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Little noticed in the UK media, reports from a financial vlogger Joe Blogs (that is his handle) on Turkey tells us that the government is ‘asking’ citizens to hand over their gold and foreign currency, at a time of 50% inflation, but citizens will get Lira in return. There are 30,000 gold shops in Turkey and five major refineries. Do not worry that Erdogan is a (not so) covert Islamist, he is first and foremost a Keynesian.
The Turkish government is not simply standing by and watching as the Lira inflates away, the government has cut tax on food from 8% to 1%, and this in the context of a currency crisis, the lira falling 44% in 2021 against foreign currencies. So they know that cutting taxes eases burdens on people. Unfortunately, Atatürk’s doctrine of ‘statism‘ lingers, with lots of Turks employed by the State.
Meanwhile, the Turkish Finance Minister has been in the UK and reported had a ‘fantastic‘ meeting with potential investors. And the goverment is determined to keep on down this path, telling the private banks to step up their efforts to help by handing over foreign currency deposits. (Doubtless this is all voluntary).
Here is a graph of recent Turkish inflation rates. Are we going to be seeing a ‘crack-up boom’ in real time any week now? Turkey is reportedly informally dollarising, with over 50% of transactions in Turkey in dollars (Why not the Euro?).
I can’t help thinking that in the UK, the government is looking at Turkey with envious eyes, dreaming of taking steps to inflate away what remains of our prosperity and to seize our assets.
And it is not all bad from the Turkish government, they have changed the name of the country in a re-branding exercise, changing it from ‘Turkey’ to ‘Türkiye’, apparently to avoid confusion with the bird of the same name.
Joe Blogs also has some interesting coverage on the Chinese property conglomerate Evergrande, and the efforts of a US Hedge Fund to take ownership of collateral in Hong Kong.
So who is to be first against the wall? The traditional view is that it should be the Sirius Cybernetics Corporation. While anyone who could call a robot “Your plastic pal who’s fun to be with” deserves their fate, bear in mind that Douglas Adams died before the triumph of the chatbot.
“For God’s sake, chatbots, let me talk to a human being”, cries Jessie Hewitson in the Times. She had a rotten time when both her bank cards stopped working.
Cross though the bus driver looked, he took pity on me and waved me to a seat. When I got off at the Tube station I tried again with the card readers at the gates. Same problem. My cards weren’t working, so there I stood, stranded, unable to get to work.
I called Barclays. After ten minutes of extreme faffery, an automated voice told me that I had to use the chat function because I had downloaded the phone app. So, thumbs frozen outside the tube, I typed my problem into the “chat”.
It was more like an endurance test, where the bank pushes you to the limit of your resolve. To see how long you will hang on to speak to a real person, if indeed you can figure out when you finally are.
In comparison to that “your plastic pal” doesn’t seem so bad. At least you can hit it. Let us spare the Sirius Cybernetics Corp. for a little while and execute the entire British banking establishment instead. But even they, citoyens, do not go first. So far, Ms Hewitson’s article is a pretty standard moan about the way the telephone number of your local bank now sits alongside the nuclear codes as a closely-guarded secret. Things are indeed grim. They, the chatbots, have taken to giving themselves names. Happy female names, mostly amusingly mis-spelled variants of human ones. We may also have to kill everyone who has ever used the term “customer engagement”. But bad as our current plight is, there are very few bad situations that government “help” cannot make worse:
Why are financial companies doing this? The obvious reason is money, but there’s another one: banks, broadband providers et al are keenly aware of the complaints figures that are given to the Financial Conduct Authority and other regulators.
If they manage to reduce these, customers view them as more trustworthy. The harder they make it for you to speak to a person, the fewer complaints that will be logged. And so you have a warped situation where the good banks that encourage people to raise problems look worse than the bad ones that don’t.
I present my revised schedule for the public entertainments on Day One:
3. The Sirius Cybernetics Corporation
2. BarcWestLloydHSBCrap
1. The Financial Conduct Authority
“The politicians’ challenge is to wrest well-functioning energy and financial markets back from a financial, activist and media class that seems unshaken by the anticonsumption, income-redistribution miseries their agenda is inflicting. Culture war, indeed.”
– Joseph C. Sternberg.
“The idea that you are successful because you are hardworking is pernicious and wrong because it means everyone who is unsuccessful is stupid and lazy.” Minouche Shafik (LSE director, quoted in The Observer / The Guardian, Saturday 22nd January 2022)
“I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.” (Ecclesiastes 9:11, King James Version)
I prefer the Bible’s less judgemental, more qualified take to the LSE director’s woke-sounding justification of why she wants to reset capitalism, replacing the “extreme individualism of the last 40 years” with the “shared endeavour” expressed in her book ‘What We Owe Each Other’. ‘The preacher’ did not say it was ‘pernicious’ to think swiftness, strength, wisdom, understanding and skill favour success – just that you’d be wise to understand that time and chance also play a part.
