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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. July 24th, 2009 | 43 comments - (Comments are closed)
 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. July 23rd, 2009 | 17 comments - (Comments are closed)
“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 What was once a comfortable consensus about the strength of our regulatory structure has now been replaced by an equally comfortable and equally flawed consensus about how to fix it.”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. July 22nd, 2009 | 13 comments - (Comments are closed)
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? July 19th, 2009 | 4 comments - (Comments are closed)
Which is why you can’t trust nature. Anatole Kaletsky is worried about stagflation. Can this be the same Anatole Kaletsky who only six month ago called for government to “punish savers”? As I wrote at that time,
Mr Kaletsky has got what he asked for and now finds he does not want it. Human, all too human. July 17th, 2009 | 16 comments - (Comments are closed)
I had to read the headline twice. Then I read the article twice. I still don’t get it. What I first thought it said was,
Weird, obscure line, but no weirder than a lot of things that come out of the international development department, and potentially a lot more sensible. I suppose it might make sense for the big southern African companies, especially, to combine their employee health programmes. But if it were more effective, wouldn’t they already be doing it? Wouldn’t the South African government, in any case (now they have got rid of that barking health minister), be the one doing the urging? What it actually said was,
Now that makes a lot less sense. It is quite up to the standard we have come to expect from DFID, a real candidate for economic illiteracy of the day.
What can this possibly mean? There’s no real explanation here of how a ‘patent pool’ might work. It sounds like pharmaceuticals companies are being offered to the opportunity to swap an unstable legal monopoly for an internationally approved cartel, and to pose as humanitarians while doing so. Would that really lower the cost of HIV medication, and improve its effectiveness in general? It is far from obvious why that should be the case. Would medicines that are both cheaper and more effective be permitted to flow back to Western countries? I doubt it. Which points up the weirdness of the whole exercise. In order to be economic in Western countries, HIV medicines have to be very expensive to buy there. That is not just because they are expensive to develop, but because the absolute numbers of people who need them are small. In the West, just as in poorer parts of the world almost no individual can afford to pay for their own treatment. So there’s a different sort of cartel effect maintaining the oligopolistic market. Government protects the patentees; and government subsidies end up paying for the consequences. You don’t have to be a believer in the efficacy of beetroot and garlic as anti-virals to notice that the difference between the scale of the epidemic in parts of Africa and the richest parts of the world is not a consequence of the availabilty of drugs – or at least not the availabilty of anti-retrovirals. We have fewer people getting the disease in the first place. But we have fewer people with all sorts of infectious diseases. Malaria and dengue are not more treatable than they were when they were endemic in Europe, and the US, less than a century ago. The difference is better living conditions that everyone will work for if they have the chance. Patent pooling, it seems to me, is no better than patent farming, in that it seeks to exploit artifical restrictions on innovation that just happen to be there for the benefit of a restricted interest group. It is an exercise in dinosaur husbandry, with little real relevance to improving the lives of us mammals. A reconfiguration of corporarate welfare, with its concentration on subsidising treatment of a particular disease, and bureaucrats swapping targets with bureaucrats, is a distraction from the less collectively ‘manageable’ task of avoiding the spread of infection, which is the invisible part of the virtuous circle of the people who are not sick getting better general health and more comfortable lives. That isn’t going to come from government drug programmes. I suspect it might come from “people living in poverty” having a bit more access to the non-patent and never-patent – but still restricted – technologies of choosing their own priorities and exploiting their own comparative advantages. July 13th, 2009 | 6 comments - (Comments are closed)
There have been a few clashes between Switzerland and the US, and to a certain extent, Britain, in recent months over the fact that centuries-old Swiss bank secrecy laws prevent Swiss-based banks from divulging information about their clients to foreign governments that suspect people to be evading taxes. Evasion is not a crime in Swiss law, contrasting with the Anglo-Saxon legal distinction between avoidance (which is broadly ok), and evasion (which isn’t). UBS, the Zurich-listed banking and wealth management giant, is currently embroiled in a case in the US in which the Department of Justice is demanding that the Swiss bank reveals details on up to 52,000 US clients. UBS is, so far, telling the American authorities to sod off. But the affair has cost UBS: the bank has stopped offering offshore banking to US clients and other non-US banks may also follow suit, or start to do so. Meanwhile, countries such