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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There does seem to be a lot of confusion (even in libertarian circles) about monetary policy.
There are two points of view, on monetary policy, that libertarians might favour. The better known school of thought (at least better known to the media and other such) is the ‘Monetarist’ school of thought that holds that government should increase the money supply in line with increases in economic output in order to keep the rate of inflation at zero. And the ‘Austrian’ school of thought that holds that government should not increase the money supply at all.
The Monetarist school is most closely associated (in modern times) with Milton Friedman – although the situation is complicated by the fact that Dr Friedman (in recent years) has come out against a government being allowed to increase the money supply in line with the output of general goods – on the grounds that government can not be trusted with this power and that therefore the ‘monetary base’ (the notes, coins and other government produced money) should be ‘frozen’ – i.e. not increased.
The ‘Austrian’ school of thought is divided between those (such as F.A. Hayek) who have argued that money need not be linked to any particular commodity (hence Hayek’s bringing back of the 1920’s idea that money might be based on a ‘basket’ of different commodities held by banks in a sort of ‘index money’), or at least that private institutions who issued paper money (or credit notes) need not be forced to actually have the exact amount of the commodity they claimed was backing their notes. And the ‘hard money’ people who have argued that a bank (or other institution) that issues money should base it on one commodity and have enough of that commodity in its vaults to cover all its notes.
Actually the debate within the Austrian school has little political importance – as even the ‘hard money’ people (Ludwig Von Mises, Murray Rothbard and so on) formally agreed that a bank (or other private institution) did not have to base its notes on a commodity or have to back all its notes with this commodity – as long as it told people what it was doing. A private institution that did not base its notes on a commodity or did not have enough of that commodity to back its notes would only be guilty of fraud if it implied that it did.
The real matter of dispute was what would happen to institutions that issued unbacked paper money – with the hard money people arguing that such institutions would eventually go bust (or convince the government to bail them out).
These seemingly obscure matters of theory do matter. For example when a libertarian says that the government is increasing the money supply ‘too much’ he is talking as a Monetarist (whether he knows it or not) – as an Austrian school man (of whatever faction) would hold that government had no business being involved in increasing the money supply at all.
For the record I am Austrian school man – and of the ‘hard money’ faction. Any book choice I recommended might well be influenced by these facts – so I will stop here.
Paul Marks
Paul Marks reads what is generally said to be a ‘pro-free market’ newspaper and find a procession of writers who do not have the slightest idea what they are talking about
Page four of the Sunday Telegraph business supplement (4 August 2002) tells us quite a lot of the state of what passes for free market thought in Britain today – remember the ‘Sunday Telegraph’ is about as free market as mainstream Britain gets, the other newspapers (let alone radio and television programs) are far worse.
There are three articles on the page. The first article is by Jeff Randall of the BBC Mr Randall is one of several B.B.C. people who write in the Daily and Sunday Telegraph and such people are given as evidence that the B.B.C. is tolerant of free market thought. My own opinion is that the Telegraph is rather welcoming to anti free market thought – but I must deal with the article on its merits (not on basis that the author works for the BBC.)
Mr Randall writes about two topics in his article. The second topic is the stupidity of the Football League – a topic I know little about. However, Mr Randall starts his article by writing about the 1990’s stock market bubble. Mr Randall blames the whole thing on stupid greedy people (businessmen, politicians, ordinary investors and so on) and gives several examples of stupid behaviour.
Mr Randall shows little sign of understanding that the bubble was created by an expansion of credit-money by the Federal Reserve Board and the other central banks. But why should Mr Randall understand this? The source of Mr Randall’s understanding of economics is that “classic work” by J.K. Galbraith “The Great Crash”. J.K. Galbraith (being a socialist) would hardly blame the great depression on government credit-money expansion – no, greedy businessmen and other silly people were the cause. Being mostly University graduates Sunday Telegraph readers are likely to have heard of Galbraith’s work. However, it is very unlikely that the average reader (or even Mr Randall himself) has heard of Ludwig Von Mises’ “Theory of Money and Credit” or Murray Rothbard’s “America’s Great Depression”.
