Quotulatiousness

November 26, 2023

Ontario’s beer market may see radical changes soon

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

For beer drinkers outside Ontario, the province’s weird beer retailing rules may seem to be from a different time, but that’s only because they are. Until fairly recently, the only place to buy beer was from one of two quasi-monopoly entities: the provincially owned and operated LCBO or the foreign brewery owned Beer Store. LCBO outlets were limited to single containers and six-packs, while Beer Stores sold larger multipacks and also handled bottle deposits and returns. In the last few weeks, the Ontario government has indicated that long overdue changes are coming:

“The Beer Store” by Like_the_Grand_Canyon is licensed under CC BY-NC 2.0

The only thing we really know at this point (and it’s been reported by the Toronto Star and now CBC, and earlier by this website, all from sources) is the horribly unfair deal The Beer Store has had since 1927 in Ontario is about to come to an end. It’s expected that The Beer Store will be given notice by the end of December under the Master Framework Agreement (MFA) that the deal will be all but dead. They will have two years to wrap things up while a more modern system of booze retailing is fine-tuned and prepared for implementation. There’s a new era dawning in Ontario, one that would seemingly benefit grocery and convenience stores, local brewers, Ontario wineries, and obviously consumers who will get wider selection, more convenience and competitive pricing.

“The MFA has never been about choice, convenience or prices for customers, it has always been about serving the interests of the big brewing conglomerates, and that’s what needs to be addressed,” Michelle Wasylyshen, spokesperson for the Retail Council of Canada, whose board of directors includes members from Loblaw, Sobeys, Metro, Walmart, and Costco, told Mike Crawley of the CBC.

The end of The Beer Store MFA in whatever iteration it will look like will have a cascading impact on local VQA wine. Ontario wineries hope that it’s a positive impact and are cautiously optimistic that wide open beer and wine sales at grocery and convenience stores means more sales and less levies for their products.

As the CBC pointed out in its story, the looming reforms “pit a range of interests against each other, as big supermarket companies, convenience store chains, the giant beer and wine producers, craft brewers and small wineries all vie for the best deal possible when Ontario’s almost $10-billion-a-year retail landscape shifts. And — this is a biggie — the LCBO lobbying efforts to keep its antiquated system of monopoly retailing intact, which seems to be a big ask with what we now know from sources. Something must give.

Some key bullet points from the CBC report:

  • Will the government shrink the LCBO’s profit margins, including its take from products that other retailers sell?
  • Will retailers such as grocery and convenience stores be required to devote a certain amount of shelf space to Ontario-made beer and wine, or will they have total control over the inventory they stock?
  • Will small Ontario wineries get any help in competing against big Ontario wineries whose products can contain as much as 75% imported wine?

The government has been listening to all stakeholders in the booze industry in Ontario for over a year now. Three key associations — Ontario Craft Wineries, Tourism Partnership Niagara, and Wine Growers Ontario — joined together to commission a report titled Uncork Ontario. That report, which concludes that the Ontario wine sector is well positioned to drive sustainable economic growth for the region, the province, and the country and has the potential to drive at least $8 billion in additional real GDP over the next 25 years, launched a campaign to lobby the government for radical changes to reach those lofty goals, or at least put the wheels in motion.

One of the big issues for Ontario wineries is a punishing 6.1% “sin” tax charged on every wine made in Ontario but not foreign wines. It’s a tax that’s been hurting Ontario wineries for years even though a grant was issued to wineries to help pay that tax back. To this date, the tax has not been cancelled and wineries keep remitting the tax owed monthly and can only hope the grant keeps getting extended. Ontario wines are among the highest taxed in the world with up to 73% of every bottle sold going to taxes and severe levies at the LCBO.

August 23, 2023

QotD: “Megacorporations” of the Roman era

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

The definition of a megacorp differs a bit, work to work. They are, of course, megacorporations in the literal sense; massive, vertically integrated companies that often have monopolistic control over multiple markets. But more fundamental to the definition of the megacorp is that they typically employ their own armed forces and either enforce their own law or are at least able to ignore the law more generally. It is not enough for a company to be big, it has to generate the sort of wealth to which M. Licinius Crassus famously quipped “no one was truly rich who could not support an army at his own expense” (Plut. Cras. 2.7).

Which is to say that what really defines a megacorporation is that it trespasses into domains usually occupied by the state: military, police and judicial functions – the use of force. A megacorporation is, simply put, a corporation so large and powerful that it begins to act as a state, be that in the form of the private armies of Cyberpunk 2077, the privatized police force of the Robocop franchise, or the straight-up corporate governments of Stellaris (which in turn channel things like the Spacer’s Guild or the Ferengi Alliance) And that is core to the generally dystopian leaning of megacorporations – they are meant to reflect capitalism and corporate empire building taken to an extreme, to the point where it has swallowed the entire rest of the society.

Taking that definition to history, we can actually see a fair number of megacorporations; they are by no means common, but they do exist. Going very far back, the Roman societates (lit: “fellowships”, but “business association” or “company” is an accurate enough rendering) of the publicani (businessmen who filled public contracts) exercised close to this sort of power in some of Rome’s early provinces. During the Middle and Late Roman Republic, the job of extracting tax revenue from the provinces was too administratively complex for the limited machinery of the Republic, so instead the senate directed the censors to auction the right to collect taxes. Groups of Roman businessmen (and often silent patrician partners) would group resources together to bid for the right to collect taxes from a province – any taxes they took in excess of that figure would be their profit.

