Quotulatiousness

April 9, 2014

Being “pro-business” does not mean the same as being “pro-market”

Filed under: Business, Economics, Politics, USA — Tags: , , , , — Nicholas Russon @ 07:32

It’s a common misunderstanding (especially with people who don’t know what laissez faire actually means):

For years, Republicans benefited from economic growth. So did pretty much everyone else, of course. But I have something specific in mind. Politically, when the economy is booming — or merely improving at a satisfactory clip — the distinction between being pro-business and pro-market is blurry. The distinction is also fuzzy when the economy is shrinking or imploding.

But when the economy is simply limping along — not good, not disastrous — like it is now, the line is easier to see. And GOP politicians typically don’t want to admit they see it.

Just to clarify, the difference between being pro-business and pro-market is categorical. A politician who is a “friend of business” is exactly that, a guy who does favors for his friends. A politician who is pro-market is a referee who will refuse to help protect his friends (or anyone else) from competition unless the competitors have broken the rules. The friend of business supports industry-specific or even business-specific loans, grants, tariffs, or tax breaks. The pro-market referee opposes special treatment for anyone.

[...]

GOP politicians can’t have it both ways anymore. An economic system that simply doles out favors to established stakeholders becomes less dynamic and makes job growth less likely. (Most jobs are created by new businesses.) Politically, the longer we’re in a “new normal” of lousy growth, the more the focus of politics turns to wealth redistribution. That’s bad for the country and just awful politics for Republicans. In that environment, being the party of less — less entitlement spending, less redistribution — is a losing proposition.

Also, for the first time in years, there’s an organized — or mostly organized — grassroots constituency for the market. Historically, the advantage of the pro-business crowd is that its members pick up the phone and call when politicians shaft them. The market, meanwhile, was like a bad Jewish son; it never called and never wrote. Now, there’s an infrastructure of tea-party-affiliated and other free-market groups forcing Republicans to stop fudging.

A big test will be on the Export-Import Bank, which is up for reauthorization this year. A bank in name only, the taxpayer-backed agency rewards big businesses in the name of maximizing exports that often don’t need the help (hence its nickname, “Boeing’s Bank”). In 2008, even then-senator Barack Obama said it was “little more than a fund for corporate welfare.” The bank, however, has thrived on Obama’s watch. It’s even subsidizing the sale of private jets. Remember when Obama hated tax breaks for corporate jets?

February 17, 2014

The dirty not-so-secret about Olympic venues

Filed under: Sports — Tags: , , , , — Nicholas Russon @ 10:44

Every time somebody suggests that Toronto be seriously involved in an Olympic bid, I become a big supporter of the other competing cities. Toronto is dysfunctional enough without adding the cost, disruption, and anti-democratic central planning aspects of hosting the Olympic games. In Samizdata, Michael Jennings looks at the shenanigans going on both in Sochi with the current Winter Games and in future venues:

The 2018 Winter Olympics are in Pyeongchang county in South Korea. Assuming that North Korea does not collapse or try to start a war between now and then, this will be straightforward, as these things go. A vast amount of money has been spent building new world class ski resorts at Alpensia and Yongpyong. These have largely been built already. They were built in anticipation of Pyeongchang winning the Winter Olympics. Pyeongchang also made unsuccessful bids for the games of 2006 and 2010, and has therefore been building for some time. There are already large financial black holes from the construction of these venues, but one cost overruns will be anywhere near as bad as have come from the highly corrupt race to get things built on time that took place prior to Sochi. Plus there have been and will be time for lots of test events to get the venues right. Of course, there are still highly expensive new highways and railways to be built, and a lot of indoor venues to be built for the ice events in the coastal city of Gangneung. As national pride is at stake, South Korean taxpayers will undoubtedly suffer painfully, but South Korea is a rich industrial democracy with competent people in charge. These games will likely go smoothly, but they will cost a lot — just not as much as Sochi.