And other things too, perhaps. As recipient of a “too good to miss” offer from the LSE after several years at the World Bank and two years as (youngest ever, IIRC) number 2 at the Bank of England, Minouche Shafik’s career would be very impressive indeed if one assumed that her Egyptian ethnicity or female gender had been always and everywhere only a handicap to her.
Rising to the top – to resident of the White House, for example – may indeed not denote swiftness, strength, wisdom, understanding or skill (or even the honest counting of all and only legal votes), may indeed be compatible with stupidity and laziness. Being unsuccessful – losing a university post, for example, or not gaining it – may indeed not denote stupidity and laziness, may indeed be for failure to tolerate these attributes. Many an ‘expert’ isn’t.
There’s a pernicious idea around these days – that anyone who is unsuccessful is not so because they are stupid and lazy. If Minouche heard someone say “The idea that you are unsuccessful because you are the victim of prejudice is pernicious and wrong because it means everyone who is successful gained it solely through luck and privilege”, she’d not be so slow to see the need to tone it down. And that, I think, is why she’s so slow to see the absurdity of her ‘everyone’.
A new article by Max Roser, founder of Our World in Data, spells out exactly how to end poverty.
I calculated that at a minimum the world economy needs to increase five-fold for global poverty to substantially decline. This is in a scenario in which the world would also achieve a massive reduction in inequality: inequality between all the world’s countries would disappear entirely in this scenario. It should therefore be seen as a calculation of the minimum necessary growth for an end of poverty.
Anyone arguing that economic growth is in any way bad, or needs to be reduced, is saying that they have enough and they do not care about anyone else.
For some time it has been one of those views that acquire the status of conventional wisdom that our politics has gone through a period of “re-alignment” and people don’t really divide on whether they are for a small State versus a Big State any more. For example, Stephen Davies at the UK’s Institute of Economic Affairs has been arguing that the divisions over Brexit, for example, have driven a 10-ton lorry through old divisions that have been in place for decades. I have heard Dr Davies make this argument many times.
It seems quite persuasive, although even when I first heard it I wondered how it will fit with issues such as Net Zero. All those “Red Wall” voters in the North and Midlands who shifted from Labour to the Conservatives did not seem all down with the idea of being forced to buy electric cars, install expensive heat pumps, and all the rest. Economics, in other words, still seems to count for quite a lot in framing political allegiance. The pandemic and the lockdowns reinforced how there are those who do very well out of Statist controls of lives, and those who don’t. While not always mapping along conventional party lines, Covid has again reminded us that economics is a big deal (which is all the more reason why it is appalling that the UK government has paid so little heed to it until relatively late.)
Anyway, I thought of these points when reading the daily CapX roundup of articles today, including this excellent item by Kristian Niemietz, also of the IEA and a colleague of Dr Davies:
It is a commonly held view that ‘socialism vs capitalism’ was yesteryear’s divide, while ‘woke vs unwoke’ is where the action is now: pronouns are the new tax rates, and cancellation is the new nationalisation.
The problem with this argument is that it is only true on one side of that divide, namely, the ‘un-woke’ or ‘anti-woke’ side. The opponents of Wokeness do indeed tend to get far more animated about the latest Culture War shenanigans than by the latest economic policy announcements. They also find it easy to form loose coalitions over a shared cultural outlook with people with whom they disagree on economic issues. (For example, a left-wing critic of Cancel Culture can easily get a piece published in a centre-right publication.)
But it would be a huge mistake to assume that something similar must be true on the other side of that divide, i.e. that on the progressive Left, woke identity politics has somehow crowded out socialist economics. Quite the opposite is true. It is hard to think of a prominent woke culture warrior who is not also a committed anti-capitalist.
This makes sense to me. I have noticed quite a few cases of people on the “right” almost sighing with joy at finding “un-woke” lefties with whom to hang out, seeing them as converts. Up to a point, Lord Copper. A person who has subscribed to Big Government views all their lives, but who has a nasty experience of being attacked for views on, say, transgender rights (JK Rowling comes to mind), does not therefore suddenly become a champion of classical liberalism, individual liberty and capitalism. Of course, their being bullied by advocates of Critical Race Theory or whatever might make them stop to reflect on whether some of their ideas on other subjects were also mistaken, but in all the recent jousting that has gone on, I haven’t come across many examples of socialists who have abandoned socialism, possibly apart from US personality Dave Rubin.
Insulin is expensive in the USA. “The average list price of one unit of insulin in the US is $98.70, compared to $12 in Canada and $7.52 in the UK.”
