Figaro wonders why people are leaving France
The cover of Figaro magazine says it all. “They are leaving for London, Brussels or New York,” it says, and asks, “Why are they leaving France?” It then talks of “the ravages of fiscal banishment” and “the youngsters who leave to succeed elsewhere.” The young people shown seem to be happily waving goodbye to France’s punitive taxes. It bears remembering that there are misguided people in Britain who tell us that taxes do not make people change their behaviour…
Ten reasons why the Left should like the ASI, 3: Trade with poor countries
3. The ASI enthusiastically supports giving goods from developing countries unrestricted access to developed world markets. The Left should appreciate our stance in firmly and publicly supporting the one thing that can make people in poorer countries wealthier.
Some campaign for more aid, but the ASI's line is that trade is more important. Humanitarian aid is fine, and we should give generously to support victims of natural disasters, to help provide clean water, and to fund health programmes. We do not, however, support development aid that is designed to boost state investment in industry or state direction of emerging economies. Every country that has gone from poor to rich has done it through trade, and none has done it without trade.
Some of those who piously call for more development aid also support the tariffs and subsidies by which some developed countries prevent poorer countries from selling their goods in rich world markets. We express our support for nations struggling to become wealthier with a three-word mantra: "Buy their stuff." When others were wearing wristbands that said "Make Poverty History," we produced and distributed thousands that proclaimed "I buy goods from poorer countries." The former expressed a hope that other people would do something, but ours declared something the wearer was actually doing to bring about change.
When we buy goods from developing countries, we become wealthier by having cash left over after buying their lower-priced produce. They become richer from the money we pay for their goods. It is a win-win process that is rapidly lifting most parts of the world above subsistence poverty.
Ten reasons why the Left should like the ASI, 2: Support for debt relief
2. The ASI supported debt relief for third world countries. The Left should appreciate the removal of the debt-servicing burden from the citizens of poorer countries that this would bring.
Many of the churches joined a 'Jubilee' campaign at the turn of the Millennium, calling for much of the debt owed by poorer countries to rich ones to be cancelled. Even before then the ASI had called for the same, pointing out that in many cases the loans had been ill-advised, given to dictators for dubious projects, and that much of the money had been spent by them on arms and self-aggrandizement. Now sometimes long after many of those dictators had gone, the burden of servicing those debts fell upon people struggling at subsistence level. The ASI even featured on Bono's website for its stance on this issue.
The ASI took the position that this was a one-off, a move to right previous errors, and certainly not a co-ordinated policy to cover future loans. It urged tighter controls and conditions over the issue of subsequent loans to make sure that these errors were not repeated. To the charge that a Jubilee debt amnesty would encourage reckless borrowing in future, the ASI replied that poor countries must not assume that they could count on this happening at the turn of every future millennium.
Curbs on migration are curbs on our freedom
Recently, Kier Martland produced an article in The Libertarian attacking Sam Bowman's take on immigration, suggesting an alternative libertarian view on the issue – using Hoppe to back up the position. I think this view is entirely mistaken. Indeed, Anthony Gregory and Walter Block take apart Hoppe's position here and Block again here.
The position taken by Hoppe is that nobody should be able to make a claim on the state without 100% consent from those paying for it, including for goods such as roads. The issue is that the state does exist, so long as there is government we should seek to ensure a policy of least damage done. By having high costs or even bans to hire migrants, the state would be taking away people's right to freely associate and make contracts. Further, by increasing the cost of labour, and doing other such damage to the economy as described in Bowman's article, restrictions on immigration do damage to the taxpayer. Hoppe's “second best” position simply doesn't hold true.
If one group in society objects to immigration, that does not mean migration is wrong because they pay a small percentage of the cost (even though, again, immigrants are a net positive for the tax collector). Indeed, the same argument would hold true for economic nationalists or greens who wished for only local goods to be sold in the economy. By importing foreign products, one would be initiating trespass on the roads by transporting goods unwanted by third parties. The same could be said of any good transported that an individual disapproved of, whether alcohol, meat products or any other “vice”. Similarly, Christian Scientists or others who disapprove of modern medicine might insist that taxpayer roads not be used for transporting any related materials. The position is ridiculous, you cannot support absolute rights to reject immigration whilst not supporting the same absolute right to reject other goods and services people might disapprove of.
By suggesting an increase in government control of migration, both Martland and Hoppe are going the wrong way on this issue – it is not about defending the taxpayer. Increasing the scope of the state, and the cost to taxation in policing it, as the Hoppeans propose, is damaging. What about those who pay taxes that DO want immigrants to use government services such as roads? Are their rights lesser than those who are for government restriction? Even if the costs and size of government are larger to be more restrictive? Should they be forced to fund border forces in this way? The Hoppean position on immigration is illogical; you do not reduce the scope of the state by increasing it and the number of tasks it undertakes. We should be looking at ways to limit the damage and cost of government now, and not sit in ivory towers trying to fudge a philosophical position that takes away the right of free association.
Why 'Heavens on Earth' is a very important book
I've just been re-reading Jean-Paul Floru's "Heavens on Earth." (I should declare an interest in that I am one of two that the book is dedicated to). It is a superb book, not least for being highly readable and packed with engaging anecdotes. More importantly, though, it puts its message across with a wall of supporting evidence. The message is that microeconomics works. Every single country that has tried to achieve rapid economic growth by cutting taxes and red tape has succeeded.
The formula is simple. You don't achieve growth by massive public works and government spending. You do it by making it easier for private people to innovate, to invest, to spend on what they value, and to build for the future. Whether it is post-war Germany, the US, Hong Kong, China, Chile, New Zealand, Singapore and industrial revolution Britain, it has always worked. It achieves all of the choices and the chances that wealth brings with it. It creates "Heavens on Earth," and you do it by motivating people, by increasing the rewards of success, and by removing the barriers that stand in the way of human achievement.
