.
Prime exhibit: the New Deal of Franklin Delano Roosevelt. When I was a child doing my O-Level history course in the early 1980s, I got this broad version: the New Deal demonstrated the success of Keynesian pump-priiming economics, therby proving also that support for fuddy-duddy things like the Gold Standard, or balanced budgets, or “sound money” was silly, reactionary and wrong. And some of my impressionable teenage brain agreed. I did rather sense that there was something fishy about this, but it was not until I was a bit older, and started reading all those wicked reactionary Austrians and Chicago economists that the issues began to clarify.
Recently, there have been moves by some writers to challenge the Roosevelt-As-Great-Man story more explicitly. One of the most recent examples is Amity Shlaes’ book, The Forgotten Man (borrowing her title from a famous essay by Willam Henry Sumner). And Jonathan Chait, a leftist writer for the New Republic, is angry at Ms Shlaes’ analysis. Reading his review, there are some points where I think he is being quite fair, but his article fails to deal with what I think is the most damning thing about FDR’s record during the 1930s, namely, that unemployment, according to official US data, never fell below double percentage figures right up until the outbreak of WW2. However one slices and dices it, that is an appalling record. Chait tries to claim that unemployment roughly fell by half, in percentage terms, during FDR’s period of office in the 1930s but that does not seem to be born out by the official statistics. Chait even tries to claim that FDR was not much of a consistent Keynesian anyway.
We then get this:
“Moreover, the classic right-wing critique fails to explain how the economy recovered at all. In one of his columns touting Shlaes, George Will observed that “the war, not the New Deal, defeated the Depression.” Why, though, did the war defeat the Depression? Because it entailed a massive expansion of government spending. The Republicans who have been endlessly making the anti-stimulus case seem not to realize that, if you believe that the war ended the Depression, then you are a Keynesian.”
Well it is undoubtedly correct that unemployment did fall dramatically at this point. Well, for a start, it is not very difficult to achieve full employment if your country ends up, by a terrible turn of events, to be the sole economic power that has not been invaded or otherwise been bombed heavily. And Mr Chait completely ignores the rather important fact that a large chunk of the US male workforce was put into uniform. And yes, when the war was over, and with oil prices at rock bottom, the momentum the US had built during the war years continued. But remember, Mr Chait, that the US had a recession in the late 1950s and JFK, let it not be forgotten, cut taxes – they were implemented after his murder, in 1964. That was a supply-side measure, although not advertised as such, since the language adopted by Arthur Laffer and his school had not yet become common currency in US public affairs
But the broader point Mr Chait makes is troubling: is Mr Chait saying that what the world, or at least the US needs right now is the economic equivalent of a war, or of some massive, government-led direction of all economic activity, complete with rationing, forced service to the nation, etc? He needs to argue why it was that Britain, for instance, had managed arguably to recover quicker from the Great Crash than the US. By the late 1930s, Britain, at least in the south and east, was actually quite prosperous, although unemployment in the traditional industrialised regions was still bad.
Mr Chait makes a number of valid points about Shlaes’ book, which is not the most persuasive or rigorous demoltion job on Keyensianism that I have read. If you want to read such a book, this is a great place to start. And if one wants recent evidence of the problems with trying to reflate economies with cheap money, then the history of Japan over the last decade and a half is striking. Mr Chait will have a tough job trying to shrug that example off.
Following from my previous article about the alleged size of the role played by China/Asia in the current financial troubles, an eagle-eyed commenter by the name of Marc Sheffner pointed this excellent article out which clarifies a lot. My thanks to Mr Sheffner.
God but I love the internet.
“If you have a mortgage and are celebrating record low repayments, then enjoy it for now. Ask what the consequences will be for your household budget of interest rates of 10 per cent or higher, which will be needed to tame the rising prices that will result from this mad experiment. But there is another great British consensus emerging around the idea. “It is essential,” say analysts. “No other option,” sighs many a fiscal conservative. “Everyone” is in favour of it, we’re told. I have just about had enough of “everyone”. It was “everyone” – most economists, politicians, etc – who thought that the bubble would never burst. They were wrong then, and are now. “
Iain Martin, on the Bank of England’s descent into monetary madness. Milton Friedman must be spinning in his grave.
Following on from this, is another theme that came out of that seminar with media/City luminaries I went to the other day. One point that Anthony Hilton mentioned was the “global imbalance” issue. This is all about how the West, which is in net terms, up to its eyes in debt, has been living high on the hog thanks to oodles of surplus savings generated by countries such as China and Japan. In looking to figure out how to play the “global financial crisis blame game”, one argument goes like this: China, with its cheap exports, kept cheap by its artificially low and fixed exchange rate, earned huge amounts of money by selling this stuff to the West; in turn, the Chinese needed to reinvest the proceeds – there would be no point earning money you cannot spend – and they reinvested those proceeds in things like US government securities. As a result, long-term bond yields in the US fell, which enabled Mr and Mrs Westerner to renegotiate their long-term mortgages, release equity from their homes, and spend even more of their inflated wealth on – yes you guessed it – Chinese consumer goods. Result: a whacking great housing and consumer spending boom that inevitably crashed.
