Quotulatiousness

May 9, 2012

Stephen Gordon explains that Dutch Disease is merely “economic hypochondria”

Filed under: Cancon, Economics — Tags: , , — Nicholas @ 09:17

Politicians and newspaper columnists have a fetish about manufacturing. In the Globe and Mail Economy Lab, Stephen Gordon explains why it’s not the crisis we’re constantly being told it is:

The appreciating Canadian dollar has little to do with the decline in manufacturing; employment has been declining worldwide for decades. Changes in relative prices are more important. Producer prices for manufactured goods have increased by about 15 per cent since 2002, while the Bank of Canada’s commodity price index has more than doubled. Any attempt to promote manufacturing exports by depreciating the dollar is doomed to fail, since a lower Canadian dollar will also benefit resource exporters. Capital and labour will always move from sectors where prices are soft to sectors where demand is strong, regardless of what the exchange rate is doing.

But what about those 500,000 lost jobs? An underappreciated fact of the Canadian labour market is the size of the flows in and out of employment. More than 100,000 workers are laid off every month, and even more are hired. Before the recession, the fall in employment manufacturing was largely the result of attrition — workers who quit were not replaced. The loss of 500,000 manufacturing jobs since 2002 has been more than offset by the creation of 2.5 million jobs in other sectors.

[. . .]

Penalizing exports of raw resources could create processing jobs, but those gains will be more than offset by losses elsewhere. If processing in Canada were profitable under world prices, no government intervention would be necessary. The only way policy can generate significantly more processing jobs is by forcing producers of raw materials to accept lower prices or by forcing provincial governments to accept lower royalties. This would be a simple redistribution of income if production is held constant. But it is much more likely that producers would respond to these lower prices by reducing output. Total output and income would fall.

[. . .]

The shift away from manufacturing is part of a process that has increased incomes across Canada. “Dutch disease” is not a problem that needs solving.

May 6, 2012

One of the worst moves African countries can make

Filed under: Africa, Economics — Tags: , , , — Nicholas @ 09:55

Tim Worstall at the Adam Smith Institute blog:

You don’t have to go far into NGO land to find people arguing that poor countries need to protect their baby industries from the big bad wolves of international capitalism. That trade barriers are a good idea, that infant industries need to be nurtured and, as is the way of these things, the Washington Consensus is the imposition of the poverty that the poor suffer from.

That this is entire nonsense does not stop those idiots wearing ideological blinkers from repeating it. Which is something of a pity as it really is trade, openness to it, which drives economic growth:

    In recent years, sub-Saharan African countries have grown remarkably. According to data from the Penn World Table 7.0 (Heston et al. 2011), average annual real GDP per capita growth from 2005-9 has been over 2.5% (3.5% when excluding 2008 and 2009). This recent growth performance is remarkable given that, for over four decades since 1960, real GDP per capita growth in sub-Saharan Africa was dismal, averaging less than 0.5% per annum.

We are, as we know, talking about the poorest of the poor and any uptick in their fortunes has been both extremely difficult to find and extremely welcome when it is.

One thing that might be remembered is that, post-colonialism, most sub-Saharan countries did in fact follow the policies of infant industry protection behind tariff and licencing barriers. It was the falling apart of this in the 80s and then the gradual adoption of good old neoliberalism in the mid to late 90s which has turned the numbers around.

April 14, 2012

Colombia tries to butter up Obama with “quickie” SOPA rules

Filed under: Americas, Law, Liberty, Media, Technology — Tags: , , , , , , — Nicholas @ 10:26

Colombia buckles under intense US lobbying to introduce SOPA-like copyright rules in time for President Obama’s visit:

President Obama is heading to Colombia this weekend for a summit, and we’d been hearing stories that US officials had been putting tremendous pressure on Colombian officials to pass new, ridiculously draconian copyright laws ahead of that visit. So that’s exactly what the Colombian government did — using an “emergency procedure” to rush through a bad bill that is quite extreme.

Earlier this year, Colombia tried to pass basically the same bill, which was called LesLleras, after Interior Minister German Vargas Lleras (who proposed it). That bill was so extreme that it resulted in SOPA-like protests, following significant concerns raised by the public as well as copyright and free speech experts. So, this time around, the government just claimed it was an emergency and rushed the bill through, despite all of its problems. They seemed to think that the public wouldn’t notice — but they’re wrong.

