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]
|
If you are an even occasional Samizdata reader I am sure you will find this interview with Milton and Rose Friedman of great interest. Their opinion on immigration, for example, is predictably libertarian:
Is immigration, I asked–especially illegal immigration–good for the economy, or bad? “It’s neither one nor the other,” Mr. Friedman replied. “But it’s good for freedom. In principle, you ought to have completely open immigration. But with the welfare state it’s really not possible to do that. . . . She’s an immigrant,” he added, pointing to his wife. “She came in just before World War I.” (Rose–smiling gently: “I was two years old.”) “If there were no welfare state,” he continued, “you could have open immigration, because everybody would be responsible for himself.” Was he suggesting that one can’t have immigration reform without welfare reform? “No, you can have immigration reform, but you can’t have open immigration without largely the elimination of welfare.
I would have loved to have been there to ask him about my ideas on immigration and the politics of the minimum wage.
A while back I suggested that the the high price of gold may be a harbinger of rising inflation, and that even though some people suggest that gold prices are a fogeyish obsession of a few “gold bugs”, the price movement of this golden metal can still offer an early indicator of trouble.
I think I can say a mild “I told you so”. After having been off the radar for years, due to a variety of factors, inflation is rearing its head again. To an extent, of course, the cost of living has been rising in Britain a lot more than official statistics suggest because of the way in which Britain’s finance minister, Gordon Brown, has stripped out things like housing price movements and taxes to make the figures look better. (In all fairness to Brown, his Tory predecessors were no better in this respect). Anatole Kaletsky has a good article here warning that the mighty U.S. Federal Reserve is in danger of letting the inflation genie out of the bottle. A further rise in rates, he says, may be needed, possibly raising the risk of a recession. He may be right. The Fed’s key lending rate is 5.25 percent and has risen 17 times since its low-point around the time of 9/11.
It is a bit rich, though, for an unashamed neo-Keynesian like Kaletsky to bash the Fed for failing to be tough enough, and for not acting sooner, on rates. Kaletsky has not been shy of bashing the European Central Bank for its supposedly restrictive approach on interest rates. The problem of course is that no central bank chief, even if he or she has the wisdom of Solomon, can anticipate perfectly the right course for interest rates. If such a central bank makes an error, that mistake can be enormously costly in terms of jobs, livelihoods, even the loss of homes (I recall a now-departed commenter, called Euan Gray, dismiss such concerns with a sort of “let the experts sort it out” approach of his.)
The perils of central bankers getting the economic signals wrong explains why some classical liberal economists remain fond of F.A. Hayek’s argument for a return to a sort of commodity-backed, competitive currency system. Yes, such a system would have its problems and banks might go bust from time to time. But although such a banking system would have its crises, they would be relatively small compared to the risk of an entire economic region getting into trouble on account of a mistake by a central bank chief and his economists. The bigger and more powerful the central bank, the bigger the potential cockups. That remains for me a great attraction of Hayek’s idea: mistakes will get made, but those mistakes will be dispersed and people will have options to flee a delinquently-run currency.
That is to ask, who actually foots the bill for business taxes? It is much easier for a politician to raise taxes on businesses, which do not vote and are constantly portrayed as the villains by our virulently ignorant press, than on individuals. But we learn, from todays (subscription-only) Wall Street Journal Political Diary, that it is not so simple::
A new study by American Enterprise Institute scholars Kevin Hassett and Aparna Mathur shows that the corporate income tax is for the most part paid by workers in the form of lower wages. They found manufacturing wages were negatively associated with high corporate tax rates in a study of 72 nations.
Taxes have to come from somewhere. Businesses will pass costs on to those with the least bargaining power. Businesses have to choose between holding down wages, charging customers more (hard to do, in a competitive market), paying capital less (very hard to do, in the brutally competitive capital markets), and cutting capital re-investment (not smart if you want to be in business in three years). In the absence of an extremely tight labor market, keeping wages down is the path of least resistance.