This argument sounds quite convincing. If it is true, then it also suggests that, contrary to what some of the critics of the Fed or other central banks might say, that there is not much that someone like Alan Greenspan could have actually done to curb domestic US monetary growth if there were such enormous inflows of hot money coming into the country’s debt markets from abroad. Well up to a point, Lord Copper. Much depends, I think, on what proportion of monetary growth in the West was driven by Asian inflows, and what was basically driven by domestic factors. I haven’t seen a lot of commentary on this.
If you buy the “Asian connection” argument, a problem, it seems to me, is that it would not have been realistic, for various reasons, for the US to have tried to curb these supposedly dangerous inflows of Asian money by protectionist measures such as capital controls or exchange controls. If one believes that capital and trade flows are good things, then imposing such controls would and could cause more damage than it solved. Exposure to capital flows has, in many ways, driven beneficial economic change.
But the argument about Asian money does suggest that had the Fed, etc, raised rates to curb inflationary pressures, all that would have achieved would have been to suck in even more Asian money from investors seeking a higher yield. But presumably, with higher rates, it would have curbed, and did eventually curb, US consumer spending, and hence dent the demand for Chinese and other non-US goods. China is now starting to feel the effects of the global slowdown rather sharply.
Even so, the “global imbalance” argument highlights the fact that in a world of fiat money without capital controls, it is now very hard for state central banks, even those with powers as wide as the Fed or the European Central Bank, to set interest rates effectively. Of course, the idea of a central bank setting rates for a complex economy is itself a version of state central planning. Globalisation has exposed its limitations.
One of the things I really want to ask Kevin Dowd at his Libertarian Alliance Chris R. Tame memorial lecture next week is how this sort of issue can be addressed. The “Asian dimension” to our current predicament could be the proverbial big gorilla in the living room. Or maybe it is just a small and rather distracting rodent.
Brian Micklethwait, over at his personal blog, links to a sentiment that states that it is wrong to blame the private sector banks for the current problems, given that the underlying cause of the credit/property bubble was cheap credit as supplied, ultimately, by central banks. Central banks are not creatures of the free market and would not exist in a world of pure laissez faire. So obvious to us, it hardly needs to be said. But outside our little intellectual bailiwick, you’d be be surprised – or perhaps not – to realise that saying such things still gets you a funny look.
As purely personal evidence, let me cite an experience last evening. I went along to a financial seminar in London’s Bloomsbury district, where various folk, including Anthony Hilton of the London Evening Standard and Angela Knight of the British Bankers’ Association were holding forth. Q&A ensued. Yours truly asked a question about what the panelists thought was the role of central banks and governments in causing the current SNAFU. You could almost smell the palpable relief on Knight’s behalf that she had heard someone not try to pin the blame entirely on private banks. My god, she thought, here’s a guy who has not bought the statist line that what is happening was caused by big, evil private banks. I have to say I found her answer on how the central banks mucked up was quite convincing although she by no means accepts the idea that the existence of central banks as such is a problem. As a lobbyist for the existing fractional reserve banking industry, she is certainly no Ludwig von Mises, but still.
I sense that some of the banking industry’s more independent-minded figures are getting really angry at being pilloried for sins outside of their control. The banking industry, however, cannot win any battle for hearts and minds until they are absolutely transparent about their own financial affairs, and until some of the leaders of the banking industry begin to embrace genuine free banking rather than the quasi-statist mess that we have now. Let’s face it, given the reputation of banks at the moment, what do they have to lose? The current option – hope for the best and take taxpayer’s money – is not proving to be very successful.
Clive Davis, who blogs at the Spectator’s Coffee House site these days, reckons the concerns that civil libertarians have about CCTVs all over the UK are “over-hyped”. Well maybe they are but it seems that Mr Davis does rather miss the point slightly. CCTV may not, of themselves, be a threat to civil liberties in the same way as some of other vast collection of laws now on the statute books in the UK, but they are not harmless in this respect, either. True, society has always had its snoops, its “nosey parkers” – as we Brits used to say – and curtain-twitching neighbours. Sometimes such vigilant folk performed a kind of public service, even if unintended, by creating a social network in which certain kinds of delinquent behaviour could be spotted and dealt with. But clearly there are costs to this in that innocent people can find their actions being picked on by the hyper-vigilant. On a more practical level, the obsession with surveillance can crowd out resources better devoted to deterring crime in other ways.
In fairness to Mr Davis, I am sure that readers can come up with any numbers of contenders for laws that are far worse than CCTV. My personal favourite is the Civil Contingencies Act, which confers on government a whopping collection of powers to use in emergencies; this act received virtually no serious press coverage in the MSM whatsoever. But CCTV, and the sheer number of them in the UK, is all of a piece of a move by this country towards a Big Brother state. Yes, if one wants to be nit-picky about it, one could argue that CCTVs in privately-owned shopping malls, for example, are not intrusive since a person is not forced to go into such places, whereas cameras in public streets for which the public has a right of access are intrusive. Also, there is the sheer, practical issue of information overload: there comes a point where there are so many cameras that it is hard to know if the police can physically track all of their photos all the time. So maybe panic is unjustified.
