Quotulatiousness

June 30, 2012

Writing the UN’s epitaph in advance

Filed under: Bureaucracy, Cancon, Politics — Tags: , , — Nicholas @ 11:10

Conrad Black on the increasingly useless United Nations (although he urges reform instead of abandonment):

For the past 45 years the United Nations has become steadily over-populated by poor states, failed states, petty despotisms and militant Muslim counties chiefly preoccupied in diplomatic matters with the harassment and denigration of Israel. Most of the agencies have become sink-holes of patronage and corruption for poor countries paying themselves with the contributions of rich countries and polemically biting the hands that feed them.

It has become a source of payola windfalls for corrupt agency officials as well as a substitute for theatre and psychiatry for many of the world’s most disreputable regimes. Muammar Gadaffi’s Libya was elected to the chair of the Human Rights Commission (precursor of the present Human Rights Council), and the whole hierarchy of the UN was implicated in the scandalous misappropriation of many millions of oil dollars supposedly destined for humanitarian purposes in Iraq. The chief humanitarian beneficiaries were Saddam Hussein and crooked UN officials. Many of the peace-keeping missions are staffed by unqualified soldiers from very poor countries, which rent themselves out to the warring factions for cash; and thereby increase, rather than control, local violence.

Unfortunately, Canada was, for most of the UN’s history, far too indulgent of it. First, as a victorious ally and charter member, it was part of the Anglo-American governing consensus. Then, after Lodge gave Pearson the Suez peacekeeper idea (and Pearson forgot that it wasn’t his originally), the foreign policy establishment in Ottawa began to view the UN as a way for Canada to distinguish itself from the U.S. at little cost, and to allow itself, with a modest foreign aid budget, to pander to Third World countries without seriously annoying our traditional allies. This gradually developed into the Chrétien government’s endorsement of “soft power,” a phrase originated by former U.S. president Bill Clinton’s national security adviser Joe Nye, which was a soft alternative to the use of American military might. It is a concept that has any validity only when there is a hard power option, which Canada did not possess. As practised by this country, soft power was a fraud, it was just more softness.

[. . .]

Undoubtedly, there will be those in Canada who decry the Harper government’s comparative friendliness with Israel and call for appeasement of Pillay and her foaming claque. What we should do instead is lead agitation for a massive transformation of the United Nations — back to the defence of Eleanor Roosevelt’s Universal Declaration on Human Rights (which is not subject to Shariah law or any other such barbarities), jettison the antiquated Security Council and propose a variable system of voting in the General Assembly, where votes are accorded to countries and groupings of countries according to a combination of their population, economic strength and objectively assessed respect for human rights.

Canada is well placed to organize the support for such measures by the countries that pay most of the UN’s bills. This would be a much more appropriate stance for Canada, now that it has been so unjustly pilloried by the anthill of bigotry of a Human Rights Council, than continued reverence for this citadel of hypocrisy. The United Nations is both a mad cow and a sacred cow; it is in desperate need of radical reform.

June 29, 2012

From Maoism to Kleptocracy in one generation

Filed under: Business, China, Economics, Government — Tags: , , , — Nicholas @ 08:14

China’s economic growth has been one of the wonders of the modern world, as one of the poorest nations has pulled itself well up the economic tables over just the last twenty years. What it has not done, however, is replace the communist leadership with democratically elected leaders. What has happened is that switching from a pure command economy to a freer economy has created fantastic opportunities for graft and corruption. Opportunities which have been grasped eagerly by party leaders and their friends and family:

As I set out in The Fall of the Communist Dynasty, and a HT to John Hempton’s piece within which he contends that the entire Chinese economy is a Kleptocracy , this week we have news from Citron Research who reports that Evergrande Real Estate Group Ltd is ‘a deception on a grande scale’ .

Citron quote ;-

‘Evergrande who ranks among the top 5 Chinese property companies. Our analysis and primary research reveal that: 1] Evergrande is insolvent; and 2] Evergrande will be severely challenged from a liquidity perspective. The Company’s management has applied at least 6 accounting shenanigans to mask Evergrande’s insolvency. Our research indicates that a total write-­down of RMB 71bn is required and Evergrande’s pro forma equity is negative 36bn.’

