Tuesday, January 30, 2007

Ted Kennedy - supreme ignoramus

I've just viewed video footage of senator Ted Kennedy putting forward a passionate, no.. an enraged and fiery sermon, literally screaming at Republicans for opposing an increase in the minimum wage.

This is a brilliant case study. A perfect specimen of a phenomenon that is so accurately portrayed by this video footage. This is the true embodiment, the pinnacle of left wing, self-righteousness. I am often convinced that advocates for socialist policies, including the minimum wage, government run education, government run health, welfare and redistributive taxes, are doing so because they think they have a monopoly on compassion, and that all people who disagree with them are doing so out of greed and selfishness and even contempt for poor and suffering people.

It is precisely because of compassion for poor and struggling people, for the sick and elderly, for the people who have to support families, that I support unlimited free trade and unregulated markets.

Ted Kennedy, chooses to ignore all the logic and evidence against socialist policies. Rather than try to put forward an intellectual case for the minimum wage, simply lashes out at Republicans, going red in the face whilst yelling the following:

"What is the price you want from the working men and women!?"

"When does the greed stop!?"

"Do you have such disdain for such hard working Americans that you wan't to pile your amendments on top of this?"

" What is it about it that drives you Republicans crazy ?!"

" What is it about working men and women that you find so offensive ?!?!?"

Monday, January 29, 2007

Too much government ? Join the LDP !

I think that a fair and honest look at the amount of taxes we pay in Australia, the level of regulation that controls our lives, and the size of the public sector, will overwhelmingly prove that Australia has too much government, taxes and central planning. The facts and figures are plain to see, even to individuals without a libertarian or classical liberal perspective.

Even the left-leaning socialists and welfarists can see the writing on the wall, but its up to them whether they choose to ignore it or to process it. John Humphreys at Thoughts on Freedom summarises the situation:

Next financial year the federal government will spend about $230 billion of your money. They will pay for this by taxing your imports, taxing your income, taxing your spending, taxing your driving, taxing your drinking & smoking, taxing your super and various other taxes, charges & levies.

It is no secret that the government has been spending more and more of our money every year. Some commentators have suggested that government spending should grow over time because the government is involved in growth industries, such as health and education. However, the reason for government involvement in health and education (& welfare) is to help people who don’t have enough money. As we get richer, there should be less need for government. Yet they have been spending more.

And he puts forward a scenario that can only leave us wondering what could have been:

But what if they hadn’t been? What if at some point in the past we had frozen government spending in real per capita terms? How much tax money would we have saved?

If the Howard government had managed to keep their spending constant (all numbers adjusted for population & inflation) we could be saving an extra $30 billion per year.

If the government hadn’t grown in the last 30 years we could keep an extra $65 billion per year.

And if we had the same sized government as the year before Whitlam (1971) then we’d be taking home an extra $120 billion every year. Our total tax burden would be less than half what it is today and we could afford to abolish personal income tax.

Even under the so-called Liberal party, and their 10 years in power, taxation and the size of government continue to expand. The "Liberal" party would be doing us all more justice if they renamed themselves to the "Conservative, Social-democratic" party. They have mostly implemented a range of conservative social policies coupled with socialist tax and economic policies.
There is only one party which truly represents Liberal principles.. the Liberal Democratic Party.
This is one party that would cut red tape and stop increasing the size of government. It probably wouldn't acheive much in reducing the size of government initially, but it stands for a moderate approach instead of unrestrained spending and government control.

There are several parties which are committed to more tax, control, spending and less free trade. This includes the ALP, Greens, Democrats, Family First and Liberal party.

Only the LDP will commit to more freedom, liberty, property rights and free trade. I've already joined... what about you ?

Moonbats in Washington DC

The crazed hordes of self proclaimed "peace activists" marched in Washington, including Jane Fonda, Sean Penn, Tim Robbins and lots of giant puppets. It looks like Melbourne's own resident Moonbat Michael Leunig has made his way to Washington, with his trademark character appearing in a bold fight to overthrow the Bush dictatorship.

