It is in the progressive state, while the society is advancing to the further acquisition, rather than when it has acquired its full complement of riches, that the condition of the labouring poor, of the great body of the people, seems to be the happiest the most comfortable. It is hard in the stationary, and miserable in the declining state.
– Adam Smith, The Wealth of Nations.
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January 10th, 2006 | 2 comments - (Comments are closed)
 The article by one of our contributors yesterday about Russian on-line music business allofmp3.com raises all manner of fascinating issue that I think should be pondered. It has been argued by some of the commentariat that “whether you approve of the morality of the western music business or not, the goods belong to them and the artists” and thus as “one of the driving principles of this site [Samizdata.net] is respect for property rights, not glorifying those who steal, whether it be the state or someone else”, presumably we should be more critical of this. These are reasonable positions to take and certainly I would not want anyone to think Samizdata has anything less than complete enthusiasm for private property rights. However I also think with regard to this (which is to say the sale of music on-line in a manner which is against the wishes of the businesses who own/created the music) the view that property rights are being violated is not correct. In fact I would say that notion is exactly the wrong way around. Like it or not, music is now a commodity that is traded by weight in an international market and therefore the creator has only residual rights to how that commodity is subsequently resold. The model allofmp3 uses does indeed pay something to the creators of the music and refusing to acknowledge that things have changed and that recorded music is no long a physical good is pointless. It may not be the business model originally envisaged by the music creators but that is the only viable one that remains to them. The market price for their product is now about 12¢ a track and if that (or their cut of that) is not enough for the music’s creators, well I guess they should stop producing music and go find something else more profitable to do, just as if the price of diamonds falls too low, De Beers should feel free to stop digging them up in Namibia. What they (and De Beers) should not feel free to do is demand governments force the price of music (or diamonds) up by insisting they can only be sold a certain way via approved technologies at higher prices. One of the driving principles behind Samizdata.net is trying to develop theories about the world that reflect reality. I am willing to hear other theories but it seems to me that the market has spoken (loudly) and using the state to prop up a business model that technology has made nonsensical is not really serving the cause of liberty. Another issue raised by the commentariat is that companies like allofmp3.com are all involved with the ‘Russian Mafia’. As no evidence has been offered, clearly that is baseless supposition. However it does raise some other interesting issues: I would say even if it was true that allofmp3 is paying ‘protection’ to the Russian Mafia and/or using their political influence to shield their business model, the Russian Mafia fulfils certain roles that in other countries are filled by governments and lobbyists to much the same effect, thus I am not sure it makes a company like allofmp3 any different to a company (say Sony) using the force of the state to enforce its business model. There is really not that much difference and if you do not believe me, I suggest you try telling the state you no longer wish to follow their regulations and wish to make your own arrangements for ‘protection’ and therefore intend to withhold a portion of your taxes… and then see what happens to you. January 6th, 2006 | 62 comments - (Comments are closed)
I have been wandering through the fascinating nation of China of late, so I have not had much time to peruse the blogosphere – I guess this means that for a month I had a life. I was fortunate enough to spend a few days in the beautiful city of Lijiang in Yun’nan province. This mid-sized Chinese town is famed for its wonderfully restored ‘old city’, a cobbled and confusing maze of shops, traditional inns with gorgeous courtyards and a grid of small canals filled with luminous fish and gushing clean water. A beautiful place to while away a few days, but Lijiang is not really known for its nightlife. So on the evening of the 25th of December, I got trawling through some of the past articles on Samizdata. Reading through the comments section on this post, I noticed that an article I wrote early in 2005 got a mention. It was a pity I was not around a computer regularly, because a debate raged in the comments section that I would have very much liked to have been a part of. For all my appreciation of China, I am one of the few Sino sceptics. I should explain. I am not a sceptic of the aspirations of the billions of Chinese people who sense greatness in the Chinese identity. After all, I’m mentioning a deeply rich culture backed up by a vast talent pool on the mainland and in the diaspora that has the capacity to change the world radically in the future. I am, however, deeply pessimistic about China in its current nominally Communist incarnation, for reasons I have outlined in a previous post. I will not go into specifics; if