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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It would be fair to say Conrad Black’s spectacular and much publicised difficulties are being presented by him as a struggle between a capitalist libertarian (yay!) versus evil regulatory statists (boo!)…
The name-calling between the parties has been ugly, however, with Lord Black filing a libel suit in Canada against Mr Breeden and other Hollinger International directors, accusing them of waging a “campaign of defamation”. He was being persecuted by “truly evil people”, among them “Breeden and his fascists”, who represent “a menace to capitalism as any sane and civilised person would define it”, he complained in court documents.
But is that indeed the case? I am in no position to judge the truth or otherwise of the specific allegations but it seems to me what is at issue here is did Black (et al) fail in their fiduciary responsibility to the shareholders for whom they were actually working? Moreover, did were those shareholders actively defrauded by Black and his colleagues?
Again, I have no idea but I would be very leery of assuming this matter has any first order ideological dimensions at all.
The one thing I know government is good for is countervailing against monopoly. It’s not great at that either, but it is the only force I know that is fairly reliable. But if you’ve got a truly free market you only have a free market for a while before it becomes completely regulated by those aspects of it that have employed power laws to gain a complete monopoly.
The above paragraph appears in the latest edition of libertarian magazine Reason, one of the best and most thought-provoking mags out there in my opinion. The quote is taken from John Perry Barlow, veteran campaigner for civil liberties issues, scourge of government attempts to invade privacy, and a writer of lyrics for none other than the Grateful Dead.
And yet the above quotation is to my mind a piece of economic illiteracy so bad that I was rather surprised that the Reason interviewer, Brian Doherty, let him get away with his assertion about the free market so easily. However, where Reason failed, Samizdata can step in.
First off, when Barlow talks of ‘power laws’, what exactly does he mean? If he means stuff like draconian copyright laws, or licencing privileges to shaft potential competitors, then surely such things are the creation of governments and not a feature of a ‘free market’! Most of the restrictions on competition which bar entrepreneurs from entering a field were created by governments in response to business lobbying. That is clearly a bad thing, but it is weird for Barlow to suggest that the remedy to such abuse of power is to ‘re-regulate’ the market to somehow make it freer. The solution to the problem is surely to cut the state down to size so that it cannot disburse such corporate welfare privileges to vested interests in the first place.
In holding this view, Barlow makes the classic mistake of so many folk who think they have discovered a fatal flaw in capitalism in that some sectors of an economy get to be dominated by one or two major businesses such as Microsoft or the aluminium firm Alcoa. “Monopoly!”, they cry, before demanding anti-trust style laws to break up businesses into smaller, supposedly more ‘perfectly’ competing bits. (Yes, I know Microsoft’s particular circumstances are open to many legitimate attacks – I am not an apologist for them, in case commenters bring this up). This view is based on the failure to grasp that just because a firm has X percent of a market share and is very big, it is therefore somehow able to coerce folk into buying its products. However inconvenient it may be for me to avoid using the products of Bill Gates, say, I can do so. Microsoft or General Motors do not force me to buy their services at the point of a gun.
Another mistake linked to this confusion about monopoly is the failure to see that competition is not a state of affairs desirable for its own sake, but rather a dynamic process in which economic actors like businessmen are trying to figure out new and better ways to satisfy demands and also to come up with goods and services previously unthought of. At any one freeze-frame of an economy, there will be big, mature businesses fighting to hold their ground and operating on thin profit margins; medium-scale firms still posting sharp growth, and embryonic small fry waiting to burst into the scene. If a big firm with a large market share takes its eye off the ball for a second, it quickly can be overtaken by a previously unkown upstart, as indeed happened to IBM and other firms once thought to be invincible by critics like Barlow.
Big businesses are often the worst defenders of free markets, and are often only too keen on spending millions of their shareholders’ money in lobbying for tariffs and other cushy deals from the State. But to expect the State, given its terrible track record, to make the market more “free” is one of the dumbest delusions there is.
Addendum: Thomas Sowell’s excellent Basic Economics is a good place to clear up the sort of economic fallacies such as Barlow’s.
Michael Hardt and Antonio Negri (a sympathiser of Italian terrorist organisations in the 1970s and imprisoned as such) wrote Empire, a book that purported to demonstrate a new concept of Empire sans imperialism, engaging with the ongoing march of globalisation. This book came to my attention at its publication when Hardt was interviewed on Radio 3; since the BBC viewed post-Marxist critiques and other explorations of jargon as vital contributions to high culture. It was theory-laden and empirically light, a strange attempt on the part of the Left to accept a ‘theory of globalisation’ by condemning all nationalism as reactionary. Even the Marxists found this theoristic verbiage too much to take.
Still, old Reds have never lost their airbrush, as this quote demonstrates:
The legacy of modernity is a legacy of fratricidal wars, devastating “development”, cruel “civilization” and previously unimagined violence. Erich Auerbach once wrote that tragedy is the only genre that can properly claim realism in Western literature, and perhaps this is true precisely because of the tragedy Western modernity has imposed on the world. Concentration camps, nuclear weapons, genocidal wars, slavery, apartheid; it is not difficult to enumerate the various scenes of the tragedy….
