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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A New York billionairess was once reported to have said, to her eternal shame: “Only the little people pay taxes”. It is an attitude of mind that nicely demonstrates how, under even high-tax regimes, some people, if they have the right lawyers, smart tax planners and political connections, try or even succeed in avoiding paying as much revenue as possible, leaving those on lower incomes to pick up the tab.
Of course, the ideal solution to problems of tax avoidance by the rich is to cut taxes, drastically, across the board. And with all the current complaints about the British taxman’s crackdown on “non-domiciled” residents in the UK, it would be refreshing if those champions of capitalism like Lord (Digby) Jones, or William Rees-Mogg and the rest could acknowledge this point. I don’t mind non-doms being able to pay little tax; I hear all the arguments for why it is sensible to encourage them to live and invest in Britain. But would it not be nice if, say, the Tories could focus on what is a genuine problem: resentment by the increasingly taxed middle class of what is seen, however, mistakenly, as favourable tax treatment to very wealthy people? The solution, of course, is not to hit non-doms, but to cut taxes sharply, simplify them, and put the brakes on public spending, and then hit the reverse gear-shift.
It is often wrongly assumed that a supporter of capitalism has no business complaining if a beloved sports institution, like a cricket or football team, becomes a vast, worldwide brand, or if sports contests are held outside the venue from which the institution sprang. Well, up to a point, Lord Copper (to quote a line from Evelyn Waugh’s Scoop). As a libertarian, the key thing for me is that autonomous institutions, set up and created under certain rules of association by their members, should continue to be run on said principles since otherwise, the whole point of the association is destroyed. Since no coercion is involved, there is no reason, for instance, why a group of socialists could not join together to create their own communes. The only proviso being that people who live in these places have the right to quit and form their own, ‘break-away’ groupings or just leave if they so wish. The same applies to say, professional football. I happen to think that the influx of non-British players and oodles of cash into the game has been a mixed blessing; just because I support the right of people to spend their money how they want emphatically does not mean that good things always happen when they do, nor is it contradictory for a free marketeer such as yours truly to wonder whether sports can be ruined by wrangles over money.
Take the current controversy over the idea of staging Premier League football matches outside England, for example, in order to appeal to the hundreds of thousands of folk who allegedly are desperate to watch English Premier League football. Well, sorry guys, the whole freaking idea of an English premier league is that the games are played in England, not Planet Zog. If fans in England are increasingly priced out of their clubs’ games – which means that crowds often have all the passion of wet cement – and if players become exhausted by a 365-a-year playing season, then the game will suffer. And that, in the end, will damage the game that the heads of sports associations are supposed to be taking care of.
Yes, I know that the purist idea of autonomous sports institutions has been badly eroded in recent years by the attempts by governments to muscle in on sports. That is a key, if separate issue. But stay with me on this: in a free society, it is nevertheless the case that good things, like friendships, clubs and voluntary organisations, do not revolve around the desire just to make pots of money. Sport is something one enjoys and plays for its own sake, not just to win. As Michael Oakshott, the conservative philosopher said, some things, like being a member of a club or having a good friendship, have no external ‘end’. As a supporter of Ipswich Town, I think that is probably just as well.
These things tend to move in cycles, but one expression I think ought to be killed off, deleted, removed, or otherwise expunged from financial affairs is “off-balance sheet”. What this term means, at least according to Wikipedia,, are assets or liabilities that are not recorded on the balance sheet of a company’s accounts but ring-fenced in a separate, legal entity. But in fact what has turned out to be the case is that in the end, these things tend not to be very “off” any balance sheet at all. Take Britain’s private finance initiative (PFI), in which private companies bid to carry out government-funded contracts like building roads or hospitals, operate said facilities for a period of time – like 10 years – and then return them to the State’s control. The government is able to get things built, but, oh so wonderfully, the debt that the government may have to shoulder for the cost of paying for these things is “off-balance” sheet. Marvellous. Many of the banks now mired in the credit crunch ran complex-sounding things called SIVs (structured investment vehicles), which were “off balance sheet”; by using derivatives to insure their debt risks, they also moved a lot of liabilities “off balance sheet”. But in the end, come the economic storms, this will not work. Sooner or later, back to the balance sheet these things must go.
As Ayn Rand might have put it, if you evade the facts of reality, sooner or later they will bite you. That applies to accounting as much as anything else. I wonder if I can move my mortgage or credit card bill “off my balance sheet”. Somehow I don’t see that working out too well.
Bill Gates’ Microsoft has made an unsolicited bid – at a cool $44.6bn – for Yahoo!. The offer is either in stock or in cash. I must say there comes a point where the sheer, mind-bendingly large sums of money that are involved (thanks to years of inflation) make it hard to relate to the sizes on offer.
