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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I recently finished reading Jonathan Knee’s book, The Accidental Investment Banker, chronicling the period of 1994-2003 during which time our slightly jaundiced writer was working for two of the leading practitioners of mega-mergers and initial public offerings (IPOs), Goldman Sachs and Morgan Stanley. As someone who has worked on the fringes of this world here in London, I could relate to quite a lot of Knee’s account. At the heart of it is his argument that investment banks have gone from being supposedly impartial providers of advice for long-term clients to mercenary hired guns willing to pump up any stock, sell any junk bond, to the highest bidder. He wishes to see investment banking give up this sordid activity and resemble the ideals (please try not to laugh) of the legal and medical professions.
This is all written with passion and a lot of detail; if you want to know how Philip Purcell, the former head honcho of Morgan Stanley, plotted to remove rivals or vice-versa, or how investment banks can be open to conflicts of interest, this is the book for you. But at the end of this volume I had no real clear answer to the question as to why a self-declared liberal (in the American usage) like Knee soiled himself working for these ghastly banks doing their ghastly IPOs and mergers at all (sorry for my sarcasm). Or maybe those mega-buck salaries eased the pain a bit (now you are being very sarcastic, Ed). Frankly, to be rude, Knee comes across as a bit of a prig; also, I find his naivete about the world of modern finance frankly a bit hard to take. Banks want to make money and this should hardly be a shocker; if you expect Olympian standards of objectivity from an analyst about a stock that the same bank might be underwriting in an IPO, you should not be investing at all and make sure to get a second or third opinion first. And yes, while there was a lot of hubris in the 1990s IT boom, remember that without the entrepreneurial gusto that that “bubble” made possible, I would not now be typing these words on a laptop and putting them onto a blog. It would not have harmed Knee to have mentioned that point. One might as well write about the supposed evils of the 1840s railway boom in Britain while overlooking that it did, after all, make possible loads of fanstastic railways.
In fact, although there are delusional dreamers, shysters and dullards in any walk of life, I tend to find that investment bankers or hedge fund managers or private equity partners tend to be pretty straight folk on the whole; personally, I find such people to be more honest, hard-working and clever than politicians, although just as prone to the error of sometimes believing their own propoganda. I don’t think any of the people that Knee writes about could be as guilty of financial crookedness as the Britsh government has been over its shamefully under-priced bid for the London Olympic Games, for example, which have turned into the mother of all money pits. And Gordon Brown’s handling of public accounts while he was Chancellor, putting PFI projects’ liabilities off balance sheet, would have landed him in disgrace, as happened to Stan O’Neill, former head of Merrill Lynch, who was kicked out after his firm suffered massive write-downs over the US sub-prime mortgages fiasco. When things go wrong in investment banks, people get fired; in politics, they get another cabinet post.
To be fair to Knee, he does not offer any concrete solutions to the ills he claims have gripped investment banks and he also expresses doubt about the need for yet more regulation; in fact, he even concedes that the legislative reaction to the implosion of the 1990s stock bubble and various accounting frauds have arguably made the job of investment banking even worse in ways that are unlikely to benefit clients. On the other hand, he is far too gentle on Eliot Spitzer, who’s bout of lawsuits against financial players, while not without some justification, went too far and have played a part in damaging New York as a competitve place to do business, to the benefit of London.
The European Union has its uses. While rootling around for stuff to link to from CNE Competition, I came across this:
Left-wing Labour MPs are girding themselves for a rebellion over a European Union plan which they say could spell the end of the National Health Service.
When left wing Labour MPs rebel, I at least hope for possible goodness.
The European Commission will publish its health directive next week and it is meant to make it easier for people to travel to get specific medical treatment in another EU country.
Ah, the age-old dilemma of the EUrosceptic. What do you think if the EU imposes something sensible?
British diplomats say that this is NOT the same as making sure that if you fall sick in Slovakia or have an accident in Austria you can get treatment straight away.
When British diplomats say that something is NOT something else, it means that they have been told to say that by their political masters and that the small print of their argument will be about a very small difference. The feathers on the other something will definitely NOT be the exact same colour, but the other something will otherwise waddle and quack in an identical fashion to the original something, and will in fact be just another duck. For “NOT”, read ” “, in other words.
It is what some people call “health tourism” and both critics and fans say it will allow people to shop around for health care.
