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]
|
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.
Sorry to link to a depressing story on such a beautiful Friday morning here in ol’ London town, but this Bloomberg article on what is happening in Zimbabwe is a good read – about the monster who has crippled that beautiful country and the desperation of the people living in it.
Just think of the missed opportunity: a country with some of the richest natural resources in the world, a great climate for agriculture, English-speaking. Zimbabwe, liberated from the worst aspects of white rule and under the rule of law, could have been the Australia or New Zealand of southern Africa. I fear it will serve as a textbook example instead of the evils of political cronyism and warmed up Stalinist economics.
I have heard it said many times that a country with natural resources is almost cursed, while a tiny island with no resources other than the entrepreneurial gusto of its inhabitants is blessed. Zimbabwe certainly adds to that idea.
Veteran academic and writer Tibor Machan pens a nice defence of outsourcing here, using the example of going to the barber’s to get his hair cut. Like the 19th Century liberal economics writer Frederick Bastiat, he knows how to take a very simple example to demonstrate the absurdity of the idea that there is a ‘fixed’ amount of work out there to be performed, and that somehow, certain people have a prior claim to your wealth and time. They do not.
In having another bite at the Green issue, one thing struck me as I surfed around the Net looking at some of the comments made by people about the idea of the Tories’ trying to stop people from flying to holiday and business destinations. Some people genuinely seem to feel that a crackdown on global warming, and hence a halt to rising sea levels, is good for the poor. So we capitalist zealots should stop trying to argue that Tory leader David Cameron or Labour’s Tony Blair are acting out of snobbish disdain for Essex Man and the latter’s desire to go to Malaga for a cheap holiday. Oh no.
I guess it is true that if sea levels do rise as much as the gloomier scientists suggest, and the Earth gets progressively hotter, that poor people will suffer disproportionately from that. Air conditioning costs money. Buying a home away from a flood plain also costs money. I recall that about 3 years ago, hundreds, in fact thousands of French elderly people died because all the pharmacies were shut for the August holidays and they could not get treatment. That is what poverty does – it cuts your optiions and means of escape from trouble. So maybe David Cameron is acting out of paternalistic concern for the poor — in the future.
And that is the kicker. Even if global warming is man-made and can be reversed, the benefits of such an expensive exercise will not come through for decades, centuries, or even longer. How can the interests of a guy who cannot afford an expensive flight be set against the interests of someone living in 2300? Why should a politician, answerable to an electorate, sacrifice or ask to sacrifice its interests for the interests of people in such a long time to come, and over a theory or set of theories that are, at best, not proven to the standards of a court of law?
We have been beastly to Cameron and his ilk on this site lately, and with ample justification. If Cameron wants to explain quite why the ordinary citizen should be shafted, yet again, by some grand project to make the world a better place in centuries to come, let him make that case.
Meanwhile, my boss, not the most excitable of men, said, in a quite unsolicited moment of rage this morning, that Cameron was a “communist”. He is not even a rightwing Tory voter. I wonder if this view is starting to spread.
When commenting on the recent Chinese stockmarket meltdown, Glenn Reynolds wondered if a prediction posted on Samizdata some time ago could be coming to pass. Whilst exposure for Samizdata on Instapundit is nice, I think Mr Reynolds is wrong if he perceives this stockmarket wobble to be a potential opening salvo of the economic holocaust presaged on these pages early last year. Far from heralding the collapse, it will delay the inevitable.
In spite of a widespread belief in China’s embrace of free-market capitalism, enormous economic distortions characterise modern China’s economy. For example, why is it that, relative to China’s economic footprint, the Chinese stock market is rather pathetically stunted – especially in light of the vast savings pool the Chinese people have accumulated? As mentioned in the above article, the Chinese are great savers and they tend to deposit these savings into bank accounts because alternative investment opportunities are limited compared to those offered to a Western investor. Consider the following:
Why does the Chinese investor not sink his surplus funds into foreign commodities? Because he is restricted from doing so.
Why does he not invest in Chinese stocks? Because he (probably correctly) views the Chinese stock market as being distinctly ropey.
In light of these state-imposed distortive realities, what does one do with one’s savings? One puts them in the bank, of course. Predictably, the banks are awash with deposits. Under these circumstances, the principles of fractional reserve banking have been taken to the extreme in China, allowing the central government to durably zombify huge segments of the otherwise bankrupt state-owned industrial sector by forcing the “big four” state-owned banks to continuously loan depositors’ money to these failed state enterprises, in the full knowledge that these loans will never be repaid.
This fiscal expedience allows the central government to postpone the nasty (and potentially regime-threatening) hangover that inevitably follows a sustained attempt at central economic planning like that witnessed during the Mao era. Unfortunately, it cannot continue indefinitely. Firstly, it provides no market incentive – the only incentive that works – for the wayward state-owned enterprises to reform. If they do not reform into conventional free-market actors, they will always require such charity. Secondly, this charity can only continue if Chinese bank account holders continue to top up (or at the very least maintain) their balances.
Of course, the central government knows the above only too well. If China Inc. in its current incarnation is to survive, it is critically important that the Chinese do not withdraw too much of their savings from the state-owned banks to invest in other pursuits, as this will cause the banking system – and “socialism with Chinese characteristics” – to collapse. The central government probably engineered the recent stockmarket fluctuation to buttress the perception of insecurity that shrouds potential investment targets like Chinese stocks, and are no doubt well pleased with the message that was subsequently delivered to the average Chinese investor. This does not mean that the current Chinese economic model is now secure – it will unravel at some point in the future. However, that point has been postponed with a ‘hair of the dog’-type solution, which will make the eventual hangover even more severe.
The central government has merely bought some time.