I think Tory leader, windmill pioneer and attendee of uber-Chav celebrity bashes, David Cameron, might want to take a break from the social whirl and read this about the much-derided U.S. tax cuts of 2003:
In the nine quarters preceding that cut on dividend and capital gains rates and in marginal income-tax rates, economic growth averaged an annual 1.1%. In the 12 quarters–three full years–since the tax cut passed, growth has averaged a remarkable 4%. Monetary policy has also fueled this expansion, but the tax cuts were perfectly targeted to improve the incentives to take risks among businesses shell-shocked by the dot-com collapse, 9/11 and Sarbanes-Oxley.
This growth in turn has produced a record flood of tax revenues, just as the most ebullient supply-siders predicted. In the first nine months of fiscal 2006, tax revenues have climbed by $206 billion, or nearly 13%. As the Congressional Budget Office recently noted, “That increase represents the second-highest rate of growth for that nine-month period in the past 25 years”–exceeded only by the year before. For all of fiscal 2005, revenues rose by $274 billion, or 15%. We should add that CBO itself failed to anticipate this revenue boom, as the nearby table shows. Maybe its economists should rethink their models.
Britain’s Conservatives believed – at least during the 1980s when a certain Nigel Lawson was Chancellor – that cuts to marginal tax rates could actually generate more, not less revenue for the State, as well as being a good thing in its own right for widening economic liberty and reducing the bite taken out of the pockets of the citizenry. Now, I know that some libertarian purists out there might actually be suspicious about a measure that would raise more revenues, even if it is a good thing for individual taxpayers. I say let purity be damned. we know that politicians are not motivated much by supposed abstract concerns about the balance between the individual and the State these days, but the practical benefits of cutting tax rates should still resonate with our political classes. The Laffer Curve still operates, at least if you accept the WSJ article. Even current Chancellor Gordon Brown might wake up to the sort of facts that the Wall Street Journal is on about. It would be nice to think that the Tories would seize on such data, make a fuss, point out the benefits of flattening the tax code, simplifying it and cutting rates. Instead, unless I am missing out here, is silence.
Maybe the implosion of the current government means the opposition can afford to slump in the hammock during the back end of summer and wait. But it would be nice to think that they could be a tad more ambitious. Only a tad – I would not want our Dave to break into a sweat or anything.
American economist Thomas Sowell remains, in my view, one of the “must-read” authors for folk interested in the case for liberal markets and critiques of well-intentioned but hubristic social policy. In one of his books, The Vision of the Anointed, he hits upon a key fact that is so often ignored by writers making statements such as “X percent of the population own Y percent of the wealth”, and then proceed, in terms of great indignation, to argue for massive redistribution of wealth to rectify said terrible state of affairs. Sowell points out that what such statements miss out is that we are all getting older, our lives change, and as we do so, it is common for folk to pass from one wealth bracket to another:
“One common source of needless alarm about statistics is a failure to understand that a given series of numbers may represent a changing assortment of people. A joke has it that, upon being told that a pedestrian is hit by a car every 20 minutes in New York, the listener responded, “He must get awfully tired of that!” Exactly the same reasoning – or lack of reasoning – appears in statistics that are intended to be taken seriously.” (page 43).
