Quotulatiousness

September 3, 2022

The impact of the first wave of globalization

Filed under: Economics, History — Tags: , , , , — Nicholas @ 03:00

In the latest Age of Invention newsletter, Anton Howes considers the world in terms of trade before and after the transportation revolution which changed long-distance trade from primarily luxury goods to commodities for the mass market:

Long-distance trade has of course been common since ancient times. Archaeologists often find Byzantine-made glassware from the sixth century all the way out in India, China, and even Japan. Or beads from seventh-century Southeast Asia all the way out in Libya, Spain, and even Britain. Yet such long-distance trades often involved goods that were entirely unique to particular areas — gems, spices, indigo, coffee, tea — or were sufficiently valuable to make the high costs of transportation worthwhile, such as expert-made glassware, silks, and muslin cloths with impossibly high thread counts. Long-distance trade may have been ancient but was restricted to luxuries. It did not involve the everyday goods of life.

That all changed, however, when the innovations of the sixteenth to the nineteenth centuries caused transportation costs to dramatically fall. With better sailing ships, canals, and navigational techniques, followed by better roads, railways, refrigeration, steam power, and dynamite (which meant railways could cross mountain ranges, canals could link oceans, and new deep-water ports could be dug), it was soon profitable to transport even the cheapest and bulkiest of goods over vast distances — goods like meat, coal, and grain.

The entire world was brought into a single market, in which even the bulkiest commodities of each continent were suddenly in direct competition with one another. The decisions of farmers in Ukraine, for example, in the nineteenth century came to affect the farmers in America, China, India, or even Australia, and all of them vice versa. The prices of commodities all over the world thus converged to similar levels, falling in some places, but rising in the economies that had previously been too distant from the ready markets of the industrialised nations.

The result was what economic historians call a terms-of-trade boom, with the more agrarian economies’ commodity exports becoming more valuable relative to manufactured imports. Thus, their grain, raw fibres, minerals, and ores suddenly bought many more foreign manufactures like textiles. Countries that specialised in commodities thus specialised even further, devoting even more of their workers, resources and capital to extracting them. They were incentivised to extend their frontiers — to put more of the wilderness under pasture or plough, and to dig deeper for the mineral wealth beneath their feet.

Meanwhile, for the industrial economies, the opposite happened. By gaining access to many more and cheaper sources of raw resources and food, they were able to make their own manufactured exports cheaper too. And this, in turn, further exacerbated the terms-of-trade boom among their newly globalised commodity suppliers. As the great Saint-Lucian economist Sir W. Arthur Lewis put it, the world in the late nineteenth century separated into an increasingly industrialised “core”, fed by an increasingly farming- and mining-focused “periphery”.

Much has changed in the century that followed, and some of the old core/periphery distinctions have moved or entirely broken down. But the world has remained globalised. Even in periods of higher tariffs, like between the world wars, no amount of protectionism was able to counteract or undo the effects of the dramatic drop in global transportation costs. With the advent of telegraphs, telephones, fax machines, and now the Internet, even many services are becoming globalised as well — a process likely sped up by the pandemic. Those who can easily work from home will increasingly, like nineteenth-century workers the world over, find themselves either the victims or beneficiaries of global price convergence. (Incidentally, I’m not convinced that the very services-heavy economies of Europe or North America are even remotely prepared for this, to the extent that they can prepare at all for what is the economic equivalent of a planetary-scale force of nature.)

April 12, 2021

QotD: Four lessons on free trade

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

Here are the main points of the Bank of Canada’s lessons in free trade. It starts off with a bang. “Trade is dominating the news these days. With the barrage of headlines and the talk about protectionism and tariffs, it’s easy to forget that much of our economic growth and prosperity comes from international trade.”

Below are the lessons, taken almost entirely verbatim from the bank’s online lesson (except where I’ve provided a bit of additional description). It’s a terrific lesson and all within a mere 1,400 words and a short video.

Lesson 1: All parties reap the rewards of free trade.

Specialization means focusing on what each country produces most efficiently and trading for the rest. And because specialization is more efficient, it creates more wealth than if each country tried to do it all on its own. International trade is no different from domestic specialization and internal trade — few of us grow our own food or do our own dry cleaning. Instead, we specialize and trade. The lesson includes a short cartoon video featuring “Mark and Lucy” — aimed at kids but worth a presidential view — that explains the concepts of comparative advantage and opportunity costs.