As is typical of idiotic trade agreements pushed via the USTR — who only seems to listen to Hollywood on these issues — the copyright bill includes all sorts of draconian enforcement techniques and expansions of existing copyright law, and removal of free speech rights. But what it does not include are any exceptions to copyright law — the very important tools that even the US Supreme Court admits are the “safety valves” that stop copyright law from being abusive, oppressive and contrary to freedom of speech

February 23, 2012

Reason.tv: Months later, still no charges in the Gibson Guitar raid

Filed under: Bureaucracy, Government, Law, USA — Tags: , , , , , — Nicholas @ 13:36

Earlier posts on the Gibson raid here, here, here, and here.

January 4, 2012

Santorum is the “Spock with a beard” universe version of Ron Paul

Filed under: Economics, Government, Liberty, Politics, USA — Tags: , , , , , — Nicholas @ 09:55

Michael Tanner enumerates the Santorum attributes his evangelical conservative fans seem to find most attractive:

There is no doubt that Santorum is deeply conservative on social issues. He is ardently anti-abortion, even in cases of rape and incest, and no one takes a stronger stand against gay rights. In fact, with his comparison of gay sex to “man on dog” relationships, Santorum seldom even makes a pretense of tolerance. While that sort of rhetoric may play well in Iowa pulpits, it will be far less well received elsewhere in the nation.

[. . .]

Santorum’s voting record shows that he embraced George Bush–style “big-government conservatism.” For example, he supported the Medicare prescription-drug benefit and No Child Left Behind.

He never met an earmark that he didn’t like. In fact, it wasn’t just earmarks for his own state that he favored, which might be forgiven as pure electoral pragmatism, but earmarks for everyone, including the notorious “Bridge to Nowhere.” The quintessential Washington insider, he worked closely with Tom DeLay to set up the “K Street Project,” linking lobbyists with the GOP leadership.

He voted against NAFTA and has long opposed free trade. He backed higher tariffs on everything from steel to honey. He still supports an industrial policy with the government tilting the playing field toward manufacturing industries and picking winners and losers.

In fact, Santorum might be viewed as the mirror image of Ron Paul. If Ron Paul’s campaign has been based on the concept of simply having government leave us alone, Santorum rejects that entire concept. True liberty, he writes, is not “the freedom to be left alone,” but “the freedom to attend to one’s duties to God, to family, and to neighbors.” And he seems fully prepared to use the power of government to support his interpretation of those duties.

January 1, 2012

Gordon Chang still bearish on China

Filed under: China, Economics, Politics — Tags: , , , — Nicholas @ 10:54

He predicted the fall of the Communist China within a decade — back in 2001 — but he isn’t worried that his prediction hasn’t come true yet:

Why has China as we know it survived? First and foremost, the Chinese central government has managed to avoid adhering to many of its obligations made when it joined the WTO in 2001 to open its economy and play by the rules, and the international community maintained a generally tolerant attitude toward this noncompliant behavior. As a result, Beijing has been able to protect much of its home market from foreign competitors while ramping up exports.

[. . .]

Don’t believe any of this. China outperformed other countries because it was in a three-decade upward supercycle, principally for three reasons. First, there were Deng Xiaoping’s transformational “reform and opening up” policies, first implemented in the late 1970s. Second, Deng’s era of change coincided with the end of the Cold War, which brought about the elimination of political barriers to international commerce. Third, all of this took place while China was benefiting from its “demographic dividend,” an extraordinary bulge in the workforce.

Yet China’s “sweet spot” is over because, in recent years, the conditions that created it either disappeared or will soon. First, the Communist Party has turned its back on Deng’s progressive policies. Hu Jintao, the current leader, is presiding over an era marked by, on balance, the reversal of reform. There has been, especially since 2008, a partial renationalization of the economy and a marked narrowing of opportunities for foreign business. For example, Beijing blocked acquisitions by foreigners, erected new barriers like the “indigenous innovation” rules, and harassed market-leading companies like Google. Strengthening “national champion” state enterprises at the expense of others, Hu has abandoned the economic paradigm that made his country successful.