I have read Andrew Sullivan’s blog pretty much from the moment he started it. I have a natural sympathy for anyone who defies conventional stereotypes, and a man who is Catholic, gay and a small-government Reaganite conservative, a fan of Madonna and Michael Oakeshott certainly breaks more sterotypes than most. He has been magnificent in taking a stand on the issue of torture, for example. But even our heroes – and Sullivan is one in my eyes – have their feet of clay or views that I regard as stand-out dumb. And on the issue of cars, Sullivan (who does not drive) reverts to nannystatism in all its ugly glory. He endorses an article by Jonathan Rauch arguing that President Bush should press for an international pact to phase out the use of gasoline in cars over the next 30 years. Oh great. So do we humble, much-harassed motorists get a say in this? Don’t give me a line about how this would be ‘democratically’ decided. Oh yeah. Why not leave it to the market, already driving new alternatives to petroleum-based engines? If the real price of oil continues to be high, as it is at the moment, then we will get more hybrids, more hydrogen-powered cars, more innovations and new transport sources, without the need for some Grand International Treaty or 30-year deadline. If Bush did make such a pronouncement, how seriously would anyone take it? Would it not be regarded as the sort of ‘eye-catching initiative’ one has come to associate with our own Tony Blair.
A far better idea, in fact, would be to rely on innovation contests such as the X-Prize to encourage new technologies rather than go for a big Treaty with a deadline. Now that strikes me as the sort of idea a small-government advocate like Sullivan should be pushing.
I can understand the wish to reduce use of oil from the Middle East and curb C02 emissions. But in my gut I feel that Sullivan and others like him just don’t like cars very much and are mystified by most American’ love of a set of wheels (clue, Andrew – America is seriously BIG). Sullivan has lived in the States now for more than two decades, but I fear that in some way, the fella never really left this little damp island known as Britain.
One of my favourite blogs just now is China Law Blog. Its writers are very pro-freedom and pro-capitalist, and are optimistic about the future progress of China, both economically and politically, despite all the present miseries, muddles and horrors.
A recent post there by Dan Harris is about the relationship between the rise of capitalism in China, and corruption. The cliché is that the former causes the latter, by providing the money for it. The price of politicians in China is being driven up by the increased amounts of money now available to pay for them. Ergo, there is more corruption in China now, because there must be. Besides, better to blame corruption on the evil capitalist buyers of politicians than on the sellers, the corrupt politicians themselves.
But the picture Harris paints, helped by a recent World Bank study, written about by one of its authors in Newsweek, is that corruption, which was already a well-established fact in China well before capitalism got into its recent stride there, inhibits capitalism. However, once relatively uncorrupt, relatively uninhibited capitalism gets established and starts to spread, well, it spreads, and with it spreads the habit and the idea of non-corruption.
The deeply corrupt and long established industrial cities, with their big state-owned enterprises, have remained corrupt, and have stagnated. The new industrial cities, many of them near to the coast, had pretty much no industry a generation ago, and hence no old industry to protect with corrupt and discriminatory measures against new enterprises. In these newly erupting cities, corruption is not nearly so great. That is why they are erupting. The claim that capitalism causes corruption is wrong. Lack of corruption causes capitalism, and capitalism diminishes corruption by rewarding its absence.
Coastal cities. Lots of new industry. Openness to global ideas and influences. Sounds familiar, does it not? It is as if those Four Tigers are now raising a mass of tiger cubs on the mainland, and I bet you that lots of the exact same people who made the first tigers are now deeply involved in raising the new litter.
China, viewed from a distance, through blog postings and news stories, now seems very Victorian British to me. Yes there is a universe of Dickensian misery, but there is also a rising commercial class and a rising puritanical zeal for honesty, first established by those who do trade and by those who see the point of trade, but now, it would seem, starting to infect political activity. Meanwhile, democracy advances, step by little cautious step, just as it did in Victorian Britain. At present, the big deal is that they are allowing elections for Communist Party posts, and expanding the Communist Party. Sort of like how the Victorian aristocracy of Britain co-opted the new capitalists, and also became much more productive sorts of capitalists themselves. For more about this process, see this article.
Others, equally devoted to the spread of the free market (they would say more so), like these guys have a much gloomier view of modern Chinese development. The fat cats of state capitalism have merely found a new way to skim off the cream. They have a point. Like Victorian Britain, China now is a harsh and unfair place, unless you are one of the lucky ones who is working hard and is being rewarded.
