What is it about people not grasping the real world?
An insistence here that we really must rebuild the IMF and the World Bank to, well, to do something. The something being that the current system is all just too free market. It leverages private money, doesn’t pay due care and attention to how it all ought to work, producing investment and cash flows for and from governments:
But like every crisis of the Trump era, this sordid affair is an excellent opportunity to mobilize around an entirely new vision for the Bretton Woods institutions – to push for radical reforms that would put the resources of the World Bank and the IMF in the service of the many, rather than lubricating the wheels of global finance in the interest of the very few.
Well, if it is the few benefiting from the current system then sure, we’d want to change that.
Rather than supporting governments and prosperity, the World Bank and the IMF led the so-called Washington consensus: an orchestrated campaign of mass privatization, austerity and financial deregulation. “There are virtually no limits on what can be privatized,” wrote Mary Shirley, the chief of the public sector management and private sector development division, in 1992.
There’s the assumption being made. That supporting governments and supporting prosperity are the same thing. They aren’t but they could be correlated, certainly. That’s an empirical question, not a result we can assume.
Here’s an idea: build a new Bretton Woods and fund the International Green New Deal by simply mobilizing idle savings via a linkup between the revamped World Bank and the new IMF.
The IMF can become the issuer of a digital currency unit in which all international payments are denominated, countries can retain their currencies (that will float freely against the IMF’s unit), and a wealth fund can be built by depositing in it currency units in proportion to every country’s trade deficits and surpluses.
Meanwhile, backed by the IMF’s capacity to issue the world currency unit, the World Bank can crowd idle savings from across the world into green investments, reclaiming its soul after decades of investing in environmental destruction and human displacement.
Rebuild that system as it was and should have been before that dreadful irruption of neoliberalism in the 80s and 90s. Back to government to government and state led development through the official channels.
But the question is, would this work? The answer being no, for it is to fail to ask why we stopped doing this in the first place. The answer to that being that this private sector neoliberalism has led to the greatest reduction in absolute poverty in the history of our species. The Washington Consensus, that list of stupid things you shouldn’t do to an economy, it worked.
Why would we want to reject what works in order to go back to what didn’t?
The Export-Import Bank and gold ownership
The US Export-Import Bank was established by executive order on February 2nd 1934, 85 years ago today. It provides financing to enable the export of goods and services in circumstances where the political and commercial risks of a deal deter commercial lenders. In the past it has provided funding for the Pan-American Highway that links Alaska to Chile, and for the Burma Road that enabled supplies to be sent from Burma to China while bypassing Japanese forces.
It has been criticized for excessive support to some corporations, notably Boeing. In 2007 and 2008, 65% of Exim’s loan guarantees were to enable foreigners to buy Boeing aircraft, and in 2012 it was 85%. Critics have alleged that this acts to raise the price of new planes, and it has been seen as a form of subsidy to the US domestic air industry. Certainly, supporters of competition and free markets have long been strident opponents of the Bank.
My own involvement with it was modest. In 1974, when I worked for the 12-strong Republican Study Committee that did research for fairly conservative members of Congress and senators, the supporters of Exim Bank did not have the votes to push through Congress a renewal of its funding. The Democrats had the clever idea of tacking an addendum onto the appropriations bill to legalize the private ownership of gold for the first time since 1933, something the centre-right in the US had long campaigned for. They hoped this would tempt enough conservatives to support the joint bill.
The group leader called us together and asked if we should go for it. We all agreed, and swung just enough support to see it through. It passed, and President Ford signed it into law. Exim Bank had its funding renewed for another year, and Americans celebrated now being able to own gold legally, and have a hedge against future federal inflation. Exim today still has its troubles and its critics, and Americans can still own gold.
What is the definition of work of equal value?
Asda has a set back in one particular employment law case:
They say they should be paid the same as those working in the supermarket's depots, who are mostly men.
The supermarket chain was challenging an Employment Appeal Tribunal decision that the jobs in Asda stores are comparable to those in its depots.
At the Court of Appeal in London, Lord Justice Underhill ruled that "Asda applied common terms and conditions wherever they [both types of workers] work".
That is, it is feasible to compare the jobs because they’re at the same employer under largely the same terms etc.
It’s this next bit:
The workers must still prove their roles are of equal value and, if they are, that there is no reason aside from sex discrimination that they should be paid equally.
To argue about the value of work is to commit a category error. It’s, effectively, to be making Marx’s mistake with the labour theory of value. Since the 1870s and the marginalist revolution we’ve known that’s wrong. We need to consider the supply of workers able to do the job and the demand for them to do so - that’s what determines those wages.
Only after that error do we get to the next, which is any decision to insist that two different jobs are of equal such value. The only measure we’ve got - only useful one - of what a job’s worth is what someone is willing to pay to get it done. How can it be otherwise in a market economy?
The entire concept being used here is thus wrong. A sad thing to have to say about what we’ve, in error, encapsulated into law.