The basic truth that investment must be based on real savings and that trying to base investment on credit-money expansion via the central bank system MUST lead to a boom-bust cycle (whatever the moral character of businessmen) is not something that it is generally known. And how can Conservative “Telegraph” readers get to know about it? The socialists are not going to tell them – and anti-socialist establishment types such as Mr Alan Greenspan of the Federal Reserve Board are not going to tell them either. Even if the establishment types know what they have done (and I suspect that Mr Greenspan is one of the few people in the international finance “community” who actually does know what he has done) they are hardly going to say “look, we have created a boom-bust cycle”, such a statement would not make them popular. It is far better to blame “greed”.
The second article (on page four of the business supplement of the Sunday Telegraph) is by Evan Davis (another BBC man). Mr Davis notes that people in some Continental nations tend to save more than people in Britain or the United States. Mr Davis concludes from this that the E.U. central bank should cut interest rates – as this will encourage the people in Europe to spend and invest, rather than save.
Mr Davis is unaware that investment depends on saving (I suppose he thinks that “saving” means hiding money under the floor boards). Mr Davis is also unaware that people must produce before they can consume. All efforts to “stimulate the economy” by getting people to buy more things are putting the cart before the horse.
However, there is no reason why Mr Davis should know any of this – he could spend as much time as he wished in university economics departments without learning any of it. The business people who read the “Sunday Telegraph” are (no doubt) quite happy to think that all would be well if only people had more money to buy their products. Why should the business people not think like this? No one has ever told them anything different.
Mr Davis points out that there is less of a house price bubble in most continental nations and that the stock markets have not reached the heights seen in the United States. However, Mr Davis does not point out that there has in fact been vast money supply growth in most Continental nations and that presently the Euro money supply growth figures are higher than money supply growth figures for the United States – see the back pages of the “Economist” magazine for the figures.
The idea that the effects of the boom-bust cycle in Britain and the United States can be mitigated by further money supply expansion in the Euro Zone is insane – but there is no reason why Mr Davis (or his readers) should know that it is insane.
The last article (on page four of the business supplement of the Sunday Telegraph) is by Luke Johnson (chairman of Signature Restaurants). Mr Johnson is concerned about the rise of China and the relative decline of the West in manufacturing.
Mr Johnson knows little about “macro economic” matters – for example he thinks that the “relentless deflation now present in all economies” is due to China manufacturing cheap goods. Actually there is “deflation” (i.e. falling prices) in virtually no Western nations (apart from Japan) – and the falls in asset values that we have seen (and will see a lot more of next year) are due to the credit bubble (which is still being pumped up) nearing its terrible end. Mr Johnson does mention the credit bubble – but being a businessman he prefers to deal with something he can see in terms of physical goods (in this case the manufactured goods of China).
Mr Johnson is actually right to dismiss the idea that manufacturing does not matter – I know only to well that “service industries” normally do not mean flashy things (and when they do mean flashy things – they are often unstable credit bubble linked things such as “financial services”). Mostly “services” are things like the warehouses that have replaced the factories of the midlands (and much of the rest of Britain). And anyone who thinks that warehouse work, looking after goods imported from abroad, is a real substitute for actually making things is simply wrong.
Mr Johnson makes too much of China’s low wages (there are nations with much lower wages than China that produce very little in terms of manufactured goods – and there is no reason why, with automation, “high wage” areas can not hold their own against “low wage” areas).
However, Mr Johnson is right to point out that depending on a hostile power (and China is deeply hostile to the west) for essential manufactured goods may be unwise. Although one should remember that a real market order can adapt very fast – for example the British military, to some extent, depended on goods produced in Germany in 1914 (even down to the dye for army uniforms) – but this did not prevent Britain fighting Germany (British firms filled the gaps).
