The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
– Frederick Hayek, The Fatal Conceit: The Errors of Socialism
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Capitalism in America: A History. By Alan Greenspan and Adrian Wooldridge. I recently read this book, published a few months ago, and it is written by a senior journalist who is political editor of the Economist, and former Federal Reserve Chairman Alan Greenspan. Given their respective occupations, I had a rough idea of their broad ideology (a general predisposition towards free markets, private property and limited government) and on the whole I enjoyed reading this book a great deal. Their core thesis is that America has been as successful as it has been because it allows a great deal of “creative destruction” – new technologies and business models disrupt and replace older ones, causing pain for specific groups but big benefits for the wider population over time. America is so big, and people have traditionally been so willing to move around to find work, that the “creative” side wins over the “destructive”. They observe the back-and-forth process of how there have been periods of intense growth and upward progress, such as the post-Civil War boom, the rise of the great business tycoons such as the Rockefellers, and then the push-back of anti-trust and the Progressive Era, William Jennings Bryan and his “cross of gold” hysteria. We get the Roaring 20s, and ooops! the Great Depression, followed by WW2 and the post-war boom; the troubles of the late 60s, then 70s; the Reagan era, supply side tax cuts and the dotcom boom. For a while, people are diagnosed with something called “affluenza”. And finally, the 2008 crash happens and there’s all the angst over declining productivity and worries about skyrocketing debt. The most impressive thing about this book in my view is the way an enormous amount of information, some of it arcane, is conveyed into a fast-paced narrative. This book is written very well and packed with anecdotes and even a bit of sly humour. There are some standouts: the book gives a marvelous account of the agricultural technologies and innovations that turned the Great Plains into the breadbasket of the world; its understanding of business models and mass production techniques is first class. It largely absolves the likes of Rockefeller, Carnegie and the rest of the “robber baron” tag and suggests that much anti-trust doctrine is bunk. Later, in discussing the present controversies over Facebook and other “Big Techs”, it is similarly sceptical about whether state bust-ups of such entities is a good idea. The book points out how, by the late 19th Century, the US government was so small relative to today’s that the largest department of the Federal government was the Post Office. It generally praises the idea of the Gold Standard – Wooldridge and Greenspan are pretty rough on Bryan and others who think that printing money is a solution to economic problems. They are also pretty harsh on F D Roosevelt, pointing out that during the 1930s, unemployment averaged in the double-digit percentages, and that much of the New Deal was, on its stated terms, a failure. They give Roosevelt stick for his vindictive acts and foolish interventionism – they realise that his genius, if we can use that word, was inventing a myth about himself and in telling people that he was going to make sure everything was OK. Needless to say, the narrative gets more awkward when it covers the period when Greenspan, a man who in his youth was an acolyte of Ayn Rand and an advocate of gold-backed money, became Fed chairman. The book argues (page 385) that critics cannot prove that the 2008 financial crisis can be blamed on loose monetary policy. Well, how jolly convenient! They say that the Fed’s ability to set interest rates, and influence borrowing costs for those with mortgages, etc, was largely restricted by the global “savings glut”. (I will come to this a bit later.) To a great extent, they blame the 2008 disaster on government-subsidised/supported sub-prime mortgages, excess confidence by bankers in risk models and the sheer complexity of financial products, such as in the derivatives markets. All these criticisms of the financial system prior to the collapse of Lehman Bros. in September 2008 look valid but there is also a problem. A problem to overcome, the authors say, is how rising entitlement spending (Social Security, Medicare, Medicaid) has “crowded out” private savings and that, over a period of time, savings as a share of total GDP has declined. Coupled with this, and with rising regulation (which they rightly attack) has been less overall capital investment, leading to lower productivity growth. When people talk about “stagnant” wages, it is sub-par productivity that is largely to blame. Okay, so low savings are a problem. If it is true that insufficient private sector savings is a problem to be fixed, how come the “glut” of savings in the years leading up to 2008 was a problem? If Chinese/other savers were pouring genuine savings (not central bank confetti) into the West, and investing in real capital, then why would this be an issue (other than a dislike of the origins of the savings)? When do we know that there is a “glut” of savings if, in other parts of the narrative, Greenspan/Wooldridge say there are insufficient savings because of a state “crowding out” effect? Of course, had Fed interest rates been higher than they were, yield-hungry Chinese savers might have put even money into the US, but then again it might have chilled the housing market enough to halt some of the damage. Such points aside, Capitalism In America is a good study of some of the big shifts in the US economy since the Republic was born. April 17th, 2019 | 16 comments - (Comments are closed)