The venue for the 2022 Winter Olympics has not yet been decided, but the IOC announced last year there were six final bidders: Stockholm (Åre), Sweden; Oslo, Norway; Krakow, Poland (Zakopane, Poland and Jasná, Slovakia); Almaty, Kazakhstan; Lviv, Ukraine; and Beijing (Zhangjiakou), China. [It has always been the case that the indoor ice events would be held in a city and the outdoor snow events in a mountain resort. In recent times the need for the city to be close to the resort has been relaxed somewhat, and I have listed the mountain resort(s) in brackets if it is a long way away from the official host city].

Sweden has already withdrawn their bid, and Norway appears to be close to doing so. The reason: they are seeing the immense expense and horrible shenanigans going on in Sochi. A little secret of the Olympics is that many of the the same people run it every time — the host city largely just picks up the bill. Once the event has ridiculous expenses and large amounts of outright corruption attached to it, this all comes with it to the next venue. Receiving kickbacks on construction projects becomes what it is all about.

Relatively uncorrupt places like Norway and Sweden look at this, and find that they want nothing to do with it. As great centres of winter sport, they have many of the right facilities already, meaning less scope for construction industry kickbacks. This means that for some of the IOC the fact that a country is already prepared for the Games is actually a negative rather than a positive.

Anyway, though, the point is that the two countries best able to host the games end up not being serious candidates.

As for the others: Poland and Slovakia would run the games just fine, but a fair bit of infrastructure and facilities would need to be built. Krakow is a lovely city. Zakopane is a lovely resort, and the Tata mountains are a suitable place for the games, even if the best downhill resorts are on the Slovakian side rather than the Polish side. (Some of the infrastructure construction would not be too counterproductive: Poland built lots of new roads, railways stations and airport terminals before the Euro 2012 soccer tournament, most of which were needed anyway and were part of Poland’s long term post-communist infrastructure modernisation). The Olympic games are not what money should be spent on in the present economic circumstances, though, and one also hopes that the richer countries of the EU are past paying for the Olympics to be held in the poorer countries of the EU (see Athens 2004). But with the EU, who knows?

February 12, 2014

In praise of Frédéric Bastiat

Filed under: Economics, Europe, History — Tags: , , , — Nicholas Russon @ 08:48

Douglas Carswell wishes more people knew about nineteenth-century economist Frédéric Bastiat:

I reckon that one of the greatest Frenchman of all time is a fellow called Frédéric Bastiat (1801-1850). Not heard of him? France, I reckon, would have remained a truly global nation if more people had.

A free market, Classical liberal thinker, Bastiat grasped how wealth is created — and how parasitical elites and vested interests will seek to live off the productivity of others.

Nations rise, he could see, when various naturally parasitical interests were reined in, making production more fruitful than parasitism. Nations sunk into mediocrity, or remained there, when the parasites got their way — and other people’s wealth.

Far from being just a creature of his time, Bastiat speaks to us today. His spoof petition of the candlestick makers (they lobbied politicians to block out unfair competition from sunlight) tell us a great deal about the behaviour today of energy renewable interests and central bankers.

As a free market thinker, Bastiat was up there on a par with Adam Smith or Richard Cobden. Yet unlike Smith and Cobden, for all his brilliance, Bastiat had little impact on the French body politic. French lassies faire gave way to dirigisme. In terms of French politics, it is almost as if Bastiat might never have existed. And a once global player, presided over by a succession of enarques and corporatist cliques, sunk slowly into Hollandesque mediocrity.

My fear is that free-market thinkers on this side of the Channel could turn out to be little more than British Bastiats. Already the land of Adam Smith is run by a big, bloated state bureaucracy. The country that produced Cobden trades with the world on the basis of quota, not free competition.

January 27, 2014

The Kronies – Get konnected!

Filed under: Government, Humour, Media — Tags: , — Nicholas Russon @ 08:56

Published on 22 Jan 2014

Get Konnected at http://www.thekronies.com

The Kronies are in action…Mandating, Tarrify-ing, Inflating, and Boondoggling their way to profits powered by their special konnection to the G-Force. Watch Big-G and his team stomp out competition!

H/T to Popehat for the link.

January 22, 2014

Private prisons – crony capitalist palaces of injustice

Filed under: Business, Law, USA — Tags: , , , — Nicholas Russon @ 00:01

The United States has seen a vast increase in the number of drug offenders (the majority of them non-violent) and a corresponding increase in the private prison industry. As Wendy McElroy explains, these are not free-market solutions to a government problem: they’re monuments to crony capitalism:

The United States leads the world, by a large margin, in the production of at least one thing: prisoners. We have 25 percent of the world’s inmates, but just 5 percent of the world’s population.

