J.J. McCullough
Published May 19, 2024Who’s on it? What’s the history? How is it going to change?
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September 1, 2024
Explaining everything on Canadian money
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August 30, 2024
The urge to power
At Mindset Shifts, Barry Brownstein explains why the urge to gain power over other people is particularly strong in those who don’t have meaningful lives of their own:
King Louis XIV, the “Sun King”.
Portrait by Hyacinthe Rigaud (1659-1743) sometime in 1700 or 1701 from the Louvre via Wikimedia Commons.
One of my more memorable exchanges with a student came in a principles of economics class. Part of the assignment for that week was chapters from Matt Ridley’s The Rational Optimist. Ridley compared the living standards of an average worker today with those of The Sun King, Louis XIV, in 1700. Some of my more ahistorical students were incredulous at Ridley’s description of the grinding poverty of the average person just a few centuries ago.
The King had an opulent lifestyle compared to others. Louis had an astonishing 498 workers preparing each of his meals. Yet his standard of living was still a fraction of what we experience today.
Ridley outlined the miracles of specialization and exchange in our time — an everyday cornucopia at the supermarket, modern communications and transportation, clothing to suit every taste. If we remove our blinders and see how many individuals provide services to us, Ridley concludes we have “far more than 498 servants at [our] immediate beck and call”.
Then, the memorable exchange occurred. One student shared that he would prefer to live in 1700, if he had more money than others and power over them. My first reaction was amusement; I thought the student was practicing his deadpan humor skills. He wasn’t. For him, having power was an attribute of a meaningful life.
If only my student’s mindset were an aberration.
During the reign of Louis XIV, French mathematician and philosopher Blaise Pascal diagnosed why some lust for power. In his Pensées, Pascal wrote, “I have often said that the sole cause of man’s unhappiness is that he does not know how to stay quietly in his room”. Pascal explained that, out of the inability to sit alone, arises the human tendency to seek power as a diversion.
Pascal asks us to imagine a king with “all the blessings with which you could be endowed”. A king, Pascal told us, if he has no “diversions” from his thinking, will “ponder and reflect on what he is”. Pascal’s hypothetical king will be miserable because he “is bound to start thinking of all the threats facing him, of possible revolts, finally of inescapable death and disease”.
“What people want is not the easy peaceful life that allows us to think of our unhappy condition.” That is why “war and high office are so popular”, Pascal argued.
Pascal argues individuals seek to be “diverted from thinking of what they are”. I would argue a better choice of words is what they have made of themselves.
I’ll let the reader decide how many modern politicians Pascal’s ideas apply to. With Pascal’s insight, we understand why conflict is a feature of politics and not a bug.
Pascal spares no one’s feelings. Some “seek external diversion and occupation, and this is the result of their constant sense of wretchedness”. For them, “rest proves intolerable because of the boredom it produces. [They] must get away from it and crave excitement.”
Let that sink in. A person able to exercise coercive power can use their morally undeveloped “wretched” mind to create endless misery for others merely because exercising power distracts them from their failures as human beings.
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August 28, 2024
1974 – Britain’s nadir
In the second part of Ed West‘s appreciation of Dominic Sandbrook’s Seasons in the Sun, Britain was described as “sliding, sinking, shabby, dirty, lazy, inefficient, dangerous, in its death throes, worn out, clapped out, occasionally lashing out” by Margaret Drabble in her 1977 novel The Ice Age, and it certainly seems to fit the bill quite well:
The Times reported in October of that year that London’s West End was in a “sorry state”, with parts of Shaftesbury Avenue and Charing Cross Road “in the sort of condition that, in Birmingham or Manchester, would qualify them for wholesale slum clearance”.
Journalist Clive Irving wrote that London had become “a semi-derelict slum”, a city blighted by “tacky porno shops, skin movies, pinball arcades, and toxic hamburger joints” while “behind neon facades the buildings are flaking and unkempt”.
The capital had lost a million and a half people since its peak in 1939, and would continue its decline for another decade. Whitehall Mandarin Ronald McIntosh declared that “London is evidently losing population quite heavily [and] services are steadily deteriorating, and nobody seems to have the least idea of how to deal with it”.
The country as a whole was haemorrhaging people, and in 1975 its population fell for the first time since records began. In the spring of 1974 applications for emigration to Canada went up 65 per cent, while New Zealand even felt compelled to put restrictions on people fleeing the old country.
