March 25, 2016

QotD: The infrastructure problem in America

[David Cay] Johnston’s piece is titled America should be more like Disneyland but instead of thinking seriously about what this means he fumbles on the 20 yard line and concludes that what makes Disneyland different is… happy thoughts. If only we were more like W.D., he says, “we could make America into a happy place.”

No, what makes Disney invest in infrastructure is not happy thoughts. Johnston is in fact clear about this:

    The Walt Disney Co. invests in infrastructure because it makes the company money.

The problem with America is that our public infrastructure has been turned over to a fickle political process that is not governed by a rational calculation of cost and benefit, market test and experimentation but by a pursuit of power, glory and advantage that only rarely coincides with the public interest.

America should be more like Disneyland and to do that we need to develop institutions that allow more infrastructure to built by the private sector. Most ambitiously we need more cities as hotels, more proprietary cities. As Rajagopolan and I wrote in our study of India (in Cities and Private Planning):

    The lesson of Gurgaon, Walt Disney World, and Jamshedpur is that a system of proprietary, competitive cities can combine the initiative and drive of private development with the planning and foresight characteristic of the best urban planning. A proprietary city will build infrastructure to attract residents and revenues. A handful of proprietary cities built within a single region will create a competitive system of proprietary cities that build, compete, innovate, and experiment.

Alex Tabarrok “How to make America more like Disneyland”, Marginal Revolution, 2014-12-17.

February 6, 2016

The most likely explanation for politicians doing what they do

Filed under: Economics, Government, Politics — Tags: — Nicholas @ 03:00

In his weekly column for USA Today, Glenn Reynolds distills down the essence of public choice theory:

The explanation for why politicians don’t do all sorts of reasonable-sounding things usually boils down to “insufficient opportunities for graft.” And, conversely, the reason why politicians choose to do many of the things that they do is … you guessed it, sufficient opportunities for graft.

That graft may come in the form of bags of cash, or shady real-estate deals, or “consulting” gigs for a brother-in-law or child, but it may also come in broader terms of political support and even in opportunities for politicians to feel superior or to humiliate their enemies. What all these things have in common, though, is that they’re not about making life better for voters. They’re about making life better for politicians.

This doesn’t sound much like the traditional view of politics, as embodied in, say, the Schoolhouse RockI’m Just A Bill” video. But it’s a view of politics that explains an awful lot.

And there’s a whole field of economics based on this view, called “Public Choice Economics.” Nobel prize winning economist James Buchanan referred to public choice economics as “politics without romance.” Instead of being selfless civil servants motivated solely by the public good, public choice economics assumes that politicians are, like other human beings, heavily influenced by self-interest.

Public choice economists say that groups don’t make decisions, individuals do. And individuals mostly do what they think will be best for them, not for the “public.” Public choices, thus, are like private choices. You pick a car because it’s the best car for you that you can afford. Politicians pick policies because they’re the best policies — for them — that they can achieve.

How do they get away with this? First, most voters are “rationally ignorant.” That is, they realize that their vote isn’t likely to make much of a difference, so it’s not rational to learn all the ins and outs of policy or of what political leaders are doing. Second, the entire system is designed — by politicians, naturally — to make it harder for voters to keep track of what politicians are doing. The people who have a bigger stake in things — the real estate developers or construction unions — have an incentive to keep track of things, and to influence them, that ordinary voters don’t.

Can we eliminate this problem? Nope. But we can make it worse, or better. The more the government does and the more decisions that are relegated to bureaucrats, “guidance” and other forms of decisionmaking that are far from the public eye, the more freedom politicians have to pursue their own interest at the expense of the public — all while, of course, claiming to do just the opposite. Meanwhile, if we do the opposite — give the government less power and demand more accountability — politicians can get away with less. But they’ll always get away with as much as they can.