Modern negativity is located not in any transcendant realm but in the hard reality before us: the fields of patriotic battles in the First and Second World wars, from the killing fields at Verdun to the Nazi furnaces and the swift annihilation of thousands in Hiroshima and Nagasaki, the carpet bombing of Vietnam and Cambodia, the massacres of Setif and Soweto to Sabra and Shatila, and the list goes on and on. There is no Job who can sustain such suffering!
Can you see the “hard reality” that they missed?
Over on the Adam Smith Institute blog, there is another article on why outsourcing ends up actually creates job in the country doing the outsourcing. The author makes the obvious statement that:
Machine diggers took the jobs of workmen with spades. At the time, there were people who objected. But on that basis, should we create jobs by replacing each man with a spade with 50 men using teaspoons? Despite specific jobs being lost, the total number of jobs has increased.
Quite! This seems an emotive subject for those who fear their jobs will end up in India but as the comments on this blog have demonstrated when we have discussed outsourcing in the past, it is hard to make a convincing argument that outsourcing is anything other than a positive thing for an advanced western economy.
One of the interesting but un-noticed thing about world affairs is that, for all the wealth that traffic in oil is able to generate, the nations that produce it are not high up on the list of nice places to be. Not many people consider Saudi Arabia, Iran, Nigeria, or Russia to be desirable places to go for a holiday, never mind live. In an odd twist to the old folks tale that ‘money won’t make you happy’, it is pretty clear that oil wealth is not particularly useful in solving the problems of a nation.
Nancy Birdsall and Arvind Subramanian did notice it however and wrote a 5,000 word essay on the subject, with Iraq in mind, for Foreign Affairs magazine (preview here) What they noted was that oil wealth tends to corrupt the state, and since it has an easy stream of revenue at its disposal, it does not have to work so hard at gouging its citizens. So it also has no incentive to promote property rights as a way of creating wealth. And those that control the state, control the wealth.
Therefore, you get the distressing sight of the President of Chad spending the first instalment of his country’s oil wealth on a new Presidential jet for example. More recently, in Russia we see President Putin using state power to attack the oil-enriched oligarchs. And Nigeria seems to have been actively impoverished by its oil wealth, as the ‘Pirates in Power’ have skimmed $100 billion over the years. Oil wealth is not particularly healthy for democracies, either.
How to escape the curse? Merely privatising the oil sector does not work very well in states where the concept of ‘property rights’ is a shaky one at best (see Russia). Another attempt has been to create special ‘oil funds’ with constitutional restrictions on the way the money is used. This has been used in many different places. But again, the strength of the rule of law is the decisive thing. Chad had a ‘oil fund’ but the President still got his airplane.
Birdsall and Subramanian instead advocate the novel idea of distributing the oil wealth directly to the citizens. This means that every citizen of the nation gets an annual cheque from the oil company. For Iraq, this idea has many wonderful features. In the first place, Iraqi citizens get a real stake in their government, and will be not inclined to support Islamist or separatist groups who wish to smash the state for their own nefarious purposes.
Secondly, all Iraqis get the same cut. A struggling farmer, a Mad Mullah, or an educated doctor- each of them get the same thing. No complaints about the system getting rorted in favour of one ethnic group or another.
And best of all, ordinary Iraqis will get prosperous at the expense of the government. There will not be rivers of gold for a class of local ‘social planners’ to waste, and the government will have to work hard to sell the need for tax increases to fund their operations. This means that citizens can look the state in the eye. And tell it where to get off, too.
Keynesian economics may have gone out of fashion, but it is still here with us today in a different form. That is the theory of ASI president Madsen Pirie, who writes that Keynesianism has been privatized by the current UK government.
Keynesian economics used to be about government spending being used to flatten the business cycle. Now the privatized Keynesianism is about pushing private citizens into doing it. As Pirie writes:
They make saving less worthwhile by burdening companies with taxes and regulations, depressing share prices. They make spending easier with lower interest rates and by measures which boost house prices and encourage people to borrow.
The privatized Keynesianism builds up indebtedness and inflated house prices, and cuts into investment and pension provision. Government hopes that the boom part of the cycle will come to the rescue, and that rising wealth and prosperity will solve these problems.
Or will the privatized Keynesianism inflict the same long-term damage on the economy that the old Keynesianism did?
How slow can an object in motion be?
A special interest group returning taxpayers money?
A bureaucrat accounting for his travel expenses?
International trade negotiations?
There has actually been progress in the latest round of WTO talks, as serial offenders the EU and the US have finally agreed to remove export subsidies on agricultural products, and to lower domestic subsidies as well. Not too much can be read into this- the Economist report states:
The agreement leaves much of the detail to further negotiating sessions, and trade wonks are greeting it as only a minor success that takes negotiators perhaps halfway towards a final Doha-round deal. But it is progress.
There is still so much to be done. Japan, for example, maintains a 490% tariff on rice imports.
