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In the current crisis, there is a lot of wisdom in the idea that the best thing for politicians and their appointed central bankers right now is to do absolutely nothing. Nada, zip, the square root of zero. To do nothing would be the gutsiest option of all. Of course, Mr “Hope and Change” Obama is unlikely to show that sort of courage, nor will Gordon Brown or, heaven help us, David Cameron.
I actually have a theory, that the amount of time that a politician talks about courage, audacity, vision, etc, is inversely related to the actual possession of those qualities. Not even Mrs Thatcher went on about her courage all the time: the most we ever got was the “resolute approach”. And she delivered by taking genuinely brave stands on issues in the teeth of furious opposition from the chattering classes and the media establishments of the time. And in terms of telling folk what they did not want to hear and sticking to a tough policy, politicians such as former UK finance minister Geoffrey Howe in the early 1980s, wiped the floor with today’s lot.
Here is a collection of good articles attacking the massive US stimulus plan. Fair play to Andrew Sullivan for linking to them. There’s hope for him yet.
Clueless. The Independent has what it thinks is good news for employees:
The minimum amount of money that employers must pay staff they make redundant is set to be increased by the Government, The Independent has learnt. In another attempt to ease the pain of those worst affected by the recession, ministers have launched a review of the minimum payments to which people are entitled by law when they lose their job. With around 1,500 posts being axed each week, unemployment will soon pass the two million mark and could eventually rise to more than three million.
So, what is the predicatble effect of making redundancies more costly to employers? You at the back, there! A firm wants to stay in business. It needs to keep cash in hand in order to do so. Looking ahead it sees uncertainty as to whether it can afford the wage bill, and it has to balance the cost of keeping people on and maintaining capacity, with the cost of losing them, and its ability to continue in business after they have left.
Yes, Purnell minor, if the cash lost by making people redundant increases, they will be made redundant sooner, and firms will be more averse to taking the risk of hiring.
As a crude estimate, we might expect the cash constraint to require someone to be sacked sooner by the amount of time in which the cost of employing them would accrue to equal the increase in statutory redundancy they would be owed. (Which is the sort of ‘linear programming’ people could do before spreadsheets and Monte Carlo methods: the wisdom of the 1970s for a government that has worked so hard to return us to them.)
Those firms that do not make such precautionary sacrifices increase their risk of total failure, and none of their workers getting redundancy pay. So higher redundancy pay means more redundancies and more business failures, in an uncertain proportion.
What’s worse, it is likely that such a change in the rules that is signalled in advance will mean large, well-informed and unsentimental corporations (which are typically more risk averse, and more capital intensive, anyway) reducing their headcounts to get under the wire. Even “a review” undertaken to give an impression of doing something, and as a sop to the trades unions, is likely to influence hiring and firing policies. And not in a good way.
Nicolas Chatfort calls foul on the absurd sense of moral superiority trumpeted by Paul Krugman when the man’s own pronouncements are riddled with falsehoods
In a recent New York Times column, Paul Krugman wrote about what he called the bad faith of the opponents of President Obama’s economic stimulus plan. Krugman is apparently labouring under the view that his side has a monopoly of virtue in the current debate and that the Obama plan can not possibly be attacked on the merits. It must be comforting to be allied with people of such beneficence and infallibility.
Perhaps Krugman, however, should examine the good faith of his own claims before casting aspersions against his opponents. At first glance his counter arguments appear cogent, but a closer look reveals that Krugman is a master of illusion, employing many tricks that would do any sideshow magician proud.
First, Krugman assails the criticism that the Obama plan will cost $275,000 per job created as being a bogus talking point. His reasoning is that this figure involves taking the multi-year cost of the program and divides it by the number of jobs created in just one year. Krugman claims that the true cost per job is closer to $100,000 – or even a net cost of only $60,000 if you take into account the higher taxes that would be generated from a stronger economy.
