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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Andrew Sullivan, commenting on a remark about the enormous bailouts being put into place by Western governments, has this to say:
“The debt was so reckless and so immense that it now threatens to destroy the entire financial system. That’s what electing George W Bush twice has done for us. But then we are told that this threat requires us to do even more of the borrowing and spending before we can begin to get ourselves back in balance again. The unchallenged doctrine of the day is that: doing nothing would provoke a worse collapse than necessary and so we have to make our fiscal situation much worse now in order to make it much better later. Why am I not convinced?”
Well, Sullivan is obviously right that the way to solve our debt addiction is not to go on the equivalent of yet another binge in the hope of relieving the hangover. Although his glib remark that re-electing Bush twice has added to the debt addiction does rather ignore, for example, the role of the Democrats, for example, in opposing Bush’s attempts to constrain the US federal home mortgage agencies, Freddie Mac and Fannie Mae. He is right though to chide the Republicans for letting spendng soar, but then I fear that Sullivan has become such a victim of Bush Derangement Syndrome that even a good point now becomes distorted through his worship of Mr Obama. And if it is debt addiction Sullivan is worried about, I somehow do not expect the Community Organiser to be the one to decisively take us back to the days of small government.
I see the UK Chancellor, Alistair Darling, is making the point in the House of Commons that the financial crisis will not deflect the government from bringing about a low-carbon economy, despite the fact that such a change, by definition, will be costly. I am watching his statement in the House right now. He has also referred to the current economic climate as if it were an outbreak of a virus or a meteorite impact from outer space.
There is a risk that these people are sincere about all this. That, in fact, is the danger: not that such folk are liars and charlatans, but that they actually mean it.
The biographer of JM Keynes, Robert Skidelsky, writing in the Independent newspaper over the weekend, ponders what his economics hero might have done in the current environment. Not surprisingly, perhaps, Skidelsky argues that the economist would have advocated stimulating aggregate demand in some way, either through tax cuts, interest rate reductions or a combination of the two.
In the course of the article, he has a swipe at the “Austrian” school of free market economists who argued that Keynesian economics was – and is – quackery:
“However, his clinching argument in his 1930s debates with free market economists such as Friedrich Hayek was political. It was much too risky to allow economies to slide into deep depression. The example of Hitler was vivid in the minds of all democratic politicians. In 1928, at the height of Weimar Germany’s prosperity, the Nazis got 2 per cent of the vote. By 1930 they were up to 18 per cent. In 1933 Hitler was in power.”
The trouble with this argument is that when supposedly Keynesian stimulii were applied to economies in say, 1930s America, they did not work. Fact. As I pointed out here with reference to US official statistics, unemployment never fell much below the average levels for that decade until the outbreak of the Second World War. Paul Marks has also pointed out how FDR’s achievements were largely mythical, if not in fact the opposite. This woman has argued in a recent book that FDR’s policies made the situation worse. In the UK, the supposedly more fuddy-duddy governments of Baldwin and Chamberlain arguably presided over a less serious outcome by not adopting such “New Deal” policies. Meanwhile, in Japan during the 1990s and part of the ‘Noughties, a number of stimulus packages failed to revive the world’s second largest economy.
Now Mr Skidelsky presumably must be familiar with these statistics, and yet he argues that the reflationary policies of his hero, even though they have not been borne out by historical evidence, were somehow capitalism’s best defence against political fanaticism. He may be making the case that governments have to be seen to be “doing something”, even if it does not work much, to avoid the charge of callous neglect. But if policies don’t work, how is this supposed to calm political agitation? The German example is instructive: I would at the very least have thought that the destruction of the German middle class via the hyper-inflation of the 1920s was a major part of why Germany was so easily tipped over into extremism when economic problems hit home. And that reflation was caused by government, not the private sector. I also think that Skidelsky underestimates the extent to which people do, at a gut level, understand that the governments in power in the West bear some, if not all, responsibility for the present mess.
Meanwhile, I see the UK Labour government is going to take Britain down the wrong side of the Laffer curve by making tax hikes on “the rich” – including entrepreneurs and other wealth creators – a campaign pledge. And this despite evidence, which the government must surely realise, that higher marginal tax rates are destructive of revenues. Update: Fraser Nelson has a splendid, bullet-point take-down of Gordon Brown’s bare-faced lies on the economy and his supposed role in leading us to sunnier climes. It cannot be said too often what a complete shit the UK premier is.
