Quotulatiousness

November 7, 2017

QotD: Crony capitalism

Filed under: Politics, Quotations — Tags: , , , — Nicholas @ 01:00

Fascism is actually an economic system, of which “crony capitalism”, an illegitimate partnership between government and business, is an excellent example. Known otherwise as corporate socialism or simply corporatism, other eras (Adam Smith‘s for instance, in his book Wealth of Nations) have called it Mercantilism.

L. Neil Smith, “The American Zone”, The Libertarian Enterprise, 2016-03-20.

November 2, 2017

QotD: Free trade versus modern “Free Trade” agreements

Filed under: Economics, Environment, Politics, Quotations — Tags: , , , , , — Nicholas @ 01:00

Once upon a time, free-trade agreements were about just that: free trade. You abolish your tariffs and import restrictions, I’ll abolish mine. Trade increases, countries specialize in what they’re best equipped to do, efficiency increases, price levels drop, everybody wins.

Then environmentalists began honking about exporting pollution and demanded what amounted to imposing First World regulation on Third World countries who – in general – wanted the jobs and the economic stimulus from trade more than they wanted to make environmentalists happy. But the priorities of poor brown people didn’t matter to rich white environmentalists who already had theirs, and the environmentalists had political clout in the First World, so they won. Free-trade agreements started to include “environmental safeguards”.

Next, the labor unions, frightened because foreign workers might compete down domestic wages, began honking about abusive Third World labor conditions about which they didn’t really give a damn. They won, and “free trade” agreements began to include yet more impositions of First World pet causes on Third World countries. The precedent firmed up: free trade agreements were no longer to be about “free” trade, but rather about managing trade in the interests of wealthy First Worlders.

Eric S. Raymond, “TPP and the Law of Unintended Consequences”, Armed and Dangerous, 2016-04-12.

February 17, 2017

Industrial policy example – Kingston, Ontario

Filed under: Business, Cancon, Germany, Government, Railways — Tags: , , , , — Nicholas @ 05:00

David Warren remembers when the government tampered with the free market to “save an industry” in Kingston:

Once upon a time, many years ago, I scrapped into one of these “no-brainer” political deals. The remains of the locomotive manufacturing business in Kingston, Ontario — whose century-old products I had glimpsed, still on the rails in India — were now on the block. A monster German corporation was offering to buy them, for the very purpose of competing, in Canada, with a (hugely subsidized, monopolist) Canadian corporation. The government stepped in, to “save” a Canadian industry, retroactively change the ground rules, and kick in more subsidies so that the Canadian monopolists, based in Montreal, could take over instead. This was accompanied by nationalist rhetoric, and Kingston was thrilled. Critics like me were unofficially deflected with bigoted anti-German blather held over from the last World War.

But I knew exactly what was going to happen. The local works, which would have been expanded by the foreign owner, were soon closed by the new Canadian owner, after studies had been commissioned to “prove” it was uneconomic. The latter’s last possible domestic competitor was thus snuffed out. The locals, whose lives had been for generations part of a proud Kingston enterprise, had been suckered. The politicians had told them it was little Canada versus big Germany. In reality, it was pretty little Kingston versus big ugly Montreal.

That is how the world works, with politics, so that whenever I hear of a big new national no-brainer scheme, my first thought is, which innocents are getting mooshed today?

February 16, 2017

Words & Numbers: The Customer is Always Taxed

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

Published on 15 Feb 2017

We’re really excited to present the first episode of what will be an on-going video podcast featuring Dr. Antony Davies, Professor of Economics of Duquesne University in Pittsburgh, and Dr. James R. Harrigan, Senior Research Fellow at Strata, in Logan, Utah.

Each Wednesday we’ll be sharing a new short video featuring Antony and James talking about the economics and political science of current events. We hope you enjoy the show and look forward to your input on what topics Antony and James should cover in the future.

Today’s episode is about everybody’s favorite subject: Taxes!

January 26, 2017

Autarky is not the answer

Filed under: Economics, History, Japan, USA — Tags: , , , — Nicholas @ 02:00

Warren Meyer on the idiocy of Trump’s economic nationalist notions:

Think about the corollary of Trump’s economic nationalism, particularly if everyone followed this same approach. If one skews all the rules and taxes and prohibitions so everything must be sourced domestically, then if a country does not have some particular resource or skill domestically, it is out of luck. No domestic rare earth metals? Sorry.

But governments and powerful people seldom calmly accept that something they critically need is not available. They will be tempted to go and take it. The worst, most violent empire building of the last 100-150 years has occurred when countries have pursued economic nationalism. Think of the colonialism of the late 19th century. Today we happily trade with South Africa and other countries for valuable resources, but in that time of economic nationalism, if a country wanted access to these resources, it felt it had to control the land and the people. Hitler in the 1930’s wanted to make Germany self-sufficient in agricultural goods and certain other resources, and the only way to do that was to go and grab other people’s land and resources.

