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Eye-catching data from this article, by Nicolai Heering, on UK anti-money laudering regulations (AMLR) in the UK:
About 170,000 individuals are being debanked in the UK every year due to the AMLR. By comparison, only some 1,000 individuals are actually convicted of money laundering. Thus, the remaining 169,000 individuals are done a very serious injustice as being without a bank account has profoundly negative consequences for most people.
And
How can that be resolved? The electorate needs to understand the scale of the costs of AMLR compliance: that they themselves are ultimately paying those costs, that the AMLR have little to commend them by way of crime-reducing results, and that the AMLR are causing vast numbers of innocent people to be debanked every year. Only then are the politicians likely to sit up and listen.
The article refers to this study from the Institute of Economic Affairs about money laundering controls, debanking, and the perverse consequences of forms of regulation.
Part of the problem, in my view, is that because banks are not purely free enterprise institutions, but are umbilically linked to the central bank as a lender of last resort, and hedged around and protected by all manner of rules, they are almost obliged to treat clients poorly. There is nothing resembling client confidentiality. Under AML rules, bank staff are required, on pain of serious penalties, to report supposedly suspicious transactions. It means that in many cases that people are obliged to prove they aren’t doing anything wrong. And add to that the cookie-cutter approach embedded in a lot of modern “regtech” software, it is easy to see how you can end up with stories of tens of thousands of innocent people “de-banked” for no good reason.
The story last summer of how Reform leader Nigel Farage (he wasn’t leader then, but a GB News presenter) was de-banked by Coutts, (see my related thoughts here) and how evidence surfaced that he was ousted in part because the bank appeared to dislike his views, and also because of possible issues with his being a Politically Exposed Person, hasn’t vanished. There remain serious issues about how banks treat clients. And with a Labour government likely days away from achieving office, I doubt some of the more outrageous examples of “debanking” will be dealt with. As ever, the current Conservative government appears to have missed an opportunity to take decisive action.
“It is true that taxes and prices have risen. But this did not happen in a vacuum. For much of 2020 and a chunk of 2021, we paid people to stay home, and printed money with wild abandon. What the hell did we think would be the consequences?”
– Doug Hannan.
“When sweeping, idealistic dreams trickle down into sales and marketing channels, AI’s potential uses become unclear. Framing AI as a general-purpose Swiss Army knife for productivity inevitably leads to paralysis for its end users: Where do you even start with a technology that can do everything?”
– Parmy Olsen, Bloomberg ($)
Along with others, Olsen is freaked out by the skyrocketing ascent of chip-maker Nvidia’s stock price.
Lord (David) Frost is in suitably scornful form this morning in the Daily Telegraph (£). He takes aim at the idea, set out in yesterday’s Labour manifesto, that economic growth can be lifted from its torpor by a mass of councils, committees, agencies and the like, all directed from Whitehall but working, somehow or other, in “partnership” with private sector firms. As he notes, Starmer and the rest of them have learned all the wrong lessons from lockdowns, and in fact they liked the lockdowns precisely because of the ability to order the public around, to mark their movements and somehow command innovations (vaccines) by clapping one’s hands together. The headline of the article is excellent:
Lockdown is the inspiration behind Labour’s ‘plan’ for growth.
Excerpt:
The truth is, of course, that don’t get growth just by saying that you want it, by spending money, or by getting bureaucrats to draw up plans. You get growth by allowing people and companies to invest, spend and invent, as they see fit; by letting them keep what they have earned; and, as far as possible, by staying out of the way.
I cannot resist parallels with where we were in 1964. The Conservatives, led at the time by Alec Douglas-Home (a much underestimated politician and a sharply intelligent man), appeared exhausted and “out of touch”. There was this whole thing about the “grass moors” – pictures of toffs shooting game birds on Scottish estates, and speaking in absurd public school accents. The times they were a changin’: the Beatles were exploding, George Best was transforming the world of football, Sean Connery was on the big screen doing battle against Spectre, and Peter Cook and Dudley Moore were making us laugh on TV; consumer goods were more accessible in our shops, and Labour sought to go for the “white heat of the technological revolution”. A lot of this was flim-flam, although some wasn’t. Harold Wilson, who smoked a pipe in public to appear more “sound”, apparently, did a lot of arguably good liberal things: censorship of literature more or less ended; the death penalty ended; homosexuality was decriminalised, divorce laws eased. Social conservatives may jib at this, but there was an aspect of genuine liberalism on parts of the Left that have vanished now in these “cancel culture” times. The downsides were still enormous: ugly buildings, the launch of the destruction of grammar schools and encouragement of egalitarian (and mostly bad) ideas in education. (This Dominic Sandbrook article gives a flavour.)