you’re curious, please read my rationale here. Some interesting developments have taken place between now and then, however. These merit further analysis. One or two of the commenters in the mentioned Samizdata piece stated that they were keeping abreast of banking developments in the Middle Kingdom. In 2002, Chinese officials admitted that 25% of the loans written by the state owned banks were non-performing. Standard and Poors and a number of others said it was closer to 50%, and possibly more. Within the space of four years, the Chinese administration has revised its estimation of the rate of non-performing loans down to an average of about 12%. How can this be done so fast? I’m not really sure. We are, of course, talking about the writing down or otherwise accounting for of many hundreds of billions of dollars of bad loans. I assume that it’s due to the fact that most or all of the bad loans have been transferred to special “asset management” companies set up by the government. I suspect that the banks have been able to revise their non-performing loans (NPL) ratio down so quickly by performing a debt-to-equity swap with these holding companies. The article linked to immediately above believes the asset management companies have taken a chunk of the banks’ loans and issued them with 10 year bonds in return. → Continue reading: Thoughts on China’s future January 5th, 2006 | 75 comments - (Comments are closed)
The Swedish city of Stockholm – in which I spent an enjoyable short stay last year – has introduced congestion charges, much like those which now operate in central London. The supposed aim (supposed being the key word) is to reduce car use and get people to use public transport. Public transport is said to be very good in Sweden and I found it to be so, though it comes with a heavy tax bill. The congestion charge issue is an interesting one because on one level, free marketeers can see a lot of merit in the idea of treating use of a road just like any other commodity. However, in today’s world, road tolls tend to be more of a revenue-raising device than part of a free market approach to transport. Roads are not built with the consent of other property owners, but mostly built at the behest of public authorities using compulsory purchase powers (what is called eminent domain in the United States). So the idea of road pricing, nice though it may sound in some sort of capitalist utopia, is in reality bound to operate in a monopolistic environment. And as the British police have found, the C-Charge has brought certain unintended consequences. Not a great surprise. January 4th, 2006 | 11 comments - (Comments are closed)
Putin is sending shivers through the world with his attempts to strong-arm the Ukraine back into the Kremlin’s zone of influence and no doubt more and more column inches are going to be directed at this emerging crisis. Yet it seems to me pretty obvious that that Russia, circa 2006, is almost hilariously weak to be throwing its weight around. The Russian economy is pathetic for a would-be imperial seat of power, running about half the size of India based on purchasing power. Its GDP per capita is about the same as such mighty global players as South Africa, Mexico and Trinidad. The antics of its kleptocratic and economically illiterate former KGB leadership makes the place less attractive to investors by the day. Frankly you would have to be crazy to put your money in Moscow. Even its military has repeatedly demonstrated that it is inept and corrupt in equal measure. All this talk of Russia’s importance is vastly over-stated. In short, Russia needs to be treated with respect, but only the sort of respect you give a drunk with a knife as he staggers down the street. The price of gas sold to the Ukraine is currently below market levels but the cackhanded way Russia has handled this makes it pretty obvious that markets are the last thing on Putin’s mind. But perhaps he is to be applauded for massively strengthening the hand of pro-nuclear power advocates with his preposterous posturing. Even the turgid political class of western and eastern Europe can now have few illusions that it makes sense to rely on an unstable place with delusions of grandeur for their energy supplies. Methinks it might be time for those with some spare dosh to invest some of it in nuclear energy stocks. January 2nd, 2006 | 21 comments - (Comments are closed)
As 2005 draws to its close it is customary to make some predictions about the following year. I won’t do so. The world’s stock markets are ending the year in better shape than I would have expected a year before, notwithstanding the impact of higher oil prices and the devastating hurricanes that hit the U.S. gulf coast. What is interesting to me though is how the market in making predictions has continued to accelerate, spawining exotic derivatives connected even to the weather. More than two years ago in the United States, some policymakers toyed with the idea of a predictions market to help figure out terrorist threats. The idea was killed off, partly, so it was argued, due to some terrible PR for the idea as well as a cowardly refusal to embrace controversial ideas. Lawrence Lessig takes a different view here. The market in making predictions has, of course, been around for decades, if one thinks about the commodity futures markets such as the great wheat futures markets in Chicago, for instance. This Wikipedia entry I linked to shows just how broad the prediction market now goes, such as people taking bets on future scientific innovations, and so on. And these markets can be harnessed to garner useful knowledge about where certain things may be headed as well as fund valuable research. That’s my prediction, anyway. (Wikipedia link fixed. Thanks to a commenter for pointing out the error). December 30th, 2005 | 20 comments - (Comments are closed)