as Germany and the UK have been leaning on Switzerland to crack its secrecy laws, but that is not easy. To do so means that the Swiss electorate would have to approve primary domestic legislation and given that Swiss banks account for about 13 per cent of the country’s GDP, I can hardly see the Swiss voters, unless they are very stupid, throwing away one of their economic ace cards. And I have defended tax havens several times before, for those who want to see why I take my position in the way I do. In summary: I consider what some countries are doing to be nothing less than an attempt to create a global tax cartel, with jurisdictions such as Switzerland, Singapore or Monaco in the position of non-cartelised competitors. But as we have seen in the case of OPEC in the 1990s, when the oil price was low, cartels crumble eventually. I cannot see countries such as India, China, Russia or Brazil shunning the opportunity to provide low-tax attractions to investors who become fed up at the larceny of their home governments. Even though some taxes – such as sales taxes and land taxes – are quite hard to dodge, I think it is a mark of an open, free world that people can migrate to jurisdictions where the taxes are to their liking, rather than have all their options cut off at source, which the cartelisers would do. Unfortunately, the drive against tax havens is too good an opportunity for the current transnational progressive class to miss. Of course, the US has a tax haven called Delaware, and the UK has its numerous offshore dependencies, such as the Isle of Man, Jersey, British Virgin Islands and the Caymans. There is an element of cant to the stance taken by the likes of say, Barack Obama on this. So, drawing all this together from a symbolic point of view, I hope Roger Federer, the debonair Swiss tennis genius, overcomes the boom-boom serving machine, Andy Roddick. No offence Andy – who seems a nice guy – but I want the dude from the mountains to win. July 5th, 2009 | 8 comments - (Comments are closed)
One of the same, government dependent, “private” credit rating agencies who rated mortgage backed securities as “Triple A” (because Barney Frank and Chris Dodd, and the rest, were determined that reason would not stop the “affordable housing policy” and the lenders had to dump the crazy mortgages somehow – and, besides, Alan Greenspan Federal Reserve was backing up the building of a pyramid of debt upon them in spite of complaining about it from time to time) is now saying that there is no threat to the “Triple A” rating of United States government debt. No doubt questions as to the soundness of this judgement about United States government debt will be met with the same response as such questions as “are you sure these people will pay back their mortgages” were. Namely a look of contempt saying “you are so simplistic, you do not understand the first elements of these complex matters – it does not even matter who the mortgages are to, the financial instruments that important people deal in are only distantly related to such basic things”. However, please note the get out clause: As long as the United States government takes action to reduce the national debt. Both short term, “stimulus”, action and long term, health care “reform”, action is all about increasing the national debt. So when the house of cards finally collapses the credit rating agency will be able to say “What are you complaining about? We warned you!” July 4th, 2009 | 6 comments - (Comments are closed)
Thanks to our vigilant commentariat, I read this excellent, pithy demolition of central banking by Jamie Whyte, the banker and writer on philosophy and other subjects. Good on the Times (of London) for running it. It’s a healthy antidote to the flawed semi-Keynesian nonsense of Mr Kaletsky. July 3rd, 2009 | 6 comments - (Comments are closed)
If [UK Government] spending since 1997 had risen no faster than inflation, we would be spending a third less than we do now, and could abolish income tax, VAT, and council tax entirely. – Eamonn Butler, writing in the Daily Telegraph on what I am relieved to discover the Adam Smith Institute has renamed Cost of Government Day. June 25th, 2009 | 11 comments - (Comments are closed)
I do not intend to buy the book, but Sean Gabb’s review of Kevin Carson’s recent work is well worth reading. Carson is a sort of radical anarchist-libertarian who has interesting things to say. He is worth paying attention to; and Sean gives what looks like a very fair appraisal. And reading Sean’s review got me thinking about one supposedly arcane issue: bankruptcy law. I thought about this because Mr Gabb, whom I would consider to be a libertarian in the Rothbardian tradition – with a Burkean twist – and Mr Carson are opponents of limited liability laws. I am not so opposed, but I can certainly concede the force of the point, and I think a similar point applies to the bankruptcy codes of some western countries. I have come across several instances recently of the “pre-pack”, in which a business goes into liquidation, the firm’s assets are sold off to supposedly the highest bidder, and the firm is re-started, Phoenix-like, under the same management, often in exactly the same business and line of work. I know of at least one business rival of my firm who has done just that and has, as a result, been more or less given, for free, hundreds of thousands of pounds in credit, while his creditors get the shaft. In a pure free market order, a rather more drastic outcome might be felt by this debtor, not least, the blackening of his or her business reputation. Indeed, if I recall from history, debtors used to go to jail. Now, there may be good reasons for bankruptcy protection laws: they ensure that the chances of creditors getting their money back are enhanced by continuing a business as a “going concern”. But a balance needs to be struck, since if the law is too lax, it surely means that many borrowers get away scot-free with heavy debts and as a result, the average cost of credit goes up for the rest of us, good and bad risks alike. The law of unintended consequences strikes again. Anyway, I am sure Carson’s book, which covers a wide field, will get plenty of attention. June 24th, 2009 | 38 comments - (Comments are closed)
