Charles II and New Coke
It might seem that there is little to link King Charles II of England with New Coke, but there are strong parallels. On April 23rd, 1661, Charles II was crowned at Westminster Abbey, confirming the Restoration of 1660. On April 23rd in 1985, Coca-Cola launched its new brand, New Coke. What linked the two, apart from the coincidence of the date, was that both were cases in which a mistake was made, and subsequently corrected.
Cromwell had led the revolt against King Charles I, and had the king executed in 1649. People thought they were gaining liberty by supporting this, but instead they gained a brutal dictatorship. Cromwell forcibly dismissed Parliament in 1653 and ruled as ‘Lord Protector,’ until his death in 1658. He was brutal against Roman Catholics, and exceptionally brutal against the Irish. When his son succeeded him, as is common with dictators, people decided they’d had enough and restored the monarchy in 1660. It is significant that Parliament, ignoring what the people thought, as they do now, erected a statue outside Parliament of the only man who ever abolished it. After the Restoration, people could enjoy themselves again, and Britain boomed. The ‘Protectorate’ became an unpleasant memory.
By the mid 1980s, Coca-Cola had seen Pepsi, a sweeter tasting rival, eat into its market. Young people, in particular, seemed to prefer the sweeter taste. Coke introduced its response in the form of New Coke, a sweeter version of its original product. It was a disaster. People rejected and mocked the new product, and Pepsi edged ahead for the first time. Coke’s response was rapid. Within 3 months they reintroduced the original formula, rebranded as “Coca-Cola Classic.” The public took to it in droves and Coke’s sales shot up. New Coke went into history’s dustbin, and the ‘Classic’ suffix eventually disappeared.
In both cases a change had been made in the expectation of a positive outcome, and in both cases it brought disaster. The key fact is that in both cases people went back to the original and corrected their mistake. If there is a lesson from the two instances, it is perhaps that people can learn from their mistakes, and go back to undo some of the damage they have caused. They should never be afraid to do so, despite all the charges of being backward-looking. Always the current status looks like an advance on the past, and it takes boldness to recognize that it was a mistake and to set about reversing it.
As so often, new government is unpicking the mistakes of old government
As we’ve noted a number of times around here much of what government does is an attempt to manage the problems caused by earlier errors of government. Further, it never does take the form of stopping making those earlier mistakes of government, but instead piles on more layers of potential mistakes from governance.
An example here with new laws being considered in one US state concerning funerals. Perhaps, more accurately, corpse disposal:
Washington state is on the verge of becoming the first in the US to allow humans to be turned into compost, amid a surge in demand for sustainable and 'positive' funeral services.
State representative put the final touches to a bill on Friday which legalises two sustainable death care options - a chemical process of alkaline hydrolysis and a natural process of organic reduction.
We’ve long had an available method of organic reduction. Nothing so exotic as sky burial - popular though that was among certain Amerind groups - or being prepared for the birds - Zoroastrian. But that’s as good a description of burial in the earth to become worm food as we’re likely to get, organic reduction.
Given the historic nature of this form why would we need laws to allow it?
“It is an understandable tendency to limit the amount of time we spend contemplating our after-death choices, but environmental realities are pressing us to develop alternatives to chemical embalming, carbon-generating cremation and the massive land use requirements of traditional cemeteries,” she said.
As Jessica Mitford famously pointed out there are any number of American rules that lead to it being near impossible to bury without embalming. In her reading of it rules brought in to benefit the funeral directors who get paid to do it and then justified on spurious public health grounds.
Government is bringing in rules to allow exactly what previous government rules expressly disallow. Without doing the sensible thing of just cancelling that earlier government intervention which is causing the problem we’re currently trying to solve.
There is even a certain non-spuriousness to the public health argument in that shallow graves untreated will make the cemetery a noisesome place but then we’ve also already solved that. 6 foot under is common parlance for good reason.
As is so often true, new government is trying to deal with the problems caused by old government - without ever revoking the rules causing the error we’re trying to deal with.
