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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Anthony Browne, writing the main feature article in this week’s Spectator, says policymakers have underestimated, or quite possibly fibbed, about the scale of immigration into the United Kingdom from Eastern Europe. I do not want to get into all the cultural arguments that have been aired a lot here in recent months. Suffice to say that Browne makes some good, if slightly alarmist, points about the ability of a small crowded island like Britain to go on taking more and more people, never mind from often very different cultures.
He seems to make the mistake, however, when discussing the impact of immigration on wage rates, of what is known as the “lump of labour fallacy”: the notion that there is a fixed amount of work to be performed in an economy. It seems a bit odd that Browne, who calls himself an economic liberal, should fall prey to this fallacy. After all, as surely the late economist Julian L. Simon pointed out, every additional person is not just another mouth to be fed, but another brain and pair of hands to create wealth.
Which British individual has done the most good for the world during the last half century or more since the Second World War? I nominate Sir John Cowperthwaite, Financial Secretary of Hong Kong from 1961 to 1971, who died last Saturday.
By applying laissez faire ideology to Hong Kong with greater inflexibility than anyone else was at that time even attempting, anywhere, he became, in Patrick Crozier’s words, the father of Hong Kong’s economic boom.
And that, if you think about it, makes Cowperthwaite the grandfather of the Chinese economic boom.
Without the shining example of Hong Kong, and the economically benign influence that Hong Kong has for a long time now had on nearby places still governed by Beijing, who knows what economic – and political – state China would be in now?
Cowperthwaite was criticised during his time in office for not taxing the people of Hong Kong more, and for ignoring, in particular, education. But has there ever been a more stupendous exercise in business education and everything-else-you-can-think-of education than Hong Kong? Hong Kong has been a University of How To Do It for millions upon millions of Chinese, Chinese who are now struggling to turn China itself from a suicidal and murderous world threat into a creative contributor to the world. The productive and trading templates now being followed in China were mostly devised in Hong Kong, and Hong Kong still provides a huge connection between China and the rest of the world.
So, there is at least a decent chance that China will emerge onto the world stage not as a belligerent superpower in the Soviet mold, but as a creative superpower more like nineteenth century Britain or nineteenth century USA.
Of course China still faces severe problems, as has been well explained here. It could all, and quite soon, go horribly wrong. China’s creatively earned wealth and strength might yet – following some kind of economic melt-down – be cashed in to pay for the means to make only mischief on a huge scale.
But China’s economic strength is not a total illusion, any more (well, maybe a bit more) than the USA’s economic strength was wholly illusory in the late 1920s. (The worry about that comparison being that the USA proved that it could be the engine of world economic growth only after a huge depression and a huge world war.) And if, in a hundred years time, historians are able to look back on a century of (mostly) Chinese creativity and progress rather than of Chinese chaos and ghastliness, Sir John Cowperthwaite will arguably deserve more credit for that happy outcome than any other single individual.
The nightmare always was that the Chinese people would feel that they had to fight and to destroy to get the world’s respect. Cowperthwaite’s Hong Kong showed the Chinese people that they were capable of unleashing a better and more creative way to be respected, a way that the whole world is already benefiting from.
Patrick Crozier, to whom thanks for the link, picks out this particularly choice quote from the Telegraph obituary of the great man:
As for the paucity of economic statistics for the colony, Cowperthwaite explained that he resisted requests to provide any, lest they be used as ammunition by those who wanted more government intervention.
The state is not your friend. The less it knows, the better.
“We’ve taken the biggest surge in national income in years and squandered it. The punters are spending every cent they can and Canberra is encouraging that by handing back its share of the commodity price loot as tax cuts.”
Who would say such a thing? Sounds like the rantings of some bleeding heart welfarist think tank, rather than Australia’s leading economics consultancy, as Access Economics likes to describe itself.
Yes, Keynesian wannabes Access Economics released a report fretting about interest rate hikes, and it feels the answer is to remove the financial options of individuals and ensure that the government collects and hoards ever more of the people’s income. I suppose one should look at it this way; some day soon you might benefit if you find yourself in a geographic or demographic sweet spot that the government needs to court come election time.
Talking about rum plans, this proposal from Deloitte floats an admirable (though not particularly original) idea – swapping tax deductions on work expenses for across-the-board tax cuts. Liberals will start to choke when they see Deloitte’s adjustment of the progressive income tax rates:
The poorest tax payers would see their rate cut from 15 per cent to 4 per cent, with the 42 per cent tax rate paid by people earning $75,001-$125,000 falling to 33 per cent. The top 47 per cent rate paid by those earning more than $125,000 could be cut to 44 per cent.
Deloitte would surely have access to the masses of theoretical and empirical evidence showing the superior economic benefits of shrinking the gap between top marginal rates of income tax and the lower rates, not to mention the moral argument. Why this EC (and I do not mean European Community, though maybe I do…) drivel, then? Why do Deloitte believe they need to field a taxation proposal that is going to win elections?
Thankfully, the political party that prides itself on its fiscal responsibility and economic liberalism holds government in Australia. Yet we have a curmudgeonly treasurer (chancellor of the exchequer) who steadfastly refuses to budge over our absurdly high top marginal tax rate of 47%. He is more than happy to ladle out benefits to politically useful groups, however. Oddly named, the Liberal Party of Australia, when one considers it is run by big government conservatives.
Couple these few good men with the leading economics consultancies, who seem to be trying to outdo each other in the social crusading stakes.
Have these people never heard of the Chicago school? I despair.
Jamie Whyte in The Times is a paragon of rational liberalism. Today he neatly skewers the fallacious thinking of those who impose their own heirarchy of values and risk aversion on the rest of us.
Doctors, he points out, will tend to overvalue health relative to other goods, such as pleasure. They “confound what is good for us with what is good for our health.” And this analysis is readily applicable to the army of experts who struggle to control us and get use of our taxes to pursue their own preferences. They all fail to accept that other people have different tastes that in conditions of liberty are traded-off by those people.
Jamie Whyte again:
Politicians always claim that their safety regulations are motivated by concern for people in dangerous jobs. Yet the beneficiaries are always people who do not do dangerous jobs. Workplace health and safety meansures are a zero-sum game in which wealth is transferred from the brave to the timid.
And yet, I think Whyte here simplifies and understates the case. He concentrates on the loss of ‘danger money’ to workers if the market price of the safer jobs falls. That, adding in workplace costs, might look like a zero-sum game, but a business is not a closed isolated system linking effectively infinite reservoirs of labour and capital. → Continue reading: The reality of compliance
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.
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.
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
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.
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.
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).
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’.
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.
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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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