November 27, 2015

Wealth, inequality, and billionaires

Filed under: Economics, Government, Politics — Tags: , , , — Nicholas @ 04:00

Several months ago, the Washington Post reported on a new study of wealth and inequality that tracked how many billionaires got rich through competition in the market and how many got rich through political “connections”:

The researchers found that wealth inequality was growing over time: Wealth inequality increased in 17 of the 23 countries they measured between 1987 and 2002, and fell in only six, Bagchi says. They also found that their measure of wealth inequality corresponded with a negative effect on economic growth. In other words, the higher the proportion of billionaire wealth in a country, the slower that country’s growth. In contrast, they found that income inequality and poverty had little effect on growth.

The most fascinating finding came from the next step in their research, when they looked at the connection between wealth, growth and political connections.

The researchers argue that past studies have looked at the level of inequality in a country, but not why inequality occurs — whether it’s a product of structural inequality, like political power or racism, or simply a product of some people or companies faring better than others in the market. For example, Indonesia and the United Kingdom actually score similarly on a common measure of inequality called the Gini coefficient, say the authors. Yet clearly the political and business environments in those countries are very different.

So Bagchi and Svejnar carefully went through the lists of all the Forbes billionaires, and divided them into those who had acquired their wealth due to political connections, and those who had not. This is kind of a slippery slope — almost all billionaires have probably benefited from government connections at one time or another. But the researchers used a very conservative standard for classifying people as politically connected, only assigning billionaires to this group when it was clear that their wealth was a product of government connections. Just benefiting from a government that was pro-business, like those in Singapore and Hong Kong, wasn’t enough. Rather, the researchers were looking for a situation like Indonesia under Suharto, where political connections were usually needed to secure import licenses, or Russia in the mid-1990s, when some state employees made fortunes overnight as the state privatized assets.

The researchers found that some countries had a much higher proportion of billionaire wealth that was due to political connections than others did. As the graph below, which ranks only countries that appeared in all four of the Forbes billionaire lists they analyzed, shows, Colombia, India, Australia and Indonesia ranked high on the list, while the U.S. and U.K. ranked very low.

Wealth and political connections

Looking at all the data, the researchers found that Russia, Argentina, Colombia, Malaysia, India, Australia, Indonesia, Thailand, South Korea and Italy had relatively more politically connected wealth. Hong Kong, the Netherlands, Singapore, Sweden, Switzerland and the U.K. all had zero politically connected billionaires. The U.S. also had very low levels of politically connected wealth inequality, falling just outside the top 10 at number 11.

When the researchers compared these figures to economic growth, the findings were clear: These politically connected billionaires weighed on economic growth. In fact, wealth inequality that came from political connections was responsible for nearly all the negative effect on economic growth that the researchers had observed from wealth inequality overall. Wealth inequality that wasn’t due to political connections, income inequality and poverty all had little effect on growth.

November 19, 2015

The historical origins of the nation-state

Filed under: Government, History — Tags: , , , — Nicholas @ 04:00

Samizdata Illuminatus” on the historical evolution of a bunch of armed thugs into a modern government:

… I was familiar with the hypothesis that the origin of the modern state has its roots in criminal enterprise, yet it is always amusing attempting to reconcile this with the modern state’s increasingly matronly efforts to get its subjects to behave themselves. And it is certainly far from an implausible theory, when you consider how similar the objectives of a criminal enterprise and a state can be. The major difference is, of course, that the state functions within the law — hardly surprising since it is the major source of law — while criminal organisations operate outside of the law. But honestly, how could the activity of a crime gang that defeated a local rival in a turf war be described as anything other than a spot of localised gun control — in terms of ends, if perhaps not means?