These companies could be very large indeed. For instance, parts of the lex portorii Asiae (the customs laws for the Roman province of Asia) survive and include regulations for the relevant company including a slew of customs houses and guard posts (the law is incomplete, but mentions more than 30 collection points – all major ports – to which would also need to be added posts along the land routes into the province). From other evidence we know that the staff at customs posts included armed guards along with the expected tax collectors and bookkeepers. And we know that publicani were sometimes delegated local or Roman forces to do their work (e.g. Cic. Ad Att. 114, using Shackleton Bailey’s numbering). They also maintained the closest thing the Roman Republic had to a postal service (Cic. Ad Att. 108). It’s not clear exactly how many employees one of the larger tax collection companies might have had (and those for the province of Asia – equivalent to the west coast of Anatolia – would have been some of the largest), but it was clearly considerable, as were the sums of money involved.

To the cities and towns of a province, such Roman companies must have seemed like megacorporations, especially if they were in with the governor (which they generally were) and thus could call down the forces of Rome on recalcitrant taxpayers. And we certainly know that these publicani often collected substantially far more than was due to them under the law (the reason why “tax collector” and “sinner” seem to be nearly synonymous in the New Testament, a fact that gave Ernst Badian’s study of them, Publicans and Sinners, its title). At the same time, we see the clear limitations too: such companies were clearly subservient to the governor and to the Roman state. Administrative changes beginning under Julius Caesar and brought to completion under Augustus did away with some of the largest tax contracts and the influence of the societates publicanorum with them.

Bret Devereaux, “Fireside Friday: January 1, 2021”, A Collection of Unmitigated Pedantry, 2021-01-01.

June 12, 2023

“The more recent four or five years at Indigo have been a disastrophe”

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

In the latest SHuSH newsletter, Ken Whyte outlines the rise and fall of Canada’s biggest bookstore chain that stopped trying to be a bookstore chain and now appears to be looking for a new identity to assume in the wake of several board resignations and the announced resignation of Heather Reisman, the founder and public face of the chain:

“Indigo Books and Music” by Open Grid Scheduler / Grid Engine is licensed under CC0 1.0

Indigo opened its first bookstore in Burlington in 1997 and quickly expanded across the country in competition with the Chapters chain, which it bought in 2001. Heather’s husband, Gerry Schwartz, provided much of the financing in these years. Gerry is the controlling shareholder of Onex, a private equity firm that now has about $50 billion in assets under management.

Influential in Ottawa, the Schwartz-Reismans managed to convince the federal government to approve Indigo’s purchase of Chapters and also keep the US book chain Borders from moving north into Canada — a double play that cleared the field of meaningful competition and wouldn’t have happened in a country with serious antitrust enforcement.

Heather, as Indigo CEO, cast herself as the queen of Canadian literature, making personal selections of books to her customers, hosting book launches, interviewing celebrity authors, etc.

From a financial perspective, Indigo took about five years to get rolling after the Chapters acquisition. It looked steady through the late aughts and into the teens when Amazon showed up in force. Indigo’s share price caved. Unable to convince Ottawa to push Amazon back across the border, Heather adopted a new strategy, backing out of books and recasting Indigo as a general merchandiser selling cheeseboards, candles, blankets, and a lot of other crap to thirtyish women. “We built a wonderful connection with our customers in the book business,” she famously said. “Then, organically, certain products became less relevant and others were opportunities.” This charmed investors, if not the book community, and Indigo’s share price hit a high of $20 a share in 2018. By then, books, as a share of revenue, had fallen from 80 percent of revenue to below 60 percent (they are now 46 percent).

The more recent four or five years at Indigo have been a disastrophe. With its eighty-eight superstores and eighty-five small-format stores, the company lost $37 million in 2019, $185 million in 2020, and $57 million in 2021. Things looked somewhat better in 2022 with a $3 million profit, but its first three quarters of 2023 (Indigo has a March 28 year-end) resulted in an $8 million loss and its fourth quarter featured one of the most spectacular cyberhacks in Canadian commercial history. The company’s website was breached and its employment records held for ransom, resulting in a ten-day blackout for all of the company’s payment systems and a month-long outage in online sales. The share price is now $2.00 or one tenth the 2018 high.

ANALYSIS AND IRRESPONSIBLE SPECULATION

Given everything Indigo has been through over the last several years, and especially the last several months, it’s not surprising that Heather wants to pack it in. She’s seventy-four and super wealthy. There’s nothing but a desperately hard slog ahead for her money-losing company. Why stay?

Still, this has the feel of something that blew up at a board meeting, or in advance of a board meeting. It’s highly irregular for a company to lose almost half its directors in a single day. If these changes had been approached in conventional fashion, there would have been more in the way of messaging and positioning, especially regarding Heather. For all intents and purposes, she is Indigo. It wouldn’t exist without her. They ought to be throwing her a retirement parade and presenting her with a golden cheeseboard. Instead, all she’s getting, for now, are a few cliches in a terse press release.

It’s also weird that this all happened days before we get the company’s year-end results (they were out by this time last year). My guess is that the board got a preview, that the picture is ugly, that there are big changes afoot, and that the directors were nudged out as the start of a major retrenchment or given the option of sticking around for a bloodbath and chose instead to exit.

May 1, 2023

Britain’s first embassy to India

Filed under: Britain, Business, History, India — Tags: , , , , , — Nicholas @ 05:00

In The Critic, C.C. Corn reviews Courting India: England, Mughal India and the Origins of Empire by Nandini Das, a look at the first, halting steps of the East India Company at the court of the Mughal Emperor Jahangir early in the seventeenth century:

The late Sir Christopher Meyer, the closest thing modern British diplomacy has produced to a public figure, enjoyed comparing his trade to prostitution. Both are ancient trades, and neither enjoys a wholly favourable reputation. Any modern diplomat will discreetly confirm that the profession is far from the anodyne, flag-emoji civility and coyly embarrassed glamour they project on Twitter.