But I think Clive’s sang froid on this occasion is just as mistaken as screaming hysteria. We have moved decisively towards a police state in recent years and on some measures, are already in one. CCTVs are part of this state of affairs. Trying to pretend otherwise is not very credible. I am not entirely sure why Mr Davis wants to take the line he does.
As an aside, Eamonn Butler of the Adam Smith Institute, who is a man not to get hysterical about anything, is fairly scathing about the recent British love affair with CCTV in his book, The Rotten State of Britain. It looks like a good read and I will review it later.
Life for me is hectic right now – for all the right reasons – but I wanted to quickly put up this link to an excellent commentary by Dan Mitchell of the Cato Institute, concerning the current US government’s drive against offshore tax havens, especially Switzerland. Governments such as that of the spendthrift US, UK and France are getting desperate for cash, and low-tax regimes which respect client confidentiality make for an easy target.
I can also recommend Dan’s recent book, co-authored with Chris Edwards, as a fine study of the whole case for tax havens and why they are a thoroughly good thing. Whenever you read someone arguing for ending “unfair tax competition”, what they really in fact want is to create a cartel. Most cartels, if not backed by states, tend to disintegrate in time, but are generally thought of as bad. Tax cartels are a prime example of cartels of the worst kind.
“What did you do during the recession, Daddy? I installed solar panels and wind turbines. If only Franklin Roosevelt had thought to put millions of Americans to work during the Depression doing make-work jobs that were gee-whiz futuristic…. Oh, that’s right. He did. And it didn’t work then, either. But this time is different, you know.”
– Nick Gillespie, at Reason’s Hit & Run blog.
“The idea that everyone is entitled to his opinion is one of those truisms so often repeated that it now goes without saying. Like many truisms, however, it is false. It is also usually irrelevant. Let us suppose that Jill disputes Jack’s opinion that free trade causes poverty in the Third World. Jack may defend his opinion by producing evidence connecting trade and poverty but he cannot help his case by insisting that he is entitled to his opinion. How could that show that free trade causes poverty in the Third World? The entitlement would be relevant only if it guaranteed the truth of your opinions. But it can’t do that, because it is an entitlement supposedly enjoyed by everybody. And people disagree. Jack and Jill are both entitled to their contradictory opinions about trade and poverty, but they can’t both be right. So insisting that you are entitled to your opinion cannot possibly give you any proper advantage in a debate.”
– Jamie Whyte.
Fraser Nelson at the Spectator has an interesting column at the moment about how Britain’s Tories have been influenced by the culture of California, specifically, the northern part of that great state. I think his analysis is fine but I would add some caution, given that the state is, or is about to go, bankrupt. Here is what I wrote in a comment over at the Coffee House blog:
For a while, the political culture of California, both the northern, Silicon Valley/Napa/San Francisco and the southern, Hollywood bit, had been libertarian: or to put it in US politicsspeak: conservative on economics, liberal on social issues.
More recently, as the near-bankruptcy of the state shows, the culture of the state has become socialist. Spending is out of control; the Green movement has stymied developments such as new electrric power plants. Many of its best entrepreneurs are fleeing to nearby Nevada, or further afield. California has an economy the size of France and is exhibiting France-like dirigisme.
I would urge the Tories to draw the right conclusions from this state, not to get too dazzled by the admittedly superb economic success of Google and the tecchies.
One of the things that I liked about northern California when I used to visit a good friend of mine in Steve Jobs’ back yard of Cupertino was that you might be sitting in a bar, drinking a coffee next to some pony-tailed dude in a Grateful Dead T-Shirt, and that the latter would be tapping away on his laptop about his latest round of venture capital funding before heading off down the gun range to fire in his new Glock.
A good historian of California is Kevin Starr. Check this out.
“It is noteworthy that in all the glaring headlines and TV news media’s Pecksniffian commentary about Bernard Madoff’s $50 billion scam and now R. Allen Stanford’s multi-billion dollar gold brick, not one word has been heard about the federal government’s own ongoing confidence scheme. The recent “bailouts” of banks, mortgage companies and automakers, together with the $787 billion “stimulus” legislation and the $75 billion home mortgage “rescue” plan signed by President Barack Obama last week, share the same attributes and methodology as Madoff’s and Stanford’s, and differ from them only in scale. Compared to Congress, the U.S. Treasury, the Federal Reserve, and the myriad perpetuated entitlements such as Medicare, Social Security, the Federal Employees Retirement System, confidence men Madoff and Stanford are mere small-time grifters.”
– Edward Cline.
He’s right. Ponzi schemes and much public sector pension/benefits systems are more or less identical. I guess the caveat is that with Mr Madoff and others, they were allegedly claiming, falsely, to be running funded schemes with actual investments in real assets. But the broad point is valid.
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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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