Edward Coke's contribution to English Common Law
Sir Edward Coke (pronounced 'cook') was born on February 1st 1552. He is widely regarded as one of England's most prominent jurists, and one who firmly established the primacy of English Common Law, putting himself personally at risk from Stuart monarchs who tried to put themselves above it.
As Chief Justice of the Common Pleas, he declared the King to be subject to the law, and said that the laws of Parliament were void if they violated "common right and reason". James I & VI and Charles I had granted monopolies and patents in exchange for cash as a way to obtain funds outside Parliamentary control, but Coke wrote and advocated the Statute of Monopolies that substantially limited their powers to do so.
As an influential judge, he often ventured into constitutional law with his voluminous writings, declaring that no tax or loan could be implemented without the permission of Parliament.
His greatest contribution to the liberties of Englishmen was the Petition of Right, which reaffirmed the principles of Magna Carta, and is regarded as one of the three seminal constitutional documents of English law, along with Magna Carta itself and the 1689 Bill of Rights. He wrote affirming the right of habeas corpus, and declared that that no private citizen could be forced to accept soldiers into his home, or be subject to martial law imposed upon civilians.
In a 1604 decision that has reverberated through history to affirm the rights of the subject against authority, Coke declared that “the house of every one is to him as his Castle and Fortress as well for defence against injury and violence, as for his repose.”
Against the overweening power of the state, personified in the monarchy, Coke set the justice of English Common Law, and through his judgements and writings ensured that its principles were enshrined in the constitution, and that no person, however powerful, was above them.
How horribly the language changes
We’re all intensely interested in sustainability issues. We’d not want the species to disappear in a howling wasteland of nothingness after all - so we’re pretty interested in making sure that current arrangements are sustainable. Where they aren’t we should do something about it too.
The problem is that as soon as we’ve got this societal agreement that this something is a good idea then the promoters of it go of and change the meanings of the words in use.
For example, perhaps there is something in this idea that clothes should be made for more than a couple of wear. We don’t think so - in fact we’re sure that there isn’t something in it - but it’s a useful concept to consider all the same.
The six companies, which include Amazon UK, JD Sports, Sports Direct and TK Maxx, have not taken any action to reduce their carbon, water and waste footprint. None of them use organic or sustainable cotton and only two – Sports Direct and Boohoo – use recycled material in their products.
The interim report by the environmental audit committee singles out Amazon UK for its notable lack of engagement in sustainability.
As we say we’re fine with considering whether waste etc is sustainable and we’re sure we know the answer too. But looking at the actual report we find something more:
...We also asked four leading online retailers to answer similar questions following evidence at our first hearing about illegally low wages for garment workers .....We believe that there is scope for retailers to do much more to tackle labour market....This is an interim report on the sustainability of the fashion industry
The labour market has nothing to do with sustainability. What wages the workers are paid can be a source of concern, of course it can, but it’s nothing at all to do with whether the system itself can carry on, is sustainable.
And yet in the language of a parliamentary committee wages are a part of that environmental sustainability. For no reason other than the campaigners have done that bait and switch. We out here are convinced that whether the world can carry on for a few more hundred years is important. Under that banner the campaigners have smuggled in their own concerns about wage levels.
It’s in this manner that inequality gets renamed as poverty, legal privilege in favour of previously disadvantaged groups is social justice and so on. We need to be careful abut what concepts are being smuggled into the national discourse in such a manner.
Dr Madsen's Memories
Many conversant with the Adam Smith Institute will be familiar with our President, Dr Madsen Pirie. Madsen, along with Dr Eamonn Butler founded the Institute in 1977.
Madsen has compiled a series of small windows into the idiosyncrasies of his career and personal life. The memories are in no particular order; some are from early childhood, middle life, and some from the recent past. They are a compelling collection of incidents, events and observations which we would recommend for an insight into the making of Madsen Pirie.
Below is a small excerpt into the kind of writing you may come across on the website.
To most reading this who have somehow found themselves perpetually hooked the weird and wonderful alcove that is the Adam Smith Institute blog, lighthouses may bring to mind the genius of Ronald Coase. And, usually, this may be the case for the more wonky areas of the publications of an economic think tank. Nonetheless, we invite you to explore another side of the lighthouse.
The Madsen's memories post entitled Spurn Head lighthouse and faraway lands provides, a deeper, perhaps even lighter take on lighthouses.
“As a child I had looked out to Spurn, sometimes wondering if anyone out there was looking back at me. There was, of course. A middle-aged man was looking back to the beaches of his childhood with fond memories.”
Written with sabre-toothed clarity, witty judgement and a cautious discernment of the reader’s state of mind, these posts may well be the quick read that gives you something to ponder on for the train journey to work or even the inspiration for a blog post of your own.
New posts are available at 7am every weekday, click here for more.
Venezuela's failure has a name: Socialism
Dr Madsen Pirie reflects on the failures of Venzuela’s leaders, their love of socialism, and the tragedy its enforcement has brought to what was once South America’s richest state. As events come to a head, and Maduro’s grip on power looks uncertain, we in the West must be ready to help the country’s citizens in any way we can.