Then why do not people simply buy it from wherever it is cheaper? Because it is illegal to import it. Why is it not made more cheaply by competitors? Because the FDA have not approved this. President Biden claims to want to lower insulin costs but continues to support state violence that restricts access to medication.
From the Guardian, no less (and it doesn’t mince its words):
Russia’s supreme court has ordered the closure of Memorial International, the country’s oldest human rights group, in a watershed moment in Vladimir Putin’s crackdown on independent thought.
The court ruled Memorial must be closed under Russia’s controversial “foreign agent” legislation, which has targeted dozens of NGOs and media outlets seen as critical of the government.
Memorial was founded in the late 1980s to document political repressions carried out under the Soviet Union, building a database of victims of the Great Terror and gulag camps. The Memorial Human Rights Centre, a sister organisation that campaigns for the rights of political prisoners and other causes, is also facing liquidation for “justifying terrorism and extremism”.
OK, readers may ask, what’s with the energy independence headline? Well, as sometimes noted, countries such as Germany (and now Belgium) have cut back on their use of nuclear energy. Germany is a big consumer of Russian natural gas, and that reliance is going to increase via the Nordstream 2 pipeline, assuming Berlin presses ahead in the teeth of rising criticism. This gives more power to the Russian state, and to Mr Putin. In the UK, recently Shell, the energy group, decided not to go ahead with widening its North Sea oil extraction efforts, and the business of fracking in the UK is stymied. There appears zero support by the Boris Johnson administration for the UK to aggressively develop any home gas/oil sectors further. For brave little Britain, apparently, we can shrug off the winter chills and Russian nastiness with windmills, solar panels, and noble sentiments.
Forgive my sarcasm, but you get the point. Western countries appear, at least on the face of it, to favour energy policies that appear guaranteed to embolden and strengthen regimes such as that of Putin’s Russia. It’s as if it was intended.
In recent years much of the narrative is that China is rising, the US and the West as a whole are declining, and that there is not a lot we can do to arrest that switch, even if it would be desirable to do so, blah-blah-blah. Liberal democracy is on the retreat, authortarianism is the new hotness, so get ready for Social Credit, compulsory school Mandarin lessons and the rest of it. Now it is true that we seem to be well capable of gutting defences of liberty on our own without Chinese influence anyway, but it does nevertheless matter, in my view, if China’s rise continues in the way it has. Well, it is possible that things aren’t going to be quite so straightforward:
Check out this article from US think tanker Thomas J. Duesterberg, in the Wall Street Journal. As it is paywalled, I am going to publish a few paragraphs:
In December real-estate developers China Evergrande and Kaisa joined several other overleveraged firms in bankruptcy, exposing hundreds of billions in yuan- and dollar-denominated debt to default. Real estate represents around 30% of the Chinese economy, nearly twice the levels that led to the financial crisis of 2008-09 in the U.S., Spain and England.
I have been covering the Evergrande saga in my day job. Let’s just say that anyone who remembers the Japanese real estate meltdown will recognise the danger signs.
The real-estate industry has been key to keeping annual growth above 6%. Yet a debt bubble has inflated by 20% annually between 2014 and 2018. Originally intended to accommodate rapid urbanization for the industrial economy, the urban property market is now overbuilt. Some 90% of urban households own their own properties and enough vacant units are available to accommodate 10 years of urban immigrants. Sales and prices have tumbled this year, and overleveraged builders and creditors are suffering the consequences.
It seems the Dr Evil bloke at the helm is not as smart as he’s made out.
Mr. Xi is privileging the less productive and less innovative components of the Chinese economy while enhancing control, limiting financing and punishing entrepreneurial leaders in many leading industries. This isn’t a recipe for maintaining strong economic growth. Despite the frequent assertions that China is catching up or moving ahead of the West in technology industries, it has a long way to go to achieve the self-sufficiency and global leadership it seeks. U.S. sanctions on advanced semiconductors, for instance, have gutted Huawei’s ability to make its own 5G phones. China’s semiconductor industry is 10 years behind world leaders, according to a recent German study.
In short, it is difficult to escape the conclusion that China’s economy is systematically weakening and that Mr. Xi’s new priorities offer little hope for a quick turnaround. The U.S. and its allies could further compound Mr. Xi’s challenges by vigorous enforcement of trade laws, limiting Chinese access to technology and financing from the West, and imposing sanctions against China’s brutal human-rights abuses in Xinjiang and in countries in the developing world that it is trying to exploit through its Belt and Road Initiative. A good example of such exploitation is the atrocious mining conditions for key battery components cobalt and lithium in Africa and South America.
A major slowdown or acute financial crisis in China would certainly have a negative impact on the global economy. But U.S. and allied policy makers do have tools that could both influence the direction of the Chinese economy and help repair some of the accumulated damage to their economies from Chinese mercantilism. A first step is to undermine the narrative of a relentless, unstoppable economic advance under Mr. Xi’s leadership.
