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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William Rees-Mogg has a nice, rather wistful account of the days of when bank managers actually knew their clients, knew their economic circumstances and were not in the business of lending money to folk with little or no credit history. Mr Rees-Mogg is a devotee of the gold standard. However, in talking about the changing nature of banks and the quality of their staff, he does not touch on an issue which struck me the other day: limited liability.
Under limited liability laws and with central bankers acting as lenders of last resort, there is an element of moral hazard. Some free marketeers like Sean Gabb – whom I mention below – think limited liability laws are a statist curse on the capitalist system, since they would not arise without active state adjustments of corporate law. I am not sure about whether limited liability would exist in a world of pure laissez faire. It might, I guess. Also, not everyone buys the idea that LL is a distortion of the market or would not exist without state action.
However, there are still some nooks and crannies of the banking world where unlimited liability still exists and works successfully. The Swiss private bank Pictet, founded in 1805 in that memorable Napoleonic battle year of Austerlitz and Trafalgar, operates a partnership system where the bank partners face unlimited liability. As a result, Pictet operates a very conservative lending and investment policy. During the fat years of the ‘Noughties, Pictet may have seen some of its more aggressive competitors steal a march, but now the bank is attracting inflows from investors who appreciate the structure of the firm. At a time when Swiss banks have sometimes attracted bad headlines due to massive losses undertaken by over-confident people, the example of Pictet is an interesting contrast.
One of the reasons for slow output on this blog over the weekend was that several of your regular scribes, such as yours truly, Guy Herbert, Brian Micklethwait and Philip Chaston, were at the annual Libertarian Alliance (UK) conference in London. Several of us remarked on how many people turned up for the two days. By my reckoning, we had about 140 folk in total. What was particularly gratifying was the number of younger people in their early 20s whom I had never heard of before. Several of the newbies mentioned that they had come across the LA via the world of blogs. This is encouraging: there is nothing more dispiriting than to observe that the circle of folk who share similar views is static and getting greyer and more wrinkled. Suddenly, that appears to be changing.
There may have been several reasons why the LA conference proved so successful in terms of numbers. First of all, the speaker list was particularly strong: Aubrey de Grey, David Friedman and Hans-Herman Hoppe, to name just three. I thought Professor Friedman (son of Milton Friedman) was terrific when he spoke about how new technologies, such as nanotech, artificial intelligence and new forms of encryption, would throw up all manner of new legal issues. He is an irrepressible speaker and great value. Another reason for the high numbers at the conference is that I wonder whether the credit crunch has produced an unintended result by refocusing attention on the arguments about capitalism and financial markets. People want to know about what defenders of laissez faire think. Quite a few of the attendees were students furiously writing stuff down for assignments. The LA is getting used as a resource for academics.
I came home from the event yesterday feeling enthused and proud of how Tim Evans and Sean Gabb have driven the LA forward after the sad loss of Chris Tame, its founder, more than two years ago. He’d have been very proud, I have no doubt.
Occasionally, whenever one of us Samizdata scribes writes about events in the UK, such as loss of civil liberties, or the latest financial disasters perpetrated by the government, or crime, or whatnot, there is sometimes a comment from an expatriate writer, or US citizen in particular, suggesting that we moaners should pack our bags, cancel the mail and come on over to America. Like Brian Micklethwait of this parish, I occasionally find such comments a bit annoying; it is not as if the situation in Jefferson’s Republic is particularly great just now, although a lot depends on where you live (Texas is very different from say, Vermont or for that matter, Colorado).
But considering what might happen if Obama wins the White House and the Dems increase or retain their hold on Congress, I also wonder whether we might encounter the example of enterprising Americans coming to Britain, not the other way round. The dollar is rising against the pound, so any assets that are transferred from the US to Britain go further. Taxes are likely to rise quite a bit if The One gets in, although they are likely to rise in the UK too to pay for the enormous increase in public debt, even if the Tories win the next election in 2010.
Of course, this is an issue at the margins. If I were an American looking to get out of a left-tilting America, there are many other countries apart from Britain I would want to live in, not least because the weather here is generally lousy, you cannot defend yourself with deadly force, and the place is so crowded. Switzerland is likely to be popular for those who want to go to Europe; some East European states will be attractive. And there is the whole of Asia to consider, possibly even the better bits of Latin America. But do not be surprised to read of a steady exodus of Americans in the next few years, assuming Obama proves to be as bad as some reckon he is. We might hear the accents of the West Coast or New York on the London Underground and in the bars of the West End a bit more.
Update: Here’s more on the collapse of the pound. At this rate, New Yorkers will be heading to London to do their Christmas shopping. Seriously, this shows that markets believe Brown has so badly mortgaged the UK economy on debt that Labour will try to turn on the money printing presses. And we know where that leads.