Whilst none of our modern representatives are working in quite the same conditions as their predecessor Sir Thomas Roe, they may well find uncanny parallels with his unfortunate mission.

The fledgling and precarious East India Company, founded in 1600, had sent representatives to the Mughal court before, but they were mere merchants and messengers. The stern rebuff they received called for a formal representative of the King.

After the company persuaded James I of the necessity, Thomas Roe (a well-connected MP, friend to John Donne and Ben Jonson, and already an experienced traveller after an attempt to reach the legendary El Dorado) was dispatched to the court of Mughal Emperor Jahangir in 1615. He remained there until 1619, in an embassy that the cultural historian, Nandini Das, describes in Courting India as “infuriatingly unproductive”.

The company kept rigorous records, and Roe meticulously kept a daily diary. Professor Das uses these and the reports of other English travellers to narrate Roe’s journey, as well as contemporary literature and, more importantly, their Indian equivalents. It is not so much the diplomatic success that fascinates Das about Roe’s embassy, but the mindset of the early modern encounter between England and India.

In a boom time for histories of British colonialism, this is an intelligent and gripping book with a thoughtful awareness of human relationships and frailties, and a model approach to early modern cross-cultural encounters.

The privations suffered by Roe’s embassy are striking. Only three in ten people had a chance of coming home alive from the voyage to India. Das’s recreation of the journey out is as intense and claustrophobic as Das Boot, with rotten medicine, cruel maritime punishments and untrained boys acting as surgeons. Dead bodies onboard would have their toes gnawed off by rats within hours.

In India, the English sailors excelled themselves as uncouth Brits abroad: drinking, fighting and baiting local customs, such as killing a calf. A chaplain was notorious for “drunkenly dodging brothel-keepers and engaging in half-naked brawls”. For most of his time, Roe — seeking to keep costs down — lived with merchants and factors already in India, in a cramped, filthy, dangerous house.

April 30, 2023

David Howarth’s history of the East India Company

Filed under: Books, Britain, Europe, History, India — Tags: , , , , , , — Nicholas @ 05:00

Robert Lyman reviews David Howarth’s recent work Adventurers: The Improbable Rise of the East India Company:

It is the human detail of the EIC and the ultimate triumph of its trading endeavours despite the best efforts of Portugal, the Dutch Republic and of the vicissitudes of Neptune that holds great fascination for me, and which is the triumph of Howarth’s intimate and intricate portrayal of the EIC in the first century of its existence. His great achievement is both to bring the dusty tomes of the Company back to life, not just to humanise one of the greatest trading ventures of all of human history, but to interpret the early years of the Company (his book spans 1600 to 1688, though most of the narrative is pre-1650) as a peculiarly human rather than an institutional endeavour. Is this important? Yes. Humans have agency; institutions consume or act upon the determining agency of human beings, not the other way around. Too much of modern (post 1880) history is based upon determining the perspective of organisations and movements (as interpreted by later historians, many with their own ideological baggage) rather than of actual, real live people making decisions for themselves in the peculiar and particular context of their lives and times.

The means through which Howarth paints his story is by the decisions, actions and activities of actual people, some influential decision-makers and many others who were not, all of which makes up a remarkably vivid tapestry of human intercourse. Each chapter, for instance, is constructed around a person or group of people. One powerfully tells the story of the men of the Peppercorn, an EIC East Indiaman, as it seeks out the riches of a world on the extreme periphery of the consciousness of most Europeans. The ultimate triumph of European expansion into Asia is not difficult to comprehend. Europe was pursuing an adventure, aggressively, relentlessly and determinedly, to bring the riches of the world back to its own shores. At no time did the Chinese, Japanese, Indians or inhabitants of the Spice Islands return the favour. The energetic persistence of Sir Thomas Roe, for instance, the Company’s ambassador to the Mughal court (1615-1619), is easily compared to the intellectual (and alcoholic) indolence of the Great Mughal with whom Roe was attempting to interact. Roe was there, in India: Europeans were interested in the “East” and with travelling to the other side of the world for purposes of human engagement, adventure, patriotism and, yes, greed and selfish self-interest. The Great Mughal, by contrast, was also driven by greed and self-interest, but he just wasn’t interested in exploring. He certainly wasn’t interested in Europe. He was already, in his view, at the top of the human tree and had no need for either the ideas or the money of the red-haired barbarians who came from across the sea, a sea that incidentally few Mughal emperors had (amazingly) ever even seen. Fascinatingly, the Mughal shared with King James I an abhorrence with “trade”, though James knew he needed grubby merchants like Sir John Lyman [the reviewer’s ancestor] as they gave him coin. It wasn’t just about the merchants: Kings and governments needed the money that the merchants delivered by the bucket load because they couldn’t create it themselves. Howarth astutely observes that the “EIC belonged to the globe of politics as much as it did to the sphere of commerce”. Indeed, something of a symbiosis between the two in Tudor and Stewart England created a sense of nationhood – in the face of the resistance of others, in Europe and further afield – for the first time. The Mughal Empire was ultimately swallowed up as a result of a dynamism by European politicians and merchants working in unison which it never bothered to replicate by undergoing the reverse journey.

