Quotulatiousness

February 12, 2020

“… perhaps the biggest Internet cash grab in the OECD with mandated payments and levies on thousands of Internet services with Canadian users”

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

Michael Geist refutes the claim that the recent Broadcast and Telecommunications Legislative Review Panel report does not recommend a “Netflix tax”:

The reference to a Netflix tax in the overview is the only such reference in the 235 page report. It was likely included in the overview in the hope that media coverage would jump on the claim and seek to re-assure Canadians that there was no Netflix tax or higher prices likely for consumers as a result of the report’s recommendations.

Yet the reality for anyone that reads beyond the overview is that the panel’s report not only recommends what would widely be considered a Netflix tax but proposes perhaps the biggest Internet cash grab in the OECD with mandated payments and levies on thousands of Internet services with Canadian users. This includes online streaming services, social media companies, news aggregators, and online communications services such as Skype, WhatApp, and Viber. In the view of the panel, any service or site with Canadian users is part of the “Canadian system” and should be expected to contribute to the development of Canadian content, Canadian news organizations, or building broadband connectivity. Note that all of this is above and beyond sales taxes, which the panel also recommends should be implemented with respect to foreign services.

Some of the panel’s plans are admittedly somewhat confusing. For example, the panel states:

Media curation undertakings brought under the regime – including Netflix and other online streaming services – would be required to devote a portion of their program budgets to Canadian programs.

That statement, along with chair Janet Yale’s comment at the opening press conference that there was no need for Netflix to spend additional money on Cancon but rather merely divert existing on foreign location and service production spending in Canada, has been interpreted by some to mean that Netflix would not have to increase its Canadian programming budget. But that is apparently not what the panel means. I spoke with Yale who confirmed that the panel expects the CRTC to establish a minimum Cancon spend requirement on Netflix based on its Canadian revenues. In other words, the requirement has nothing to do with its existing spending on production in Canada. For Netflix, that could certainly represent an increase in spending costs in Canada with those costs likely passed along to consumers.

Yet the panel’s plan extends far beyond just online streaming services such as Netflix. It also envisions mandatory levies against social media services and news aggregators that would be used to fund Canadian news services. It similarly targets a myriad of communications services that would pay into funds to support broadband development.

February 10, 2020

QotD: Welfare programs as a form of subsidy to employers

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

A final line of argument is that these public assistance programs have become de facto subsidies for low-wage employers. For a program to be a subsidy for an employer, it needs to lower wages. Is this plausible for the public assistance programs considered? I think it is for the EITC [Earned Income Tax Credit], but not for other programs. Depending on where one is on the EITC schedule, that policy can increase work incentives. And there is a lot of empirical evidence showing EITC encourages labor force participation. An unintended consequence of that labor supply response, however, is that employers capture some of the tax subsidies. This can happen in a simple supply and demand framework, where an increased labor supply to the market drive wages down. This can also happen in a bargaining context where the size of the bilateral surplus expands from lower taxes, and employers capture some of this increased surplus. Work by UC Berkeley’s Jesse Rothstein suggests that for every $1 of transfer to workers using the EITC, post-tax income rises only by $0.73 because of employer capture.

But what about other programs like food stamps or housing assistance? These means tested public assistance programs are not tied to work, and we should not expect them to lower wages. Let’s take food stamps, which are available to eligible families whether or not a family member works or not. Indeed, when people are not working, they are more likely to be eligible for food stamps since their family incomes will be lower. Therefore, SNAP [Supplemental Nutrition Assistance Program] is likely to raise, and not lower a worker’s reservation wages — the fallback position if she loses her job. This will tend to contract labor supply (or improve a worker’s bargaining position), putting an upward pressure on the wage. Whether or not wages are increased is an empirical matter: there is evidence that the initial roll-out of the food stamps program across counties in the 1970s lowered work hours, consistent with an increase in the reservation wage. The key point is that it is difficult to imagine how food stamps would lower wages. And if they don’t lower wages, they can’t be thought of as subsidies to low wage employers. The same logic applies to other means tested programs like energy or housing assistance. Moreover, these conclusions hold in a wide array of models of the labor market, including ones that emphasize bargaining or efficiency wage concerns.

Arindrajit Dube, “Public Assistance, Private Subsidies and Low Wage Jobs”, Arindrajit Dube, 2015-04-19.