Its a duck !!

(hat tip: Little Green Footballs)

Thursday, January 25, 2007

Lebanon burns.. Mainstream media yawns

Riots have broken out across Beirut, the Lebanese capital. In fact, many people are saying that civil war has returned. Hezbollah started the riots, calling for a "strike" against the government. They have attacked cars and commuters, burnt tyres, smashed vehicles and blocked roads.

The result is more devastating than the damage Israel did last July. as it used precision air raids against Hezbollah buildings in Southern Beirut.

As one commenter cleverly said - it looks like Paris. The Lebanese army is out to stop the Hezbollah protesters from blocking roads and burning more tyres.

I urge all readers to head over to Michael Totten's blog and read his excellent coverage of life in Lebanon, with news updates of the violent riots started by Hezbollah and pro-Syrian Palestinian groups such as the DFLP.

More photos here

Welfare hurts families and creates a fertility crisis

Today's article from the von Mises institute provides some devastating empirical data that shows how fertility rates throughout Europe have plummeted as welfare payments have risen.

Some readers may stumble at the thought, and not see a direct relation between welfare and the number of children that a country produces. In fact, many of our political elites, social workers and journalists often claim that the very intention of welfare is to help out families, and to help them raise children. Well .. if only good intentions were enough !

Unfortunately, the results speak for themselves. The more socialist a country is, and the larger its social security taxes are, then far less people decide to have children.

In contrast, past communist countries, where the family was humiliated and disgraced to the utmost, go to the very bottom: some have fertility rates as low as 1.17 (Ukraine), 1.20 (Lithuania) and 1.21 (Czech Republic).

One can also look at differences among the developed Western countries. Among these countries, there are practically no differences in infant mortality rates, female labor force participation rates, and other standard explanations of the fertility decline. Yet total fertility rates differ widely — and exactly in the way predicted by the size of social security systems. The United States has a fertility rate of 2.09, whereas the European Union has an average of 1.47.

Below is a graph, of Total fertility rates (Y-axis) and social security taxes as percentage of GDP (X-axis) in 104 countries in 1997. Source: Michele Boldrin, Mariacristina De Nardi and Larry E. Jones, "Fertility and Social Security," NBER Working Paper No. 11146, 2005.

Wednesday, January 24, 2007

The Welfare State is no longer needed

The CIS has an excellent report from April 2005 by Peter Saunders, discussing the many massive problems with the current welfare system. I encourage any of you who are die-hard supporters of welfare and income redistribution to read all 16 pages and see how rational it is to continue to support a failed concept.

Some key points are:

  • In the last 40 years, real incomes have doubled, reducing the need for government assistance. Yet it is in this period that welfare state spending has escalated. The expansion of the welfare state has therefore occurred at precisely the time when the need for government support has been falling away.The welfare state is like a machine that was set running 100 years ago to meet a requirement that is no longer there.
  • Government now spends $80billion every year on welfare payments, and another $94billion on services such as health and education. This spending absorbs two-thirds of all the federal and state taxes raised each year
The article then raises and discusses the issue of "Tax/Welfare Churn". Welfare churn is the technical term for describing the process by which the Tax Office puts its hand into your pocket to remove your money, and spends it on public services that you consume. Tax churn describes how the tax office forces people to hand over taxes and then hands it straight back to some people in the form of a transfer payment. (e.g family tax benefit, baby bonus).
Although they do not always realize it, many people who use welfare state benefits and services finance most or all of what they receive through the taxes they pay (‘simultaneous churning’). These people could by-pass the welfare state altogether if they were allowed to retain their money and buy the services they want out of their own pockets.
Some fans of the welfare state will actually use this as proof that the system works, and that in the end, many people can often get back their money that is rightfully theirs. But not all people, and not all of the money that was sacrificed. Under the Howard government, middle class families have been able to get huge amounts of tax concessions and family tax benefits. Single people have not been so lucky however. More importantly, people who don't see churning as a major problem do not even consider that its somewhat unfair that the money was taken out of people's pockets in the first place, even if it does get spent towards things they value.

