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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To have a free and prosperous country, it is important to have strong institutions underpinning things like contract and property rights. Yet all too often we forget the roll of social attitudes and world-view in creating wealth and its handmaiden, liberty.
There are two interesting articles in The Telegraph today (on the same page in the print version in fact) that shows that places like Russia and China may be vastly wealthier and freer than they were under the darkest days of Communism, but both those places have yet to develop either a culture that expects liberty, understands the implications of state money (they are hardly alone in that) or accepts the usefulness of profound outside influences.
The Chinese government is trying to lure foreign educated Chinese back to China, which suggests at least the people at the top are aware that there is value in the way the rest of the world does things..
Under the government’s new incentives, returnees will be able to work wherever they like, regardless of which city they have a residence permit for, and will be offered higher pay, while their families will receive preferential treatment.
Which is interesting as that means most people still cannot live and work where they like, requiring internal passports and state residence permits. How can a place with such restrictions on a person’s ability to sell their own labour ever hope to become affluent and truly dynamic? Can they not see the link between the ability of individuals to make fundamental choices and the effectiveness of markets?
Those graduates who return, expecting their foreign education and work experience to be a passport to a glittering future in the new China, frequently face discrimination rooted in a deep-seated distrust of those who have left the motherland for the West.
Which makes me wonder, do most Chinese people not realise how much more affluent the First World is than they are? I am guessing they do but this is trumped by the cultural imperative for Chinese-ness… the sort of mindless nationalism that is thankfully largely dead in much of the Western world. This suggests to me that regardless of how China’s leaders tinker around, if Chinese culture is that obsessed with China-is-always-best attitudes, there are serious limits to their ability to grow into a prosperous and civil society.
Also in Russia, most of the institutions associated with advanced nations (courts, property rights, contract law etc.) are not known for their robustness or independence from politics. But also I wonder how much the culture in Russia allows people to imagine things any differently?
Russia’s ageing but revered scientific geniuses are on a collision course with Vladimir Putin after the 1,200-member Academy of Sciences rejected Kremlin proposals to end its unique independence from state control […] Now, however, its autonomy is threatened by a proposed new charter which would give the government control of its management, funding and multi-billion pound property holdings. Kremlin officials claim the institution needs dragging into the modern world to harness its members’ brainpower for lucrative scientific patents and commerce. But critics fear it will fall victim to Mr Putin’s appetite for control and his distrust of free-thinking institutions.
Which is interesting. But then…
The Academy receives £870 million in federal grants, owns about 400 affiliated institutes and employs around 200,000 people across Russia. Prof Valery Kozlov, 57, its vice-president, said: “This is simply an attempt to seize control of our finances and property.”
I am sure Professor Kozlov is a very smart man, yet I wonder if it even crossed his mind that perhaps his Academy should respond to Putin’s power grab by refusing to take any more state money. If they are a centre of excellence as claimed, surely there must be companies and institutions around the world which would love to fund them and allow them to be truly independent of the state.
Yet the notion that everything must happen top-down with the blessing of the state is probably so deeply ingrained that the reality of what is involved with making yourself independent does not track at all.
It is has been a long-standing complaint from pro-market folk – like yours truly – that business and capitalism tends to get a pretty crummy deal in Hollywood and its equivalents around the world. Even one of my favourite movies, Wall Street, starring Michael Douglas as the corporate raider Gordon Gekko, is normally taken to be an anti-capitalist film, even though there is nothing in the magnificent “greed is good” speech with which I fundamentally disagree (it is like Ayn Rand on acid). In the main, businessmen are treated as shysters, or cold, or boring, and business is regarded as either vaguely venal or not very dramatic. The trouble is, I suppose, that the creative process of forming a business, running it and exploring a new market is not always full of obvious drama the same way that a crime story is, or at least not obvious to people who tend to view business in a hostile light. Some processes of bringing a new product to market might actually be very dramatic, and it is surprising that the arts world has not picked up on this more.
People have of course speculated why business tends to get treated like this. In part, artistic people, including extremely intelligent and creative ones, will regard the process of raising funds for a film or play as a chore, and often resent the process of getting money and having to suck up to people to get it. Also, creative people often do not get close to the grubby necessity of having to pay bills, meet salary payrolls and so on. As a result, a lot of people in the arts world do not really understand business all that well. The results tend to bear this out. Take UK soap operas on television, like the terrible Eastenders, Coronation Street or the US shows Dallas and Dynasty. (The latter two cases were admittedly self-parodies to a degree). In almost every case, the businessman – it is usually a man – is presented as a crook, or brutal, shallow, uninteresting and generally unpleasant. And even in so-called “reality” business tv shows like The Apprentice, starring the Amstrad computer firm boss Alan Sugar, the impression is that being a great businessman means being a total wanker, which alas is the impression that Sir Alan conveys, although for all I know he is a much nicer man in real life and is just hamming it up for the cameras.