The best example of all of this phenomenon is, I think, Japan in the 1930’s. Japan felt that it was resource poor and under Trump’s theory of economic nationalism, it felt it had to control oil and other resources it did not have domestically. So it plotted to go take it. When the US instituted a trade embargo in these very goods to punish Japan’s aggressiveness in China, it just accelerated Japan’s thinking in this area, convincing it for good it had to control these resources, and it was soon invading the oil-rich islands of what is now Indonesia. This example is all the more telling because Japan actually found true prosperity after the war when it traded peacefully for these resources. Unfortunately, it adopted economic nationalism, via MITI, of another form and helped manage themselves into a 20-year recession, but that is another trade-related story for another day.

November 23, 2016

The History of Paper Money – III: Barebones Economy – Extra History

Filed under: Britain, Economics, History — Tags: , , , , — Nicholas @ 02:00

Published on Oct 15, 2016

Poor England. First Charles I and civil war, then losing to the French, then the Great Fire of London in 1666. Luckily, Nicholas Barbon comes along to help. And make obscene amounts of money. Who says you can’t do both?

July 21, 2016

QotD: The economic folly of mercantilism

Filed under: Economics, Quotations — Tags: , , , , , — Nicholas @ 01:00

At the heart of [Trump’s] argument is the belief that selling to countries is good and buying from them is bad, the crude mercantilist fallacy that Adam Smith’s Wealth of Nations debunked in the same year that America embraced the Declaration of Independence. Smith, the brilliant British political economist, argued that unless people start eating gold bullion, the point of wealth is to buy not sell; to consume not produce. If China starts shipping free plasma TVs to America, a few American companies may be thrown out of business, but American consumers will be better off. What’s more, they’ll be able to spend their savings on goods from other companies. The only folks that protectionist policies benefit are crony capitalists who face less competition — the very thing that Trump says he’s fighting.

Shikha Dalmia, “Donald Trump’s free-trade follies”, The Week, 2016-06-30.

April 14, 2016

Why there’s very little “free trade” involved in the TPP

ESR explains why the Trans-Pacific Partnership is such a huge monstrosity of regulations, crony capitalist favours to big business, anti-consumer intellectual property rules, and other mercantilist interventions in trade:

Today there’s a great deal of angst going on in the tech community about the Trans-Pacific Partnership. Its detractors charge that a “free-trade” agreement has been hijacked by big-business interests that are using it to impose draconian intellectual-property rules on the entire world, criminalize fair use, obstruct open-source software, and rent-seek at the expense of developing countries.

These charges are, of course, entirely correct. So here’s my question: What the hell else did you expect to happen? Where were you idiots when the environmentalists and the unions were corrupting the process and the entire concept of “free trade”?

The TPP is a horrible agreement. It’s toxic. It’s a dog’s breakfast. But if you stood meekly by while the precedents were being set, or – worse – actually approved of imposing rich-world regulation on poor countries, you are partly to blame.

The thing about creating political machinery to fuck with free markets is this: you never get to be the last person to control it. No matter how worthy you think your cause is, part of the cost of your behavior is what will be done with it by the next pressure group. And the one after that. And after that.

The equilibrium is that political regulatory capability is hijacked by for the use of the pressure group with the strongest incentives to exploit it. Which generally means, in Theodore Roosevelt’s timeless phrase, “malefactors of great wealth”. The abuses in the TPP were on rails, completely foreseeable, from the first time “environmental standards” got written into a trade agreement.

That’s why it will get you nowhere to object to the specifics of the TPP unless you recognize that the entire context in which it evolved is corrupt. If you want trade agreements to stop being about regulatory carve-outs, you have to stop tolerating that corruption and get back to genuinely free trade. No exemptions, no exceptions, no sweeteners for favored constituencies, no sops to putatively noble causes.

November 18, 2015

Adam Smith – The Inventor of Market Economy I THE INDUSTRIAL REVOLUTION

Published on 22 Feb 2015

Adam Smith was one of the first men who explored economic connections in England and made clear, in a time when Mercantilism reigned, that the demands of the market should determine the economy and not the state. In his books Smith was a strong advocator of the free market economy. Today we give you the biography of the man behind the classic economic liberalism and how his ideas would change the world forever.