But the article got me thinking about what we can do and perhaps intend to do about what Sean Gabb would describe as “the ruling class” — the politicians and senior bureaucrats — but also the minor apparatchiks, too. In terms of the big picture stuff, the bolded part above resonates with me as particularly axiomatic, and if libertarians or classical liberals or small government conservatives or one of the very many labels we choose to call ourselves — if we stand for any one single thing, surely it is for the obliteration of this instinct, this scourge, from the human species. Yes, I am fully aware that previous efforts to change human nature for various ends have generally worked out appallingly, so maybe I should write about ‘disincentivising’ an instinct rather than ‘obliterating’ it. (I’m keeping ‘scourge’. Fair’s fair.) Although there are those amongst us who favour a muscular Ceaușescu solution to big government for those who believe they can spend our hard-earned better than we can, along with those willing to assist them in taking it off us and spending it. Others prefer an incremental strategy of rolling back government to the point that those who wish to “command economic resources” for a living find they enjoy slightly less demand for their services than a VCR repairman. I suspect both methods, perhaps working in concert at times, will be necessary at differing stages of the struggle against the statists if we are ever to be able to declare victory over them (and then leave them alone, as Glenn Reynolds is wont to say).

I do have a gripe about a distinction the author makes between paper-stamping, useless, make-work bureaucracy, and “public goods” bureaucracy, an example of which he doesn’t actually specify, although throughout the piece the inference is quite clear that he’s referring to schools and hospitals and the like — and presumably in the parts of schools and hospitals where service provision takes place; not where the (many) papers are pushed and stamped. Now, many here (rightly, I believe) probably object to the contention made that the market traditionally failed to provide such services of the “public good”, hence the state springing to the rescue to address this “market failure”. There are many people here — Paul Marks comes to mind — who will know a great deal more than I do about the patchwork of friendly societies and other private arrangements that individuals and their families paid into voluntarily and turned to for financial aid in times of illness, unemployment, or other trouble, as well as the nature of the education sector prior to the era of compulsory government schooling; the vast majority of which was crowded out by “free” state healthcare and education. However, my purpose is not wish to dwell on this now, interesting a topic as it is.

November 5, 2015

Korea: Admiral Yi – I: Keep Beating the Drum – Extra History

Filed under: Asia, History, Japan, Military — Tags: , , — Nicholas @ 04:00

Published on 26 Sep 2015

Admiral Yi Sun-sin of Korea began his legendary career with a series of disasters. Fate (and corrupt officials) conspired against him to have him repeatedly knocked down from the success he had earned, often because his insistence on strict military codes and refusal to ignore corruption made enemies of his fellow officers. Even when his superior had him tortured and blamed after a loss to the Jurchen raiders from the north, Yi persevered. Stripped of his rank and now reduced to a common enlisted man, Yi nevertheless served Korea with distinction. Meanwhile his childhood friend, Ryu Seong-ryong, had risen to become the prime minister of Korea. Ryu recognized the threat of war from Japan looming on the horizon, so when Yi asked to retire in 1588, Ryu convinced him to stay.

October 22, 2015

The decline of democracy in Turkey

Filed under: Europe, Middle East, Politics, Religion — Tags: , , , , — Nicholas @ 03:00

Last week, Daniel Pipes looked at the increasingly dictatorial ambitions of Turkish president Recep Tayyip Erdoğan:

The Republic of Turkey is undergoing possibly its greatest crisis since the founding of the state nearly a century ago. Present trends suggest worse to come as a long-time Western ally evolves into a hostile dictatorship.

The crisis results primarily from the ambitions of one very capable and sinister individual, Turkey’s 61-year old president, Recep Tayyip Erdoğan. A career politician who previously served four years as the mayor of Turkey’s megacity, Istanbul, and then eleven years as the country’s prime minister, he forwards two goals hitherto unknown in the republic: dictatorship and full application of the Shari’a, Islam’s law code.

During his first eight years of power, 2003-11, Erdoğan ruled with such finesse that one could only suspect these two aspirations; proof remained elusive. This author, for example, wrote an article in 2005 that weighed the contradictory evidence for and against Erdoğan being an Islamist. A combination of playing by the rules, caution in the Islamic arena, and economic success won Erdoğan’s party, Justice and Development (Adalet ve Kalkınma Partisi, or AKP), increasing percentages of the vote in parliamentary elections, going from 34 percent in 2002, to 46 percent in 2007, to 50 percent in 2011.