Lesson 2: Trade protectionism makes everyone worse off.

While freer trade — in both exports and imports — makes us better off, the opposite is also true. Barriers to free trade, such as tariffs, have a negative impact on our economic well being.

Lesson 3: The pie isn’t divided equally.

Freer trade has raised incomes across the global economy, but it has not benefited everyone. Countries engaged in free trade are better off overall, but some sectors and communities within countries have suffered. Governments have used policies such as ongoing learning and retraining programs to help affected workers adjust. This a better approach than shrinking the pie through trade protection. That would be worse for everyone.

Lesson 4: Trade deficits and surpluses are not a scorecard.

It’s important to debunk the myth that cheap imports are the cause of all the pain and that a trade deficit with another country is a bad thing. Looking at trade balances between a country and its trade partners, we should expect to see surpluses with some and deficits with others. This is specialization in action.

Terence Corcoran, “Amazing! Canada has one government department that actually comprehends free trade!”, Financial Post, 2018-10-04.

November 24, 2020

QotD: Canada’s economic Stockholm Syndrome

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

Trade agreements are always about “concessions” in which foreign suppliers are grudgingly given — or, more often, indignantly denied — the right to sell Canadians goods and services at prices lower than what we pay now. Let’s be clear here: lowering the price of consumer goods and services has the exact same effect on household welfare as an increase in incomes. But I defy you to name an elected politician who will list “the ability to buy cheaper stuff” as the most compelling reason to support free trade: more than 200 years since Adam Smith wrote that paragraph, our trade agenda is still written by and for producer interests.

We’re stuck with a system in which producer interests — most notoriously the dairy cartel that operates under the name of “supply management” — hold the rest of us hostage. Dismantling the dairy cartel is an act that would significantly increase consumers’ buying power, but this is a measure that the Conservatives have all but ruled out under any circumstances, and the NDP has made maintaining the cartel a condition for supporting any sort of trade agreement.

Why would the [major parties] stubbornly insist on sticking to a policy that makes consumers worse off at the expense of producers? Because it’s a popular position. It’s one of the marvels of the Canadian electorate. Show Canadians a special interest group that uses its government-granted privileges to fleece consumers, and they’ll embrace it as a “national champion,” a “uniquely Canadian way of life” or some equally vapid catch-phrase.

This is from the Wikipedia entry for Stockholm Syndrome:

    Stockholm syndrome, or capture–bonding, is a psychological phenomenon in which hostages express empathy and sympathy and have positive feelings toward their captors, sometimes to the point of defending them.

What we suffer from is the economic policy equivalent. Call it “Canada Syndrome”: a tendency for consumers to identify with the producer interests that are holding them hostage.

Stephen Gordon, “Our Stockholm Syndrome about supply management”, Maclean’s, 2013-03-05.

November 6, 2020

An American Globalist – Cordell Hull – WW2 Biography Special

Filed under: Americas, History, Japan, USA, WW2 — Tags: , , , , , , — Nicholas @ 06:00

World War Two
Published 5 Nov 2020

Cordell Hull is the face of American diplomacy in 1941 as it navigates the precarious road to war against Imperial Japan.

Join us on Patreon: https://www.patreon.com/TimeGhostHistory
Or join The TimeGhost Army directly at: https://timeghost.tv

Follow WW2 day by day on Instagram @ww2_day_by_day – https://www.instagram.com/ww2_day_by_day
Between 2 Wars: https://www.youtube.com/playlist?list…
Source list: http://bit.ly/WW2sources

Hosted by: Indy Neidell
Written by: Francis van Berkel and James Newman
Director: Astrid Deinhard
Producers: Astrid Deinhard and Spartacus Olsson
Executive Producers: Astrid Deinhard, Indy Neidell, Spartacus Olsson, Bodo Rittenauer
Creative Producer: Maria Kyhle
Post-Production Director: Wieke Kapteijns
Research by: James Newman
Edited by: Miki Cackowski
Sound design: Marek Kamiński
Map animations: Eastory (https://www.youtube.com/c/eastory)

Colorizations by:
Norman Stewart – https://oldtimesincolor.blogspot.com/
Mikolaj Uchman
Spartacus Olsson