Sounds great. So what if it is just a plan to sell Eurostar tickets; I still like it.
In the end, there is nothing like people preferring something else to whatever bogus nirvana is being peddled by the bogus nirvana peddlers. The one argument against the much vaunted Soviet Communist nirvana that the vaunters could never wriggle free from was the fact – for fact it was – that this was a nirvana that millions wanted to escape from, through minefields if need be, and with only the clothes they were wearing at the time of their escape if that was all they could take with them. A similar process is now under way with Britain’s similarly vaunted NHS, the best healthcare system in the world except for all the others.
Amazon has just been ordered by the French state to stop delivering books for free, and in general to refrain from charging too little for books. This is just wrong, says Instapundit.
With questions like this, I come over all Paul Coulam. I start not with what might or might not seem nice, but with libertarian dogma.
Amazon owns some books. They should be allowed sell them to you for any price they like, and subject to any conditions they like. They should be allowed to offer to deliver them any way they like, for any price they like. And if you are interested, you should be allowed to say … yes! Or: no. It really should be that simple. If you have to die your hair blue before they will sell books to you, well that would be a strange business model to follow, but: the books belong to them and they should be allowed to part with them, or not, on any basis they like.
However, the principle that if you own something you should be allowed to sell it on any basis you like would also allow certain other arrangements to pertain. → Continue reading: The state should not control prices but property owners should be allowed to control their own prices any way they like
The Stockholm Network people are trying as hard as they can to parlay their Golden Umbrella Awards into something truly significant. So they were pleased when Perry de Havilland did a piece here about the awards dinner last week, and even more pleased when Instapundit linked to that posting. And they were also delighted by this Wall Street Journal piece by John Fund. With awards ceremonies, what matters is not so much the dishing out of the awards as the matter of whether anyone else cares, or can be persuaded to care. This event was good. But it is the response to the event that will surely mean that the corresponding jamboree next year will be better.
Fund, who presented one of the awards, to a Bulgarian by the name of Dimitar Chobanov, begins his piece thus:
The Heritage Foundation, the Cato Institute, the American Enterprise Institute and other free-market Washington think tanks are known to many Americans. What isn’t generally understood is that there has been an explosion of free-market think tanks around the world that are increasingly challenging the conventional view that government is the solution to society’s problems.
Like Perry, I was part of the throng, and in a piece I did about these awards for another European think tank last week, I made the same point about free market think tank expansion. Whereas Fund sees these enterprises spreading beyond the USA, I see them spreading beyond Western Europe, but however you slice this story, free market think tanks are spreading.
In among being impressed by all this, I took photos. Usually, when I take photos at pro-free-market events, my only questions are: How many women are here and how nice do they look? But the photography I did at the Golden Umbrellas focussed more on what was being officially talked about. Those ladies I did snap were snapped because they were on the stage, like Mistress of Ceremonies Karen Horn, Janet Daley and Cécile Philippe. There were plenty of other fine looking women present that night, but I concentrated my picture-taking on the people who were giving and receiving awards. And as well as photographing them, I listened to what they were actually saying. Which you can also do by going here.
I occasionally take a look the Observer newspaper to see if that sister publication to the Guardian has improved; sometimes it has good things in it – I like its sports coverage – but its write-ups on business issues never change from a sort of anti-globalista, Keynesian mish-mash. An article in this Sunday’s paper about the supposed crisis of shortages of drinking water is no exception:
The midday sun beats down on a phalanx of riot police facing thousands of jeering demonstrators, angry at proposals to put up their water bills by more than a third. Moments later a uniformed officer astride a horse shouts an order and the police charge down the street to embark on a club-wielding melee that leaves dozens of bloodied protesters with broken limbs.
A film clip from the latest offering from Hollywood? Unfortunately not. It’s a description of a real-life event in Cochabamba, Bolivia’s third largest city, where a subsidiary of Bechtel, the US engineering giant, took over the municipal water utility and increased bills to a level that the poorest could not afford.
Yup, those evil foreigners, and worse, Americans!
Welcome to a new world, where war and civil strife loom in the wake of chronic water shortages caused by rising population, drought (exacerbated by global warming) and increased demand from the newly affluent middle classes in the emerging economies of Asia and Latin America.
