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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The idea of the Enemy Class, to coin Sean Gabb’s term, gains credibility by the hour. A distinguished member of this class is Lord (but of course!) Adair Turner, now chairman of the Financial Services Authority, the regulator of UK financial affairs. The FSA was set up by the current Labour administration in 1997, and among its many achievements is to have largely failed to warn of the catastrophic expansion of credit – driven by central banks – which created an asset bubble in the UK. It failed to warn sufficiently about the high-risk lending policies of mortgage lender Northern Rock. Undaunted, the FSA churns out reams of consultations and reviews on how to make financial services more efficient and professional. It would require the patience of a saint to point out that the best way to promote competitive, high-quality financial services is for regulators and other agents of the State to get out of the bloody way and ensure that firms have to build a solid reputation and for consumers to exercise the virtue of caveat emptor.
But the latest foray of the FSA into the issues surrounding the credit crunch may be its lowest point yet. Lord Turner argues that the UK banking sector is too large, so large in fact, that it is harmful to society. He does not, in the widely cited Prospect magazine interview, elucidate what he means by “too large”, or whether it is possible for a civil servant, economist or other such person to figure out the optimum size of a specific sector. When Hayek talked of the “fatal conceit” of socialists imagining they can micro-manage the balance of human activities, this is the sort of hubristic thinking the great man was talking about.
I fear Lord Turner is also missing a crucial point, or just ignoring it. The point is that in a globalized economy such as we now have, financial centres such as London, Singapore, Zurich and New York are almost akin to nations in their own right; they dwarf the economies of their host nations because specialisation in finance has moved to a global arena. They rather resemble the old north European Hanseatic League of the Middle Ages. Take a different sector, such as telecoms. Finnish mobile phone firm Nokia is so large, as a percentage of Finnish GDP that a Finnish equivalent of Lord Turner would no doubt argue that the company should be punitively taxed, so that it shrinks and gives the reindeer industry in Lapland a greater share of GDP, or help those vodka retailers do so, or whatever. It is easy to laugh at such bizarre logic, but remember this: these guys have got where they are not by baldly stating their views in quite such terms, but by insinuating them through such question-begging terms as “excessively large”, or by referring to a sector of an economy as “swollen”.
Now it is true that as long as big banks can exert a sort of moral blackmail over taxpayers by stating that they are “too big to fail”, and as long as we benighted taxpayers are told we have to bail these guys out, then Lord Turner’s odd logic will gain a kind of ready audience. But he is looking at the problem the wrong way round: instead of making banking smaller and less profitable and simply driving it abroad, the better approach is to remove state-mandated deposit protection; to remove arbitrary and often counter-productive capital requirements and above all, to focus on the prime culprit in this business: the central bank as printer of funny money. But to do that will require the sort of analysis that does not give the FSA, or other bodies, the powers to tax and regulate. The FSA, like all regulators, is forever looking to increase its powers; it is hardly likely to consider the problem in such a way as to make itself redundant.
Perhaps we’ll soon be hearing that the casino sector is “excessive” in Las Vegas, gold mining is a “swollen” part of the South African economy, and there is too much reliance on fishing in Norway. And as for those Arabs, they spend far too much of their time drilling for oil. Cannot those chappies do something less fwightfully vulgar?
Lord Turner, by the way, is a former director general of the Confederation of British Industry, a lobby group for big business; he has had a consultancy role for Merrill Lynch and has wiritten a long and quasi-statist paper on UK pensions reform. He’s Enemy Class to the core. That he is, as I can attest, a thoroughly likeable guy does not alter that fact. It makes him actually quite dangerous.
Update: Tim Worstall points out how opposed to the notion of economic liberty this man actually is. When someone says that “an activity is socially useless”, what he or she really means is that “I don’t understand the use for it so it should be banned”.
The journalists who produce the UK’s Channel 4 news programme produced a rather sly piece of leftist propoganda last night (Quelle surprise? Ed). Faisal Islam – whom I have met – had a brief slot on last night’s daily broadcast suggesting that the Chicago school of economics, most famously associated with the likes of Milton Friedman, is somehow partly to blame for the credit crunch. Yes, you read that right.
