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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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.
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!”
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.
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.
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.
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:
“Liberty is based on a different presumption which has the virtue of making sense, which is that people should own property and do with it as they wish, because it is their property. And, honestly, if I save up and buy some land and plant a big garden on it for my retirement, I don’t care whether you think it would be better used for a glue factory because that would return you some externality that you can double charge for via your tax.”
“This is why liberty and georgism are incompatible; you keep making claims on behalf of the community. Screw this “community” of yours. It has no rights or claims on me beyond the right to freely interact with me. The LVT is a crude social engineering plan. It attempts to maximise productivity of land. Liberty is not about maximising any statistical value- it is simply the principle that the person may do with themself and what is theirs what they wish. So long as they produce enough by whatever means to survive, there are no other demands upon their economic activity.”
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:
“The selling-price of an asset on the market will be the capitalized value of its expected future rents: the capitalization to take place at the going rate of interest. The rate of interest is the price of “time,” and hence future earnings are discounted back to the present at this rate. A piece of land sells now at the discounted sum of its future rents. Similarly, any asset will sell at the capitalized value of its future earnings; and where these earnings accrue from hiring out, the rent selling-price relation will be the same. If Rembrandts are habitually rented out to museums, they will earn, say, per monthly rents; tuxedos will earn nightly rents, and so on. Admittedly, land differs from improvable capital because land is not replaceable, and therefore land earns ultimate rents.”
And then this:
“The Georgist has a curious conception of the market; he considers that the market is independent of the actions of an important part of its constituent individuals: the suppliers. On the contrary, there is no entity “market” which will take care of finding correct rents. If the shell of ownership is left and its contents confiscated by the State, there will be no incentive for owners (whether of land or Rembrandts) to allocate the assets to the highest bidders and most productive uses. There is no inconsistency when I point out that everyone will rush to grab the best locations if land were free; it would be the same if Rembrandts were suddenly declared free by the government (or if there were a 100 percent tax on their value).”
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.
Tim Worstall – back in harness after running for office as a UKIP MEP – writes about the Labour government’s stated desire to ensure that not a single tract of the UK is without broadband access. It is the sort of techie, practical measure that Mr Gordon Brown thinks will help win him a bit of respect in the traditional Tory and LibDem shires.
As Tim says, the logic of this idea is questionable. There are geographical, physical reasons why broadband access, or indeed other forms of communications, are not available everywhere, all the time. Also, as the comment thread attached to Tim’s piece reveals, there is this argument, that I have raised before – also prompted by one of Tim’s articles – about why people feel that because X or Y wants a road, canal, power cables, whatever, that therefore the state should be able to use compulsory purchase powers, and taxation, to pay for whatever it is that is wanted. I have referred to this mindset as “brute utilitarianism”. Also, it is a cost of living in the countryside that one does not always have the same degree of speedy access to certain things that one has living in a town or city. That’s life, so folk should deal with it. (One of the few arguments for land value taxes is that people living in such remote places would, other things being equal, pay less taxes also. However, there are other problems with LVT as the Austrian school of economics points out, attractive at first blush though the idea might be).
I pay more to live in my rabbit hutch apartment in Pimlico and for the same outlay I could live in a big place in the sticks. But for the benefit of living in SW1, I get quick access to airports (a short trip from Victoria to Gatwick); the Tube, buses, taxis, broadband access, etc. This is part of the cost “package”, if you like, that comes with my locational choice. A person who lives in a remote area and who demands Pimlico or New York-style communcations is demanding that the citizens of a city should subsidize that preference. And yet many of the people who migrate from the towns to the country are quite well off; as I have noted in my native Suffolk, as soon as the townies settle in, they start demanding all kinds of amenities, not realising, or caring, that such things don’t exist because they are relatively expensive to put in rural areas, which is precisely why Mr and Mrs Chartered Accountant can afford to live in their nice village cottages in the first place.