If water is so scarce (it is not, two-thirds of the globe is covered with the wet stuff) then those evil capitalists would surely be investing like hell to create more of it, by irrigation, building reservoirs, desalination plants, etc. If demand from all those “affluent middle classes is rising” for the good things of life, that seems like a great market to tap (‘scuse the pun). Greater revenues for the water companies, particularly if they are allowed to compete for business rather than protected as monopolies, will surely drive increased investment in water, no? But as far as the author of this article is concerned, the very idea of allowing foreign, private companies to operate such utilities is beyond the pale.
The question for countries as far apart as China and Argentina is whether to unleash market forces by allowing access to private European and American multinationals that have the technological know-how to help bring water to the masses – but at a price that many may be unable, or unwilling, to pay.
If the problem is that people cannot afford to pay supposedly higher water bills, then the problem is lack of income; protecting state-run utilities and resisting the investments of mulitnationals is daft; surely, if the underlying problem is poverty, then the solution is more trade, more capital flows, more investment, right?
As Cochabamba illustrates, water is an explosive issue in developing countries, where people have traditionally received supplies for free from local wells and rivers. But in the past 15 years rapid industrialisation, especially in places such as China, has led to widespread pollution and degradation of the local environment.
“For free”. Well, someone had to dig that well. Someone had to lift the water out of it, transport it, purify it, etc. When people say that water should be “free”, they pay no heed to the expenditure of effort in getting water and conveying it to where people want it the most. Multinationals are rather good at figuring out how to do this.
Max Lawson, senior policy adviser for Oxfam, says: ‘We are sceptical that private-sector involvement is the solution for very poor countries. In fact, there is an argument that much greater public sector involvement and cash is needed to channel supplies to where they are most needed.’
Another pretty good reason for not giving a penny to Oxfam, in my opinion.
Some earlier reflections on water.
Surfing around the net, I came across this now-oldish story about Charles Koch, the billionaire, who is an avid collector of fine wines. He may – I have to be careful here – have been scammed by a seller of fake wine. Instead of buying what he thought was red stuff once owned by Thomas Jefferson, the wine may be er, a bit younger. Oh dear. Given the enormous – and to my mind barking mad – sums of cash that people spend on wine, this is almost inevitable. The same thing can happen with antiques. There have been infamous forgers of paintings. The movie re-make of the Thomas Crown Affair, which I thought was an excellent film, is about art forgery (amongst other things). But I had not come across the idea of someone faking wine itself.
The investment market in wine is now a big business; this seems almost immoral, but then I tell myself, as a student of Adam Smith, Ludwig von Mises and Milton Friedman, that if investors want to punt on the future price of Margaux, Talbot or Mouton-Rothschild, then go ahead. There is even a London-based electronic exchange (Liv-ex) for trading in wines, most of which are French. Trading in New World wines is also large but not done out of a central exchange yet. I am not quite sure the God Bacchus would approve of this: the idea of wine, even if you lay it down for years, is eventually to get out the corkscrew and drink it. But the forgery story is a great one: there has to be a movie in this somewhere.
Where do they find these people?:
Today it seems politically unpalatable, but soon the state will have to turn to rationing to halt hyper-frantic consumerism
It is unpalatable because it is f******g stupid, Maddie. And how do you tell the difference, pray, between “hyper-frantic consumerism” and say, the mature, intelligent, oh-so virtuous form of consumer activity that you might favour? No answer to that, of course. We are just supposed to accept the wisdom of rationing by our betters instead of the supposed wild anarchy of the marketplace.
Well, it is Monday, start of the week and all that and a dotty Guardian columnist has got me all fired up. It is almost better than going to the gym.
Update: I urge readers, if they have the stomach for it, to actually read the CiF comment thread. Quite encouragingly, some people get just how authortarian Bunting and her mindset actually is. It is, at last, starting to dawn on the smarter parts of the left (sometimes I think this is a rather select demographic) that the whole Green agenda is poison to genuine, progressive politics. Once, socialists were supposed to be rather keen on consumption, I thought; okay, they were totally wrong about the process of getting more stuff to consume, but consumption was part of the idea. M. Bunting is, of course, precisely the kind of reactionary-in-drag worrywart that Brendan O’Neill complained about the other day.
