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With all the troubling economic news that has come out of late, such as the UK Northern Rock fiasco, or the US housing and mortgage crunch, there has been a fair bit of headscratching on how bad it could all get. Amity Shlaes has an item looking at the mistakes made in the 1920s and 1930s around the time of the Wall Street Crash and the subsequent depression. In a nutshell, she says that errors on monetary policy, a disastrous ratcheting up of protectionism and intervenionist economics turned a bad but temporary situation into a catastrophe. This book also comes to the same conclusion and points out how much of Roosevelt’s New Deal failed, even on its own terms, to work, since unemployment actually was worse by the outbreak of WW2 than when FDR was elected.
Meanwhile, to keep us in a jolly mood, the Daily Telegraph highlights some recent economic data from those old-style monetarists at Lombard Street Research, pointing out that there has been a dramatic contraction in the “broad money” measure of the US money supply, known as M3. The Fed stopped publishing data on this in 2005, on account of it not being reliable. That sounds a bit fishy to me. Anyway, the author of the piece, Ambrose Evans-Pritchard, points out that sharp moves in his measure presage significant changes, either inflationary or the opposite. He is surely correct. For much of the ‘Noughties, the world was awash with cheap money, much of it in the form of recycled savings from Asia. To a degree, the spigot has been shut, with an obvious impact on asset prices.
My only caveat here is that Pritchard has tended to be a bit of a permanent “we are all doomed” voice these days. If I earned a pound every time he had predicted the demise of the euro, for example, I’d be able to retire to the South of France. But he may be right this time.
This story will not come as a surprise to the techies that read this site, nor many other bloggers, but I was still struck by a report from TowerGroup, the research firm, that says that the day is approaching when millions of people on low incomes living around the world will be able to switch funds to their relatives and friends over the mobile phone with as much ease as downloading tunes on to an MP3 player.
This is big money, when gathered together. The market for remitting money is worth about half a trillion dollars, although goodness knows quite how one quantifies this accurately. Existing middlemen will be cut out of the equation.
“Ultimately, TowerGroup expects mobile phones will do for financial services what Apple iPods did for music – spur a sea change in the way consumers access services and suppliers deliver them,” one of executive said.
Just think what this will mean to parts of the world like Africa, already a continent where it has been easier to put in mobile phones than bother with the traditional wire-based stuff.
As far as I can see, the key issue to get right is security. But then that applies to Internet banking already.
The New Yorker has an interesting article about the risk that excessive granting of patents and copyrights can reduce, rather than increase, the potential level of goods and services. The article is very fair-minded and worth a look.
The issue of patents and IP generally remains a really tough one for me to work out what my own views are. I tend to take the view that state-granted patents are a bad idea, and think it is entirely arbitrary to work out whether a patent should run for X or Y number of years before expiry. But notwithstanding the arguments of the likes of Lessig and other “open source” folk, I can see the case for giving people some financial incentive for coming up with an idea and trying to make money from it. This seems particularly so in areas like drugs, where the costs of research and development are very high, for example.
Thinking about the recent not-so-smart observations on men’s magazines by Tory politician Michael Gove, it is useful to recall that our so-called moral guardians have for a long time got themselves all hot and bothered about the prospect of biddable young chaps getting an eyeful of the fairer sex:
“The French rulers [the Bishop informed the House], while they despair of making any impression on us by force of arms, attempt a more subtle and alarming warfare, by endeavouring to enforce the influence of their example, in order to taint and undermine the morals of our ingenious youth. They have sent amongst us a number of female dancers, who, by the allurement of the most indecent attitudes, and most wanton theatrical exhibitions, succeed but too effectually in loosening and corrupting the moral feelings of the people.”
Quoted in Decency & Disorder, by Ben Wilson, page 16. The comments were made by a Bishop sitting in the House of Lords in 1798. The late 1790s were a frightening period for the British ruling classes – as well they should have been. But it seems strangely comical that a Bishop should imagine that pretty French girls showing a bit of leg were more dangerous than the armies of Napoleon. Even at the time, I suspect that the likes of your average British sailor who was in the front line of defending Britain from attack would have thought this prelate to be a bit of an ass.
But however silly the Bishop’s comments were, they do point to something that is actually quite important: soft power, as foreign policy strategists like to call it. Yes, force of arms can subdue a weak nation. But any part of a “conquest” of a culture must take heed of the power, not just of tanks, guns or aircraft, but of ideas and preferences. When the Soviet Union collapsed, we tend to forget that the sight of Western advertisements for goods and services, occasionally glimpsed by people living in the Soviet empire, must have been a shock to anyone told that state central planning was the inevitable course of economic history. And when young people the world over – of whatever religion or of none – get to enjoy greater freedoms, most of them, from what I can tell, rather like them. Of course, religious extremists recoil in horror at such freedoms, just as the bishop I quoted did more than 200 years ago. Such folk may even use moral panics about such things to inflame opinion in reaction. But most people welcome a more liberal culture, which is why religious and other ideological puritans get so angry about it.
Maybe the Bishop was actually being quite wise after all. He need not have worried though, since those ladies’ men, Nelson and Wellington, dealt with the Corsican tyrant in the end, with a bit of help from a lot of Russians and Germans.
