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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“On the basis of economic theory and historical experience, the life expectancy of a societal model with 50 percent or more government control over the economy does therefore not look promising. The taxing, resources-consuming state-parasite must constantly weaken and sooner or later kill the productive and wealth-creating market-host. When does this happen? Well, we are about to find out, as we are now all part of some gigantic real-life experiment, bravely conducted by the current policy establishment in Europe and elsewhere at our own expense and that of our children. Across the EU, the share of government spending in the economy is already around 50 percent, depending whose numbers you believe. If we could account for regulation and interventionist legislation, the state’s grip on economic decision-making is certainly larger. To call such an economy capitalist is a joke, albeit perhaps not as cruel a joke as the one the economy itself, with its persistently anaemic performance, is playing on the Keynesian economists and their ridiculous clamour for ever more government spending to boost ‘aggregate demand’.”
– Detlev Schlichter, making a point that needs hammering home. What we have in the West, right now, is a million miles from laissez faire capitalism.
The recent debates about the US Stop Online Piracy Act, or SOPA, has reignited interest in the subject of intellectual property. As regulars here know, people who defend free markets take very different views of IP, often clashing sharply about what the purpose of property rights as such is. So to help form my views about this, I recently ordered and received this book, Justifying Intellectual Property, by Robert P Merges. From a fast skim-read, it bases its arguments around the ideas of three thinkers: Kant, Locke and Rawls. A strange mix in some ways, I think. There is a huge bibliography, and the book notes – without rudeness or dismissal – those writers who dispute the case for IP, such as Stephan Kinsella and Tom G Palmer.
Definitely an interesting read, I think. Naturally, it is under copyright.
Update: this is an interesting observation from a man, D Halling, who is a fierce proponent of IP and yet regards the SOPA and related legislation as “power politics at its worst”. So if the IP crowd hate these bills, why bother?
Another update: here is a very rigorous explanation by Stan Liebowitz of the issues as to why IP exists, and does so very much from an economics point of view, rather than say, arguing that IP is about “free speech”.
“In retrospect, there are some obvious questions an Icelander living through the past five years might have asked himself. For example: Why should Iceland suddenly be so seemingly essential to global finance? Or: Why do giant countries that invented modern banking suddenly need Icelandic banks to stand between their depositors and their borrowers – to decide who gets capital and who does not? And if Icelanders have this incredible natural gift for finance, how did they keep it so well hidden for 1,100 years?”
Michael Lewis, Boomerang, page 36.
And I liked this line (page 37): “Leverage buys you a glimpse of a prosperity you haven’t really earned.”
In a good article at The Atlantic, Conor Friedersdorf (now that is a name to remember) has this zinger of a response to a recent desperate attempt by Andrew Sullivan to try and claim that Mr Obama has been pursuing a brilliant, long term strategy. He asks, how would any Obama voters feel had their man promised to do the following prior to his election:
“(1) Codify indefinite detention into law; (2) draw up a secret kill list of people, including American citizens, to assassinate without due process; (3) proceed with warrantless spying on American citizens; (4) prosecute Bush-era whistleblowers for violating state secrets; (5) reinterpret the War Powers Resolution such that entering a war of choice without a Congressional declaration is permissible; (6) enter and prosecute such a war; (7) institutionalize naked scanners and intrusive full body pat-downs in major American airports; (8) oversee a planned expansion of TSA so that its agents are already beginning to patrol American highways, train stations, and bus depots; (9) wage an undeclared drone war on numerous Muslim countries that delegates to the CIA the final call about some strikes that put civilians in jeopardy; (10) invoke the state-secrets privilege to dismiss lawsuits brought by civil-liberties organizations on dubious technicalities rather than litigating them on the merits; (11) preside over federal raids on medical marijuana dispensaries; (12) attempt to negotiate an extension of American troops in Iraq beyond 2011 (an effort that thankfully failed); (13) reauthorize the Patriot Act; (13) and select an economic team mostly made up of former and future financial executives from Wall Street firms that played major roles in the financial crisis.”