When Congress passed the anti-slavery amendment
It was on January 31st 1865, 154 years ago today, that the US Congress passed the 13th Amendment that banned slavery, and sent it out to the states for ratification. Nearly two years earlier, Lincoln had used Presidential war powers to free slaves in Confederate states as they came under Union control, but the amendment made slavery unconstitutional.
It was one landmark among several that made illegal the ownership of one human being by another, the total denial of liberty. It predates written records and was practised in many cultures. Slavery involved suffering, and many captured slaves died in transit. The Arab slave trade, for example, which lasted over 1,000 years, typically saw 6 or even 10 die for every one that reached the destination. In the Atlantic slave ships, some 15 percent died en route, while the remainder suffered appalling conditions.
Other landmarks in the campaign for its abolition included the 1807 UK Act, inspired by Wilberforce, that abolished the slave trade throughout the British Empire. In the half-century following, the British navy seized approximately 1,600 slave ships and freed 150,000 Africans who were aboard. Wilberforce himself lived to see the 1835 Slavery Abolition Act pass into law.
A US landmark was the 1807 Act under Jefferson that banned the import of slaves, although it left the domestic practice in place. By the civil war it was estimated that one-third of Southern families owned slaves, so the 13th Amendment made a vast difference to the lives of millions.
The 1948 Declaration of Human Rights specified that, "No one shall be held in slavery or servitude; slavery and the slave trade shall be prohibited in all their forms." No person today may legally be enslaved or held in slavery, and the most basic human freedom to live free from bondage is enshrined in international law. To those who say slavery is still with us in the form of human trafficking, chattel slavery, forced marriage and child soldiers, Steven Pinker gives an eloquent distinction between what it is now, and what it was for most of human history:
“There is an enormous difference between a clandestine, illegal, and universally decried practice in a few parts of the world and an open, institutionalized, and universally approved practice everywhere in the world."
That experimentation machine we need
There are myriad methods of doing things, cornucopias of things to be done. We need, desire, some system of sorting through what can be done, what we’d like to have done, to see where a match can be made. A way of doing something we want done. The difficulty is compounded as the onward march of technology means that both are a moving target, what can and what we want.
At which point a story from something we’ve been doing this past 6,000 or more years, growing rice:
Junpeng is part of a pilot project to see if it’s possible to grow more rice with less water and fewer greenhouse gases. The dramatic difference between his two crops points a way to help the world’s 145 million small rice farmers, and could also greatly reduce global warming emissions from agriculture.
The project, backed by the German and Thai governments and by some of the world’s largest rice traders and food companies, has seen 3,000 other farmers in this corner of Thailand’s “rice basket” near the Cambodian border trained to grow sustainable rice according to the principles of a revolutionary agronomical system discovered by accident in Madagascar in the 1980s.
Jesuit priest Henri de Lalanié working in the highlands observed that by planting far fewer seeds than usual, using organic matter as a fertiliser and keeping the rice plants alternately wet and dry rather than flooded, resulted in yields that were increased by between 20 and 200%, while water use was halved. Giving plants more oxygen, minimising the competition between them and strictly controlling the water they receive is thought to make them stronger and more resilient to flood and drought.
The original finding was serendipity. The growth has been people trying it and finding it works. The end result highly desirable, but it’s the method of getting there which is important. Suck it and see and do more of what works.
This is, of course, a market method of testing innovation. The government involvement is telling people about it, not insisting that they do it nor planning who or how.
It’s not an outcome of bureaucratic planning now, is it? And thus our estimation of the value of bureaucratic planning above market experimentation is?
Mass murder of Stalin’s state "enemies"
On this date, January 30th, in 1930, the Soviet Politburo ordered the extermination of the kulaks. Stalin had decreed they were enemies of the Revolution, and they were castigated and humiliated before large numbers of them were murdered. The kulaks were peasants who were slightly better off than field labourers, having perhaps a couple of cows and a few acres of land.
This, to Stalin, made them part of the hated property-owning middle class. He wanted production of food to be done large-scale on collective farms. The kulaks were an obstacle to a peasantry totally dependent on, and subservient to, the state, and must be eliminated. Stalin declared, "The resistance of this class must be smashed in open battle and it must be deprived of the productive sources of its existence and development." This meant confiscating their animals and their grain, needed for the Red Army, and leaving them to starve. Then their land was seized.
Many were sent to gulags, with hundreds of thousands dying along the way. Some were executed, and others left to starve to death. Solzhenitsyn put the number killed at 6 million. It is reckoned that this policy led to the great Soviet famine of 1932-33 that killed millions more. It was one of the great disasters of Russian history, and it was entirely man-made.
Historians estimate that this wanton act of mass murder was but a drop in the bucket that Stalin later filled with the blood of his peoples. By coincidence, on the same date, January 30th, three years later in 1933, another mass murderer, Adolf Hitler, was appointed Chancellor of Germany.