Sources:
Naval History & Heritage Command
http://maps.bpl.org
FDR Presidential Library & Museum
Picture of MS St. Louis in Hamburg, United States Holocaust Memorial Museum, courtesy of Herbert and Vera Karliner
from the Noun Project: Skull by Muhamad Ulum, Handshake by priyanka, Pickaxe by Luke Anthony Firth, oil barrel by BomSymbols

Soundtracks from the Epidemic Sound:
Howard Harper-Barnes – “London”
Johannes Bornlof – “The Inspector 4”
Farell Wooten – “Blunt Object”
Philip Ayers – “Trapped in a Maze”
Johannes Bornlof – “Deviation In Time”

Archive by Screenocean/Reuters https://www.screenocean.com.

A TimeGhost chronological documentary produced by OnLion Entertainment GmbH.

November 5, 2020

QotD: The idiocy of tariffs

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

The entire point of trade, the very purpose of it, is to gain access to the imports. Those things which Johnny Foreigner makes cheaper or better than we do. To tax ourselves because he makes things cheaper or better than we do is simple idiocy. […] Over and above this stupidity there’s the depressing point that trade and trade protection really is a spiral. Here we’ve got the two largest economies on the planet tripping over themselves to punish their own citizenry for their temerity in buying foreign. And as we can see, it is a tit for tat spiral. A little bit of sabre rattling, a response, a larger amount of shouting, a response, then truly impoverishing levels of rock throwing into own harbours and off we go into making our own people less wealthy.

The true sadness here being that the spiral works the other way too. But hugely, vastly, more slowly. GATT was founded in 1947, it became, the process was transferred to, the WTO and it has taken them since then, that two generations, to reduce tariff levels to where they’re not really all that important in trade matters. Something that is being undone in just a couple of months of foolishness. GATT being something of a response to the economic demolition work done by Smoot Hawley of course.

Trade protection does spiral up and spiral down, the sadness being that here’s an asymmetry to the process. The reductions that make us richer take very much longer than the nonsenses that impoverish.

Tim Worstall, “The China, US, Trade War – It’s All Mutual On The Way Down As Well As Up”, Continental Telegraph, 2018-07-11.

August 21, 2020

Geography works against CANZUK ever happening

Filed under: Australia, Britain, Cancon, Economics — Tags: , , , , — Nicholas @ 05:00

Ted Campbell is a big fan of the CANZUK scheme (Canada-Australia-New Zealand-United Kingdom) to create an “anglosphere” power alongside the current economic big-hitters on the world stage like the United States, China and the European Union. I agree it has historical, nostalgic appeal, but as Aris Roussinos points out, geography is a big stumbling block to it ever being much more than an idea:

Since losing the empire, Britain has notoriously struggled to find a role on the world stage. Initial attempts to piggyback on the power of our successor as global hegemon, the United States, by acting as a guiding force — a Greece to America’s Rome, in Harold Macmillan’s phrase — faltered due to the total absence of interest ever shown in this arrangement by any American administration.

The subsequent attempt to remould Britain as a European power acting in concert with its continental neighbours through the European Union was an unhappy marriage, and has ended in a rancorous divorce whose final settlement is still to be determined. Adrift on the world stage, we are in need of good ideas.

Instead, we are offered CANZUK, a reheated Edwardian fantasy of a globe-spanning Anglosphere acting as a world power which excites the enthusiasm of a small coterie of neoliberal and neoconservative ideologues, if no one else.

In a recent piece for the Wall Street Journal, the historian and Churchill biographer Andrew Roberts argued that the CANZUK nations — Canada, Australia, New Zealand and the UK — ought to establish “some form of federation among them” as a “second Anglospheric superpower” combining “free trade, free movement of people, a mutual defense organization and combined military capabilities” , which would “create a new global superpower and ally of the U.S., the great anchor of the Anglosphere”.

One cannot fault Roberts for the grandeur of his vision, even if the details of how this would actually work are left to others to fill in. Instead, we are reassured, this would not be a centralising project like the hated EU; rather, “its program for a loose confederal state linking the Westminster democracies would be clearly enunciated right from the start.” Already, we see the harsh hand of reality ready to crush this initially appealing vision. On the one hand, CANZUK is a globe-spanning superpower ready to be born; on the other, it is merely a loose grouping of separate national governments, which would, like all national governments, act according to their own interests above all.

