Quotulatiousness

August 28, 2024

H.R. McMaster dishes on Trump’s first term in office

Filed under: Books, Government, Media, Politics, USA — Tags: , , , , , , — Nicholas @ 03:00

In Reason, Liz Wolfe covers some of the head-scratchers former National Security Advisor H.R. McMaster revealed about working for Donald Trump:

Donald Trump addresses a rally in Nashville, TN in March 2017.
Photo released by the Office of the President of the United States via Wikimedia Commons.

What might a second Trump White House be like? In his new book, At War with Ourselves: My Tour of Duty in the Trump White House, Lt. Gen. H.R. McMaster, who served as national security adviser to Donald Trump (for one year), characterizes Oval Office meetings as “exercises in competitive sycophancy” where advisers would greet him with lines like “your instincts are always right” or “no one has ever been treated so badly by the press”.

Trump, meanwhile, would come up with crazy concepts, and float them: “Why don’t we just bomb the drugs?” (Also: “Why don’t we take out the whole North Korean Army during one of their parades?”)

This is one man’s account, of course. McMaster’s word should not be taken as gospel, and some of his frustration might stem from his dismissal, or his foreign-policy prescriptions being at times ignored by his boss. But it’s a somewhat revealing look behind the curtain at policy-setting in a White House helmed by an especially mercurial commander in chief, who “enjoyed and contributed to interpersonal drama in the White House and across the administration”.

It also shows how quickly Trump fantasies have percolated through the Republican Party, namely the “let’s just bomb Mexico to get rid of the cartels” line, which Trump has been toying with since roughly 2019 (or possibly more like 2017, after he chatted with Rodrigo Duterte, former president of the Philippines, who had promised to kill 100,000 drug traffickers during his first six months as president). A few years prior, in 2015, he had suggested that Mexico was sending rapist and drug-traffickers across the southern border, and that we’d need to build a wall between the two countries, but it wasn’t until nine American citizens were killed in Mexico that Trump trotted out the idea of declaring cartels foreign terrorist organizations and using military might to eradicate them.

Trump’s line from 2019 has now become standard fare, notes The Economist: The Republican primary debates included lots of tough talk on Mexico, specifically on the bombing front, with Florida Gov. Ron DeSantis claiming he’d send special forces down there on Day One. Right-wing think tanks have embraced the messaging, with articles headlined “It’s Time to Wage War on Transnational Drug Cartels”. Taking cues from other members of her party, Georgia Rep. Marjorie Taylor Greene asked why “we’re fighting a war in Ukraine, and we’re not bombing the Mexican cartels”. Whether it’s economic protectionism (10 percent across-the-board tariffs, with 60 percent tariffs imposed on Chinese imports) or Mexico-bombing, Trump has near-magical abilities to get other members of his party to accept something previously regarded as absurd.

July 25, 2024

David Friedman on the economics of trade

Filed under: China, Economics, USA — Tags: , , , , , , — Nicholas @ 04:00

David Friedman discusses how, for example, the US and China manage their trading relationship:

“United States Balance of Trade Deficit-pie chart” by Shirishag75 is marked with CC0 1.0 .

I recently read a thread about US/China trade on a forum occupied mostly by intelligent people. As best I could tell, all participants were taking it for granted that things that make it more expensive to produce in the US, such as regulations or minimum wage laws, make the US “less competitive”, increase the trade deficit, give the Chinese an advantage. Reading Project 2025, the Heritage Foundation’s battle plan for a future conservative president, I observed the same pattern, with only one exception.

It did not seem to have occurred to any of the forum posters that US costs are in dollars, Chinese costs in Yuan, and what determines the exchange rate between them is the cost of producing things. Discussing trade policy in terms of absolute advantage, pre-Ricardian economics, isn’t quite as bad as discussing the space program on the assumption that the Earth is at the center of the universe with sun, moon and planets embedded in a set of nested crystalline spheres surrounding it — Copernicus was about three centuries earlier than Ricardo — but it is close. It is a point that I made here about a year ago, but since the question came up in my most recent post and in a thread on my favorite forum, it is probably worth making again.

The Economics of Trade

It is easiest to start with the simple case of two countries and no capital flows. The only reason Americans want to buy yuan with dollars is to buy Chinese goods, the only reason Chinese want to sell yuan for dollars is to buy American goods. If Americans try to buy more yuan than Chinese want to sell, the price of yuan in dollars goes up, if Chinese want to sell more yuan than Americans want to buy, the price goes down, just as in other markets. The price of yuan in dollars, the exchange rate, ends up at the price at which supply equals demand, which means that Americans are importing the same dollar (and yuan) value of goods that they are exporting.

Suppose the US government, inspired by the mercantilist view that countries get rich by exporting more than they import, tries to produce a “favorable” balance of trade by imposing a tariff on Chinese imports. Chinese goods are now more expensive to Americans. Since they want to buy less from China they don’t need as many yuan so the demand for yuan goes down, the price of yuan in dollars goes down, which reduces the cost of Chinese goods to Americans. Just as before, the exchange rate ends up at a level at which the dollar value of US exports equals the dollar value of US imports. Both imports and exports are now less, since trade is being taxed, but the balance of trade is exactly what it would be without the tariff.