As I sit in the Coffee&Co café in Bratislava (a town I am rather fond of visiting) taking advantage of its offer of free wireless broadband (ah, no more OWLS for me)…  …I am yet again struck by what changes are being wrought by the internet, and what amazing possibilities it opens up. Although I studied Russian many years ago when the Cold War was steering me in certain directions, that knowledge has long since been flushed by my brain. Yet the other night just before I left London for Slovakia, I was exchanging e-mails with a chap in Moscow, translating (or more accurately transliterating) my Latin script English into Cyrillic Russian via a free on-line system and similarly translating his replies into English. The results were rather crude and took a bit of smarts to interpret but we were able to conclude our business most satisfactorily. It really did bring home to me that even though we are only at the very start of the communications revolution (and revolution it is), the ways the internet will change everything are incalculable. The social, scientific, economic and political implications are so far reaching that I am sure the world twenty years from now will be hard to recognise. Perhaps that is just stating the obvious but for me at least it is the very fact I am now so blasé about all the things the internet makes possible for me that makes it is useful to sometimes stand back and marvel at what an astonishing thing it is. Of course just as we take electric light as a given and only appreciate it when the power goes out, I might be unusually appreciative because at the moment I do not have my usual 24/7 broadband access and there is nothing like withdrawal to make you value getting a ‘fix’. December 22nd, 2005 | 10 comments - (Comments are closed)
The Chinese economy is set to be bigger in GDP terms than that of Britain by the end of this year, according to this report. Of course, raw statistics, such as aggregate economic numbers, do not tell the entire story, such as the degree of upward mobility, quality of life, extent of personal opportunity and so forth, but even so, China’s growth remains for me the most compelling economic story of the past year. It is interesting to speculate just what the world economy would be like without the dynamo of China. What remains to be seen, of course, is whether China’s economic dynamism is eventually reflected in greater individual liberty. The jury is well and truly out on that question. Meanwhile, this article in Forbes is worth a look. December 20th, 2005 | 37 comments - (Comments are closed)
Tom Peters, who presumably found it in this piece, reports:
People say things like this from time to time, but they seldom mean them, and they never mean them when at all severely challenged I mean, suppose you were to ring up the Hua Xin Li Dress Co., Ltd. and to say: “Hello, God speaking. I want you to design my daughter’s wedding dress. It must be genuine silk, with genuine gold fiddly bits sewn into it, with miniature iPods for buttons, and must win numerous design awards. However, being God, I don’t want to pay more than 50 pence. Got that did you? Fine. Tomorrow morning then. The wedding’s tomorrow afternoon.” I know, I know, God has no daughter, and if He did have a daughter, she would probably not get married. She would do altogether more dramatic things than that. Not my point. Which is: would the Hua Xin Li Dress Co., Ltd. knuckle under to such a demand? Would they obey God, the customer, you, and supply an expensive product at less than it costs them to produce it? I think not. They would surely respond instead with something more along the lines of: “Not quite our kind of job. If you want lots of cheap dresses to sell in your shop, maybe we can do business. Take a look at our website, and see if there is anything there that you like.” God might not be satisfied with an answer like that, but you, a mere customer, would have to settle for that, or something like it. Or to put all of the above another way, “the market” includes everyone, and everyone’s desires and plans, consumers and producers. Customers are indeed sovereign, over themselves and what is rightfully theirs, but so are producers. Customers do not have to pay for things they do not want, and producers do not have to produce things they do not want to produce. The market is not some ghastly new tyrant who tells you what you must do, regardless of your rights or wishes. The market is not some hideous and only slightly nicer collective reincarnation of Chairman Mao. The market is the outcome of everyone’s rights counting for something, and nobody’s rights counting for everything. So yes, the market does decide a lot of things, but the customer is not God. This is an exaggeration for the sake of effect. The effect may, in a business sense, be good, but it is still an exaggeration, and that is putting mildly. December 19th, 2005 | 24 comments - (Comments are closed)
In search of things to write about for the Globalisation Institute blog, I came across this report, itself about a report issued by the International Labour Organisation.