By totting up the different GDP figures of the various CANZUK nations, Roberts claims that his proposed Empire 2.0 “would have a combined GDP of more than $6 trillion, placing it behind only the U.S., China and the EU,” while “with a combined defense expenditure of over $100 billion, it would also be able to punch above its weight”.

Yet the flaws of this argument are obvious. As other critics have noted, only a minuscule proportion of the CANZUK nations’ trade is with each other, save New Zealand, an economic satellite of Australia. Australia is a great East Asian trading power, and will remain so. Canada is enmeshed in the greater North American trading sphere, as are we with Europe, whatever Brexiteers may wish. As always, the simple matter of geography trumps the affective bonds between far-flung kith and kin, whatever their emotional appeal.

August 8, 2020

QotD: The British Empire

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

Security empires come and go. While they serve a purpose, their citizens are willing to pay the cost. When they become too expensive to maintain, they simply fold, or get ground under. They work to purpose, or stop.

Conquest empires rarely outlive their founders, or only last a few generations. Alexander’s generals, or Charlemagne’s children and grandchildren, dividing and subdividing into smaller and smaller units, is the norm for such empires. (If not straight collapse when the dictator holding it all together vanishes.)

The only “conquest” empires that have held up are those that send settlers into the lands of hunter-gatherers or nomads. The United States, Russia and Australia being good examples. (But the only reason they can hold up is if the captured territory can be converted into a functional part of the state and society … something the US and Australia have largely managed … Russia’s attempts to enforce this unity by repression of its more developed conquered peoples have not been so successful over the last few centuries, and it is unlikely that China will do much better long-term no matter how much repression it introduces into its recent conquests of established societies like Tibet and the Uyghurs.)

Which leaves only trade empires as potentially successful long term options. And only because their success is not measured by sustaining the political unity of the “empire”, but by sustaining its economic goals.

The most successful empire in world history is the British empire, which could delightedly declare itself obsolete in the 1920s, and again (after having to work mostly co-operatively to fight World War Two) in the 1950s. Both times it encouraged the member states to go look after themselves (some successfully and some less so), and yet it still managed to leave an almost completely secure legacy for its existence … relatively safe international free trade routes. (The almost complete elimination of both piracy and slavery worldwide just being minor side benefits of the British Empire.)

For an empire developed “in a fit of absent mindedness”, and as a byproduct of trying to develop free trade around the world: the measure of success has to be the Commonwealth of Nations – comprising 54 nations with about 1/3 of the world’s population, getting together to play cricket every year and hold a Commonwealth Games every 4 years.

This is not an empire that copllapsed, or was destroyed. This is an empire that over a century or so (from granting independent Dominion status to Canada in 1886 [Canadians stoutly maintain it was 1867], Australia 1901, New Zealand and South Africa pre-Great War, Ireland and Egypt interwar, India and Pakistan post war, large parts of Asia and Africa in the 60s and 70s etc.); nonetheless developed and secured the international free trade system that the world has embraced. (Including a re-integration by an early exit-er from the empire … the 13 out of 35 British north American colonies that became the United States … and who finally inherited the title of world policeman when the rest of the Commonwealth nations had got sick of the whole thing.)

Nigel Davies, “Types of Empires: Security, Conquest, and Trade”, rethinking history, 2020-05-02.

July 20, 2020

QotD: Protectionists misunderstand the role of money

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

A Protectionist is Someone Who … thinks that the ultimate purpose of producing goods and services is to use them to acquire as much money as possible. Unlike a free-trader who understands that the purpose of producing goods and services is to acquire for yourself and your family as many as possible real goods and services to raise as much as possible your standard of living – and who understands that exchanging for money what you directly produce is merely a means of lowering your cost of acquiring in exchange as many as possible goods and services produced by others – the protectionist thinks that the ultimate purpose of producing real goods and services is to use them to acquire as much money as possible.

The Econ 101 teacher typically draws on the white board a diagram of two countries trading with each other. Country A is shown exporting (say) steel to country B in exchange for dollars, and then using those dollars to buy lumber from country B. The Econ 101 teacher informs his or her class that, while these exchanges are mediated by dollars, what ultimately is going on in this diagram is that the people of country A produce steel and send some of that steel to the people of country B because the people of country A want lumber from country B. Likewise, the people of country B produce lumber and send some of it to the people of country A because the people of country B want steel from country A. “The money that you see, class,” explains the Econ 101 teacher, “merely facilitates the exchange of steel for lumber. What’s important here is the getting of steel and of lumber. Money is a tool used by the people of country A to transform some of the steel they produce into lumber that they want to consume. Likewise, money is a tool used by the people of country B to transform some of the lumber they produce into steel that they want to consume.”