Equally important is the bureaucratic mess that it creates, as the individual or family in question must submit tax returns and/or time with Centrelink representatives to prove that they are eligible to receive some taxes back in the form of a payment. So much like a casino, the government gets to collect billions in revenue, pay for expensive office space and the hiring of thousands of public servants to administer and manage it, to produce websites and publications that explain how the system works, and then they are able to pay out whats left in actual welfare payments.

The key points from the report about churning, specifically why and how to eliminate it, are summarised below:
  • Simultaneous churning is less marked at the extremes of the income distribution, for households in the bottom third of the income distribution rely quite heavily on welfare state transfers. This is why people think scrapping the welfare state would lead to widespread destitution.
  • However, the people comprising the poorest third of households change all the time. Poor net recipients of welfare at one time become affluent net tax donors at another, so over a whole lifetime, they too may end up financing many of their own benefits (‘lifetime churning’).
  • At least half of all welfare state spending goes on churning. That is, it is money paid by individuals at one time and reclaimed by the same individuals at the same time or at a later date. The welfare system is like a giant piggy bank.
  • If the money that is churned could all be left in taxpayers’ pockets, at least $85 billion would be released for tax cuts.This would allow personal income tax to be cut to a flat rate of 10% with the first $20,000 of earnings not taxed at all, which would enable many people to self-fund their health and welfare needs.

The Greens hang out with Fatah

On her recent taxpayer funded trip to an imaginary state called "Palestine", Green senator Kerry Nettle brings us her holiday pics where she can be seen hanging out with one of the most corrupt, holocaust denying thugs to ever lord it over the palestinians. This is a perfect display of how all extremist ideologies tend to meet and converge (otherwise known as Blair's Law).

My fellow Australians - behold your tax dollars at work.

Its worrying enough that moonbat Kerry Nettle is only sympathetic to every Palestinian she encounters, and eager to photograph their suffering and voice their grievances. Forget the fact that she simply didn't visit, write, photograph or describe a single Jewish person or Israeli city in her account. What bothers me is her very presence.

Aren't the Greens supposed to.. you know.. focus on environmental issues ?
Well.. I suppose you could justify the trip on environmental grounds.. looks like she spent some time documenting the genocide of innocent olive trees below.

The caption reads: Olive trees uprooted to build the wall now on display on the main street of Bethelehem near the Nativity Church. Many tourists walk this street.

The world's smallest violin is playing for you right now Kerry.

Tuesday, January 23, 2007

African community leader: "Centrelink is to blame"

There is no shortage of bleeding-heart types who continue to support Australia's massive and generous welfare system which is administered by thousands of public servants who work for Centrelink. Supporters of the Australian welfare system usually defend the $91bil annual budget by saying "Centrelink does good", "It helps people in need", "We should help the struggling" etc etc.

Well.. there is some merit in those arguments. It is a good thing to help out people who are struggling but trying valiantly to build their lives, and temporarily need assistance.

Thats 1 point in favor of the welfare fans.

But. The debate is far from over there.

Is that the *only* thing that Centrelink accomplishes ? Social workers, journalists, writers and leftists all seem to think so. Economists, and other keen observers, seem to notice other effects in play. This is best described as perverse incentives, or moral hazard.