Fibre optic cable in communication
On April 22nd, 1977, fibre optic cable was first used to transmit telephone messages. It was a significant milestone because of what it portended. Previous communication had been along metal wires, usually copper. Fibre optic cable is an advance, not least because it is made of silica, available in plentiful supply. It is drawn out to a diameter slightly thicker than that of a human hair, and can be used to transmit light for use in fibre optic communications. It can do so over longer distances and at higher bandwidths (data rates) than electrical cables. Moreover, the signals travel along them with less loss, and are immune to electromagnetic interference.
This was an important step because it gave a classic lesson in substitution. When resources grow scarce in supply, people develop and use alternatives. Although some environmentalists suppose that we carry on using scarce resources until there are none left, the world doesn’t work like that. If resources become scarce, the price rises so it becomes economic to use less by turning to substitutes, ones that might previously have been more expensive. The price further signals to people that it is worth extracting further supplies that might have been too expensive at the old price, but are now economic.
In the 1970s, some people thought that we were running out of copper. It was one of the five resources chosen by Paul Erlich for his famous wager with Julian Simon. I believe the reserves of it were then estimated at about 7 years. In fact, over the 10 years of the bet, copper fell in price, and Simon won his wager on all five resources. The main reason copper prices fell was that demand shrank as people turned to fibre optic instead.
People now use substances like carbon laminates instead of steel to manufacture things such as automobiles and aircraft. Governments could tell us to develop and use substitutes, and young people could campaign in the streets to push them into doing so, but this is far less effective a motivator than price. When the price of a resource rises, people use less of it and turn to alternatives because it is more efficient to do so.
Copper reserves are far greater now than they were in the late 1970s when it was thought to be “running out.” Current estimates suggest we now have 40 years of copper reserves and over 200 years of resources left. And we are not likely to run out of silica (sand) with which to make fibre optic cables, unless and until someone nationalizes the deserts.
Numbers are important but concepts even more so
One of the trailing - but imminently to break through! - Democratic runners over in the US is Andrew Yang. He’s arguing in favour of a universal basic income over there. Our own views on such differ among us with at least one of us simply arguing that it would be better than the current disincentives of the extant welfare state.
Yang’s shtick is that he can do math and that this is important. Which, of course, it is. But getting underlying concepts right before doing the sums also matter, which is where there’s a bit of a failure.
A Value-Added Tax (VAT) is a tax on the production of goods or services a business produces. It is a fair tax and it makes it much harder for large corporations, who are experts at hiding profits and income, to avoid paying their fair share. A VAT is nothing new. 160 out of 193 countries in the world already have a Value-Added Tax or something similar, including all of Europe which has an average VAT of 20 percent.
It’s true that the great difference between the US Federal tax system and those across Europe is the absence of a VAT. Also that anyone desirous of increasing the size of that Fed stuff to European levels will have to have a VAT or equivalent. It’s not possible to tax the rich enough to pay for such an expansion.
And yet, VAT is not a tax upon production. Sure, it’s producers who collect it but that’s not where the incidence is at all. As every economic textbook will tell you it’s a consumption tax. The people actually paying it are consumers. Us that is.
It might well be true that a UBI is the way to go and the numbers don’t look all that off. But concepts matter too - it’ll be US consumers paying the VAT to fund the UBI. Best to tell them that, eh?
Venezuela Campaign: Chavez versus the workers
The contempt of Chavez and his followers for the organised working class can be seen clearly in the fate of Ciudad Guyana, Venezuela’s industrial heartland. A hub of giant steel mills, coal and bauxite mines, iron smelters and aluminium plants, this is where the bulk of Venezuela’s heavy industry was built. This city is home to a million people, and was once Venezuela’s best hope of escaping its dependence on oil exports.
Instead, Chavez nationalised factories not already under state control, installing inexperienced political acolytes as managers who were only interested in ideological conformity.
Ideological schools were set up in factories, investment halted, maintenance was forgotten, and markets in the West were abandoned in favour of politically-aligned ones. Corruption became rampant, products were stolen and sold on the black market, and managers would buy trucks from Belarus just in order to take a cut on the contract.
Nearly all the country’s electricity was generated at Ciudad Guyana, but when nationalisation and mismanagement of the electricity industry led to a power shortage in 2009 – the first of many - Chavez shut down heavy industry rather than cut off supply to potential supporters in Caracas. 400 vital electrolytic cells in CVG Venalum and 200 in CVG Alcasa were terminated, never to start again. These cells effectively implode when denied power for more than two hours.