But Mr Johnson’s last but one paragraph makes his most important point (and shows there is some reason to read the ‘Telegraph’ papers, rather than reading the ‘Guardian’ or watching the BBC.).
“Fatuous E.U. bureaucrats legislate for more burdensome health and safety regulations, higher taxes, and more red tape for business, and insist that curing unemployment is a priority”.
When they are dealing with “micro” economics (as opposed to the financial magic of “macro” economics) Telegraph business people have something to say. It is the taxes, spending and regulations of Western nations (E.U. or not E.U.) that is helping destroy Western industry – not a wicked Chinese plot. Of course Western industry is also being destroyed by the boom-bust cycle, the very demands for “lower interest rates” and “more consumer demand” that we hear from business people in every Western nation.
They are rich, they are well meaning, they are hard working – but (sadly) they are ignorant.
Paul Marks
It has long seemed to me that as interest rates have been forced to a ludicrous 40 year low, there is no real reason to keep money sitting in a bank as once the government appropriates a chunk of the pitiful interest on your cash, you might just as well have it stashed under your bed.
The rational view is that rather that seeing a bank as intermediary to invest your money for you, it is really just a glorified piggy bank… a supposedly safe place to invest your money. But then when you add in the fact retail banks go out of their way to pile on service costs and pull such ‘fast ones’ as taking up to four days to clear cheques (thereby pocketing a few days interest on the uncleared funds), when in reality they are capable of clearing the transaction before you have walked away from the counter, it is hardly surprising that retail banks are hearing the first rumblings of a consumer revolt.
I have always thought consumer boycotts were splendid things but quite why the inane Independent Banking Advisory Service (IBAS), a bank consumer group, is calling for a windfall tax (free registration required for link to ERisk Portal) on banks as a result is not so clear.
[Eddie Wetherill of the IBAS says] Nobody can understand how charges are calculated or precisely when they apply. The banks appear a law unto themselves.The Government has made fancy promises to be the consumer champion, but in reality it appears to have been in the pockets of the banks. We are calling for a windfall tax. They have ripped off the public and ought to be paying back £5-10 billion. We have seen ten years of plundering.
And as a consumer of retail banking services, exactly how do I benefit from having the government help itself to the bank’s funds? Does Wetherill think the state is going to appropriate £5-10 billion from the banks and then dole it out to retail banking customers? How idiotic. The government already takes a great deal more of my money that my bank ever has and any ‘windfall tax’ is just going to make the bank a less solvent less secure piggy bank without helping me one iota. With ‘friends’ like the Independent Banking Advisory Service, who needs enemies?
Happy birthday, Professor Milton Friedman! Chicago’s greatest academic passes the 90-year milestone today. Now there are many ways we Samizdatistas got to hold the views we do, but speaking for myself, Prof. Friedman was a key factor.
I recall reading his book Free to Choose when I must have been in my mid-teens, and found the clarity of his writing and often wry comments about the insanity of Big Government a compelling combination. As a youngster, I found his arguments easy to understand but they never patronised the reader. He surely ranks alongside Ludwig Mises, Murray Rothbard, Ayn Rand, F.A. Hayek and Robert Nozick as one of the giant figures in the libertarian counter-revolution after the Second World War.
Remember Clinton’s “Don’t Ask, Don’t Tell” policy for admitting gays into the US military? It appears that Big Media has adopted a “Don’t Know, Don’t Care” approach to covering the tumultuous stock market. Cal-Berkeley journalism prof Orville Schell says that Big Media’s obliviousness to the looming financial scandals stemmed in part from the fact that they are part of the corporate world too.
Maybe that’s why Big Media failed on the investigative side, but that still doesn’t explain how it is that the largest and most reputable media outlets in the world are simply at a loss to tell their readers what is happening in the financial markets. Instead of providing answers, they rely on pop-culture cliches, psychobabble and a Rolodex full of self-serving “experts.” Here are three of the worst examples of the DK/DC mentality in recent days from three major news sources: MSNBC, the New York Times, and CNN.