  • Centrelink payments are phased out as the welfare recipient starts to earn income. This creates massively high Effective Marginal Tax Rates, as high as 70% or 80%. For a welfare recipient to decide to start earning income, they only get to keep a small share of it, so they are faced with a massive disincentive to work.
  • The flip side to the policy of targeting welfare towards those most in need, is that it subsidizes and encourages the individual to maintain a lifestyle that qualifies for the welfare payment
    • Young women can receive thousands in the form of a baby bonus for each child they have.
    • Retirees who find themselves with no investments at the age of 65, will receive a $27,000 annual pension if they have no other form of income. For any individual who is happy to survive on such an income, they need not work or save at all over the course of their lifetime to prepare for retirement.
    • Teenagers can become school leavers after Year 10, and even parents and receive hundreds of dollars per fortnight, as long as they convince Centrelink that they have been looking for work. This is a fairly easy thing to do, even if they spend the entire day watching TV or down at the beach surfing.
The most visible drawback to welfare is the cost - billions of dollars forcibly ripped out of the hands of the rightful owners, the people who earn income and would have otherwise spent the amount on things that they value. An army of Centrelink workers, administrators, bureaucrats are needed to implement such a vast system. Last year alone, there were 700,000 people who qualified for the disability support pension. Also, the millions of welfare recipients need to engage in all sorts of activities that they otherwise wouldn't have done under a free market. They need to show Centrelink that they have been looking for employment. They need to spend their time in contact with Centrelink and performing paper work, and their tax returns are further complicated because they have to declare welfare payments. Welfare recipients need to inform Centrelink whenever their details change.

So instead of spending time looking for, and engaging in productive employment, hundreds of thousands of people use their resources and efforts to go to a job interview every now or then, fill in paper-work or make phone calls to Centrelink and sometimes go to extreme efforts to earn undeclared income via the black market (cash in hand).

Along with supporting the current welfare payments, a large segment of the voting public also support easy immigration laws and believe that once immigrants arrive here, they should qualify immediately for welfare payments.

When you couple this with welfare payments, you get a fairly predictable result - thousands of immigrants from poor countries are motivated to come to Australia, not because of all the opportunities that exist in our advanced economy, but because of the generous welfare payments and public schooling and health that they can receive.

Another perverse incentive is that young teenagers who run away from home are qualified to receive an extremely generous welfare payment. So although the intention is to help those in need, the actual result is that you encourage, subsidise and promote individuals to put themselves in a situation of need.

These comments lend support to my claims (hat tip - AWH):
Aguer Raul of the African Community Development Centre said that's the only way they would get discipline, because laws in Australia left parents unable to control teenagers once they turned 16. He said one option they wanted to put to the Federal Government was repatriating teens who dropped out of school and lived on the dole away from their families or guardians.

"They have been unable to settle here. If they were back in Sudan, they would have discipline - the discipline of the elders and local laws they could not ignore," he said. They will be good citizens there but here they will create problems, for their families and for the Australian community."

A knifing at a Keysborough cultural festival a fortnight ago has added to concerns raised by a brawl last year between Sudanese and islander youths in Sunshine.

Mr Raul has blamed government services, including the police, Centrelink and Department of Human Services, for protecting teens who want to move out of the family home after age 16.

He claimed parents or guardians were not being properly consulted when these agencies took action over breaches of the law or custody issues.

Thursday, January 18, 2007

Poetic justice for a tyrant

The Liberty Papers asks the following question, which conjures up thoughts of irony and poetic justice in my mind:

Is Fidel Castro The Latest Victim Of Socialized Medicine ?

According to a new report from a Spanish newspaper, Fidel Castro’s current condition may be due to failures in Cuba’s vaunted nationalized medical industry:

HAVANA (Reuters) - Cuban leader Fidel Castro chose to avoid a colostomy and opted for riskier intestinal surgery that led to serious complications, the Spanish newspaper El Pais said in its Wednesday edition.

U.S. doctors said Tuesday’s report in El Pais suggested Castro had received questionable or even botched care.

“It sounds like they tried to spare him the colostomy, which would have been the safer and more conservative approach,” said Dr. Meyer Solny, a gastrointestinal expert at New York Presbyterian Hospital.

UPDATE: An articulate gentleman called "Thomas" posted the following comment on the SMH forum, to show what an intelligent and insightful crowd the SMH readers are:
Posted by: THOMAS at January 17,:02 PM

Priceless !!

UPDATE #2: Check out this photo-essay to see just how deplorable and sub-human the Cuban medical facilities are. No wonder you have Cuban refugees flowing to America and not the other way around.

O-BA-MA runs for Prez !

The media has been buzzing with frenzied speculation after U.S Democrat senator Barack Obama declared he would run for President in '08.