We know how things ended. In 1967, there was a serious run on the pound in the foreign exchange markets (the UK was still part of the Bretton Woods system, which was ultimately underpinned by the dollar and the $ was still linked, however tenuously, to gold); attempts to rein in trade unions failed; spending on welfare and health rose. Horrid tower blocks were built to replace older housing, to the questionable benefit of the country. There was a “Brain Drain” – sky-high taxes on the “rich” meant that anyone of note in music, film, entertainment, commerce and industry lived abroad.
By 1970 the wheels had come off. Wilson’s government appeared out of ideas, and its enthusiasm for central planning and control appeared as discredited as the Soviet Union. Throw in the turmoil abroad (Vietnam, end of Bretton Woods, the OPEC oil shock, racial and social mayhem in the US,) and things moved fast. Unfortunately, when the Tories were elected on a slim majority in 1970, a promise of radical reform under the horrible Edward Heath did not endure, and by 1974 the country was in deep trouble: strikes, power cuts, civil disorder, the nightmare of Northern Ireland. It wasn’t until 1979, with the election of Margaret Thatcher’s Conservatives, that matters improved. And for several years it was turbulent, and not a sure thing.
Consider the parallels, even beyond the confines of the Labour manifesto: We have seen a relentless assault on “the rich”; and taxes are rising on them, and there is in the background the threat of a wealth tax, encouraging people who can to get out. The Labour Party wants to impose value added tax on private schools, consolidating the power of unions who hate any form of choice in education. There’s likely to be a lot of house building (something I broadly support), but one has to ask about the likely quality and appearance of it. And to go back to Lord Frost’s point, there is an inability, a sort of complete mental block, to think of bottom-up solutions by individuals doing their own thing to anything. Every problem, in the Labour mind, starts with what government can do about it. I am reminded of the theme of that excellent book, “Seeing Like A State, How Certain Schemes to Improve the Human Condition Have Failed”, by James C Scott. I doubt that Keir Starmer or his likely future Chancellor and finance minister, Rachel Reeves, have read it.
The groundwork for this memory-holing of lessons from the past has been in evidence for some time. I think the 2008 financial crisis, and the way that a poisonous narrative was allowed to build around what caused it (evil bankers, deregulation, etc, when the causes were mostly about government), carries a lot of the blame for this.
There’s also just a dreadful complacency among those who just assumed that arguments for free enterprise had been won and we can focus more on gender pronouns or so on. (I have seen plenty of comments like this from “social conservatives” who have even told me, at times, that public debt “does not matter” because immigration is so much more important.) What has happened is that the classical liberalism tradition has gone soft. I was struck by how, for example, you can go into a bookshop such as Waterstones in the UK and almost every tome on politics and economics will be banging on about the alleged evils of neo-liberalism and how such ideas rule the world. If only. (A book, Free Lunch Thinking, by Tom Bergin of Reuters, is one of the more intelligent ones, but it is full of questionable conclusions, such as its attacks on the idea that incentives matter, and has been nicely and politely taken apart by Kristian Niemietz of the IEA.)
It is worth recounting all this to understand that while history never exactly repeats itself, it does rhyme. The 60s aren’t coming back as far as music, fashion and films are concerned (shame), but we are likely to get some of the other stuff.
“I am under no illusion that even the most passionate and articulate defence of classically liberal values would be an enormous vote winner. But in an election likely to return a Labour government who will, by their nature, proselytise about the good the state can do, and with a Conservative Party which has in recent years shown a frankly alarming tendency towards illiberalism, implementing sugar taxes and attempting to ban smoking forever. The country desperately needs a counterweight to slow our seemingly inevitable slide towards an ever expanding state. Even if the Tories don’t get completely annihilated at the ballot box they are likely to spend at least the next six months tearing themselves apart in a leadership election. The Lib Dems will be providing the real opposition for a while and they need to stand for something.”
– Emma Revell, in CityAM.