October 30, 2014

“Free Trade” deals usually have little to do with actual free trade

Filed under: Americas, Economics, USA — Tags: , , , , , — Nicholas @ 00:02

It’s not exactly a revelation that what politicians call “free trade” agreements are usually tightly constrained, regulated, and micro-managed trade: almost the exact inverse of what a genuine free trade deal would look like. This is primarily because politicians and diplomats have hijacked the original term to describe modern mercantilism. In The Diplomat, Ji Xianbai looks at how so-called free trade negotiations are little more than diplomatic beat-downs of the weaker parties by the stronger:

The classic mercantilism, the one associated with the idea that the precious metals obtained through a favorable balance of foreign trade were essential to a powerful nation, may be historically obsolete. The core of the mercantilist view, namely that self-interested states maximize economic development by optimizing political control to strengthen national power, is very much alive and well. Indeed, the vitality of mercantilism as a state of mind may have infiltrated every corner of the international political economy. If one considers the essence of mercantilism through Robert Gilpin’s definition – the attempt of governments to manipulate economic arrangements in order to maximize their own interests – multiple examples immediately come to mind: Japan’s “economic totalitarianism” system in which the entire society was united in deterring foreign competition in the postwar period, China’s ascendance since 1980s through an export-led development mode underpinned by a deliberately undervalued currency, and Germany’s unprecedented trade surplus accrued from the stringent austerity imposed on its economy to sustain competitiveness in the aftermath of the euro crisis.

Compared to those national triumphs of classic mercantilism, there is a less visible showroom, but one in which mercantilism presents itself over and over again in the form of legal mercantilism. This would be free trade agreements (FTAs), negotiations of which are usually kept in the dark. In bilateral FTA negotiations, legal mercantilist governments endeavor to impose their own (or desirable) trade rules and economic policies on other sovereign countries, usually with the aid of a combination of economic immensity, political hegemony, and asymmetric trade dependence, to create a sort of “international best practice,” favorable trade rules, and legal gains that can be leveraged and multilateralized at a regional and/or global level. The “competitive liberalization” strategy aptly pursued by the U.S. since 2002 is one such legal mercantilist policy, which aims to create another “gold standard” in international trade standard setting to project U.S.-friendly economic policies all over the world. In short, the U.S. expects the trade policies of other nations to follow those of the U.S., in the same way that their currencies used to peg to the U.S. dollar.

The U.S.–Peru FTA (PTPA) marks the very first success of Washington’s attempts to subordinate other countries’ sovereignty to its own national interest by squeezing non-trade-related provisions into a bilateral trade liberalization agreement and overriding foreign national laws. To provide a level playing field for American companies, the PTPA lays out detailed measures that Peru is obliged to take to govern its forest sector. The Forest Annex of the PTPA requires Peru to set up an independent forestry oversight body and even enact new Forestry and Wildlife Laws to legalize key provisions of PTPA. The U.S.–Colombia FTA (CTPA)’s labor provisions represent an “even more blatant assault on another country’s sovereignty.” Meanwhile, Colombia was forced to agree to establish a dedicated labor ministry; endorse legislations outlawing interference in the exercise of labor rights; double the size of its labor inspectorate; and set up a phone hotline and an internet-based system to deal with labor complaints. Examples of similar provisions abound: Don’t forget that the U.S.-Panama FTA has “helped” revamp Panama’s tax policy on behalf of Panamanians.

February 11, 2014

Quebec’s anti-capitalist heritage

Filed under: Business, Cancon, History — Tags: , , — Nicholas @ 13:15

At The Gods of the Copybook Headings, Richard Anderson looks at the problem Quebec has with entrepreneurial and capitalist tendencies:

The hatred of capitalism in the “Quebec Dark Ages” had little to do with Anglo economic dominance. That most quintessential of Canadian capitalist icons, the coureur de bois, was a black marketer who flouted the authority of the colonial government and the sanctioned merchant class. Official French society, on both sides of the Atlantic, has always despised businessmen, except for those rent seekers who paid homage to the powers that be. In New France these licensed traders were known as voyageurs.

This is a never resolved tension in Quebecois society, between the pure entrepreneur represented by the coureur de bois and the official capitalist represented by the voyageur. There has been no shortage in modern economic history of talented Quebecois entrepreneurs, but their efforts are widely regarded as being some how suspicious. There is something slightly unwholesome about turning a profit and speaking French at the same time.

This is not unique to French society. In most Catholic, or post-Catholic countries this suspicion of capitalism and free markets is endemic. To their credit the French-Canadians, unlike the Portuguese, never burnt businessmen at the stake for displaying “Jewish tendencies.” It was only in some of the Protestant societies that capitalism became somewhat respectable. My own suspicion is that this had less to do with theology and more to do with social dynamics.

April 16, 2013

Six political talking points on international trade that are myths

Filed under: Cancon, Economics, Media, Politics — Tags: , , , — Nicholas @ 11:32

In Maclean’s, Stephen Gordon collects six of the most common myths politicians use to justify trade distorting policies:

1) Exports are good. Not true; exports are the costs we pay for engaging in international trade. Diverting domestic productive resources to producing more things for foreigners doesn’t increase our standards of living.