That 2011 election victory, his third in succession, gave Erdoğan the confidence finally to remove the armed forces from politics, where they had long served as Turkey’s ultimate power broker. Ironically, this change ended the increasing democratization of prior decades for his fully taking charge allowed Erdoğan to develop an oversized ego, to bare his fangs, flex his despotic muscles, and openly seek his twin objectives of tyranny and Shari’a.

Indeed, Erdoğan made his power felt in every domain after 2011. Banks provided loans to the businessmen who kicked back funds to the AKP. Hostile media found themselves subject to vast fines or physical assault. Ordinary citizens who criticized the leader found themselves facing lawsuits, fines, and jail. Politicians in competing parties faced dirty tricks. Like a latter-day sultan, Erdoğan openly flouted the law and intervened at will when and where he wished, inserting himself into legal proceedings, meddling in local decisions, and interfering with police investigations. For example, he responded to compelling raw evidence of his own and his family’s corruption by simply closing down the inquiry.

October 2, 2015

Marcus Porcius Cato – the man who almost stopped Julius Caesar

Filed under: Europe, History, Law, Liberty — Tags: , , , — Nicholas @ 02:00

In The Freeman, Lawrence W. Reed talks about one of the last few Republicans in the Rome of Julius Caesar’s ascendance:

In the estimations of many historians, two men hold the honor as the most notable defenders of the Roman Republic. Marcus Tullius Cicero was one. Marcus Porcius Cato, or “Cato the Younger,” was the other.

Since there was a “younger,” there must have been an “elder,” too. Cato the Elder was the great grandfather of the younger. Both men, separated by more than a century, were influential in public office. Think of the elder as the social conservative, concerned in his day with preserving the customs and traditions of Rome. The younger was one of history’s early libertarians, interested more in personal and political liberties because he believed that if they were lost, nothing else mattered. It is this second one to whom I refer in the balance of this essay as simply “Cato.”

By the time of Cato’s birth in 95 BC, the Roman Republic was long in the tooth. Founded four centuries earlier, it had risen from obscurity to political and economic dominance in the Mediterranean. Rome was easily the world’s wealthiest and most powerful society. It wasn’t a libertarian paradise — slavery was a part of its makeup, as it was even more brutal everywhere else — but Rome had taken liberty to a zenith the world had never seen before and wouldn’t see again for a long time after it finally fell. The constitution of the republic embodied term limits; separation of powers; checks and balances; due process; habeas corpus; the rule of law; individual rights; and elected, representative legislative bodies, including the famous Senate. All of this was hanging by a thread in the first century BC.

Cato was just five years of age when Rome went to war with its former allies in the Italian peninsula — the so-called “Social War.” Though the conflict lasted just two years, its deleterious effects were huge. The decades to follow would be marked by the rise of factions and conflict and local armies loyal to their commanders instead of the larger society. A “welfare-warfare” state was putting down deep roots as Cato grew up. The limited government, personal responsibility and extensive civil society so critical to the republic’s previous success were in an agonizing, century-long process of collapse. Even many of those who recognized the decay around them nonetheless drank the Kool-Aid, succumbing to the temptations of power or subsidies or both.

Before the age of 30, Cato had become a supremely disciplined individual, a devotee of Stoicism in every respect. He commanded a legion in Macedon and won immense loyalty and respect from the soldiers for the example he set, living and laboring no differently from day to day than he required of his men. He first won election to public office (to the post of quaestor, supervising financial and budgetary matters for the state) in 65 BC and quickly earned a reputation as scrupulously meticulous and uncompromisingly honest. He went out of his way to hold previous quaestors accountable for their dishonesty and misappropriation of funds, which he himself uncovered.