Suppose the US becomes less good at making things due to an increase in government regulation or some other cause. Dollar prices of US goods in the US go up. That makes US goods more expensive to Chinese purchasers so they buy fewer of them, decreasing the demand for dollars on the dollar/yuan market. The exchange rate shifts — dollars are now less valuable so their price falls. Trade still balances. The US is not “less competitive”, merely poorer.

Now add in more countries. One reason Chinese want to buy dollars is to sell them to Germans who want dollars with which to buy American goods. We end up with a trade deficit with China, since some of the dollars they get for their exports are being used to import goods from Germany instead of the US, but a matching trade surplus with Germany, since they are using both the dollars they get by selling things to us and the dollars they get from China to buy goods from us. The same logic applies with more countries.

To explain how it is possible for the US to have a trade deficit we now drop the assumption of no capital movements. One reason Chinese want dollars is to buy goods and ship them to China but another is to buy assets in America — government bonds, shares of stock, real estate. Dollars bought and dollars sold are still equal but exports of goods no longer equal imports of goods. Part of what the US is “exporting”, selling to foreigners, is assets located in the US.

Suppose the US government wants to reduce the trade deficit. One way would be to reduce the budget deficit, since if the US is borrowing less it will not have to pay lenders as high an interest rate, which will make US bonds less attractive to Chinese buyers. Another way would be to block capital movements, make it illegal for foreign buyers to buy US assets. Doing that, however, means less capital investment in the US, hence higher interest rates. With fewer lenders to buy US bonds, the government will have to offer a higher interest rate to sell them.

One argument sometimes offered for restricting foreign investment is that if the Chinese own a lot of US assets that gives them power over us. The same argument was offered in the early 19th century when European investors were paying to build railroads and dig canals in the US. Daniel Webster pointed out that, if there was a conflict with European powers, their assets were sitting on our territory under our control. It wasn’t like they could repossess the Erie canal.

What about imposing a tariff in order to reduce imports? The logic of the previous argument still applies — the exchange rate will shift to make imports more attractive, exports less. Any effect on the deficit will depend on what happens to the attractiveness of US assets to Chinese investors. Figuring out the net effect is complicated, depending in part on what people expect trade policy and exchange rates to be when they collect on their capital investments.

April 16, 2024

QotD: Binding and non-binding rules

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

Describing situations in which violating a sound rule will make the world a better place is surprisingly easy. The reason for this ease is that the very purpose of rules – “the reason of rules” – is that they are tools to better enable us always-imperfectly informed human beings to successfully navigate a world filled with uncertainty. All that such descriptions require is the assumption that we human beings know more than we know.

An omniscient being would be foolish to bind itself to rules.

When we adopt a rule, we wisely admit our ignorance. For a clever assistant professor or ambitious politician to then describe situations in which violating this or that rule will make the world a better place is to achieve absolutely nothing. Although such descriptions often appear to be ingenious discoveries of means for improving the human condition, such descriptions are nearly always nothing but trite demonstrations that if we knew what we do not and cannot know, then acting in disregard of the rule would bring about a state of affairs better than the state of affairs that would be brought about by following the rule.

Well duh.

As a rule, whenever you encounter someone peddling a scheme for improving the world by giving the state discretion to act in violation of well-established rules – for example, to make workers better off by blocking the operation of the price system with minimum wages, or to enrich residents of the domestic economy by substituting free trade with “strategic trade policies” or “optimal tariffs” – recognize that these scheme peddlers arrogantly assume that they or those who will carry out their schemes possess knowledge and information that human beings, as a rule, do not and cannot possibly ever possess.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2019-08-20.

April 11, 2024

All the ways A few of the ways Canada is broken

Filed under: Cancon, Economics, Government, History — Tags: , , , , , , , — Nicholas @ 05:00

In The Line, Andrew Potter outlines some of the major political and economic pressures that prompted the formation of the Dominion of Canada in 1867, then gets into all the ways some of the myriad ways that Canada is failing badly:

It is useful to remember all this, if only to appreciate the extent to which Canada has drifted from its founding ambitions. Today, there are significant interprovincial barriers to trade in goods and services, which add an estimated average of seven per cent to the cost of goods. Not only does Canada not have a free internal market in any meaningful sense, but the problem is getting worse, not better. This is in part thanks to the Supreme Court of Canada which continues its habit of giving preposterously narrow interpretations to the clear and unambiguous language in the constitution regarding trade so as to favour the provinces and their protectionist instincts.

On the defence and security front, what is there to say that hasn’t been said a thousand times before. From the state of the military to our commitments to NATO to the defence and protection of our coasts and the Arctic to shouldering our burden in the defence of North America, our response has been to shrug and assume that it doesn’t matter, that there’s no threat, or if there is, that someone else will take care of it for us. We live in a fireproof house, far from the flames, fa la la la la. Monday’s announcement was interesting, but even if fully enacted — a huge if — we will still be a long way from a military that can meet both domestic and international obligations, and still a long way from the two per cent target.