Where do they come from? Well, since the Anti-Drug Abuse Act of 1986, the number of American inmates has risen from approximately 300,000 to a currently estimated 2.3 million. This statistic points to the role of drug-related victimless “crime” in creating prisoners.

There are other sources. The “private prison complex” is a creation of crony capitalism through which privileged corporations are paid well for the “care” of inmates and for leasing out prison labor to other businesses.

Ten percent of American prisons are now “privately” operated, for-profit businesses. Between 1990 and 2010, the number of for-profit prisons rose 1600 percent, far outpacing the growth of public ones or the population at large. The likelihood of being arrested is already higher in America than anywhere else in the world. That likelihood will rise if the financial incentives to imprison more people continue or increase.

[...]

“Private” prisons are run by corporations to which government outsources the care of inmates. The corporation receives X tax dollars for each prisoner, quite apart from the actual cost of care. This builds in an incentive to skimp on services such as food and medical care. And, indeed, most prison contracts include a “low-crime tax” or “lock-up quota.” This system means taxpayers compensate the corporation for empty cells if the number of prisoners falls below a set quota. A recent report, “Criminal: How Lockup Quotas and ‘Low-Crime Taxes’ Guarantee Profits for Private Prison Corporations,” found the average “occupancy guarantee” to be 90 percent; in four states, it is between 95 percent and 100 percent. Thus the “private” prison is guaranteed a tax-funded profit.

[...]

The “private” prison industry is private in the same sense that crony capitalism is capitalist. Namely, not at all. It is the antithesis of a truly private industry that competes in the free market, does not accept tax funds, and cannot compel labor. By contrast, the “private” prisons enjoy a monopoly over a service that is created by laws and sentencing policies. They receive tax money and preferential treatment. They exploit captive labor through circumstances similar to plantation slavery.

January 15, 2014

QotD: Early 20th century American imperialism

Filed under: Americas, History, Military, USA — Tags: , , , — Nicholas Russon @ 00:02

I spent thirty-three years and four months in active military service as a member of this country’s most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major-General. And during that period, I spent most of my time being a high class muscle-man for Big Business, for Wall Street and for the Bankers. In short, I was a racketeer, a gangster for capitalism.

I suspected I was just part of a racket at the time. Now I am sure of it. Like all the members of the military profession, I never had a thought of my own until I left the service. My mental faculties remained in suspended animation while I obeyed the orders of higher-ups. This is typical with everyone in the military service.

I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested.

Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.

Major General Smedley Darlington Butler, USMC (1881–1940), War is a racket, 1935.

January 14, 2014

Noam Chomsky – TPP is an “assault” that furthers corporate “domination”

Filed under: Economics, Government, Pacific, USA — Tags: , , , , , — Nicholas Russon @ 08:59

The Trans-Pacific Partnership (TPP) is perhaps the most secretive “free trade” deal ever negotiated. It’s apparently so important that the details be kept from the electorate that even our elected representatives are not being given much information on what has been discussed or agreed. It’s not just libertarian and free market advocates that find this lack of transparency disturbing, as this piece in the Huffington Post shows:

The Obama administration’s Trans-Pacific Partnership trade deal is an “assault,” on working people intended to further corporate “domination,” according to author and activist Noam Chomsky.

“It’s designed to carry forward the neoliberal project to maximize profit and domination, and to set the working people in the world in competition with one another so as to lower wages to increase insecurity,” Chomsky said during an interview with HuffPost Live.

The Obama administration has been negotiating the TPP pact with 11 other Pacific nations for years. While the deal has not been finalized and much of it has been classified, American corporate interest groups, including the U.S. Chamber of Commerce, have already voiced strong support for the TPP, describing it as a free trade deal that will encourage economic growth. The Office of U.S. Trade Representative has also defended the talks, saying the TPP will include robust regulatory protections. But labor unions and a host of traditionally liberal interest groups, including environmentalists and public health advocates, have sharply criticized the deal.