Later he served in the Roman Senate, where he never missed a session and criticized other senators who did. Through his superb oratory in public and deft maneuverings in private, he worked tirelessly to restore fealty to the ideals of the fading Republic.

August 13, 2015

Grand Theft, banking style

Filed under: Law, Liberty, USA — Tags: , , , , , — Nicholas @ 05:00

At Salon, David Dayen tells the astounding tale of American banks going feral and mass-forging legal documents to foreclose mortgages on houses they had zero claim on:

If you know about foreclosure fraud, the mass fabrication of mortgage documents in state courts by banks attempting to foreclose on homeowners, you may have one nagging question: Why did banks have to resort to this illegal scheme? Was it just cheaper to mock up the documents than to provide the real ones? Did banks figure they simply had enough power over regulators, politicians and the courts to get away with it? (They were probably right about that one.)

A newly unsealed lawsuit, which banks settled in 2012 for $95 million, actually offers a different reason, providing a key answer to one of the persistent riddles of the financial crisis and its aftermath. The lawsuit states that banks resorted to fake documents because they could not legally establish true ownership of the loans when trying to foreclose.

This reality, which banks did not contest but instead settled out of court, means that tens of millions of mortgages in America still lack a legitimate chain of ownership, with implications far into the future. And if Congress, supported by the Obama administration, goes back to the same housing finance system, with the same corrupt private entities who broke the nation’s private property system back in business packaging mortgages, then shame on all of us.

August 12, 2015

“… premiers look to Ottawa for one reason and one reason only: To beat the Prime Minister … over the head with their begging bowls”

Filed under: Cancon, Government — Tags: , , , , — Nicholas @ 03:00

Richard Anderson explains why Ontario Premier Kathleen Wynne is upset with Prime Minister Stephen Harper:

It is a time honoured tradition that premiers look to Ottawa for one reason and one reason only: To beat the Prime Minister of the day over the head with their begging bowls. What Kathleen Wynne is looking for is not a “partnership” but a ceaseless no-strings-attached flow of federal money. Like a petulant teenager the sextuagenarian premier always wants more and offers little in return. Prime Minister Harper has wisely refused to play her game.


Now imagine that you’re Kathleen Wynne — please try to subdue the gag reflex — and billions of dollars now flow into the provincial coffers from this de facto payroll tax. Perhaps the money gets tossed into general revenues. Queen’s Park then turns arounds and issues IOUs to the “arm’s length board” in the form of increasingly worthless provincial bonds. The pension would for actuarial purposes be “fully funded” but as a practical matter one pocket of government is borrowing from the other.

But perhaps the Wynnesters are a tad more clever than all that. The revenues from this payroll tax go directly to the allegedly “arms length” investment board. Nothing goes into general revenues and the Liberals allow themselves a patina of fair dealing. The board, however, will almost certainly have its investment guidelines laid out by the government. Those guidelines, by the strangest coincidence, will likely have an “invest in Ontario” component.

Some of the money will get used to buy up provincial bonds, lowering the government’s cost of borrowing at a time when capital markets are getting skittish about Ontario debentures. Quite a lot of the rest will be used to fund infrastructure projects, private-public sector partnerships and other initiatives that will, mysteriously, favour Liberal allies. The Chretien era Adscam scandal will seem like chump change in comparison.