Second, the global boom of the last two decades ended in 2008 when markets around the world crashed. The tumultuous events of that year brought to a close an unusually benign period during which countries attempted to integrate China into the international system and therefore tolerated its mercantilist policies. Now, however, every nation wants to export more and, in an era of protectionism or of managed trade, China will not be able to export its way to prosperity like it did during the Asian financial crisis in the late 1990s. China is more dependent on international commerce than almost any other nation, so trade friction — or even declining global demand — will hurt it more than others. The country, for instance, could be the biggest victim of the eurozone crisis.

Third, China, which during its reform era had one of the best demographic profiles of any nation, will soon have one of the worst. The Chinese workforce will level off in about 2013, perhaps 2014, according to both Chinese and foreign demographers, but the effect is already being felt as wages rise, a trend that will eventually make the country’s factories uncompetitive. China, strangely enough, is running out of people to move to cities, work in factories, and power its economy. Demography may not be destiny, but it will now create high barriers for growth.

H/T to Chris Myrick for the link.

December 19, 2011

Kelly McParland: “Norwegians are the most revoltingly perfect people in the world”

Filed under: Bureaucracy, Economics, Europe — Tags: , , , , — Nicholas @ 14:24

Don’t worry, my Norwegian friends, it’s just small-minded Canadian jealousy that you tend to beat us in all the “Smug Country” polls and your national monopoly is even more constricting and incompetent than our equivalent national monopoly:

Everyone knows the Norwegians are the most revoltingly perfect people in the world.

They consistently top all lists of Things Good Countries Do.

They give more to foreign aid than just about any other country in the world. Countries are supposed to give 70¢ for every $100 of national production, but hardly any do. Norway gives about 40% more than the benchmark. They’re sitting on hundreds of billions of dollars in oil profits, and instead of blowing it on short-term expediencies (like a certain western province we could mention) they squirrel a lot of it away in an investment fund to help maintain their high standard of living when the oil runs out. And believe me, their standard of living is high: a cradle-to-grave nannyism that revolts conservatives but seems to work for Norwegians. (In Norway, life is so soft that even cows are required to have rubber mats in their stalls so they can rest comfortably between shifts).

They’re so perfect they’re annoying. Even Swedes get tired of hearing about them. So it’s kind of fun to read about how they’ve completely buggered up their supply management system, so that the entire country has been stripped of its butter supply just as Christmas arrives and everyone gears up to make lots of stuff for which butter is required. And if it reminds you of Canada’s own supply management system (think: dairy products and Quebec), all the better.

December 12, 2011

Defining crony capitalism

Filed under: Economics, Government, Liberty, Politics — Tags: , , , , , — Nicholas @ 14:51

Bill Frezza explains what crony capitalism is and how it differs from free market capitalism:

If defenders of capitalism hope to win over fair-minded fellow citizens who are honestly upset and confused, we need to define these terms and answer some basic questions. In what ways are Crony Capitalists and Market Capitalists the same and in what ways are they different? What makes the former immoral and the latter virtuous? Why are Crony Capitalists a threat to democracy and prosperity while Market Capitalists are essential to both? How is it that ever larger numbers of Market Capitalists are being corrupted, turning into Crony Capitalists? And what can we do to reverse that trend?

All capitalism is driven by greed — the desire to not only achieve economic security, but to amass pools of capital beyond one’s basic needs. This capital can fuel the kind of conspicuous consumption that offends egalitarians. But it also finances investments in new products and businesses, without which the economy cannot grow. [. . .]

What makes Crony Capitalists different is their willingness to use the coercive powers of government to gain an advantage they could not earn in the market. This can come in the form of regulations that favor them while hindering competitors, laws that restrict entry into their markets, and government-sponsored cartels that fix prices, grant monopolies, or both.

Crony Capitalists are also more than happy to help themselves to money from the public treasury. This can come from wasteful or unnecessary spending programs that turn government into a captive customer, subsidies that flow directly into their coffers, or mandates that force consumers to buy their products.

[. . .]