As for politics, only the most delusional observer would pretend that this is even remotely a properly functioning federation. Quebec has for many purposes effectively seceded, and Alberta has been patiently taking notes. Saskatchewan is openly defying the law in refusing to pay the federal carbon tax. Parliament is a dysfunctional and largely pointless clown show. No one is happy, and the federal government is in some quarters bordering on illegitimacy.

All of this is going on while the conditions that motivated Confederation in the first place are reasserting themselves. Global free trade is starting to go in reverse, as states shrink back from the openness that marked the great period of liberalization from the early 1990s to the mid 2010s. The international order is becoming less stable and more dangerous, as the norms and institutions that dominated the post-war order in the second half of the 20th century collapse into obsolescence. And it is no longer clear that we will be able to rely upon the old failsafe, the goodwill and indulgence of the United States. Donald Trump has made it clear he doesn’t have much time for Canada’s pieties on either trade or defence, and he’s going to be gunning for us when he is returned to the presidency later this year.

Ottawa’s response to all of this has been to largely pretend it isn’t happening. Instead, it insists on trying to impose itself on areas of provincial jurisdiction, resulting in a number of ineffective programs — dentistry, pharmacare, daycare, and now, apparently, school lunches — that are anything but national, and which will do little more than annoy the provinces while creating more bureaucracy. Meanwhile, the real problems in areas of clear federal jurisdiction just keep piling up, but the money’s all been spent, so, shrug emoji.

What to do? We could just keep going along like this, and follow the slow-mo train wreck that is Canada to its inevitable end. That is is the most likely scenario.

February 25, 2024

Canadian publishing “has been decimated since Ottawa took an active interest in it and while federal policies haven’t been the whole problem, they’ve been vigorous contributors”

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

In the latest SHuSH newsletter, Ken Whyte contrasts the wholesome intentions of the Canadian federal government on cultural issues with the gruesome reality over which they’ve presided:

Even James Moore, [Liberal cabinet minister Melanie] Joly’s Conservative predecessor in the heritage department, applauded her initiative as good and necessary, although he warned it wouldn’t be easy. Moore had wanted to do the job himself, but his boss, Stephen Harper, didn’t want to waste political capital on fights with the arts community. He told Moore his job in the heritage department was to sit on the lid.

Joly got off to a promising start, only to have her entire initiative scuppered by a rump of reactionary Quebec cultural commentators outraged at her willingness to deal with a global platform like Netflix without imposing on it the same Canadian content rules that Ottawa has traditionally applied to radio and television networks. Liberal governments live and die by their support in Quebec and can’t afford to be offside with its cultural community. Joly was shuffled down the hall to the ministry of tourism.

She has been succeeded by four Liberal heritage ministers in five years: Pablo Rodriquez, Steven Guilbeault, Pablo Rodriguez II, and Pascale St-Onge. Each has been from Quebec and each has been paid upwards of $250,000 a year to do nothing but sit on the lid.

The system remains broken. We’ve discussed many times here how federal support was supposed to foster a Canadian-owned book publishing sector yet led instead to one in which Canadian-owned publishers represent less than 5 percent of book sales in Canada. The industry has been decimated since Ottawa took an active interest in it and while federal policies haven’t been the whole problem, they’ve been vigorous contributors.

Canada’s flagship cultural institution, the CBC, is floundering. It spends the biggest chunk of its budget on its English-language television service, which has seen its share of prime-time viewing drop from 7.6 percent to 4.4 percent since 2018. In other words, CBC TV has dropped almost 40 percent of its audience since the Trudeau government topped up its budget by $150 million back in the Joly era. If Pierre Poilievre gets elected and is serious about doing the CBC harm, as he’s threatened since winning the Conservative leadership two years ago, his best move would be to give it another $150 million.

The Canadian magazine industry is kaput. Despite prodigious spending to prop up legacy newspaper companies, the number of jobs in Canadian journalism continues to plummet. The Canadian feature film industry has been moribund for the last decade. Private broadcast radio and television are in decline. There are more jobs in Canadian film and TV, but only because our cheap dollar and generous public subsidies have convinced US and international creators to outsource production work up here. It’s certainly not because we’re producing good Canadian shows.

[…]

When the Trudeau government was elected in 2015, it posed as a saviour of the arts after years of Harper’s neglect and budget cuts. It did spend on arts and culture during the pandemic — it spent on everything during the pandemic — but it will be leaving the cultural sector in worse shape than it found it, presuming the Trudeau Liberals are voted out in 2025. By the government’s own projections, Heritage Canada will spend $1.5 billion in 2025-26, exactly what it spent in Harper’s last year, when the population of Canada was 10 percent smaller than it is now.

That might have been enough money if the Liberals had cleaned up the system. Instead, they’ve passed legislation that promises more breakage than ever. Rather than accept Joly’s challenge and update arts-and-culture funding and regulations for the twenty-first century, the Trudeau government did the opposite. Cheered on by the regressive lobby in Quebec, it passed an online news act (C-18) and an online streaming act (C-11) that apply old-fashioned protectionist policies to the whole damn Internet.