Update 2: this comment at CiF is worth reproducing in full:
What utter nonsense. I was a child during WW2 and rationing, along with being bombed and losing fathers to the carnage, was suffering and sacrifice, sometimes resulting in lifelong problems due to inadequate nutrition. You know nothing about what we and our parents endured during the war and have no right to compare it to reducing consumption, apparently because dinner party liberals will make us do it. Rationing will not be introduced and it is incredible that a sane person could imagine it will be.
Well said. My only nagging worry is that rationing might be introduced. Never underestimate the sheer fanaticism of the eco-authortarians.
I am not quite as vexed by the writings of former Living Marxism (a bit of an oxymoron, Ed) writers such as Brendan O’Neill, Mick Hume or Claire Fox as Stephen Pollard is – life is too short for such intellectual eye-gouging – but I kind of get Stephen’s general point. Those of us who have toiled away exposing the idiocies of Big Government for decades and plugging the case for free markets, etc, find it a bit hard to take for a bunch of Marxists to claim to be such libertarian souls, when in fact they are just as hostile to the market economy as they ever were. No-one has ever proved to me that you can have a liberal, open society without property rights. O’Neill, writing in this week’s edition of The Spectator, rather confirms Pollard’s suspicions in what was quite good rant against modern “anti-capitalists”:
Of course, Marx wanted to destroy capitalism because he thought it didn’t go far enough in remaking the world in man’s image and organising society according to man’s needs and desire. Today’s sorry excuses for Marxists and anti-capitalists think capitalism has gone too far in its development of the forces of production and encouragement of consumerism. I’m with Marx. Let’s replace capitalism with something even more dazzlingly cocky and human-centric. But let’s first deal with the luddites, locavores and eco-feudalists who have given anti-capitalism a bad name.
The problem, of course, is that the “dazzlingly cocky and human-centric” shiny sort of Marxist future is never spelled out. What would it look like? Does it come with a tester? Are there examples on eBay? Seriously, given the manifold failures of state central planning, and the various incoherent attempts by some thinkers to fashion “market socialism” (another oxymoron), it is not really quite good enough for a chap like O’Neill to pose as some sort of hip and clever critic of anti-capitalists, then to claim that he is still a Marxist, but then to leave a bloody great black hole of explanation of what his sort of society would look like. Consider, the various theories associated with Marx have been more or less destroyed, both by practical experience and logical argument: the labour theory of value (which ignores the value of ideas in wealth creation); the theory of the inevitable clash between the “workers” and the “bosses”; the historical “inevitability” of the collapse of capitalism, the immiseration of the proletariat, etc. While some of Marx’s arguments about class had some interesting points, pretty much all of the central tenets of the Bearded One’s ideas are plain wrong. I mean, as intellectual defeats go, this is the equivalent of a village pub football team being annihilated 10-nil by Manchester Utd. There’s no way back.
I do not often look at, and never buy, the Financial Times newspaper. Partly, and perhaps unfairly, because of the Marxists it used to employ and partly because the main relatively free market voice in the newspaper is that of Samuel Britton – a man who supported the exchange rate fixing ERM of the European Union. A very bitter political dispute in Britain some years ago, about which people on opposite sides still carry a lot hatred to this day – well if they are unforgiving people like me they do.
However, I happened to see a copy of the Financial Times a few days ago and had a brief look at it.
There was an article by Lawrence Summers suggesting three steps to avoid an American recession. The three steps were basically “more subsides, more subsidies and more subsides”. People who owned money on their houses were to be helped by the government (via various “private” entities it controls), the banks who are suffering a “credit crunch” were to be helped as well, and the whole system was to get more money also.
Why not just print the money and throw it into the streets at random? Or if computers must be used, just tell everyone they have ten per cent more money in their bank accounts?
Perhaps because following a Major Douglas style approach is too open and public. The political merit of complex and private subsidies, as supported by Lord Keynes, is that it both gets powerful private special interests on the side of the credit-money expansion and keeps things from the attention of the general public. Of course one must not ask too many questions about what caused the credit money bubble in the first place – just a bit of vague talk about “animal spirits” or “speculation” will do. As Mr Summers says “the time to worry about bad debts is over” – we must “keep the credit flowing”.
So the way to deal with a credit-money bubble is to increase the amount of credit-money. Well the Federal Reserve, and the rest of the system, have been playing this game a long time – the last serious effort to let the system clear itself out was in the early 1980’s when Paul Volker was head of the Fed. And with the basic situation, the entitlement programs and so on, so vulnerable now I do not see much chance of people of power accepting a clear out – till it is forced on them by events.