This might have made the grade as a Samizdata quote of the day, but we already have a superb one today. However, I wanted to post this by the regular commentator, IanB, as it was too good to leave at the bottom of a very long thread about the flawed idea that land, qua land, is special, and must be singled out for tax because of its supposed uniqueness, as distinct from say, income or consumption:
Exactly. Suffice to say, I doubt the LVT enthusiasts will give up (they are persistent, a bit like cockroaches that can apparently survive a nuclear blast). Question: why does this issue come up a lot on this site? Are we masochists? Well, libertarians obviously are against taxation, period, but there are grounds for debate on the least-worst form of tax; for what it is worth, some form of consumption tax is probably best in my view, not least because they tend to be fairly easy to collect, although there are still issues here. But in debating the pros and cons, let’s not lose sight of the fact that it is tax, per se, that we want to grind down as far as possible (that leaves open debate between anarcho-capitalists and minarchists on how to fund “core” functions of law and defence). There is no such thing as a perfect tax, and use of tax to re-arrange some alleged fault in the economic order of things by punishing some presumed “unearned” surplus is not just morally wrong, it is almost always doomed to failure. So however tedious some readers might find the LVT debate, I make no apologies for giving it the occasional good kicking on this site, along with other taxes. The debate has certainly encouraged me to read a bit more about Henry George, the thinker associated most often wiith the land tax idea. He was an interesting thinker in many ways. He was a good guy in many respects: a passionate defender of free trade, for example. And he hated other taxes besides LVT. He’d be far too free market for most of our current politicians. Here’s a nice entry on him, which has some good but I think very fair criticisms. Update: as part of our slugfest with these Georgists – they embrace a range of ideological stances, BTW – I thought to add some further points, having read a bit about their views. I don’t know why Georgists should, for some reason, not give more weight to foolish central bank policy in causing asset price bubbles, or assume that property bubbles are bad, but other bubbles – like say, the dotcom one of the 1990s, are less so. One Georgist likes to raise the example of Hong Kong, which has a LVT. But that example won’t fly as there have been big gyrations in the price of accomodation, which hardly suggests LVT did much to alleviate the situation, or by much. In fact I would say that proves pretty conclusively that LVT, on its own, cannot fix this sort of problem if monetary policy is deranged by Keynesian demand-management or other economic quackery. There is another, even more fundamental problem with the Georgist position about land. The problem is that it does not distinguish between the fact that while land is, by definition, fixed, available land is not. This is why the likes of John Bates Clark, an economist of the late 19th Century, demolished the land value tax movement’s arguments as did Murray Rothbard half a century later. Both men pointed out that the LVT argument ignores the fact that the price of land is driven by its marginal productivity, and in that sense is no different from labour or physical or human capital. To single out land for special tax treatment will lead to a misallocation of resources, encouraging more building density than is rational, etc. The total amount of land is fixed – obviously – but the total amount of sellable land is determined by the amount of marginal buyers and sellers, a very different thing. If demand is heavy enough, new land comes onstream. Just ask the Dutch. Update: one commentator on the other long thread – it is so far down that I’d rather address it here – claims that Rothbard’s critique has been “thoroughly demolished”. Has it hell. Perhaps someone could explain to me why his point is mistaken. Consider this paragraph by the fellow:
And then this:
Here is also a very detailed, and to my mind, devastating take on Georgism in its various forms, by the writer Paul Birch. It is pretty technical, but worth studying. He concludes that the “libertarian” Georgists are the least-bad, but also notes, as many Samizdata commenters have done, that Georgists tend to flick around between a sort of hatred of landlordism per se on the one hand, and a more pragmatic concern with efficiency, on the other. One commenter has referred to landowners as “parasites”. That should tell us something about where these guys are coming from. In boxing terms, the referee would have to stop the fight at this point to save Mr George’s hide. And I am done here. June 23rd, 2009 | 107 comments - (Comments are closed)
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