February 9, 2020

The lightbulb conspiracy again

Filed under: Business, China, Economics, Environment, Government — Tags: , , , — Nicholas @ 05:00

I’ve banged on a few times over the years about lightbulbs, specifically about our government’s passionate desire for us to abandon the tried-and-tested (and cheap) incandescent bulbs to move first to (ultra-expensive, dim, and potentially dangerous) compact fluorescent bulbs and now to (cheaper, but still not living up to longevity promises) LED bulbs instead. Tim Worstall explains how governments were persuaded to enforce this crony capitalist plot over the years (he’s discussing the European market, but Canadian regulators were doing exactly the same thing):

We all recall when we used to use incandescent light bulbs. Simple, cheap, the result of a century’s worth of fiddling with the basic technology to make it around and about right for the use to which it was put.

A spiral compact fluorescent bulb (CFL).
Image by Sun Ladder via Wikimedia Commons.

Then they were banned. Sure, there was that energy and thus planet saving argument but that was always very weak indeed. It was an excuse, not the actual reason itself. The reason was that the big three manufacturers, Phillips, Osram and GE, had invested heavily in the next generation of technology, compact fluorescents. These cost not pennies per bulb but pounds. Rather better profit margins that is. Oh, and also, not subject to that crippling competition from China.

So, we get the EU ban on incandescents, driven entirely by the manufacturers. There’s a lot of the Baptist and Bootlegger in here given the environmentalist support for it.

The problem with the technology being the use of mercury in those bulbs.

An aside, I made my living for a number of years selling weird metals that are added to that mercury. I do actually know quite a bit about the nuts and bolts here. I’m also out of the business and have been for a decade and more. So it’s knowledge driving this, not knife sharpening.

Mercury’s not good stuff to have floating around. So, what happens next? Yep, a decade or a bit more after the incandescents were banned so now they’re coming for the CFLs.

The mercury issue was not as well publicized here in Canada as it was in Australia, for example:

How many of them have looked up the Environment Department’s website to find what its bureaucrats falsely describe as the “simple and straightforward” precautions to take against poisoning should one of these lamps smash:

  • Open nearby windows and doors to allow the room to ventilate for 15 minutes before cleaning up the broken lamp. Do not leave on any air conditioning or heating equipment which could recirculate mercury vapours back into the room.
  • Do not use a vacuum cleaner or broom on hard surfaces because this can spread the contents of the lamp and contaminate the cleaner. Instead scoop up broken material (e.g. using stiff paper or cardboard), if possible into a glass container which can be sealed with a metal lid.
  • Use disposable rubber gloves rather than bare hands.
  • Use a disposable brush to carefully sweep up the pieces.
  • Use sticky tape and/or a damp cloth to wipe up any remaining glass fragments and/or powders.
  • On carpets or fabrics, carefully remove as much glass and/or powdered material using a scoop and sticky tape; if vacuuming of the surface is needed to remove residual material, ensure that the vacuum bag is discarded or the canister is wiped thoroughly clean.
  • Dispose of cleanup equipment (i.e. gloves, brush, damp paper) and sealed containers containing pieces of the broken lamp in your outside rubbish bin – never in your recycling bin.
  • While not all of the recommended cleanup and disposal equipment described above may be available (particularly a suitably sealed glass container), it is important to emphasise that the transfer of the broken CFL and clean-up materials to an outside rubbish bin (preferably sealed) as soon as possible is the most effective way of reducing potential contamination of the indoor environment.

February 6, 2020

Fallen flag – The Nickel Plate Road

Filed under: Business, History, Railways, USA — Tags: , , , — Nicholas @ 03:00

Kevin J. Holland provides a brief look at the history of the New York, Chicago & St. Louis, better known as the “Nickel Plate Road”:

The New York, Chicago & St. Louis opened between Buffalo and Chicago on October 23, 1882, in many spots east of Cleveland just a stone’s throw from rival Lake Shore & Michigan Southern Railway. What would become the Nickel Plate became a Vanderbilt property in January 1883.

Although eclipsed by the Lake Shore’s plush limiteds, NYC&StL from 1893 fielded three unpretentious, reliable Chicago to Buffalo, N.Y., passenger trains, establishing a long-standing pattern of modest passenger service. In 1897, Delaware, Lackawanna & Western entered the picture, conveying NYC&StL cars from Buffalo to Hoboken, N.J.