I think we are long past the point where organisations such as the UK’s BBC, never mind such havens of moral bankruptcy, the UN, can be treated seriously any more. One of the long list of reasons I have for despising the current Conservative government (and that’s not about Rishi Sunak, but earlier) is that the BBC still exists. It ought to be a smouldering wreck, as if taken out by an IDF F-15:
The non-surprise is that professional anti-Israel voices, United Nations officials and the European Union foreign-policy chief rushed to attack Israel. Egypt condemned the operation “in the strongest terms.” How dare Israel rescue its own citizens. Didn’t it know there would be casualties? The BBC asked whether Israel gave a warning that the rescue raid was coming. Seriously? A tip-off to terrorists? Perhaps read them Miranda rights too.
Wall Street Journal editorial comment on how the rescue of four hostages has elicited condemnation from various quarters.
Hamas started the war with a massacre, took these hostages and hid them in a crowded civilian area. Then, when Israel came to free them, Hamas responded with heavy fire, including RPGs—yet people are condemning Israel. It makes us wonder if the West has lost the moral discernment and instinct for self-preservation needed to defend itself in a world of killers. Hamas could not survive if not for its enablers around the world.
A question that appears not to occur to some, but does to me, and a few others, is if the civilians in Gaza are the poor innocent types that we are told they are, how come the hostages were residing at the pleasure of them? According to Charles Moore, in the Daily Telegraph (£), Questions that ought to be put by journalists include: “Why does the BBC not inquire into the reasons that Hamas keeps hostages in civilian areas?”
He also asks: “At least three of the hostages were held by civilians (a former Al Jazeera journalist and his family members). What is the extent of Gaza civilian cooperation with Hamas murder and hostage-taking?”
Finally: “One understands…deeply deplores, that the BBC has committed itself to extreme bias in its coverage of Israel/Gaza, but does that mean that it has to employ imbiciles?” I fear the answer is `yes'”.
A few years ago, the UK’s Institute for Economic Affairs had a relatively mildly-written case for scrapping the licence fee tax. It seems to me that if any supposedly sane political party wants to win my vote, the least it can do is pledge to scrap that fee and break the BBC up. For years, the standard response of the BBC grandees to any suggestion of reform is to go on about how it provides world-class journalism and programmes. It’s not a joke that gets funnier with being repeated.
“In the Singaporean case, economic growth has proved to be an upshot of cultural values; it requires a critical mass of the population to hold a certain moral and political psychology, and a particular set of dispositions about enterprise and industry, risk, and change. Cultural values are sticky, and to change them, some moment of acute crisis, when it appears that the costs of continuing down a certain path are greater than shifting course, is required. Yet while crises are necessary for cultural change, they are not sufficient: they represent moments of maximal opportunity, though they must be exploited. And for this, skilled politicians with judgement and a strategy are required.”
– James Vitali
The Wall Street Journal ($) has been running articles looking at the silicon chip industry, and the attempts by countries such as the US to try and protect and stimulate production of high-end chips. I can strongly recommend Chip Wars by Chris Miller for an overview of the rise of this extraordinary industry, and the web of supply chains that underpin it.
Here’s the newspaper’s latest feature on the topic:
Two years into a nearly $53 billion government effort to shore up the U.S. chip industry, the [US] program’s impact is becoming clearer: Big companies making advanced chips are getting a boost, but there are limits to what the money can do. The Chips Act, passed in 2022 to jump-start domestic semiconductor production, is supposed to supercharge chip making in the U.S. But even in its early stages, it is being challenged by fast-growing chip industries in competing countries, political complexity regarding the allotments at home and the sheer expense of manufacturing chips.
The lion’s share of the allotments have been slated for Intel and other large chip makers that plan to make advanced chips in the U.S., while some companies that are important in other parts of the chip-making supply chain have missed out. Meanwhile, other countries have amped up spending to keep competitive.
The government received hundreds of applications for the grants from companies eager for funding.
No kidding. When lots of public money is hosed around, firms will try and get some of it.
The biggest chunks of money went to Intel, which got up to $8.5 billion of grants for several projects, and to Taiwan Semiconductor Manufacturing Co., Samsung Electronics and Micron Technology, each of which were allotted more than $6 billion for their projects.
Another way of describing it is corporate welfare.
Industry executives have largely been pleased with the rollout of the program, even as labor disputes, higher costs and extended environmental reviews are slowing work compared with some other countries.
I am sure they are.
Some investors are worried about the amount of money being spent on new construction. Elliott Investment Management, an activist investor, took a $2.5 billion stake in Texas Instruments and wrote a letter last month to its board of directors urging slower spending on manufacturing growth to boost cash flows. TI is expected to receive grants under the Chips Act.