August 4, 2015

Byzantine Empire: Justinian and Theodora – II: The Reforms of Justinian – Extra History

Filed under: Europe, History, Law, Middle East, Religion — Tags: , , — Nicholas @ 02:00

Published on 27 Jun 2015

Justinian wanted to restore the glory of Rome, but many obstacles stood in his way. He brought on talented advisors to help him reform the tax system, the law code, and the military might of the empire. With them he made great strides, but these advisors had very human flaws. His tax collector, John the Cappadocian, centralized tax collection and crushed corruption in his agents, greatly increasing the revenue to the empire – but he also skimmed money off the top to feed his private corruption. Meanwhile, a lawyer named Tribonian took centuries of confusing and even conflicting legal precedents and resolved them into a single code, the Corpus Juris Civilis, which remains the foundation of modern law today. He even made a textbook for students to learn from. But he was also a practicing pagan during an era when Justinian was trying to crack down on pagan rituals. And last, Justinian’s chief military commander Belisarius helped the Empire recover its military glory. He defeated the Sassanid Persians in the Battle of Dara, crushing a force of 50,000 men with only 25,000 of his own through clever strategy: he dug a trench to halt their infantry’s advance, then baited the Persian cavalry into overextending and sprang a surprise attack on them with Hun mercenaries. Although Belisarius seems to have been an upstanding person, his personal historian Procopius tainted even his clean record. Procopius wrote glowing official histories of the reign of Justinian, but his long lost secret history depicted Justinian as a literal headless demon and Theodora as a debauched monster.

August 2, 2015

Witchcraft in the Islamic world

Filed under: Middle East, Religion — Tags: , , , , — Nicholas @ 03:00

A few weeks back, Strategy Page looked at “practical sorcery” in the Middle East:

ISIL (Islamic State in Iraq and the Levant) recently got some media attention because they had beheaded two Moslem women accused of sorcery. For a Moslem the only thing unusual about this was how the women are killed. Public beheading is usually reserved for men. Sorcery, on the other hand, is quite common in the Islamic world, even though it is strongly condemned in the Koran. Many Islamic majority countries consider sorcery a capital (the guilty are executed) crime. But there’s a lot more to sorcery than that.

For example, back in 2013 Mehdi Taeb, a senior cleric in the Iranian government explained that the major reason so many nations went along with the increased economic sanctions against Iran was because Israel had been using magic to persuade the leaders of these nations to back more sanctions. Without the Israeli witchcraft, the sanctions would not exist. Taeb explained that the Israelis have used this magic before, as in 2009, against Mahmoud Ahmadinejad when he was running for president. Many Iranians openly opposed Ahmadinejad, who won anyway. This, to Taeb, was proof that devout Moslems could defeat the Jewish magic.

What’s interesting with this observation is that, in 2011 Taeb and his fellow clerics tried to get rid of Ahmadinejad and his zealous (against corrupt clerics) associates. One method used was to send the police (which the clergy control) to arrest key Ahmadinejad aides and accuse them of witchcraft and sorcery. This led to street brawls between fans of Ahmadinejad and Islamic hardliners. Clubs, knives, and other sharp instruments were used. There was blood in the streets. All because of a witch hunt.

Ahmadinejad was quite popular because he has gone after corrupt officials, especially the clerics and their families, who feel they are immune from prosecution and can take what they want. In theory, the clerics can get rid of Ahmadinejad by simply declaring that he is not religiously suitable to run for election. That’s the kind of power the clerics have. But Ahmadinejad was too popular for that sort of censorship and Ahmadinejad was not corrupt. His rants against Israel and the Jews, while a bit much for some clerics, is also not grounds for being declared “un-Islamic” and ineligible to run for election. Ahmadinejad is quite respectful of Islam and most Moslem clerics but willing to go after clerics who are dirty. This is also quite popular with most Iranians, and that scares the dirty clerics at the top.

So why had the clerics decided to accuse Ahmadinejad cronies of sorcery? That’s because in most countries where there is a dominant religion, especially a state approved one, there is usually still a fear that the previous religion (or religions) will try to make a comeback. The former faiths often involved some really old-school stuff, including what many would consider magic and sometimes animal, or even human, sacrifice. It is not uncommon for there to be laws covering those accused to be practicing such sorcery and severe punishments for those convicted. At the very least, the accused will be driven from any senior government jobs they might hold, and that’s what’s being done to dozens of Ahmadinejad associates. In Iran Ahmadinejad was eventually removed from power by going after his more vulnerable associates and sorcery was one of the false accusations used.

