We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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I 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
There is a remarkable article on Media Influencer about Sir Martin Sorrell, the CEO of WPP (a marketing communications company), in which makes a very perplexing assertion. He has described the internet, an overwhelmingly unregulated (i.e. not politically directed) social network, as ‘socialist anarchy’, adding “The internet is the most socialistic force you’ve ever seen”. Of course he is not the first person to make a preposterous conflation of those sort of terms, neither will he be the last spout such oxymorons. Sorrell is clearly someone who has little grasp of the meaning of the political terms he bandies about, which I find surprising considering the man is running a communications company.
Although the internet could be reasonably called ‘anarchic’ in the most loose sence of the word as it is largely unregulated by states (though that varies), the internet is not really ‘anarchy’ as national laws regarding defamation (etc.) are often invoked regarding conduct on-line… but the real absurdity is to describe it as ‘socialist’. Socialist? In what way is the internet being allocated to people via political direction? In what way is the internet being used to impose collectivism and politically constrain markets?
I can only speculate what confused reasoning leads Sorrell call the internet ‘socialist’. Perhaps because the web is extremely threatening to the business model of WPP and most other ‘marketing communications’ companies (threatening as in “you are going to be dis-intermediated and destroyed”), he might therefore see the internet a sort of virtual jacquerie, a horde of angry torch bearing peasants moving towards his corporate castle in a threatening manner, thereby deducing that anyone who destroys a company’s business model must be a ‘socialist’ because socialists want to destroy companies, right?
I am just guessing here of course, but perhaps Sorrell needs to read about capitalist ‘creative destruction’ and reconcile himself to the fact his industry is in the process of being creatively destroyed by capitalism. The reason sections of the economy go the way of the dodo is nearly always caused by people following eminently capitalistic and quite several (as opposed to collective) motivations in responce to changing conditions. The internet is the most individually empowering tool in human history and has nothing to do with socialism but rather a lot to do with creating dis-economies of scale and breaking the mass markets so beloved of large businesses into a mass of niche markets… the key word here being markets.
Let it never be said Samizdata does not listen to its public. I am sure the sainted editors would prefer me to add at this point that we reserve the right, however, to listen carelessly and ignore your views if it suits us. Be that as it may, I was at the Adam Smith Institute’s Tax Freedom Day celebrations this evening, and one of our readers, having said some very complimentary things, made a rather brilliant suggestion that I am now going to steal.
Inflation, we are told, is at a long-term low, because of that nice Mr Brown’s prudence. My friend points out however, that part of Mr Brown’s prudence has been prudently to exclude from many of his more interesting taxation devices, the items forming the Retail Price Index. He proposes a new index, of all those items whose prices the Chancellor controls because their consumer price is largely duty, or because they are practical necessities for most people whose price is directly set by the government. The latter are excluded from RPI by definition and the (plausible) suggestion is that such prices have risen very fast indeed.
The Gordon Adjusted Price (“GAP”) index would explain where your money goes, and why so many people find their pockets emptier despite notionally higher incomes and low inflation. It might make visible some of those hidden taxes. I have a hunch that the cost of living is actually falling in Britain, but the cost of government more than takes up the slack. Is it true? The GAP might provide a measure.
Tickets for the Ashes series of cricket Test matches in the Australian summer went on sale yesterday to unprecedented levels of demand. Interest in cricket contests between England and Australia, which have a long history (the first series of Test matches was in 1877) is at an all time high in the wake of England’s winning the 2005 series. The return contest in the Australian summer of 2006/07 has been eagerly awaited ever since.
The demand for tickets was expected to be strong, but Cricket Australia’s ticketing system was overwhelmed by the public’s response. I was not surprised by that.
As is now traditional, the travelling English support is likely to be tremendous. Even when English sporting teams have been uncompetitive, their travelling supporters have stuck by them; in 2006 England’s football and cricket teams are doing quite well and naturally England’s supporters want to be there for the good times. Thanks to the Internet and air travel, now they can be, and in greater numbers then ever.
This is not exactly welcomed by Australia’s cricket administrators. They fondly imagined that they could sell out their stadia to domestic audiences, rake in the cash, and wave the patriotic flag and all the usual sentimental blather. They forget that, for all its history, cricket is an entertainment, and a business. Cricket administrators sell entertainment in the form of television rights and seats at stadia.