So is there any hope? Well, this interesting blog item suggests that things might be brightening up. Why does it matter? It matters, I am afraid, because people these days seldom form their views by reading long books like Economics in One Lesson by Henry Hazlitt or Milton Friedman’s Capitalism and Freedom. For better or worse – and it is usually the worse – we get our opinions, our prejudices and our ideas from watching visual media.
On a qualifying note, I should add that I do not, of course, want television dramas or films to become propoganda for the views that I like, as a reaction to propoganda for views that I detest. Rather, it is just that it would be nice to see entrepreneuriship given a bit of a fairer shake from the luvvies, once in a while.
I can unreservedly plug this film, however, I can also repeat my admiration for this film as well. This old movie, Cash McCall, is worth a look although it might be hard to get hold of easily.
Rather like the current mania for ‘socially responsible investment’ (not investing in ‘sinful’ industries), and carbon emissions trading, another strong trend in the financial world these days is sharia-compliant finance. There are sharia-focused hedge funds (I kid you not), sharia bonds, sharia companies. It all boils down to how devout Muslims who want to raise finance or invest in business can do so while negotiating the complexities of their religious code and its ban on usury.
On one level, I have no quarrel with any of this so long as no coercion is involved and there might even be unintended benefits. If the capital markets can make it possible for people to live their lives in ways they feel ethically comfortable with, then that surely demonstrates the enormous flexibility and benefits of the market (it is as well to remember that anti-capitalist ideologies, be they religious or secular, rarely return the compliment in this way). Of course, in as much as sharia financing does screen out interest on loans, one suspects that the returns on such investments must logically lag behind those of regular capitalist activity, if certain money-making practices are deemed off-limits but then if Muslims wish to surrender some money to comply with their own beliefs, they are entitled to do so, just as environmentalists sacrifice some returns by refusing to put money into businesses such as oil or whatever.
I cannot help but feel there is something rather rum about all this sharia financial wheeler-dealing. Many of the financial instruments that are used for the purposes of sharia-compliant finance look awfully similar to regular capitalism to me. In fact, it is hard to see what is really the difference on ethical grounds between speculating on certain types of assets, such as gold, and lending money to a company in the hope that the firm will profit and repay the interest. It strikes me as being the financial equivalent of splitting hairs.
I also suspect, as this article at Bloomberg lays out, that a lot of people putting themselves around as sharia ‘experts’ are making a huge amount of money out of this trend and yet their motives appear in some ways to be as ‘selfish’ as that of any regular capitalist, not that I have a problem with the honest pursuit of long-term self interest, quite the opposite.
The moral prejudice against usury always struck me as irrational. Here is a good piece on the subject.
…to discover that carbon management and carbon credits are scams.
As for the carbon offsets so beloved of our elite Gulfstream Greens:
Companies and individuals rushing to go green have been spending millions on “carbon credit” projects that yield few if any environmental benefits.
A Financial Times investigation has uncovered widespread failings in the new markets for greenhouse gases, suggesting some organisations are paying for emissions reductions that do not take place.
Others are meanwhile making big profits from carbon trading for very small expenditure and in some cases for clean-ups that they would have made anyway.
Net effect of most carbon offsets: zero, or close to it. The Gulfstream Green crowd’s carbon footprints are just as big as before, in other words, although by writing a check they have given themselves permission to ignore this fact.
And from the statist/authoritarian wing, we have cap and trade, which many proponents like to claim is a market solution. As if a market in an artificial intangible permit issued by government and valued only because of government regulatory scheme is anything other than gussied up rent-seeking.
This system sets an overall cap on carbon emissions, creates a fixed set of carbon credits which add up to this cap level, and then allows companies to trade credits with each other. There really is no upside to this system, though proponents will argue that it does have a firm cap on carbon emissions. The downsides are that industries will cheat, price volatility will be really high, counties will cheat and the system privileges insiders:
By creating tradable financial assets worth tens of billions of dollars for governments to distribute among their industries and plants and then monitor, a global cap-and-trade program also introduces powerful incentives to cheat by corrupt and radical governments. Corrupt governments will almost certainly distribute permits in ways that favor their business supporters and understate their actual energy use and emissions.