This comes on top of the Liberals transforming major cultural entities, including the CBC and our main granting bodies, The Canada Council and the Canada Book Fund, into Quebec vote-farming operations. The CBC spends $99.5 per capita on its French-language services (there are 8.2 million Franco-Canadians) and $38 per capita on Canadians who speak English as the first official language. The Canada Council spends $16 per capita in Quebec; it spends $10.50 per capita in the rest of Canada. The Canada Book Fund distributes $2 per capita in Quebec compared to $.50 per capita in the rest of the country. Even if one believes that a minority language is due more consideration than a majority language, these numbers are ridiculous. They’re not supporting a language group; they’re protecting the Liberal party.

February 20, 2024

QotD: Tariffs and protectionism

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

The economic case against protectionism is practically invincible. While theoretical curiosities can be described in which an import tariff (or an export subsidy) yields to the people of the home country net economic gains, the conditions that must prevail for these possibilities to have practical merit are absurdly unrealistic.

Yet in their efforts to justify punitive taxes on fellow citizens’ purchases of imports, protectionists regularly trot out these theoretical curiosities. And none is more frequently paraded in public than is the assertion that high tariffs imposed by the home government today will pressure foreign governments to lower their tariffs tomorrow, with the final result being freer trade worldwide.

“Our tariffs are the best means for making trade freer and bringing about what Adam Smith and all free traders have desired: maximum possible expansion of the international division of labor!” protectionists declare with straight faces.

This protectionist apology for tariffs is as believable as is the apology often offered by today’s campus radicals for speech codes and the harassment of certain speakers: “Our insistence on silencing conservatives and libertarians is actually a means of promoting campus diversity and inclusion!”

Both declarations are Orwellian.

Don Boudreaux, “Is Trump’s Ultimate Goal Global Free Trade?”, Catallaxy Files, 2019-06-11.

September 20, 2023

How the feds could lower grocery prices without browbeating CEOs

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

Jesse Kline has some advice for Prime Minister Jagmeet Singh Justin Trudeau on things his government could easily do to lower retail prices Canadians face on their trips to the grocery store:

What exactly the grocery executives are supposed to do to bring down prices that are largely out of their control is anyone’s guess. Do they decrease their profit margins even further, thereby driving independent retailers out of business and shedding jobs by increasing their reliance on automation? Do they stop selling high-priced name-brand products, thus decreasing their average prices while driving up profits through the sale of house-brand products?

If the government were serious about working with grocers, rather than casting them as villains in a piece of performative policy theatre, here are a number of policies the supermarket CEOs should propose that would have a meaningful effect on food prices throughout the country.

End supply management
Why do Canadians pay an average of $2.81 for a litre of milk — among the highest in the world — when our neighbours to the south can fill their cereal bowls for half the cost? Because a government-mandated cartel controls the production of dairy products in this country, while the state limits foreign competition through exorbitantly high tariffs on imports.

The same, of course, is true of our egg and poultry industries. Altogether, it’s estimated that supply managements adds between $426 and $697 a year to the average Canadian household’s grocery bill. It’s not a direct cause of inflation, but it’s a policy that, if done away with, could save Canadians up to $700 a year in fairly short order.

Yet not only have politicians been unwilling to address it, they have been fighting some of our closest trading partners to ensure that foreign food products don’t enter the Canadian market and drive down prices. Ditching supply management would be a no-brainer, if anyone in Ottawa was willing to use their brain.

Reduce regulations
The best way to decrease prices in any market is to foster competition. As the Competition Bureau noted in a report released in June, “Canada’s grocery industry is concentrated” and “tough to break into”. Worse still, “In recent years, industry concentration has increased”.

So why don’t more foreign discount grocery chains set up shop here? Perhaps it’s because they know our national policy encourages Canadian-owned oligopolies. While grocery retailers don’t face the same foreign-ownership restrictions as airlines or telecoms, the products they sell are heavily regulated, which acts as a barrier to bringing in cheaper goods from other countries.

Although it wasn’t the primary reason for the lack of foreign competition, the Competition Bureau did note that, “Laws requiring bilingual labels on packaged foods can be a difficult additional cost for international grocers to take on”.

Other ways the federal government could help Canadians afford their grocery bills include:

  • Jail thieves
  • Stop port strikes
  • Don’t tax beer
  • Axe the carbon tax

Don’t hold your breath for any of these ideas to be taken up by Trudeau’s Liberals.

September 17, 2023

Why Indigo’s struggles are far from over

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

Following up from last week, in this week’s SHuSH newsletter Ken Whyte explains why Indigo went in the direction it chose and why it seemed like the thing to do at that time:

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

Bookselling is a difficult business and it’s been especially difficult over the last twenty years. The Internet captured a lot of the used book business and shifted it online. Amazon captured a lot of the new book business and shifted it online (and bought Abebooks.com, one of the largest used book sites).