Doctors in particular were leaving in droves, and recruitment agency Robert Lee International estimated that the number of professionals wanting to move abroad rose by 35% in just six months, from January and July 1975. Interest was keenest among engineers, accountants, scientists and teachers.
Many high earners were fleeing excessive tax rates, so punitive that even the Bond producer Albert R Broccoli left to make the iconic British movies elsewhere, and Moonraker would be filmed in France.
Gone were the days of the Swinging Sixties; instead, the London of George Smiley was “the city of the Sex Pistols and The Sweeney, not the Beatles and The Avengers; a city of tramps and hooligans, hustlers and muggers, the downtrodden and the disappointed, haunted by the deadly figure of the IRA bomber”.
Britain’s second city was in an even worse state. During Wilson’s first term Birmingham had been hailed as “the most go-ahead city in Europe”. Now the Times admitted it looked like a “large and chaotic building site”.
Travel writer Jonathan Raban described Southampton’s Millbrook estate as “a vast, cheap storage unit for nearly 20,000 people”. The country’s increasing problem with crime, hooliganism, graffiti and drug addiction meant that residents wouldn’t even hang their clothes in communal areas, for fear of theft.
The great architectural feats of the post-war era were beginning to look like a miserable failure, and none more so than the utopian social housing schemes, which had often entailed destroying closely-knit and organic communities in overcrowded and run-down – but rescuable – terraced housing.
Christopher Brooker visited Keeling House in Bethnal Green and found “its concrete cracked and discolouring, the metal reinforcement rusting through the surface, every available inch covered with graffiti”. Here was the story of modern Britain, “the bright, anticipated dream followed by a seedy, nightmarish reality”.
The National Theatre’s Peter Hall visited the New York Juilliard School and upon return home “found it depressing to compare it with our own already run-down, ill-maintained South Bank building”.
“The English apparently no longer care enough about material surroundings,” he wrote: “They even seem to take a positive pleasure in defiling them.”
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August 27, 2024
Was 1974 the worst year in British politics or just the worst year so far?
I wasn’t in the UK in 1974 (although I did spend a couple of dystopian weeks there in January 1979), so I don’t know from personal experience just how bad things were, but as Ed West considers Dominic Sandbrook’s very informative social history Seasons in the Sun, he certainly helps make a strong case for it:
One of my favourite moments from reading Fever Pitch as a teenager was the passage where Nick Hornby and a friend bunk off school to watch Arsenal play West Ham, a game which was being held on a weekday afternoon because there wasn’t enough electricity for the floodlights. Britain was enduring a three-day week due to the energy crisis, and assuming the ground would be empty, Hornby is stunned to find it packed with 60,000 people, all skiving off work, and he recalls his hypocritical juvenile disgust at the idleness of the British public.
The scene encapsulates the comic crapness of that period, one that many of us have enjoyed laughing at with the recent Rest is History series on 1974. I began reading Sandbrook’s book Seasons in the Sun afterwards, from where the material for the series was drawn; the early chapters comprise a highly entertaining account of what he described on the podcast as “the worst year in British politics”. Reassuring, perhaps, for those of us inclined towards pessimism, although to paraphrase Homer Simpson, perhaps it was only the worst year so far.
Nineteen-seventy-four saw two elections, the first of which ended in a hung parliament, with Labour as the largest party, and the second with Harold Wilson winning with a majority of 3. These were fought between parties led by exhausted leaders who had run out of ideas, with a third, the Liberals headed by Jeremy Thorpe, soon to be notorious as a dog killer. Britain had declined from the richest country on the continent to one of the poorest in western Europe, and its economy seemed to be falling apart.
During his troubled four years in office Edward Heath had called a state of emergency several times, culminating in ration cards for petrol and power restrictions. In 1973 Heath had “told his Chancellor, Anthony Barber, to go for broke”, Sandbrook writes: “It was one of the greatest economic gambles in modern history: while credit soared and the money supply boomed, Heath hoped to keep inflation down through an elaborate system of wage and price controls”. By October that year, “his hopes were unravelling at terrifying speed”.
The “Barber boom” led to “house prices surging by 25 per cent in just six months, the cost of imports rocketing and Britain’s trade balance plunging deep into the red”. Yet just a week after Heath had published details of his “Stage Three” incomes policy, “the Arab oil exporters in the OPEC cartel announced a stunning 70 per cent increase in the posted price of oil, punishing the West for its support for Israel. It was a devastating blow to the world economy, but nowhere was its impact greater than in Britain.”
