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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“If spending on munitions really makes a country wealthy, the United States and Japan should do the following: Each should seek to build the most spectacular naval fleet in history, an enormous armada of gigantic, powerful, technologically advanced ships. The two fleets should then meet in the Pacific. Naturally, since they would want to avoid loss of life that accompanies war, all naval personnel would be evacuated from the ships. At that point the US and Japan would sink each other’s fleets. Then they would celebrate how much richer they had made themselves by devoting labor, steel, and countless other inputs to the production of things that would wind up at the bottom of the ocean.”
– Thomas E. Woods Jnr, in Meltdown: A free market look at why the stock market collapsed, the economy tanked, and government bailouts will make things worse. (Page 105).
This is a marvellous, succinct and pretty devastating indictment of bailouts and an excellent little primer on the Austrian school’s analysis of the business cycle and the role of money. I thought I knew quite a lot about the subject but this book explains the idea of money, as a claim on resources, and the importance of understanding the balance of supply and demand for savings, quite beautifully. The book also highlights how the sharp recession of 1920-21 ended with no bailouts and is an episode that seems to baffle Keynesians.
Rather amusingly, this has been a New York Times best seller, much to the chagrin, no doubt, of NYT columnist Paul Krugman. Krugman, needless to say, believes that the sort of massive government spending seen during WW2 helped end depression. To think that he actually won a Nobel. Oh, wait a minute…
More good sense on the current economic difficulties.
At the bottom of the interventionist argument there is always the idea that the government or the state is an entity outside and above the social process of production, that it owns something which is not derived from taxing its subjects, and that it can spend this mythical something for definite purposes. This is the Santa Claus fable raised by Lord Keynes to the dignity of an economic doctrine and enthusiastically endorsed by all those who expect personal advantage from government spending. As against these popular fallacies there is need to emphasize the truism that a government can spend or invest only what it takes away from its citizens and that its additional spending and investment curtails the citizens’ spending and investment to the full extent of its quantity.
– Ludwig Von Mises as quoted by Toby Baxendale
Here is a nice little video, via the blog of Tom G. Palmer, singing the praises of free trade, ahead of the upcoming G-20 meeting in the US. Incidentally, the recent decision by The Community Organiser to slap tariffs on Chinese tyre imports – focusing particularly on China – looks to be especially dumb. Given that the Asian giant holds rather a lot of US debt, and has the ability to switch dollars for euros on a vast scale, making such a move seems almost reckless. About as clever as moving to switch off anti-missile defence over Poland on the 70th anniversary of Hitler’s invasion of Poland. In the latter case, the decision may have been right on specific military grounds, but the timing was dumb. Was not part of the appeal of the chap from Chicago that he did not make such errors?
We were promised that Mr Obama would be all smooth and charming to other countries, unlike the terribly vulgar Mr Bush with his Texan drawl (sarcasm alert). But I am not really sure that Mr Obama is not as capable of making an even more dangerous mistake: he pisses off really important, or potentially important, allies and large economies in a position to act. Annoying the French, as Mr Bush wonderfully did, is hardly a mistake, but hitting China with a very public act of protectionism, most decidedly is.
It is not just the economic downturn that has got us deep in debt, it is a consumerist politics in which our elected representatives feel compelled to tell us we can have our cake, eat it and walk out without paying.
Writes Matthew Taylor, former policy adviser to the Blair government, in today’s Times. I think that is not quite right. Not “feel compelled” – “are compelled”. Elected representatives do not stay elected very long unless they maintain the fiction for those who voted for them that someone else is less deserving, someone else is paying.
Taylor says ‘leadership’ is the answer. I wonder why we should believe that, when politicians are actually exercising leadership all the time, in the manner their interests direct. Leadership conferred by outbidding other leaders for the favour of the public is precisely where consumerist politics comes from.
There is a nice article in the Daily Telegraph today talking of how humans, be they religious, pagan or unbeliever alike have celebrated the festival of the harvest, in this time of Keats’ “season of mists and mellow fruitfulness”. And as we remember the other day after the death of “Green Revolution” scientist Norman Borlaug, the harvest has been something that we not only take for granted these days, but have even reached the point where, in recent years, our political leaders have thought fit to actually pay farmers not to grow stuff. The idea of set-aside subsidies was, if I recall rightly, one of those many terrible ideas of Roosevelt in the Great Depression.
Some idea of how far we have travelled comes up in this nugget of information from David Carpenter’s account of early Medieval Britain, The Struggle for Mastery. On page 36, we come across this:
“On the estates of the Bishop of Winchester yields of wheat remained around eight to twelve bushels per acre (a bushel is 36 litres), where on modern farms they are in the seventies.”
Such a massive increase has a lot to do with why, despite the population increase since the 12th Century, Britain had a sufficient surplus of food production to embark on an Industrial Revolution several centuries later. For in the time of William the Conqueror and for some time thereafter, mass famine was a grim reality of life.
So I will be celebrating the harvest this year and salute the scientists, farmers and yes, the commodities speculators of Chicago and elsewhere for making our daily bread as plentiful as it is. Here’s to them. Now, shall I go for wheat beer or the barley variety later this evening?
From time to time, the Guardian, to its credit, likes to shake up its leftist readership with a dose of sanity. Here is a fine example.