And, of course, the final ‘solution’ to global warming is the carbon tax, which, like any tax, will grind down productivity, transfer wealth from producers to parasites, burden the development of truly poor areas, and (absent a trade war or true Global Total State) be applied only on a local basis and thus be ineffective to reduce carbon output in any meaningful way. Does anyone think that the worlds biggest carbon producer, China, will cripple its economy with this tax?
The three proposed solutions for the carbon problem are ineffective, corrupting, and damaging. Only someone in the grips of green religious mania, or with a profitable angle dialed in, could possibly be in favor of any of them.
Be very suspicious when you hear the phrase “gap between rich and poor”. In the print version of the Evening Standard (I could not find a link to the article), Financial editor Anthony Hilton writes an article that makes a lot of rather questionable unspoken assumptions.
Gordon Brown will not change the rules that attract tax exiles to London. he is right to want the super-rich to stay but we must be aware the increasing gap between rich and poor
…and…
The British economy could be about to enjoy another 50-year boom but the major challenge remains the division of the spoils
…and…
The unwritten deal is that they pay little tax in return for adding to the general prosperity of the nation. It may be unfair to normal British taxpayers, it may be unfair competition from the perspective of foreign competitor countries, but it is pragmatic and it has worked
Although this article goes on to say that it is now the uncontested view that market economies are the only way to go, Anthony Hilton’s words are redolent with an assumed underpinning Marxist meta-context, to use Samizdata-speak. The fact that there is a gap between rich and poor is bad is a given to him. Why is it bad? He does not say because his meta-context takes it as a given that such a notion will be shared by his readers.
And that an economy is something that must be ‘divided as spoils’ is very strongly indicative of the fixed quantity of wealth fallacy. It suggests that for someone to get richer, someone else has to get poorer, which is perhaps the single most important underpinning notion behind almost every form of command based economics. Wealth is seen as something “we” have to divide, rather than something which is created.
Finally, for it to be “unfair” for someone else to have less of their money taken by the state even when that person can bring a quality of economic value beyond that of “normal British taxpayers”, seems to indicate that Anthony Hilton thinks the person being taxed more (in relative terms) should feel aggrieved against the person being taxed less rather than feeling aggrieved against the state which is taxing them more. Of course Anthony Hilton might not mean that but somehow I suspect he does.
Make no mistake, Anthony Hilton is not some poisonous Polly Toynbee style Stalinist as he does accept that market economies are the way to go, yet in almost everything he writes there is a large (and often unspoken) ‘but’ implicit in notion after notion… which is why I do not actually think he really does like the idea of market economies when it really comes down to it.
For finance geeks and stock market punters, here is an article about the growing use of computer programmes to trade the equity, bond and other markets. Even as early as 1987, when equities fell dramatically – was it really nearly 20 year ago? – I vaguely recall reference to ‘programme-trading’, a process whereby orders to buy or sell a bunch of stocks was automated. Banks and hedge funds now use what are called algorithmic trading systems, which, in plain English, make use of recognisable patterns of behaviour that can be expressed mathematically in order to give out ‘buy’ or ‘sell’ signals in a market, spot trends, etc.
The usual worriers, not all of them anti-market people, may fret that all this mathematical wizardry, aided by the powers of modern computing, will make markets dangerously volatile, but as Iain Dey’s Telegraph article suggests, this does not appear to be the case. In recent years, in fact, global equity and bond markets have been pretty calm, although punctuated by the occasional sharp selloff, as happened in late February and early March. The last really big blowup was when Russia defaulted on its sovereign debt in 1998, triggering the meltdown of Long Term Capital Management, a hedge fund. When last year the fund Amranth nearly collapsed in the natural gas market, it hardly caused a wider ripple.
In fact, contrary to what the Will Huttons of this world might have us believe, the growing use of financial derivatives to offload risks seems to be making markets more, not less, able to deal with risk and ultimately, makes the whole financial system safer. That is not, of course to say that all is well. It is not. In Britain, a profligate government could yet put the market into a spin if the inflation problem gets worse (UK retail price inflation is nearly at 5%). House prices could, if interest rates rise as expected, take a nasty fallback. So there are gremlins in the systems. But the blame, as usual, should be pinned on the real culprits, and not computers or strange-sounding things like collateralised debt obligations.
Of course, this also explains why some of the best science graduates and post-graduates now work in the City, rather than making space rockets. Money talks.
(I have corrected the spelling of Iain Dey).
I still think of myself as an environmentalist. Almost everyone is interested in their living conditions. So I hope in that sense you do, too.
My problem with greenery is that I also think. Something that many greens have given up decades past. It was apparent to me even 20 years ago, that most were adapting their understanding of the problems – and indeed inventing problems – to match their prefabricated concept of a good society. I tried to fix that. I failed.