What sparked Citrons interest in Evergrande was the mail order doctorate the chairman claimed from the University of West Alabama, a small college 230 miles north of New Orleans with 2300 on-campus students. Evergrande’s is one of the top 5 players in the Chinese property market that fell for its 8th consecutive month in May. My experience with these types of matters is that small things can be excellent markers to greater problems. Small examples of dishonesty in one area of life are often reflected in larger undiscovered examples in other areas of a person’s life.

[. . .]

Zoomlion has an interesting business model, it is similar in many of ways to Caterpillar, except whereas Caterpillar report falling sales, Zoomlion reports astounding sales growth with a fivefold increase in revenue since 2007. Zoomlion customers sometimes buy ten concrete mixers when they planned to initially by one or two. They have a perverse incentive to buy more than they need because these concrete trucks are purchased via finance packages supplied by Zoomlion.

Then the machines can be garaged and used as collateral to borrow further funds from other lenders. Zoomlion continues to grow while cement sales have plunged. In May, cement output increased 4.3 per cent YoY, down from 19.2 per cent recorded last year. Zoomlion’s new debt of $22.5B buys roughly 900,000 trucks which could produce enough concrete (at six loads a day) to build over thirty Great Pyramids of Giza a day.

[. . .]

All revolutions have class and economic matters at their core. Ironically, the difference in a future Chinese collapse is that the expropriators in China in this cycle have been the Communist Party political class. The CCP have become the Kleptopreneur bourgeoisie who have expropriated from China’s proletariat (the industrial working class), via corruption and theft from the state and state owned enterprises. The Ka-Ching Dynasty is responsible for the greatest looting of a nation in history.

Marx wrote that modern bourgeois society (Capitalism) has conjured up such gigantic means of production and of exchange, that it is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells (Karl Marx)

The CCP ‘sorcerers’ have summoned up a political and economic nether world that is so systemically corrupted it is in the process of spiralling into same revolutionary physics that destroyed the original Chinese merchant bourgeoisie that Mao overthrew.

Earlier posts on China’s economy are here. H/T to Cory Doctorow for the link.

June 27, 2012

John Kay on the evils of rent-seeking

Filed under: Economics, Germany, Government, Politics — Tags: , , , , — Nicholas @ 08:08

Broadly speaking, wealth can be accumulated in two distinctly different ways. It can be earned through hard work, innovation, and competition, or it can be extracted from the public by use of coercive methods, corruption, and misappropriation:

Whatever the true extent of the Mubarak family fortune, it stands in stark contrast to the lot of most Egyptians. Gross domestic product per capita in Egypt is a mere $2,500. In western Europe and North America GDP per capita is about $40,000, yet the capacities of Egypt’s intellectual and entrepreneurial elite are the rival of any state in the world.

The real damage imposed by men such as Mr Mubarak is not the money they might have stolen. The tragedy is that the system that enables them to steal it destroys opportunities for others to generate wealth — not only for themselves but for the whole population.

The price of requiring a potential Mark Zuckerberg or Mr Gates to pay a $100 bribe to each of 10 officials before he can establish his new business is not the $1,000 creamed off by corrupt bureaucrats. It is the far greater one of lost businesses that never came into being because the licensing process that makes such corruption possible was not navigated. In the meantime, people who might be successful entrepreneurs choose instead to seek political power. If business is endlessly frustrating and politics endlessly rewarding, the career choice for able and enterprising people is obvious.

Institutions are the key influence on economic prosperity — West Germany did not outperform East Germany because of its excellent monetary policies. And, as Daron Acemoglou and James Robinson point out in their book, Why Nations Fail, a critical feature of successful economic institutions is that they limit the scope for what these authors call “extractive activity” — others have described it as predation or rent-seeking — which appropriates the wealth created by other people.

June 13, 2012

When is a bribe appropriate?