The stock market lost a quarter of its value in just a month, while by January 1974 share prices had fallen by almost half in under two years. Just before Christmas, the government cut spending by 4 per cent, and Labour’s Shadow Chancellor, Denis Healey, “warned his colleagues that Britain stood on the brink of an ‘economic holocaust'”. Nine out of ten people told a Harris poll that “things are going very badly for Britain” and nearly as many foresaw no improvement in the coming year. They turned out to be correct.
Amid trouble with the National Union of Mineworkers, in November 1973 “Heath announced his fifth state of emergency in barely four years. Floodlighting and electric advertising were banned; behind the scenes, the government began printing petrol ration cards. As the railwaymen voted to join the miners in pursuit of higher pay, it seemed that Britain was sliding into darkness. Offices were ordered to turn down their thermostats, while the BBC and ITV were banned from broadcasting after 10.30 at night. On New Year’s Day, with fuel supplies running dangerously low, the entire nation went on a three-day working week.” Happy days.
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August 26, 2024
QotD: The job of a Soviet economic planner
Matthew Mitchell (MM): Tell us a little bit about the job of a planner. What were your responsibilities? And how did you go about doing them?
Gia Jandieri (GM): Our department inside of Gossnab [the State Supply Committee for the Central Planning Authority] was responsible for monitoring the execution of agreements for production of goods and government orders. My task was to verify that the plans had been executed correctly, to find failures and problems, and to report to the higher authorities.
This included reading lots of reports and visiting the factories and their warehouses for auditing.
The Soviet economy had been in a troublesome condition since the 1970s. We (at the Gossnab) had plenty of information about failures, but it wasn’t useful. We knew that the quality of produced goods was very low, that any household good that was of usable quality was in deficit, and that the shortages encouraged people to buy on the black market through bribes.
In reality, a bribe was a substitute for a market-determined price; people were interested in paying more than the official price for the goods they valued, and the bribe was a way for them to indicate that they valued it more than others.
The process of planning was long. The government had to study demand, find resources and production capacities, create long-run production and supply plans, compare these to political priorities, and get approval for general plans at the Communist Party meetings. Then the general plans needed to be converted to practical production and supply plans, with figures about resources, finances, material and labour, particular producers, particular suppliers, transportation capacities, etc. After this, we began the process of connecting factories and suppliers to one another, organizing transportation, arranging warehousing, and lining up retail shops.
The final stage of the planning process was to send the participating parties their own particular plans and supply contracts. These were obligatory government orders. Those who refused to follow them or failed to fulfill them properly were punished. The production factories had no right or resources to produce any other goods or services than those described in the supply contracts and production plans they received from the authorities. Funny enough, though, government officials could demand that they produce more goods than what was indicated in the plans.
Matthew Mitchell, “Central planning from the inside—an interview with a Soviet-era economist”, Fraser Institute, 2024-05-25.
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August 23, 2024
QotD: The decline of the British working class
Marxists themselves were perhaps the first to notice that the “proletariat” as their theory conceived it was vanishing, assimilated to the petty bourgeoisie by the postwar rise in living standards and the propagation of middlebrow culture through the then-new media of paperback books, radio, and television.
In the new environment, being “working class” became steadily less of a purchasing-power distinction and more one of culture, affiliation, and educational limits on upward mobility. A plumber might make more than an advertising copywriter per hour, but the copywriter could reasonably hope to run his own ad agency – or at least a corporate marketing department – some day. The plumber remained “working class” because, lacking his A-level, he could never hope to join the managerial elite.
At the same time, state socialism was becoming increasingly appealing to the managerial and upper classes because it offered the prospect not of revolution but of a managed economy that would freeze power relationships into a shape they were familiar with and knew how to manipulate. This came to be seen as greatly preferable to the chaotic dynamism of unrestrained free markets – and to upper-SES people who every year feared falling into poverty less but losing relative status more, it really was preferable.
In Great Britain, the formation of the National Health Service in 1947 was therefore not a radical move but a conservative one. It was a triumph not of revolutionary working-class fervor overthrowing elites but of managerial statism cementing elite power in place.