Let us examine this counter argument carefully as Krugman is employing some slight of hand here. He is pulling a switch by re-framing the costs from a total program basis to an annual basis. The critics of the plan never claimed that the $275,000 per job was an annual cost. By the way, the $275,000 per job estimate is generous as it cedes the point that the plan will create the 3 million new jobs claimed for it by President Obama. Not all economists believe that anywhere near this number of new jobs will be created under this plan. → Continue reading: On true ‘Bad Faith Economists’
Roger Thornhill, an occasional commenter here who also has his own blog, asks what is all the fuss about a foreign firm in the UK hiring foreign workers? He points out that if a UK firm operating in say, Germany, were to bring over some of its own staff, it might cause outrage among the locals, but then UK unions would protest at their members being banned from working abroad.
The truth is that when Gordon Brown made his comment, “British jobs for British workers”, he stoked the flames of a protectionist labour force doctrine that is now threatening to get out of hand. The disgrace of it is that even when the UK economy was growing relatively strongly, millions of able-bodied UK adults were not working and living off benefits. The tax, benefit and education system conspire to keep large numbers of the indigenous population out of the workforce. So naturally, firms turn to other sources of labour if they feel they can get a better deal.
In these tough times I feel sympathy for skilled workers who have felt themselves to be frozen out by a foreign employer doing business in the UK, but the brutal fact has to be faced that as far as many employers are concerned, some of the locals are just not as employable as foreigners. It is a terrible indictment of what has happened to the UK labour market under this administration. Untangling the mess is, or should be, a priority lest the situation fans the flames of protectionism, with disastrous consequences.
Update: The always cool-headed Chris Dillow puts up a feast of links explaining the impact of such foreign labour on local markets.
This is excellent. Brew up a coffee, give yourself a break, and read the whole thing.
Via Will Wilkinson’s blog, a term I think is ideal for the crazed Keynesian policies now being applied: disaster dirigisme.
Dave Cameron, the head of the non-conservative Tory Party, has addressed the great and ‘good’ at Davos, and as usual he says things that actually mean the opposite of the words looked at in isolation:
He will say: “We must stand up for business because it’s businesses, not governments or politicians, that create jobs, wealth and opportunity, it’s businesses that drive innovation, and choice, and help families achieve a higher standard of living for a lower cost. But we must also stand up to business when the things that people value are at risk. So it’s time to place the market within a moral framework – even if that means standing up to companies who make life harder for parents and families.
Translation: moral framework in fact means political control… whoever best has the ability to manipulate the political system can simply distort the market so suit their narrow needs. So when Dave Cameron says ‘moral capitalism’, he actually means ‘regulatory statism’ and ‘political manipulation’… in other words he does not actually want to change a damn thing.
And political manipulation is exactly how we ended up where we are now with banks and car companies being handed vast quantities of other people’s money: Neither moral nor capitalism, which sums up Dave Cameron’s ‘philosophy’ perfectly.
Vladimir Putin slapped down Michael Dell at the World Economic Forum in Davos and hopefully some wisdom will come from this.
Then it was time for questions. First up: Dell. He praised Russia’s technical and scientific prowess, and then asked: “How can we help” you to expand IT in Russia.
Big mistake. Russia has been allergic to offers of aid from the West ever since hundreds of overpaid consultants arrived in Moscow after the collapse of Communism, in 1991, and proceeded to hand out an array of advice that proved, at times, useless or dangerous.
Putin’s withering reply to Dell: “We don’t need help. We are not invalids. We don’t have limited mental capacity.”
Which demonstrates several things:
1. when a multinational company in effect offers to invest more in Russia (i.e “here are some assets, please confiscate them at your leisure like you did with those idiot western oil companies”), the kleptocrat-in-chief would rather pretend that his country is “not an invalid” in spite of copious evidence that Russia is an economic basket case. So yes, Vladimir Putin does indeed appear to have limited mental capacity even in his role as kleptocrat.
2. investors in Dell need to make sure that Michael Dell never ever has any say whatsoever is which places Dell invests the company’s money. Russia? Michael, are you out of your fucking mind?