Former Indigo CEO Heather Reisman tried and failed to convince the federal government to keep Amazon south of the border back around 2002. She went so far as to sue the feds on the grounds that Amazon, as a cultural entity, was not majority-owned by Canadians and therefore operating in contravention of the Investment Canada Act. The suit went nowhere because Amazon then had no physical presence in Canada; it operated primarily through Canada Post. By the time Amazon did announce its intention to build a warehouse north of the border, early in 2010, the government had given up enforcing the Investment Canada Act. It was happy to have Amazon create new jobs.

It was when Amazon opened its Canadian warehouse that Heather began backing Indigo out of the book business. She cursed Amazon for its anticompetitive practices, not least its habit of selling books below cost to destroy competitors, and adopted the term “cultural department store” as a pivot from bookstores.

I’ve made it clear in newsletter after newsletter that I don’t like the direction Heather took Indigo but it’s only fair to look back at prevailing circumstances in 2010 and wonder if she really had a choice.

I’m sure she had stacks of research and hordes of people telling her that abandoning books was the only move. Attempting to compete with Amazon’s enormous scale and superior logistics would have struck many as a fool’s errand. Amazon would always have the largest selection, the best price, and the fastest delivery.

There was also a widespread belief that print was dead. E-books, e-readers, and tablets were the future, along with the “one very, very, very large single text“. Global e-reader sales were growing like this:

They were expected to keep growing. So were sales of e-books. In 2012, the Financial Post quoted data from Indigo predicting that e-books would capture 50 percent of the market in five years.

So, having played the Canadian Nationalist card and discovering that the government was willing to bluster but not to meaningfully act, Heather Reisman took the advice of her consultants and diversified away from books and into all the utter crap that currently befoul at least half of the retail space in every Indigo store. After all, the big box bookstores in the United States were clearly failing in the face of Amazon, with Borders filing for bankruptcy and Barnes & Noble staggering in the same direction. From 1999 to 2019, fully half of all the bookstores in the country disappeared.

The story isn’t as bleak as it looked in 2019, as Barnes & Noble is staging quite a comeback by concentrating on the book business. It’s a radical move, but Indigo could do far worse than cooking up a maple-flavoured version of the Barnes & Noble strategy. It might fail, but they’ll definitely fail if they keep on pretending to be a department gift store that also has a few books.

August 29, 2023

The noble reasons New Jersey banned self-service gas stations

Filed under: Business, Government, History, Politics, USA — Tags: , , , , — Nicholas @ 09:46

Of course, by “noble reasons” I mean “corrupt crony capitalist reasons“:

“Model A Ford in front of Gilmore’s historic Shell gas station” by Corvair Owner is licensed under CC BY-SA 2.0

New Jersey’s law, like Oregon’s, ostensibly stemmed from safety concerns. In 1949, the state passed the Retail Gasoline Dispensing Safety Act and Regulations, a law that was updated in 2016, which cited “fire hazards directly associated with dispensing fuel” as justification for its ban.

If the idea that Americans and filling stations would be bursting into flames without state officials protecting us from pumping gas sounds silly to you, it should. In fact, safety was not the actual reason for New Jersey’s ban (any more than Oregon’s ban was, though the state cited “increased risk of crime and the increased risk of personal injury resulting from slipping on slick surfaces” as justification).

To understand the actual reason states banned filling stations, look to the life of Irving Reingold (1921-2017), a maverick entrepreneur and workaholic who liked to fly his collection of vintage World War II planes in his spare time. Reingold created a gasoline crisis in the Garden State, in the words of New Jersey writer Paul Mulshine, “by doing something gas station owners hated: He lowered prices”.

In the late 1940s, gasoline was selling for about 22 cents a gallon in New Jersey. Reingold figured out a way to undercut the local gasoline station owners who had entered into a “gentlemen’s agreement” to maintain the current price. He’d allow customers to pump gas themselves.

“Reingold decided to offer the consumer a choice by opening up a 24-pump gas station on Route 17 in Hackensack,” writes Mulshine. “He offered gas at 18.9 cents a gallon. The only requirement was that drivers pump it themselves. They didn’t mind. They lined up for blocks.”

Consumers loved this bit of creative destruction introduced by Reingold. His competition was less thrilled. They decided to stop him — by shooting up his gas station. Reingold responded by installing bulletproof glass.

“So the retailers looked for a softer target — the Statehouse,” Mulshine writes. “The Gasoline Retailers Association prevailed upon its pals in the Legislature to push through a bill banning self-serve gas. The pretext was safety …”

The true purpose of New Jersey’s law had nothing to do with safety or “the common good”. It was old-fashioned cronyism, protectionism via the age-old bootleggers and Baptists grift.

Politicians helped the Gasoline Retailers Association drive Reingold out of business. He and consumers are the losers of the story, yet it remains a wonderful case study in public choice theory economics.

The economist James M. Buchanan received a Nobel Prize for his pioneering work that demonstrated a simple idea: Public officials tend to arrive at decisions based on self-interest and incentives, just like everyone else.