Now I don’t, as readers know, like everything about Ron Paul, who is opposed to every single thing mentioned in this paragraph. But the reason, surely, why even those who might have the odd doubt about him are giving this man respect is for the sort of facts as contained in this paragraph. It is, if you think about it for a few minutes, truly shocking, even though someone like me is not really all that easily shocked by politics and politicians any more.
And here are further signs that Sullivan’s infatuation with Mr Obama is a joke:
“Over the years, Sullivan has confronted, as few others have, American transgressions abroad, including torture, detainee abuse, and various imperial ambitions. He’s long drawn attention to civil-liberties violations at home too, as a solo blogger and as lead editor and writer of a blogazine. When I worked for Sullivan, he not only published but actively encouraged items I found that highlighted civil-liberties abuses by the Obama Administration, and since I parted ways with The Daily Dish, he and the Dish team have continued to air critiques of Obama on these questions.”
“But his Newsweek essay fits the pattern I’ve lamented of Obama apologists who tell a narrative of his administration that ignores some of these issues and minimizes the importance of others, as if they’re a relatively unimportant matter to be set aside in a sentence or three before proceeding to the more important business of whether the president is being critiqued fairly by obtuse partisans.”
And this:
“Beyond strenuously objecting to the focus of his piece and what it doesn’t mention, and agreeing with some of Sullivan’s points, I have important disagreements with others. “Where Bush talked tough and acted counter-productively, Obama has simply, quietly, relentlessly decimated our real enemies, while winning the broader propaganda war,” Sullivan writes. “Since he took office, al Qaeda’s popularity in the Muslim world has plummeted.” But it’s surely relevant that, according to surveys like this one from James Zogby in 2011, “After improving with the election of Barack Obama in 2008, U.S. favorable ratings across the Arab world have plummeted. In most countries they are lower than at the end of the Bush Administration, and lower than Iran’s favorable ratings (except in Saudi Arabia).” And in the areas where Obama’s drone strikes are killing innocent civilians, he is trading short-term terrorist deaths for the possibility that our policies will create more terrorists in the long run. It’s a tradeoff some people consider prudent; but that’s different from saying he is “winning the propaganda war.” In fact, the predictable effect of some of his policies is to increase hatred of the U.S.”
Meanwhile, foreign policy specialist – and Salma Hayek fan – Daniel Drezner is unimpressed.
This article over at the Foreign Policy website, by Helen Mees, dusts off an argument that I have mentioned here on Samizdata before, (in relation to a comment by the US investor and commentator Peter Schiff) namely, that China, by using its vast foreign exchange reserves to buy Western government debt, thereby pushed down long-term interest rates and encouraged the kind of reckless lending that ended up going ker-boom! in 2007-2008. And if only the Chinese had not flogged us all those artificially cheap computer parts and children’s toys (made cheap by that naughty fixed exchange rate regime for the yuan), they would not have made so much money to then lend to us Westerners to blow on housing we cannot really afford. (Here is another old post of mine on the same subject of debt/savings imbalances between the West and China.)
The problem with this line of reasoning is that if, say, a country has earned genuine income by selling something valuable and useful (like toys, cars, electronic components or whatnot), and invested the proceeds abroad in things that can generate new wealth in the future, what is the problem? The problem is not that China invested huge savings and other surpluses into the West – after all, in the 19th Century, the UK invested large capital surpluses in places such as the US, Canada and Argentina (now there’s an irony, Ed). And there was nothing “imbalanced” about that. If real savings – not central bank funny money created out of thin air – gets lent to people to invest, that’s hardly bad. The problem is if the money is lent to people buying homes as part of a broader speculative bubble in real estate, say. And there is no doubt that domestic policy in the West, most definitely in the US, encouraged unwise lending and borrowing for property, consumer goods and so on, rather than investment in new technologies and industries.