And power? No. Howarth is remarkably clear that the primary task of the EIC was to make money, not to accrue territory, create power in foreign territories or aggrandise native populations. The role of the executive arm of the EIC (its ships, sailors and factors) was to make money for its investors, many of whom were the very merchant adventurers in the little ships travelling east over vast oceans. The great game of mercantile expansion took place because those who had most to lose were also sailing the ships, negotiating with foreign emissaries, fighting the Portuguese and the Dutch and placing their lives on the line. Amazingly, in 1570 England had only 58,000 tons of marine tonnage compared with Spain’s 300,000, and was very definitely the minnow in the rush to conquer the seas. The men who built and sailed its boats came from a long way behind, and yet in time were to build a seagoing commercial empire which more than rivalled all its competition. Its early growth was fuelled by the wealth provided by spice rather than slaves and, in contradistinction to what some modern historical moralists are keen to tell us, by a “reluctance to use violence and vigilance to avoid land commitments”. Indeed, unlike that of the Dutch, and despite what one might assume if we were to read the British national anthem back into history, “expansion in England happened with no appeal whatever to national glory”.

The amazing thing about the EIC was just how chaotic and disorganised it was. There was nothing inevitable about its rise as a monolithic mercantile overlord destined for instance, in the due course of time, to rule India. Second guessing history is only possible for historians able to look backwards and identify trends and features, convictions that didn’t exist for those when history was happening trying to make their way through the fog of an uncertain and troublesome future. The EIC proved simply to be better organised than the Portuguese, and not distracted as the Dutch were in their long war against Spain. Luck and serendipity played as much a role on the eventual survival of the EIC as did its ability to raise massive amounts of money from venturers in England (every raise or round of financing was heavily over-subscribed) for its adventures and to recruit adventurers to take its ships to sea. The EIC was phenomenally successful in raising voluntary capital to fund its ventures relative to other European states. By comparison, “although Iberian barns might have looked well built and better stocked, once they were given a good kick the rusted hinges flew off”.

February 9, 2023

“Prediction is very difficult, especially about the future” … but sometimes it’s almost prophetic

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

Once again, Ted Gioia’s Honest Broker Substack has something interesting I’d like to share with you (I wouldn’t blame you at all for cutting out the middleman and just subscribing for yourself):

Today I want to focus on a single paragraph published in 1960.

You’re asking yourself: How much can a single paragraph matter — especially if it was written 63 years ago? But read it first and judge for yourself.

It’s a chilling paragraph.

[…]

By any measure, [Paul Goodman] was one of the most eccentric thinkers of the era. Yet he anticipated our current situation with more insight than any of his peers.

Let’s look at this one paragraph from the Preface to Growing Up Absurd. It’s a long paragraph — it takes up most of two pages. So we will break it down into pieces.

Goodman begins with a puzzle he needs to solve — society is stagnating everywhere, and we all can see it. But there’s no action plan to fix it. There’s a lot of huffing and puffing and finger-pointing everywhere, but nobody has even started on developing a practical agenda.

According to Goodman, this is because people “have ceased to be able to imagine alternatives”. Everybody accepts that the current system “is the only possibility of society, for nothing else is thinkable”.

Now comes his analysis, and — to my surprise — Goodman begins by talking about music. This was the last thing I expected in a social critique, but for Goodman the manufacturing of hit songs is a metaphor for everything else that’s wrong in a stagnant society.

He writes:

    Let me give a couple of examples of how this [inability to imagine healthy alternatives] works. Suppose (as is the case) that a group of radio and TV broadcasters, competing in the Pickwickian fashion of semi-monopolies, control all the stations and channels in an area, amassing the capital and variously bribing Communications Commissioners in order to get them; and the broadcasters tailor their programs to meet the requirements of their advertisers of the censorship, of their own slick and clique tastes, and of a broad common denominator of the audience, none of whom may be offended: they will then claim not only that the public wants the drivel that they give them, but indeed that nothing else is being created. Of course it is not! Not for these media; why should a serious artist bother?

When I first read this, I was dumbstruck. Goodman wrote this during the winter of 1959 and 1960, when radio stations were independent and freewheeling. Back in my teen years, a single business was only allowed to control one AM station and one FM station. In 1985 this was increased to 12 stations on each band. And in 1994 this was raised again, this time to 20 AM stations and 20 FM stations.

But then all hell broke lose when the Telecommunications Act of 1996 passed in the Senate by a 91 to 5 margin and was signed into law. Now the sky was the limit — and all the airwaves it contained.

Soon Clear Channel Communications owned more than 1,200 radio stations in some 300 cities. The company began the process of standardizing and homogenizing our musical culture. We still suffer from that today.

Even after radio started losing influence in the Internet Age, huge streaming platforms (Spotify, Apple Music, etc.) ensured that access to the ears of America would be controlled by a tiny number of huge corporations. A musical culture that was once local, indie, and flexible has become centralized, corporatized, and stagnant.

How could Paul Goodman even dream of such a scenario back in 1960? That future was decades away at the time.

But we are only at the start of this visionary paragraph. Goodman now explains that the same thing will happen in universities.

Colleges and schools were small and non-bureaucratic back in 1960. Yet Goodman sees a crisis looming. On the next page Goodman warns against “the topsy-turvy situation that a teacher must devote himself to satisfying the administrator and financier rather than to doing his job, and a universally admired teacher is fired for disobeying an administrative order that would hinder teaching”.

Administration at US colleges has grown exponentially in the last two decades and has turned almost every academic institution into a plodding bureaucracy — but how in the world did Goodman anticipate this in 1960?