March 22, 2023

QotD: “[T]he Conservatives were a party whom its enemies need not fear and its friends did not trust”

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

[Theresa May’s] party is deeply divided on the question of Brexit, and the situation is eerily reminiscent of that which followed Joseph Chamberlain’s sudden conversion from Free Trade to protectionism in 1903. Though the times then were generally prosperous (judged by their own and not by subsequent standards), Chamberlain argued that unfair foreign competition was harming, and even destroying, British agriculture and industry. The solution that he proposed was protectionism within the then extensive British Empire.

The Conservative Party, led (or at least, headed) by the highly intellectual Arthur Balfour, was deeply divided on the question. It appeared not to be able to make up its mind; as one brilliant young Conservative Member of Parliament, Harry Cust put it, “I have nailed my colours to the fence”. Balfour, the Prime Minister, refused to express himself clearly on the subject, for fear of alienating one or other of the factions of his own party, and thereby bringing the government down. Intellectually brilliant as he was, he proved incapable of exercising any leadership.

In the election that followed Chamberlain’s conversion to protectionism, the Conservatives were swept from power. Neither free-traders nor protectionists trusted them, and the opposition Liberal Party, which at least was clear on this question, soon became a government of reforming zeal. For many years, the Conservatives were a party whom its enemies need not fear and its friends did not trust.

Theodore Dalrymple, “On Brexit, Remember that Politics Is Not a Dinner Party”, New English Review, 2018-03-11.

February 6, 2023

Food prices going up? Destroying “excess” production? That’s Canada’s Supply Management system working at peak efficiency!

Filed under: Bureaucracy, Cancon, Economics, Food, Government, USA — Tags: , , , , — Nicholas @ 05:00

Jon Miltimore reports on recent comments about some of the weird requirements for quota-holding dairy farmers under the Canadian Supply Management system:

Canadian dairy farmer is speaking out after being forced to dump thousands of liters of milk after exceeding the government’s production quota.

In a video shared on TikTok by Travis Huigen, Ontario dairy farmer Jerry Huigen says he’s heartbroken to dump 30,000 liters of milk amid surging dairy prices.

“Right now we are over our quotum, um, it’s regulated by the government and by the DFO (Dairy Farmers of Ontario)”, says Huigen, as he stands beside a machine spewing fresh milk into a drain. “Look at this milk running away. Cause it’s the end of the month. I dump thirty thousand liters of milk, and it breaks my heart.”

Huigen says people ask him why milk prices are so high.

“This here Canadian milk is seven dollars a liter. When I go for my haircut people say, ‘Wow, seven dollars Jerry, for a little bit of milk'”, he says, as he fills a glass of the milk being dumped and drinks. “I say well, you have to go higher up. Cause we have no say anymore, as a dairy farmer on our own farm. They make us dump it.”

[…]

In the United States, the primary regulations are high-level price-fixing, bans on selling unpasteurized milk (which means farmers have to dump their product if dairy processors don’t buy it), and “price gouging” laws that prevent retailers from increasing prices when demand is low, which incentivizes hoarding.

In Canada, the regulations are even worse.

While the price-fixing scheme for milk in the US is incredibly complicated and leaves much to be desired — there’s an old industry adage that says “only five people in the world know how milk is priced in the US and four of them are dead” — in Canada the price is determined by a single bureaucracy: the Canadian Dairy Commission.

The Ottawa-based commission (technically a “Government of Canada Crown Corporation”), which oversees Canada’s entire dairy system (known as Supply Management), raised prices three times in 2022, citing “the rising cost of production”.

Food price inflation remains a serious issue in Canada, but the problem is particularly acute in regards to dairy products, which has seen their annual inflation rate triple over the past year, to almost 12 percent.

If the farmers were doing this sort of price-fixing themselves, it would be illegal. Instead, because it’s the government doing it, it’s mandatory. You aren’t allowed to produce any of the supply-managed products outside the system, and the government helpfully protects Canadians from being “victimized” by cheaper imports by high tariffs on anything competing with supply managed output.

As with any rigged market, the costs of “protecting” the market are diffused among all Canadian consumers, but the benefits are concentrated in the hands of the quota-holders (and the bureaucrats who oversee the system). My issues with the supply management system are one of the “hobby horses” I’ve ridden many times over my nearly 20 years of blogging.

February 4, 2023

Federal regulation of the Canadian book market has resulted in 95% of the market now being foreign owned

Filed under: Books, Business, Cancon, Government — Tags: , , , — Nicholas @ 05:00

For the record, I don’t think this kind of cultural regulation is a good idea to start with, but as Ken Whyte points out, if staving off foreign ownership was the primary intent, could it have failed any more comprehensively than this?

Sometime last year, the Association of Canadian Publishers, which represents most of the independent book publishers in English Canada (Sutherland House is not a member), began discussing a radical — some might say dangerous — new form of regulation for the Canadian book industry.

The ACP started from the reasonable position that the existing federal approach to regulating the Canadian book industry has failed. That approach is to encourage a Canadian-owned book sector and, ipso facto, to discourage foreign ownership of Canadian publishing. Successive Canadian governments, Conservative and Liberal, have paid lip-service to the policy and failed to enforce it. The multinational publishers — Simon & Schuster, Penguin Random House, HarperCollins — have moved into Canada in a big way. Great chunks of the Canadian-owned industry, including McClelland & Stewart and Harlequin Books, have been sold to foreign buyers.