There is a good article by Bloomberg columnist Mark Gilbert on why just transferring billions of taxpayers’ money to America’s embattled automakers is a bad idea, and he has thoughts who might be better equipped to run these firms.
As he says, long before the credit crisis hit, some, if not all of the carmakers were suffering from problems. There is a glut of cars on the world market and the spike in oil prices – admittedly now in reverse – has made a number of such vehicles uneconomic.
Talking of oil, the black stuff is now below $50 a barrel, down by about $100 from its peak. Wow.
Last night I was lucky enough to get invited to a smart awards ceremony in London marking achievements in the world of luxury goods and services. There were folk from various brands and companies such as Chanel, Aston Martin, and the like. Lots of nice expensive champagne, dishy women and impeccably dressed chaps. At the end of the event, an award was given to a certain Vivienne Westwood, one of Britain’s most famous fashion designers. She started her career back in the 1970s in the world of punk, associating with Malcolm McClaren, who went on to manage the Sex Pistols, before moving on to other fields. To describe Ms Westwood as a gloriously bohemian figure is an understatement: she wore this amazing red dress, had bright orange hair and her face was painted a sort of white to create the impression of an eccentric 18th Century party-goer in the court of Versailles.
I was struck by two things. On the one hand, Ms Westwood is a great entrepreneur. She has a fashion business empire that stretches around the world, employing loads of people, creating jobs and income, not to mention fashions, for thousands of people. My wife adores some of her stuff. She has been heaped with honours and is the toast of Milan, Paris, London and New York.
And yet as soon as she opened her mouth in the ceremony last night, we were treated to meandering monologue about how how “Britain has far less culture than France”; how cheap labour is the evil that causes wars, how mankind is threatened with extinction in a few year’s time; how the French were great because they had central planning back in the 17th Century to create a fashion industry, how she was soooooo glad that Obama was in the White House…..on and on it went, bringing together in one speech an amazingly concentrated collection of fatuity.
It keeps amazing me how people in business, even tremendously successful businesspeople, can hold views that would make any sixth-form pupil cringe with embarrassment. But part of me loves the free market precisely because even an eccentric like Ms Westwood, while decrying global capitalism, can make a mint out of it by selling people stuff that they want. Just don’t ever take her views on world affairs seriously.
Oh well, at least she is more fun to watch that Polly Toynbee and like I said, she has created a great business.
Guido Fawkes, in a break from his usual occupation of digging up scandals on our political class, instead focuses a bit more on the underlying policies of the UK government and the opposition. He rightly notes that sterling’s falls against the dollar undermine Gordon Brown’s attempt to frame the crisis as something that has hit Britain from afar, like the impact of a meteorite or SARS virus. Many of Britain’s problems are home-grown. Guido also reminds us of that little-noticed adjustment to the Bank of England’s inflation target back in the early ‘Noughties. Brown removed housing prices from the index of inflation that the BoE targets. Result: house prices no longer figured as a reason for setting interest rates. Brown, in a word, helped make the property price bubble worse than it might otherwise have been.
Now, I know some of us hardline defenders of free market banking will say that this is a quibble about how to run state monopoly money, and they have a strong point about that. But clearly, even the supposed wondrous Brownite creation of an independent central bank turned out to be an illusion. No wonder sterling is falling against the dollar and the euro. As I work for an export business, I guess I should be grateful.
Brown, in his current efforts to create a narrative as “Gordon the statesman who fixed the crisis” reminds me rather of the late Lord Louis Mountbatten, the UK Royal Family member and disastrous military commander and Indian Viceroy who managed, at least for many years, to create the idea of him being some kind of hero. Sooner or later, Brown is going to get, and deserve, the Andrew Roberts treatment. (Roberts helped to annihilate Mountbatten’s reputation).
A lot of people are noticing the parallels between what happened in Japan when and since their bubble burst, and what Britain, and if our Prime Minister gets his way the entire world, is now doing to itself. About a month ago, I did a podcast, with Antoine Clarke and Michael Jennings, in which Michael J in particular gave Japan a big mention, as an illustration of what not to do.
This headline, which I snapped yesterday, reminded me of that conversation:
A zero percent interest rate has been a feature of Japanese life in recent years, as has almost total economic stagnation. In an October 29th article in the Independent, Hamish McRae noted this parallel. I got back to that piece thanks an ASI email, which flagged up this blog posting by Tom Clougherty. Said Clougherty:
The result is that average Japanese living standards have barely risen for 20 years, while inequality has risen sharply. And this is despite them adopting the policies our government are now touting: low interest rates, increased government borrowing, and higher public spending to “prime the pump”. If it didn’t work for Japan, are we really to believe it will work for us?