Exhibit 1: MSNBC on Market timing
MSNBC wonders out loud whether it is possible to “time” the market — that is, can investors count on making extra money in the stock market by picking the optimal times to buy and sell? This is hardly a controversial issue in the finance community — the weakest version of the Efficient Market Hypothesis (EMH) says that you cannot forecast stock prices by extrapolating present trends or by overlaying historical cycles — that “market timing” is fool’s gold. Yet in an attempt to make the story “balanced,” MSNBC gives disproportionate weight to the crankish opinions of a “stock cycle” fetishist named Peter Eliades. The author of the story is totally unable to critically assess Eliades’ claims.
Never mind that stock cycle theory is the phrenology of the finance world — Peter Eliades is telling us that he can make money timing stocks. His “proof”: stock prices fluctuate, so it is critical to buy and sell at the right times. Gee, you mean I would make more money if I bought at a lower price and sold at a higher one? That is a tautology, not an argument; it is not proof that any valid strategy for forecasting the peaks and valleys of the market can be devised. The MSNBC author seems totally incapable of making this critical distinction.
As for Mr. Eliades, we are told that he “[has] his money in cash until the market shows clearer signs of its next move.” So he essentially concedes that he doesn’t know how to time the market either, but this point is also lost on the author of the piece. And why on earth is he in cash? Is cash the only alternative to corporate equities? But since MSNBC knows as much about securities markets as Mr. Eliades — next to nothing — he is their peer, and as such is taken at face value by clueless Big Media scribes.
If you are concerned about when to get out of the stock market, you can always hedge your bets by selling off your stock portfolio a little at a time, smoothing out the bumps in the ride. Market timing poses no crisis to smart, disciplined investors.
Exhibit 2: The NY Times on the recovery
I picked this next quote not because I felt like picking on the New York Times, but because I think that it is all too typical of pseudoscientific analysis of the stock market and the sheer pervasiveness of the DK/DC policy by Big Media in general. It could have come from any newspaper. This is how The Gray Lady attempts to explain Monday’s stock market rally:
Emboldened by the broad market’s ability last week to snap a three-week losing streak, investors jumped back into the market on Monday, scooping up stocks with beaten-down prices.
Stock prices rose because investors jumped back into the market? Hmmm … how did these investors “jump into” the stock market? By purchasing stocks from the Stock Market Fairy, right? No, they bought shares from willing sellers who were already in the market and wanted to reduce their exposure to those particular securities. Every share of stock that is traded on the NYSE is simultaneously bought and sold, by definition. Duh!
And what is with this psychobabble? In an absurd anthropomorphosis, the Times tells us that the market had the “ability” to snap a losing streak. Markets don’t have “abilities” — markets do not “struggle” to “find their level” or “seek to reverse their losses” or whatever other characteristics journalists assign; markets simply calculate the prices needed to avoid surplus or shortage conditions. If the buyers were “emboldened,” what does that say about the investors who sold their shares to the emboldened buyers? Are they wusses?
Exhibit 3: CNN on the scandals
This CNN piece is typical of the media’s DK/DC attitude toward the
corporate earnings scandals. Investors, we are told over and over again, have been “alarmed” and “shaken” by various scandals in which senior management “cooked the books” to overstate profits. Well, maybe rank amateurs and ham-fisted day traders allow measures like “earnings per share” drive their investment decisions, but as they tell you in accounting courses — profit is opinion, cash flow is fact.
