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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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.
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.
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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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