“The great … Nickel-plated railroad”
When NYC&StL was being surveyed, Editor F. R. Loomis of Ohio’s Norwalk Chronicle waxed enthusiastically on the railroad coming to town referring to it as “the great New York and St. Louis double-track, nickel-plated railroad.” Use of “Nickel Plate Road” proliferated, in newspapers and by the road itself.

In 1914, LS&MS and Nickel Plate were wards of New York Central. Passage of the Clayton Act that same year was intended to bolster the earlier Sherman Antitrust Act, and left NYC with a dilemma. Enter brothers Oris P. and Mantis J. Van Sweringen, self-made Cleveland real-estate developers who purchased acreage from NYC Vice President Alfred H. Smith. “The Vans” as the brothers were known, approached Smith, by then NYC president, to discuss their plans involving land owned by the Nickel Plate. As the Clayton Act’s divestiture deadline loomed, Smith engineered a sale to the Vans of not only the land they sought, but of the entire Nickel Plate Road. Their Alleghany Corporation holding company eventually in­­cluded control of the Nickel Plate, Chesapeake & Ohio, Pere Marquette, Erie, Wheeling & Lake Erie, Chicago & Eastern Illinois, and Missouri Pacific.

The gaunt NYC&StL was ripe for re-equipping under its new owners. Addressing the Vans’ lack of railroad experience, Smith orchestrated John J. Bernet’s move from an NYC vice-presidency to be Nickel Plate’s president. Neglected physical plant and obsolete motive power received needed attention under Bernet, who reincarnated the road into a lean and aggressive contender.

Nickel Plate Road GP9 number 526 switching a way freight at Gibson City, IL on November 24, 1962.
Roger Puta photo from the Mel Finzer Collection via Wikimedia Commons.

February 2, 2020

Boeing and the kitchen sink

Filed under: Business, USA — Tags: , , — Nicholas @ 05:00

In the Continental Telegraph, Tim Worstall looks at the mess the new Boeing management has inherited and what they may need to do to be seen to be fixing it:

Which brings us to another piece of stock market wisdom, about trying to catch a falling knife. A dangerous occupation and the reference is to trying to call the bottom on some stock that has just had a disaster. At some point, surely, the tumble in price will stop and there will be a bounce. Well, yes, or perhaps maybe, for we must not forget that that proper bottom is that end of life – the bankruptcy – price of nothing. For everything that isn’t about to go bust then yes, there’s a price at which buying in the face of everyone else’s panic can be highly profitable. The question being, well, what is about to go bust? Toys R Us did, after all. Actually, so have quite a lot of retailers just recently. There was no above zero price at which it was sensible to buy in.

So, some stock crashes in price, should we buy in? After all, there is that phenomenon known as the dead cat bounce – anything will bounce at least once if you drop it from high enough. The question becomes one of, well, is this crash a result of something that can be reversed, or perhaps something that’s not going to be terminal for the organisation? Or is this just the start of that realisation process that the organisation is coming to the end of its life and going to that final resting place of a zero dollar valuation?

[…]

So, Boeing and the 737 Max. The changes in airframe had the unfortunate consequence of diving a couple of the planes into the ground. We’ve had a drip of stories about how the development process wasn’t all we would wish it to be. The FAA isn’t going to let it back up into the air until the summer at earliest. The Dreamliner seems to be having demand problems and, well, things aren’t looking good.

But is this the start of some spiral to zero? No, don’t be daft. Partly because the American government simply would not allow that. Boeing’s too much part of the backdrop of the US economy for that to be left to happen. The military business is also of significant value whatever happens to the civil aviation side. And of course the numbers we’re talking about here could be painful to stock holders – they are already in part of course – but at the very worst we’re looking at some tens of billions of problem here. That’s just not enough to drive a company Boeing’s size down to zero. Not in this decade at least, given that the only reasonable competition is Airbus. Global duopolies don’t end that way.

So, at this point there’s an argument to say that trying to catch that falling knife of the Boeing stock price might be worthwhile. So, when might that be? At which point another idea, kitchen sinking. This is when a new management team decides to make themselves look good by declaring how bad things had got under the previous one. Absolutely anything and everything that looks like, it might even smell of a problem in the future is taken out and declared. Provisions are made for this problem on this contract, for that problem that might occur over there, add a bit more and then heck, why not, double it! This has, assuming the company survives this balance sheet massacre, the obvious effect of making the new management team look good over the years. Not just because everything starts from this new low place. But also because many of those provisions – those over-provisions – won’t be needed and can be written back from reserves into the P&L.