Beyond these obvious Crony Capitalists lies a slippery slope designed to attract and entrap Market Capitalists: the tax code. By setting nominal corporate tax rates high while marketing tax breaks to specific companies and industries, Congress assures itself a steady stream of campaign contributions from companies looking to lighten their tax load. While there is no shame in reducing one’s tax burden from 35% to a more globally competitive 20%, is it any wonder that people get sore when some extremely profitable corporations manage to get their tax burden down to nearly 0%?

November 29, 2011

Stephen Gordon: Governments should favour consumers over producers

Filed under: Cancon, Economics, Government — Tags: , — Nicholas @ 09:40

In his latest post at the Globe & Mail‘s Economy Lab, Stephen Gordon points out that governments get the entire prosperity thing wrong:

The next time a political party vows to defend the interests of the producers in a certain industry, you should ask why it isn’t choosing to defend the interests of consumers instead. Because the contribution of an industry to the public good is not its ability to provide large incomes to those who work there; it is its ability to produce things that people want to buy.

Business groups may give lip-service to the benefits of competitive markets, but their heart isn’t in it; they know that their real interests are best served by providing reduced output at high prices. And that’s exactly what we get whenever governments set policy in order to benefit producers: see, for example, our dairy industry.

The motives of producers who call for special treatment in the name of consumer protection are equally suspect. Producers are not in business for their health, and they definitely are not in it for your health. So when producers call for regulations in the name of protecting consumers, you can generally assume that the real and intended effect is to exclude potential competitors: see, for example, our dairy industry.

November 12, 2011

Still no charges in the Gibson Guitar case

Filed under: Bureaucracy, India, Law, Media, USA — Tags: , , , , , — Nicholas @ 11:00

An update in the Wall Street Journal just recaps the background to the case, and has an interview with Henry Juszkiewicz, the CEO.

On Aug. 24, federal agents descended on three factories and the Nashville corporate headquarters of the Gibson Guitar Corp. Accompanied by armored SWAT teams with automatic weapons, agents from the Fish and Wildlife Service swarmed the factories, threatening bewildered luthiers, or guitar craftsman, and other frightened employees. A smaller horde invaded the office of CEO Henry Juszkiewicz, pawing through it all day while an armed man stood in the door to block his way.

“I was pretty upset,” Mr. Juszkiewicz says now, sitting outside that same office. “But you can only do so much when there’s a gun in your face and it’s the federal government.” When the chaos subsided, the feds (with a warrant issued under a conservation law called the Lacey Act) had stripped Gibson of almost all of its imported Indian rosewood and some other materials crucial to guitar making.

The incident attracted national attention and outrage. Like Boeing — whose plans to locate new production in South Carolina are opposed by the National Labor Relations Board — here was an iconic American brand under seemingly senseless federal fire.

September 16, 2011

Ontario’s clean energy Potemkin village

Filed under: Cancon, Economics, Politics, Technology — Tags: , , , , , — Nicholas @ 10:50

John Ivison reports on a recent photo op by Premier Dalton McGuinty:

The solar energy company touted this week by Ontario Premier Dalton McGuinty as a flagship of the province’s clean energy economy has halted production because of slow demand.

Mr. McGuinty was flanked by Eclipsall Energy Corp.’s workforce when he visited its Scarborough solar panel plant Tuesday, but there was no mention that the production line is temporarily shut down. When my colleague Tamsin McMahon visited the plant she found the reception desk was empty, the cafeteria was closed and only a handful of employees milling around inside the sparsely furnished building.

Leo Mednik, Eclipsall’s chief financial officer, said the production line halt is because the company has already completed its current order book. “It’s no secret that the market is slow and there have been delays. That’s part of it — part of it is logistics. Our production team went through our purchased inventory a lot quicker than expected,” he said.

Not only is the plant not working to capacity: it’s only working at all because of government subsidies:

The Liberal government’s efforts have created jobs — though the 20,000 number touted by Mr. McGuinty seems highly questionable, far less the 50,000 he says will be created by the end of next year. In addition, they are hardly high wage, high skilled jobs the Premier claims (Eclipsall pays 20% over minimum wage to its workers, who assemble glass and solar cells imported from Asia, thereby qualifying for the Liberal Green Energy Act’s 60% domestic content rule).