During the long recovery boom after World War II – until the early 1970s – it was possible to avoid noticing that the interests of the managerial elite and the working classes were diverging. Both the U.S. and Great Britain used their unmatched industrial capacity to act as price-takers in international markets, delivering profits fat enough to both buoy up working-class wages and blur the purchasing-power line between the upper-level managerial class and the owners of large capital concentrations almost out of existence.
The largest divergence was that the managerial elite, like capitalists before them, became de-localized and international. What mobility of money had done for the owners of capital by the end of the 19th century, mobility of skills did for the managerial class towards the end of the 20th.
As late as the 1960s, when I had an international childhood because my father was one of the few exceptions, the ability of capital owners to chase low labor costs was limited by the unwillingness of their hired managers to live and work outside their home countries.
The year my family returned to the U.S. for good – 1971 – was about the time the long post-war boom ended. The U.S. and Great Britain, exposed to competition (especially from a re-industrialized Germany and Japan) began a period of relative decline.
But while working-class wage gains were increasingly smothered, the managerial elite actually increased its ability to price-take in international markets after the boom. They became less and less tied to their home countries and communities – more willing and able to offshore not just themselves but working-class jobs as well. As that barrier eroded, the great hollowing out of the British industrial North and the American Rust Belt began.
The working class increasingly found itself trapped in dying towns. Where it wasn’t, credentialism often proved an equally effective barrier to upward mobility. My wife bootstrapped herself out of a hardscrabble working-class background after 1975 to become a partner at a law firm, but the way she did it would be unavailable to anyone outside the 1 in 100 of her peers at or above the IQ required to earn a graduate degree. She didn’t need that IQ to be a lawyer; she needed it to get the sheepskin that said she was allowed to be a lawyer.
The increasingly internationalized managerial-statist tribe traded increasingly in such permissions – both in getting them and in denying them to others. My older readers might be able to remember, just barely, when what medical treatment you could get was between you and your physician and didn’t depend on the gatekeeping of a faceless monitor at an insurance company.
Eventually, processing of those medical-insurance claims was largely outsourced to India. The whole tier of clerical jobs that had once been the least demanding white-collar work came under pressure from outsourcing and automation. effectively disappearing. This made the gap between working-class jobs and the lowest tier of the managerial elite more difficult to cross.
In this and other ways, the internationalized managerial elite grew more and more unlike a working class for which both economic and social life remained stubbornly local. Like every other ruling elite, as that distance increased it developed a correspondingly increasing demand for an ideology that justified that distinction and legitimized its power. And in the post-class-warfare mutations of Marxism, it found one.
Eric S. Raymond, “The Great Inversion”, Armed and Dangerous, 2019-12-23.
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August 22, 2024
QotD: The changing role of the Medieval housewife in England
Jane Psmith, “REVIEW: The Domestic Revolution by Ruth Goodman”, Mr. and Mrs. Psmith’s Bookshelf, 2023-05-22.
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August 9, 2024
Rare signs of growth in the Argentine economy
It looks as if Argentina is managing a trick that Justin Trudeau can’t manage — growing the national economy while keeping inflation down:
Javier Milei, 8 October 2022.
Photo attributed to Vox España via Wikimedia Commons.
During his first year as president, Javier Milei has been waging a bitter but largely successful campaign against inflation.
Now, Argentines received more welcome news: their economy is growing again.
“Economic activity rose 1.3 percent from April, above the 0.1 percent median estimate from analysts in a Bloomberg survey and the first month of growth since Milei’s term began in December,” Bloomberg reported on July 18. “From a year ago, the proxy for gross domestic product grew 2.3 percent.”
The positive economic report, based on data from the Argentine government, is a surprise to many.
The 2.3 percent year-over-year increase defied expectations of a decline of similar magnitude, Bloomberg reported. As Semafor notes, the Argentine economy was projected to have the least economic growth of any country in the world in 2024, according to the International Monetary Fund.
A “Wrecking Ball”?
Argentine economists I spoke to said that the numbers are encouraging, but the country’s economy is far from being out of the woods.
As most people know, Milei inherited an economic mess decades in the making. When the self-described anarcho-capitalist assumed office in December, Argentina was suffering from the third highest inflation rate in the world — 211 percent year over year. The poverty rate was north of 40 percent, and Argentina’s economy was declining.
With his country’s economy in a full tailspin from decades of Peronism, Milei proposed a series of economic reforms dubbed “shock therapy” that consisted primarily of three components: slashing government spending, cutting bureaucracy, and devaluing the peso.