January 31, 2020

“… the report envisions unprecedented government and regulatory intervention into the delivery of news services”

Filed under: Bureaucracy, Business, Cancon, Technology — Tags: , , , — Nicholas @ 05:00

Michael Geist heaps scorn on the recommendations of a panel that would empower the CRTC to regulate the internet in Canada to a very high degree:

The Broadcast and Telecommunications Legislative Review Panel released its much anticipated report yesterday with a vision of a highly regulated Internet in which an expanded CRTC (or a renamed Canadian Communications Commission) would aggressively assert its jurisdictional power over Internet sites and services worldwide with the power to levy massive penalties for failure to comply with its regulatory edicts. The recommendations should be rejected by Innovation, Science and Industry Minister Navdeep Bains and Canadian Heritage Minister Steven Guilbeault as both unnecessary to support a thriving cultural sector and inconsistent with a government committed to innovation and freedom of expression.

[…]

Yet the strengths of the telecommunications and consumer rights portions of the report are overshadowed by a stunning set of recommendations related to Internet content, some of which are unlikely to survive constitutional scrutiny, likely violate Canada’s emerging trade commitments, and rest of shaky policy grounds. If enacted, the Canadian Internet would be virtually unrecognizable with the CRTC empowered to licence or require registration from a myriad of Internet services, mandate what Canadians see on those services, and intervene in commercial negotiations. The 235 page report will require several posts to address all of its aspects and implications (including notable CBC and copyright reforms), but this post seeks to set out its broad-based content regulatory vision and make the case that the panel’s plan should be firmly rejected by the government.

The foundation of the content section of the report is the decision to regulate all media content, which includes audio, audiovisual, and news content delivered by telecom. In doing so, the report envisions unprecedented government and regulatory intervention into the delivery of news services. It argues that there are three types of services that provide this content that require regulation where they access the Canadian market:

  • Curators – services that disseminate media content with editorial control (broadcasters and streaming services such as Netflix, Spotify, and Amazon Prime)
  • Aggregators – cable companies, news aggregators such as Yahoo News
  • Platforms for Sharing – services that allow users to share amateur and professional content such as YouTube, Facebook and other platforms

The panel recommends that all of these kinds of companies be regulated (either by way of licence or registration), be required to contribute to Canadian content through spending percentages or levies, and comply with CRTC regulations on discoverability that would include regulatory rules on how prominently Canadian content is displayed within the service. The CRTC would be empowered to decide whether to exempt services from regulation with the power to levy huge penalties for failure to comply with its decisions (described as “high enough to create a deterrent foreign undertakings”).

January 29, 2020

“CanCon” rules for internet streaming services will be “inevitable”

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

Yes, the federal government is serious about extending the moronic “Canadian content” regime to internet streaming companies (like Netflix). Canadians are too blind to be allowed to select all of their own viewing without the paternal hand of government jiggling those choices in a politically desired direction, as Michael Geist explains:

Later this week, a government appointed panel tasked with reviewing Canada’s broadcast and telecommunications laws is likely to recommend new regulations for internet streaming companies such as Netflix, Disney, and Amazon that will include mandated contributions to support Canadian film and television production. In fact, even if the panel stops short of that approach, Canadian Heritage Minister Steven Guilbeault and Canadian Radio-television and Telecommunications Commission chair Ian Scott have both signalled their support for new rules with Mr. Guilbeault recently promising legislation by year-end and Mr. Scott calling it inevitable.

My Globe and Mail op-ed notes that the new internet regulations are popular among cultural lobby groups, but their need rests on a shaky policy foundation as many concerns with the fast-evolving sector have proved unfounded.

[…]

Third, the not-so-secret reality of the Canadian system is that foreign location and service production and Canadian content are frequently indistinguishable. Qualifying as Canadian requires having a Canadian producer along with meeting a strict point system that rewards granting roles such as the director, screenwriter, lead actors, and music composer to Canadians.

Yet this is a poor proxy for “telling our stories”. The rules mean foreign companies can never produce Canadian content leading to the absurd outcome that revivals of Canadian programs such as Trailer Park Boys and Degrassi will not meet the qualification requirements if Netflix is the sole funder and producer. Moreover, programs such as The Handmaid’s Tale may be based on a Margaret Atwood novel, but using one of Canada’s best known novelists as the source doesn’t count in the Canadian points system.