George Soros, a man who can annoy with some of his less-than-brilliant pronouncements on public affairs, nevertheless is an investor of genius. Well, at least he was in the 80s and early 90s when, purely out of glorious avarice, of course, he helped push Britain out of the European Exchange Rate Mechanism in September, 1992. This event irreversibly damaged the reputation for competence of the then-Tory government of John Major and Chancellor Norman Lamont. Soros’s fortunes in the 1990s waxed, although he failed to exploit fully the 1990s dotcom boom and now prefers to travel the world dispensing advice. He is loathed by many on the right for his support for the Democrats. I saw him give testimony to a Treasury Select Commitee in the House of Commons a few years ago and felt that this was a brilliant financier who, like many men who are brilliant in one area, can be often rather silly in other areas (Einstein springs to mind).
But the beauty of open markets is, that even if you disagree with the views of a person, you can still trade with that person and make each other better off. Voltaire, when he travelled around England in the 18th Century, marvelled at the London Stock Exchange and how people of all religions could and did transact with one another. Well, Soros, a lefty financier, has just made the sort of deal that is likely to send those charming folk of the Democratic Undergound off the edge. Tee-hee.
The president of our National Welfare Rights Network is a man named Michael Raper.
Surely an excellent name for someone who constantly thinks about how best to take advantage of taxpayers.
When I read the following column by Will Hutton, lambasting private equity firms for daring to take over big UK companies like supermarket J. Sainsbury or whoever, I laughed out loud. Here is his lead paragraph in Friday’s Guardian:
It is time to come to the defence of the public limited company, one of the great Enlightenment gifts to western civilisation. Increasingly capital, in the quest for higher returns to make vast personal fortunes, is going private to escape the demands of public accountability on stock markets. If uninterrupted, the long-term adverse consequences of this privatisation of capital for our economy, society and democracy will be profound.
Rubbish. Firms that are floated on the London Stock Exchange, Nasdaq or the Martian 250 are privately owned, Will. They are not owned by the state. True, limited liability laws, as the libertarian writer and friend of mine, Sean Gabb, likes to point out, present serious issues in terms of the gap between ownership, responsibility and control (I wrote about this topic a while ago). But to argue that private equity shops like Apax, Carlyle or Texas Pacific – those evil Amerikans – are taking what should be ‘public’ into grubby ‘private’ hands is economic illiterate nonsense. Firms exist to make a profit, Will. As Milton Friedman trenchantly put it without hint of apology to the gods of ‘social responsibility’, a company’s job is to make a profit for their owners, not to further whatever corporatist/fascist/socialist/ist agenda that happens to attract the gaze of Guardian editorialists.
Why the current wave of hysteria about private equity? It is being fuelled by two things: fear and envy. Fear of the power of these sometimes shadowy firms to buy up famous companies with great wodges of debt finance, or leverage, as the finance geeks put it. Envy, because of the large bonuses that the private equity honchos pay themselves and the often high profits they make in turning firms around. And of course no story about private equity can be written without referring to the Masters of the Universe lampooned by Oliver Stone in Wall Street or portrayed in books with such objective titles like Barbarians at the Gate.
In the main, what these firms do is target cash-rich firms that are run by often lazy executives who have presided over crappy business decisions. Take the meltdown of Marconi a few years ago, one of Britain’s most famous companies. That was a listed company. The destruction of value and jobs in that company remains, in my mind, one of the most disgraceful episodes in British corporate history and who knows, it might have been saved from making big errors had a private equity fund been in charge, rather than deluded executives. Private equity firms helped stymie Deutsche Börse’s foolish bid for the London Stock Exchange 2 years ago, and have turned around businesses. They typically buy and hold a firm for 5 years or more, take a hands-on approach to running firms before spinning them off to another buyer or floating them in an IPO. So Will Hutton should spare us sentimental guff about how limited liability firms floated on the stock exchange represent the perfect model of doing business or something that Adam Smith or Voltaire would exalt. They are merely one of the many ways in which economic activity manifests itself. As interest rates rise and the economic cycle turns, some of the excesses of leveraged buyouts will fade and private equity transactions will decline. No doubt Will Hutton will forget everything he has written and go back to bashing listed firms for their “short-termist” fixation with pleasing shareholders, or whatever.
As mentioned several times in these pages, by the way, one additional reason why listed firms go private is because their bosses prefer not to have to put up with onerous reporting requirements under US and other laws, like the onerous Sarbanes-Oxley rules. If Hutton or other big government advocates are worried about the migration of companies off the listed stock market, they might like to remember that point.
Right, my rant of the day is over. Enjoy the rest of the weekend.
Update: have slightly amended the text about Marconi, just to reinforce the point. One commenter, Bryan Appleyard, has argued that firms become “cultural” forces, as if released from the laws of supply and demand. I have heard some odd attacks on private ownership and M&A before, but that is a new one. Companies that have been taken over by private equity include the Automobile Association, Kwik Fit, Debenhams, various property firms, HEA, the US health chain, and many more. I don’t really see how the cultural issue makes a bit of difference to the folk who work in them or buy their products.
I’d also add that I think some of these private equity deals are in danger of coming unstuck, and no doubt much gloating and gnashing of teeth will occur when or if this happens. It is partly a function of low interest rates and the impact this has on asset prices. Monetary growth is strong at the moment and this is one of the ways in which money supply growth comes out. Another lesson from Friedman to remember.
Sometimes you see a set of numbers and they really make you sit up and gasp:
Last year, more than 350 companies went public in Europe, selling $86
billion of stock, according to data compiled by Bloomberg. In the U.S.,
235 companies raised $48 billion in IPOs. In 1999, 507 companies went
public in the U.S., selling a combined $63.93 billion of stock. Not one of the 10
largest stock issues of 2006 was listed in New York.
Nice work, Messrs Sarbanes, Oxley and Spitzer.
|
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.
|