There are dangers of major misallocation of capital when politicians drive anything.
The impact of the program is also limited by the sheer cost of chip plants. A single advanced chip fab can cost more than $20 billion, and the planned U.S. facilities won’t be operating until later this decade. Those realities mean that even a historic $39 billion grant program can’t itself tip the global share significantly in the U.S.’s favor.
This is an expensive business.
The tax credit expires in 2026, and industry lobbyists are already preparing to push for an extension.
I am sure they are. The lobbying industry gets another cause to chase.
The historical record is clear; “One-Nation” Conservatism is an unelectable platform. It is completely toxic, politically. The existence of challenger parties on the Right is possible only because the Conservative Party is still under the malign influence of individuals who believe that vast legal immigration is an unmixed economic good which creates ‘concerns’ which must be addressed by listening. Who think that ‘trans’ and ‘woke’ are just culture war distractions from the next bold investment in Britain’s ever nascent life sciences industry. Who think that we must be a ‘Net Zero superpower’ if we want to maintain our ‘soft power’ abroad. There is no political constituency in Britain for these people. They are kept in Parliament because of tribal Tory voters and the fact that the alternative is usually worse.
– Sydney Carton, The Critic.
More and more mainstream journalists (maybe we need to retire the term “mainstream” as it begs many questions) are sitting up and taking notice of the Argentinian president, Javier Milei. His openly declared support for radical classical liberalism and “Austrian economics”, for thinkers such as Ludwig von Mises, FA Hayek and Milton Friedman are a breath of fresh air in these increasingly unpleasant, statist times. His package of reform moves, including slashes to the budgets of the Argentinian state, are inevitably attracting criticism and pushback.
This is to be expected. When Ludwig Erhard, the former West German economics minister, put the Deutschemark on a firm footing, ended price controls and cut forms of intervention, the UK occupying authorities, for example, thought he was nuts; when Poland pivoted sharply towards free enterprise in the early 90s, things got tough for a while as a lot of formerly concealed unemployment surfaced. The same happens in many other nations that adopt the “shock therapy” of moving off the morphine drip of cheap money. Imagine, if you will, the likely pain if Venezuela moves away from socialism; the UK had a tough time when Mrs Thatcher enacted reforms in the 1980s, and fashionable opinion thought she was mad and could not succeed.
It seems rather typical of this cycle, then, that Daily Telegraph economics writer Ambrose Evans-Pritchard argues that Argentina is engaged in an “extreme” form of Austrian economics, and argues that it is all going wrong. AEP is a Keyensian; he sometimes writes intelligently but a lot of his predictions are way off base. He’s predicted the crackup of the eurozone so many times that his credibility is shot on that issue. He’s all for Net Zero and the policies to make it happen. But there is more than a grudging respect for Milei here – AEP knows that Argentina’s statist, Peronist culture is awful and needs to change. And AEP does argue that maybe Milei ought to take a leaf out of Erhard’s book on the issue of the currency. Unfortunately, AEP is a full-on fiat currency guy, who presumably agrees with Keynes that gold is a relic, etc.
In any event, people are noticing Argentina now. Its currency and debt is more highly valued; thousands of civil servants have been fired, and Milei is pushing to end a lot of controls. He faces resistance, and may not succeed. But here he is, more than six months into power, and I hope he succeeds. A prosperous, liberal Argentina would be a refreshing contrast not just to the Argentina of many recent decades, but to the horrible regimes of other Latin American states. And who knows – it would be nice if the UK could improve relations with such a country, maybe work out something over the Falklands, and forge closer trade ties with a country that the UK helped to build a century ago.
The recent decision by President Biden to slap tariffs on a range of Chinese imports, including electric vehicles, has gone through with relatively little political noise and pushback. There was a time a while ago when certain figures in the Republican Party and part of the mainstream media would have been alarmed by this, given how widely free trade was accepted as a default position, with caveats about protecting sectors deemed vital for security, or because of things such as blatant abuse of intellectual property. Nowadays, it appears that mercantilism, and special interest lobbying power that drives it, is as strong as ever.
The Wall Street Journal writes ($):
The way to defeat Beijing economically is by making America more competitive. This means playing to traditional strengths of innovation, low taxes and regulation, and trade alliances. Mr. Biden has done the opposite. His Administration has blocked critical mineral mining projects. It has attacked domestic fossil-fuel production and petrochemicals, which contributes to pharmaceutical production.