So what is Canadian? A quick scan of Canadian Audio-Visual Certification Office data turns up Blood and Fury: America’s Civil War, The Kennedys, Murder in Paradise, Natural Born Outlaws, Who Killed Ghandi?, and dozens of other programs that are Canadian in regulation-only. Further, there are also “co-productions”, in which treaty agreements deem predominantly foreign productions such as The Borgias or Vikings as Canadian.

January 26, 2020

You, your new DeLorean, and the LVMVMA

Filed under: Bureaucracy, Business, Government, USA — Tags: , , , — Nicholas @ 03:00

Many people — not all of them rabid fans of the Back to the Future movies — would like to own a DeLorean and it is going to be possible … eventually:

Photo of a DeLorean by grayesun is licensed under CC BY-NC-SA 2.0

Basically, the legislation [the Low Volume Motor Vehicle Manufacturers Act of 2015], which was signed into law by President Barack Obama in 2015, would allow companies to produce limited-run replica vehicles without being bound by certain safety and emissions standards. But after that administration ended, the law stalled because the National Highway Traffic Safety Administration didn’t follow through with implementation.

“One problem, Espey explains, was that NHTSA hasn’t had a permanent administrator since the previous presidential election, and the acting administrator would not sign off on the regulations,” writes Hagerty. Thankfully, the Specialty Equipment Market Association (SEMA) took matters into their own hands and filed a lawsuit, and now it looks like the law could take effect soon.

That means DMC is once again gearing up to sell new turnkey DeLoreans, and this time around they’ll have modern conveniences like power steering and cruise control (imagine that!) and potentially features like heated seats and smartphone integration (the future!).

While they’re not available to order just yet, interested buyers can fill out a non-binding pre-order form. Just don’t expect to hit 88 miles per hour in 2020; as Espey said, “There will be no cars produced under this legislation for at least a year, and that’s presuming the feds do their job this time and don’t drag it out for four more years.”

H/T to Colby Cosh for the link.

January 23, 2020

The EU apparently fears a “Singapore on the Thames”

Filed under: Britain, Bureaucracy, Business, Economics, Europe — Tags: , , , , , — Nicholas @ 03:00

In the Continental Telegraph, Tim Worstall explains why the EU negotiators are reportedly offering a much worse trade deal to the United Kingdom than they’ve already agreed with Canada, Japan, and other trading partners:

Take, for example, this idea of Singapore on Thames. It’s trivially easy to rally the peeps against one or other relaxation of regulation. Chlorine washed chicken for example. But what about lifting the entire burden? Singapore is, after all, about 50% richer than Britain on a per capita basis. The correct question therefore is would you like a 50% pay raise at the price of shooting all the bureaucrats? Given the manner in which the bureaucrats don’t want the question even asked we have a reasonable enough guide that the answer would be yes.

Which is why the terms on offer to a Britain which could do the SonT thing are so terrible. Because of SonT succeeded it would be a death blow to the entire idea of how Europe is regulated. Lille, Leipzig and Livorno will all put up with interfering bureaucracy because that’s just the way the world is. But if Les Rosbifs become richer by half again simply by that bonfire of the regulations then the auto da fes will light up all over Europe.

So, yes, of course the EU is offering shit trade terms. They can’t allow an independent and free Britain to succeed. That we will anyway is what will bring that freedom and liberty to the continent – once again. For as so often it will be us that saves Europe from itself.

January 19, 2020

Travelling SNCF in the age of the smartphone app

Filed under: Business, France, Humour, Media, Railways, Technology — Tags: , , , , — Nicholas @ 05:00

At The Register, Alistair Dabbs reveals some unfortunate truths about the French railway service (the Société nationale des chemins de fer français or SNCF) and its mobile app:

An SNCF Train à Grande Vitesse (TGV) Duplex DASYE (moteur asynchrone, nouvelle generation de duplex) train at Figueres-Vilafant station, 1May 2011.
Photo by eldelinux via Wikimedia Commons.

Actually, the hotel app is rubbish. The booking system is slow, the property information incomplete and some of the buttons don’t do anything at all. From time to time, the app flashes up a notification inviting you to install the app … er, that you’re already running. Much better to book using a proper computer. Still, flashing the screen around got me the Presidential Disability Suite. Franklin D rocked a wheelchair, remember, and I’m a fan.

This, however, pales into insignificance with the tedious and frankly silly collection of smartphone apps I had to juggle to manage my train journey to get here. Yes, it’s my own fault for trying to navigate my way across France on public transport in the midst of a general strike but surely that’s precisely the kind of thing digital communications ought to be able to help you with, don’t you agree?