The protectionist thinks of this hypothetical two-country exchange entirely differently from the way that the Econ 101 teacher thinks of it. For the protectionist, the people of country A produce steel as a means of getting money; that is the ultimate goal. And the people of country B produce lumber as a means of getting money; that – the getting of money – is the ultimate goal. While for the Econ 101 teacher the two-country diagram that he or she draws is meant to show how money facilitates the ultimate acquisition by the peoples of each country of real goods, for the protectionist the diagram seems to show that the production of real goods is a means of facilitating the ultimate acquisition by the peoples of each country of money.

Don Boudreaux, “A Protectionist is Someone Who…”, Café Hayek, 2018-04-10.

May 3, 2020

The Great Exhibition of 1851

Filed under: Britain, Economics, History, Technology — Tags: , , , , , , , — Nicholas @ 03:00

In the latest Age of Invention newsletter, Anton Howes looks at one of the biggest popular events of Queen Victoria’s reign, the Great Exhibition:

The Crystal Palace from the northeast during the Great Exhibition of 1851, image from the 1852 book Dickinsons’ comprehensive pictures of the Great Exhibition of 1851
Wikimedia Commons.

On this day, in 1851, Londoners were finally allowed to enter one of the most spectacular edifices to grace their city. Over the previous months they had watched it spring up in Hyde Park — the largest enclosed structure that had ever been built, and made with three hundred thousand of the largest panes of glass ever produced. Set against the blackened, soot-stained buildings of London, the massive glass edifice gleamed. It soon became known as the Crystal Palace.

Although it no longer exists — it was rebuilt in Sydenham, but the new version burnt down in the 1930s — the fame of the Crystal Palace endures. The same goes for the event that it was originally built for, the Great Exhibition of 1851. But, despite that name-recognition, I’ve found that most people don’t really know what the Great Exhibition was for. Yes, it attracted six million visitors in the space of just a few months — an estimated two million people, almost a tenth of the entire population of Great Britain, most of them returning again and again. But why? I must admit, despite having mentioned the event before in some of my work, I’d never really considered it properly before I started researching the history of the Society of Arts.

The idea of such an exhibition in Britain originated with the Society’s secretary in the 1840s, the civil engineer Francis Whishaw. He had seen the use of industrial exhibitions in France, as a means of catching up with Britain in terms of technology. Every few years since 1798, the French government had held an exhibition of its national industries in Paris. The state paid for everything — a grand temporary building, as well as the expenses of the exhibitors — and the head of state himself awarded medals and cash prizes for the bet works on display. Some of the very best exhibitors were even admitted to the Légion d’honneur, France’s highest order of merit. The benefits to exhibitors were so high that essentially every manufacturer wished to take part. In the days before GDP statistics, the exhibitions were thus an effective means of getting a detailed snapshot of the nation’s manufacturing capabilities. An exhibition served as the nation’s industrial audit.

[…]

Although there had been a few local exhibitions of industry in Britain in the late 1830s and early 1840s, there had been nothing on a national scale to rival the French ones. So Francis Whishaw began the work of getting the Society to organise such an event — a national exhibition of industry for Britain. His initial plan came to nothing, partly as he left the Society to take another job, but in the late 1840s the project was resurrected by a new member of the Society, a civil servant named Henry Cole. In fact, Cole almost entirely took over the Society in the late 1840s, turning it into an exhibition-holding organisation. It held exhibitions devoted to particular living artists, on ancient and medieval art, on inventions, and especially on industrial design — what Cole liked to call “art-manufactures”. And, at the 1849 national exhibition in Paris, he adopted an idea that had already been floated for some years by French officials: an international exhibition, to show the industry of all nations.

This was the crucial step. The idea of an international exhibition of industry appealed to the free trade movement in Britain, which had achieved success in the 1840s with the abolition of the Corn Laws. By displaying the products of other nations, the argument went, British consumers would demand that they be able to buy them more cheaply. And free trade would hopefully bring an end to war, too. Free trade campaigners argued that the productive classes of rival nations competed peacefully, simply by trying to outdo one another in the quality and quantity of what they produced. It was the landed aristocracy, they argued, who let the competition become violent, feeding their pride by causing destruction. Thus, a grand exhibition of the products of all nations — the Great Exhibition — would be a physical manifestation of free trade and international harmony: a “competition of arts, and not of arms”.