The question is: how sustainable are these jobs? Mr. Mednik admitted that if the domestic content rule was removed, Eclipsall and other Ontario manufacturers would not be able to survive. “Frankly, it would be very difficult for any start-up to compete” against cheaper Chinese producers, he said.

He said it is a question of when, rather than if, the 60% threshold is removed. Both the European Union and Japan have taken the FIT program to the World Trade Organization and want the local content requirements removed. They claim this Buy Ontario provision is a prohibited subsidy. The FIT program might also soon become subject to a NAFTA dispute case, after American renewable company Mesa Power Group said it would file a complaint.

September 8, 2011

Play it again, Gibson

Filed under: Bureaucracy, India, Law, USA — Tags: , , , , , — Nicholas @ 08:59

Allahpundit posted the video clip above, saying:

If I’m understanding the applicable law correctly, Gibson is as much a victim of Indian protectionism as they are federal meddling. Watch the quickie John Roberts segment for the gist of it. The wood they use to make guitar keyboards is sufficiently rare/endangered that it can’t be exported legally from India unless it’s already been finished by Indian workers, and under U.S. law, if the export is illegal under Indian law, then it’s illegal here too. The governing statute, the Lacey Act, was passed in 1900, but only in 2008 was it expanded to include plants as well as animals, which is why Gibson’s now being hassled about the wood. All of which is jim dandy — except for the question of why Gibson seems to be getting so much federal attention vis-a-vis other firms. Roberts touches on that.

H/T to Jon, my former virtual landlord, who commented “I like the way he pulls the finished guitar fret out of his ass.”

Update: Speaking of Jon, he’s all over this issue with another link and extra commentary:

CHRIS DANIEL: Mr. Juszkiewicz, did an agent of the US government suggest to you that your problems would go away if you used Madagascar labor instead of American labor?

HENRY JUSZKIEWICZ: They actually wrote that in a pleading.

[. . .]

He’s even warned clients to be wary of traveling abroad with old guitars, because the law says owners can be asked to account for every wooden part of their guitars when re-entering the U.S. The law also covers the trade in vintage instruments.

As Jon points out, this is more than just an issue for the musical instrument makers and musicians:

It’s only a matter of time until this is applied to tools and furniture.

I wonder where [hand tool maker] Lie Nielsen’s politics lie — but he should be safe, using domestic cherry for his totes and knobs.

Lee Valley might have a problem exporting to the US, what with bubinga and rosewood components and being based in Ottawa, which is now a hotbed of hard-right conservative political thought. (A co-worker is wondering why I’m giggling to myself here).

March 2, 2011

Why “Buy American” or “Buy Canadian” campaigns are bad economics

Filed under: Economics, History, Liberty, USA — Tags: , , , , — Nicholas @ 12:26

Daniel Ikenson takes ABC to task for their misleading propaganda against international trade:

Back in the “golden age” of 1960, when imports were oddities to marvel over in a disdainful way, the per-capita U.S. income was $2,914. In 2009, with imports ubiquitous, per-capita income was $46,411. (Economic Report of the President, 2010, Tables B-1 and B-34). In real, inflation-adjusted terms, even with a U.S. population increase from 181 million to 307 million, per-capita incomes in 2009 were almost triple what they were in 1960 ($42,277 vs. $15,669 in 2005 dollars — ERP, 2010, Tables B-2 and B-34). Oh, if only we could replicate the relative poverty, the limited consumer choices, the inefficient production processes, the massive trade barriers that compelled Americans to buy American, and the uneconomic work rules and wages commanded by once-powerful private sector labor unions. In 1960, before real economic liberalization spawned cultural and social liberalization, Diane Sawyer would never have dreamed of being a network news anchor, if she even dared to entertain the concept of working outside of the home. How can she pine for such an era?

It’s frustrating that so much research refuting the myth of manufacturing decline and supporting the conclusion that U.S. manufacturing is thriving — and is in fact leading the world in terms of value of output — is simply neglected by a media that is more committed to scaring than informing. Today Americans are less likely to find in their homes products manufactured in the United States because U.S. manufacturers have moved on to producing higher value products. American manufacturing isn’t focused on products that consumers find in retail stores, like furniture, hand tools, sporting goods, flatware, draperies, carpeting and clothes. American factories produce more value than any other country’s factories by focusing on producing the highest value products: pharmaceuticals, chemicals, airplanes, sophisticated componentry, technical textiles, and other items often sold directly to other businesses.