And to think that $44.6bn is chump change to Gates.
Patrick Crozier and various others, of whom I am one, continue to put stuff up at Transport Blog from time to time (although my contributions are not always very profound). One of the more interesting Transport Blog items of recent weeks has been this recorded conversation in which Samizdata’s own Michael Jennings talks with Patrick Crozier about low cost airlines. Says Patrick: “Here‘s my favourite bit.”
This favourite bit is worth quoting in full:
Jennings: There was an airline named ValuJet which flew a plane into the Everglades and everybody on that plane was killed. Now this sort of put a damper on the discount airlines of the US, because ValuJet was the second largest discount airline in the US at that point after South West, and it got out … once there was an investigation into this crash, it turned out that ValuJet had cut costs in all kinds of places, and in particular they’d simply neglected safety. And because the fact that this one discount airline in the US had done terribly bad things with respect to maintenance, discount airlines in the US didn’t grow as fast after that as they probably would have if this crash had not happened.
Crozier: It’s interesting that that does sort of put a kibosh on the profits-before-safety argument. If you try to put profits you lose the safety, and if you lose the safety you lose the profits.
Jennings: The interesting thing which came out of that was that discount airlines in other parts of the world really, really learned a lesson from that. Discount airlines in Europe, in particular RyanAir, which is … one of the most ferocious cost-cutting companies I’ve ever seen of any kind … it doesn’t skimp on maintenance. The lesson was learned that whatever you do, you do your maintenance properly, because if you do skimp on maintenance and a plane crashes that will be the end of you, basically.
One of Patrick Crozier’s relentless Transport Blog memes is that safety and profit are not alternatives; they go hand in hand. As he says here in connection with railways, where exactly the same equation applies:
… crashes are expensive. You lose the train, you lose passenger revenue through delays and cancellations and you probably have to rebuild the track. As a rail executive once said: “Even a minor derailment or a collision can cost a fortune. I mean millions.”
No wonder Patrick was glad to hear Michael saying a similar thing not just about airlines, but in particular about cheap airlines.
My favourite bit is where, reflecting on the impact on low cost aviation of the Second World, Michael says:
There are probably more airstrips in East Anglia than there are in all of China.
It’s not so much that I never knew that as that it had never occurred to me to even think about it.
On the face of it, who could object to a company deciding to do more to help the world’s poor? Reuters has a story titled Gates calls for “creative capitalism” (which is a bit like saying ‘Gates calls for agriculture that creates food’).
Gates said the self-interest behind capitalism had driven multiple innovations but to harness it to the benefit of all required the system be refined. Greater focus on recognition for improving the lives of others could provide a spur for companies to focus more on making money out of providing valuable products at affordable prices to the world’s poor. He urged multinationals to pledge the services of their top people to the work.
Ah, I get it. White man speak with forked tongue… “but to harness it to the benefit of all required the system be refined”. Bill Gates is not in fact calling for voluntary anything, he is calling for The System to be ‘refined’, which means he wants to make capitalism less capitalist and more politically directed by our caring masters. Could the fact he hangs out with show biz types and politicos who are all solidly statist give us a clue to decoding his words here?
So is Billy Boy just another dissembling corporate stuffed shirt looking for more ‘feel good’ photo opportunities with such deep thinkers as Bono or that Guy Who Thinks He Invented the Internet?
Well, why should the English-speaking world have all the fun when it comes to a banking disaster?
Société Générale, France’s second-biggest bank, has revealed that one of its traders in Paris had committed a 5bn euro (£3.6bn/$7.1bn) fraud.
3.6bn quid. However one looks at it, that is a lot of money. The Telegraph story I linked to has named the guy who is alleged to have perpetrated the fraud; the meltdown easily surpasses the collapse of Barings, the blue-blooded British bank that went down due to massive losses incurred by derivatives dealer Nick Leeson back in the mid-90s.
What early conclusions can one draw? First of all, it is not possible to argue that the more heavily regulated banking systems in continental Europe are inherently superior to those wild, anarchic Anglos. At the very largest banks operating out of Paris, New York or London, it seems that human venality, incompetence and dishonesty is no respecter of cultural differences. What investors need to realise is that banks contain human beings with all the weaknesses, as well as virtues, humans have. Regulatory zeal has not prevented frauds; and yet every time there is a fresh SNAFU, a chorus goes up demanding some new set of regulations – “something must be done”. In the end, the only course is to catch the wrongdoers, lock them up or force them, if possible, to repay the folk they have swindled.