Critics warned that these measures would be disastrous, and many took it for granted that the remedies would deepen Argentina’s recession.
The former head of the International Monetary Fund’s Western Hemisphere Department, Alejandro Werner, said Milei’s strategy could tame inflation, but at great cost.
“A deep recession will also take place,” Werner wrote, “as the fiscal consolidation kicks in and as the decline in household income depresses consumption and uncertainty weighs on investment.”
Felix Salmon, the chief financial correspondent at Axios, concurred, comparing Milei’s policies to “a wrecking ball”.
“Milei’s budget cuts will cause a plunge in household income, as well as a deep recession,” wrote Salmon.
Despite these warnings, Milei delivered his “shock therapy” plan in the first few months of his presidency. Tens of thousands of state workers were cut as were more than half of government ministries, including the Ministry of Culture, as well as the Ministries of Labor, Social Development, Health, and Education (which Milei dubbed “the Ministry of Indoctrination“). Numerous government subsidies were eliminated, and the value of the peso was cut in half.
Even before Milei’s policies were given a chance to succeed, many continued to attack them.
“Shock therapy is pushing more people into poverty,” journalist Lautaro Grinspan wrote in Foreign Policy in early March. “Food prices have risen by roughly 50 percent, according to official government data.”
Yet the official government data Grinspan cited was a report from December 2023, before Milei had even assumed the presidency.
Contrary to the dire predictions, the results of Milei’s policies have been better than even many of his supporters had dared hope.
During the first half of 2024, inflation cooled for five straight months in Argentina, the Associated Press reported in July. Though consumer prices were up 4.6 percent in June from the previous month, that’s down from a 25 percent month-over-month increase in December, when monthly inflation peaked in Argentina. Meanwhile, in February the government saw its first budget surplus in more than a decade. And just days ago, an economic report was published showing a massive decline in poverty in Argentina.
Many doubted that these successes were possible, and the conventional wisdom said that wringing inflation out of the economy and slashing government spending could only be achieved at great cost: a deepening recession.
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Why Oil Paint Is So Expensive | So Expensive
Business Insider
Published Jul 13, 2019Oil paint is simple. At its most basic, it’s just a mixture of oil and pigment. But depending on the color and quality, a liter of this paint could cost you $285 to $1,100.
While the rise of oil paint is associated with the Renaissance, paintings using poppy-seed oil have been dated as far back as seventh-century Afghanistan. So what is it that makes this paint so special? And why is it so expensive?
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QotD: Celebrity fund-raising for foreign aid
Can you imagine a more perverse incentive? The poorer and more wretched are a nation’s people, the more likely celebrities such as Bono will convince Westerners and their governments to take pity on that country and to send large sums of money to its government. And because that country’s citizens are poor largely because their government is corrupt and tyrannical, the money paid in “aid” to that government will do nothing to help that country develop economically.
The cycle truly is vicious. Aid money naively paid by Westerners to alleviate Third-World poverty is stolen or misspent by the thugs who control the governments there. Nothing is done to foster the rule of law and private property rights that alone are the foundation for widespread prosperity. The people remain mired in ghastly poverty, their awful plight further attracting the attention and sympathy of Western celebrities, who use their star attraction and media savvy to shame politicians in the developed world into doling out yet more money to the thugs wielding power in the (pathetically misnamed) “developing world”.
If I could figure out a way to measure the long-term consequences of this new round of debt relief — a way that is so clear and objective that even the most biased party could not quibble with it — I would offer to bet a substantial sum of money that years from now this debt relief will be found to have done absolutely no good for the average citizens of the developing world.
It’s a bet I would surely — and sadly — win.
Don Boudreaux, “Faulty Band-Aid”, Pittsburgh Tribune-Review, 2005-06-18.
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August 4, 2024
QotD: Canada’s “middle class”
There’s the “middle class” that’s constantly prioritized, flattered and fetishized by every campaign and candidate; critiques of people who come from such a privileged class they can’t possibly understand the concerns of normal people; sometimes bizarre pitches aimed at those who want a better future for their kids and just need a boost (camping, anyone?); and leaders who come from hardscrabble backgrounds — except that maybe they don’t quite.
But if class is an ever-present anthem running through campaign 2019, it’s a tune no one seems to know the proper words to, or they’re deliberately mumbling nonsense lyrics and assuming no one else will notice.