Many Democrats and large swathes of the media are elated, seeing him as a much more moderate and likeable candidate, especially compared to Hillary. He seems promising, optimistic, articulate and very moderate in his opinions. He claims that he has the ability to overcome the bitter feuding between the two parties and be a uniter. And the media are swallowing this whole.

In truth, he is fairly new and not very well known. The general population may not feel as excited as the Hollywood types and media talking heads are. Nonetheless, the media are doing their best to hype him up:

His candidacy is likely to appeal to the party's grassroots voters, who play an influential role in the primary contests. His star has risen on the force of his personality and message of hope - helped along by celebrity endorsements from the likes of Oprah Winfrey, billionaire investor Warren Buffett and actors Matt Damon and Edward Norton.
Its just like Team America... where would the stupid common folk be if not for the benign wisdom of Hollywood billionaires ?

But.. alas.. Many of his ideas aren't brilliant at all.
In 1996, he was elected to the Illinois state Senate, where he earned a reputation as a consensus-building Democrat who was strongly liberal on social and economic issues, backing gay rights, abortion rights, gun control, universal healthcare and tax breaks for the poor.
What the #!@# are "abortion rights" ?! And gun control ? What country does he think he is in, Sweden ? Americans with any sense of history and liberty won't stand for such a gross violation of their constitution. Universal healthcare is a disaster waiting to happen, despite what critics suggest, America already is running a massively bloated public health industry, it will take decades to wean the public off these wasteful and inferior services and allow private markets to flourish and provide decent health care.

He has a history that may certainly put off social conservatives. Oh well.. good luck, he'll need it.

He can now expect operatives from rival campaigns - not least from inside the Clinton camp, to be digging feverishly for dirt.

He has admitted in an earlier book to having taken marijuana and cocaine in his youth.

Tuesday, January 16, 2007

Leftwing intelligentsia justify more power and bigger government

Such is the case with Johann Hari's latest article. Millions of moderate Britains are more than alarmed at their socialist government's plot to build a central database in Whitehall that will store personal and private details of every single living human in Britain, so that every single apparatus in his vastly bloated government will have access to more information than ever before.

No piece of information will remain private, and many fear that it will not remain very secure either, given how efficient and reliable government facilities are known to be.

A central database is, and always has been identified, as one step closer to tyranny and one step further away from liberty and freedom. As the size of the British government expands, it approaches the kind of society described by Orwell in his prophetic novels. Perhaps soon, the government will install GPS locators into every criminal, or perhaps even every newborn child to track and monitor them.

Finally, British people are fed up with being controlled and brainwashed by their overlords and are fiercely resisting the proposed measure. But Johann Hari wants them all to just breathe easy and hand over their personal details to government (as if it weren't enough that they hand over one third of their property in the form of taxes !).

And as Britain takes a step closer towards fascism, Johann describes this unprecedented invasion of government into people's private lives as something benign:

The Prime Minister is proposing to make it easier for government departments to share information. The Department for Work and Pensions will be able to find out from the Department of Health which pensioners are so sick they count as disabled, so they can give them the hundreds of extra pounds they are entitled to every month. The Housing Department will be able to find families who are slipping and sliding into financial chaos and help them out before they turn up at their local town hall one day, clutching their kids and some hastily-stuffed boxes, after being evicted. The Land Registry will be able to catch more middle-class people who cheat on their council tax returns by not declaring home extensions. If it succeeds – as it has in most democratic countries – the state machinery will become smoother, faster and more efficient.
You've gotta be kidding. This man is completely blind to the repeated and characteristic failures that plague all government actions. Good intentions count for nothing, when a detached faceless bureaucrat is in charge of your personal life, preferences, property and actions.

Johann Hari shows what happens when you give socialists one inch.. they demand more and more control. They clearly have to deal with the reality with the facts on the ground, and that they don't live in a utopia. It shows that all forms of government regulation and control tried to date have failed, but the pure fanatics like Johann say "bring it on !! we need even more !"