Nations which have already woken up to the fact that free trade is a good thing have been more proactive. Australia, for example, has signed a free trade agreement with the US, which goes with similar agreements with New Zealand, Singapore, and Thailand. There is no doubt that these agreements, while useful, are a poor substitute for genuine international trade liberalisation, but they are still progress, at least for those willing to give Free Trade a chance.
One of Spain’s top banks, Santander, is making a bid to buy the British banking firm Abbey plc, the mortgage lending firm which used to be a building society (what Americans would know as a Savings and Loan).
I do not have much to say about the specifics of the deal. It is all a part of the merger, acquision and disposal process which is a healthy part of capitalism and the efficient allocation of scarce capital. Maybe the shareholders of either firm have strong views on the matter but I do not. However, what is interesting to me is what this deal says about Spain’s development as an economic power.
Spain is one of the success stories of the past few years. When I went to the glorious city of Barcelona last year I was struck by how prosperous and dynamic the place was. I hear and read similar impressions from other sources. Much of this has to do with the determination of Spanish entrepreneurs to throw off the shackles of former failed socialist policies and embrace a more liberal economic culture, which former centre-right premier Aznar helped spawn. Let us hope the new socialist government elected earlier this year in rather shameful circumstances after the Madrid bombings does not mess it up.
It would be a grave error to infer too much from the acquisitive activities of a Spanish bank in Britain. But I get the feeling that this grand old nation is flexing its economic muscles again, and who knows, making a distinct improvement to the quality of Britain’s economy while getting richer as well. Good. It feels appropriate somehow. There are hundreds of thousands of British expatriates living in Spain so it perhaps fitting that Spain’s biggest companies are trying to get a piece of the action in the UK.
(As an aside, I would like to know what the Spanish-based blog Iberian Notes makes of this).
Now where did that come from?
Japan’s economy is actually growing at more than a statistically obvious rate for the first time properly since the 1980s. The fact that a heatwave is being credited with boosting business leads to the obvious conclusion.
Global warming is Good for Capitalism. Light those brown coal fires now! Chop down those hedgerows! Hunt those whales! Bring back leaded gasoline!
There is a tax strike in Lebanon against government levies on mobile phone charges.
This is pure supply-side economics coming from Zuheir Berro, the president of Consumers Lebanon:
Berro also refuted allegations that the government needed to charge high fees to insure more income. “This is a random policy which will get us nowhere,” he said. We still have a very high capacity for subscriptions and if they lower the fees, then subscriptions will multiply,” he added.
Lebanon has a 24 percent level of subscribers, compared to over 80 percent in industrialized countries, according to Berro.
The high subscription and communication fees, according to the group, are hindering the country’s development and investments.
Meanwhile British MPs are demanding extra local taxes, in addition to the existing local property and business taxes because it is the key to ‘democracy’.
It is always refreshing to read an article trashing state intervention only to read in the by-line at the end that the author is a candidate for the State of Massachusetts’ Senate.
Going back to look up James D. Miller’s bio details, I see that he is ‘Assistant Professor of Economics, Smith College’. My ignorance of the American education system is profound. Yet it seems to me that this is not the profile I would expect for a British economics professor. A candidate for political office who publicly calls for less state intervention, and does not even ask for more tax money in education! We used to have one or two or those.
I am especially intrigued by Mr Miller’s references (linking to Thomas Sowell) to the two earthquakes in California and Iran during 2003. The reason fewer than 10 people were killed in a Californian earthquake measuring 6.5 on the Richter scale, whereas 28,000 were killed by a 6.6 Richter earthquake in Iran? One word: wealth.
I really must read more Sowell. And thank you James D. Miller for an educational article.
It takes a lot to make me doubt the benefits of the free movement of people, money, ideas, goods and services. But a new report published by the Centre for the New Europe raises some questions about parallel trade in the European Union.
In today’s Wall Street Journal, Stephen Pollard explains the harm that can be caused by the re-exporting of pharmaceuticals from a country such as Spain, where regulated prices are low, sometimes under different labels and with inaccurate expiry dates, to countries where prices are regulated higher, such as Germany and the UK.
Until now my own view has been so what?
If a company sells products in two countries at different prices then an entrepreneurial opportunity may exist for traders to exploit. Demand in the cheaper country goes up, pushing up prices there, and supply increases in the more expensive country, pushing prices down. We may not see equal prices everywhere because there may be other factors affecting costs: land prices, distance, demographic differences, even the cultural acceptability of using medication. But with price controls in the various countries, the market process is subverted: increased demand in Spain does not lead to higher prices and increased supply does not produce lower prices in Germany (except possibly in the ‘informal sector’).
The EU appears to be promoting the compulsion to sell the same product everywhere in the EU, which is a violation of a person’s right to choose to sell or not. So what I would at first glance dismiss as special pleading by a corporate lobby turns out to be an anomaly. The CNE estimates that more than 3 people could be dying every two hours as a result of these regulations.
If the EU really wants freer trade, it should start by challenging the price control systems of its own member states.
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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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