[…]
Then there is the electorally beloved — and conveniently poorly defined — “middle class”. Given all the campaign trail hot air devoted to lauding the values and hard work of this population and lionizing their noble struggles, you would think that at some point, other corners of the electorate would get ticked off about being ignored by politicians in favour of these golden children.
But they don’t, because pretty much everyone thinks that’s them.
Shannon Proudfoot, “The ‘family shame’ of Canadian politics: class struggle”, Maclean’s, 2019-10-04.
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July 30, 2024
The new and improved malaise for the 21st century
Back in the 1970s, US President Jimmy Carter identified the theme of the decade as “malaise”, and now, thanks to generations of feckless politicians, burgeoning bureaucratic empires, and economic stagnation, it’s back in an even malaisier form for the Current Year:
“Kamala Harris” by Gage Skidmore is licensed under CC BY-SA 2.0 
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Some time ago, I noticed that a general fatigue had taken a place alongside the malaise that was already being felt by many Americans and Canadians. The malaise stemmed from the overdue recognition that their lives were not going to get any better, and that they would have to work harder to just maintain a standard of living that they were already used to.
The fatigue came from a different, but not too distant place; the politicization of everything these past one and a half decades meant that there was no escape [from] the political. Whether sports, video gaming, or even fashion, everything had to be run by the cultural police before it could be deemed “not problematic”. The problem was (and still is) that everything to this type is “problematic”. This would not be a problem at all if this type were not empowered by the powers-that-be, but for some strange reason the cultural police quickly became ubiquitous, and their constant hectoring and lecturing ground most people down to the point where fatigue set in.
Everything became political, so therefore there was nothing that was not political. The fact that sanctions began to be placed against those who dared to buck the new trends in social mores meant that this was a totalizing form of politics. It wasn’t fascism, nor was it communism … but it was (and is) totalitarianism in a new form all its own. The rise of populism on the right in the West (as this trend is also present in Europe, but is not as thoroughly embedded there as it is in North America) is almost entirely a reaction to this. Freedom and liberty, as traditionally understood in the Anglosphere (i.e. “as long as I don’t harm others, I can do or say what I want”) took a back seat to what they call “equality”, a first step towards the more extreme demand known as “equity”.
Economic precariousness combined with the permanent presence of the Sword of Damocles above your head is a brilliant way to get people to shut up and get with the program. It is very coercive, but it is for the “greater good”, they tell us. What we already see is that it does not convince all, and that it has a negative effect on trust in governing institutions and national elites. The level of control by the managerial elite over the daily lives of its citizens is now at a micro-management one. Everyday, most people have to think carefully before speaking for fear of committing some aggression that could lead to the termination of their employment. They must mouth elite-approved social mores just in order to be able to tread water, as boat rocking is a secular sin. Why would the powers-that-be want to ever give up such a tool of mass control? The people are not to be trusted, which is why this totalizing system must remain in place. Just imagine if it were removed: the dreaded 1990s would return … or something.
Jacob Siegel has written an interesting essay on the concept known as “Whole of Society”, and how it has become a totalizing system:
To make sense of today’s form of American politics, it is necessary to understand a key term. It is not found in standard U.S. civics textbooks, but it is central to the new playbook of power: “whole of society“.
The term was popularized roughly a decade ago by the Obama administration, which liked that its bland, technocratic appearance could be used as cover to erect a mechanism for the government to control public life that can, at best, be called “Soviet-style”. Here’s the simplest definition: “Individuals, civil society and companies shape interactions in society, and their actions can harm or foster integrity in their communities. A whole-of-society approach asserts that as these actors interact with public officials and play a critical role in setting the public agenda and influencing public decisions, they also have a responsibility to promote public integrity.“
In other words, the government enacts policies and then “enlists” corporations, NGOs and even individual citizens to enforce them — creating a 360-degree police force made up of the companies you do business with, the civic organizations that you think make up your communal safety net, even your neighbors. What this looks like in practice is a small group of powerful people using public-private partnerships to silence the Constitution, censor ideas they don’t like, deny their opponents access to banking, credit, the internet, and other public accommodations in a process of continuous surveillance, constantly threatened cancellation, and social control.
The catch:
“The government” — meaning the elected officials visible to the American public who appear to enact the policies that are carried out across the whole of society — is not the ultimate boss. Joe Biden may be the president but, as is now clear, that doesn’t mean he’s in charge of the party.