The Great Exhibition thus had many roles. It was partly born of national paranoia, about French industrial catch-up, as well as about Britain being the first to hold such an event. It was also about exciting competitive emulation between manufacturers, showing consumers what they did not know they wanted, and achieving world peace and free trade. It certainly spurred on dozens of examples of international cooperation. In fact, just the other day I discovered that the first international chess tournament was held in London to coincide with the exhibition. And it served as an audit of the world’s industries, allowing people to judge who was ahead and who was behind. It thereby gave domestic reformers the ammunition to push for changes in areas where Britain seemed to be falling behind, in areas like education, intellectual property, and design. But more on those another time.

March 10, 2020

QotD: Free trade versus protectionism

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

It is a myth that free trade is unproven in practice. Forget that countries with freer trade have both higher per-capita incomes and faster rates of economic growth. Look instead at the essentials of the case. Each and every day you trade freely with many merchants. Do you think that you and your family would be enriched if your neighbor extracted punitive payments from you whenever you buy some item that your neighbor judges to be from a seller located too distant from your neighborhood? Every day Arizonans trade freely with Texans and Rhode Islanders. Do you think that Arizonans would be enriched if the government of that state obstructed their ability to trade as they choose with people located in other states?

People trade freely countless times, each and every day. Yes, yes, I’m well aware that such trade isn’t ideally free. Occupational-licensing restrictions, for example, unjustly and harmfully obstruct domestic trade. But the fact remains that today within each country – including within the U.S. – trade is not typically obstructed based on geographic location or political boundaries. And therefore people buy and sell freely within countries. If the case for a policy of free trade were not practical – if it were only a theoretical curiosity – then it would be true that ordinary people would be even richer if the state obstructed their abilities to trade with each other domestically.

It’s a myth also that the economic case for a policy of free trade in any one country requires that other governments also practice free trade. The case for a policy of free trade is, at bottom, a case for unilateral free trade: while nearly everyone in the world would be better off if all governments adopted policies of free trade, nearly everyone in the home country would be better off if the home government adopts a policy of free trade regardless of the policies of other governments.

Protectionism is a nasty mash of logical fallacies, half-truths, hubris, economic ignorance, and cronyist apologetics.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2017-12-18.

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 9, 2020

Addressing overblown fears of “regulatory divergence” after Brexit

Filed under: Britain, Economics, Europe, Politics — Tags: , , , — Nicholas @ 05:00

Tim Worstall explains why worries about “regulatory divergence” are not very sensible:

So now we get to – having agreed that Brexit is going to happen – having to decide what the new trade deal is going to be. At which point there are all sorts of people insisting that we shouldn’t have regulatory divergence. Yet gaining that regulatory divergence is the very point of our having Brexit. We want to be able to do things differently than the European Union.

Thus this sort of worry is thinking about it the wrong way around:

    Brexit is nearly done, but don’t expect an easy ride on trade. The EU is terrified of regulatory divergence

    We are still very much in the early honeymoon period of the new Government, when flush with a stunning election victory all things seem possible. Even the traditionally hostile Financial Times seems to have been partially won over by the infectious optimism that for now flows through the nation’s veins, warming to some of the opportunities for positive change that Brexit may allow.

    Yet at some stage, with the feelgood mood colliding with harsh realities, there is going to be a comedown. The first of these awakenings is likely to centre on trade.

    In reaching a trade deal with the EU by the end of the year as promised, the Government will either have to compromise on scope for regulatory divergence, …

The point being that since the divergence is the very thing we want it’s not the thing to compromise upon.

Start from the very basics. There is no version of voluntary trade that is worse than autarky. There are versions of trade that are better than simple unilateral free trade. Like, for example, the other people adopting unilateral free trade too.

So, our baseline starting point for any negotiation on trade is that any trade is better than none, but we must measure any specific proposal against the effects of unilateral free trade. If it would be better to have this extra thing then all well and good, let’s have it. But if the conditions attached to that make the overall deal worse than the unilateral position then we should not have it.

