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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I have been playing on my Asus Padfone (review to follow) with an app called Zinio, which lets users buy electronic versions of print magazines. It came with a free sample of the November 2011 edition of India Today. As far as I can tell the magazine is run and written by Indians. According to Wikipedia it is published in Hindi, Tamil, Telugu and Malayalam as well as English. So I imagine it provides some kind of snapshot of the opinion and thinking that is going on inside India, rather than an outsider’s view. The cover story was about cotton farmers who are committing suicide because they can not pay their debts. A boxout by Dhiraj Nayyar entitled “Government the Culprit” reads:
Rahul Gandhi has a straightforward explanation for why farmers in Vidarbha commit suicide. Speaking on the perils of globalisation on October 18, he said, “The farmer in Vidarbha drinks pesticide as global prices tumble.” The economics behind the suicides of cotton farmers in Maharashtra is more complex.
Contrary to Rahul’s claim, it is the Government which has done more to depress the prices of cotton than the international market has. The Government has imposed numerous restrictions on the export of cotton since April 2010. This has led to a decline in the domestic price that farmers get.
…
The use of genetically modified Bt cotton has been at the centre of controversy, with activists blaming it for the plight of farmers. Evidence suggests that Bt cotton has been good for farmers. A position paper published by the Foundation for Biotechnology Awareness and Education, an NGO, quotes five independent academic studies conducted after the launch of Bt cotton in 2002, that say that Bt cotton has increased yields in India by 30.9 per cent to 63 per cent. The increase in profit to farmers, according to these studies, has ranged from 50 to 110 per cent over non-Bt cotton.
This seems like sound thinking so far. I wonder why the Indian government would restrict export of cotton.
While Bt cotton is resistant to pests, it is not resistant to droughts. So crops still fail.
In normal course, farmers are entitled to a concessional financial bailout from the local administration or public sector banks. They don’t always get it. “The administration will only help if the farmer was using a seed approved by the Government. A lot of farmers use unapproved seeds”, says [agricultural economist Yoginder] Alagh. By his estimate, there are 20 large firms and anywhere between 200-300 small firms which sell Bt seeds. Most small firms aren’t Government approved but sell seeds cheap. Banks are usually reluctant to lend to indebted farmers because they lack collateral. That sends farmers into the clutches of moneylenders who charge between 25 and 40 per cent interest instead of the 7-9 per cent charged by banks. It isn’t Bt cotton that has failed farmers. It is the failure of back-up systems that has.
I am not so sure about this appeal to government bailout schemes. The implication here is that the government is wrong to favour seeds from certain suppliers. There may be rational reasons for doing so, such as seed quality, or there may be political connections with certain suppliers. I imagine that a free market solution, such as insurance or futures trading, would be more likely to make only rational and proportional restrictions. Could the government scheme be crowding out such solutions?
In any case, I am encouraged to detect a somewhat pro-free-market stance in a mainstream magazine in India.
The stifling impact of being run by so-called “moderates” continues. On the BBC TV this morning, the programme is leading with the fact that a government finance minister, some hopefully soon-to-be-gone creature called David Gauke, is attacking people who have ever paid a builder, plumber or garage mechanic in cash so as to avoid paying VAT. Mr Gauke told his TV interloctor, in words that may haunt him, that he has never done any such a naughty thing, oh no.
The context for this is that the UK government has recently announced a campaign against what it defines, with worrying vagueness, as “aggressive avoidance” schemes. Not just “avoidance”, which is what happens if you hold a tax-advantaged fund such as a Self Invested Personal Pension, or if you do not smoke (avoiding tobacco duty), or don’t drive (avoiding petrol tax) or drink (etc). No, “bad avoidance” is if you structure your financial affairs in such a way as to pay as little tax as you can do so without actively defrauding anyone. An interesting notion. As we know, the UK comedian Jimmy Carr was recently hit by exposure of his tax-planning, and other celebs and sports folk have sometimes got into similar sorts of arrangements.
In as much as governments need to exist at all – and I am not an anarchist – there is a legitimate argument about the least-bad way to do this, and the simpler and flatter the tax regime is, the better. A huge chunk of this tax planning industry from which people like Jimmy Carr make use would vanish in a puff of smoke if our system was overhauled on the sort of lines recently proposed by the 2020 Tax Commission.
The trouble with the stance taken by Mr Gauke is that he presumes that there is some correct chunk of our wealth to which the State has presumed to take a share, and that any action we take to avoid tax might increase the tax burden paid by our fellow citizens. But what this man seems to ignore is, a), that an economy is not a static pie where my action must negatively affect someone else (that old zero-sum problem again), but an economy is something can grow through mutually beneficial trade, and that that, b), in a tolerably free society, the level of tax that citizens will pay has its limits, even if people don’t go in for some of the more artificial wealth structures to minimise tax (bearing in mind that it costs money to get an accountant/lawyer to set these schemes up).