To switch metaphors from cats to cookery, at least now in China, amidst all the broken eggs, there is the beginning of a seriously tasty omelette to be seen sizzling in the frying pan. A few decades ago, all they had to show for their broken eggs was broken eggs.
In connection with my regular writing duties here (at one of the blogs that Alex Singleton was recently so kind about) I have been unable to avoid learning about the huge takeover battle that now surrounds Arcelor. I hazarded the guess over a month ago that Lakshmi Mittal, one of the protagonists, seemed to be doing okay, despite much opposition, and now it does indeed look as if he will win.
Cécille Philippe‘s latest piece for the Molinari Economic Institute may have been particularly inspired by this huge news story, although all that she alludes to is a “large wave of takeovers”. Anyway, she writes lucidly about the benefits of takeovers, and of the constant disciplinary effect they have upon the managers of large enterprises, concluding thus:
Takeovers make it possible to put an end to sources of loss, to increase the wealth of shareholders and thus to preserve employment which would otherwise have been lost if the company had been brought to bankruptcy for failing to satisfy its consumers. Takeovers are thus an alternative to bankruptcy which leads in a brutal way to a total reallocation of assets to better performing companies.
An industry’s prosperity cannot be decided by law, it has to be created. If one allows the owner’s deeds to be exchanged freely on the financial markets, they end up in the hands of those who think they are most capable of developing them. The reason why they are better placed than the public authorities to carry out this task is that they will have to undergo the financial consequences of their actions in the event of failure. The bureaucrats while escaping the sanction of loss and profit, cannot do other than carry out industrial projects by hazard and chance.
It is thus necessary to recognise the legitimacy of takeovers and to make sure that foreigners are free to make purchase offers. It is equally important that nationals are free to compete with them. The freer the financial market is and the more the shareholders’ right is respected, the more the industry’s prosperity depends on industrial projects being adequate to consumers’ requirements.
Most of which will be fairly obvious to the average Samizdata reader. But France is, perhaps, a country in which such obvious propositions need to be stated with particular clarity just now. Knowing Cécille Philippe a little, I not only hope but assume that she is also doing this in French.
However, Arcelor is a very special case, and Cécille is probably right not to name that particular case in this piece, because it would complicate her argument dreadfully. With Arcelor, wider considerations, as they say, are at stake. However, having now come across this earlier piece, I am surer than ever that it is the Arcelor case that she, and her, I trust, numerous French readers, have been particularly thinking about.
Writing on the CNE Competition Blog, my co-Samizdatista Brian Micklethwait responded to my post on the present anti-trust investigation of British Airways, by in response to a mention on my part of “landing fees”, bringing up the question of whether there should be a free market in airport landing slots. Brian clearly has in mind something like an airport charging a fee for aircraft to land that is driven by demand, and setting it at a point such that the supply and demand curves meet, and thus allocating airport capacity using market pricing signals.
While I agree completely that this would be the optimal way of allocating airport capacity, things are never going to work like this. In aviation industry terms, I didn’t mention the question of landing slots at all. I mentioned “landing charges”. Slots are seen as something else. Even when people talk about a free market in landing slots, they still aren’t talking about landing charges specifically. Landing rights, landing slots, and landing fees are all separate from one another, and it wouldn’t occur to many or most people in the aviation industry that they are connected. The situation is an awful mess, and if it is ever going to be untangled, it is necessary to understand it.
For this reason, I am going to attempt to explain it. This is going to be rather nerdy. If Transport Blog still existed, it would be a fine post for that blog. However, it does not, so I will do it here. → Continue reading: The situation is even less simple than you think
The American standup comedian and actor Denis Leary has a wonderfully raucous sketch in his Lock n’ Load show when he loses his temper, unable to get someone, anyone, to serve him a regular, ordinary cup of coffee. You feel for the irascible Irish-American as the fella goes on his folorn search (he fails).