Filed under: Britain, Bureaucracy, Business, Law, Russia — Tags: , , , , — Nicholas @ 09:59

The British government is trying to crack down on bribery, which on the surface seems like a good thing to do: but will it cripple British businesses in third world countries?

We used to draw a distinct line between what was acceptable business conduct here at home and what we did abroad with Johnny Foreigner.

Inviting Bertie from your major customer to Henley or the Derby, or waving Cup Final and Olympic tickets in his face was entirely acceptable. Slipping him £500 for an order was bribery and both illegal and immoral.

But what you did abroad was an entirely different matter: bribery was until very recently tax deductible.

[. . .]

This is of course very different from the system of old. Which was, essentially, that soft soaping someone with experiences and days out was just absolutely fine while any mention at all of cash was not just legally but also socially verboten.

At home, in Britain, that was. Having worked in some pretty odd and even rough places I’ve done my share of bribing people, but even so I would be profoundly shocked if I was asked for a bung in Blighty. But the system also most definitely facilitated the payment of bribes to Johnny Foreigner.

At one point, working in Russia, I needed to get cheap railway prices out of the Russian railroads to make the numbers on a metals shipment add up. The only way known to do this was to make a deal with the North Koreans who had special state-set prices on said railways. Which is how I found myself inside the N. Korean embassy in Moscow handing over $10,000 in crisp notes to their KGB-style guy after the successful conclusion of the shipment.

Yes, of course, it’s terribly naughty subverting the employees of a communist dictatorship, but the reaction here at home was the most interesting. When I made gentle enquiries to the taxman as to how I might account for this transaction, hinting gently at first, he finally pointed out that since I’d paid the bribe in a foreign currency to a foreign chap that was just fine. Just list it as a business expense and it was tax deductible.

April 24, 2012

Corruption in Afghanistan reaches new heights

Filed under: Asia, Government, Middle East, Military — Tags: , , , , — Nicholas @ 08:33

From Strategy Page:

A major obstacle to improving security in Iraq and Afghanistan was not equipment, training or leadership, but corruption. No matter how well led, trained and equipped the troops were, if they could be bought they were worse than useless. But the corruption went beyond the troops themselves. Government officials had to be carefully monitored to prevent the money for equipment, training and pay from being stolen before it got to the troops. More fundamentally, corruption was the reason Iraq, Afghanistan and so many other nations are poor and full of unhappy, and often violent, people. Corruption is why these places are chaotic and so often in the news. Corruption is the major cause of Islamic terrorism. Corruption does not get the recognition it deserves.

But in Afghanistan corruption has recently risen to new heights; literally. Several recent attacks in Kabul have made use of unfinished high-rise buildings, where terrorists used the height advantage to do more damage. American advisors noted that there were a lot of unfinished tall buildings in Kabul, and many had apparently been abandoned. The Americans asked the local government who owned these high-rise structures and was told that the government didn’t know. Kabul has undergone a construction boom in the last decade, and many of the builders (or their backers) didn’t bother with getting construction permits. If the cops or officials came around asking questions they were offered a bribe, or a death threat, or both. Inquisitive journalists were handled the same way.

April 14, 2012

The fall of the House of Bossi?

Filed under: Europe, Italy, Politics — Tags: , , , , — Nicholas @ 11:59

BBC News has a profile of Umberto Bossi, who recently had to resign as head of the political party he founded, Italy’s Northern League:

… Mr Bossi made one of his charismatic, raucous and fiery speeches, declaring in essence that northern Italians were no longer going to kow-tow to Rome’s greedy politicians and to pay their taxes to enable lazy southern Italians to live on public welfare.

One of his famous phrases was “Roma ladrona” meaning “Thieving Romans!”

It was all pretty provocative stuff, and had strongly racist undertones.

The League mocks the accents and the origins of Southerners whom they derisively call “terroni”. I suppose “ignorant peasant” would be the nearest English translation.

[. . .]

Sixteen years later it turns out that Umberto Bossi has apparently been dipping into the public trough, even more deeply than the Roman politicians he was so critical of when he founded his separatist party, and set up the phantom north Italian state he dubbed “Padania” – meaning the country of the river Po.