I and others have been making these points for several years, as U.S. manufacturing continues to thrive in every metric . . . except employment. Manufacturing employment peaked in 1979 and has been on a downward trajectory ever since. But that is the point that eludes ABC and everyone else who thinks U.S. manufacturing’s best days are in the past. Making more with less is the goal! That’s how an economy grows! The political imperative of “putting people back to work” regardless of the economic value of that work — remember the so-called stimulus? — spits in the face of economics. The fact that Americans are unemployed speaks to a mismatch of skills demanded and skills available, as well as to a business and regulatory environment that dissuades investment and hiring.

February 23, 2011

Now you can’t have “Cornish Pasties” unless they’re from Cornwall

Filed under: Britain, Bureaucracy, Europe — Tags: , , , — Nicholas @ 09:16

Apparently the poor bakers of Cornwall have been driven to the edge by unfair competition. They’ve been fighting the tide of so called “Cornish Pasties” that have never been within hundreds of miles of Cornwall. Now, thanks to the intrepid bureaucrats of Brussels, the Cornish Pasty now has the same kind of name protection as Champagne:

Aficionados of the Cornish pasty will in future be assured that their pasty is the real deal, following a European Commission ruling that only pasties prepared in Cornwall in the traditonal way can be labelled “Cornish”.

Cornish maiden bearing platter of genuine Cornish pasties. Photo: Cornish Pasty AssociationThe announcement that the pasty has been granted “protected geographical indication” (PGI) marks a great day for the Cornish Pasty Association, which for nine years has battled to protect its product from pretenders pumping out non-traditional imitations “inferior in both quality and taste”.

I’ve always been a big fan of “Cornish Pasties”, but I now discover that I’ve apparently been cheated all these years: I’ve never actually eaten a “real” Cornish Pasty in my entire life! (And given that I’ve never been to Cornwall, I may never try one . . .)

January 25, 2011

Margaret Wente: Harper has found the “sweet spot” in Canadian politics

Filed under: Cancon, Media, Politics — Tags: , , , , , , — Nicholas @ 12:14

Margaret Wente is sympathetic to her Liberal friends:

I’ve been feeling kind of sorry for my liberal friends. They can’t stand Stephen Harper. They wince when they hear his name. And yet, in spite of his disagreeable personality, his grip on power is stronger than ever. He has lasted an improbable five years. He has run the longest minority government in Canada’s history and held office longer than Lester Pearson. Aaargh!

On the radio Monday, a Liberal academic was explaining just what makes Mr. Harper so despicable. He’s been stealing Liberal policies! Now that’s dirty. Everyone was certain he would move the country to the right. Instead, he moved the party to the left. He racked up stimulus deficits by the billions and expanded the size of government. He pleased the people by handing them deductions for their kids’ hockey gear. He even quashed an unpopular foreign takeover — only the second veto of a foreign bid in 25 years. The Financial Post went nuts. Who does this guy think he is — Maude Barlow?

Put another way, for everyone who’s attacking Mr. Harper for being too conservative, someone else is attacking him for not being conservative enough. In politics, this is known as “finding the sweet spot.” Both the Liberals and the right-wing National Citizens’ Coalition, which he used to head, are accusing him of reckless spending. Even Peter Mansbridge challenged him for failing to live up to his small-c conservative ideals. (I wonder how the conversation would have gone if Mr. Harper had slashed the CBC.)

Wente may well be right, but I wonder how long Harper can keep the small-c conservatives happy while he does a very credible imitation of Paul Martin’s Liberal government. They wanted a change, but this is a change in labels, not in actual policies.

To be fair, Harper has been able to provide a more distinctive foreign policy than Martin would have done: his outspoken support for Israel is more than enough to set him apart from his Liberal predecessor. On domestic issues? The difference is much more in tone than in substance. On some issues, Michael Ignatieff is running to the right of Harper, which unnerves his own party no end.

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