In 2009 workers went on strike to protest the damage being done to their livelihoods. The result? The strike leader, Ruben Gonzalez, was imprisoned for seventeen months for incitement, unlawful assembly and violating a government security zone. He was subsequently sentenced in 2011 to another seven years in prison.
By 2014 Ciudad Guyana’s decline had considerably worsened. Investment was next to non-existent and labour disputes had further spread. In August of that year troops shot at protesting steelworkers, injuring three. The huge steel-making company Sidor, at the heart of the Ciudad Guyana initiative, was shut down as a result of strike action. It produced 4.3 million tonnes of steel a year before it was nationalised by Chavez in 2008. But by 2014 its production was less than 700,000 tonnes per annum. Striking workers complained of poor wages, harmed by increasing inflation. 25-year Sidor veteran Wilmer Salazar said that while he used to be able to buy a new car with 3 months of wages, “now everything I earn goes to buy food for my family, and it’s still not enough.”
In 2019 the nation-wide power cuts dealt a final blow to Ciudad Guyana. At the country’s two remaining aluminium plants, the electrolytic cells went out for the last time – 59 at Venalum and 14 at Alcasa.
As a result, 5,000 Alcasa and Venalum employees were sent home. In March 2019 Sidor closed its doors for the last time and ceased production permanently. 13,000 employees lost their jobs.
Ciudad Guyana, once the great hope for Venezuelan prosperity, is now a ghost town. It is no surprise that of Venezuela’s six unions, five back interim President Juan Guiado against the Maduro regime. But it’s dangerous for workers and the leaders to oppose the regime. Ruben Gonzalez has been arrested yet again for leading another protest, and when workers criticised the regime’s incompetence, corruption and neglect of the national power grid, they were taken away by the secret police and haven’t been seen since.
Once democracy is restored in Venezuela, a major challenge will be to rebuild its industrial base that has been so comprehensively destroyed by Chavez and Maduro. Workers and trade unions should have their rights re-instated and be valued partners in that endeavour.
More information on the Venezuela Campaign can be found on their website.
Long to reign over us
April 21st is not just Easter Sunday this year; it is also the 93rd birthday of Her Majesty, Queen Elizabeth II. She came to the throne at the age of 26 upon the death of her father in 1952, and has reigned for 67 years, the longest reigning monarch in our nation’s history.
She acceded to the throne when Britain was still recovering from World War II, and presided over the UK’s relinquishing of its colonial status and the assumption of its position as a Commonwealth Power. The Queen has always set great store by her position as head of the Commonwealth, believing that it brings together diverse peoples and is a force for good in the world. During the decades when Britain seemed to be leaving its old friends to join forces with Europe, she continually highlighted the importance of the Commonwealth.
She witnessed the decline of the UK’s great power status as the postwar world came to be dominated by continental powers rather than individual countries. She also saw the decline of Britain’s economic position, as the resources that could have provided the investment for regeneration and renewal were spent instead on welfare progammes and nationalization.
The rebirth of self-confidence and the economic revival that followed the abandonment of the Keynesian postwar consensus from 1979 meant that she was now head of state of one of the top economies of Europe, rather than of the bottom one.
She has shown careful and considered restraint, taking care to remain above politics and to accept and work with whatever governments her people chose to elect. Her continued popularity derives in part from her status as a national symbol who takes no part in the issues of the day that sometimes divide her subjects.
On a personal level, she is known to be both intelligent and well-informed. In her visits around the country she meets and talks to people from diverse fields and takes on their information. She is briefed weekly by the Prime Minister and at Privy Council meetings, and reads her ministerial red boxes every day. She is by no means a mere figurehead, though she is careful never to reveal her own views, in order to preserve her impartiality.
Thanks to the Queen, constitutional monarchy remains popular and firmly entrenched in Britain. We join the nation in congratulating her and wishing her a happy birthday, and more years of wise oversight of her realm.