There are lots of exceptions, and I still have a lot of time for those who hang on to rationality. But unfortunately they tend to feel too much loyalty to the Green brand to distinguish themselves from it. Maybe this is good politics, but I think it is bad policy. Fostering craziness leads to the growth of craziness.
Here is a profession of the true, mad, faith from The Ecologist, a magazine that has otherwise been gently drifting from the hard-core towards the mainstream since Zac Goldsmith took over from his late uncle. ‘Cassandra’ writes:
I listened [to Julian Morris at a Conservative Party climate change seminar] in a sort of daze of disbelief that anyone professing to profess anything at all in matters academic could be so divorced from the realities around him and so blind as to where we are heading.
The rich countries have reached their current unsteady and unsustainable apex of ‘development’ by bankrupting our posterity of basic resources such as oil; by perpetrating crimes against the natural world in terms of species poisoning and elimination, of soil and oceanic degradation that will beggar humanity for generations; by promoting the biological hoodlumism of global warming; and by disintegrating our local community structures, the oldest social unit in all human history, to such a degree that our prisons and hospitals are full to overflowing and figures for such ills as cancer, venereal infections, juvenile behaviour disorders and psychotic forms of family breakdown are climbing to ever higher levels as millions resort increasingly to drugs and opiates to relieve the stresses all this wonderful development is imposing on them.
And so on, in a column so rich in lunacy as to defy fisking. Cancer and sexually transmitted disease are caused by wealth. Burning oil is “biological hoodlumism” but nonetheless it is a basic resource of which we are short. The corollary: “we should be embarking on a massive programme of de-industrialisation”.
My question for such anti-humanist zealots is the same logical positivist one that I have for the religious fundamentalists: is there any conceivable evidence from which you would not derive the same conclusions? The mythic pseudonym should be Procrustes, not Cassandra.
Tyler Cowen notes an unsavoury fact about the Chinese economic miracle:
…of the 3,220 Chinese citizens with a personal wealth of 100 million yuan ($13 million) or more, 2,932 are children of high-level cadres. Of the key positions in the five industrial sectors – finance, foreign trade, land development, large-scale engineering and securities – 85% to 90% are held by children of high-level cadres.
Cowen lifted the above quote from an interesting article that details how the regime in Beijing controls economic data coming out of the Middle Kingdom, which helps to prompt foreign investors to keep funding the great confidence trick that is the modern Chinese economy.
The family connections of China’s super-rich and captains of industry must be considered alongside rosy economic statistics provided that expound China’s development. These filial links between the commanding heights of China’s supposedly private sector and its government betray the fact that China Inc. is the unholy alliance of a dictatorial regime and the application of corrupted ‘free’ market ideals. Such an arrangement will fail in due course, and will probably fail spectacularly since it has come this far.
I am quite a fan of the fiction and some of the non-fiction of Ayn Rand, but I am the first to concede that some of the people who call themselves Objectivists are an assorted bunch, to put it politely. I have little time for some of the “official” Big-O Objectivists, like Leonard Peikoff, although I enjoy the writings of Tara Smith very much. The group of folk who liked Rand’s broad ideas but detested the narrow-mindedness and paranoia of some of the “official” group broke off, under the leadership of Dr. David Kelley, to form groups like The Objectivist Center. I like the TOC crowd and have corresponded with a few of them. I subscribe to The New Individualist, the monthly journal edited by the great Bob Bidinotto. What is so refreshing about it is that one does not get lots of shrilll lectures or dense philosophical treatises, but an engaging and assertive writing style coupled with an often impish sense of humour and enjoyment of the good things in life. It is a cracking read, in fact. Bob is also addicted to thriller novels, which puts him in the same bracket as me.
Okay, enough creeping from me, now for the nasty part. In the April print edition – the web version does not appear to be up yet – there are two articles that struck some decidedly jarring notes. The first, by Roger Donway, argues that basically, the late Milton Friedman was not a good advocate of capitalism and individualism, and in fact he used arguments that play straight into the hands of socialists. (I am not making this up). The second article, by Bidinotto, includes a defence of the use of torture in ’emergency’ situations, although Bob does not define ’emergencies’ very clearly and leaves begging the question about who gets to decide such matters. But I have pretty much argued on this torture issue before and will not repeat myself here. So I will focus instead on what Roger Donway has to say about Friedman.
To try to make this point, Donway argues that Friedman’s attack on the idea that firms have “social” responsibilities itself rests on a sort of utilitarian basis. Does it?