The multinationals now account for about 95 or 96 percent of book sales in Canada. All but the last 5 or 6 percent of their revenue comes from sales of imported books, most of them produced in the US or UK.

The Canadian-owned component of the book sector, which produces the vast majority of Canadian author books, has shrunk to about 4 or 5 percent of the market and sales of Canadian-authored books, says the ACP, have “flatlined”.

So you can see why the ACP is interested in a new approach: for more than half a century, while pursuing an official policy of encouraging Canadian-ownership, our government has managed to hand almost the whole of our book industry to foreign-owned firms.

I, too, am interested in a new approach. It’s the ACP’s next step that worries me.

The ACP has been watching over the past couple of years as the federal government rewrites its Broadcasting Act. The thrust of Bill C-11 is to bring foreign-owned streaming services operating in Canada — the likes of Netflix, Apple, YouTube — under the jurisdiction of the Canadian Radio-televison and Telecommunications Commission (CRTC). The bill would grant the CRTC the power to impose on streaming services the same rules it imposes on the likes of CTV and Global and the companies that own them. It would compel streamers to use Canadian talent, abide by Canadian diversity requirements, prioritize Canadian content on their platforms, and give a percentage of their revenues to a fund to support the production of Canadian content.

It has occurred to the ACP that no one in government is asking foreign-owned book publishers to abide by Canadian content quotas or to deliver percentages of their revenue to a fund to support Canadian-owned book producers: “The absence of a CRTC or related regulatory body, along with the policies and programs that such a body can enact, has meant that non-Canadian firms enjoy unfettered access to the Canadian marketplace.”

That’s not quite right. Non-Canadian firms dominate Canadian publishing because the feds won’t enforce their existing policy, not because we don’t have a CRTC for books. In any event, the ACP is embracing the spirit of Bill C-11.

Oh, goody! Government bureaucratic oversight is bound to make Canadians more interested in reading Canadian books, right? I see no way that this could possibly fail.

January 25, 2023

QotD: “National unity” and economic commonsense

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

Protectionists … often trot out various versions of this national-unity argument. The premise is always that when the government uses trade restrictions that reduce the business, wages, and profits of many of us in order to compel the many of us to artificially to increase the business, wages, and profits of some of us, national unity is being served.

But never is a compelling explanation offered of just how the people of the nation are made more united – of just how some common national cause is being pursued – when one subset of the people convinces the government to reduce the real incomes, options, and freedom of another subset of the people.

Economically uninformed economic nationalists … focus only on the gains that protectionism brings to protected domestic producers. … being blind to the losses suffered by all fellow citizens save the relatively small handful of protected interests – or, inexplicably, discounting the reality or severity of these losses – interpret the gains enjoyed by the protected interests as evidence that protectionism is in the national interest.

It’s all (to use an old-fashioned term) poppycock.

Don Boudreaux, “Bonus Quotation of the Day…”, Café Hayek, 2019-04-01.

January 24, 2023

An alternative theory about German Chancellor Olaf Scholz’s hesitation to allow Ukraine access to Leopard 2 tanks

Filed under: Germany, Military, Russia, USA, Weapons — Tags: , , , , — Nicholas @ 03:00

I’ve been going on the assumption that the German government was terrified of Russian reaction if they allowed some Leopard 2 tanks to be donated to the Ukrainian forces, but eugyppius points out there’s another strong contending explanation:

Leopard 2A6M in Afghanistan

Years of peace in Europe, an ageing population and a corresponding focus on expensive social programmes have caused Germany to put its defence industry into near-hibernation. Only a little over 2,000 Leopard 2s have ever seen the light of day. Each one is a hand-built machine that takes two years to make. If Germany permits the export of the European supply of Leopard 2s to Ukraine, the Russians will grind them to nothing within months, and then Europe will have no tanks except the tanks that the Americans sell them:

    Defence industry representatives, who wish to remain anonymous, report that the Americans are offering their own used tanks as replacements to [European] countries able to supply Leopard 2s to Ukraine, together with a long-term industrial partnership. Any country that accepts the American offer would be hard to win back for the German tank industry. Berlin’s influence in armament policy would decrease correspondingly.

Tanks are driven by men, who have to be trained in the operation of specific models. Their use moreover requires a whole supply chain of munitions and especially spare parts, which the Americans are eager to offer. The upshot is that, once Europe opts into American armour, it will never switch back, and Germany will be out of the game for good. Nor should we lend much credence to the idea that our very few tanks will make any difference either way for Ukraine’s prospects. The insistence that Scholz release the Leopard 2s is simply an attempt to edge Germany further out of the European arms industry and into a position of lesser political and economic influence in Europe, so that the United States can fill the gap.

