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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Brian recently wrote a piece about the importance and usefulness of mobile phones in poor countries, particularly in Africa. I couldn’t agree with him more, but there is another interesting story in just where the expertise and money to build these African networks are coming on, and it is an oddly positive story.
But first, a seeming digression. When mobile phones came along in the early to mid 1980s, there were generally two patterns of licensing. Firstly, there were countries (eg Australia) where the incumbent telephone monopoly was given a monopoly on the new technology. Secondly, there were countries (eg Britain) where two mobile companies were licensed. One of these was usually the incumbent telephone monopoly, and the second was usually a new company that was brought into being to provide the new service. It is worth remembering that few people at this point expected that there would be a large market for mobile phones, so often these second players were small start up companies that paid very little for the licences. (The US issued no national licences and instituted called party pays pricing, and its market thus evolved differently from the rest of the world. Discussing this is an article in its own right, and I won’t go into it further here). In both instances additional networks were licensed when second generation digital services came into being in around 1993. Even in 1993 nobody realised what a big deal mobile phones would be, and although it generally took pre-existing companies to raise the necessary capital, it was still possible for relatively small players to enter the market at this stage. In some instances the companies that took out these licenses were mobile companies that already had networks in other countries, but usually these were companies new to mobile telephony.
However, the market share of companies in various markets seems to depend very much on which choice was made in the early 1980s. In cases where the existing telecoms monopoly was given a mobile monopoly, that company is usually to this day the dominant player in that national market. In most such instances, that player has a market share of around 50%. Other players can be more profitable, have most of the premium customers, or be perceived as providing better service, but it has been difficult in such markets for the later players to gain large amounts of market share. (Australia is a good example of such a market. Telstra (formerly Telecom Australia) has a market share of around 50%, and Optus and Vodafone (which entered the market with 2G licences in around 1992) have about 30% and 15% respectively).
In markets where there were two operators licensed from the start, the incumbent was usually unable to entrench a large market share in this way. Often, although the start up competitor had much less in terms of resources, it made up for this by having a nimbleness and a better cost structure than the incumbent. When additional competitors entered the market in the early 1990s with the introduction of 2G phones, they were often able to challenge the incumbents more effectively than was the cases in markets that were previously monopolies. The classic example of this is the British market, from which Vodafone initially became the strongest player, but in which the later entrants were able to grow to similar sizes to the existing players. There are four networks in the UK, and all four presently have about 25% market share. (Although a powerful but dominant player in the UK, Vodafone was able to expand internationally to become the biggest player in Europe and the world).
In about 1999-2001, the strongest players in the various European markets went on an acquisition binge, generally buying the weaker operators in other European countries (and further afield), leading to cross-border brands in Europe. The three dominant players that came out of this were Vodafone (originally the second operator in the UK), T-Mobile (former German telecoms monopoly) and Orange (former French telecoms monopoly), all three of who own networks in many European countries, and elsewhere. Sadly, these companies have not grown into pan-European networks in a way that would be good for consumers. Although there might be a Vodafone network in Germany, it still costs a huge amount for a Vodafone customer from Britain to use it. International roaming is so expensive, and such a profit source for the mobile networks, that it is not in their interests to break it down and leave us with networks that appear international in scope to their users. This will happen eventually, but not until cellular networks face competition from vastly more operators or from other technologies. This may be happening – I have a PDA that runs the Voice over IP client Skype and from which I can make free calls whenever I can find a WiFi hotspot in a foreign country – but it is going to take a few years to really happen.
So that is where we are. We have brands that are international, and it is a truly miraculous thing that I can turn my mobile phone on almost anywhere in the world and it will just work, but pricing mechanisms and a regulatory environment that is are sadly far too subject to national borders.
But what does this have to do with Africa? → Continue reading: Some more thoughts on African (and other) mobile phone networks
I do not really believe this, but it makes a good story:
The man who sparked the flat tax revolution is former Estonian Prime Minister Mart Laar. He governed his country from 1992 to 1995 and from 1999 to 2002. When the historian became Prime Minister in 1992 at the age of 32 he knew nothing about economy. Laar’s area of expertise were Europe’s 19th-century national movements. “It is very fortunate that I was not an economist,” he says. “I had read only one book on economics – Milton Friedman’s “Free to Choose.” I was so ignorant at the time that I thought that what Friedman wrote about the benefits of privatisation, the flat tax and the abolition of all customs rights, was the result of economic reforms that had been put into practice in the West. It seemed common sense to me and, as I thought it had already been done everywhere, I simply introduced it in Estonia, despite warnings from Estonian economists that it could not be done. They said it was as impossible as walking on water. We did it: we just walked on the water because we did not know that it was impossible.”