Mr Islam went on about the “complex models” that were used by these economists and somehow sought to draw a link between the Chicago School, and the decisions taken by banks, both central and private. That seems a bit rum. I don’t recall Dr Friedman or his associates granting a sort of blanket blessing to financial engineering techniques of the kind associated with recent turmoil, suchas using derivatives to put bank liabilities off the balance sheet. That school has also hardly been in favour of encouraging sub-prime lending by legislation. After all, quite a lot of economists with conventional “soft Keyensian” views pretty much signed up to how banking has operated in the last few decades, and of course signed up to the idea that former Fed Chairman Alan Greenspan, and his successor, Ben Bernanke, did a spiffing job.
There was no apparent attempt – admittedly quite difficult in a short TV spot – to explain what the key arguments of the Chicago school of economics actually are. Nor was there any attempt to point out that this “school” is only one of the centres of free market economics. The Austrian viewpoint, which tends to eschew statistical formulae completely, went unmentioned. And yet it is the latter approach, as exemplified by the likes of Thomas Woods, that has been most active in pointing out the sheer folly of central bank activity in the past decade or so. And this central bank activity is what has been the prime culprit, a fact that Mr Islam’s documentary left unmentioned.
The programme also failed to ask any questions of the Keynesian tradition, with its love of big, artificial aggregates such as “consumer demand” etc. If one is going to point to the hubris of statistical models of economic behaviour, then the Keynesian macroeconomic tradition is surely as much in the firing line as the Chicago one.
As propoganda, it was very effective on anyone who might not understand the issues. It might have been put together by that performance artist, Naomi Klein.
Maybe the problem is that these issues are often highly complex and difficult to portray intelligently in a 5-minute news slot. Well indeed.
David Gordon, a US writer, has a good review of a book called, unambiguously, The Case for Big Government by Jeff Madrick.
I liked Gordon’s final paragraph, which is worth waiting for. Assuming his review is fairly based, it is amazing how lame, or downright thin, are the arguments for big government. It is a sort of backhanded compliment to the efforts of free marketeers that collectivists should still feel the need to write such works defending their views at all. Whenever we get grumpy and depressed about the way the world is going, it is good to remember that the other side cares enough about our views to want to try and deal with them, however shabbily.
Update: thanks to a reader for spotting my error in the name of the reviewer. My bad. Now fixed.
Jeffrey Rogers Hummel lays out a pretty solid case for saying that the US government will let down international borrowers, and fairly soon. This is not a new or original argument, but he does so with great aplomb. Definitely worth a read.
Arnold Kling has been debating – in a friendly way – with fellow US blogger Will Wilkinson on the relative power of exit, the ability to take oneself and one’s business away from place A to B, for example, with “voice”, such as voting. There is a good Wikipedia item on the forces of “voice” and “exit”. Arnold is definitely an “exit” man and is in favour of things like creating new nations and the power to secede and emigrate. I need to think a bit more about the exchange between Will and Arnold before commenting at great length, but my two cents on this issue amounts to observing how the right of an individual to take his or her money out of reach of a country’s tax net to a less oppressive place has come under a harsh spotlight because of the recent case of Swiss bank UBS.
As I keep saying, the current crackdown on certain so-called tax havens shows that some political leaders understand the power of “exit” only too well; they know that if folk can emigrate, take their money and affairs abroad, then that puts a monkey wrench into the wheels of Big Government. And so there is no wonder that such Transnational Progressive organisations as the OECD and the rest are kicking up a stink about the supposed evils of tax evasion, and putting huge pressure on such countries as Switzerland. It is, in my view, rather important that escape routes remain plentiful, and multiply.
Yes, that’s three posts from me in a day. My holiday break in France seems to have done the trick.
UBS has been closing the secret accounts of its American clients, forcing them into the cold, tax lawyers say. Many Americans with undeclared accounts have sought leniency by making voluntary disclosures to the IRS. Meanwhile, UBS has reported large outflows of deposits, which go beyond its American clientele.
