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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.
On June 18th I attended an IEA lecture addressed by the Peruvian property rights advocate and analyst Hernando de Soto, author of The Other Path and more recently The Mystery of Capital, and I promised a report. I apologise that this is a belated report, but this has also given me time to think. (I also said I hoped to get a picture of the great man, but he rushed away as soon as he’d given his talk and I didn’t manage this.)
De Soto understands that property is a social fact. Property rights are triggered by ownership documents and written records and de Soto makes much of these triggers, often to the point of saying that they are the property. No, the property is the property. But the bits of paper make it clear to the world that this is what it is and who owns it.
De Soto’s key insight is that poor countries are poor not because they don’t contain enough potential property, but because the abundance of informal property that they do contain has mostly not yet been nailed down in writing. It therefore can’t be traded, or used as collateral. There can’t be a modern economy. De Soto’s life’s work is to try to set in motion the political and legal processes necessary to correct this. He lobbies politicians, he speechifies, he writes books. He gives lectures like the one I attended.
Most of what de Soto said at the lecture echoed things I’d already read in The Mystery of Capital. But the question and answer session contained what for me were novelties.
He said that the reason so many of the world’s poor like growing “drugs” is that drugs offer a quick return, in a world of insecure property rights. Contrive more secure property rights, and the poor of, e.g., Columbia would have an incentive to go into more respectable businesses which take longer to yield a profit. Interesting.
How, someone asked do you persuade the existing powers-that-be that clearer property rights are good? How about the police? You have to look at things from their point of view, he said. It is easier to catch criminals if you have a property rights paper trail to follow. Property in other words, doesn’t just attach my home to me, it attaches me to my home. It tells the police where to go if they want to talk to me. Interesting, and somewhat creepy.
He said that that if he wants to get the right things done, he has to let the politicians take the credit. Accordingly he no longer boasts about what “he” has been doing, which is why the website of his Institute for Liberty and Democracy has gone so quiet lately. (I’d wondered about why that was.) So, how much notice are governments actually taking of this man? That he was in a great rush after giving his IEA lecture suggested that he has vital business constantly on the go, but who knows? Not me.
I hope that powerful people are paying attention to this man, because what he says still sounds convincing. Indeed it is the best big idea about ending world poverty that I know of. But although I still think de Soto is a great man, under his influence I find myself seeing property – indeed the entire modern world – in a different and rather gloomier light, almost as a pact with the devil. We must have it, but we all know where “paper trails” can lead.
Paul Marks casts a jaundiced eye at real voodoo economics.
The latest crackbrained theory to hit the media is the “Brazil must win for Wall Street” argument.
This argument holds that if Brazil wins the world cup “confidence” in Brazil will improve, an Argentina style collapse will be avoided, the ‘Right’ will win the election – and the money lent to Brazil by various ‘Wall Street’ institutions will be safe.
Of course if the term ‘Right’ means anti-statist the argument is out of touch with reality – as the government of Brazil are a bunch of social democrats and the opposition ‘Workers Party’ are worse.
However. the problem with the argument is rather more basic than this. The argument is really anther example of J.M. Keynes’ theory that a change in ‘confidence’ (‘animal spirits’) creates slumps.
Actually government credit money expansions create the boom-bust cycle.
This may have been explained a long time ago (David Hume stated it in a basic way – and Mises explained it in detail many decades ago), but ‘Wall Street’ and the media do not have a clue.
Everyone reading this blog may be saying to themselves “why is Paul Marks telling us things we already know” – but the problem is that the powers that be in our world do NOT know these things. They are not evil – they are ignorant. Ignorant of the basic principles of political economy.
Of course if Brazil wins the World Cup its economy will still collapse, but will that lead the people of power in our world to do some real thinking? I doubt it.
Paul Marks
The World Cup is a positive image of globalisation: it isn’t a government project, it’s racism free, it’s about as capitalist as it gets and celebrates individual and team efforts. It also allows national hatreds to be acted out without anyone getting killed. Even the refereeing is generally better than some previous shockers.
Especially wonderful has been the willingness of Japanese spectators to ‘adopt’ teams and players regardless of national origin. The sight of Japanese supporters of Belgium against Brazil was surreal.
Actually, GBRI stands for Global Business Research Initiative, and to call it the brainchild of my good friend Syed Kamall somewhat exaggerates its current level of development. The enterprise is now hardly more than a strand of intellectual DNA.
Mission
– The GBRI exists to promote a greater public understanding of the role of business in spreading prosperity across the globe.