Shrewd politicians often pretend to be dumber than they are, if only so that they can look well-meaningly sheepish instead of thoroughly ridiculous when things go wrong. So, I take Laar’s claim to ignorance of economics and of economic policy outside Estonia with a pinch of salt. But what does not seem to be in doubt is the importance that a good book can have, and good ideas in general. If only the same did not apply to bad books and bad ideas.
I visited Estonia briefly in 1991, for a Libertarian International gathering in Tallin. I am not surprised that the Estonians are now doing well. They struck me as very level-headed and efficient people. They of course have a long mercantile tradition as a result of their proximity to and seaborne trade with Scandinavia. Those places are not called the “Baltic” states for nothing.
Is there anything, anything, now going on in what used to be called, either with delicate euphemism or with a sneer, the “developing world”, but which now really is the developing world, that is more encouraging than the rapid spread throughout said world of portable telephones?
I have just done a piece for the ASI blog about this process in Africa, linking to this New York Times article. And the Private Sector Development blog (whom I have just added to my personal blogroll here), in addition to supplying the same link today, have also linked to of a recent Economist piece on the same subject. Pablo Halkyard also links to this Wall Street Journal piece.
It is not all good news. It never is. Governments all over the place are now demanding extortionate connection taxes, to the point where the tax bill is starting seriously to outweigh what would have been the regular cost. Sounds like those cheap European air tickets that I sometimes buy on the internet for peanuts, where the government then charges me peanuts times four. Nevertheless, even there the news is partly good, because at least some governments are learning that if they cut connection taxes down to something more in line with the extreme cheapness of the service itself, people are more ready to pay such taxes. That is because illegal phones are more likely to go wrong and harder to get mended if they do go wrong. Is the unwillingness of people to pay big taxes good news or is their willingness to pay small taxes bad news? You decide.
The portable phone quote that made me smile the most this morning was this, from the Economist piece:
(Oh, and the “digital divide” vanishes, too.)
I especially like the brackets.
Uber-blogger Andrew Sullivan, fresh back from his holidays, rages against Americans who drive big SUVs on the grounds that by doing so, they help swell the coffers of terror sponsoring states in the Middle East. Patriotic Americans, says the ahem, British Mr Sullivan, should drive smaller, more fuel-efficient vehicles. He does not like the habit of “soccer moms” driving their kids around in such vast vehicles, full of clobber he thinks is a waste of space and money.
Well Andrew, maybe. I would have thought that with the price of crude oil hitting the region of around $66 per barrel, that even the dimmest motorist is going to see the impact on a bank statement eventually and wonder about trading in the Hummer for something a tad smaller. I know it is crazy ideological talk but people do actually take account of prices.
If oil prices stay on their current trajectory, it won’t need a scold like Sullivan to remind Americans, or indeed anyone else, to adjust their consumption. All it takes is the operation of prices. Some Scottish geezer called Adam Smith once wrote about this about 230 years ago, I think. It is such a shame that even bright folk like Andrew Sullivan take all this time to catch on.
Cameron Carswell discusses the role of the World Trade Organization in promoting free trade.
The World Trade Organization (WTO) draws wrath from people of all sides of the political spectrum. There are those supporters of globalization who oppose it on principle, saying that while free trade is a desirable goal such an organization implies it needs to be “managed”. It makes sense to be sceptical of the idea that economic liberalism and free trade can be imposed from the top down – for an excellent and balanced view of this by Dr. Razeen Sally see here.
There are those who oppose globalization and see the WTO as advancing the very process others see it as hampering. The question is, does the WTO genuinely advance free trade (with all the associated benefits), or is it merely a vehicle for special interests and rent seeking?
There are some elements of the WTO rules which do seem at odds with the goal of free trade – Chinese clothing exports are currently limited under special WTO rules. However it could equally be argued that this was merely a practical measure to prevent further trade barriers being set up.
The WTO is designed to promote free trade but by its nature as an international organization is open to politicisation. If it is the case that trade barriers are reduced as a result of the pressure it exerts then all the better. On the other hand, unilateral moves toward freer trade are invariably good things, and it would appear that this is the most likely route for the goal of free trade, once again with China leading the way.
Via the Global Growth blog comes news of the recently (June of this year) launched Private Sector Development blog.
Says the Global Growth blog:
Its great to see that market approaches to development thinking are gaining traction, yet more evidence that a new paradigm is forming.
Indeed.