Now let’s return to our chilling paragraph. Immediately after discussing radio stations, Goodman adds a gargantuan sentence. It jumps all over the place but hits the target at every twist and turn:

    Or suppose again (as is not quite the case) that in a group of universities only faculties are chosen that are “safe” to the businessmen trustees or the politically appointed regents, and these faculties give out all the degrees and licenses and union cards to the new generation of students, and only such universities can get Foundation or government money for research, and research is incestuously staffed by the same sponsors and according to the same policy, and they allow no one but those they choose, to have access to either the classroom or expensive apparatus: it will then be claimed that there is no other learning or professional competence; that an inspired teacher is not “solid”; that the official projects are the direction of science; that progressive education is a failure; and finally, indeed — as in Dr. James Conant’s report on the high schools — that only 15 per cent of the youth are “academically talented” enough to be taught hard subjects.

Here in a nutshell is the credentialing crisis of our times. Learning is replaced by exclusionary certification programs that limit career opportunities — unless you take out loans and “purchase” the necessary credential from these academic gatekeepers.

This has become so destructive in our own time that many are crushed by student loans, and others seek ingenious ways of bypassing college entirely. There’s no way that Goodman could have grasped this in 1960 — when only 7.7 percent of Americans had college degrees.

Nor could he have known about the replicability crisis in science or the destructive games now played in awarding of scientific grants. Those are the problems of our times — not his.

But somehow Paul Goodman saw it coming.

February 4, 2023

A lobster tale (that does not involve Jordan Peterson)

Filed under: Britain, Economics, Europe, Food, Government, History — Tags: , , , , , , — Nicholas @ 03:00

In the latest Age of Invention newsletter, Anton Howes relates some of his recent research on the Parliament of 1621 (promising much more in future newsletters) and highlights one of the Royal monopolies that came under challenge in the life of that Parliament:

European lobster (Hommarus gammarus)
Photo by Bart Braun via Wikimedia Commons.

One of the great things about the 1621 Parliament, as a historian of invention, is that MPs summoned dozens of patentees before them, to examine whether their patents were “grievances” — illegal and oppressive monopolies that ought to be declared void. Because of these proceedings, along with the back-and-forth of debate between patentees and their enemies, we can learn some fascinating details about particular industries.

Like how 1610s London had a supply of fresh lobsters. The patent in question was acquired in 1616 by one Paul Bassano, who had learned of a Dutch method of keeping lobsters fresh — essentially, to use a custom-made broad-bottomed ship containing a well of seawater, in which the lobsters could be kept alive. Bassano, in his petitions to the House of Commons, made it very clear that he was not the original inventor and had imported the technique. This was exactly the sort of thing that early monopoly patents were supposed to encourage: technological transfer, and not just original invention.

The problem was that the patent didn’t just cover the use of the new technique. It gave Bassano and his partners a monopoly over all imported lobsters too. This was grounded in a kind of industrial policy, whereby blocking the Dutch-caught lobsters would allow Bassano to compete. He noted that Dutch sailors were much hardier and needed fewer provisions than the English, and that capital was available there at interest rates of just 4-5%, so that a return on sales of just 10% allowed for a healthy profit. In England, by comparison, interest rates of about 10% meant that he needed a return on sales of at least 15%, especially given the occasional loss of ships and goods to the capriciousness of the sea — he noted that he had already lost two ships to the rocks.

At the same time, patent monopolies were designed to nurture expertise. Bassano noted that he still needed to rely on the Dutch, who were forced to sell to the English market either through him or by working on his ships. But he had been paying his English sailors higher wages, so that over time the trade would come to be dominated by the English. (This training element was a key reason that most patents tended to be given for 14 or 21 years — the duration of two or three apprenticeships — though Bassano’s was somewhat unusual in that it was to last for a whopping 31.)

But the blocking of competing imports — especially foodstuffs, which were necessaries of life — could be very controversial, especially when done by patent rather than parliamentary statute. Monopolies could lawfully only be given for entirely new industries, as they otherwise infringed on people’s pre-existing practices and trades. Bassano had worked out a way to avoid complaints, however, which was essentially to make a deal with the fishmongers who had previously imported lobsters, taking them into his partnership. He offered them a win-win, which they readily accepted. In fact, the 1616 patent came with the explicit support of the Fishmongers’ Company.

It sounds like it became a large enterprise, and I suspect that it probably did lower the price of lobsters in London, bringing them in regularly and fresh. With a fleet of twenty ships, and otherwise supplementing their catch with those caught by the Dutch, Bassano boasted of how he was able to send a fully laden ship to the city every day (wind-permitting). This stood in stark contrast to the state of things before, when a Dutch ship might have arrived with a fresh catch only every few weeks or months, and when they felt that scarcity would have driven the prices high.

October 16, 2022

QotD: State monopolies

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

Competition leaves people with choices. But under the New Socialism, people will really discover what it means to be unfree when they only have this choice: work for the state and spend your falling wages on government-supplied goods — or starve. And to whom does the unhappy citizen turn when there is only one healthcare provider, one landlord, and one education system? The state monopolies under socialism offer a kind of subjugation and submission far greater than that in competitive markets. The faceless corporate decision makers that trouble professor Robin are far less sinister than government bureaucrats who can block all exit options. Imagine how poorly the Post Office would function without competition from Federal Express and UPS.

Richard Epstein, “The Intellectual Poverty of the New Socialists” [PDF], 2018.