Map of the French railways on which the TGV (LGV: blue; normal tracks: black) and Intercités (grey) SNCF trains run. Only lines going to and from Paris are shown here.
Wikimedia Commons.

The French train company, SNCF, has been doing its best by notifying travellers with bookings every day at 17:00 which of the following day’s trains would be running and which would be cancelled. I’m a lifelong union member myself and I fully support the workers’ rights to … oh buggeration, my TGV’s been rerouted to set off from a city 300km away. Fucking union arsewipes – sack ’em all bastard wankers.

Oh well, I thought, I’ll just have to work out another way. Fire up the SNCF booking app!

A banner at the top informs me that I should seek information about which train services are running by checking its Twitter feed. So I launch the Twitter app. SNCF on Twitter says I should check via the idiotic INOUI brand for TGV bookings. So I launch the INOUI app. This tells me I should check with SNCF or, if I want more information, click on a highlighted link. I click on it: it links to a one-sentence message that tells me there is a strike on and that train services may be affected.

Two hours of thumb-numbing smartphone tomfoolery later, I have worked out my own alternative route via multiple connecting services. This was made more challenging by the SNCF and INOUI apps providing contradictory information about the same journey. Best of all is they can’t agree on where my TGV will actually go. Will it reach its terminus as usual or will it apparently go inexplicably missing from the tracks in the countryside outside Lille? According to SNCF and INOUI, it will do both. It’s Schrodinger’s train.

Just as I go to bed, the Eurostar app sends me a notification reminding me to get to my local station on time tomorrow to catch the TGV that’s been cancelled.

As you can see, my much prolonged, zig-zag route up the country and into Blighty worked, no thanks to these ridiculous apps. It wasn’t all bad: I got to see more French farmland than I expected and experienced first-hand the extraordinarily rich cultural variety of train station beggars that France has to offer the modern rail traveller.

January 11, 2020

The bubbly 1720s

Filed under: Americas, Britain, Business, Economics, France, Government, History — Tags: , , , , , — Nicholas @ 03:00

In the latest Age of Invention newsletter, Anton Howes looks at Britain’s volatile financial scene in the 1720s:

William Hogarth – The South Sea Scheme, 1721. In the bottom left corner are Protestant, Catholic, and Jewish figures gambling, while in the middle there is a huge machine, like a merry-go-round, which people are boarding. At the top is a goat, written below which is “Who’l Ride”. The people are scattered around the picture with a sense of disorder, while the progress of the well-dressed people towards the ride in the middle represents the foolishness of the crowd in buying stock in the South Sea Company, which spent more time issuing stock than anything else.
Scanned from The genius of William Hogarth or Hogarth’s Graphical Works via Wikimedia Commons.

Over in France, a Scottish banker named John Law had in the late 1710s overseen an ambitious scheme to reorganise the government’s finances. He ran the Mississippi Company, one of the many companies with monopolies on France’s international trade. His scheme was for the company to acquire all of the other similar monopolies, so that it could have a monopoly on all of the country’s intercontinental trade routes. By 1719, the Mississippi Company had swelled into a Company of the Indies, which in turn had purchased the right to collect French taxes, from which it took took its own cut. In exchange for acquiring these monopolies, Law’s new super-monopoly would buy up the French government’s accumulated war debts, allowing repayment on more generous terms. By allowing the state to borrow more cheaply, the scheme was to be a key plank in improving French military might.

Meanwhile, in Britain, a very similar project was afoot. Following the War of the Spanish Succession, one of the things Britain won from France was the asiento – the monopoly on supplying African slaves to Spain’s colonies in America. The asiento was given to the South Sea Company, which had the monopoly on British trade with South America, and which in 1720 began to follow a scheme similar to Law’s. Given developments in France, it would not do for the British state to be left behind in terms of its capacity to take on more debt for war. Thus, with political support, the South Sea Company began to buy up the government’s debt, persuading its creditors to exchange that debt for increasingly valuable company shares.

In 1720, both schemes came crashing down. In the case of Law’s scheme, he had printed paper currency with which people could buy his company’s shares, but in 1720 discovered he had printed too much. When he prudently tried to devalue the company’s shares to match the quantity of paper notes, the devaluation spun out of control. In the case of the South Sea Company, the causes of the crash were a little more mysterious, perhaps even verging on the mundane. One explanation is that too many wealthy investors simply tried to sell their shares so that they would have ready cash to spend on holidaying in Europe, precipitating a minor fall in the share price which then led to a more widespread panic. Regardless, it did not end well. The company itself continued for many years thereafter — it even got involved with whaling off the coast of Greenland — but the collapse of its share price ended its chance to restructure the government’s debts.