And of course when you mismanage your pricing, one of two things happen. Either you don’t sell your tickets at all, or they become so valuable that profits can be made by reselling them. The latter is happening in this case. And Cricket Australia CEO is not happy about it:
Scalpers have also cashed in by immediately placing their buys on EBay for prices thousands of dollars more than their retail value. “Scalpers using EBay are a disgraceful insult to normal, loyal cricket fans who should have access to these tickets at face value,” James Sutherland, Cricket Australia’s CEO, said. Organisers have told people purchasing black market tickets to beware and say they have asked experts about tracking the passes.
Scalping on this scale indicates that there’s a severe underestimation of the financial value of the tickets. It’s a bit rich, also, to see an implied threat against purchasers of EBay tickets as well. Once Cricket Australia has sold the tickets, they are the property of whoever owns them, and the owner has the natural right to use them, sell them on EBay, or use them as Christmas decorations if they so wish.
It is disappointing, but not entirely surprising, that the CEO of a private commercial organisation such as Cricket Australia does not know, or understand, the basics of property rights.
Anyone with the slightest knowledge of economics is aware what a scam a ‘minimum wage’ is. When an artificial bottom placed on hourly rates is raised ,there are only two rational responses an employer can make: fire anyone whose value is now less than their cost; or raise prices to cover the added cost of doing business.
The raising of prices following a minimum wage hike sends ripples through the economy, like those of a handful a pebbles tossed into a farm pond. At some point everything damps out and the steady state returns. No new value has been created by the higher wages so the end result is roughly enough inflation to wipe out the change.
This analysis misses a detail however. The economy does not respond instantaneously. There is a time lag during which recipients have more purchasing power. They will pay for it later of course: TANSTAAFL. But from the viewpoint of a politician if the gain can be timed to properly coincide with something of value to them, say an election, it is a win. The pain comes later and memories are shorter than the interval betwixt elections.
I realized this morning there is a way in which politicians can hide much of the pain indefinitely: illegal immigration. Think it through. Raise the minimum wage in an environment where there is cheap, willing labour, undocumented and outside the system. What is the rational employer response? Raise wages for legal employees and export the costs to the undocumented workers. Illegal immigrants are not voters so this is a win-win situation to both the ruling class and those who keep them there. The voters get a higher real wage and living standard because the inflationary cost has been shifted. The pain has been exported outside the political game.
Statist politicians cannot do anything about illegal immigration because if they stop it, the deferred inflation will cause prices to rise enough to erase the excess income of their constituents. Employers will have to either drop low end jobs or else raise prices to support them. Voters will not be happy and it is well known the wallet is a bigger determinate of election outcomes than just about anything else. So, QED, illegal immigration is now a structural requirement of the centralized Western bureaucratic state.
A second force drives the need for cheap labour: the demographic transition in modern societies leads to a lowering of birthrates and a consequent labour shortage. Some places, like Japan, are looking to solve this with robots: the real deal kind. Less closed societies are covering the short fall with immigration of both legal and illegal varieties.
There is simply no practical way out of the situation in the short run and politics is all about delaying pain in hopes it will either go away or happen after you are gone.
The question I ask in the headline may not have an affirmative answer but the world’s stock markets have a decidedly shaky look at the moment. The British bluechip index is now at the level where it was at the start of the year, erasing all its gains. Some emerging market bourses have fared even worse. What is going on?
Inflation – which some economists had claimed was ‘dead’ – is possibly back, created as a result of the vast amounts of monetary liquidity sloshing around the global economy at the moment. For a while, red-hot growth in China, India and continued robustness to the U.S. economy may have bred a dangerous amount of complacency. We have a new head of the powerful U.S. Federal Reserve, Ben Bernanke. Bernanke is clearly keen to establish his own policymaking persona after the long stretch of the Alan Greenspan years. There is a sense that interest rates could be headed up further. Gold prices have been above $700 an ounce, rising rapidly to a degree that has got some old-fashioned ‘gold bugs’ like me decidedly nervous.
So should we fear a recession is on the way? Not necessarily. The enormous motor power of the U.S. economy repeatedly counters the doomsayers. But there are clear risks. China’s state-dominated banking sector is stuffed with bad loans and investment is often wildly misallocated. The price of oil is acting like a tax on growth, although in time it may weaken if new energy supplies come on stream to slake demand (assuming governments allow it).
The economic sea may be choppy for a while yet. However, to counter some of the gloom read this sharp piece at the Mises Institute.
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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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