The comment thread on the FP item are interesting, where it is contested that subprime borrowing made up only a tiny fraction of the US mortgage market. It did not, since one of the issues with the sub-prime market and the huge losses sustained by banks was how sub-prime debt was mixed up with better quality stuff and then sold to investors as if it is was all investment-grade, when it was wasn’t. For example, here is a comment from a person called “RRAFAY”:
“Actually, 5% of Subprime is enough to cause a crash. Especially, when no mention is made of how these mortgages were leveraged. Secondly, Alt-A is not mentioned either. When both are taken together, they represent roughly 15% of the US mortgage market. Secondly, the idea that Chinese surplus capital led to an excess supply of money is so weak, that it is mind boggling that someone would even suggest this. China only holds 7% of total US debt. Each country mentioned had a housing crisis, Ireland, Spain, and the US.”
In my view, it is certainly true that in a world of free capital movements, if a country A can export a vast amount of its capital into country B, and people in the latter country are not constrained by proper market disciplines and there is already a full-blown encouragement of high borrowing and lax lending, then the added money will pour fuel on the fire. But in the main, I think it is a pretty silly line of argument to say that it is the fault of the Chinese for having earned so much money and then reinvested it. There’s something just not quite right about that argument on so many levels.
“And, make no mistake, Marxists did lose a big argument, one we now know as ‘the 20th century’.”
– Will Wilkinson
“Certainly there is a need for free-market economics to be rescued from those who distort and discredit it, but that is the argument that must be made: that this system has delivered mass prosperity (and the self-determination that comes with it) on a scale unprecedented in human history, and that it deserves to be saved from the spoilers.”
Janet Daley, writing with justified scorn about those people who have been bashing Mitt Romney for his career in venture capital at Bain. To be honest, his background in this area is one of the few things going for him. It would be quite refreshing to have a president of the United States who can actually read a balance sheet.
For those who have not come across the “creative destruction” line before and how it applies to sometimes wrenching change in business, check out the great Joseph Schumpeter.
As a caveat, I should add that some – but no means most – private equity buyouts of firms have been made possible by cheap credit, and therefore might not have occurred in the way they did had interest rates not been how they were in the past decade or so. On a related point, here is what I wrote in defence of private equity at Samizdata several years ago. Excerpt:
“In the main, what these firms do is target cash-rich firms that are run by often lazy executives who have presided over crappy business decisions. Take the meltdown of Marconi a few years ago, one of Britain’s most famous companies. That was a listed company. The destruction of value and jobs in that company remains, in my mind, one of the most disgraceful episodes in British corporate history and who knows, it might have been saved from making big errors had a private equity fund been in charge, rather than deluded executives. Private equity firms helped stymie Deutsche Börse’s foolish bid for the London Stock Exchange 2 years ago, and have turned around businesses. They typically buy and hold a firm for 5 years or more, take a hands-on approach to running firms before spinning them off to another buyer or floating them in an IPO. So Will Hutton should spare us sentimental guff about how limited liability firms floated on the stock exchange represent the perfect model of doing business or something that Adam Smith or Voltaire would exalt. They are merely one of the many ways in which economic activity manifests itself. As interest rates rise and the economic cycle turns, some of the excesses of leveraged buyouts will fade and private equity transactions will decline.”
Anyone looking for evidence that the current Conservative/Liberal Democrat government in the UK has the same tidy, but severely limited intelligence of its predecessor need do no more than read this story suggesting that thousands of jury trials held in the country could be axed to save what appears to be a relatively paltry sum, when measured against the dangers and cost to individuals of being wrongfully convicted.
I can understand why jury trials can be an easy target. In my distant past I had a spell covering court cases in the UK and watched several juries at work. It struck me – especially in the more complex fraud cases – that there are clear problems. And maybe – although no politician will dream of saying so – that the British are not as law abiding as they presumably were 50 years ago and therefore the average jury panel reflects this fact. But historians would point out that juries in, say, early 19th Century England could be an awkward bunch. But therein lies the strengths of trial by jury – it is one of the few elements in which ordinary members of the public can be brought into the affairs of civil society by sitting in judgement on the alleged guilt or innocence of their fellows. Juries remind the powerful and the legally sophisticated about the proper order of things.