In 2004 Mr Bossi suffered a stroke which left him with impaired speech, but failed to quench his political ambitions or his vulgar public manners.

He frequently uses swear words in public to smear anyone he does not like and often gives the finger in front of TV cameras to make his message even more clear.

[. . .]

According to court documents, Mr Bossi’s wife bought no fewer than 11 houses and apartments with Northern League party funds.

Mr Bossi himself had his own house done up with public money and his son Renzo — nicknamed by his father the Trout, who in fact does have a somewhat fish-like expression — also had access to apparently unlimited cash to indulge in his taste for fast cars.

The party even paid for the Trout’s speeding tickets, not to mention medical expenses. The 23-year-old has now been forced to resign from his sinecure as a regional government official, which brought him 12,000 euros (£10,000, $16,000) a month.

March 24, 2012

The state of Pakistan: grim and getting grimmer

Filed under: Asia, Books, Economics, Education — Tags: , , — Nicholas @ 10:00

Robert Fulford in the National Post, examines the evidence presented in Ahmed Rashid’s book, Pakistan on the Brink: The Future of America, Pakistan and Afghanistan:

In rich, persuasive detail, Rashid describes corrupt leaders and a despairing population, an army that obeys orders only when it wants to, a stagnant economy, disastrous relations with neighbouring countries — and above all, a persistent national tendency, exemplified by Zardari, to blame others when anything goes wrong. Americans are often seen to be at fault, and sometimes Israelis. India is considered permanently blameworthy.

Half of school-age Pakistanis don’t attend school. At the state’s founding in 1947, 52% of the citizens were literate; in 65 years that number has been raised to 57%. In the last 20 years, Rashid notes, Pakistan has not developed a single new industry or cultivated a new crop. On the level of imagination, it has died or lapsed into a coma.

Politicians and military officers take turns forcing each other out of power; that’s the only system of regime change that operates, and it does nothing to eliminate corruption.

Rashid makes it clear that Pakistan’s core problem is as much a moral as a political failure, a matter of shirked duties, profound dishonesty and rancid hatreds that encourage murder. Reforms don’t happen, he believes, because neither political, nor military leaders have the courage, will and intelligence to carry them out.

February 16, 2012

The economics of the military-industrial complex

Filed under: Bureaucracy, Economics, Government, Military, Technology, USA, Weapons — Tags: , , , , , , — Nicholas @ 08:57

Eisenhower was right: the military-industrial complex has the US government tight within its grip, and there’s no easy fix. Strategy Page has a useful overview:

For decades the U.S. Armed Forces has been having problems with rapidly growing (much greater than inflation) costs of weapons. Congress passes laws to try and cope and the laws are ignored. One example is the laws calling for accurate life-cycle costs (for development, manufacturer, and maintenance of weapons over their entire service life). A recent study found out that, despite laws calling for accuracy and consistency in these numbers, most manufacturers manipulated the data to make their systems look less expensive than they actually were. The Department of Defense is increasingly taking extreme measures in the face of this corruption and cancelling more and more very expensive systems. But the manufacturers continue to use smoke and mirrors to get new projects started and failed ones funded.

New weapons get approved because of another form of procurement corruption, the Low Ball Bid. Last year the U.S. Air Force demanded that defense contractors stop low balling, which in practice means submitting unrealistically low bids for new weapons (to make it easier for Congress to get things started) and then coming back for more and more money as “unforeseen problems” appear and costs keep escalating and delivery is delayed. Currently, procurement projects are about a third over budget and most items are late as well. Procurement of weapons and major equipment make up about a third of the defense budget. While this is expected to decline over the next decade, as defense budgets shrink, the problem also extends to upgrades and refurbishment of existing equipment.

The most intractable problem is the decades old contractor practice of deliberately making an unreasonably low estimate of cost when proposing a design. The military goes along with this, in the interest of getting Congress to approve the money. Since Congress has a short memory the military does not take much heat for this never ending “low ball” planning process.