The GBRI’s Work
– Our initial work will concentrate on barriers to free trade.
– We will identify and expose human and cultural barriers to trade, as well as traditional barriers such as tariffs.
– We aim to educate people about different business cultures across the world.
– We will publish the work of leading businessmen, economists and policy thinkers from across the globe.
– We will also seek to promote new, young intellectual talent and fresh perspectives.
And so on. A few more bullet points follow. If all I knew of the GBRI was the small amount of verbiage currently on offer at its website, I’d be saying: could mean anything and probably means nothing. However, I had supper with Syed yesterday evening at his home and it all sounded decidedly promising. The Internet has massively reduced the costs in cash, office space, time and emotional wear-and-tear of running something like the GBRI, and Syed is not merely enthusiastic; he is also capable and not given to exaggeration. So I too am optimistic, and will keep you posted of developments, as and when.
Brian remarks that no one posts him advice about what to say about Third World poverty, but that he was relatively flooded with info about the US soccer team. This is a good sign. Worrying about the US soccer team is a relatively harmless past-time. (Revelling in their defeat of Mexico might be dangerous in some places however). The libertarian answer to what radio listeners should do about the Third World is basically “do nothing”. The three main obstacles to enrichment of people in the Third World fifteen years ago were:
1) the skirmishing of the Cold War (which I think was justified by anti-Soviet forces)
2) the absence of the rule of law
3) trade barriers and a belief that socialism was better than capitalism for developing economies
The first is redundant.
The second can only come about by internal pressures or by the imposition of direct colonial rule from the only country whose constitution I would trust: Switzerland. Realistically this means, the Africans are going to have to sort it out for themselves.
The third is very simple. We oppose Bush’s trade tarriffs. We want the European Union Common Agricultural Policy abolished immediately. We should also try to stop the IMF and the World Bank from financing welfare state programmes in countries that can’t afford them (and never will afford them, if they try to leap from pre-industrial to welfare-underclass in one go).
BRING ON BRAZIL!!!!!!!!!
Doesn’t sound like such a big deal does it? Portugal out? What’s new? So are France. So are Argentina. No, the big story is that the USA are through to the last 16, despite being beaten 3-1 by Poland. Weird weird world (cup) or what?
On a more serious note, I’m doing a broadcast for BBC Radio Scotland this Sunday morning (at about 9.15 am) on the subject of what the Trade Justice Movement hopes will be a big demo by the Trade Justice Movement. What should I say? Their campaign seems to be big on waffle and weak on specifics, which I think is probably good because any specifics they favour would probably be bad. So what specifics (a particular identified tarriff barrier – a particular WTO procedure or rule or programme) should I talk about?
Please don’t email me with why free market economics in general is better than statism in general for getting rid of world poverty. I already know that.
A few days ago, I received through the post one of those half-book half-pamphlet things (only 85 pages long but with a readable spine) that have so abounded ever since the Institute of Economic Affairs got into its stride, this one being from the Social Affairs Unit. It is called Marketing The Revolution: The New Anti-Capitalism and The Attack Upon Corporate Brands. It’s by Michael Mosbacher, who is a longish standing friend/acquaintance of mine. It’s good.
There’s a biographical note at the back which tells us that Mike, who is now the Deputy Director of the Social Affairs Unit, once upon a time “studied politics at Exeter University, writing his Master’s dissertation on the impact of the collapse of communism in Eastern Europe and the Soviet Union upon the British Communist movement”. This, or something pretty like it, was published by the Libertarian Alliance as Political Notes No. 127. This new piece is the logical successor of that earlier one. It describes some of the new globalised groups and campaigning methods and ideological themes that have elbowed their way forward to fill the void once occupied by those pathetic old Bolsheviks and all their massed ranks of useful and not so useful idiots.
Here’s a chunk, not from the piece itself, but from the press release that arrived with it:
The broader message is an old, and rather tired one, hatred of capitalism, the belief that the world is diametrically and permanently divided between the exploiting corporate fat cat few and the exploited masses. What’s changed is the way that message is now being marketed to a new, wider audience by piggy-backing on the corporations’ own publicity. The activists do this, often via websites, by cleverly parodying corporate ads, organising media-friendly stunts at AGMs and launching boycotts.
That you can play games with a famous brand and get your joke bounced around the world at virtually no cost to yourself is a fact that Samizdata readers have several times also been invited to enjoy. Think of the logo adaptations we’ve featured of London Underground (“take a taxi”), and of Intel (“Big Brother inside”).