July 28, 2015

Like a bad monster movie cliché, the INSAS rifle rises again

Filed under: India, Military — Tags: , , , — Nicholas @ 02:00

India spent a lot of time and money to develop an arms industry that could supply the Indian army with Indian-made weapons. One of these weapons is the INSAS rifle. Unfortunately. Strategy Page reports on the resurrection of the INSAS despite its many failings in combat conditions:

INSAS rifle (via Wikipedia)

INSAS rifle (via Wikipedia)

In early 2015 India seemed to be finally responding to complaints from soldiers and other security personnel fed up with the poor performance of the locally made INSAS (Indian Small Arms System) 5.56mm assault rifle. The government recently reneged on that promise and announced that the despised INSAS would be replaced, in two years, by the MIR (Modified INSAS Rifle). On paper there are some improvements, like full auto-fire (INSAS can only do single shot or three round bursts), folding butt stock, Picatinny rail (for all manner of accessories), more reliable and effective magazines and more ergonomic design (making MIR easier to handle, clean and use). The government also revealed that recent firing tests have shown only two jams after 24,000 rounds fired by MIRs. There will also be a MIR 2 that is chambered to fire the AK-47 (7.62×39) round. Despite all that, to the current unhappy INSAS users the promise of the MIR comes as a huge disappointment. The government weapons design capability has a long and consistent history of failure and disappointing promises. Few INSAS users believe MIR will be much of an improvement over INSAS and will serve more as another source of cash for corrupt officials. While buying foreign weapons uses a lot of valuable foreign exchange it is more closely monitored and has proven to be less corrupt. In 2010 the government had agreed to allow the military to get a rifle that works and that meant a foreign rifle. The leading candidate was Israeli. But now that competition has been cancelled and many troops believe it is all about corruption, not getting the best weapons for the military.

This sad situation began in the 1980s when there was growing clamor for India to design and build its own weapons. This included something as basic as the standard infantry rifle. At that time soldiers and paramilitary-police units were equipped with a mixture of old British Lee-Enfield bolt action (but still quite effective) rifles and newer Belgian FALs (sort of a semi-automatic Lee-Enfield) plus a growing number of Russian AK-47s. The rugged, easy to use and reliable Russian assault rifle was most popular with its users.

In the late 1980s India began developing a family of 5.56mm infantry weapons (rifle, light machine-gun and carbine). Called the INSAS, the state owned factories were unable to produce the quantities required (and agreed to). Worse, the rifles proved fragile and unreliable. The design was poorly thought out and it was believed corruption played a part because the INSAS had more parts than it needed and cost over twice as much to produce as the AK-47.

July 16, 2015

The hidden scale of East Germany’s economic disasters

Filed under: Economics, Europe, History — Tags: , , , — Nicholas @ 03:00

Earlier this month, David Pryce-Jones wrote about one of the 20th century’s greatest con-men and his unbelievable role in the East German economy:

Alexander Schalck-Golodkowski was a most ingenious conman. The world at large never knew about him because he stayed in a little circle of corrupt political and financial insiders with whom he was doing his dirty businesses. In a mind-blowing interview that I had with Günter Mittag, the East German minister of finance, I first heard something about Golodkowski. The collapse of Communism allowed Mittag to speak more freely. Communist East Germany, he said, had always been an economic disaster, so much so that he had never dared tell Erich Honnecker, the Party first secretary, the truth that the state had no money. Mittag made up the numbers. For cash to keep up the pretenses, he turned to Golodkowski, giving him permission to do whatever he thought might be profitable. The measure of Golodkowski’s success was the CIA’s preposterous judgement that East Germany had the tenth-largest economy in the world.