A friend of mine suggested the theory that Putin was angry that Dell purchased Alienware. 
Mike Oliver has spent a great deal of time on the coalface of capitalism and has some interesting things to say about the current economic crisis.
In years gone by I was a radical libertarian/objectivist fomenter in the U.S. In fact in the mid-1970’s when the late Chris Tame of the Libertarian Alliance spent a month or few crossing this once great land, he spent a few nights under my roof. He was a great guy and I miss him.
In any case in the years since my crusading lapsed (I used to be editor of The New Banner, perhaps the first widely read national objectivist/anarcho-capitalist periodical in the U.S.) I since went to ground. I became a futures market specialist and then a market analyst (for hire to major asset management entities such as multi-billion dollar mutual funds). I did my work and looked at the world from a market perspective.
In the summer of 2007 as a small hedge fund manager/analyst-for-hire I realized that the interventions of the U.S Fed under Bernanke were engineered to hold up/support the S&P500. I realized that if that persisted that the downside move that I had expected in the market ‘correction’ would turn into something other than a mere correction… as indeed it did.
The lovers of statism (and of we the people) decided to pull out all the plugs and defend the market at each and every low – to try to fake reality. Instead they super-charged the downside. What would have been a normal correction in the market ballooned into a disaster. Why?
Benanke allowed in summer of 2007 for an asset class never previously allowed to be used as collateral in fed borrowings by financial institutions, and even expanded what institutions could come to the Fed. In effect the Fed was “pricing” this debt (sub prime mortgages, etc.) at a level such that it would not have to hit the market and be priced openly and fairly.. The Fed was apparently afraid of the real consequences of seeing it priced openly. So they in effect took it off the market and froze it at the Fed window as “acceptable collateral” but as an unpriced asset. Hence from that point forward these sorts of assets on bank books were not “priced” in an open and market manner. Hence those who wanted to invest in the bank were uncertain as to the value of these assets. Hence uncertainty arose as to any and all bank valuations.
Uncertainty breeds doubt and fear and finally the collapse we saw in October and November. The lack of clarity of valuation – created by the Fed’s motherly and smothering love of “the people” in effect created the doubt and uncertainty that cascaded into the spiral we later saw in October of 2008. Oh sure, the chain of statist actions that helped to build and blow-up these malevolent factors date from before Bernanke, but he was pivotal at his unique moment in time.
Well, for the record my small hedge fund was up nearly 10% in 2008 while the lovers of “trend following” and statism sank some 30-40%. Good riddance.
Then came the onslaught of statist bandages and programs etc. And therefore here comes the final wave of statism – fully open to “caring” for us all in the wake of the failure of “capitalism.” And all the while many in the press and public accept the notion that the “market” failed and government has and will be our saviour. But reality ultimately will betray the fakery. There are already too many in the financial markets and in the financial press who realize the sequence of events, and who will not be fooled. The Charade has reached its zenith. The seemingly perpetual ascendancy of the State is in fact a paper tiger. Yes, the State will appear to rise as The Saviour, but its salvation and credibility will not weather the storm that it has itself created.
“The folly and immorality of the “stimulus” plan passed today can be attacked on many fronts. For one thing there’s the awe-inspiring irony of a Democrat-dominated Congress and a Democrat president spending taking nearly a trillion dollars from the hardworking middle class people of this country and giving it to corporations and businesses—and precisely as a result of the apparent improprieties in which those same businesses were engaged! Honest liberals who resent corporate welfare must really have a headache at this point.”
– Timothy Sandefur.
A good friend of mine, the Norwegian journalist Kristine Lowe, reflects on a recent trip to Iceland, which has seen its government collapse amid the credit crunch. Iceland has, of course, benefited from sensible low-tax policies as well as being buoyed by what now appears to be some foolish banking lending policies.
I am not sure I would want to live there, mind. The long nights and expensive beer would drive me nuts.
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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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