Siegel writes that the “whole of society” approach arose during Obama’s shift away from the War on Terror to something called “CVE” (Countering Violent Extremism) i.e. the shift away from focusing on Islamist terror towards fighting America’s own citizens who are not with the new political, social, and cultural programs:
But the true lasting legacy of the CVE model was that it justified mass surveillance of the internet and social media platforms as a means to detect and de-radicalize potential extremists. Inherent in the very concept of the “violent extremist”, was a weaponized vagueness. A decade after 9/11, as Americans wearied of the war on terror, it became passé and politically suspicious to talk about jihadism or Islamic terrorism. Instead, the Obama national security establishment insisted that extremist violence was not the result of particular ideologies and therefore more prevalent in certain cultures than in others, but rather its own free-floating ideological contagion. Given these criticisms Obama could have tried to end the war on terror, but he chose not to. Instead, Obama’s nascent party state turned counterterrorism into a whole-of-society progressive cause by redirecting its instruments — most notably mass surveillance — against American citizens and the domestic extremists supposedly lurking in their midst.
A reflection on the 20-year anniversary of Sept. 11 written in 2021 by Nicholas Rasmussen, the former director of the U.S. National Counterterrorism Center, captures this view. “Particularly with the growing threat to public safety and security posed by domestic violent extremism, it is essential that we move beyond the post-9/11 counterterrorism strategy paradigm that placed the government at the center of most counterterrorism work.” Instead of expecting the government to deal with terrorist threats, Rasmussen advocated for “a much wider, more expansive and inclusive ‘whole-of-society’ approach” that he said should encompass “state and local governments, but also the private sector (to include technology companies), civil society in the form of both individual voices and non-governmental organizations (NGOs), and academia.”
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July 26, 2024
QotD: Comparative advantage
David Ricardo, On the Principles of Political Economy and Taxation (1817), quoted on the Library of Economics and Liberty site.
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July 25, 2024
David Friedman on the economics of trade
David Friedman discusses how, for example, the US and China manage their trading relationship:
“United States Balance of Trade Deficit-pie chart” by Shirishag75 is marked with CC0 1.0 
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I recently read a thread about US/China trade on a forum occupied mostly by intelligent people. As best I could tell, all participants were taking it for granted that things that make it more expensive to produce in the US, such as regulations or minimum wage laws, make the US “less competitive”, increase the trade deficit, give the Chinese an advantage. Reading Project 2025, the Heritage Foundation’s battle plan for a future conservative president, I observed the same pattern, with only one exception.
It did not seem to have occurred to any of the forum posters that US costs are in dollars, Chinese costs in Yuan, and what determines the exchange rate between them is the cost of producing things. Discussing trade policy in terms of absolute advantage, pre-Ricardian economics, isn’t quite as bad as discussing the space program on the assumption that the Earth is at the center of the universe with sun, moon and planets embedded in a set of nested crystalline spheres surrounding it — Copernicus was about three centuries earlier than Ricardo — but it is close. It is a point that I made here about a year ago, but since the question came up in my most recent post and in a thread on my favorite forum, it is probably worth making again.
The Economics of Trade
It is easiest to start with the simple case of two countries and no capital flows. The only reason Americans want to buy yuan with dollars is to buy Chinese goods, the only reason Chinese want to sell yuan for dollars is to buy American goods. If Americans try to buy more yuan than Chinese want to sell, the price of yuan in dollars goes up, if Chinese want to sell more yuan than Americans want to buy, the price goes down, just as in other markets. The price of yuan in dollars, the exchange rate, ends up at the price at which supply equals demand, which means that Americans are importing the same dollar (and yuan) value of goods that they are exporting.
Suppose the US government, inspired by the mercantilist view that countries get rich by exporting more than they import, tries to produce a “favorable” balance of trade by imposing a tariff on Chinese imports. Chinese goods are now more expensive to Americans. Since they want to buy less from China they don’t need as many yuan so the demand for yuan goes down, the price of yuan in dollars goes down, which reduces the cost of Chinese goods to Americans. Just as before, the exchange rate ends up at a level at which the dollar value of US exports equals the dollar value of US imports. Both imports and exports are now less, since trade is being taxed, but the balance of trade is exactly what it would be without the tariff.
Suppose the US becomes less good at making things due to an increase in government regulation or some other cause. Dollar prices of US goods in the US go up. That makes US goods more expensive to Chinese purchasers so they buy fewer of them, decreasing the demand for dollars on the dollar/yuan market. The exchange rate shifts — dollars are now less valuable so their price falls. Trade still balances. The US is not “less competitive”, merely poorer.