I really wish that some well-to-do business-person would fund the cost of sending a copy of this book to every Member of Parliament. If sufficient numbers of them dipped into its pages or told their assistants to read it and summarize its findings for them, the governance of this nation would be much improved. I am recommending to everyone I meet that they should read it and absorb its lessons.
Chart of the week: 25 fastest growing countries, 2015-2050
The 21st Century may well be Africa’s Century – not Asia’s
What the chart shows: The chart shows the 25 countries with the fastest forecast population growth over the next 25 years. Only one – number 25 in the list – is not African.
Why is the chart interesting: Demographics are not an absolute science, but the trends are broadly easy to forecast. With numerous exceptions, population growth should lead to economic growth and that in turn to a rise in political importance. Economic growth is also over the medium and long term a pre-requisite for return on investments. We are frequently told that the 20th Century was the American Century and the 21st will the Asian. But from a demographic perspective, Asian countries are almost in the same bad state as European. The fastest population growth over the next generation will be in Africa. This is also where we are already seeing some of the fastest economic growth. Whether Africa’s governments and peoples will build on this is impossible to say – but the conditions for growth are there. The 21st Century may be Africa’s.
Chart and comments provided by Stein Brothers (UK), www.steinbrothers.co.uk.
Making a complete mess of Cyprus
The people in charge of economic policy in the EU appear to believe that they can create economic reality by passing laws and reaching decisions through negotiation. Their knowledge of human psychology seems to be even more flawed than their understanding of how markets actually work in practice. The decision they forced upon the Cyprus government is flawed on many levels. The bank levy punishes savers but leaves the bond-holders untouched, violating the principle that small savers should be protected, while the bond-holders who knew they were taking a punt should take a hit.
It is also a wealth tax, violating one of the principles of fair taxation that it is OK to tax transactions such as making money or buying goods, but not OK to take money from someone simply because they have it. A state might claim to justify a transaction tax by saying that it provides and maintains the infrastructure that makes it possible for people to deal with each other to mutual advantage, but not a wealth tax.
If the Eurocrats had studied game theory or psychology they could have anticipated the anger and outrage that their move has provoked. People mind losses more than they value gains. They mind precipitous losses more than they mind gradual ones. They mind visible losses more than invisible ones. People do not like it if their €200 in the bank will, through inflation and currency fluctuations, only buy them €180 worth of goods in the future. But they dislike it almost infinitely more if government removes €20 from their savings account. Indeed, 'dislike' is too mild a word. They are outraged because their government has stolen their money, even though they were not responsible for the crisis.
The signals this move sends out are that it is foolish to save, and foolish to keep money in banks. These signals are spreading to countries other than Cyprus. A precedent set in one place could be followed in another. It is entirely possible that this action will set in motion runs on several banks as savers seek to place their funds beyond the reach of predatory governments. The reaction of outsiders to this move can only be one of shocked incredulity.
Uncertainty for Italy means uncertainty for us, too
The political crisis in Italy will just deepen the eurozone's resolve to move faster and deeper into real economic and banking union. With no clear winner emerging, a large vote against austerity measures, and the prospect of another election in weeks, markets already have the jitters. The European Central Bank (ECB) will find itself, inevitably, being drawn in to try to calm them.
Italy is a big country, the third largest European economy. It is not going to be rescued by a few Greek-style bail-outs that are annoying and irritating, but bearable for the other eurozone countries (and for non-euro countries like the UK, which have got sucked into some of the bailouts). Italy really is too big to be allowed to fail. If it did, there would be monetary chaos throughout the eurozone, and beyond. And although a considerable number of Italians gave pro-euro politicians the thumbs down last weekend, the country seems to have no real intention of pulling out of the euro and getting the lira back. Indeed, it went to very strenuous efforts to get into the euro when it was created, and the other eurozone countries were keen to bend the rules and get Italy in (as they did with Greece, so they only have themselves to blame).
Over to you Mario Draghi. He has already indicated that he will do whatever is necessary to keep the euro show on the road. With Italy looking shaky, that can only mean one thing: creating new money and flooding the markets with liquidity until (hopefully) the problem goes away. Quantitative easing, euro-style. It is something that Germany and others have long resisted, some fearing the inflation it could cause and others fearing the enormous power that the ECB would be acquiring. But what is the (politically realistic) alternative?
But such money-creation will probably do little more than it has done in the UK. The new money will go to the commercial banks of the eurozone, who will buy 'safe' assets (like government bonds) with them in order to strengthen their balance sheets in advance of the next Basel deadline. Financial asset prices will rise, but little of the stimulus will get into the real economy and make a real difference to growth.
Which is bad news for the UK too. Continued uncertainty and low growth among our nearest customers is not the way to grow ourselves out of the recession. George Osborne's overview of economic conditions in his budget in three week's time will be... interesting.
Chart of the week – GDP developments in euro area
Summary: GDP fell by more than expected in most EA countries in Q4
What the chart shows: The chart shows the quarterly percent change in GDP in Q3 and Q4 2012 in the euro area and in its six largest members
Why is the chart interesting: That GDP would fall in most of the euro area in Q4 of last year was already expected before the news release on 14th February. In that sense, this is old data. But the falls were generally worse than expected, notably so in Germany, in France and in Italy (where GDP fell for the sixth consecutive quarter), and hence also for the EA as a whole. While early data for January show some recovery, notably in Germany, the numbers highlight the continued weakness of domestic demand in the single currency group. The strong euro is adding to the problems and a cut in interest rates to help weaken the currency is again becoming likely, although strongly opposed by Germany.
Chart and comments provided by Stein Brothers (UK), www.steinbrothers.co.uk.