Would that Mike Mosbacher’s work was making equally clever use of the Internet. Alas, the Social Affairs Unit website makes that of my dear old Libertarian Alliance look downright advanced. That it doesn’t refer in any way to this publication is peculiar (although technical difficulties have also prevented any reference to the LA’s latest batch of paper yet finding its way onto our site). But far worse than that, the SAU website commits the basic old-school sin of using the internet only to try to sell paper, instead of also to distribute text free of charge. There’s nowhere on the site from which you can download anything “published” by the SAU, other than short bits of sales blurb. If you actually want to read anything substantial that they’ve “published”, you have to order it through the post. You have to pay money. (For all the difference it can make me saying it here, you can buy Marketing the Revolution by sending GBP9.95p plus GBP1 for postage and packing (blogspotbollocks won’t do pound signs so please decypher that as best you can) to: Social Affairs Unit, 314-322 Regent Street, London, W1B 3BB. Or ring Mike Mosbacher himself on 020 7637 4356.)
You’ve got to make a living, and if you are in politics, “public affairs” etc., that tends to involve doing things that ignorant old people think will influence the young, rather than doing things that actually will influence them. I don’t blame Mike Mosbacher for the foolishness of writing interesting things about the internet but then publishing them in an internet-hostile manner. Well, maybe I do, because like I say he doesn’t just write for the SAU; he is its Deputy Director. Whatever. But let’s be clear what the next step is: an internet presentation of Mike’s stuff which actually deploys some of the good work that he’s been doing in an internet-usable form.
Because it is good work. Mike is not overwhelmingly strong, for my taste, on analysis. His big picture is somewhat unpersuasive. He makes much, for example, of the fact that anti-capitalists make a living within the world of actually existing capitalism by having capitalist money of their own, and by accepting great lashings of it from others who do if they don’t. So what? This is like moaning about Soviet dissidents who also had jobs as government scientists. What were they supposed to do? Starve? The case against these anti-capitalists isn’t that they are taking money from capitalism to trash capitalism; it is that they are trashing capitalism.
But if the big picture is somewhat blurred, the small pictures are in exact focus again and again. Just as with PN127, Mike digs into just how this campaign operates, and what that bunch of lefty-capitalist self-haters actually say and do and ill-spend their well-gotten gains. Waffle it is not. And again as with PN127 (communists who reviewed that said it was very accurate), those it describes would recognise the details as accurate rather than the polemical and inaccurate waffle that is often presented as anti-anti-capitalist “analysis”.
Mike is good on the way that capitalism appropriates the imagery of youthful rebellion and uses it to sell things to those same youths when they get a bit older. (While doing this I also noted a TV advert featuring the late Jimmy Hendricks emitting all manner of anti-establishmentarian vibrations via the latest psychedelic computer-graphical trickeries, in honour of the latest Audi.)
But one of the better bits of analysis comes not from the text itself, but from that same press release which I’ve already referred to. Just after the bit quoted above, it goes on to say:
Because its impulse is anti-capitalism rather than ameliorating the practice of corporations, the anti-corporate movement views progressive corporate policies as simply an attempt to mask the true nature of capitalism; which it is their mission to unmask. The harder an individual corporation seeks to show that it is doing good, the more important it becomes for these activists to seek to show that it is not. Progressive companies are attacked not in spite of, but because of their progressiveness.
I don’t remember anything as bang-on-the-nail as that in the thing itself, although of course in Marketing the Revolution itself there’s much more detail:
The TV stations of Turner and the skin care products and lotions of the Roddicks are, of course, themselves identified by the anti-branders with all the alleged sins of branding. They are, in fact, seen as especially heinous offenders by some: the mainstream media represented by Ted Turner is seen as the engine behind the construction of the branded world and Anita Roddick is the champion of what they see as the blind alley of ‘ethical consumerism’. Hence, The Body Shop was a prominent target on the web-based hit list of corporations to be subject to ‘anti-capitalist actions on Tuesday 1st May 2001’.
Here we have a principle that might enable the pro-capitalist movement to start making some waves of its own, by piggy-backing on the anti-capitalists. We can note which corporations are trying to be seriously “progressive” to the point of being actually anti- any capitalism but their own, and especially if they are doing this not just with their messages but with their money. We can point out to them not only that they are asking for trouble, but that, if they don’t stop letting the capitalist side down, we will set the anti-capitalist dogs on them.
It’s no use blaming anti-capitalists from getting money from whoever they can, but you damn well can blame capitalists for giving it to them.
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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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