Sometimes such debates are as easy as this: if people want something, then damn well pay for it yourself, and do not use the robber powers of the state to grab it off someone else.
Rant over.
Er, not quite: my reference to LVT brought out a crop of Henry George “land-is-special!” types on the comment board. Several of us have responded to them, but I came across this nice essay by Jan Narveson, which I think is one of the best smackdowns for the land value tax mob that I have ever read. Excerpt:
Now, the point of this little essay is that that is basically all there is to it, and there doesn’t need to be anything else. The idea that we all have an equal right to the land is amazingly arbitrary, and contrary to all human experience while it’s at it. It’s arbitrary in that it has no basis. The fact that we don’t make the land is irrelevant, as already seen: we don’t make the natural part of anything we have or own, no matter whether we have “made” it or not. But the point is, it doesn’t matter. For things are just things: they do not come with labels saying that they “belong” to some people or that some people, somehow, have a “claim” on them, nor in turn that everybody has a claim on them, equal or otherwise.
The late Peter (Lord) Bauer, a Hungarian-born economist who lived for much of his life in the UK, did outstanding work in demonstrating why markets and trade are superior to overseas aid, and pointed out how aid, and the organisations that often get involved in delivering it, frequently make problems of poverty worse, not better. Even aid advocates like Sir Bob Geldof will readily concede, meanwhile, that aid delivery becomes next to impossible during conditions of war, and when countries are under the rule of armed thugs. So last night’s Channel 4 programme on Somalia will have surprised few regulars at this blog.
What was interesting was how local traders were allegedly bribing some aid officials to take sacks of food and then sell it into the market. We were meant to be appalled by this, and part of me was. But also I also could not ignore the fact that this part of Africa seems to be buzzing with a sort of entrepreneurial class of men – one did not see many women – who trade in, and take great efforts to obtain, food and other stuff. That surely suggests that a market, of sorts, works in this part of the world. But what clearly does not work is the rule of law, or the enforcement of property rights. Without due protection for the latter, in particular, then the indestructible desire to “truck and barter” can all too easily degrade into a form of banditry. But let’s be clear here: while one can be nauseated at foreign aid being filched by some of the locals, that desire to trade is not, in itself, the problem. It is, in fact, part of the solution to the poverty of Africa.
Meanwhile, I strongly recommend William Easterly’s book on foreign aid and the mistakes that well-intentioned folk make about aid.
Some right-wing Americans got very upset when Jon Stewart, the TV comedy/news guy, monstered the CNBC “Mad Money” front-man Jim Cramer a few months ago. They had a point; it is clear that at least in some of his shows, Stewart tacks left. But whether unwittingly or otherwise, he was very fair in an interview recently with Peter Schiff – who by the way is possibly running for political office. Mr Schiff is a hard-money capitalist, an attacker of the Fed, of the bailouts of Bush/Obama. I wrote about him a while back. And Schiff used the platform of this very popular show to beat the drum for free markets, sound money, and getting rid of the Fed.
Good for Jon Stewart, at least on this occasion, for giving Schiff a platform.
My good friend in the US, Russell E. Whitaker, has plugged this excellent lecture in a Facebook posting (thanks Russell!). The lecture is delivered by the investor and commentator, Peter Schiff. It runs for one hour and 16 minutes, so you will want to find an appropriate time to brew up some coffee or pour your favourite tipple, relax and enjoy. He is an entertaining speaker, who makes the issues intelligible without dumbing down. He also has ideas on how to protect your money during the fallout.
It should be seen in conjunction with this book, by Thomas E. Woods, that I have mentioned a few times before. As these men observe, it is nonsense for policymakers like Gordon Brown, Alan Greenspan, etc, to blame what has happened on reckless private individuals, “greedy” Wall Street bankers, and so on. What happened was clearly predictable once one understands how incentives to save, borrow, invest and spend have been skewed by ultra-cheap central bank credit, the moral-hazard drivers of state regulations, bailouts, and the rest.