January 3, 2020

Fallen flag – the Pennsylvania Railroad

Filed under: Business, History, Railways, USA — Tags: , , , , — Nicholas @ 05:00

The origins and an outline history of the “Standard Railroad of the World” for Classic Trains magazine by George Drury:

The original Pennsylvania Railroad ran from Philadelphia to Pittsburgh. Much of its subsequent expansion was accomplished by leasing or purchasing other railroads.

Construction began in 1847. Two years later the Pennsy made an operating contract with the Harrisburg, Portsmouth, Mountjoy & Lancaster, and by late 1852 rails ran from Philadelphia to Pittsburgh via a connection with the Portage Railroad between Hollidaysburg and Johnstown, Pa. The summit tunnel was opened in 1854, bypassing the inclined planes and creating a continuous railroad from Harrisburg to Pittsburgh.

In 1857 PRR bought the Main Line of Public Works and in 1861 leased the Harrisburg, Portsmouth, Mountjoy & Lancaster, putting the entire Philadelphia to Pittsburgh line under one management.

PRR also acquired interests in two major railroads, the Cumberland Valley and the Northern Central. The Cumberland Valley was opened in 1837 from Harrisburg to Chambersburg, and it was extended by another company in 1841 to Hagerstown, Maryland. The Baltimore & Susquehanna was incorporated in 1828 to build north from Baltimore. Progress was slowed because of the reluctance of Pennsylvania state officials to charter a railroad that would carry commerce to Baltimore. The line reached Harrisburg in 1851 and Sunbury in 1858. By then the railroad companies that formed the route had been consolidated as the Northern Central Railway. Pennsy acquired majority ownership of the Northern Central in 1900.

The Pennsy expanded into northwestern Pennsylvania by acquiring an interest in the Philadelphia & Erie Railroad in 1862 and assisting that road to complete its line from Sunbury to the city of Erie in 1864. The line to Erie was not particularly successful, but from Sunbury to Driftwood it could serve as part of a freight route with easy grades. The rest of that route was the Allegheny Valley Railroad, conceived as a feeder from Pittsburgh to the New York Central and Erie railroads. The Pennsylvania obtained control in 1868, and in 1874 opened a route with easy grades from Harrisburg to Pittsburgh via the valleys of the Susquehanna and Allegheny rivers. PRR leased the Allegheny Valley Railroad in 1900.

Horse shoe curve near Altoona on the Pennsylvania Railroad, circa 1874.
Photo by W.P. Mange & Co. via the Library of Congress.

But even the mighty can fall, and the PRR fell into difficult times after WW2:

During World War II Pennsy’s freight traffic doubled and passenger traffic quadrupled, much of it on the eastern portion of the system. The electrification was of inestimable value in keeping the traffic moving. After the war Pennsy had the same experiences as many other railroads but seemed slower to react. PRR was slower to dieselize, and when it did so it bought units from every manufacturer.

As freight and passenger traffic moved to the highways, Pennsy found itself with far more fixed plant than the traffic warranted or could support, and it was slow to take up excess trackage or replace double track with Centralized Traffic Control.

PRR was saddled with a heavy passenger business. It had extensive commuter services centered on New York, Philadelphia, and Pittsburgh and lesser ones at Chicago, Washington, Baltimore, and Camden, New Jersey. It had gone through the Depression without going bankrupt.

Pennsylvania and New York Central surprised the railroad industry by announcing merger plans in 1957. The two had long been rivals, and the merger would be one of parallel roads rather than end-to-end. The merger took place on February 1, 1968 — and Penn Central fell apart faster than it went together.

PRR E8A 5803 with Train 72, The Red Bird, passing the Hartsdale, Indiana tower and crossing the NYC and EJ&E on November 26, 1965.
Photo from the Roger Puta collection via Wikimedia Commons.

January 1, 2020

The Day The Gauge Changed

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

The History Guy: History Deserves to Be Remembered
Published 16 Jun 2018

The History Guy remembers the 1886 Southern Railroad Gauge Change, an important moment in railroad history.