The other day, I criticised a short programme slot about how the Chicago school of economics – to use that rather loose term – might have to carry some responsibility for the credit crisis. The programme was put together by the Channel 4 news programme. Anyway, someone at the show noticed my comments, and the journalist who put the programme together, Faisal Islam, was kind enough to comment at some length in an email to our editors. Here goes:
“Hello Johnathan,”
“I saw your comments on the piece on economics that aired on C4 News last month. I thank you for your understanding of the limitations of television. Even C4 News would be hard-pushed to do a piece on the history of economic thought. It was really meant to be the entree for a main course of red-blooded economic debate, but that didn’t quite come off. Anyway, clearly I would dispute the notion that it was ‘propaganda’. I think it’s a bit harsh when the main protagonist is a chicago professor who does a fairly good job of defending his position, yet also recognises that they did get some things wrong.”
“Likewise we ran almost unchallenged a piece featuring Jim Rogers’ Austrian-ish critique of Obama/ Brown’s global stimuli. so I’d like to think we are more eclectic than you seem to indicate.”
“Anyway, you’ll be interested to see the rest of the Robert Lucas interview. I put it on the blog as a balance to the Paul Krugman NY Times magazine article. It’s all here, I’m sure it might stimulate some debate on your excellent blog.”
Here is Faisal’s link.
Good for Channel 4 for its reponse to what was a fairly grumpy posting by me. I guess I should have mentioned its Jim Rogers interview. I actually did link to it a while ago on this site. Jim Rogers is great value.
Anyway, I think my original point still stands, although in the light of the reaction, I will be a bit easier on Mr Islam from now on. It is gratifying that we got a response, and that Mr Islam even understood the significance of why we are writing about this topic and get annoyed if schools of economic thought are presented in a seemingly unfair way. If parts of the MSM pick up on the idea that the credit crisis cannot be blamed on “greedy bankers” and derivatives – although these instruments can be aggravating factors – but has origins in erroneous ideas of printing money, “too big to fail” bailouts and the rest, then we might be making progress. By continuing to slog away at it, we can influence ideas that are held in the media/academy and even public affairs more broadly. And influencing a guy who presents economic and business news for a major UK news channel is a pretty big deal.
US-based academic Stephen Hicks, whose excellent website I occasionally check in on, is taking part in a conference in Las Vegas on 11-13, April, next year. And he is raising the issue of what are the ethical issues stemming from the turmoil. As he rightly notes, a lot has been said and written about the economic, political, even legal sides of the drama. But the ethics? Not so much. If you want to mix a bit of food for the brain with a few sessions at the blackjack tables and the odd show, this might be a fun few days.
It is certainly like to be more intellectually and sensually stimulating than watching the latest offerings of Michael Moore or the Hugo Chavez fan, Oliver Stone. Update: talking of which, how interesting it is that Mr Stone should champion a regime that exercises media censorship.
A commentariat has pointed out a very interesting Reason article on Ben Bernanke.
In the words of Ron Paul:
Paul, a libertarian like Schwartz and Friedman, worries that the Federal Reserve is bringing the pair’s monetarist model into reality. In a phone interview, he noted, “In essence, Bernanke is following Friedman’s advice. He’s a Friedmanite when it comes to massively inflating. Bernanke was able to justify [his policies] by using Friedman.”
Asked if Friedman’s enthusiasm for inflation flouts libertarianism, Paul answered: “Absolutely. The monetarists said that you could overcome a natural market correction of a collapsing system by inflation—print money faster! Which contradicts Friedman’s whole thesis. He wanted a steady, managed increase in the supply of money of about 3 percent.” Here Paul is alluding to Money Mischief, Friedman’s 1991 book in which he called on the Federal Reserve to grow the money supply at 3 percent annually, presumably forever. “Yet, at the same time, Friedman said the Depression could’ve been prevented by massively inflating.”
Paul has kind words for Friedman, whom he praises as a staunch defender of economic liberty, but his final summation is damning: “Friedman’s very, very libertarian—except on monetary issues.”
I will be very interested to hear others impressions of this thesis.
The US Securities & Exchange Commission, which regulates US-based financial institutions, has been blasted by a report for failing to act to stop the massive Ponzi scheme fraud of Bernard Madoff, who has been jailed after admitting his crimes. The SEC, like Britain’s own Financial Services Authority, has not exactly covered itself with glory during the financial crisis.
A point worth making – since I doubt it will occur to much of the MSM to make it – is that this episode will hardly deflect policymakers from the idea of loading even heavier regulations on financial services. Our own Financial Services Authority, in the form of its chairman, Lord Adair Turner, recently reminded people of how bureacratic mindsets work by calling for a tax on financial services which he says have become “too big”. Politicians and commentators routinely describe the crisis as somehow proving that “unregulated capitalism” has failed. And yet the SEC failure over Madoff proves a very different point: you can have all the regulations in the world, but if you don’t enforce them, and financial watchdogs are run by people lacking a bit of common sense, then the regulations will be useless.
As I keep reminding people, the credit crisis and the subsequent fallout occured, primarily, right under the noses of the world’s most powerful regulators and central banks, and not some obscure Caribbean tax haven or Alpine principality. And yet the impression given is that we have lived through a sort of re-run of a Wild West movie. The truth is very different.
A few evenings ago I came across this graph. Some of you may also have seen it recently as it seems to be one of those things which is making the rounds:
The Fed and inflation.
TCSDaily
It shows inflation as we know it pretty much begins with the creation of the Fed. The buying power of a dollar slowly appreciated between the founding of the US and the start of the Fed; over the next century that value has plummeted. As we are wont to say here at Samizdata: “The State is not your friend.”
You can read more about it here.
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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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