Is Russia now doing well, economically? Here’s a quote which suggests that it is. It is from classical music commentator Norman Lebrecht, writing with his usual over-the-topness about the young Russian recently installed as conductor of the Royal Liverpool Philharmonic Orchestra, Vasily Petrenko. According to Lebrecht, he is doing very well. Here is what Petrenko says about his recent Russian past.
Petrenko’s grandparents endured the siege of Leningrad; his parents grew up under communism. He is among the last to have enjoyed the elitist benefits of the Soviet education system, getting fast-tracked through specialist schools after being spotted singing in a choir from the age of four. ‘People around me were being trained to direct choruses in Siberia,’ he remembers. ‘There were 200 professional choirs in the country, now there are nine. Those times are over. Parents don’t want their kids to be musicians any more. They make more money as bricklayers, not to say bankers.’
Whatever your opinion is about people being paid to sing in choruses – mine is that if audiences won’t pay, such singers shouldn’t be paid – it surely says something about the Russian economy that now you can make proper money laying bricks. “Banking” could mean anything, from proper banking to legalised thievery. Merely getting rich being a construction worker would be similarly ambiguous, economically speaking. But there is something reassuring mundane about bricklaying, suggestive of real people wanting to hire you for good reasons, to build buildings that actually make sense.
I remember vividly what Soviet bricklaying used to be like. I attended a Libertarian jamboree in Tallinn, Estonia, in about 1990, and I recall seeing the wall around the local Soviet military base (I think it must have been). It was by far the most badly constructed wall I have ever seen, then or since, and had I not seen it, I wonder if I could even conceive of such constructional badness. Try to imagine the most spectacularly incompetent bricklaying that you can, and then halve its quality. Then halve it again. That’s approximately half as bad as this brick “laying” was. It looked as if it had been done by six year olds, who had been alternating that with drinking Vodka.
Russian walls are now, I surmise, getting a lot better. Which I agree may not be wholly good news.
My dad was a newsagent, I went to state school, I’m Asian, I work in the city and I earn loads of money. I do it so my parents and future children can have something close to the only kind of life Toynbee has ever known. Me explain my position? How about she explains her right to speak for the poor?
– Peter Hoskin singles out that comment by Raj Chande on an excerpt from Polly Toynbee and David Walker’s book entitled Unjust Rewards
If you can speak and write mandarin Chinese to the extent that you can also teach it, then chances are that this is going to be one hell of a lucrative career right now, according to this report.
I fear that this is a trend I am going to miss out on. Even if I had a flair for languages – and I speak French and German a bit – Chinese is a whole different ball game. And at my age – 42 – it would be probably far too late to start anyway. Mind you, an old colleague of mine who is in his 40s had been learning for several years and is how working in China, in the media business. So it is possible if one is determined enough, I guess.
Consider the fact that the Federal Reserve is a central planning committee. We are lucky, I think, to have intelligent, highly professional planners, but there are in-principle limits to what they can do with limited information, and so there is no way they are not going to get it wrong sometimes, or a lot of times. The housing “bubble”, which has turned out very badly for a lot of people, and the historically high price of gas, which is to a large extent a function of the low value of the American dollar, probably has had a lot to do with the policies chosen by our monetary central planners. Failures of government planning don’t discredit free markets. Rather, they suggest free markets might be worth trying some time.
– Will Wilkinson, of the CATO Institute, on their blog.
But of course, blaming the credit crunch, or high oil, or expensive bread and rice prices on evil speculators is soooo much more satisfying!
A few days back, I pointed out what a collection of dishonest, inaccurate drivel was contained within Naomi Klein’s recent book, in which she wrongly accused the late Milton Friedman of, among other things, supporting the invasion of Iraq (he opposed it, as a cursory Google search could have shown her). Jonathan Chait, of The New Republic, a left-leaning US publication, also stamps hard on the woman.
Now, I might disagree with the late Professor Friedman about the rights and wrongs of invading Iraq but what interests me is why some people on the left, and the right for that matter, get themselves so confused about what the likes of Milton Friedman were about. And yet his views are hidden in plain sight, or not hidden at all. He was, in the best sense of the word, a liberal. He opposed the War on Drugs. He opposed military conscription. (Does Klein?). He thought sexual relations between adults was no business of government. He opposed censorship. He opposed robbing the poor of their savings via inflation. He opposed trade union closed shops as injurious to the non-unionised worker. He opposed exchange controls and countless other controls on our lives, of all kinds. He supported school vouchers as beneficial for the children of the poor and politically overlooked. Being the son of poor Jewish immigrants, Professor Friedman was a classic example of the American Dream. His influence on American public life, and the wider world of ideas, was and still is immense.
At some gut, non-intellectual level, Ms Klein knows this. So instead of wrestling with such ideas, she has to create this conspiracy-theory: that free market ideas depend on there being brutal shock events to succeed. Really? Now, it may be true that crises such as hit Britain in the late 1970s may sweep pro-market governments to power, but there is nothing pre-ordained about this. Instead of a Maggie, we could quite easily have elected an extreme socialist government dedicated to total state central planning, as has indeed happened before. Wars and recessions are typically no friend of small government, or of the open society in general.