Also, suppose that, instead of getting a builder into do a bit of work for cash to smarten up my flat or tackle an issue, I try and get a mate around to do the job for me in return for buying him a nice bottle of wine or editing some material for him/her? Is this not also wrong in the eyes of Mr Gauke? I guess it is. Even before I have done anything, the State is saying: “I want a piece of whatever action you engage in”. Taken to extremes, this penalises work over leisure. It is not surprising what the results are.
At root, this is a matter of basic political philosophy. In the main (there are exceptions), the current Conservative Party and its Liberal Democrat coalition partners subscribe to a deeply paternalistic, communitarian outlook of the sort that Barack Obama, in his recent communitarian-leaning “you did not build that” speech, could identify with. This is also a sign of how under Cameron, the Tory party has reverted to the older, more trade-disdaining traditions of old and away from its Thatcherite strains. How’s that working out for us?
People who make a living by getting paid in cash to fix windows, respray cars or mend pipes are not an evil. In the vast majority of cases, they are doing something about which someone like David Gauke, David Cameron or Barack Obama have been ignorant of all their lives: earning a living, and providing people with goods and services in a free market. They might as well try and understand life on Mars. It is shame we can’t send them there.
Update: The Daily Telegraph weighs in. It is not impressed by Gauke.
While the weather in the UK has been, with barely a break, a miserable wet time resembling one of those bits of the Old Testament where God gets a bit pissed off with His Creation, it has been stinking hot in some other countries, notably the wheat-growing parts of the US. Hence, all kinds of grim predictions of shortages, and ensuing higher prices for bread and other foods, as reported by Reuters.
But there is another factor besides the weather – deliberate government policy concerning biofuels. Here is blogger Bishop Hill on the matter:
“I’m sure that people who can no longer afford a loaf of bread will be much reassured by the fact that the UK government is discussing flexing their biofuels mandates.”
Of course, the idea that misguided environmental ideas might make poor people even poorer is a notion that does not fit with the conventional narrative from our political class. I doubt that our own benighted Prime Minister, David Cameron, gives this much thought, or if he does, evades the implications thereof. One of the biggest scandals of our time, in my view, is not private banks cooking up “LIBOR”, or MPs fiddling their expenses, but the fact that a mistaken or overwrought theory about climate change was used to justify loading extra costs on the global economy and those least able to bear it.
Today’s SQotD is already taken, and in any case yesterday’s SQotD was also about banking, but here is more quotability, from regular quotee here, Steve Baker MP, writing for the Spectator Blog about the LIBOR scandal:
The really important question today is not whether the Bank of England encouraged manipulation of credit markets by self-interested rogues but why we tolerate systematic credit market manipulation by the central banks as a matter of policy: nowhere else in the economic system would we accept explicit planning of the price and quantity of a vital commodity. If it worked, we’d all be communists.
In the Cobden Centre round robin email flagging up this piece, the words “linked from Guido” were included in the email title. This stuff is not merely being said, relentlessly. It is getting around.
Here is some further evidence of that, from the BBC:
A popular solution to the financial crisis has been to print more money, but is there another way of fixing our economy? Would the financial system be more stable if each pound, dollar or euro in our pocket was once again backed by gold?
And they go on to provide the answer given to them by Detlev Schlichter: yes.
All of which confirms the Austrianism as Number 2 meme.
LATER: More incoming from the Cobden Centre flagging up this programme, the first part (of two) of which will be shown at 9pm on Channel 4 this evening. Various Cobdenites contribute. Plus, see also this.
Enough diagnosis. What is the cure? A change of personnel will not do it. The search for chief executives who are not motivated by greed and for regulators who are sufficiently god-like to know how to design rules that cannot be gamed will never succeed. The truth is, the financial system, like the whole of human society, was not designed in the first place; it evolved. And the answer is to allow a better one to evolve.
– Matt Ridley
In a Twitter discussion my interlocutor suggested that mobile phone companies were behaving like a cartel when it came to data roaming charges. I am not sure about that but in any case such arrangements are less stable in a free market than otherwise, because barriers to new entrants would be lower.
Yes, said my interlocutor, look how well a free market works for Barclays, Enron and privatised rail companies.
If that is what people think free markets look like then no wonder we are having a hard time winning arguments. It is not just a semantic problem where capitalism has been incorrectly defined, though that is part of it. People really believe that rail companies are free to do what they please, and so are banks. There is some doublethink going on because the same people will talk about the failure of regulators.