Although, I have already spotted one error in this new blog. In his June 29th posting, Pablo Halkyard says that Bill Nighy played the Chancellor of the Exchequer in The Girl in the Café (my opinion of The Girl in the Café is to be found here). No. Nighy played a mere civil servant. The Chancellor was played by the appropriately Scottish Ken Stott.
This is a small error. That the private sector is the way to go for enriching countries that are now poor is a great truth.
Anatole Kaletsky, the economics journalist who, despite a fondness for Keynsianism, is one of my favourite columnists, believes Italy’s departure from the euro and possible re-creation of the lira is a real possibility, one that needs to be taken with deadly seriousness by financial markets. He says the financial fallout from an Italian divorce could be disastrous:
While detailed consideration of these arguments is probably premature, the practical implication is clear: If the possibility of an Italian withdrawal were ever taken seriously by the markets, foreign holders of Italy’s €1.5 trillion public debt would face enormous losses, big enough to endanger the solvency of many non-Italian banks. In other words, the Italian Government is now in a position to kill the euro and wreck the European banking system merely by threatening to withdraw.
I think he is correct. As I said in my last posting about Hayek’s idea of competing currencies operating inside the same country, it is folly to imagine that the cult of the all-wise central banker will not come a cropper some time or later. Many Italian entrepreuneurs might be very glad indeed of an alternate store of value if that country does indeed pull the plug on the euro.
Some scare stories deserve to be ridiculed but I think Kaletsky is on to something. Between now and the Italian national polls next year, it would be smart to keep a very close eye on the euro zone financial markets indeed.
(Thanks to the Adam Smith Institute blog for the pointer. It reaches pretty similar conclusions).
Paul Staines says Sony should welcome Brits buying Playstations before their UK release.
European video-gamers who buy the Sony Playstation Portable (PSP) will be surprised to find out that Sony is suing the retailers who sold it to them.
Not yet formally launched in Europe, the eagerly awaited PSP can be bought online from Hong Kong dealer Lik-Sang.com, a leading online retailer for videogame systems. Sony, in an aggressive tactic borrowed from Big Pharma’s lawyers, is suing the parallel trader for breach of trade mark and seeks a court order that would prevent Lik-Sang.com from selling or offering systems, games and accessories to customers in the UK and the European Economic Area (EEA). Sony claims “Lik-Sang’s sales are an unlawful interference with Sony’s economic interests.”
Pascal Clarysse, Marketing Manager for Lik-Sang.com says:
This is the most aggressive move against its own customers that a console manufacturer has ever taken in the 30 year history of videogames. Sony wants to completely cut hardcore gamers away from items released in Japan or anywhere else outside their own country. A very active part of the gaming community has been enjoying Japanese gaming culture for over two decades, and that’s what the Empire is now willing to destroy.
The lawsuit comes as a total surprise to Lik-Sang.com, given that the laws of Hong Kong are clear when it comes to parallel trade. Hong Kong’s legislation is based on the fact that allowing parallel and free trade will restore natural competition and benefit consumers with lower prices. Hong Kong, one of the pioneering countries respecting worldwide exhaustion of trademark rights, allows free trade once an item has entered the market for sale.
Sony wants to control its products even after it has sold them, but that is not how the globalized world works today. Sony should be pleased that the demand from UK customers is so great. Instead of acting against its fans’ interests, they should welcome the early demand.
Arnold Kling has brief thoughts here about the phenomenon of air miles. The “bonus” miles one accumulates due to air travel now equate to about $700 billion of value, according to a study that Kling cites. That is a lot of money. He is not very keen on air miles, largely it seems because he dislikes the way that dinner table companions go on about them. I know how he feels. An acquaintance of mine, who shall remain nameless, would constantly brag about how many air miles he got via Virgin or whatever… zzzzzz
On a more serious note however, one can see how some people might want to treat the air miles market as a sort of parallel currency. $700 billion dollars worth of air miles could buy one a lot of goods and services, conceivably, if exchanged by barter. Clearly they are highly restricted in terms of liquidity, the key advantage of money. But during a period of high inflationary stress, I could see how air miles could become quite popular as a medium of exchange.
The idea of competitive currencies is often rightly associated with the late F.A. Hayek. The idea seems to have gone rather quiet of late. Perhaps because we currently live in a period of relatively low inflation, the fears about the dangers of monopoly money and hubristic central banks have faded. It would be highly complacent, however, to assume that the current benign low-inflation environment will last forever. These things seldom do. Hayek’s idea may be ready for a comeback.
I suppose most readers around these parts would reckon that actors should stick to acting, and keep their political opinions to themselves.