Indeed. McRae actually went on to say that we are not in as bad a pickle as Japan. Which is some comfort, but not very much.
Matt Welch – author of a recent fine study of John McCain – has this to say about the recent cave-in by so-called conservatives to calls for a massive bailout of failed businesses and banks:
In June I read what I thought I’d never see again: a mainstream column, by a mainstream columnist (The Washington Post’s David Ignatius), arguing against the effects of airline deregulation, one of the most liberating government acts of the last four decades (see “40 Years of Free Minds and Free Markets,” page 28). When reregulation is suddenly on the table even for an industry where market forces have cut prices in half while doubling the customer base, it’s time to get back to first principles and fight like hell to secure victories we’d long thought won.
Indeed. Like a few other Samizdata contributors – such as carbon-footprint monster Michael Jennings – I am a big fan of the deregulated airline business. This business has been a huge boon in places like Europe. Thanks to the lower cost of flying around, I can see friends in Europe, see my family (and they, ahem, can visit me). The development of the cheap airline business model, notwithstanding some of its flaws, has done more to bring Europeans together than all the EU directives ever passed. Arguably, such directives have in fact been a hindrance, rather than a help, to such closeness.
On Matt’s broader point, he is right that we are going to have to make the case for free markets, dispersed property rights, entrepreneurship and trade all over again. It is extraordinary to think that barely over a year ago, Conservative Party leader David Cameron was attacking cheap flights. He has allowed a Big Government, environmentalist message to overshadow what must always be a staunch support of freedom and property rights. He reminded me of the comment attributed to the Duke of Wellington in the 1820s about the railway train: he disapproved of them as they would encourage the common people to move around.
Thankfully, such nonsense has disappeared But just you wait: as and when the good times reappear, the inhabitants of Notting Hill, the Upper East Side and central Paris will be arguing for shackling the unwashed masses to living and holidaying within a few miles of where they live. It is vital, therefore, that the defence of the market order, and resistance to bailing out politically well connected firms like GM or RBS, be given a strong, populist image. Defending deregulated airlines strikes me as a good sort of issue to use in this respect. Keep your stinking, socialist hands off my Ryanairs, my Easyjets and my Southwests! Unleash the spirit of Richard Cobden!
“Unlike those excitable countries where the peasants overrun the presidential palace, settled democratic societies rarely vote to “go left.” Yet oddly enough that’s where they’ve all gone. In its assumptions about the size of the state and the role of government, almost every advanced nation is more left than it was, and getting lefter.”
Mark Steyn. As he points out, the upcoming US government bailout of General Motors and god-knows-what-else should nail the idea that the US is the land of “unregulated capitalism”.
Update: PJ O’Rourke writes in similar vein.
Tim Worstall, whom I read daily, has a good post dealing with the idea that it is somehow wicked for banks to charge a higher interest rate for a mortgage than the official base rate as set by the Bank of England (or any other central bank, come to that). It is, as he says, a matter of pricing for risk. Lending money to a person with a relatively small deposit – or collateral – relative to the total value of a loan is risky. I am going to have to renegotiate my mortgage in the next few weeks, and because the pricing of risk has risen dramatically, I can expect to pay more even though my loan-to-value ratio is quite low and I have a decent amount of equity, while both my wife and I earn a reasonable amount of money. It is not a great situation to be in, but it could be worse. For many years I chose to rent and stash up enough money to put down a good deposit, as did my wife. That, by the way, is one reason why there is a basic injustice when relatively prudent folk get taxed to bail out the imprudent, such as a person on a 100 per cent mortgage.
To be honest, had the price of risk not been artificially reduced by recklessly loose monetary policy over the past few years, we would not be in this pickle in the first place, but that’s another story.
Politics trundles on and the more you pay attention to it the more depressed you are going to get, so what I like to do instead is look at gadgets. Gadgets aren’t everything. An affordable mobile phone is scant consolation if your ludicrously unaffordable house has just been repossessed. Flat screen televisions are only as good as the stuff that’s on them. Cool cars only provide escape from the cares of city life in car commercials, not in cities.