The man is intoxicated with large government. He didn't see what happened to China and Russia, and what is still happening to Cuba and North Korea, when they overdosed on socialist ideology. The hangover will last a long time, perhaps many generations.

The seventies pop-screecher Leo Sayer announced last week that living in the Celebrity Big Brother House is “like being in Abu Graib”. When another contestant pointed out that the tortured Iraqis weren’t being paid hundreds of thousands of pounds and didn’t have the option of popping into the diary room for a chat, he conceded. “Okay, I see what you mean,” he said. “It’s more like Guanatanomo Bay.”

I don’t know why everyone laughed. The people who will ritually jerk their knees today by declaring that Tony Blair’s proposals for a simple centralised Whitehall database are “a step towards tyranny” sound startlingly similar.

The Prime Minister is proposing to make it easier for government departments to share information. The Department for Work and Pensions will be able to find out from the Department of Health which pensioners are so sick they count as disabled, so they can give them the hundreds of extra pounds they are entitled to every month. The Housing Department will be able to find families who are slipping and sliding into financial chaos and help them out before they turn up at their local town hall one day, clutching their kids and some hastily-stuffed boxes, after being evicted. The Land Registry will be able to catch more middle-class people who cheat on their council tax returns by not declaring home extensions. If it succeeds – as it has in most democratic countries – the state machinery will become smoother, faster and more efficient.

Yet these proposals are already being presented by the Conservatives – and many on the left – as yet another step into 1984, part of a proto-tyrannical package ranging from CCTV cameras to ASBOs to the DNA database that they cite as evidence Britain is “sleepwalking into a surveillance society”.

Most of the people who are tetchy and tense at news of more government powers are good people with good worries. Blair’s government has abused civil liberties. They reintroduced internment, and only ditched it in favour of the almost-as-awful house arrest because the House of Lords forced them to. They allowed British airspace to be used to “render” human beings for torture in secret US prisons in Eastern Europe. They slashed back jury trials. They imprisoned refugees and their children in camps, for the “crime” of seeking asylum. They tried to criminalize fierce criticism of religion. I wouldn’t trust that old Stalinist John Reid with a kitten, never mind fundamental freedoms – so everything the government proposes needs to be scrutinised carefully.

But there is a danger that, in response to these real abuses, we have ended up with a right-wing reflex reaction. If we assume all state action undermines human freedom, we will end up opposing smart measures that help people along with the ones that cause real harm.
The philosopher Isaiah Berlin famously drew a distinction between “negative liberty” and “positive liberty”. Negative liberty is freedom from interference by the state. Positive liberty is freedom to achieve your goals – and sometimes, that requires help from the state. Most of us have now sunk into an unspoken belief in negative liberty alone. When we hear the government is acting, we automatically assume there is something to be feared – as though government can only take liberty, and never help us to achieve it.
Look.. the state knows nothing about my goals. I'd like them to stay out of my life. Johann Hari could never convince millions of us that we are better off submitting to an all-powerful central authority with a supreme leader, even if he has good intentions and says he will help us out.

Stay out of our lives socialist scum !!

The fundamental grammar of politics

Whenever I engage in political or economic discussion, I find that the conversation will not be very fruitful if you don't share the same underlying assumptions with the other participants.

When trying to advocate the merits of liberty, sometimes the discussion revolves around a particular issue (e.g smoking) by trying to highlight the particular problems of government control and regulation. Its very easy to show that there are particular real-world problems with the current set of government regulations in place, but all this does is instill some doubt in my opponents about the current type or form of regulation and control. They often end up proposing new policies and methods of social engineering which they believe will work because they are intended to work.

As the authors of Freakonomics, and other free-market economists will tell you, there are always unintended consequences, not to mention the immeasurable cost of a reduction in personal liberty and freedom. So when it comes to highlighting the specific problems of regulation, some of which are very visible and some of which are more subtle and hidden, this method is often easy, but perhaps not as effective as taking a general approach.