Enough of terrible politicians. What people should really know is what to drink during social and business encounters. Over to you, John Tierney.
As I suggested yesterday on the immigration issue, a danger during harsh economic times is that political leaders play the nationalist card, not just on the immigration – or emigration issue – but also on the purchase of so-called national “champions” by foreigners. It was the protectionism of the early 1930s in America, copied by many other nations, that helped transform would have been a relatively short, if unpleasant, recession into a global slump.
It appears that Nicolas Sarkozy, French president, has learned very little about this episode. He wants France (ie, the benighted French taxpayer) to create a national fund to prevent French firms from being taken over. So if cash-rich Middle East, Asian or other businesses want to invest in say, an under-capitalised French firm, then Sarko would rather the French state owned it instead. Quite how this squares with the European Union’s single market rules is unclear. But then, ever since the credit crunch, whatever “free market” credentials the EU project ever had would appear to be totally dead.
There are times when, in one of my less admirable moments, I pray that certain politicians suffer a grisly end. It is not big of me, I know, but boy it is hard sometimes.
Over a year ago, when parts of the UK were inundated by floods, I remember the Spectator’s Rod Liddle moan that one reason why the water was running off the ground and into the rivers so much faster was because of all the additional immigrants crowding into the UK at the time. (Yes, really). It was a nonsense argument: much of the worst flooding was in places like Gloucestershire rather than in London, the former hardly being a hotbed of immigration. But hey, if you are in the business of defending zero-sum economics and the “lump of labour fallacy”, not to mention hold a general dislike of foreigners messing up the view, any stick will do.
It turns out that tens, maybe hundreds, of thousands of immigrants want to go back to their country of origin because of the changing economic landscape, and may do so. So Rod and his other worriers can sleep easy. Britain is now able to breathe free (sarcasm alert).
On a side-note, I’d add that with a recession now occuring, dislike of “foreigners” taking “our jobs” is going to become an even more toxic political issue, particularly where among the low-paid, arrivals from abroad do depress wage rates, if only in the short run. But then one should consider the shocking fact that during the boom years, immigrants were taking half of the new job vacancies in the UK, despite there being a large amount of unemployment among the indigenous population, a terrible indictment of the tax and welfare system’s destruction of work incentives.
Spectator politics correspondent Fraser Nelson spots that Gordon “off balance sheet” Brown, as I will now continue to call this shit of a national leader, has devised an accounting wheeze to remove the tens of billions of public debt involved in the Northern Rock bailout from the public accounts. As a result, Brown can claim that the UK public finances are fine, nothing to look at here, please move along.
As Mr Nelson points out, Brown engages in practices that politicians are only too keen to condemn when applied by banks. But at least banks, if they try to remove certain default risks off their balance sheets, use forms of tradable insurance policies known as credit default swaps. I’d be interested to know how exactly Brown & Co. intend to hedge out the risk that Northern Rock does not return to any form of profit. This disconnect between the talk of prudence on the one hand and financial trickery on the other will, I hope, be the undoing of this overrated bullshitter from north of the border. Brown is damaging the age-old Scottish reputation for plain dealing. No wonder so many Scots want to cut loose from the UK. I don’t blame them.
One of the hardest things for a libertarian to do at the moment is to maintain any kind of optimism or sense of confidence that his or her ideas will catch on. The danger is that if one sinks into despair, then that despair will come across as a form of defeatism, which turns into a sort of self-fulfilling prophecy. If I have a criticism of one of the head honchos of the UK-based Libertarian Alliance, Sean Gabb, is that he used to wallow so much in this sort of “we are all doomed” schtick that I almost imagined, that in a perverse kind of way, that he was secretly rather enjoying it and that it was all a bit tongue in cheek. Funnily enough, at last year’s annual LA conference in London – the next one is held this weekend – I sensed that Mr Gabb had cheered up a bit. Even so, reasons for to be grim about civil liberties issues remain but sometimes I think that momentum might be slowly changing at the level of public debate. Increasingly, if the government comes out with some new measure, it is geeted with a sort of wearied resignation or outright derision; enthusiasm for such measures are few, or supported by obvious toadies and fools.
Take this story in the Daily Telegraph today. The outgoing Director of Public Prosecutions, no less, talks about the UK embracing the politics of fear:
Outgoing Director of Public Prosecutions Sir Ken Macdonald warned that the expansion of technology by the state into everyday life could create a world future generations “can’t bear”.
Maybe they will not just bear it, but do something about it.
In his wide-ranging speech, Sir Ken appeared to condemn a series of key Government policies, attacking terrorism proposals – including 42 day detention – identity card plans and the “paraphernalia of paranoia”.