Now add in more countries. One reason Chinese want to buy dollars is to sell them to Germans who want dollars with which to buy American goods. We end up with a trade deficit with China, since some of the dollars they get for their exports are being used to import goods from Germany instead of the US, but a matching trade surplus with Germany, since they are using both the dollars they get by selling things to us and the dollars they get from China to buy goods from us. The same logic applies with more countries.
To explain how it is possible for the US to have a trade deficit we now drop the assumption of no capital movements. One reason Chinese want dollars is to buy goods and ship them to China but another is to buy assets in America — government bonds, shares of stock, real estate. Dollars bought and dollars sold are still equal but exports of goods no longer equal imports of goods. Part of what the US is “exporting”, selling to foreigners, is assets located in the US.
Suppose the US government wants to reduce the trade deficit. One way would be to reduce the budget deficit, since if the US is borrowing less it will not have to pay lenders as high an interest rate, which will make US bonds less attractive to Chinese buyers. Another way would be to block capital movements, make it illegal for foreign buyers to buy US assets. Doing that, however, means less capital investment in the US, hence higher interest rates. With fewer lenders to buy US bonds, the government will have to offer a higher interest rate to sell them.
One argument sometimes offered for restricting foreign investment is that if the Chinese own a lot of US assets that gives them power over us. The same argument was offered in the early 19th century when European investors were paying to build railroads and dig canals in the US. Daniel Webster pointed out that, if there was a conflict with European powers, their assets were sitting on our territory under our control. It wasn’t like they could repossess the Erie canal.
What about imposing a tariff in order to reduce imports? The logic of the previous argument still applies — the exchange rate will shift to make imports more attractive, exports less. Any effect on the deficit will depend on what happens to the attractiveness of US assets to Chinese investors. Figuring out the net effect is complicated, depending in part on what people expect trade policy and exchange rates to be when they collect on their capital investments.
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QotD: Why devolution has not worked in the United Kingdom
I remember when arguments were originally made for devolution, commentators would claim that devolution would work in the same way that the federal structure of the US works, or, for that matter, how the cantonal system works in Switzerland. By which they meant that if a state such as Zug in Switzerland or Wisconsin in the US tried a specific policy (encouraging cryptos, or enacting Workfare, to take two actual examples), that the perceived success or failure of these policies would be studied by other cantons and states. Hence the idea that devolution allows a sort of “laboratory experiment” of policy to take place. It creates a virtuous kind of competition. That’s the theory.
What seems to have happened is that since devolution in the UK, Scotland, Wales and to some extent, Northern Ireland, have competed with England in who can be the most statist, authoritarian and in general, be the biggest set of fools. Whether it is 20 mph speed limits spreading to many places and harsh lockdowns (Wales) or minimum pricing on booze and “snitching” on your own family for views about gender (Scotland), the Celtic fringe appears to be more interested in being more oppressive, rather than less. I cannot think of a single issue in which the devolved governments of the UK have been more liberal, and more respectful, of liberty under the rule of law. (Feel free to suggest where I am mistaken.)
One possible problem is that because the UK’s overall government holds considerable budgetary power, the devolved bits of the UK don’t face the consequences of feckless policy to the extent necessary to improve behaviour.
Even so, I don’t entirely know why the Scots and Welsh have taken this turn and I resist the temptation to engage in armchair culture guessing about why they tend to be more collectivist at present. It was not always thus. Wales has been a bastion of a kind of liberalism, fused to a certain degree with non-conformity in religion, and Scotland had both the non-conformist thing, and the whole “enlightment” (Smith, Hume, Ferguson, etc) element. At some point, however, that appears to have stopped. Wales became a hotbed of socialism in the 20th century, in part due to the rise of organised labour in heavy industry, and then the whole folklore – much of it sentimental bullshit – about the great achievements in healthcare of Nye Bevan. Scotland had its version of this, plus the resentments about Mrs Thatcher and the decline of Scotland as a manufacturing power.
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Maybe the “test lab” force of devolution will play a part in demonstrating that, as and when we get a Labour government for the whole of the UK, it will be a shitshow on a scale to put what has happened in the Celtic parts of the UK in the shade.
Johnathan Pearce, “Why has devolution not worked in a liberal direction?”, Samizdata, 2024-04-23.
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