May 16, 2022

The Hudson’s Bay Company in Canadian history

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

As a kid growing up in the late 60s and early 70s, “The Bay” was just a department store. It wasn’t as upscale as Eaton’s, but had different stock than Eaton’s or Simpson’s so occasionally you’d find something there that wasn’t available in the other major central Canadian department stores. It took me an embarrassingly long time to make the connection between the big retail store in the mall and the company that owned vast swathes of what eventually became Canada in the seventeenth and eighteenth centuries. At Terra Nullius, Ned Donovan tries to put that massive geo-political organization into context:

At the turn of the 17th Century, felt hats were all the rage and felt hats are made of beaver skin. At the time, this relied on Russia’s long-established fur trade. But as demand grew, quality dropped significantly as the native European beaver population began to be hunted out of existence. Within decades, it was very difficult for merchants to find high quality felt from Russia, and customers in England were complaining that they were having to wear felt made from rabbit instead.

Approximate extent of Prince Rupert’s Land in the late 17th to early 18th century – note that this is the range of the company’s trappers and traders, not military or political control.
Image from Wikimedia Commons.

But around the same time, irregular and rare shipments began to arrive from the European colonies in North America where beaver – mostly trapped by French settlers and Indigenous Americans – was still plentiful and of very good quality. In 1669, the ship Nonsuch dropped anchor in the Thames with a large shipment of some of the highest quality furs London had ever seen, selling them immediately for £1,233 (equivalent to around £1 million in 2022). The Nonsuch had led an expedition invested in by some of London’s richest merchants and sponsored by Prince Rupert, a first cousin of King Charles II. It had done its trapping in Hudson’s Bay in the north of what is now Canada. The purpose of the expedition was to demonstrate that the issues with fur supply could be solved if its trapping in North America could be optimised, leaving behind the slow and traditional approach of the French and First Nation trappers.

This was not the first time Prince Rupert had seen to make money from exploiting colonised lands, having poured large amounts of his wealth into the slave trade from West Africa and sitting on the board of the Royal African Company. With this financial success made from trading in human lives, he turned his interest to North America and helped put together the syndicate that sent the Nonsuch to Hudson’s Bay. In 1670, his cousin King Charles II granted the syndicate a royal charter to form the Hudson’s Bay Company, giving the company a monopoly over “Prince Rupert’s Land” made up of the land drained by rivers and streams flowing into Hudson’s Bay – or 3,861,400 square kilometres.

In short order, the company had established trading posts throughout its monopoly, known as factories (as each was controlled by a company official known as a factor). The only thing that mattered to these factories and its parent company was beaver. Nothing could stand in the way of ensuring the safe passage of furs and pelts to Europe. By 1690, the demand in England for hats and caps was five million per year – or one per person. Hundreds of thousands more would be exported onwards from England to Europe such was the demand for the well-known quality of the Hudson Bay beaver. For example in 1756, Portuguese customers spent more than £20 million in today’s money on English beaver felt hats.

As Prince Rupert’s Land was largely still wilderness, besides company staff it was inhabited only by European and First Nations trappers and as a result there was only a barter economy, to both subjugate indigenous residents and prevent private wealth. There were standardised prices throughout Prince Rupert’s Land and instead of a normal currency, the company instead pegged everything against the unit of 1MB (1 Made Beaver). For three made beaver pelts, you could be given one clay pot in exchange at a company store, or for 10 you could get a gun. Private trading was outlawed and all beaver pelts that left Prince Rupert’s Land traveled through the warehouses and accounts of the Hudson’s Bay Company.

April 27, 2022

QotD: Competition

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

In a normal industry (e.g., restaurant ownership) competition should drive profit margins close to zero. Want to open an Indian restaurant in Mountain View? There will be another on the same street, and two more just down the way. If you automate every process that can be automated, mercilessly pursue efficiency, and work yourself and your employees to the bone – then you can just barely compete on price. You can earn enough money to live, and to not immediately give up in disgust and go into another line of business (after all, if you didn’t earn that much, your competitors would already have given up in disgust and gone into another line of business, and your task would be easier). But the average Indian restaurant is in an economic state of nature, and its life will be nasty, brutish, and short.

This was the promise of the classical economists: capitalism will optimize for consumer convenience, while keeping businesses themselves lean and hungry. And it was Marx’s warning: businesses will compete so viciously that nobody will get any money, and eventually even the capitalists themselves will long for something better. Neither the promise nor the warning has been borne out: business owners are often comfortable and sometimes rich. Why? Thiel says it’s because they have escaped competition and become at least a little monopoly-like.

Thiel hates having to describe how businesses succeed, because he thinks it’s too anti-inductive to reduce to a formula:

    Tolstoy opens Anna Karenina by observing “All happy families are alike; each unhappy family is unhappy in its own way.” Business is the opposite. All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

Scott Alexander, “Book Review: Zero to One”, Slate Star Codex, 2019-01-31.

April 3, 2022

King James I and the problem of gold and silver thread in England

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

In the latest Age of Invention newsletter, Anton Howes began to research what appeared to be a minor economic issue that very quickly took over his time going deep down the gold and silver market rabbit hole:

A hammered silver sixpence of James I dated 1603 from the first coinage with a thistle mintmark. Obverse features a right facing crowned bust with the numerals VI behind and the inscription JACOBVS*DG*ANG*SCO*FRA*ET*HIB*REX. The reverse has a shield with the royal arms and the date 1603 above. The reverse inscription is EXERGAT* DEVS*DISSIPENTVR*INIMICI.
FindID 510696 – https://finds.org.uk via Wikimedia Commons

When England’s Parliament met in 1621, it was mainly supposed to vote King James I the funds to fight a war. His daughter’s domain, the Palatinate of the Rhine, had just been invaded, and the European Protestant cause was under grave threat. As I set out two weeks ago, however, the House of Commons had seized the chance to pursue a scandal. Jealous of the Crown’s challenge to their status as local power-brokers, and hoping to embarrass the king’s favourite, the Marquess of Buckingham, MPs opened an investigation into Sir Giles Mompesson’s patent to license inns.