Union Bank of Switzerland is haemorrhaging clients, not just American ones who have unwisely not stuffed their US passports in a shredder, but others too who no longer trust the bank with their privacy.
Frankly UBS was insane to do business in the USA in the first place, given the mafia-like behaviour of the American tax authorities, and the way I see it, this is just a very bad business decision being punished by clients voting with their feet money in favour of more discrete and less bombastic banks that cater to people with the quaint notion that their own money belongs to them and not the IRS… or any other rapacious state.
And any US nationals throwing themselves on the mercy of the thuggish IRS seriously need their heads examined. At the first sign of trouble, and this has been brewing a long time, they should have sold up and got the hell out of the USA for good. The weather in Costa Rica is really very nice, guys, trust me, and your money buys a whole lot more down here.
As I read a recent issue of New Scientist this morning, I very nearly skipped over an article titled “Falling Out of Love With Market Myths” with a photo on the fold of Ronald Reagan walking with Margaret Thatcher. The title and presentation leads one to expect the sort of thing one would expect from British academic types, and ditto, check… the article was written by an Oxford educated academic named Terence Kealey, now a Vice-Chancellor at the University of Buckingham.
I plowed on any way and was rewarded by a very surprising statement:
In fact, the evidence shows otherwise. In 2003, the Organisation for Economic Co-operation and Development published The Sources of Economic Growth in OECD Countries, reporting on a comprehensive regression analysis of the factors that might explain the different growth rates of the world’s 21 leading economies between 1971 and 1998. This indicated that only privately funded R&D led to economic growth, and that publicly funded R&D did not. Worse, the public funding of R&D crowded out private funding, and thus slowed economic growth.
Surprising, that is, in the sense of being a key element of an article in New Scientist by a member of academia. It is a very interesting article and well worth reading.
Brian Doherty has an article slamming the record and conduct of Federal Reserve chairman Ben Bernanke. It will not be news to the likes of us hard-money advocates, but still, well worth your time.
I like Doherty’s recent book on the American libertarian movement, by the way.
The next time Gordon Brown, or his counterparts mock free marketeer “Austrians” such as myself for our opposition to Keynesian monetary expansionism and huge state debt, perhaps they could explain why, after all the vast spending that there has been, we get figures such as this. Just asking.
For those unaware, Mr Kaletsky is an economics writer and supposed investment guru who fully supports the Keynesian view. I assume most readers have heard of Mr Krugman.
The decision by the UK government a few months ago to use anti-terrorism powers over the case of Icelandic banks in trouble has caused deep resentment in Iceland. As this article suggests, such a tactic is hardly a way for Britain – now in deep debt – to make friends with foreign investors. Of course, Mr Brown may have made the calculation that he will be out of power in a few months so why care? But even so, the use of such powers represented a new low for UK diplomatic relations. It also proves the age-old truth that if governments acquire new powers, they will use them in ways far beyond their original scope.
“Groupthink was a major factor in the buildup of risk in the financial system in the decade preceding the recent crisis. Top bank executives and regulators ignored dissenting voices from both ends of the political spectrum which were questioning the excesses that were building up in the system. What was once a comfortable consensus about the strength of our regulatory structure has now been replaced by an equally comfortable and equally flawed consensus about how to fix it.”
Arnold Kling, libertarian-leaning economist, giving a long report on the problems with how the US administration has sought to deal with the crisis, and why he thinks those moves will make future problems more, not less likely. My fear is that for now, such warnings will continue to go unheeded not just in the US administration of The Community Organiser, but in the UK and parts of Europe, as well.
Apparently it is news that the UK is still in recession, or as the headline says Economic recovery in UK ‘on hold’.
On hold? The government is debasing people’s saving as quickly as possible and stripping money out of productive sectors and pumping it into unproductive sectors, and generally trying their damnedest to drive businesses and wealth creators out for years now… and the fact this is tearing a huge hole is surprising to who exactly?
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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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