If you build a case for liberty as a guiding principle, as the highest principle, then people will often discuss an issue without the implicit assumption that we need to decide what government policy works best in tackling that issue. When somebody suggests that we force bicycle riders to wear helmets, instead of wasting time discussing the pros and cons such a policy would likely have, the debate should be over once somebody recognizes that it results in a loss of liberty.

Similarly, if we discuss the fact that in Australia, a person has to vote at elections or else be fined, then it should be discussed in a similar framework. Supporters will declare that it is our democratic duty, of the highest order, or a democratic right to vote. But I will ask - where is my democratic right not to vote ? People on the left declare that a policy is good if it supports social justice, such as spending billions of tax-dollars on poverty-stricken Aboriginal communities, or the long-term unemployed, or parents who stay at home, or university students ... the list of victim groups ready to put their hand up for free tax money is endless.

I'd say that a part of this stems from general school education, which results in misplaced priorities. I'd say that the average Australian thinks that democracy is the greatest concept in Western thought. And they view government as the group of guys who get to run the country in whatever way the public see as popular and effective. Now I'm also a big supporter of democracy, but only because it reduces the powers of government to remain in power indefinitely. Periodic democratic elections in themselves don't do anything to stop government from expanding and abusing its powers, implementing policies that violate rights and liberty and disregarding common law.

What about the word freedom ? What value does it have, and when did people fight for it ?

Well my impression is .. that most people think of centuries past, where American slaves, or the Scottish, or any other group rebelled against a cruel government or tyrant in a period of widespread war and oppression.

They therefore look at todays world, where we are mostly free to do many of the things that we like, and we have astronomically high standards of living compared to the past, so nobody can relate to the idea of struggling, promoting and arguing on behalf of the word "freedom". They think freedom is only something you fight for against a government which has slavery, conscription or occupation of foreign lands.

When you decide that you don't like government setting ridiculously low speed limits and high speeding fines, or using 1/3 of police resources to prosecute people who take drugs, or force people to vote at elections or else be fined, or whatever policy bothers you ... you tend to form lobby groups and influence the media to pressure government to "change" the policy through democratic channels. You try and make a new policy stance (that suits you and other people in your interest group) popular, well advertised and influential.

Why don't people march through the streets with banners asking for "freedom" ? Everybody has a right to freedom, you shouldn't have to lobby government ministers and journalists to be free.
It all boils down to -- How do you rank the following words ? Here is my ranking

  1. Liberty
  2. Freedom
  3. Rights
  4. Property
  5. Democracy
  6. Tolerance
  7. The National Interest
  8. Equality
  9. Social Justice
People who have no regard for freedom and liberty (most of them are found in left wing circles) would put social justice and equality as their favorite words. The problem with these words is they have no useful meaning !! They can be used to implement whatever hare-brained policy you want and end up curbing freedom for millions of citizens, simply because the government in power implement it.

Monday, January 15, 2007

The Pursuit of Happyness

This was an outstanding movie, no matter who you are. The conflict and challenges for the main character are riveting and keep viewers glued to their screens throughout.

Will Smith plays a poverty stricken father, whose wife has left him to care for his infant son. We get to see him struggle through some tough times by anyones standards. His character had evidently made a few bad decisions in his life, having invested his life savings in medical equipment that wasn't so revolutionary and few hospitals needed. As his savings dwindle and he fails to even pay rent for several months, he sees how several stockbrokers have achieved personal fortunes and realizes his dream.

Unfortunately, he is held down during tough times, by different forms of government coercion and theft. His car is towed off and impounded by the city of San Francisco after failing to pay several parking tickets. The night before a job interview, the police arrive and arrest him for not paying the tickets. But he successfully passes the interview for a prestigious, but unpaid, internship at a stock trading firm. Out of the 20 interns, only one will be awarded a high paid senior job at the end of the program.

So although he has been granted an internship which leads to a shot at a dream job, he has to scrounge and save every penny to survive until it is over.