Coffee. I drink the stuff every day and there is no doubt that in my brief lifetime, it has gone from being the nasty stuff brewed from ‘instant’ granules in a jar to a massive industry boasting tremendous variety and choice. Companies like Coffee Republic and of course, Starbucks, have played a huge part in this. Sometimes the sheer headspinning variety of choices and the names of some coffees bring out the Denis Leary in me, but on the whole I have to accept that this choice has done a lot for the consumer. There is a fine article here by Edward Hudgins of the The Objectivist Center defending Starbucks and other chains from the chidings of our modern-day health scolds. There is also a fine and detailed article here via Reason magazine about the Fair Trade coffee movement. While fairly friendly to the Fair Trade outfits, the article, written by Kerry Howley, also raises some uncomfortable questions about just who wins or loses from the Fair Trade business model, and whether it is really simply about feel-good consumerism, benefiting poor farmers or just raising the quality of coffee. However, it is a paradox that the Fair Trade model has become a hugely successful business phenomenon. The FT brand is ironically, pitched at precisely the sort of folk who might claim to despise brands generally, writes Howley, in a passage reminiscent of David Brook’s work, Bobos in Paradise:
“The hippie spilling buckets of ake blood may never break bread (or sip coffee with straight-laced businessmen talking quality, but the consumer has little to lose from a synthesis of strong words and strong lattes. Another Starbucks, a better coffee, a calmer conscience: What caffeine fiend can argue?”
Related thoughts here.
European steel giant Arcelor looks as if it is going to be bought by the Indian Mittal family company. If the ink is allowed to dry on this deal, it will create the world’s biggest steelmaker and do so at a time when metal prices have been rising strongly, as have pretty much most other commodities.
That India’s economy has been on the rise is pretty much a part of the received economic wisdom these days. What is clear, though, is that country is a lot more than about lots of call centres. It is becoming a breeding ground for a whole crop of entrepreneurs able and willing to take on the biggest businesses in the established industrial world and where necessary, put a few noses out of joint in the process.
British Airways on Thursday announced that the British Office of Fair Trading (OFT) and the US Department of Justice (DOJ) are investigating the airline regarding passenger ticket pricing, in particular about the degree of ‘fuel surcharges’ that have been added to ticket prices in the current environment of high oil prices. For some reason airlines put up prices in such environments by adding this separate ‘surcharge’, rather than simply increasing prices the way they would in response to an increase in any other cost. It is believed that a number of other airlines have been involved in this investigation, (Virgin Atlantic, American Airlines and United Airlines) but probably in the context of providing information rather than being targets for investigation.
Accusations are that the airlines were behaving as a cartel. If the various airlines were found to have colluded in setting the level of these price increases, then theoretically the airlines could be subject to huge fines and the executives of the airlines to prison sentences. The severity of these potential punishments means that actual collusion is unlikely to have occurred, and that what the airlines are doing is responding to one another’s price increases, and are simply taking advantage of an oligopolistic market lacking in competition. I can hardly blame them for that.
Why do I think this? Well, the four airlines mentioned (BA, Virgin, AA, and UA) are the four ‘designated carriers’ under the Bermuda II agreement between the US and UK.
What does this mean? Well, I have explained this in detail before, but a quick summary. Between the end of World War 2 and about 1980, international aviation was a cartel, in a very explicit and literal sense. Only a very small number of airlines were allowed to operate on international routes (often only two airlines – the national airline of each country – were allowed to operate between country A and country B). Fares, routes, and frequencies were set by bureaucrats and governments, and airlines were often not allowed to compete with each other on price, at least not explicitly. (In reality they did, which led to a large grey market in international tickets where tickets were sold through third party ‘bucket shops’ and the customer paid a lot less than the price written on the ticket). Over the years this has broken down in some places and some parts of the aviation market (eg flights within the EU) are extremely competitive, but in certain areas of the market quite a lot of the old structure still exists. → Continue reading: The lunatics take over the asylum
|
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.
|