That of course would mean efforts to counter China’s thefts of Western IP, and for Western governments to limit Chinese access to Western finance and tech. That isn’t easy. Of course, a big slowdown/recession in China will hit the West, given the web of capital and trade relations. And for what it is worth, I still think the world is far better off with a prosperous China than the horrors of Mao in the 50s and 60s. But it is plain that China’s current behaviour (Hong Kong, South China Sea incursions, treatment of various groups, IP thefts, clashes with India, etc) mean that the regime in Beijing needs a very big kick. Maybe we will see this happen in the next year or so.
When President Joe Biden said, in one of his many foolish sayings, that “Milton Friedman isn’t running the show any more”, the hubris of that comment was truly on the Greek tragedy scale. Inflation is almost at 10 per cent on an annualised basis in producer price terms in the US. Consumer price inflation is also high. In the UK, inflation runs hot. Yes, disruptions and energy price spikes are big factors, but these are structural – and ultimately, what causes prices to rise overall is because money loses its purchasing power. (See this decade-old video featuring UK-based investment figure and author Detlev Schlichter.)
Across the developed world and beyond, that loss of purchasing power involves a huge shift in resources from savers to borrowers, with the latter being governments in many cases. Finance ministers won’t admit it, but they want inflation to resolve their fiscal incontinence without having to cut spending or raise taxes.
The late Prof. Friedman pointed this sort of process out many times. Yes, I get that not all aspects of the Quantity Theory of Money hold up, and the “Chicago” school has its disagreements with others, such as the “Vienna” one over money, banking, etc. But the broad point seems to hold that if you print government fiat currencies on a massive scale, eventually inflation will bite. President Biden is unfit for the office he holds for a variety of reasons, and his jeering at one of the great minds of the 20th Century is one of them.
Update: Bank of England slightly raised interest rates today.
Incoming from Dominic Frisby:
The YouTube premiere of our feature documentary Adam Smith: Father of the Fringe will take place this Sunday evening at 7pm and you are invited to join. I hope you can make it. If you can’t fear not, the film will remain on YouTube thereafter, so you’ll still be able to watch. We’ll leave it on there until some broadcaster with deep pockets wants to broadcast it.
See also my previous post about this.
On Monday night I attended a screening of Dominic Frisby’s film Adam Smith: Father of the Fringe at the IEA.
It is a documentary about how the government-subsidised Edinburgh Festival was usurped by amateurs who just turned up, organised their own venues and ticketing, and put on their own shows. The fringe festival was, and remains, a triumph of the free market. This is in spite of many of the performers being somewhat left-leaning. In the film, one comedian being interviewed points out that doing comedy for a living is very entrepreneurial, and that during the 80s most comedians were mocking Thatcher whilst doing exactly what she wanted.
It is a funny, entertaining and informative film. Dominic Frisby tells a good story. During the Q and A afterwards, one young questioner said that he was worried about his generation because they all seemed to think socialism was the right way. He thought that films like this might go some way to convincing them otherwise. There proceeded some discussion about how a good story is often more persuasive than facts and logic. Dominic pointed out that most people saw themselves as wanting to be nice, and the prevailing view was that anyone not on the left was unkind and uncaring. Clearly some better marketing is needed.
The counterpoint, demonstrated here, is that the state subsidised organisations are slow, curmudgeonly and favour the distinguished and established elites. The free market is for amateurs and small groups who experiment, fail, and provide much desired diversity of choice, interesting niche products and discovery of exciting new innovations. The film gives examples of all this happening at the fringe. During the Q and A, comparisons were made to YouTubers, who similarly provide diverse opinions and information on niche topics, as compared to the mainstream media who offer a narrow selection of often poorly researched information. It seems to me that the distinction between big and small organisations in general is relevant. Big companies who hold apparently unassailable apparent monopolies in some sector are regularly usurped by nimble startups despite the former’s capture of state favour.
After the event I chatted with the director of the film, Alex Webster. He had pointed out that cheap equipment was one of the things helping those YouTubers. It turned out we both own the same camera: the Blackmagic Design Pocket Cinema Camera 6K Pro. It is a relatively cheap device that can capture video with cinematic quality good enough for a Hollywood feature film. Blackmagic Design are making film-making cheap not just with cameras but with the editing, compositing and colour-grading software Davinci Resolve which anyone can download for free. This is one of the ways that young people with little money can develop their skills in film-making, and that small, independent, innovative, niche film-makers can afford to make their films.
Perhaps there is a chance that fringe-like dynamics might come to the aid of those who have the desire and ability to improve the marketing of the idea of freedom by telling some compelling stories about it.
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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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