But what about these opinions?
“People think more aid will help, but it won’t,” said Ms. Driver, an actress who is working on her second music CD. “Trade is the surest way of decreasing the savage amount of poverty in our world. These countries have got to be able to trade fairly.”
And the point is, by “fairly”, she does not mean being paid artificially high prices; she means getting rid of agricultural subsidies in the rich countries.
It was never a practical project to silence the acting profession. These people are famous. Having acquired their fame, they then want to use their fame to do good, and in the process to become even more famous. This is only natural, especially when you consider that doing good and being heroic is what, according to the entertainments these people spend their lives making and acting in, life is all about. Trying to stop famous actors from expressing what they consider to be virtuous and heroic opinions in public is like trying to stop the wind from blowing or the sea from being wet.
No, the task that faces us is not to silence the acting profession from ever opining about goodness. That would be impossible, to say nothing of censorious and unpleasant. Rather is our task to change the definition of goodness that actors of sufficient fame to care about such things reach for when they get to the public virtue stage in their careers, and to make goodness really mean goodness.
Ms. Driver’s pronouncements concerning the superiority of trade over aid as a means of rescuing the world’s poorest people is evidence that some progress is being made along these lines.
Many actors surely already believe such things, on the quiet. But it is still a fine step forward when one of them feels able to say such things in public.
Anthony Batty asks if we really need the Competition Commission to promote competition between UK supermarkets.
In the news recently, the UK’s Competition Commission has been flexing its muscles in the area of supermarkets. Somerfield may have to sell stores, after buying what Morrson’s did not want after acquiring Safeway (a one-time subsidiary of the American supermarket company).
Do these people really feel that by virtue of the fact a supermarket has two stores within some arbitrary distance they have a monopoly? Or are able to raise prices and earn large profits? For starters the barriers to entry for say Iceland to open a new store are simply planning permission. If they feel customers would use the shop I am sure at least one of the major players would open up a store. Not to mention continuous competition from supermarket home delivery, local shops and the fact people may just drive another few miles if they do not like the selection they are offered. Supermarkets are one of the most competitive areas in the modern economy, if a company does not keep pace with the efficient supply chain, changing demand (such as the low carb craze that swept through the UK) it will find itself the target of a takeover bid, or in administration. This is not because of the work of government departments; rather it is the free market at work. Only through this competition can we find which stores give us what we want, at a price we are prepared to pay. If one firm is not performing we go elsewhere, if prices are too high we use an alternative retailer. There simply is no need for bureaucrats to be in charge.
I do agree however, with the basic premise of more competition. For this reason I find myself reverting to a point made by the late Screaming Lord Sutch, why is there only one Competition Commission? (In his day, the Monopolies and Mergers Commission.) Surely in the interests of competition we should have several. By allowing new entrants and getting rid of the protected monopoly that exists at present, firms can choose between different conclusions and suggestions. Lower administration costs and fewer worries about whether or not an action will be allowed, means lower prices for consumers. In that way we will have free and fair trade, without the diktats that are not in the interests of firms or consumers.
It is easy, with all the terrible events going on in London at the moment, to let other significant stories slip under the radar. However, last week the UK senior finance minister, Chancellor of the Exchequer Gordon Brown, tweaked the rules of UK budget policy in an offhand manner that takes the breath away for sheer barefaced cheek.
Brown has a so-called “Golden Rule” that stipulates that the government’s books must be in balance over the course of the economic cycle. The books are currently seriously in the red at the moment, which would appear alarming given that we have had a relatively decent period of economic growth recently. So what does the gloomy Scot do? He shifts the year in which a key part of the economic cycle is supposed to have started by two years, the effect of which is supposed to show that the Golden Rule has not been broken. This sleight of hand produced fairly scant coverage outside the business sections, but in its own little way illustrates the utter contempt this government has for the financial markets, or the general public.
Brown has done this sort of thing before. And it makes one wonder just how long Brown can go on before the economy, supposedly Labour’s strongest card in the last election, turns south.
I never bought the argument that Brown was a great Chancellor, as, with all his faults, was Nigel Lawson, for example. Brown has been enormously lucky to inherit an economy left in fine fettle by the previous Conservative government, and apart from his wise move of making the Bank of England independent, has done precious little right since. He is an ardent meddler and micro-manager, making the tax code into a hideously complex morass that does precious little for growth apart from make lots of jobs for tax accountants.
How the world changes. A few weeks ago the political trainspotters were wondering how soon Brown would take over from Blair. I suspect the likelihood of that happening has been pushed away by quite a distance.
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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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