Noah Carl, over at the Daily Sceptic, drew attention last week to remarks by the French intellectual Emmanuel Todd that “this war is about Germany“:

    After the collapse of the Soviet Union, Zbigniew Brzezinski called Eurasia the new “great chessboard” of world politics … The Russian nationalists and ideologues like Alexander Dugin indeed dream of Eurasia. It is on this “chessboard” that America must defend its supremacy – this is Brzezinski’s doctrine. In other words, it must prevent the rapprochement of Russia and China. The financial crisis of 2008 made it clear that with reunification Germany had become the leading power in Europe and thus also a rival of the United States. Until 1989, it had been a political dwarf. Now Berlin let it be known that it was willing to engage with the Russians. The fight against this rapprochement became a priority of American strategy. The United States had always made it clear that they wanted to torpedo [Nord Stream 2]. The expansion of NATO in Eastern Europe was not primarily directed against Russia, but against Germany. Germany, which had entrusted its security to America, became the Americans’ target [in the destruction of the pipeline]. I feel a great deal of sympathy for Germany. It suffers from this trauma of betrayal by its protective friend — who was also a liberator in 1945.

After the anti-Russian sanctions regime and its clear deindustrialising effects on the German economy, followed by the attack on the Baltic Nord Stream pipelines, and even smaller things, such as the high-profile anti-industry protests by the American-funded activist group Letzte Generation, I am willing to believe many conspiratorial things about the Ukraine war.

January 21, 2023

When did England become that sneered-at “nation of shopkeepers”?

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

In the latest Age of Invention newsletter, Anton Howes considers when the English stopped being a “normal” European nation and embraced industry and commerce instead of aristocratic privilege:

A meeting of the Anti-Corn Law League in Exeter Hall in 1846.
Wikimedia Commons.

England in the late eighteenth century was often complimented or disparaged as a “nation of shopkeepers” — a sign of its thriving industry and commerce, and the influence of those interests on its politics.

But when did England start seeing itself as a primarily commercial nation? When did the interests of its merchants and manufacturers begin to hold sway against the interests of its landed aristocracy? The early nineteenth century certainly saw major battles between these competing camps. When European trade resumed in 1815 after the Napoleonic Wars, an influx of cheap grain threatened the interests of the farmers and the landowners to whom they paid rent. Britain’s parliament responded by severely restricting grain imports, propping up the price of grain in order to keep rents high. These restrictions came to be known as the Corn Laws (grain was then generally referred to as “corn”, nothing to do with maize). The Corn Laws were to become one of the most important dividing lines in British politics for decades, as the opposing interests of the cities — workers and their employers alike, united under the banner of Free Trade — first won greater political representation in the 1830s and then repeal of the Corn Laws in the 1840s.

The Corn Laws are infamous, but I’ve increasingly come to see their introduction as merely the landed gentry’s last gasp — them taking advantage of a brief window, after over two centuries of the declining economic importance of English agriculture, when their political influence was disproportionately large. In fact, I’ve noticed quite a few signs of the rising influence of urban, commercial interests as early as the early seventeenth century. And strangely enough, this week I noticed that in 1621 the English parliament debated a bill that was almost identical to the 1815 Corn Laws — a bill designed to ban the importation of foreign grain below certain prices.

But in this case, it failed. In the 1620s it seems that the interests of the cities — of commerce and manufacturing — had already become powerful enough to stop it.

The bill appeared in the context of a major economic crisis that, for want of a better term, ought to be called the Silver Crisis of 1619-23. Because of the outbreak of the Thirty Years War, the various mints of the states, cities, and princelings of Germany began to outbid one another for silver, debasing their silver currencies in the process. The knock-on effect was to draw the silver coinage — the lifeblood of all trade — out of England, and at a time when the country was already unusually vulnerable to a silver outflow. (For fuller details of the Silver Crisis and why England was so vulnerable to it, I’ve written up how it all worked here.)

The sudden lack of silver currency was a major problem, and all the more confusing because it coincided with a spate of especially bountiful harvests. As one politician put it, “the farmer is not able to pay his rent, not for want of cattle or corn but money”. A good harvest might seem a time for farmers and their landlords to rejoice, but it could also lead to a dramatic drop in the price of grain. Good harvests tended to cause deflation (which the Silver Crisis may have made much worse than usual by disrupting the foreign market for English grain exports). An influential court gossip noted in a letter of November of 1620 that “corn and cattle were never at so low a rate since I can remember … and yet can they get no riddance at that price”. Just a few months later, in February 1621, the already unbelievable prices he quoted had dropped even further.

Despite food being unusually cheap, however, the cities and towns that ought to have benefitted were also struggling. The Silver Crisis, along with the general disruption of trade thanks to the Thirty Years War, had reduced the demand for English cloth exports. And this, in turn, threatened to worsen the general shortage of silver coin — having a trade surplus, from the value of exports exceeding imports, was one of the only known ways to boost the amount of silver coming into the country. England had no major silver mines of its own.

It’s in this context that some MPs proposed a ban on any grain imports below a certain price. They argued that not only were low prices and low rents harming their farming and landowning constituents, but that importing foreign grain was undermining the country’s balance of trade. They argued that it was one of the many causes of silver being drawn abroad and worsening the crisis.

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