It might be useful to point to examples of truly free markets. This is quite difficult as almost everything is subject to some regulatory interference. I like to think that we are not starving mainly because of free markets in food production and distribution, but there are all sorts of EU food subsidies and it can be argued that large supermarket companies have an advantage when it comes to planning permission.
I can think of examples from industries that I am familiar with. Consumer electronics are, as far as I can tell, almost completely free from regulation except for some safety and, lately, power consumption requirements. The rapid advances that have resulted are plain to see. The same is true of the semiconductor industry. Intel, AMD, Qualcomm and Nvidia are achieving ever more performance and making ever smaller transistors, and governments have very little to say about it, thankfully.
I can also think of services like web hosting and cloud computing which have very low barriers to entry and the result is a vast choice of very low cost products for consumers. All this is very nice because we can point to the freedom and the competition and the lack of monopolies, cartels and other unpleasantness, and all the wondrous things that have resulted and would not result if bureaucrats were present to make sure everyone behaved themselves.
There has to more that is free than the tech industry, though. What am I missing?
“In order to punish Barclays further, they should have to start life again as a third division Scottish football club.”
Mark Littlewood, boss of the Institute of Economic Affairs, in a private communication via Facebook. It is so good that I don’t think he’ll mind me quoting him here.
He is talking about the resignation, announced today, of Bob Diamond as CEO of Barclays. That bank has been fined a total of £290 million by US and UK authorities for manipulating the inter-bank interest rates known as LIBOR. Criminal prosecutions are high possible and the net could widen very far indeed.
Barclays is one of those UK banks – HSBC being the other big high street one – that did not receive, nor ask for, bailouts by the UK taxpayer. However, that bank, like all the rest, did benefit from the privilege of being able to get access to cheap Bank of England funding; and it also benefited from state-backed guarantees. The point cannot be made too often: we don’t have a proper capitalist banking system but at best a hybrid. But it also needs to be recognised that even in a world of total laissez faire and no funny fiat money, there might still be market conventions for setting a benchmark reference rate for interest rates between banks, just as there is a daily “fix” for the gold price in the London spot gold market. Such market benchmarks arise, like a sort of Hayekian spontaneous order, because they are useful for other economic actors in pricing products of their own.
However, when a bank or other institution fiddles the prices submitted for these benchmarks, it erodes confidence in the system and the reputation of the miscreant will be badly damaged. In a crude sort of way, what has happened is a good sign that organisations which screw up suffer.
Update: Guido Fawkes weighs in, and points out that the manipulation of interest rates has also been government policy for years.
It’s not capitalism when private individuals stand to gain from their actions but the taxpayer carries the risk. When risks are socialised and potential profits huge, individuals are bound to be reckless: why be responsible? It’s no good agonising about the culture of banking without considering the astronomical moral hazard endemic in the system today. Of course people who do not have to bear the negative consequences of their actions behave badly.
– Steve Baker MP
Here is a great video featuring “Skeptical Environmentalist” Bjorn Lomborg, talking to John Tierney, . Lomborg discusses his views about how any debate on improving lives of the poor around the world requires us to understand that resources are scarce, and that being obsessed by “sexy”, attention-grabbing issues means we ignore the less glamorous, but often far more severe issues. Of course, the media and political world tends to push attention towards the “eye-catching initiatives” (to use Tony Blair’s formulation). But that doesn’t mean we have to settle for this. Lomborg is terrific. No wonder he drives deep Greens nuts.
I recommend pretty much all his works, especially his book, Cool It.
Here is a brief comment I left over at Tim Worstall’s blog, regarding fractional reserve banking and supposed journalistic illiteracy about said:
“I can see why smart people are dubious about fractional reserve banking. The whole “maturity transformation” line that defenders of FRB come up with only works if you are prepared to take the risk that, in the event of a crisis, you won’t be able to get your money out of a bank when you want it. That is why, in a real free market, not the rigged charade we have now, FRBs would have to be clearly advertised as such, and without the moral hazard-machines of state deposit insurance and a central bank acting as lender of last resort, printer of funny money, etc. In such a laissez faire world, FRB might persist, but it would be a lot more restricted than now, and its capacity for causing booms and busts reduced. Like I say, it should not be illegal so long as everyone knows what it is.”
Sometimes useful insights about the state of the world comes from sources very far removed from the dismal mainstream media. This was taken from Knight Frank estate agency promotional bumf stuck through my door yesterday under the title “What nationalities are buying in your area?”
Given what has happened with the presidential elections in France we will be seeing many more French buyers shortly. We have also seen a huge spike from people in France searching on our website for properties in London.
Yup. We may be fucked but we are less fucked than you.
I received this via e-mail and thought it was too good not to share…
Bliss.
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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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