Of course, the question is who is being “defeated”, if at all, by hammering the economy of China? Will it be the Chinese Communist Party, which in many ways is more or less a sort of Mafia, or the regular Chinese people? Let’s not forget that tens of millions of Chinese citizens have been lifted to a standard of living that would have been a shock to those familiar with the terrible Mao-induced catastophes/crimes of the Great Leap Forward in the 50s and the Cultural Revolution of the mid-60s.
While I suppose that deliberately impoverishing China – which is what some people might want to see – is the goal, regardless of the human costs – I see it as right to pursue two broad courses – encourage prosperity around the world and resist the most egregious abuses. It is also a fact worth considering that it is not, in general, prosperous countries that attack other rich ones. It usually tends to be countries that are in decline for various reasons – often self-induced – that lash out against their real or presumed opponents. A China that wants to conquer Taiwan, for example, or mess with the West in various ways, is in my view motivated by a sort of nagging insecurity as much as anything else. China has done far more to harm itself by its clampdowns under Xi than anything that Biden, Trump or whoever is likely to do. And protectionism is, as I explain below, a very blunt instrument that causes widespread collateral damage and self-harm.
The newspaper notes that one bad policy begets another, as politicians try to offset the bad effects of their previous policy:
The Biden tariffs are a classic example of how bad industrial policy is compounded by another bad policy in the name of fixing the first mistake. Thus Mr. Biden wants to use tariffs to raise the price of EVs that he wants everyone to buy. It’s bananas.
It is. The long-term negative consequences of rising protectionism will be complacency, sloth, special pleading, shoddier products, and the rest. This may take years to manifest itself. It is not even as if the tariffs being imposed by the Biden administration are to be offset by large tax cuts domestically. In the late 19th Century, the various administrations after the US Civil War did impose tariffs, but domestic taxes were puny compared with what we have now.
In any event, arguments that protectionism “protects” seem to be as weak as they ever have been. And there are the downstream impacts to consider: by making imports of solar panels, cars, cooking oil or whatever more expensive, it increases costs not just to consumers, but also to intermediate manufacturers who use these things. Import tariffs on steel drive up the cost of everthing made with steel, to give one simple example.
There is also the corrupting effect that protectionism has, as explained by Phillip W Magness:
In economic terms, tariffs deliver a “rent” by transferring a portion of the consumer surplus from exchange to beneficiary producers who no longer face import competition. The collective action advantages of concentrated interest groups enable lobbying efforts to coalesce around tariff-benefitting industries, which then divert resources away from productive economic activities and into seeking favors through the political system. On net, the concentrated benefits received by politically savvy industries are dwarfed by the combination of deadweight losses on consumers and political losses due to rent-seeking to obtain more tariffs.
Magness also notes another myth about tariffs that modern-day protectionists like to lean on:
As Douglas Irwin has shown, the claimed correlations between late nineteenth-century American industrialization and protectionism are both exaggerated and spurious. Economic growth in sectors that did not face heavy import-competition—think of transportation, communication, and utilities—generally outpaced the tariff-beneficiaries of industrial manufacturing. The United States also had the unique advantage of a large, geographically diverse internal commercial base in this period. Nor were tariffs the unambiguous benefit to industry that Cass claims. They raised the prices on imported capital goods like heavy machinery, which likely impaired many of the same industries that benefited from tariffs on their own goods.
In any event, while they are different in many ways, it appears that both Mr Biden and Mr Trump are in agreement that tariffs are great. Whatever other qualities, or the lack thereof, may distinguish these men from each other and may persuade voters to jump one way or the other, or abstain, or just despair, it appears that on protectionism, we are back in an age as if Adam Smith and David Ricardo never existed.
“If I messed up a funny story around my relatives, they would go ‘That’s not how you tell that joke. The prostitute has to be behind the drapes when the wife comes in.’ You went to Duke—that is an unbelievable privilege. I now have an Honorary Doctorate of Humane Letters degree from Duke University. And if I can figure out a way to use that, I will. I haven’t figured anything out yet. I think it’s pretty much as useful in real life as this outfit I’m wearing. But so what? I’ll take it. My point is we’re embarrassed about things we should be proud of and proud of things we should be embarrassed about.”
– Jerry Seinfeld drops some humorous truth bombs at a college speech.
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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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