As for the Financial Times, articles like the one by Mr Summers reminded me why it is a good idea not to buy it.
I did look at the article directly below Mr Summers’ article. It was about how the Democrats should not give any “hint” that they are hoping for defeat in Iraq – which is odd as many of the Democrats have been doing everything short of conducting a Black Mass to Satan in the hope of that there would be defeat in Iraq. The article also said that the Democrats have a “winner” in their idea of the United States government organizing health care for 300 million people.
Enough said.
I have often wondered why it is that so many super-rich – and they do not get a lot richer than Warren Buffett – feel the need to make out that their enormous wealth is something embarrassing or shameful, or that they would rather they did not have it. Our capitalists of today are sometimes a rather glum bunch. Buffett says he wishes he could pay more in taxes. Well, Mr Buffett, I am sure you can look up the address of the IRS from the Internet and send them a big cheque. If he really thinks that Congress can make better use of his wealth than one of the smartest investors of modern times, well, go for it. Get out that pen and sign away. Buffett has already demonstrated, via his contributions to the Bill Gates Foundation, that he knows how to use his wealth for philanthropic purposes.
Of course, if he wants to give it to me, I have certain needs……
Ambrose Evans-Pritchard, who currently covers economic issues for the Daily Telegraph, wonders whether the €uro zone, faced with a possibly ruinously high exchange rate for the single currency against the dollar and some other major currencies, will embrace the “nuclear option” of imposing exchange controls to prevent the euro rising much further. Evans-Pritchard wonders whether such thoughts are idle. I think he is right but is also right to ponder this issue. If, in order to protect the likes of Airbus and other big exporters, the EU were to halt or control inflows of capital to the euro zone, the impact on places like London, the world’s largest forex market, would be devastating. Tens of thousands of jobs in the money market business would be lost. Such controls would further hammer any idea that the EU had, or ever has had, much to do with free trade. It would set back the cause of global free markets for years. Some defenders for exchange controls might try to argue that they would be less bad than higher tariffs on imports to the EU, but there are plenty of those tariffs already.
The general popularity of the euro at the moment is more because it is – temporarily – seen as a more reliable store of value than the dollar, rather than because of a new-found belief in in the economic prowess of Germany, France, Italy or Spain, for instance. With a large budget and current account deficit, the US has been letting the buck drop to make its exports more competitive overseas and as a result, the euro and the pound have risen, making it cheap for Brits to take their holidays in the States, for example. There is some sign that this exchange rate movement is working (I am actually pretty bullish about American exporters for the next year. I am actually quite upbeat about the US economy, which is always written off, with a hint of anti-American bias, by the usual commentators).
I do not think the EU will embrace exchange controls; such a move would be hugely controversial and unlikely to succeed. Prophets of doom would do well to recall that West Germany, back in the 1970s, lived quite successfully with a strong deutschemark; there is nothing axiomatic about why the EU cannot cope with a strong euro, at least not in the short run. The more fundamental problem, of course, is whether the countries making up the euro zone should have joined it in the first place, given their different characteristics. I think the euro could be a disaster for some nations, or at least a very painful experience. My wife’s country, Malta, is about to join the euro next year. Thank god it does not have a big export market.
The other day, flicking through one of those glossy property magazines that get shoved through my letterbox, I came across this article about the Russian emigre, Leon Max, who fled the Soviet Union in the 1970s, went to the States and founded a now very successful fashion business, Max Studio. He has recently bought a beautiful stately home in Northamptonshire – Paul Marks’ stamping ground – and I sympathise with most of the sentiment behind this paragraph in the magazine, Country House: “Max admits that England’s favourable tax regime was a factor (in buying the house). He is not apologetic about this. He is an enthusiastic free marketeer and libertarian. In his own self mocking words, he says, “Considering I was brought up under Communism, I am a little to the right of Pinochet.” (There is no web link to the article).
Not sure I like the Pinochet argument – he was a torturer although no worse than most Latin American regimes and better in many ways – but I get the general idea of what Leon Max means. Frankly, if more people like him want to live in Britain, bring them on. It may partially counter a trend of emigration among smart young Britons as noted by Fraser Nelson, the journalist, in a recent article.
Perhaps Britain’s newest classical liberal think tank, Progressive Vision, should ask Leon Max for a donation.
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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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