I rather liked Mr Schiff’s idea that Bernard Madoff, the Ponzi fraudster, is ideally qualified to run the US Treasury Department, given his er, skills.
Update: After queries, I put another link on as there appear to have been some problems with it the first time around.
There is a Reuters story quoting a survey suggesting that the recession could trigger a general increase in violence around the world. As is always important in these kind of claims, we need to be sure that correlation between two things – violence and economic uncertainty – is not being conflated with causation. Consider: Saddam Hussein invaded Kuwait in the early 1990s when the world, in general, was quite prosperous, albeit coming out of a short recession in countries such as the US and UK, when the price of oil had also been falling. The violence that broke out in the MEast later in parts of Africa (think Sudan, think USS Cole) took place in the middle to late-1990s, a period when emerging market economies were generally on the rise. The exceptions may prove the rule: what I think is true is that places that are felt, rightly or wrongly, to be unfairly excluded from a global prosperity are often likely to be unstable, and quite violent, but not always.
In fact, it is even arguable that greater prosperity might even cause some forms of violence if reactionary/religious groups regard such wealth as a defilement of whatever it is they want to protect. (I happen to think that explains why some anti-globalisation folk are often, in essence, reactionary snobs). That in part explains the argument of those who said that the West was attacked on 9/11 not for its supposed transgressions in the Middle East, but for its wealth and freedom per se.
Where I think economics does play a more direct role is where you have regimes that are financially busted, with few remaining resources, and where they greedily, and desperately, eye other, resource-rich nations nearby. That explains some, but not all, military campaigns. As in the case of Japan during the 1930s, a hunger for raw materials, coupled with a militaristic ruling ideology and elite, led to the Japanese conquests in parts of East Asia and the Pacific Rim. The same happened with Argentina and its invasion of the Falklands Islands in 1982 (the islands are supposedly close to some very big oil reserves). Ceasar’s conquest of Gaul had a partly economic incentive (all that gold, slaves, etc). And so on.
There may also be some evidence that the more prosperous we are, the more tolerant we are, too. In fact tolerance, which is allied to liberty, and prosperity, are faces of the same coin. In the minds of the great Victorian champions of free trade, such as Richard Cobden and John Bright, free trade and peace went hand in hand. A bit naive, maybe – trade routes need to be protected against thieves and thugs – but it is a view based on an essentially benign view of how most of us live our lives, given half a chance.
Even in Britain, the headlines this morning are full of the imminent bankruptcy filing of GM. It is, as one report points out, the biggest bankruptcy in US industrial history, setting an unenviable record. Several things stand out as I looked through the details but one immediately grabbed my attention: the US taxpayer could be on the hook for up to $60 billion on account of state assistance. $60 billion. I guess we all get so punch-drunk with the vast sums involved in bank bailouts and the like that the significance of these sums becomes a little fuzzy (or maybe it was that white wine I had at the BBQ yesterday). $60 billion of money that is being spent to rescue part of a veteran auto firm will be money that will not be available to fund, say, a new set of business startups in the US. GM has highly recognisable brands and a lot of well organised workers. Pretty much everyone has heard of it, has heard of Detroit’s status as a car-making town. So, naturally, there is big media and political interest in what happens to GM. All those thousands of jobs on the line, etc. But the entrepreneurs, taxpayers and consumers who will see their wallets lifted, business plans stymied, or car purchases affected – who speaks for them? Taken as a whole, far more people will be affected by the cost of paying to sort out GM than the management and workers, but given the dynamics, it is usually far easier for politicians to portray themselves as “saving” a firm by spending or “investing” (sic) public money than it is to accept, however painfully, that a firm needs to be broken up and capital released for other, more productive things. (It needs to be remembered that GM’s problems pre-date the credit crunch).
The French classical liberal economist, Frederic Bastiat, wrote a famous essay, “What is seen and what is not seen”. He was attacking things like subsidies and tariffs. And not a word of his essay is out of date.
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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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