Governments win ISDS Cases often enough - therefore ISDS cases are bad
As we all know there’s a significant movement insisting that investor state dispute settlement systems - ISDS - in international treaties are a bad idea. For what they are is an insistence that there should be an independent court of law able and willing to rule upon the manner in which states live up to - or don’t - their contractual promises. And for those in favour of untrammeled state power who wants that?
As we’ve pointed out before such ISDS provisions do indeed mean that companies and individuals can sue governments. But then so does the European Court of Justice and even the European Court of Human Rights. None of those complaining about ISDS provisions going on to complain about those two.
What does amuse is that even when governments win such ISDS cases this is still taken to be proof that the system shouldn’t exist:
A US energy company’s controversial and unprecedented attempt to sue the Australian government has collapsed, leaving taxpayers with a $44,000 bill.
In 2017 Florida-based APR Energy became the first company to attempt to sue the Australian government under the Australia-US free trade agreement, demanding $344m in compensation for Australia’s treatment of its gas turbines.
The action was made possible by deeply controversial provisions contained in many trade deals – known as investor-state dispute settlement, or ISDS – that allow foreign corporations to sue a government for actions or policies that hurt them commercially.
No, no one gains the right to sue for commercial harm. People only, ever, gain the right to sue for government breaching contracts or terms they have already agreed to. And holding government to account is rather a useful function in a society, no?
Despite the case’s relatively short and uneventful journey, taxpayers have still been charged tens of thousands of dollars to defend it.
Documents obtained by the Centre Alliance senator Rex Patrick show the total legal bill to Australia was $44,000.
The bill is small but Patrick says it is further evidence that ISDS provisions leave Australia vulnerable.
“These are the dangers,” he said. “The matters have been discontinued but it has cost the taxpayer. Last time it was $39m, this time it was $44,000. Who knows what it will be next time.”
$44,000 to uphold the rule of law? Seems rather cheap at the price. What next, complaints about the cost of trying someone who turns out to be innocent? A demand that trials not be held because innocence might be proven?
420 - Cannabis Culture day
Every culture has its founding myths, distorted by telling and by time, and the truth of them sometimes matters less than the legend. Cannabis culture is associated with “four-twenty,” and since 4-20 is the American way of expressing April 20th, that date is celebrated as Cannabis Culture Day. It may be true that some high school students who called themselves the Waldos met at 4.20pm to seek out an abandoned cannabis crop, but the story racks more of lore and legend than it rings of reality.
Either way, on April 20th there are gatherings across the world centred around cannabis. Some are calls for legalization, but as more and more countries and states legalize it, many of the gatherings are simply celebrations of victory. When Washington DC’s Initiative 71 succeeded in legalization in 2014, the Mayor gave its leader the licence plate number 420 in celebration.
At the heart of it lies the desire of some people to consume substances that give them pleasure, a category that includes alcohol and nicotine. Others who disapprove have in the past used laws against such activity. They do not consume it themselves, and they want to prevent others doing so. It may be that the substances have harmful effects, but the choice of whether to accept the risks of what might follow is a choice that those of a liberal persuasion believe should be made by the individuals concerned. It is fine for them to be made aware of the possible consequences, but the choice should still be theirs.
The harmful effects of criminalization were vividly revealed in America’s period of Prohibition. It led to criminal gangs corrupting the police and the judicial process and to murdering competitors in turf wars. The illegality made it profitable for bootleggers, and turned ordinary citizen into law-breakers at odds with authority.
The illegality of narcotics leads to the rise of criminal gangs. Their actual production cost is tiny; it is their illegality that makes them expensive. Their manufacture, transport, distribution and sale all carry the risks of fines and imprisonment, and these risks have to be paid for. Were the drugs legal, none of these attendant risks would be carried, and the prices and profits would plummet.
Rival drug gangs in South America bury hundreds of victims in mass graves, while their bosses put billions into bank accounts. Teenagers in Britain murder each other on the streets in turf wars to decide who gets to tap the local income stream that illegal drugs generate. The huge profits made are magnified by being untaxed. Legal drugs would be cheap, controlled in quality, regulated in advertising and sale points, and have their profits subject to taxation.