Nevertheless, gadgets are still being done well, and every now and again I like to pick out a new one and praise it on Samizdata, both for its own beautiful sake, and because doing this makes the point that life would be so much better if everything (not just gadgets) was done like that, by grasping capitalists in competition with one another instead of by tyrannically pompous bunglers who are clever only at winning elections or at sucking up to such people. The last such gadget that I got excited about here was the Asus Eee-PC, which I now happily possess, and am gradually finding more uses for. And now, I offer you the Panasonic Lumix DMC-G1, which is a digital camera, which looks like this:
 It doesn’t look anything very special, or very different, does it? And for many people it won’t be. For all those Real Photographers squinting into their optical viewfinders to get the perfect shot with their brick-like Canon or Nikon DSLRs, the G1 would be a severe come-down, because the G1 doesn’t have an optical viewfinder. But for that vast tribe of cheaper and more cheerful digital snappers who prefer cameras that don’t weigh so much, the fact that the G1 has no optical viewfinder is exactly the point. We Billion Monkeys, as I like to call us, look at all those Real Photographers with their clunky black contraptions and we say to ourselves, yes, I’d love my pictures to be as good as theirs are, and it would certainly be nice to be able to use lots of different lenses the way they do, but really, does a camera have to be that big to be that good?
The thing is – from where we Billion Monkeys stand, sit or crouch – DSLRs look like a relic of the analog age, like those weird early steam ships that also had sails on them. DSLR stands for Digital Single Lens Reflex, and this refers to the fact – commenters will doubtless correct me to the degree to which I am, I am sure, somewhat-to-completely wrong – that in order for the optical viewfinder to be an accurate foretaste of the picture being attempted, the light that enters a DSLR has to be divided up and sent off to two different places, one of them being the optical viewfinder and the other being the magical electronic surface that turns the light into a digital picture. This process involves … well, it involves a lot of space and a lot of complication.
So, the G1 does away with the the optical viewfinder. You can still squint through an eyepiece if you really want to, but what you see is a digital picture, not a merely optical one. More conveniently, you can see the digital picture beforehand on a small screen, which, as with the best little digital cameras, twiddles, and hence lets you take pictures that you can still see even when you are holding the camera way above your head or way down in front of your private parts. Most DSLRs still only show you the picture on their screens afterwards, but the latest ones also have these see-the-picture-beforehand screens, but this combining of optical and digital previewing all adds to the size and the expense. What the G1 does is put all its pre-viewing and post-viewing eggs in the one digital basket.
→ Continue reading: The Panasonic Lumix DMC-G1 is a glimpse of a different and better world
I must say that one of the few gratifying aspects of the current financial turmoil has been the way in which one of the UK’s biggest banks, Barclays, has decided to spurn any offers of help from the UK government – ie, the UK taxpayer – and raise funds from mostly private investors. In its recent raising of about $12 billion of funds to improve its capital position, Barclays made it clear that it wanted to stick with funding via the commercial market because, if it had drawn on the UK state moneys that have been provided for the likes of Lloyds TSB and Royal Bank of Scotland, it would lose its freedom to set pay, among other things.
Now, free market purists may object that the Middle Eastern funds that have pumped cash into Barclays are not entirely private sector organisation and of course they have a point. But the fact is that as a taxpayer, I haven’t been asked to write a checque to Barclays, in contrast to other UK banks. Barclays has also kept its affairs away from the hands of such characters as Alistair Darling, the UK finance minister. Those banks which have taken state aid face the risk that the confidentiality of their clients, especially in the wealth management area, could be compromised. Of course, even before 9/11, banks have been required to compromise on secrecy due to things like money laundering laws and the like. But there is no doubt that once a bank becomes an arm of the state, such erosions of client confidentiality that have already occurred will increase.
And the reaction of certain parts of the media has been interesting. On Friday evening, the BBC economics correspondent, Robert Peston, told us in that extraordinary voice of his how Barclays shareholders would be penalised by having to pay a higher amount to obtain funding than if they had, like good little corporatists, gone along to the UK Treasury. Peston, as a corporatist himself and creature of New Labour, cannot fathom why a bank wants to stay out of the public sector. Barclays’ executive bonuses may be “obscene” as far as Peston is concerned, but at least Barclays avoided some of the worst excesses of the credit boom. It is, as a result, relatively strong as a bank. Barclays must be thankful that it lost a merger battle to buy ABN Amro last year. If its refusal to eat from the state table annoys BBC journalists – who of course are paid out of a tax – then the bank must have done something very right. One cannot exactly say that of a lot of banks these days.
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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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