2) Imports are bad. This is point one restated: imports are the benefits from trade. The reason we engage in international trade is to obtain goods and services more cheaply than we can produce them for ourselves.

3) Trade deficits are bad. I went though this at length in this post: noting that a country has a trade deficit (or, more properly, a current account deficit) is the same thing as noting that domestic investment is larger than domestic savings. It’s not obvious why this is necessarily a bad thing.

4) Trade deficits are a sign of a slowing economy. The Canadian trade balance is generally counter-cyclical: falling during expansions and rising during recessions. A trade deficit is standard fare for Canadian expansions, not something to get concerned about.

5) Liberalized trade increases employment. Again, this is point one restated. Liberalized trade may increase the number of workers in certain export-oriented sectors. But the effect on total employment in the economy is zero.

6) Liberalized trade reduces employment. Again, this is point two restated. Liberalized trade may reduce the number of workers in certain sectors vulnerable to foreign competition. But the effect on total employment in the economy is still zero.

April 2, 2013

QotD: In praise of cheap, gimcrack, run-of-the-mill manufacturing

For the first time ever, labourers were able to purchase cheap goods for themselves. The first factories focused on mass production of cheap goods for the poor. Shoes, for example, were produced for the proletariat — the rich bought made-to-measure shoes. This was different from France, where the government’s mercantilist product standards, designed to uphold quality, ensured that nothing was produced for the poor at all. In France, mercantilism continued to be state policy for much longer than in England. This is the reason why industrialisation took fifty more years to arrive on France’s shores.

J.P. Floru, Heavens on Earth: How To Create Mass Prosperity, quoted by Brian Micklethwait at Samizdata, 2013-03-29.

March 10, 2013

Do they have to destroy the Republican Party to save it?

Filed under: Media, Politics, USA — Tags: , , , , , — Nicholas @ 10:00

The defeat of the Republicans in the last US federal election has a lot of them starting to consider radical changes to the party in order to attract new voters. Some of these proposed changes are so radical that it’s hard to believe they wouldn’t rupture the party and drive away nearly as many as they hope to bring in. The farcical notion of a “conservative welfare state“, for example, would likely jettison any last vestiges of reducing the size of government:

[Matthew] Continetti is not the first conservative to argue — falsely as I note in an upcoming piece for Reason magazine — that courting new constituencies such as Hispanics, Asian Americans and other minorities will require the party to give up even its pretense of limited government. Still, Continetti’s basic point that the GOP does not have a coherent ideology that will allow it to court new constituencies while hanging on to its old ones is well taken. After all, how does the party appeal to the “millennial generation” that includes gays, young foodies and indie-music listening hipsters without losing the meat-and-potato social conservatives in, say, Charleston, South Carolina?

Continetti’s answer, dusted off from a 1975 essay by Irving Kristol, is that what the GOP needs is an authentically conservative version of the liberal welfare state. To fashion such a state, Continetti argues, would require:

    Republicans to revisit some of the assumptions they have held since the end of the Cold War. Maybe the foremost concern of most Americans is not the top marginal income tax rate. Maybe you can’t seriously lower health care costs without radically overhauling the way we pay for health care. Maybe a political party can’t address adequately such middle-class concerns as school quality and transportation without using the power of government. Maybe the globalization of capital and products and labor hasn’t been an unimpeachable good.

I am all for rethinking post-Cold War assumptions, but do we have to throw globalization and trade liberalization under the bus in the process? After all, hostility to trade has become passé even among Third World anti-trade activists such as Vandana Shiva — the last ones holding their finger in the dyke to stop globalization. This is in no small part due to the debunking done by economists such as Jagdish Bhagwati who have shown that even the immediate losers of trade liberalization win in the long run. So what is the point of reviving this animus especially since Continetti offers no new (or even old) evidence of trade’s downside?

[. . .]

In short, the ideal conservative welfare state would be a libertarian dystopia of even bigger proportions than the liberal welfare state. There is less welfare and more state in it.

But what is deeply ironic is that a magazine that accuses libertarians of isolationism because they oppose American military interventionism has no qualms about recommending a restrictionist immigration policy to keep foreigners out and a protectionist trade policy to keep foreign goods out. If I had to pick a term for this foreign policy, I’d call it neo-isolationism. And maybe I lack imagination, but it is hard to see how a party that wants to engage the world through its “fearsome military” — rather than through voluntary exchange and mutual cooperation — could gain enough moral high ground to craft a winning political message, especially in a war-weary country.

September 29, 2012

Disabusing Canadians about mercantilism, one tweet at a time

Filed under: Cancon, Economics — Tags: , , , — Nicholas @ 10:29

Stephen F. Gordon is waging a lonely campaign to persuade Canadians that free trade is better than the managed, mercantilist “free trade” most of our governments have wanted since the NAFTA negotiations:

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