February 13, 2012

How Greece got into their predicament

Filed under: Economics, Europe, Government, Greece, Politics — Tags: , , , — Nicholas @ 10:18

Anita Acavalos wrote this article in 2010. It’s still relevant — perhaps even more so today:

Although at first glance the situation Greece faces may seem as simply the result of gross incompetence on behalf of the government, a closer assessment of the country’s social structure and people’s deep-rooted political beliefs will show that this outcome could not have been avoided even if more skill was involved in the country’s economic and financial management.

The population has a deep-rooted suspicion of and disrespect for business and private initiative and there is a widespread belief that “big money” is earned by exploitation of the poor or underhand dealings and reflects no display of virtue or merit. Thus people feel that they are entitled to manipulate the system in a way that enables them to use the wealth of others as it is a widely held belief that there is nothing immoral about milking the rich. In fact, the money the rich seem to have access to is the cause of much discontent among people of all social backgrounds, from farmers to students. The reason for this is that the government for decades has run continuous campaigns promising people that it has not only the will but also the ABILITY to solve their problems and has established a system of patronages and hand-outs to this end.

Anything can be done in Greece provided someone has political connections, from securing a job to navigating the complexities of the Greek bureaucracy. The government routinely promises handouts to farmers after harsh winters and free education to all; every time there is a display of discontent they rush to appease the people by offering them more “solutions.” What they neglect to say is that these solutions cost money. Now that the money has run out, nobody can reason with an angry mob.

[. . .]

Greece is the perfect example of a country where the government attempted to create a utopia in which it serves as the all-providing overlord offering people amazing job prospects, free health care and education, personal security and public order, and has failed miserably to provide on any of these. In the place of this promised utopian mansion lies a small shack built at an exorbitant cost to the taxpayer, leaking from every nook and cranny due to insufficient funds, which demands ever higher maintenance costs just to keep it from collapsing altogether. The architects of this shack, in a desperate attempt to repair what is left are borrowing all the money they can from their neighbours, even at exorbitant costs promising that this time they will be prudent. All that is left for the people living inside this leaking shack is to protest for all the promises that the government failed to fulfil; but, sadly for the government, promises will neither pay its debts nor appease the angry mob any longer. Greece has lost any credibility it had within the EU as it has achieved notoriety for the way government accountants seem to be cooking up numbers they present to EU officials.

H/T to Steve Baker MP for the link.

February 2, 2012

Is Sino-Forest a typical Chinese company?

Filed under: China, Economics, Government, Law — Tags: , , , — Nicholas @ 09:52

Colby Cosh posted an initial article on the investigation into Sino-Forest’s business back in June:

Timber company Sino-Forest is locked in a fascinating battle for survival against Carson Block, a stock analyst with a mixed record of publicity attacks on Chinese-based enterprises. With professional analysts reluctant to say what they make of Block’s “strong sell” report on Sino-Forest, I’m in no position to endorse it as a piece of financial advice or investigative journalism. Considered strictly as entertainment, however, the report is remarkable.

Block has documented that Sino-Forest operates with extraordinary opacity for a company whose holdings are surely very widely distributed — particularly, one assumes, within Canada. Sino-Forest claims to be doing hundreds of millions of dollars’ worth of sales through mostly unidentified “authorized intermediaries” in China — traders who are apparently happy to let the company buy title to trees, hold them as they appreciate, take on the bulk of the costs and risks in the meantime, and then snap up revenues when the trees are eventually converted into wood products. Block, having poked around a bit in the literal Chinese backwoods, questions whether much if any of the reported underlying activity is happening.

[. . .]

Sino-Forest is refusing, despite intense pressure, to make a full disclosure of the identities of the “authorized intermediaries” who are making its money. The company claims that to do so would put it at a competitive disadvantage, which makes one wonder why its business model ought to depend so heavily on sheer obscurity. One possible answer is that Sino-Forest’s real, fundamental business is some sort of cryptic regulatory arbitrage; that seems like a game potentially worth playing with paper assets in places that have a strong rule of law, but it is surely a dangerous one in a nominally Communist country, where a nationalization could be arranged in the space of an afternoon. (Or where some regional Party functionary could simply be bribed to “lose” crucial paperwork.)