When it came to inns, I argued that the case against Mompesson was flimsy (making me perhaps the only person to have defended him for over four hundred years). He appears to have been a trusted and able bureaucrat, the source of his downfall being his sheer effectiveness. But the flimsiness of the case against him was not enough to stop the political witch-hunt. Next on the list was a project he had administered for making gold and silver thread.

It sounds obscure, and I was fully expecting to write up a short overview of a niche industry that just happened to be thrust into the limelight of 1620s politics. That was a month ago, when I first started drafting this piece. But pulling on the golden thread revealed a desperate, decade-long battle between the City and the Crown, over who would get to control the financial stability of the realm. I’m sorry for the delay in publishing it, but I hope I’ve made it worth the wait.

January 14, 2022

Industry with 1% profit margins accused of earning “record profits”

Filed under: Business, Economics, Media, Politics, USA — Tags: , , , — Nicholas @ 03:00

Joe Lancaster on Senator Elizabeth Warren’s renewed assault on the top-hatted, monocle-wearing robber barons of the grocery business:

“Piggly Wiggly” by afiler is licensed under CC BY-SA 2.0

… Warren could hardly have picked a worse industry to use as an example: Grocery stores consistently have among the lowest profit margins of any economic sector. According to data compiled this month by New York University finance professor Aswath Damodaran, the entire retail grocery industry currently averages barely more than 1 percent in net profit. In its most recent quarter, Kroger reported a profit margin of 0.75 percent, during a time in which Warren claims that the chain was “expanding profits” due to its “market dominance.”

In actuality, for much of the last year, grocery stores have seen enormous boosts in revenue, but not increased profitability, for the simple reason that everything has been costing more: not just products, but transportation, employee compensation, and all the extra logistical steps needed to adapt to shopping during a pandemic. Couple that with persistent inflation — which Warren also recently blamed on “price gouging” — and it is no wonder that things seem a bit out of balance.

Warren has had an itchy trigger finger for antitrust laws for some time. In 2019, as part of her presidential platform, she called for using the laws to forbid retailers from selling their own products. This would affect industry leaders like Amazon and Walmart, but ironically, it would have a devastating impact on grocery stores as well: Grocers increasingly rely on their own proprietary goods to stock cheaper alternatives alongside name brands. This provides not only less expensive options for consumers, but lower costs to the stores themselves. Store brands also help fill gaps created by external supply shortages.

December 4, 2021

When King James VI became King James I and VI

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

In his latest Age of Invention newsletter, Anton Howes discusses how the King of Scotland succeeded to the English throne as well:

King James I (of England) and VI (of Scotland)
Portrait by Daniel Myrtens, 1621 from the National Portrait Gallery via Wikimedia Commons.

It’s late March 1603, and an exhausted messenger arrives in Edinburgh bearing a sapphire ring. He has ridden for over two days straight, over hundreds of miles, and his hair and clothes are matted with blood — on the way he had fallen from his horse, a hoof striking him directly in the head. It’s a miracle he’s alive, but he knows it has been worth it. He is the very first to tell you that your childless first cousin twice removed — the killer of your mother, whom you never knew — is finally dead. You, King James VI of Scotland, are James I of England as well.

[…]

James’s accession was a frenzy. From the very moment of Elizabeth’s death, her entire patronage network was turned on its head. Her chief ministers, the Privy Council, were relatively safe. Some of them had been corresponding with James for years. But they could only look on, anxiously, as a rush of would-be cronies went north to meet their new king. The exhausted messenger with the sapphire ring, Sir Robert Carey, was just the first. Carey had been related to Elizabeth I on her mother’s side — he was her first cousin once removed. (Carey’s grandmother was the “other Boleyn girl”, played by Scarlett Johansson in the 2008 film — although there’s no solid evidence, it’s not totally impossible that Carey was actually related to Elizabeth on her father’s side instead …) But that family connection meant nothing now that the queen was dead.

The sudden reset of the source of all patronage meant that the earlier the access to the new king’s person, the greater the chance of gaining his favour. Carey may have angered the Privy Council by riding ahead of their formal letters to James, but his exertion won him an on-the-spot appointment as a gentleman of the bedchamber, and his wife became a lady in waiting to James’s queen. The Careys were soon charged with the care of the royal couple’s younger sickly child, and when that child eventually became Charles I, Carey was made Earl of Monmouth. Not a bad result for a head wound and a two days’ ride, though I’m sure the horses would disagree. An old proverb about England was that it was “a paradise for women, a purgatory for servants, and a hell for horses” — something that James’s accession really put to the test. One teenage noblewoman reported how she and her mother killed three horses in a single day, pushing them hard despite the heat, in their rush to meet the new queen.

Just as courtiers flocked to James, however, the king wanted to win friends and allies too. So he handed out favours like confetti. Before he had even reigned a single year, he had created 934 knighthoods — already more than the 878 that Elizabeth I, her generals, and her lord deputies in Ireland had created over the course of her entire 45-year reign. One morning, during his journey down to London, James knighted more people than Elizabeth had in her first five years — all before he’d even had his breakfast. The sheer volume of new knighthoods prompted Francis Bacon — one of about 300 to be knighted in London ahead of the coronation — to call it a “divulged and almost prostitute title”.