If I am a CFO, which would I rather do: report higher earnings or lower earnings? Suppose that I have the option of valuing inventory in two ways, one of which would result in a higher cost of goods sold; or suppose that I can choose from two depreciation schedules for my fixed assets, one of which would cause me to take more depreciation expense sooner in the life of the asset. In either case, I’ll take the option that depresses current earnings, thus minimizing current tax liability and giving me more cash sooner. Tax reforms such as accelerated depreciation and LIFO (last in, first out) inventory modelling would allow corporations to report LESS taxable income while INCREASING their cash flow by decreasing their tax liability. Investors value a stock for the company’s ability to generate cash to pay dividends, not for its ability to enrich Uncle Sam.
A healthy firm is going to try to err on the low side when reporting earnings. For a struggling, nearly insolvent firm like MCI WorldCom or Enron, the incentives might be reversed if, for example, reporting very low or negative earnings would cause the firm’s bond rating to fall substantially. WorldCom and Enron were highly leveraged, which means (1) that they are extremely sensitive to the cost of financing their debt and (2) that they are extremely sensitive to downturns in the business cycle. Firms that are fighting for survival, and management that is trying to hold on to power, might try anything. But it is fatuous to treat every business as the exception to the rule.
Here is something that Big Media is not going to tell you: the outright majority of the value of the US stock market is owned by financial institutions (e.g. investing intermediaries such as mutual funds, and contractual intermediaries such as pension funds and life insurance.) Households are net sellers of individual stocks, but they are net buyers of mutual funds. In other words, households are still heavily vested in the stock market, but they are investing indirectly through professionally managed mutual funds and pension funds, etc. A pension fund manager is not going to be swayed by a cash flow statement that tries to shift $4 billion from operating activities to financing activities (as WorldCom did) — these people are just not duped that easily.
So is “shattered investor confidence” the reason the stock market is falling? Call me a heretic, but I think the scandals have relatively little to do with the declining US stock market. I think it has more to do with the EU Savings Tax Directive, which Perry has discussed below. The US stock market was fueled in the ’90s by massive foreign investment in American equities (British Petroleum buying Amoco, Daimler-Benz buying Chrysler, etc.) Europeans prefer to set up American holding companies to invest in the US, earning income on their investments that is taxed at (comparably low) American corporate tax rates.
The US attracts massive amounts of foreign investment (another way to say this is that the US has a massive current account deficit) because the US has relatively low tax rates, and relatively light regulatory burdens. But the EU considers this “unfair tax competition” and is trying to establish a tax cartel that would tax receipts of income earned in the US by Europeans at higher European rates. To the extent that such a thing would make investment in the US less profitable, it has reduced the global demand for American corporate equities. It’s just a theory, but at least it is a theory backed by some evidence, not just a bunch of tiresome cliches pastiched together into a jejune news story.
Call me an incurable optimist, but I can’t help wonder whether the recent jarring fall in the price of gold to near the psychologically-key $300 per ounce level may be a sign that the worst is over in the global stock market.
Gold has shot up in recent months partly because it is seen as a safe store of value at a time of cratering equity markets, corporate scandals and worries about developments in the Middle East. Now that yellow stuff is getting cheaper again. A straw in the wind, perhaps. But without investing erroneous mystique in this metal, I think its recent fall from highs is the market’s way of telling us that better times may be ahead.
On the other hand, if an when the U.S. goes after Iraq, gold may go into hyperspace for a while.
The good news is that it looks like there is no significant support for the US joining what can only be described as a monstrous tax cartel with truly global reach being advocated by the high tax states of Europe.
This is truly splendid but do not for a moment think that this is the last we have heard of attempts to end the ‘unfair’ competitive advantages of lower tax economies.
There is an excellent, detailed and revealing interview in the July edition of techie magazine Wired with supply-side economics writer and computer enthusiast George Gilder. I missed it when the magazine came out but caught it on the net this morning.