→ Continue reading: Sometimes, even a superb magazine gets it very wrong
The next time you read someone denounce the United States as a haven of unfettered capitalism, read this story and similar ones like it. It is a reminder that the cause of free trade has been on the back foot in the United States for some time.
Regardless of one’s feelings about the dark side of China – its dreadful human rights record, for starters – to slap tariffs on the country’s imports to buy a few votes from special interests in the US will come at a high price for future global economic growth and at a cost to US consumers of products like paper, steel or electronics. Adam Smith wrote the Wealth of Nations over 230 years ago. One might hope that his lessons would have sunk in by now.
An old refrain from protectionists and other fixed-wealth folk is that it is terrible that Britain does not have a major car manufacturer any more. Japanese and other nations’ car plants are in Britain, true, but we have little home-grown stuff. Jaguar is owned by Ford. Aston Martin has been taken over from Ford by a private equity firm. TVR has gone. Morgan is just about hanging on. Land Rover, Rolls Royce, Bentley, MG… they are all in the hands of evil foreigners.
This is largely a function of globalisation, with a bit of help from decades of restrictive practices, crap design and poor quality during the 1950s, 60s and 70s and early 80s. The car industry never really recovered. A whole generation of people learned to loathe British Leyland cars and bought Saabs, Renaults, Citroens and VWs whenever they could. Even though some gems remained – Landrovers and some of the Jags were fine – the reputation of the British car industry was devastated. The same nearly happened to Italian carmaker Fiat when Communist-run unions nearly destroyed that industry as well. But at least Italy had Ferrari.
However, the situation these days is quite bright. Many of the world’s top Formula 1 racing teams are based in Britain, like MacLaren in Surrey. And as this article demonstrates, while it may be cheaper to make cars in China or Brazil or Poland, many of the hottest car designers are still British. In the information economy, the value-added areas of design are what count, and it turns out that Britain is rather good at it.
Today is ‘Budget Day’, when the UK government lays before Parliament the amount of money it needs to raise to pay for its spending. Since the days of William Pitt, Robert Peel and William Gladstone in the late 18th and 19th centuries, the length of the tax code has grown at a terrifying pace. I came across this from a firm of accountants commenting on today’s performance by Gordon Brown:
Since 1997, the UK tax code runs to more than 8,300 pages, twice as long as it was 10 years ago, and the second-highest in the world’s top 20 countries apart from India , according to the World Bank and PriceWaterhouseCoopers
(Wall Street Journal, print edition)
No wonder accountants love Gordon. There is a sort of unhealthy symbiotic relationship between the whole financial services sector and Brown’s tax morass: the finance minister increases the complexity of the tax code; the accountants make money explaining this to their clients and helping some people to avoid it where possible. This in turn creates a whole industry of people with a vested interest in complexity. A flat-tax, for example, would put a lot of these financial whizzkids out of business and force them to do something more useful instead.
At a recent discussion with City types about this, this point was made very clear to me. Assuming we have taxes at all, they should be summarised on two sides of A4 paper, tops. The cost savings to business and individuals would be enormous.
Today, Brown grabbed superficial headlines by cutting the standard tax rate to 20p from 22p and cut the rate of corporation tax to 28p from 30p. It sounds like a good step and there will be some net winners from this. Good. However, as is always the case with this sly and driven character, the details are less flattering. The removal of the 10p rate for low earners, adjustments to National Insurance and corporate capital allowances means the overall balance is neutral rather than towards a smaller state. The state will take about 45-46% of UK GDP, compared with 37% in 1997 when Ken Clarke was in Brown’s job (it is worth remembering that Clarke is regarded as a leftwing Tory, but in certain respects his record is pretty good, or at least not as bad as it might be).
Watching the House of Commons debate on Brown’s speech, several things struck me. Tory leader David Cameron was plainly rattled by Brown playing the tax-cut card – however bogus a ploy Brown’s is. It might – just might – be enough of a shock to the Tories to realise that competing over which party can push up taxes the most and not get caught might not be a smart strategy with the voters. Brown is trying to pose as a tax-cutter. How odd it is that the Labour Party is now trying to make the running in this direction. Even though it is all hooey, it is interesting to see how Brown’s gambit may pay off.
The whole point of this budget, as far as I can see, is in Brown trying to squash Cameron: stealing some of his ‘Green clothes’ while also trying to persuade middle-income voters that Labour is actually more of a tax-cutting party than the Tories.
Even if this is utter rubbish – it is – the very fact that Brown wants to create such an impression is interesting. I am increasingly coming round to the view that libertarians and free-marketeer Tories should let Cameron realise that they prefer to keep in Labour than let the Tories win on a Big Government agenda.
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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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