Paraphernalia of paranoia – that is a nice turn of phrase.
Now that banks are being forced back to their traditional model of being dull institutions, those chasers after excitement who have been shown the door might like to consider some career options. I rather like Matthew Lynn’s list of suggested new ideas.
On a serious note, it is one thing to embrace risk-taking as a virtue of entrepreneurship, so long as the persons taking the risks carry responsibility for the bust. The problem with the investment banks, such as now-defunct Lehman Brothers and Bear Stearns, is that seldom happens. If the “Masters of the Universe” really do crave the high-wire, much better that they do so with money not given to them by the taxpayer.
On a separate but related point about state ownership of banks, one issue that has not yet been much discussed is that of political and business corruption. Under “public” ownership, what will count will be what Ayn Rand called “the politics of pull”: the ability of governments to put their toadies onto bank boards to ensure that favoured groups get their loans and other benefits, while enriching those with the right connections. We saw that in countries like France, state-controlled banks such as Credit Lyonnais became engines of corruption on a huge scale. If ever there was an issue for enterprising journalists to go after, it is this one. They may probably do so once they have become bored describing Gordon “off balance sheet” Brown as some sort of economic superman.
You might think that with all the worries about recession, bank failures and so on, that political leaders might want to avoid making ever greater commitments on public spending. Not so. Just to remind us about the kinds of concerns that animate the political classes, here is this story:
Everyone who buys a mobile telephone will be forced to register their identity on a national database under government plans to extend massively the powers of state surveillance.
Phone buyers would have to present a passport or other official form of identification at the point of purchase. Privacy campaigners fear it marks the latest government move to create a surveillance society.
It is hardly a fear. It is a reality.
A compulsory national register for the owners of all 72m mobile phones in Britain would be part of a much bigger database to combat terrorism and crime. Whitehall officials have raised the idea of a register containing the names and addresses of everyone who buys a phone in recent talks with Vodafone and other telephone companies, insiders say.
It is important to remember that even supposedly private sector firms such as Vodafone can easily find it next-to-impossible not to co-operate with governments on stuff like this, particularly if the government can threaten to cut off licences.
The move is targeted at monitoring the owners of Britain’s estimated 40m prepaid mobile phones. They can be purchased with cash by customers who do not wish to give their names, addresses or credit card details.
So let’s assume that the government has data on the 40 million-plus people who buy a pre-paid phone. Even leaving aside the moral objections to such a database, the practical issue of how on earth one can sift through the haystack of millions of such details for the possible pin of a terrorist plot does not seem to register.
But then again, one must remember that the database state is not really about terrorism. It is a beast that is now acquiring a life of its own. After all, thousands of jobs, millions of profits, are tied up with this. If the Tories really do stick to their pledge to shut this thing down – and I would not want to bet my house on it – it is going to put a lot of “consultants” out of a job. A certain grim satisfaction would be involved in that. My wife, who is a consultant, refuses to work on any such things, god love her.
It is funny how films that you put down on the “must get around to seeing it sometime” list never get seen. Well, I have wanted to watch that 1970 epic, Waterloo, for a while and watched it during a quiet Saturday afternoon. Several things struck me about it, not least the fact that the cast was drawn from the Soviet Union (the Red Army?). I think I remember reading somewhere that the Soviet forces were used as cast extras in quite a lot of films, including a Russian film version of War and Peace. Rod Steiger’s portrayal of Bonaparte has not, in my view, ever been bettered. What a great actor Steiger was. Mad eyes.
I wonder if anyone who drives past the rolling wheatfields of Belgium in which the battle was fought ever wonder about the sheer carnage that was caused on that damp June day in 1815, or reflect that, nearly 200 years later, Bonaparte’s dream of a pan-European empire has in some ways come to pass, albeit without the nifty French cavalry uniforms.
Andrew Roberts’ fine account of both Napoleon and his nemesis, Wellington, is certainly worth a read.
…They would make Guido Fawkes an advisor on how to fight the next election. Of course Guido (aka Paul Staines), whom I know and like, prefers, as I and many other bloggers do, to give party politics a wide berth in professional terms. He is far more effective doing what he is doing now and obviously has a great time doing it. But as his example shows, the guy has more sense on how the Tories should go after the absurd notion of Gordon ‘off-balance-sheet’ Brown than any number of folk working in Tory HQ.
Think about it: the Tories should put up posters with the Brown comment on “no return to boom and bust” over, and over, and over. That this man, who has presided over deteriorating public finances during a relatively strong period of growth, sold our gold reserves at a fraction of their current value, raided pension funds and shafted taxpayers should be able to pose as some sort of economic Winston Churchill is a joke.
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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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