For example, UK farm goods gaining tariff and quota free access to the EU would be a nice thing to have. But a likely cost of that is that British consumers would not be allowed tariff and quota free access to the farm goods of the rest of the world. The cost of that second is greater than the benefits of the first – we don’t do it therefore.

On regulation much the same becomes true. The negotiating stance at least. What would be the paradisical effect of a system of perfect regulation? Not that one exists nor ever will but that’s what we need to imagine. Then, anything we’re asked to accept which is worse than this has to be tested for whether what we lose from the restriction is worth what we then gain elsewhere.

Given EU regulation this is always going to lead to the answer “No”.

November 15, 2019

QotD: Understanding trade policy

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

You live on a block on Elm St. which has two other households: the Joneses and the Jacksons. Suppose your neighbor Jones puts a knife to your throat and threatens to kill you unless you either buy your tomatoes from him or, if you insist on buying tomatoes from a grower across town, pay him a fine for each across-town tomato that you buy. You immediately understand that Jones is violating your rights; you immediately understand that Jones is a thug, pure and simple. No amount of philosophy, economics, political science, or theology will change your assessment.

Now let Jones secure Jackson’s approval for his actions. Jackson expresses his approval not only of Jones obstructing your freedom to buy across-town tomatoes, Jackson also approves of Jones taking some of your money directly to help Jones pay for the employment, arming, and dressing up in fancy costumes of a street gang who will do the actual dirty work of caging or killing you if you refuse to abide by the tomato-buying terms that Jones imposes on you.

When you object to the injustice of Jones’s actions, he reminds you that you had a vote in this matter. But being outvoted 2 to 1, this majority outcome, by some mystical process, transforms Jones’s pure and simple thuggery into perfectly acceptable – even noble – “trade policy” the violation of which would make you the anti-social criminal.

Further, Jones, to his delight, discovers that Jackson has been hard at work on a treatise that details the many dangers of allowing you to buy your tomatoes without obstruction from across town. Jackson’s treatise even has empirical data on the number of tomatoes and labor hours that would no longer be grown and and worked on your Elm St. block if you are left free to buy your tomatoes unobstructed. Combined with criticisms of “simple-minded” defenses of free trade and with explanations that tomatoes grown across town are sold at unfairly low prices, Jackson’s treatise rids Jones of the few qualms that Jones’s threats of violence against you caused him to suffer from time to time

Thus is “trade policy.”

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2017-10-23.

September 15, 2019

Explaining Brexit to liberal Americans

Filed under: Britain, Europe, History, Law, Politics — Tags: , , , , , — Nicholas @ 05:00

Andrew Sullivan tries to put the Brexit debate into terms that coastal, urban Americans can understand:

One of the frustrating aspects of reading the U.S. media’s coverage of Brexit is that you’d never get any idea why it happened in the first place. Brexit is treated, automatically, as some kind of pathology, a populist act of wanton self-harm, an absurd idea, etc etc. And from the perspective of an upstanding member of the left-liberal media establishment, that’s all true. If your idea of Britain is formed by jetting in and out of London, a multicultural, global metropolis that is as lively and European as any city on the Continent, you’d think that E.U. membership is a no-brainer. Now that the full hellish economic consequences of exit are in full view, what could possibly be the impulse to stick with it?

I get this. I would have voted Remain. I find London to be far more fun now than it was when I left the place. But allow me to suggest a parallel version of Britain’s situation — but with the U.S. The U.S. negotiated with Canada and Mexico to create a free trade zone called NAFTA, just as the U.K. negotiated entry to what was then a free trade zone called the “European Economic Community” in 1973. Now imagine further that NAFTA required complete freedom of movement for people across all three countries. Any Mexican or Canadian citizen would have the automatic right to live and work in the U.S., including access to public assistance, and every American could live and work in Mexico and Canada on the same grounds. This three-country grouping then establishes its own Supreme Court, which has a veto over the U.S. Supreme Court. And then there’s a new currency to replace the dollar, governed by a new central bank, located in Ottawa.