Gilder is one of my favourite writers on economics. He can actually make the often-dry subject matter really sing, in a way few others can. His first major book, Wealth and Poverty, published in the early 1980s, helped to provide the intellectual ammunition for Reagan and Thatcher’s supply-side tax cuts, the beneficial effects of which are – mostly – still with us. I recall an enjoyable evening, about 17 years ago (!) when Gilder came along to the now-defunct Alternative Bookshop in Convent Garden, central London, to talk about his following book, The Spirit of Enterprise. After that book was published he turned his attention almost full-time to writing about technology, especially the whole area surrounding computers and the Internet. He later became something of an investment guru, which initially made him a very wealthy man.
Gilder has taken a hard knock from the meltdown in technology stocks over the past two years, but his boyish enthusiasm for what the future can hold is undimmed. The man is a tonic, even when reflecting on the rough times he has endured over the past two years.
Now that our own British government seems bent upon wholesale reversal of some hard-won supply-side reforms, his message needs to be broadcast again.
One of the threats to economic freedom is the state sponsored cartel, in which groups of economic agents can collude to fix prices with the aid of the state, crushing opportunities for lower prices from newcomers to the market. A particularly dangerous cartel is in the offing – the global tax cartel. Such a cartel is the aim of the European Union, which in the name of tax “harmonisation” wishes to prevent countries, especially the United States, from setting taxes at rates lower than those in the EU. The EU, dominated in recent years by leftist governments hostile to the market, resents the way in which the Anglosphere nations have been able to outperform the EU in terms of growth and job creation. The latest manifestation of this desire is enshrined in what is called the “savings tax directive”.
One of the great things about global free markets has been the ability of financial capital to whizz around the planet, seeking out the best returns and the countries with the lowest tax rates. This financial freedom has forced many a government to give up tax-and-spend policies and follow a more market-friendly path. And that is precisely why the High Priests of Big Government at the EU wish for such a cartel. I am quietly optimistic, though, that American politicians will see this proposal for what it is, a desire to shaft American enterprise and hobble the global economy. (I may be wrong, of course) It comes at a time when there has been a lot of friction between America and Europe post September 11. Tthe threat of a tax cartel to throttle American enterprise will only deepen the rift.
With this in mind may I commend readers the freedomandprosperity.org website, which is a lobby group and publishing house giving a full list of articles spelling out the horrors of tax harmonisation. They also have email addresses so that people can contact Senators and Representatives about this crucial issue.
It is difficult to get one’s mind around the vast sums of taxpayers’ money that British finance minister Gordon Brown has planned to hurl at our public sector. The sums are mind-numbing. The spending plans are predicated on some pretty rosy forecasts for the British economy over the next few years, not to mention some fairly dubious accounting methods which reduce the potential bill to the taxpayer from infrastructure projects.
Those rosy forecasts could easily fail to materialise, particularly as mounting red tape, higher taxes and growing interference from the EU clogs the arteries of the UK economy. What is beyond doubt in my mind is that “New Labour”, that strange political entity supposedly different from old tax-and-spend Labour, is dead. Central control of finance, big spending, handouts for the public sector unions – the whole unlovely mix is back. And of course Brown’s announcement on Monday of this spending mania was accompanied by a sharp fall in British equities to the lowest levels in six years. Of course much of the damage to stocks stems from events in the U.S., mired as it is in accounting scandals. But one cannot help but conclude that Brown’s charmed existence for the first five years of his time in the job is about to get a lot rougher.
There may be some upside to all this. Brown’s attempt to improve our creaking health and education system may prove the futility of state monopoly as the ideal way to deliver good service and give the opposition Conservatives ammunition for the case for root and branch reform. But I would not bet the farm on it just yet.
Paul Staines thinks Alan Greenspan as a canny operator who requires some careful interpretation
Yep, the 80s are over, Gordon Gekko is dead and buried, Gordon Brown lives, the stock market is going to the Antarctic, CEOs are going to jail and now the high priest of central banking himself says greed got out of control in the 90s.