As a summary of what follows in this report of the report, this turns out to be severely misleading. Globalisation, according to what follows, is cranking out new jobs, and it is cranking out better jobs. True, it is not cranking out “new and better” jobs, all in one go, if by that is meant people in dirt poor countries now being able to leap in their thousands from having no jobs to having nice jobs, but that is hardly surprising.
There is still a lot of poverty in the world, in other words. So?
This is, at best, thoughtless bluster, and probably a flat lie. If he thought at all about this claim, Juan Somavia would realise that it is false, but he makes it anyway. I believe that he assumes that only the spending of tax money in explicitly labelled better job creation schemes would count as the intention to create better jobs. But I support globalisation, and write regular contributions for the Globalisation Institute blog, because I believe that globalisation is creating and will continue to create “better jobs and income for people” all over the world. This is a big part of why I do this. And I am definitely not the only one who thinks thus. Does Juan Somavia sincerely believe that all of us who enthusiastically support globalisation are indifferent to “better jobs and income for people”? Maybe he really is that ignorant, but I doubt it.
Once again, bad policies to achieve “decent work” – making indecent work illegal, and making it obligatory to perpetuate all decent work (“sustainable”) indefinitely, I assume – are confused with wanting lots of decent work. I do want lots of decent work for people, but believe that making indecent work illegal, and all firing of people from decent work illegal, is the absolute worst possible way to achieve that outcome. Making indecent work illegal hurts the very poorest people in a downright lethal way, by taking away even the crap jobs that they do now have and can now get, and it kicks away a vital rung in the ladder from no work to indecent work to decent work, which guarantees that the lethality will continue indefinitely. Charming. Demanding that all decent work be “sustainable” is to demand the impossible, and to guarantee idleness for all. The other thing to say about that weasely paragraph is that all that it really says is that poverty is not being got rid of as fast as it might be, and as fast as would be nice. My interpretation of that truism being that globalisation is not working as fast as it might to make all that decent work (some of it perhaps even somewhat sustainable), all that “better jobs and income for people”, and my conclusion is that globalisation should be intensified, and that Juan Somavia and his ilk should get out the way and let that happen. → Continue reading: Juan Somavia and the ILO lose the globalisation argument December 13th, 2005 | 3 comments - (Comments are closed)
It is nice to see that a compatriot of mine is presently making the case for free trade at the WTO summit in Hong Kong, at which the usual bunch of vested interest and anti-globalisation protestors have shown up. Seriously, that anyone can go to Hong Kong and then attempt to argue that free trade is against the interests of the poor just boggles the mind. But they do. (link once again via Tim Blair). December 13th, 2005 | 4 comments - (Comments are closed)
Those smart fellows at the Marginal Revolution economics blog like to track all manner of strange and innovative ways in which Man engages in the age-old routine of truck and barter. Sport has spawned all manner of new business enterprises in recent years and now it is possible for investors to build assets by investing in the future market value of footballers. Makes sense, really. These days football players, even quite mediocre ones – never mind great talents like Pele or George Best (RIP) – are paid enormous amounts of money in their careers. Rather like the bloodstock trade, I think. The idea of getting a financial stake in a player is also likely to bring investor pressure on players to be monitored off the field as well as on it (do we really want a potentially lucrative asset to be carousing down the pub?) Personally, I am sticking to equities, bonds, cash and a bit of brick and mortar. December 5th, 2005 | 4 comments - (Comments are closed)
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