As I remarked the other day about the dangerously misconceived move by the previous Labour government to scrap the double-jeopardy rule, the ongoing attempts by administrations of all political hues to gut the English Common Law, and the checks and balances of the system, remain one of the most foolish trends in our public life. And that such an idea is being contemplated makes a mockery of the idea that having the Lib Dems in the government coalition will increase, in any way, the supposed liberality of this administration.
Jeremy Warner, a columnist at the Daily Telegraph, has a short, thumb-sucker about what happens if Scotland becomes independent, as many Scots (and many English voters and taxpayers) want. Given that the Euro is a partial disaster, no sane Scottish politician would want to campaign to join it, at least not yet. The idea of Scotland staying in the sterling zone is also bit, well, problematic if Scotland breaks free of any fiscal union with the English, or if the English decide to give the Scots the elbow. Could Scotland go back to an old, Scottish currency of its own and would that be viable?
Of course, the land of Adam Smith and David Hume could adopt a gold-backed currency and set a magnificent new trend, but given the socialistic nature of most Scottish politicians seeking independence, that does not seem very likely, but you never know. I always felt that if the SNP wanted to really pull a trick, they should seek to turn Scotland into a sort of northern Switzerland.
Here is an old essay by Lawrence White about Scottish banking.
The ultimate pre-flight procedure, courtesy of Southwest Airlines.
Some commenters on this blog got more than a little sniffy when I had a few critical things to see about Ron Paul the other day. I stand by my remarks, which actually were hardly the sort of fire-eating stuff that some people come up with, but I’ll happily repeat my respect for his genuine good points, as I see them.
David French, over at National Review, has an interesting item reflecting on why, of all GOP candidates, and of Obama himself, Ron Paul gets more respect in financial terms from the serving military. Here is the final paragraph:
“I know there are many other reasons why troops support Ron Paul (quite a few embrace libertarian economic principles), but this post is an attempt to explain his support within a national-security framework — how some of the most hardened warriors I know enthusiastically embrace a man whom others say is soft on national security. They don’t see him as soft. They see him as realistic. I disagree (strongly), but it’s an argument that won’t be defeated by ridicule, and it’s an argument grounded in a cultural reality that few Americans have experienced.”
Now and again, when the subject of environmental alarmism comes up, someone – such as the likes of me – might wonder when, or whether, a mainstream, high-profile politician in an important country will get up and stick it to the Green lobby. For perhaps obvious economic reasons, given its vast natural resources, Canada seems to be the country where this is starting to seriously happen. Consider this report (Reuters):
On the eve of public hearings into a proposed oil pipeline from Alberta’s tar sands to the Pacific Coast, the Canadian government lashed out on Monday at what it said were foreign-funded radical groups opposing the project. The comments by Natural Resources Minister Joe Oliver were another sign of the pressures mounting against Enbridge Inc’s proposed C$5.5 billion ($5.4 billion) Northern Gateway pipeline. Canada’s right-leaning Conservative government, which says the pipeline would help diversify energy exports away from the United States and more towards Asia, says activists are clogging up the regulatory process.
There’s more:
“Unfortunately, there are environmental and other radical groups that would seek to block this opportunity to diversify our trade,” Oliver said in a statement. “These groups threaten to hijack our regulatory system to achieve their radical ideological agenda … They use funding from foreign special interest groups to undermine Canada’s national economic interest.” Ottawa and the oil industry are particularly interested in Northern Gateway after Washington delayed a decision on approving TransCanada Corp’s Keystone XL pipeline, which would transport oil sands crude from Alberta to Texas.
Of course, it goes without saying that the UK government is a million miles from this sort of rhetoric, with the partial exception to how ministers sometimes try to push aside environmental concerns that are raised about various transport or other projects. In these cases, though, there are legitimate private property rights issues as stake (such as the use of compulsory purchase powers to make way for something like a high-speed rail link). And as for AGW alarmism in particular, there is yet no sign of a major political figure realising how many votes might be won in confronting this.
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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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