Today, he posted a follow-up report:

Could a curious investor look at actual maps of timber controlled by Sino-Forest agents, you ask? Well, you see, it’s not exactly kosher for foreigners to carry around maps of remote parts of China. You can borrow them from forestry officials if you really need to. Will the local forestry bureaus confirm Sino-Forest’s claims about plantations operated by its agents? Well, sometimes they’ll give you a certificate of sorts, for all the good it might do. “The confirmations are not title documents, in the Western sense of that term,” the committee report notes. (As I understand it, the Western meaning of “title document” is that it gives one an unquestioned, justiciable claim to ownership of something, whether the Party or the Army or the good Lord in heaven approve or not.)

[. . .]

The impression given is that you need influential “backers” to do business in China. The question for the Western investor, though it’s probably now moot, is whether the real role of these backers is to help exploit Chinese resources for the benefit of the Western shareholders or to help fleece Western shareholders for the benefit of Chinese suppliers and bureaucrats.

As Jon, my former virtual landlord puts it, this is a hobby horse I like to ride now and again.

January 23, 2012

The EU culture war against Hungary

Filed under: Europe, Government, Media — Tags: , , , , , — Nicholas @ 10:07

Frank Furedi on the confused situation between the European Union bureaucracy and the government of Hungary:

Thirty or 40 years ago, the way that the EU and the IMF are behaving towards Hungary would have been described as a classic example of neo-colonial pressure. Unlike Greece, Hungary is not simply being lectured about the need to sort out its economy — it has also been subjected to a veritable culture war. As far as the EU and the Western media are concerned, the real crime of the Hungarian government is not so much its inept economic strategy as its promotion of cultural and political values that run counter to what is deemed correct in Brussels.

The Brussels bureaucracy has long regarded Hungary as a society in danger of being engulfed by white savages. In 2006, when people in Budapest rioted against their corrupt government, the EU and sections of the Western media described the demonstrators as right-wing mobs posing a threat to democratic values. At the time, Brussels weighed in to support its man in Budapest, Ferenc Gyurcsany, the Socialist prime minister. The fact that Gyurcsany had lied to cover up the scale of Hungary’s massive budget deficit, and that he had admitted his dishonesty to some of his close colleagues, did not stop his mates in the EU from singing his praises. Poul Nyrup Rasmussen, president of the Party of European Socialists, was quick to rush to Gyurcsany’s defence, claiming he was the ‘best man to make the reforms that Hungary needs’.

What the Western media overlooked was that the corrupt Gyurcsany government was complicit in creating the conditions for mass demoralisation and cynicism. It was this EU-backed regime that did much to unravel and damage public life in Hungary. Gyurcsany’s humiliating electoral defeat in 2010, and the triumph of Viktor Orban and his Fidesz party, meant that the EU’s placeman was replaced by an autocratic nationalist and populist prime minister.

[. . .]

But then, the EU itself has no inhibitions about imposing its values on to its target audiences. It, too, does not want its constitutional proposals held up to public scrutiny. Sometimes it rules by decree and refuses people’s requests to hold any referenda on EU-related matters, on the basis that the issues are far too complex for ordinary people to understand. Evidently, the EU commissioners have read their Voltaire. To recall — it was Voltaire who praised the Russian absolute monarch Catherine the Great’s invasion of Poland and celebrated her ability ‘to make fifty thousand men march into Poland to establish there toleration and liberty of conscience’. The EU does not have 50,000 men but it does have many other resources for executing its culture war. Voltaire was tragically mistaken in his belief that deploying coercion was a legitimate tool for forcing people to change their beliefs — but at least he actually believed in tolerance and freedom of conscience. In contrast, the EU technocracy has little time for genuine tolerance.

January 8, 2012

George F. Will on big government

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

Even fans of bigger government should recognize the accuracy of this short summary:

Liberals have a rendezvous with regret. Their largest achievement is today’s redistributionist government. But such government is inherently regressive: It tends to distribute power and money to the strong, including itself.