To say that 2008 has started badly in the financial markets is an understatement; with banks like Citi taking huge losses linked to the falls in the US housing sector, this latest, Gallic twist of bad financial news is the last thing that investors needed. Jobs have already been axed in the City; it is likely to get worse before it gets better.
Here is a list of recent monster banking frauds.
It is interesting how companies are so keen to get swept up in whatever profoundly illiberal fashions define the mainstream. Prêt a Manger, a high quality sandwich chain, proudly says they do not use air freighted produce. They are a major purchaser and they are refusing to buy from a great many Third World producers whose products depend on air freight. No doubt this is seen as a positive thing, hence the fact they go out of their way to let you know.
 Prêt founder Julian Metcalf is a fine entrepreneur and his company does make great lunch food. Moreover I approve of them giving their leftover food to homeless shelters, all enlightened stuff. From a business point of view I can see their thinking as a much higher percentage of their clientele are likely to be middle class Guardian readers with an eco-fetish than impoverished Kenyan farmers desperately trying to get the European trading system to let them sell their damn products and really not needing a meme infecting the private sector that makes it even harder for them than it already is.
I have no idea if the directors of Prêt actually believe the eco-bollocks or if it is just a marketing exercise. However as I am not saying Prêt a Manger should not have the right, for whatever reason they wish, to buy from who they wish, it does not make any difference to my argument because either way I would criticise them for it. I eat there in spite of the greener-that-thou crap, not because of it. But the thing that really gets up my nose and motivates me to look elsewhere is… → Continue reading: Prêt a Manger and fighting the Culture War
It has been a mad-cap few days; the FTSE 100 index of shares oscillated by 9% today, an incredibly volatile day and although it ended higher after the Fed tried to kick-start the US economy with a sharp rate cut, we are not out of the woods yet. Although Britain may not have some of the problems of the USA, we have the disaster of Northern Rock. It looks as if the British government has decided that it is so desperate to avoid being tarnished as a government that nationalised a failed bank that it will, instead, create an elaborate set of government guarantees to enable a consortium of investors, led by Richard Branson, to run Northern Rock and over a period of time and with luck, repay the loans. It is a no-win situation for the taxpayer, of course, who bears the risk of this venture. It also adds to moral hazard and undermines the necessary fear of going bust that should, in a healthy economy, act to deter unwise lending practices (that is harsh, I know, but consider the long-term problems of not letting this happen).
Anatole Kaletsky is far too much of an economic intervenionist for my liking, but his article today is pretty good. His comments on Brown are damning.
Some time ago I made vaguely praiseworthy comments about Richard Branson, in the context of the airline industry. Well, we are all entitled to revise our opinions; I am not really sure I like what the Bearded One is up to, or his rather undedifying association with a deal involving huge amounts of public funds.
Update: Tim Worstall has some further thoughts.
Equity investors are having a rough time at the moment.
All of Asia’s major stock markets plummeted on Tuesday morning, continuing a bloodbath in share prices that saw London’s FTSE 100 suffer its biggest one-day fall since the 9/11 terror attacks as fears of a worldwide recession gripped the markets.
I wonder what brought that on? Could it be that the lack of easy money going through the financial system will finally impact on company earnings? I have no idea; I don’t work in the industry. But with the bears rampant, it will be interesting and worrying to see our political lords and masters promise ‘interventions’ to ‘stabilise’ the market. Good luck with that!
Thank you for trying to offer us high quality, low cost agricultural products. However I am sorry but we would prefer it if you remain dependent on tax funded handouts from First World governments and their anointed NGOs. And speaking of NGOs, if you People of Colour start getting involved in horrid global trade, what will happen to the people who work for NGOs? We need NGOs so that our children can go work for them in that pesky gap year, helping you poor ignorant dark people with your Third Worldie Problems, and thereby allowing our kiddies to develop self-esteem and feel good about themselves.
Also we prefer to see you living in photogenic eco-friendly low carbon footprint mud huts, so please stop trying to pull yourself out of poverty via icky capitalist global trade in the one area you should have a comparative advantage. I say ‘should’ because actually we prefer to buy our food from tax subsidised local farmers, for the good of the planet, you understand.
Peace and love,
Janet Guardianista
Good piece by Jeff Randall today on what the rapid rise of gold implies. Gold at $1,000 an ounce looks eminently plausible. Mind you, there is a fair bit of speculative froth here. I like the fact that Jeff, who must have felt very out of place during his time as a journalist for the BBC, approvingly quotes F.A. Hayek’s views on banking and gold.
Let’s not forget that Gordon Brown, you know, that clever chap from the University of Edinburgh, once a centre of the Scottish Englightenment, flogged Britain’s official gold reserves for a mere $275 an ounce. Vote Labour!
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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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