Ms Klein is a moron. The smarter parts of the left are starting to notice.
I am currently watching the head of Equitable Life, the UK life insurer that made massive losses a few years ago, demanding that you and I, the UK taxpayer, put our hands in our pockets to compensate EL’s policyholders for their losses. They are complaining that mistakes taken by government caused many of the problems it suffered.
Leaving aside the ins and outs of the case, in general principle, I think it is outrageous that anyone claiming to be a senior manager of a commercial business like Equitable Life should have the brass neck to demand that governments, ie, taxpayers, should bail them out. Yes, some of the rule changes made by governments can harm a business – the tax changes on pensions by Gordon Brown in the late 1990s are a classic case in point. There may, as a result, be something to be said for demanding repayment of taxes wrongly levied on a company, for example. But why should a taxpayer, say, who has no likelihood of a decent private sector pension, be taxed to save the blushes of business executives on six-figure salaries or affluent policyholders who have lost a portion of their pensions? There seems to be no awareness of the perverse, and often regressive, redistribution of wealth that is entailed when these demands for compensation emerge.
It is true that Equitable Life has done quite a bit to honour some of its debts. However, asking the UK general public to put right the rest of the mess is a step too far. And there is another reason for objecting to such corporate welfare, since every time taxpayers foot the bill for another financial Snafu, it creates a fresh moral hazard, and encourages financially inept firms to imagine that if anything goes seriously wrong, the taxpayer will put everything right.
At a time when the credit/money bubble financial institutions are in crises the Economist chooses to lead with a story on Mr Cameron – the leader of the British Conservative party. I can not claim to have read the story as I do not find Mr Cameron very interesting – at least compared to other matters. And, as I am British and have been an active member of the Conservative party since the end of the 1970’s, if he was of such great interest to anyone (other than his family and friends) it would be surely be me.
In case anyone makes the defence that the financial crises was not known at the time when the Economist went to press…
Well the absurd government created Freddie Mac and Fannie Mae had not lost 50% of their stock market value when the Economist went to press – but their problems were obvious, as were the problems of the compassionate lender to the poor (always run a mile from a company that says it is in business to help the poor) Indybank of California, the run on that enterprise was well under way.
The people at the Economist could have made some reasonable predictions about the general financial situation, but they did not – or at least did not lead with them. I will make the prediction now that the the gutless Bush Administration will not order the arrest of the corrupt Mr Johnson (the ex head of Fannie Mae and leading Democrat) as this would upset his friends, such as Senators Obama and Durbin and Congressman Barney Frank – and we must not upset these upstanding individuals…
…Any more than we must upset Speaker Nancy Pelosi by having a Presidential press conference asking people to telephone her to ask why she will not allow a vote in Congress on whether or not to allow more drilling for oil at a time of record fuel prices – although it is fine for Speaker Pelosi to have a press conference telling everyone to telephone the President Bush to blame him for high fuel prices.
Of course the Economist did have other stuff in it:
A brief look, thanks to the library, showed an article sneering at Governor Bobby Jindal (the upcoming Republican and someone the Economist shows signs of fearing) and another puff piece about the all wise Senator Obama – this one claiming that his cynical habit of saying anything to get elected (even, supposedly, reversing positions he has held all his life – well reversing them till after the election) is a good thing, and pointing to his economic advisers as the height of “sensibleness”.
No doubt they will prove about as sensible as the fanatical collectivist Paul Krugman – a man the Economist long favoured.
I could go on, for example examining their obituary of the late Senator Richard Helms and showing how the obituary shows the Economist writers do not understand the nature or effects of the 1964 Civil Rights Act, but I will stop here.
Anyone who is still buying the Economist is beyond rational argument.
Apparently, the humourless twerps who lead many of the world’s main industrial nations got a touch of the vapours over these parting remarks from the President as he left the G8 cant-fest in Japan:
The American leader, who has been condemned throughout his presidency for failing to tackle climate change, ended a private meeting with the words: “Goodbye from the world’s biggest polluter.”
He then punched the air while grinning widely, as the rest of those present including Gordon Brown and Nicolas Sarkozy looked on in shock.
Oh please. Mr Bush, who I imagine is fed up to the back teeth at the preening hypocrisy, moral posturing and downright dishonesty of the Green lobby, has clearly decided that the US is not going to be ashamed of being an industrial nation. The constant calls by various environmental groups for the US and other major states to slash CO2 emmissions by more than a half by tomorrrow afternoon or whatever are unworkable, and they know it. The massive cost of shifting energy sources to supposedly cleaner ones could help to tip parts of the world economy into recession or make the existing slowdown even worse; the push for biofuels, for example, is, arguably, hurting poor people in countries that are traditionally highly dependent on grains etc for basic foodstuffs.
In case any commenters ask, no, I am not a climate change denier, but I do seriously doubt whether a massive cut in carbon emissions over the timescale demanded by some is going to work without causing havoc.
No, I am glad Mr Bush gave his rival leaders the verbal equivalent of a kick in the nuts. More please.
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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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