With legalization would come control. Crime rates would plummet, including violent crimes. The prison population would be dramatically reduced, and the drain on police and court time spent on dealing with narcotics would end, leaving them far more able to deal with crimes that mattered.
As we mark Cannabis Culture Day, therefore, we should redouble our efforts to bring about the end of the perverse prohibition that casts such a blight on our society.
How terrible to demand actual facts
One of the minor amusements of current UK political life is the shrieking going on over the number of people rough sleeping - the truly homeless. There’s, if not an industry then certainly an interest group, a section of the NGO world which insists that the problem is massive, terrible, the economy must be radically changed to deal with it. This might not be a quite accurate description of reality.
So, what should we do about this? Well, one obvious idea is that instead of relying upon estimates from those inside the system we should go and do a direct count. For yes, those in the industry may well know lots - Hayek’s local knowledge - but there’s also the mildest of possibilities that they could harbour the tiniest piece of bias.
Claims that rough sleeping is falling in England should not be trusted until the government has explained how an emergency funding scheme for the worst-affected areas might have skewed the latest figures, the chair of the UK statistics Authority (UKSA) has said.
Sir David Norgrove’s comments are the latest development in a row over the apparent 2% fall in rough sleeping in England in 2018, which ministers said was a sign the government’s Rough Sleeping Initiative (RSI) was tackling the homelessness crisis.
The specific and detailed complaint here is that incentives have changed so don’t trust the numbers before and after that incentive change. Which is fair enough.
However, there’s also complaining about this:All councils recorded significant falls in rough sleeping from 2017 to 2018 after switching from an estimate to a count, which critics said occurred because of the methodology change and did not reflect the reality on the streets.
Well, no, not really, because the incentives didn’t change everywhere. At least some of the change therefore really being that the estimates were a tad too high. But given that admitting this means the government could claim to have reduced rough sleeping that can’t really be admitted.
Ourselves we prefer the actual count. Not because of anything specific about homelessness but just because of our general and long running insistence. Unless you know what reality is it’s rather difficult to change it.
Venezuela declared home rule from Spain
On April 19th, 1810, Venezuela overthrew its Spanish colonial masters and established a Junta Suprema de Caracas to take power, beginning a war of independence. There were reverses and reconquests along the way, but the incident initiated a train of events that led to full independence from Spain. Venezuela was the first Spanish colony in America to declare independence.
The country is well situated and exported agricultural crops including cocoa and coffee. Oil was discovered in the early 20th century, and Venezuela was found to have the world's largest known oil reserves. From the 1950s to the early 1980s, the economy saw steady growth and achieved the highest standard of living in Latin America. It ranked close to West Germany.
I went there a couple of times in the 1980s and was impressed by its natural beauty and obvious vitality. It was a country on the rise, with a vibrant business sector creating both wealth and jobs.
Hugo Chávez was elected in December 1998, and used oil revenues to boost welfare and social spending. Prices were fixed, and the leader's cronies systematically looted the economy, a policy continued under his successor, Nicolás Maduro. The oil industry was crippled by replacing its skilled staff with regime supporters, and using its revenues to buy voter loyalty rather than investing in its future.
This mismanagement resulted in hyperinflation, economic depression, and shortages of basic goods, coupled with increases in unemployment, poverty, disease, child mortality and malnutrition. Inflation has exceeded 1.3 million percent. Three million people have emigrated, and those who remain have to cope with lack of medicines and water, and frequent power cuts. Venezuela faces the worst economic crisis in its history. None of this is caused by sanctions, which mainly target individual corrupt officials. It is caused by mismanagement and criminal corruption.
There seems to be a pattern sometimes when a country sees economic growth. A populist leader is elected to divert the increased wealth to social and welfare programmes, and to take over successful industries, allegedly to have them serve the people, but in reality to make them tools of a government anxious to reward its cronies and supporters. The economy is run into the ground. Hyperinflation increases the prices of goods dramatically, so these are fixed by law, resulting in shortages when they cannot be produced at those prices.
It is a depressing cycle. Even more depressing is the adulatory support given to such governments by left-wing intellectuals in developed countries. They hail the birth of a bold new experiment in socialism, go quiet when it crumbles apart, and then announce afterwards that it was "never really socialism."