Golodkowski operated through KoKo, a company set up for him freed from the laws and restrictions of both Communism and capitalism. A colonel in the Stasi secret police, he had protection the Mafia would have envied. Through bankers in West Germany and Switzerland he set up false accounts and shell companies. He was an arms trader, a speculator in commodities, and a specialist in bogus insurance claims. One of his scams was to “liberate” 600 old master pictures from the Dresden Museum and sell them. In 22 years of illegal operations, Golodkowski himself estimated (with understatement no doubt) that KoKo had amassed 27.8 billion East German marks.

QotD: The proper role of government

Filed under: Government, Liberty, Quotations, USA — Tags: , , — Nicholas @ 01:00

Good government is a constable — it keeps the peace and protects property. Parasitic government — which is, sad to say, practically the only form known in the modern world — is at its best a middleman that takes a cut of every transaction by positioning itself as a nuisance separating you from your goals. At its worst, it is functionally identical to a goon running a protection racket.


The desire to be left alone is a powerful one, and an American one. It is not, contrary to the rhetoric proffered by the off-brand Cherokee princess currently representing the masochistic masses of Massachusetts in the Senate, an anti-social sentiment. It is not that we necessarily desire to be left alone full stop — it is that we desire to be left alone by people who intend to forcibly seize our assets for their own use. You need not be a radical to desire to live in your own home, to drive your own car, and to perform your own work without having to beg the permission of a politician — and pay them 40 percent for the privilege.

Principles are dangerous things — whiskey is for drinking, water and principles are for fighting over. The anti-ideological current in conservative thinking appreciates this: If we all seek complete and comprehensive satisfaction of our principles, then there will never be peace. This is why scale matters and why priorities matter. In a world in which the public sector consumes 5 percent of my income and uses it for such legitimate public goods as law enforcement and border security, I do not much care whether the tax system is fair or just on a theoretical level; and while I may resent it as a matter of principle, the cost of my consent is relatively low, and I have other things to think about. But in a world in which the parasites take half, and use it mainly to buy political support from an increasingly ovine and dependent electorate, then I care intensely.

Kevin D. Williamson, “Property and Peace”, National Review, 2014-07-20.

June 18, 2015

QotD: The “optimal” level of corruption

Filed under: Bureaucracy, Government, Quotations — Tags: — Nicholas @ 01:00

Quick question for you: What’s the optimal amount of corruption in politics?

If you said “zero,” then I’m sorry. You do not win the prize. (It was a year’s supply of Mr. Clean Magic Erasers, just so you know.) The optimal amount of corruption in any system is almost never zero, and that goes double for politics.

We shouldn’t try to get corruption to zero because fighting corruption is costly. Think, for example, of government contracting, which mindlessly awards contracts to the low bidder, as if quality and reliability were irrelevant considerations. This sloppiness inevitably adds time and costs. Or the various requirements we impose on civil service workers to make sure that not one of them enjoys so much as a stray sandwich on the taxpayer dime … and thereby ensure that normal business practices, like sitting down for an inexpensive group meal to discuss something, are almost comically difficult to arrange. All these procedural rules make government less effective and more costly. My father, who was the head of a trade association for contractors on heavy infrastructure projects, estimates that adding federal money to a project adds about five years to its completion date.

There’s even more reason not to strive for zero corruption: Politics is the art of getting widely disparate factions to come to some sort of policy agreement, and “clean graft” greases those wheels. Now, calm down — I’m not advocating that we move to a full-on kleptocracy like Russia. What I’m suggesting is in attempting to root every last vestige of pork and patronage out of the system, we have inadvertently produced the partisan gridlock that we now decry. Anyone who thinks that this is a crazy statement should read Jonathan Rauch’s terrific new e-book, Political Realism: How Hacks, Machines, Big Money, and Back-Room Deals Can Strengthen American Democracy. At a trim 55 pages, it is a fast read, and at $0, it is the bargain of the century.

Megan McArdle, “In Politics, It’s Good to Be a Little Bad”, Bloomberg View, 2015-05-07.

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