 An interesting item on the Guido Fawkes blog:
A point worth making that goes way beyond current political fights is that it has become something of a cliche that young adults, in particular, are so annoyed at the lack of affordable housing, or worthless higher education qualifications + debt, that they are all hot for the 1970s tribute band routine of Corbyn in the UK or, for that matter, Bernie Sanders in the US. The media (and often the conservative bits of it) appears obsessed with running stories about the latest dumb statements of someone such as Alexandre Ocasio Cortez, the young Congresswoman in the US, or surveys about how young adults all want socialism. But from my admittedly impressionistic stance, I am not seeing an upsurge in enthusiasm for state control, rationing of resources, bureaucracy, etc. A poll conducted by Gallup in 2005 showed how lots of young US males wanted to start their own business. A more recent study from 2016 shows that a large number of Millennials, that generation which a Gen X-er like me likes to poke fun at, want to create their own firms. It seems to me that any half-intelligent politician (that’s going to be a small population sample, ed.) should tap into this and stop pandering to the idea that the “young” all have a crush on Big Government. What I suspect is going on is that they dislike Bigness per se, not always coherently (Big Business is downright good if the bigness comes from superior performance rather than political favours), and want lots of choices and options in their lives. So smart policy, including around issues such as civil liberties, should play to that. It depresses me how our current political class seems so keen, for example, on regulating the internet and the like, because this is exactly the sort of issue that young adults, given their distrust not just of business but very big techs such as Facebook (even though they use it) get fired up about. One would think, therefore, that tapping this distrust makes sense. After all, even if you have decidedly mixed views about a character such as Julian Assange, the Wikileaks man who was arrested in the UK yesterday, it is hard not to notice that a lot of people admired how he poked the establishment (well, at least that is what he claimed), in the eye. We are living at a time when there is a lot of dislike of established ways of doing things and this is something that thoughtful libertarians must embrace. Related thoughts from the Institute of Economic Affairs. April 12th, 2019 | 43 comments - (Comments are closed)
The Independent reports, Let Us Vote: New campaign launched to give everyone living in UK the right to vote in elections
The “Let Us Vote” campaign’s own website is here. What was your first thought upon reading this proposal? What would it have been ten years ago? My first thought was this was David Lammy’s way of ensuring he never again loses another referendum. (My second was, “Leave campaign: use this on C2DE voters.”) Ten years ago I might have said, “It’s a difficult question”. I do not think I was ever unambiguously in favour of complete open borders on libertarian grounds but I knew plenty of people who were and I was open to persuasion. It was seen as one of the questions that sorted the committed Libertarians from the dilettantes. That, I think, is where my instinctive casting of the question in religious terms came from. My impression is that my loss of belief in free movement of people is shared by many. Is it shared by you? Or have you kept your faith strong? Have you converted to this belief? April 11th, 2019 | 75 comments - (Comments are closed)
According to this report by Techcrunch, the technology publication, a bi-partisan agreement in Congress (usually a bad sign) means that a tech solution enabling taxpayers to prepare their annual returns for no charge has been blocked. The tax preparations industry, which is huge, has objected. Sometimes the sheer brazenness of lobbying in the political systems of the world befuddles even a long-term observer of such things such as me. We should not be surprised, really. There is a large industry of people who help others navigate the reefs and shoals of taxes, and one suspects many of them fear things such as simpler, lower and flatter taxes because if people can file a return on a single sheet of A4 paper, or its internet equivalent, then much of this sector is, to put it in non-technical terms, fucked. April 10th, 2019 | 23 comments - (Comments are closed)
Vegans have a point: the great thing about civilisation is we can overcome basic natural urges to improve the world. Animals do not want to be eaten; humans have the ability to reduce animal suffering; not eating them is a good thing to do. On the other hand, bacon tastes good. If I honestly answer the question of why I am not a vegan, the answer comes out something like this: I care about eating bacon more than I care about the welfare of pigs. There is a spectrum, though. A well-cared-for pig can live happily on a pleasant farm for years, oblivious to its impending doom. I imagine it is possible to sneak up behind it one day and kill it painlessly. Probably such methods of bacon production are more expensive than intensive factory farming of pigs, but if I have enough spare disposeable income I will pay that price to alleviate a little bit of bacon guilt. It is quite likely the bacon will taste nicer too. This sets the scene for this question:
Or this question:
These questions are asked in the context of a discussion about free trade. If we just allow people to buy food from wherever they want, the argument goes, then they will buy meat from places where animals are poorly treated because it is cheaper. One possible answer to that is: so what? People ought to be able to choose how much they care about things like animal welfare. Honestly, I agree with this. I do not think the non-aggression principle applies to animals. I do not think it is right to harm a human solely to protect an animal. Whatever the role of the state is, it is not to intervene in individual choices about animal farming. That is not to say that treating animals nicely is not desirable. I happen to think there is a good chance that as people get wealthier, they start to be able to afford to care about such things as animal welfare, and they do. This is why there is a market for free range animal products, and in the UK meat branded “Organic” is purchased partly because the Soil Association, who license that brand, mandate strict animal welfare standards. This is exactly how it should work. Somebody cares about animal welfare, somebody puts their money where their mouth is and markets products which promise better animal welfare, people voluntarily buy these products. Banning imports of food from certain countries because they have lower animal welfare standards is harming people solely to protect animals. It is insisting on threatening people with violence for treating their farm animals in a certain way. And it is threatening people with violence for voluntarily trading in animal products from certain sources. It takes choice away from people. It is regressive: by removing cheaper products from the market, poorer people have to eat less meat. It might be argued that eating less meat is better for them, or that the trade-off is worthwhile because it is perfectly possible to cheaply obtain enough protein from other sources, but this is paternalistic nannying. If these things are true then it ought to be possible to persuade people to change their ways. Resorting to the violence of trade regulations is admitting that you can not persuade people to make these decisions voluntarily. Complaining that people make the wrong voluntary decisions is condescending. However, I have a problem. My Big Idea (such as it is) is that the left tends to win arguments because it successfully appeals to people’s sense of virtue, and we ought to get in on that action. Helping people who are suffering is virtuous. Reducing animal suffering is virtuous. Our job is to demonstrate that freedom achieves these things better than the ideas of the left do. A Guardian article by Chris McGreal is an example of the left being really good at this.
The article paints a picture of rural America reduced to a few people farming grain to feed animals in factories in the worst possible conditions. All this is done in the name of profit because nobody cares about animals suffering; they only care about getting dinner on the table as cheaply as possible. This might actually be true. If so we have a paradox: being kind to animals is virtuous; people want to be virtuous; but everybody is choosing voluntarily to buy meat from producers who are cruel to animals. Perhaps they are misinformed, in which case opponents of this type of animal production need only to inform them; there is no need to use violence against people who buy meat from the USA. Or perhaps all this talk of virtue is mere signalling. Perhaps nobody really does care about animal welfare. If true, then persuasion will not work. People who care about animal suffering have no choice but to resort to violence. This is the problem with the state, of course. You use clever semantics to hide the nature of the violence: you call it regulation; you say it is legitimised by democracy. At the ballot box you trick people into thinking that other people will pay the cost of the decision. Someone voluntarily buying Organic bacon pays the price and they see that they are paying the price. If you convince people to vote for the politician who will instruct the police to arrest the person who buys bacon from the USA, you remove from the marketplace the cheap bacon and nobody sees. What path, then, is left for us to convince people that freedom minimises suffering, even of animals? It might just be true that state meddling does not work to minimise animal suffering at all. If so, we should make sure of it and tell people. In Everything I Want To Do is Illegal, Joel Salatin writes,
The picture here is one of the state actively stifling innovative attempts to make a profit at selling well-cared-for animals. It may well be that without all this regulation, being cruel to animals may not be the most profitable way to produce them. Or at the very least that marginally more people would buy meat from well-cared-for animals because it would be marginally cheaper. The other case to make is that economic growth solves all problems. Enough economic growth gets you tasty lab-grown meat at a fraction of the price of tortured-animal meat. Anything that impedes economic growth by a fraction of a per-cent per year directly causes the suffering of millions of additional future animals, not to mention people. If we can market that argument in an appealing way and counter the more-to-life-than-profit rhetoric of the left, we will be onto a winner. March 12th, 2019 | 23 comments - (Comments are closed)
I wrote this on Facebook today in response to a guy arguing that the EU was necessary for the following reasons:
As you can detect, I am not impressed by these statements. This was my response: A few things: it is a big claim that the EU (or what used to be the EEC) has been the major reason for stopping Germany from invading France yet again after 1945. I would argue that the “glue” of the EU has had some positive impact, but surely, the fact that Germany was utterly destroyed in 1945, split in two, and that the Western powers faced the Soviets, and were protected under the NATO umbrella, was the key to why there wasn’t another continental war. And even if all the red tape, rule harmonisation, costly farm subsidies and all the other palaver was justified as a price worth paying on that basis, why would the UK, which wasn’t a defeated power and with a different history, want to subsume itself into a federal project? It does not follow at all. The case is not made. De Gaulle was also correct in his “non” to UK entry in the early 60s as he rightly feared that his Franco-German compact would be bent out of shape. As global trade expands and the world becomes “smaller” with the Internet and jet travel and containerisation, it doesn’t require ever larger, more elaborate bureaucracies of transnational states to be built. In fact, what things require is more, not less, devolution of power, more variety, and less one-size-fits-all thinking. Why should complexity require more centralisation, rather than less? The idea that we need single EU rules on how lightbulbs and other materials of the modern world are made is not justified on the basis of protecting “fairness”, and in fact all too often, such regulations are imposed and lobbied for by industry groups knowing that they raise barriers to entry against cheaper or different manufacturers, and reduce competition. Unless there are very clear-cut safety issues, I invariably smell a rat when people defend government bans on certain mechandise by talking about “fair trade”. It’s protectionism with a nice tie. My position is not an “anarchist” one. It is more in tune with a general classical liberal approach to business, government and diplomacy, and above all driven by scepticism about big projects to reshape very old institutions and national loyalties. The launch of the single currency was an exercise in hubris, the results of which are still with us. Take-home fact: Members of the European Parliament cannot, as far as I know, repeal a directive once it has become law. Nor can MEPs initiate a new law on their own, as an MP can. The MEPs are pale shadows of truly effective legislators and the democratic deficit in the EU is unsustainable. March 4th, 2019 | 15 comments - (Comments are closed)
There are all kinds of parallels between the “Gilded Age” of Rockefeller, Vanderbilt and Morgan, and the populist, anti-gold standard levelling views of Bryan, and what is going on today, with AOC, Robert Reich saying billionaires must have all done something evil, and the rest. Bryan was famously opposed to the gold standard, as well as being an opponent of teaching Darwinian evolution to children and supported taxing land and was for prohibition of alcohol. It’s sometimes odd to find a political figure who is wrong on so many issues in one go, and so dangerously appealing to people seeking a person on a white horse who is going to drive the “money changers out of the temple”, as it were. Right now, with the rubbish coming out about why billionaires should be banned, and must have got their wealth immorally, it feels all very familiar. Of course – and this is where these issues get complex – some of what is going on with the Big Tech entrepreneurs of today, and the Leftist grandstanding or PR they sometimes engage in, is creating renewed enthusiasm for government powers that came out of the late 19th Century in the era of Teddy Roosevelt. I note that Instapundit blog supremo and law professor wants the US government (I mean, what could possibly go wrong?) to use anti-trust powers to bust up the Facebooks and the rest, and in part this appears driven by political animus as much as any ideas of competition, although Glenn Reynolds’ arguments that there are problems certainly are strongly made. Yes, it is true that it looks odd to say captains of business taking what appear to be annoying SJW stances, but part of me cannot help but think that these people aren’t sincere enough to willingly wreck their firms by so doing, by “going broke by going woke”. To some degree, they have entered a Faustian Pact of making nice SJW noises, getting close to various causes, in the hope that the Left’s crocodiles forget to eat them. If there’s a recession, as there will be eventually, expect this trend to change. Firms cannot afford to damn their customers (as in Gillette, for example) if business is on the skids. And in contrast to the Bryan denunciation of the “cross of gold”, today’s Left and Trumpist Right rarely refers to the massive balance sheet expansion of the US Federal Reserve (quantitative easing), which juiced asset prices such as real estate and equities after 2008, disproportionately benefiting the already-wealthy. In fact, if anything, today’s Left is beholden to the print-until-you-drop approach, without a thought for the Zimbabwe/Venezuela/Weimar consequences. Take its recent enthusiasm for something called Modern Monetary Theory. The recent row about Amazon and its planned new big offices in Queen’s, New York, suggests that a sort of high point to this strategy has been reached and that maybe the Silicon Valley Big Techs will realise that there is no point trying to make all nice to those who want to destroy them. Eventually, the malevolence of the looter Left shows itself. Even though some critics of these firms might be motivated by dislike of corporate welfare (NYC wanted to give Jeff Bezos a fucking helipad, when the multi-billionaire has his own private space programme), it is hard not to smell are far more pungent smell of anti-capitalism. They cannot be appeased. Joel Kotkin has written an interesting study of some of these modern “Gilded Age” trends, such as the culture of modern Silicon Valley, Hollywood and Washington, vs the rest of the US. On a far smaller scale, there are echoes of this in the UK. But Kotkin, as he shows in a thoughtful (mostly) item on all this, has his own rather William Jennings Bryan-like blind spots:
This is zero-sum thinking on steroids. For a start, much of why the cities of San Francisco and others are so expensive is not because of demand but lack of supply (ie, planning laws); are Kotkin and others arguing that they would prefer for modern, disruptive businesses to not exist at all? A century-plus ago, the Sears catalogue business made its fortunes by blending the tech. of telegraph wires and railroads to bring supplies across the plains of the US. Sears today is in financial dire straits, as times change. But the Kotkins of this world would, presumably, have complained about how all the folk working for these businesses were driving up prices to “sky-high levels”. How dare they be so successful. As for the demise of the “cherished bohemian culture”, well, your mileage may vary as to how cherished that is. Finally, I recently met Adrian Wooldridge, co-author with Alan Greenspan, former Fed chairman, of Capitalism in America. The book makes a number of claims (it is a good read) about American economics, and one of them is that the appetite for the “creative destruction” of capitalism is waning. Recent trends suggests that this is true. And that’s bad news for the world in general. February 22nd, 2019 | 21 comments - (Comments are closed)
Guido Fawkes has a smart observation about the recent announcement by Japanese carmaker Nissan that it will not produce a new model from its plant in the UK’s Northeast. This has produced a storm, with people claiming that this shows the UK’s move towards independence from Brussels is a mistake, and that all those thick Northerners who voted for Brexit were misled, and will suffer, etc, etc. However, there’s a big fat problem with this “a pox on Brexit” narrative. If moving out of the snug embrace of the EU and its Single Market is such a dumb idea, only to be entertained by fools or knaves, etc, why hasn’t Nissan relocated to France, Spain, Germany, the Netherlands, or some of the other benighted states of the EU, rather than produce the new models in far-away Japan? Guido also mentions EU emission standards and other issues as a factor for the firm pulling out. Of course, it may be that one reason why not a single other EU state appeals to the folks in Tokyo is the high labour costs and restrictions of doing business in these places (imagine Italy, for instance!), but if that’s true, then the Single Market’s alleged charms aren’t enough to outweigh the Big Government features of the EU’s constituent members. The EU is, in this sense, stagnating under the weight of its own bureaucracy. Guido asks why Sky News and others haven’t asked the kind of questions asked here, but that misses how for much of the UK media, to ask these questions assumes a level of objectivity and understanding of business that simply isn’t encouraged in journalists today. (I should know, as I have been a financial reporter, but being a crazed libertarian I just about avoided the infection when I was being trained.) Most UK journalists regard business with suspicion and tend to tilt left politically, in my experience. So points about regulation and red tape encouraging a firm to move from A to B just don’t compute. As a result, the questions aren’t asked. (Just imagine, if you will, how the average Western journalist would react to a book such as this, by Yaron Brook and Don Watkins of the Ayn Rand Institute, defending banking and modern finance. You just know what the response will be.) A few months ago, a US-based commodities and derivatives business, ICE, decided to pull certain futures contracts out of London and back to Chicago, because the costs of complying with EU regulations known as MiFID II were so great they outweighed the benefits of being in the Single Market. As the regulatory process gets worse (I see zero desire to reverse it), the presumed desirability for non-EU countries to be involved will wane. This is a point that we cannot expect the likes of the BBC, or Financial Times, Economist or most of the rest to grasp. And part of the reason is the mindset of the journalists who work for these entities. February 6th, 2019 | 9 comments - (Comments are closed)
Well, it may be “fashionable” to dislike Starbucks (usually a pose taken by those who haven’t the faintest notion of what building a business involves) but I could not give a flying expleted-deleted about a lot that passes for fashion. I use Starbucks quite a lot and it has also helped spawn the model of the coffee shop that is also a sort of office/study zone for anyone with a laptop. The dislike of Starbucks is often nothing more than a reworking of the general hatred of enterprise and trade that is indulged by people who, hypocrically, enjoy its fruits. I recall this great episode of South Park and how it lampooned the hatred of big business chains of this type. And who can possibly dislike a business that got a name-check in an Austin Powers movie? Oh behave! February 5th, 2019 | 12 comments - (Comments are closed)
Today I am reading and watching all those weather reports about how extremely cold it is in the US and some of my friends in New York and Chicago have been telling me about it. But what impresses me above all is that these urban hubs, these centres of modern human civilisation, go on. And we take it for granted that apart from certain disruptions, they do. I came across this wonderful graphic item on the web that visually conveys the daily commute volume into and out of Manhattan. Have a good weekend and keep warm and safe. This global warming is a real bitch. February 1st, 2019 | 17 comments - (Comments are closed)
“Bill Gates says poverty is decreasing. He couldn’t be more wrong”, writes Jason Hickel, an anthropologist at the London School of Economics.
The comments give me hope. January 31st, 2019 | 34 comments - (Comments are closed)
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