The same went for peerages. Elizabeth, over her long reign of almost half a century, had created only 18 new titles. James, before he had even been crowned, had already created 12 — mostly turning knights into lords, and raising some lords into earls. Along with the honours came grants of land, annual pensions, and one-off gifts — not only to James’s new English courtiers, but to his old Scottish favourites too. James’s arrival was an explosion of largesse. (Not all were happy about the relative loss of favour, of course […] at least one pro-invention courtier got involved in a treasonous plot against the new king and ended up losing his head.)

James’s largesse even extended to policy. As he triumphantly marched into London, he issued a proclamation to immediately suspend all of Elizabeth’s patent monopolies, to be re-granted pending review. (This did not apply to patents for trading corporations or guilds.) Rather than leaving the validity of patents to be tested in the common-law courts, at great legal cost to those affected, he would have his Privy Council systematically examine them first, only allowing them if they were in the public interest. He characterised it as a continuation — even a “perfecting” — of Elizabeth’s partial measures a couple of years earlier, which we discussed in Part II. With his proclamation also condemning various other unpopular things, like high court fees, his new subjects were overjoyed.

But the honeymoon was not to last.

November 27, 2021

King James I and his hatred of tobacco smoking — “so vile and stinking a custom”

Filed under: Americas, Britain, Health, History — Tags: , , , , , , , — Nicholas @ 03:00

Anton Howes recounts some stories he uncovered while researching English patent and monopoly policies during the Elizabethan and Stuart eras:

… some of the most interesting proclamations to catch my eye were about tobacco. Whereas tobacco was famously a New World crop, it is actually very easy to grow in England. Yet what the proclamations reveal is that the planting of tobacco in England and Wales was purposefully suppressed, and for some very interesting reasons.

James I was an anti-tobacco king. He even published his own tract on the subject, A Counterblaste to Tobacco, just a year after his succession to the English throne. Yet as a result of his hatred of “so vile and stinking a custom”, imports of tobacco were heavily taxed and became a major source of revenue. Somewhat ironically, the cash-strapped king became increasingly financially dependent on the weed he never smoked. The emergence of a domestic growth of tobacco was thus not only offensive to the king on the grounds that he thought it a horrid, stinking, and unhealthy habit — it was also a threat to his income.

What I was most surprised to see, however, was just how explicitly the king admitted this. It’s usual, when reading official proclamations, to have to read between the lines, or to have to track down the more private correspondence of his ministers. Very often James’s proclamations would have an official justification for the public good, while in the background you’ll find it originated in a proposal from an official about how much money it was likely to raise. There was money to be made in making things illegal and then collecting the fines.

Yet the 1619 proclamation against growing tobacco in England and Wales had both. The legendary Francis Bacon, by this stage Lord High Chancellor, privately noted that the policy might raise an additional £3,000 per year in customs revenue. And the proclamation itself noted that growing tobacco in England “does manifestly tend to the diminution of our customs”. Although the proclamation notes that the loss of customs revenue was not usually a grounds for banning things, as manufactures and necessary commodities were better made at home than abroad, “yet where it shall be taken from us, and no good but rather hurt thereby redound to our people, we have reason to preserve”. Fair enough.

And that’s not all. James in his proclamation expressed all sorts of other worries about domestic tobacco. Imported tobacco, he claimed, was at least only a vice restricted to the richer city sorts, where it was already an apparent source of unrest (presumably because people liked to smoke socially, gathering into what seemed like disorderly crowds). With tobacco being grown domestically, however, it was “begun to be taken in every mean village, even amongst the basest people” — an even greater apparent threat to social order. James certainly wasn’t wrong about this wider adoption. Just a few decades later, a Dutch visitor to England reported that even in relatively far-flung Cornwall “everyone, men and women, young and old, puffing tobacco, which is here so common that the young children get it in the morning instead of breakfast, and almost prefer it to bread.”

[…]

Indeed, policymakers thought that the domestic production of tobacco would actively harm one of their key economic projects: the development of the colonies of Virginia and the Somers Isles (today known as Bermuda). Although James I hoped that their growth of tobacco would be only a temporary economic stop-gap, “until our said colonies may grow to yield better and more solid commodities”, he believed that without tobacco the nascent colonial economies would never survive. Banning the domestic growth of tobacco thus became an essential part of official colonial policy — one that was continued by James’s successors, who did not always share his more general hatred of smoking. Although the other justifications for banning domestic tobacco would soon fall away, that of maintaining the colonies — backed by an increasingly wealthy colonial lobby — was the one that prevailed.

November 25, 2021

QotD: Corporate coercion can be just as dangerous as state coercion

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

So many libertarians […] have a simplistic, dare I say dualistic notion about bad-things-done-by-private-business and bad-things-done-by-the-state. One is met with “so start up a rival company” the other with “an outrageous example of state overreach that must be opposed politically.”

And in an ideal world, yes, that makes sense. We do not live in anything resembling an ideal world.

In an era when three (two really) credit card companies and a handful of payment processors have an off-switch for pretty much any on-line business they take a dislike to (unless they are called Apple or Amazon), as more and more of the economy goes virtual, what we have is turn-key tyranny for sale to the highest bidder, and the highest bidder is always going to be a state. I am uncertain what the solution is, but as we do not live in a “free market”, not convinced “so go set up your own global credit card and payment processing network” adds anything meaningful to the discussion. It is a bit like saying when the local electric provider turns off the power in your office (or home) because they disapprove of what you are doing “so go set up your own electric supply company”, as if that would be allowed to happen.

Perry de Havilland, “This is what so many libertarians cannot understand …”, Samizdata, 2021-08-22.

« Newer Posts — Older Posts »

Powered by WordPress