Chomsky argues that much of the negotiations concern issues outside of what many consider trade, and are focused instead on limiting the activities governments can regulate, imposing new intellectual property standards abroad and boosting corporate political power.

“It’s called free trade, but that’s just a joke,” Chomsky said. “These are extreme, highly protectionist measures designed to undermine freedom of trade. In fact, much of what’s leaked about the TPP indicates that it’s not about trade at all, it’s about investor rights.”

December 15, 2013

Wall Street’s dream matchup in 2016 – Christie vs Clinton

Filed under: Business, Politics, USA — Tags: , , , , — Nicholas Russon @ 10:27

Sheldon Richman says the big money folks on Wall Street know who they’d like to see at the top of the tickets for the 2016 presidential election, and they might just get their way:

If you share my belief that the major obstacle to the free society is the national-security/corporate state, 2016 is shaping up to be a year of apprehension. The Wall Streeters, who are among the biggest advocates of partnership between big government and big business, are looking forward to a presidential contest between Hillary Clinton and Chris Christie, a contest the bankers can’t lose.

They have already discounted any populist rhetoric Clinton may need to fight off a primary challenge from, say, Sen. Elizabeth Warren. As “one well-placed Democrat” told Politico, “Wall Street folks are so happy about [having Clinton run] that they won’t care what she says.”

[...]

In Clinton, then, we have a friend of the bankers and a friend of the military-industrial complex, since as secretary of state she was an advocate of a muscular foreign policy, including intervention in Libya. (When she was in the Senate she voted to give George W. Bush a blank check to invade Iraq, and when she was first lady, she pushed Bill Clinton to drop bombs on the Balkans).

“And if the banking class is delighted with Clinton lately,” Politico notes, “the feeling appears mutual.”

Wall Street’s first choice on the GOP side is apparently Chris Christie, the governor of New Jersey. He had his own meeting with the big-money crowd in July 2011. Politico calls him “the candidate with the best chances at winning the support of bankers in the next presidential election.”

At that 2011 meeting: “Henry Kissinger [!], the former secretary of state, stood and pleaded with the governor to enter the presidential race for the good of his country. Christie would, of course, resist their pleas, becoming perhaps even more alluring to those on Wall Street as a prospect for 2016.”

December 10, 2013

The pundits are “mad as hell” and hope we’re ready to man the barricades for them

Filed under: Media, Politics, USA — Tags: , , , — Nicholas Russon @ 09:03

Jim Geraghty notes the common theme among anguished pundits both left and right:

One problem with the “this is intolerable, and we need an uprising!” cry is that we’ve already had at least two “uprisings” at the ballot box in recent years: The Obama wave of 2008 and the Tea Party wave of 2010. But their remedies for the “intolerable” condition are contradictory — one envisions a much greater role for government in Americans’ daily lives, while the other concludes government’s growing role exacerbates the problems instead of solving it.

Ironically, the two sides agree in their denunciation of crony capitalism, but what they usually mean is that they’re opposed to the other guy’s crony capitalism. Obama voted for TARP and then exploited its discontent, shrugged at the taxpayers getting stuck for the bill of Solyndra and other green energy boondoggles, then did his part to help walking conflict of interest Terry McAuliffe become governor of Virginia. The flip side of the coin too many Republicans are all too comfortable with their own versions of crony capitalism — loans and loan guarantees subsidize U.S. exporters, state economic development boards, and Bob McDonnell’s cozy financial arrangements with donors, among other examples. While crony capitalism isn’t really a driving force behind our national sense of diminishing economic opportunities, it certainly doesn’t help anyone except the cronies, and enhances the sense that wealth is built through cheating and secret deals, not hard work or innovation.

(Notice that this expression of economic discontent is so generic that everybody’s got a grievance, and nobody thinks they’re the beneficiaries. This is how you get multimillionaire rapper/mogul Jay-Z selling Occupy Wall Street-themed t-shirts, or the CEO of bailed-out insurance giant AIG explicitly comparing the treatment of his company to lynchings in the South, or the number of members of Congress who have complained about their $174,000 per year salary.)