I admit to never understanding why Disney’s Eisner would be motivated to work Mickey Mouse harder if he had $300m in stock options instead of $100m, but hey, I thought it was up to the shareholders to decide rather than the readers of the New York Times. Enron was pretty bad, the accountants seem to have been looking the other way and the CEOs were acting like robber barons of yore.
Today the Federal Reserve chairman Alan Greenspan was giving his biannual testimony to congress. Markets stop and listen, particularly when they are in trouble – and boy are they trouble today – I had CNBC (“bubblevision”) playing him live whilst trying to figure out how not to lose money, I heard him say “the latter part of the 1990s … arguably engendered an outsized increase in opportunities for avarice. An infectious greed seemed to grip much of our business community..”
Guilty as charged. For a period in 1999 to 2001 whilst the NASDAQ got gloriously irrationally exuberant, I was completely infected with greed, my altruistic immunity system shutdown. Hot dot.com IPOs? “Gimme, gimme, gimme” I cried. “Yahoo! Lets go Cisco!” I wasn’t the only one, an old friend is currently staying with me. He is a private banker, he grew his family’s nest egg 2000% in four years, then wiped it out in one year. His wife is suing him, not for divorce, but for misadvising her in his capacity as her broker. (Memo to self, never marry an American lawyer).
Greenspan has been very clever in his testimony, he has defended capitalism whilst decrying capitalists and their avarice. He basically said the bull market gold rush of the 90s overwhelmed the checks and balances of American capitalism, but capitalism is good, just some capitalists are bad. I could further summarize what he said but why not click to the Fed’s own page for yourself?
Oh, one of the big insurance companies has just announced that it “is not a forced seller of equities”. Hmmm.
Paul Staines
I spent a couple of torpid hours on Tuesday afternoon listening to the billionaire hedge fund king and now globetrotting philanthropist George Soros give a talk to a British parliamentary committee. Soros is the man who, to the everlasting gratitude of the British public, attacked the pound sterling in the foreign exchange markets during September 1992, ejecting this country out of the European Exchange Rate Mechanism (ERM), a move which allowed the pound to fall to a level that made it possible for British goods to be profitably sold abroad once more. So one might have thought that the Hungarian-born finance wizard would be a hero to this humble hack. Alas, the man has feet of clay, and very big lumps of clay at that.
Soros has spent the last few years ruminating about the many dangers of global capitalism, which is a bit like Formula One racing ace Michael Schumacher warning about the risks of high-speed motor racing. Soros thinks the globalisation of capitalism, while not without a few benefits, is full of dangers and problems, which require rules and international watchdogs to run things. Here are a few snippets:
“The major causes of poverty are bad governance and bad location.”
Well, I agree bad governments contribute to poverty, and there are dozens of examples of how collectivist regimes of various stripes have beggared their populaces and retarded wealth creation down the centuries. Take the current miserable example of Zimbabwe, for example. But bad location? Does Soros think that unfortunate geography causes poverty? Then how does he explain why places like Hong Kong, with hardly any natural resources apart from good shipping links, are fabulously wealthy, while most of Africa, with huge mineral wealth, subsides in misery? The same goes for large chunks of Asia and parts of Latin America.
“Governments are less well situated to provide public goods than they were because they cannot tax capital as they used to. We need to strengthen international institutions for the provision of public goods.”
Well, all I can say to that is – thank heaven for multinationals. By George, George has got it! International capital flows are cramping the ability of would-be socialist spend-it-like-water governments from doing what they used to do. The likes of British Prime Minister Tony Blair have been forced, through gritted teeth, to rein in old socialist habits on the knowledge that financial markets will punish those habits in a heartbeat.
George Soros is clearly a highly clever man when it comes to making dollops of money beyond most folks’ wildest dreams, but I fear that like many in his case, he has almost rebelled against the free market order in which he made his billions out of guilt or perhaps more honorably, out of a desire to help mankind from his lofty vantage point. It bears out the point I have sometimes heard in libertarian circles that capitalists often make the worst advocates of the classical liberal order.
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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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