The photographs used in the episode are Public Domain images from the age of steam. As photos of actual events are sometimes not available, I will often use photographs of similar events and objects for illustration.

The economic analysis mentioned in the episode is available here: https://www.hbs.edu/faculty/Pages/ite…

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The History Guy: Five Minutes of History is the place to find short snippets of forgotten history from five to fifteen minutes long. If you like history too, this is the channel for you.

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The episode is intended for educational purposes. All events are presented in historical context.

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QotD: “Bin End” sales

Filed under: Business, Humour, Quotations, Wine — Tags: — Nicholas @ 01:00

I was amused this week to see to see a sign outside my local Wine Rack store which read “Sawmill Creek Bin End Sale.” Bin end usually means the last few bottles or cases of the lot. For a wine that arrives in Canada by the boatload, “bin end” sounds a bit far fetched. Then again, “Tanker End Sale” doesn’t sound quite as dignified.

Richard Best, The Frugal Oenophile Newsletter, 2005-07-13.

December 29, 2019

Changing western views about China

Filed under: Business, China, Economics, Government, Politics — Tags: , , , , — Nicholas @ 05:00

John Gray charts the image of China that has held steady for years among western countries but which has been severely shaken with the unrest in Hong Kong and the Chinese government’s reactions:

“The Chinese People’s Liberation Army is the great school of Mao Zedong Thought”, 1969.
A poster from the Cultural Revolution, featuring an image of Chairman Mao, published by the government of the People’s Republic of China.
Image via Wikimedia Commons.

The most important year of the decade is the one that is just ending. The struggle that will most deeply shape the global scene in years to come is not occurring in Britain, the US, Europe or any Western country. It is underway in Hong Kong, where a popular demand for democracy is confronting the immovable power of the world’s most highly developed authoritarian state.

It is a struggle no government wants to see escalate. More realistic than its Western counterparts, the Chinese leadership shows few signs of believing the conflict can be definitively resolved any time soon. Incremental concessions and large-scale repression both carry high levels of risk for Xi Jinping’s regime. The ideal end-state for Beijing is probably long-term containment. But the situation in the former colony is not stable, and it is difficult to exaggerate the impact that suppressing the protestors by force would have on China’s position in the world.

It is often pointed out that Hong Kong’s economic importance has dwindled with the rise of mainland cities such as Shanghai. But this leaves out how much two-system governance shapes global perceptions of China and its future. Xi’s progress towards a neo-totalitarian surveillance state has deflated the Western elites’ confidence that China is on a path of slow evolution towards liberal democracy. Yet the fantasy still lingers. The likelihood that China will be an authoritarian great power in any realistically imaginable future is too disturbing to contemplate.

It is worth recalling the comforting tale on which Western governments have modelled China’s development. The country was getting rapidly richer, and while average incomes remained low by international standards, the middle class was steadily growing. This process of embourgeoisement would lead to stronger demands for democratic freedoms, and China would become ever more like the West. Embedded in practically every Western government and regularly invoked by the Western businesses that operate in China, this is a story with almost no basis in reality.

It is true that the rise of the middle classes in early 19th-century Europe coincided with an expansion of liberal freedoms in some countries. This was the main thrust of Marx’s analysis of bourgeois democracy. (A little-noted aspect of recent liberal thinking is that it relies heavily on a crude version of Marxian class analysis.) But there is nothing in the historical record that says the middle classes are inherently a force promoting liberalism. In the late 19th century, they backed the restoration of monarchy and empire in France and militarism In Prussia. In the early 20th century, large sections of the European middle classes embraced ethnic nationalism and then fascism. There was not much sign of the freedom-loving bourgeoisie in interwar Europe.

Protests continue in Hong Kong, 25 November 2019.
Photo by Studio Incendo via Wikimedia Commons

While it is so far less developed, a similar pattern of bourgeois support for illiberal politics has emerged in many European countries since the collapse of the Soviet Union. Across the continent, far-Right parties enjoy the support of significant sections of the middle classes. In America, Trump’s constituency includes many from precarious middle income groups.

So, the linkage between the middle classes and liberal values is tenuous throughout Western countries. In the UK and other English-speaking countries, it is middle class students, professors and administrators that have shut down freedom of inquiry and expression in higher education. Woke capitalism and much of the mainstream media are continuing this trend. Threatened by what they call populism, bourgeois liberals have ditched the values that once defined them. Far from being a universal law, middle class support for liberalism looks like a brief historical accident.

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