Government becomes big by having big ambitions for supplanting markets as society’s primary allocator of wealth and opportunity. Therefore it becomes a magnet for factions muscular enough, in money or numbers or both, to bend government to their advantage.

The left’s centuries-old mission is to increase social harmony by decreasing antagonisms arising from disparities of wealth — to decrease inequality by increasing government’s redistributive activities. Such government constantly expands under the unending, indeed intensifying, pressures to correct what it disapproves of — the distribution of wealth produced by consensual market activities. But as government presumes to dictate the correct distribution of social rewards, the maelstrom of contemporary politics demonstrates that social strife, not solidarity, is generated by government transfer payments to preferred groups.

[. . .]

The tax code, government’s favorite instrument for distributing wealth to favored factions, has been tweaked about 4,500 times in 10 years. Generally, the beneficiaries of these changes are interests sufficiently strong and sophisticated to practice rent-seeking.

Not only does redistributionist government direct wealth upward; in asserting a right to do so it siphons power into itself. A puzzling aspect of our politically contentious era is how little contention there is about the ethics of coercive redistribution by progressive taxation and other government “corrections” of social outcomes it considers unethical or unaesthetic.

December 31, 2011

The “Reverse Pelzman” Effect

Filed under: Americas, Bureaucracy, Economics — Tags: , , , — Nicholas @ 10:35

A semi-serious discussion of a real-world experiment in getting rid of driving licenses:

Those of us who are econ geeks will know about the Pelzman Effect. Regulations that supposedly make us safer (say, seatbelts or cycling helmets) don’t actually make us safer as behaviour changes to take account of the new safety. Almost as if there’s what we consider to be an acceptable risk to take and reducing it in one manner just allows us to be silly in another so as to maintain that risk we’re comfortable with. What I didn’t know (but better econ geeks than I might have done already) is that there is a Reverse Pelzman Effect.

Exploiting an interesting natural experiment, the authors of that paper are able to show that we should abolish driving licences. The various States of Mexico found that bribery was impossible to avoid when attempting to gain a licence. So, to varying degrees, they changed their issuance system, some deciding simply not to have them any more. So, of course, death rates from car accidents went up, didn’t they?

Erm, actually, no, they didn’t. Those places that didn’t bother with licences any more, allowing absolutely anyone at all to get in and drive, saw no change in such death rates any different from those that had now (well, hopefully) incorruptible issuance systems.

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%?

December 1, 2011

Grim situation for North Korean civilians gets grimmer

Filed under: Asia, Media, Military — Tags: , , — Nicholas @ 08:58

Strategy Page reports that the North Korean government is trying to distract the population from a declining economy with talk of an invasion from South Korea:

North Korean media is taking an ominous turn. For much of the year, the big story was that everything would change in 2012, with new housing and more of everything. That failed, as it is obvious to all that the 2012 promises are not going to be fulfilled. The new pitch urges North Koreana to eat less and save food. That military is being praised, as is the artillery attack on South Korea (Yeonpyeong Island) a year ago.

The most visible aspects of the 2012 promises (and the centennial of North Korean founder Kim Il Sung) are many new construction projects in the capital. This effort is not only way behind schedule, but is putting up poorly built structures and killing hundreds of students and others who have been conscripted as unskilled labor. The government puts a positive spin on the construction, but darker views get around, despite government efforts to control the news.

While North Koreans are warned about hunger, the government is silent on why they are going to be cold. The government has greatly increased coal exports to China, meaning prices have doubled in some parts of North Korea. The government denies that exports are up sharply, but won’t say anything about the rising prices. Meanwhile, illegal tree cutting is increasingly common as people seek fuel with which to survive the cold weather. Satellite photos show the sharp difference between forestation in the north and south. Foreign aid groups believe that at least three million North Koreans are in danger of starvation. Many more North Koreans are eating less. But many North Koreans are living better. The market economy, but the legal markets and the black market, increasingly thrive.

« Newer Posts — Older Posts »

Powered by WordPress