How many Americans would support this? How many votes would a candidate for president get if he or she proposed it? The questions answer themselves. It would be unimaginable for the U.S. to allow itself to be governed by an entity more authoritative than its own government. It would signify the end of the American experiment, because it would effectively be the end of the American nation-state. But this is precisely the position the U.K. has been in for most of my lifetime. The U.K. has no control over immigration from 27 other countries in Europe, and its less regulated economy has attracted hundreds of thousands of foreigners to work in the country, transforming its culture and stressing its hospitals, schools and transportation system. Its courts ultimately have to answer to the European Court. Most aspects of its economy are governed by rules set in Brussels. It cannot independently negotiate any aspect of its own trade agreements. I think the cost-benefit analysis still favors being a member of the E.U. But it is not crazy to come to the opposite conclusion.

More to the point, the European Economic Community has evolved over the years into something far more ambitious. Through various treaties — Maastricht and Lisbon, for example — what is now called the European Union (note the shift in language) has embarked on a process of ever-greater integration: a common currency, a common foreign policy and now, if Macron has his way, a common central bank. It is requiring the surrender and pooling of more and more national sovereignty from its members. And in this series of surrenders, Britain is unique in its history and identity. In the last century, every other European country has experienced the most severe loss of sovereignty a nation can experience: the occupation of a foreign army on its soil. Britain hasn’t. Its government has retained control of its own island territory now for a thousand years. More salient: this very resistance has come to define the character of the country, idealized by Churchill in the country’s darkest hour. Britain was always going to have more trouble pooling sovereignty than others. And the more ambitious the E.U. became, the more trouble the U.K. had.

August 18, 2019

QotD: “Hitting back” at protectionist policies

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

You buy lawn-care services from company XYZ located on the other side of town. Your neighbor, Mr. Stump, takes it upon himself to hold you up at gunpoint to the tune of $25 each time you buy services from XYZ rather than from Stump’s teenage son. You are less powerful than Stump and, not being suicidal, you pay the “tariff” that he officiously demands. But Stump is a magnanimous fellow, and so he agrees to a deal with XYZ: Stump drops his tariffs on your purchases from XYZ in return for XYZ agreeing to raise the price it charges you by $15.

But soon a trade dispute erupts. Stump discovers – correctly, we can assume – that XYZ is charging you less for its lawn-care services than Stump agreed is acceptable for you to be charged and that XYZ agreed in the trade deal to charge. Stump, being a master negotiator, threatens to reimpose the $25 tariff on you unless and until XYZ raises the price it charges you to at least the level that Stump has divined is acceptable and that is enshrined in the terms of the trade agreement between him and XYZ. Alas, XYZ gives in and agrees to raise the price it charges you. Stump then boasts that, by not letting XYZ get away with breaking its word in the trade deal, he is not only protecting the neighborhood from dangerously low prices but is also upholding the sacred rule of law and the sanctity of contractual agreements.

Of course, in reality, Stump’s presumptuous exercise of the power to rob you impose a tariff on you whenever you engage in commerce that he finds objectionable is a wrong inflicted on you and on your trading partner, XYZ. The fact that the practicalities of the situation result in your and XYZ going along with the “deal” to entice Stump to stop robbing you each time you buy XYZ’s services does not ethically oblige you to stick to the terms of the deal if you can, in secret, get better terms from XYZ. When Stump threatens to reimpose on you the $25 tariff, he harms you. That is, when in response to Stump’s threat to reimpose the tariff XYZ agrees to abide by the terms of its trade agreement with Stump and raise the price that it charges you, you are made worse off, not better off.

Stump’s enforcement of this agreement, in short, does not protect you from further victimization in the future; instead, that enforcement is itself an act of victimizing you. Successful enforcement of this agreement assures you a future less prosperous than it would be were Stump instead to ignore XYZ’s “violation” of the deal.

Note: we can all agree that, between the two options (1) $25 tariff and (2) no tariff but an enforced price-hike, under the trade agreement, of $15, that the second option is better for you than the first option. It is in this limited sense that trade agreements in reality are beneficial. But there’s a third option: (3) Stump does not interfere with your commerce and you pay whatever price you negotiate with XYZ without that price being artificially affected by Stump’s interference. This third option is, for you, the best of the three – and it’s the only fully ethical one of the bunch. (So when Dan Griswold, myself, and other free-traders defend trade agreements, we do so with the realistic recognition that option (3) is politically infeasible. Given this unfortunate infeasibility of option (3), we endorse option (2) over option (1).)

Don Boudreaux, “Strict Enforcement of an Impoverishing Deal Assures Continuing Impoverishment”, Café Hayek, 2017-07-07.

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