December 7, 2013

Pro and college football as taxpayer-funded non-essential services

Filed under: Football, Government — Tags: , , , , — Nicholas Russon @ 00:01

In Time, Nick Gillespie points out that among the most-subsidized industries in the United States, the college and pro football leagues get a lot from taxpayers (even taxpayers who don’t like football):

As we enter the drama-filled final week of the regular college football season and the final month of the National Football League’s schedule, forget about GM and Chrysler, Solyndra, or even cowboy poetry readings. Fact is, nothing is more profitable, more popular, and more on the public teat than good old American football. That’s right. You, dear taxpayer, are footing the bill for football through an outrageous series of giveaways to billionaire team owners and public universities that put pigskin before sheepskin.

It’s just not right when governments shovel tax dollars at favored companies or special interests, even when those firms are called, say, the Minnesota Vikings or the Scarlet Knights of Rutgers University. The NFL’s Vikings are lousy at scoring touchdowns — they have the worst record in the NFC North — but they’ve proven remarkably adept in shaking down Minnesotans for free money. Next year they’ll be playing ball in a brand-spanking new $975 million complex in downtown Minneapolis, more than half of whose cost is being picked up by state and local taxpayers. Over the 30-year life of the project, the public share of costs will come to $678 million. The team will pay about $13 million a year to use the stadium, but since it gets virtually all revenue from parking, food, luxury boxes, naming rights, and more, it should be able to cover that tab. Not that the Vikings were ever hard up for money: Forbes values the franchise at nearly $800 million and the team’s principal owner, Zygi Wilf, is worth a cool $310 million. When the Minnesota legislature signed off on its stadium deal for the Vikings, the state was facing a $1.1 billion budget deficit. Priorities, priorities.

[...]

Especially in an age of busted government budgets, even the most rabid sports fan should agree that it’s an outrage that the highest-paid public employee in a majority of states is a college football coach (in another 13, it’s a basketball coach). It’s far better to be broke and have a cellar-dwelling NFL franchise, right?

Minor nit: they just broke ground for the Vikings’ new stadium, so it’ll be a few years before they actually open for business there. Other than that, Nick is quite right.

December 3, 2013

Syracuse airport pods – civil liberty violations or crony capitalist profit centres?

Filed under: Government, USA — Tags: , , , — Nicholas Russon @ 09:36

Wendy McElroy thinks that the outrage over the new exit pods at Syracuse Hancock International Airport is misdirected:

There is yet another reason not to fly into or within the US. “Nazi-style detention pods” — that’s what opponents of the Transportation Security Administration (TSA) have called the new “exit pods” being tested at the Syracuse (NY) airport. But the pods are not primarily a rape of civil rights. Their import is equally ominous but more subtle. Their main purpose seems to be profit rather than the flexing of arbitrary power, although the two are closely related.

A major change is occurring in one aspect of airport security. The change? The TSA will no longer be monitoring exit lanes at one-third of American airports; the TSA withdrawal is likely to extend to all airports over time. Exit lanes are the means by which passengers who have completed their travel leave the airport terminal. TSA agents had been policing the lanes to prevent passengers from walking the ‘wrong’ way and re-entering the terminal. Now that task is left to airport security because, as TSA deputy administrator John Halinski explains, ”We firmly believe that exit-lane monitoring is not a screening function, but rather an issue of access control.” Apparently, Halinski believes the ‘S’ in TSA stands for “Screening” because “Security” definitely includes access control.

[...]

The economics of the pod construction make sense only in two contexts. First, the airport wants to avoid or divest itself of unionized employees; unions have been a source of conflict in all areas of airport and airline operations. Second, crony capitalism. This is the faux capitalism by which profits do not result from productivity but from political connections, which often include bribes or kickbacks. The Syracuse Hancock International Airport official “sneak preview” of the security overhaul listed 17 local firms that will profit richly from the construction. Who do the firms know? With what financial incentives did they ‘purchase’ their contracts?

December 2, 2013

Reason.tv: Gregg Easterbrook on how football fleeces taxpayers

Filed under: Business, Football, Media — Tags: , , , , — Nicholas Russon @ 16:46

Published on 2 Dec 2013

Whether you like football or not — whether you’ve ever bought a ticket to a high school, college, or NFL game — you’re paying for it.

That’s one of the takeaways from The King of Sports: Football’s Impact on America, Gregg Easterbrook’s fascinating new book on the cultural, economic, and political impact of America’s most popular and lucrative sport.

“The [state-supported] University of Maryland charges each…undergraduate $400 a year to subsidize the football program,” says Easterbrook, who notes that only a half-dozen or so college teams are truly self-supporting. Even powerhouse programs such as the University of Florida’s pull money from students and taxpayers. “They do it,” he says, “because they can get away with it.”

At the pro level, billionaire team owners such as Paul Allen of the Seattle Seahawks and Shahid Khan of the Jacksonville Jaguars benefit from publicly financed stadiums for which they pay little or nothing while reaping all revenue. Easterbrook also talks about how the lobbyists managed to get the NFL chartered as a nonprofit by amending tax codes designed for chambers of commerce and trade organizations.

As ESPN.com‘s Tuesday Morning Quarterback columnist, Easterbrook absolutely loves football but also isn’t slow to throw penalty flags at the game he thinks is uniquely America. In fact, he sees the hypocrisy at the center of the business of football as “one of the ways that football synchs [with] American culture….Everyone in football talks rock-ribbed conservatism, self-reliance. Then their economic structure is subsidies and guaranteed benefits. Isn’t that America?”

Easterbrook sat down with Reason‘s Nick Gillespie to discuss The King of Sports, how the business of football burns taxpayers, and whether increased worries about brain injuries and other problems spell eventual doom for the NFL and other levels of play.

Produced by Todd Krainin. Cameras by Meredith Bragg and Krainin.

November 15, 2013

Corporations and social responsibility

Filed under: Business, Government, Law — Tags: , , , , , — Nicholas Russon @ 14:17

In this week’s Goldberg File email, Jonah Goldberg talks about the notion that corporations should operate with an eye to “social responsibility”:

Milton Friedman was famously opposed to the whole idea of “corporate social responsibility.” His argument was that corporations have a single obligation: to maximize profits for shareholders. When CEOs spend money on gitchy-goo feel-good projects, they are exceeding their authority and wandering outside the lines of their job description. I’ve always been very sympathetic to this view. If you asked me to invest $10,000 dollars in your startup company and then I found out you spent $5,000 of it to sponsor a program to teach prison-gang members to settle their disagreements by acting out scenes from Little Women, I’d be pretty pissed. That’s not why I gave you the money. And it’s pretty shabby of you to buy fame and praise for your generosity while spending someone else’s money. Indeed, it’s not much less selfish than blowing it on a three-day bender with the mayor of Toronto.

There are lots of different takes on this argument and, because this is my “news”letter, I choose not to deal with most of them. My problem with the profit-maximizing-über-alles creed for Big Business is that it offers no principled or moral reason for Big Business to stay out of Uncle Sam’s bed. If the federal government can make it rain Benjamins for any business willing to twerk for its amusement, why should GE or Big Pharma or the insurance companies demur?

Of course, some businessmen understand the risks of getting in bed with the government. But, since there’s lots of money to be made, there will always be other businessmen perfectly happy to put on the French-maid uniform and bark like a dog.

Even Adam Smith said, “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” That’s true. What’s even more true is that when government officials and business leaders sit down to talk, the inevitable result is a new “public-private partnership” that uses government force to limit competition from non-whorish corporations. Railroad magnates lobbied for the Interstate Commerce Commission. AT&T asked the government to make them a monopoly in the name of “efficiency” so they could clear the field of competition. Andrew Carnegie wanted government control of the steel industry so he could rely on Uncle Sam to guarantee his profit margins. GE loves Obama’s green-energy stuff, because without the inherent subsidies and regulations, it couldn’t make money off of its green tech.

I have no problem with contractors doing work for the government. It’s better that the guys building roads and bridges work for the private sector. But when big businesses agree to make the country less free, the market less competitive, Americans less prosperous, and the state more powerful just to make a few more bucks for their shareholders, it makes me think that Milton Friedman was wrong. We need a free-market version of corporate social responsibility. We need to equip businessmen with an ethical code that tells them there’s a principled reason not to get in bed with the government. They’d still be free to violate that principle, of course, but if they did, I hope they’d have the good sense not to come running to us to complain that the government has asked them to eat a bowl of dogsh**t.

November 7, 2013

Children and the early industrial revolution

Filed under: Britain, Business, History, Law — Tags: , , , , — Nicholas Russon @ 11:35

Wendy McElroy talks about the plight of poor children in the early days of the industrial revolution in Britain:

Parish workhouses existed in Britain long before the Industrial Revolution. In 1601, the Poor Relief Act paved the way for parish officials to collect property taxes to provide for the “deserving poor.” In 1723, the Workhouse Test Act was passed to prevent false claims of poverty. Any able-bodied person who wished to receive poor relief was expected to enter a workhouse; its harsh conditions would presumably act as a deterrent. About the same time as the Industrial Revolution (circa 1760-1840), attitudes toward the poor underwent their own revolution. The Napoleonic Wars (1803-1815) not only bled Britain of money; they also created a flood of injured and unemployable men who returned from battle. Those men had families who were plunged into poverty. Between 1795 and 1815 the tab for Britain’s poor relief quadrupled. Meanwhile, the cost of mere subsistence soared because of political machinations such as the Corn Laws, a series of trade laws that artificially preserved the high price of grains produced by British agriculture. Many people could not afford a slice of bread.

But sympathy for the poor was in short supply. Historian Gertrude Himmelfarb’s definitive book The Idea of Poverty chronicles the shift in attitude toward the poor during that period; it turned from compassion to condemnation. An 1832 government report basically divided the poor into two categories: the lazy who sucked up other people’s money and the industrious working poor who were self-supporting. The Poor Law Amendment Act of 1834 instructed parishes to establish “Poor Law Unions” with each union administering a workhouse that continued to act as a deterrent by ‘virtue’ of its miserable conditions. Correctly or not, statesman Benjamin Disraeli called the act an announcement that “poverty is a crime.”

Pauper children were virtually imprisoned in workhouses. And nearly every parish in Britain had a “stockpile” of abandoned workhouse children who were virtually sold to factories. Unlike parents, bureaucrats did not view poor children as loved or otherwise valuable human beings. They were interchangeable units whose presence was a glut on the market because there would always be another poor child born tomorrow. Private businessmen who shook hands with government did not have clean fingers, either. Factory owners could not force free-labor children to take dangerous, wretched jobs but workhouse children had no choice and so they experienced the deepest horrors of child labor. The horror was not because of the free market or capitalism; those forces, along with the family, were among the protectors of children. Child laborers were victims of government, bureaucracy and businessmen who used the law unscrupulously.

October 10, 2013

QotD: Micro-economics with a Chinese twist

Filed under: China, Economics, Quotations — Tags: , — Nicholas Russon @ 08:53

China’s great economic renaissance began when Deng Xiaoping said that creating a modern China required “opening and reform.” Xiaoping hedged on the precise definition of “opening and reform.” In 1989 he sent tanks and infantry to Tiananmen Square to demonstrate that the process had severe limitations.

But micro-economic innovation? Xiaoping sought a micro-economic revolution. Xiaoping wanted Chinese entrepreneurs to fulfill what economist Joseph Schumpeter dubbed the entrepreneur’s function: “to reform or revolutionize the pattern of production.” The micro-economic opportunity, however, came with the Tiananmen restriction: The Party must remain supreme.

China’s first-generation entrepreneurs of micro-economic innovators pulled it off. In 1980 China had a GDP of about $190 billion. In 1998, the year after Xiaoping died, China’s GDP topped $1 trillion. In 2013 China has the world’s second largest economy, with a GDP of over $7 trillion.

Wei Gu is The Wall Street Journal‘s “China Wealth and Luxury editor” — and in 1980 who’d have predicted that job? In a recent article titled “China’s Second-Generation Entrepreneurs A Different Breed,” Gu reported that the “foreign educated” children of Chinese entrepreneurs are not enthralled with “the endless wining and dining of government officials that is necessary to do business in China.” In China, since personal whim still trumps law, businesspeople must constantly curry favor with government officials. It amounts to micro-economic lobbying.

Austin Bay, “China’s Toughest Economic Problem Is Political”, Strategy Page, 2013-10-8

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