After struggling hard to sell several medical scanning machines and gathering enough savings to survive several months, he is completely destroyed and crushed when the IRS forcibly removes $600 savings from his account for failure to pay taxes. By 1981 standards, this would have been enough for him to survive several months. After this act of theft, he was only left with $21 to his name.

So here we see, yet again, the federal and municipal governments steal, imprison and coerce an individual. His car, his savings, his freedom and liberty, are not given the slightest bit of respect by bureaucrats and public servants who work within the vast gray apparatus of government. The fact that they are pushing the man into extreme poverty and homelessness, the fact that his money is his life, count for nothing.

The story of this movie, although clearly not designed to be overtly political, is a subtle but resounding justification of the merits of freedom, liberty and capitalism.

And the setting of this story was America in 1981, under the presidency of Reagan. You would think that in such a time and place, freedom and liberty would be at its apex, at one of its highest points. Reagan was a president who spoke the language of liberty and freedom. America was a nation considered (by its European socialist cousins, and the communist Soviet bloc) to be overly obsessed with low taxes and free trade.

America is often described as the perfect example of capitalism, an example of what happens when you take capitalism and free trade to the extreme. How can anybody be fooled into thinking that America is not a social-democracy, a semi-capitalist country, just like England, France, Canada, Australia, Germany and other Western nations ?

Hong Kong, is the closest thing we have to capitalism on this planet. The Hong Kong government only consumes 10% of GDP, and leaves people to work and trade and live in as much freedom as possible.

America is only slightly less socialist than European nations. They have a vast government apparatus with dozens of bureaus. Since 9-11, there are more than a handful of intelligence and security bureaus who are given extreme powers over any individual. There are huge bureaus to monitor land, air and sea. To monitor and implement environmental regulations on industry and commerce, to implement consumer advocacy regulation which looks out for anti-trust, price fixing, price gouging, profiteering, reporting of financial statements etc etc. There is the behemoth IRS which taxes and collects, there is the military, the police, the navy, the air force the fire department, emergency response services.

America is not an ultra-capitalist nation.

Anyway ... About the movie.. Go see it, it's brilliant.

Friday, January 12, 2007

Curse you Team America !!

Alec Baldwin is back.. and hes pissed. Hes got a whole new range of crazy opinions he wants to share with the world:

"All around us are signs of global climate change. And this administration's response is to send in more troops. If you don't think there is a link between the weather and Iraq, you are wrong."

"Our country must lead the way in global energy strategies that will, somehow, convince countries like China not to spend decades to come burning trillions of tons of fossil fuels to grow their economies in the way we did. It is the most important work we can do now, on par with "fighting terrorism."

And .. in other Team America related news .. a collection of Kim Jong Il propaganda videos from the 1980's are finally available online, at Youtube.
(parts 1, 2, 3, 4, 5, 6 and 7).

I just watched Part1, with the flowery glorious music and the endless praise of the new Dear Leader !

Thursday, January 11, 2007

Myth of the day: Private schools are expensive

In August 2000, the CIS published an extremely insightful and useful report looking into the reality of private schooling in Australia. Here are some of the key findings that should demolish some of the left-wing mythology that private schools are for the rich and elitist, with many unneccesary frills and facilities, and they are super-competitive and the only reason parents send their children there is to achieve excellent study scores.
In contrast is the left wing opinion that public schools are cheap and efficient, help students socialize with people from different backgrounds and makes them better characters, and provide quality education to the struggling classes.

Fact 2: Private schools have spent less per student than public schools.
From 1990 until 1997, average expenditure per private school student was lower than the average expenditure per public school studen

Fact 3: Private schools are not ‘elitist’.
More than 30% of students in private schools are from families with an income of less than $41,600 per annum. This is almost the same proportion as students from families with incomes of $62,400 or more per annum. The other 40% of students lie between these two income brackets. Both public and private schools have significant proportions of students across the full range of family income levels. Furthermore, very few private schools are academically selective.
Also important is the fact that 17% of students in public schools are from households with incomes of $62,400 or more.

Fact 4: Private schools achieve better results than public schools.
Performance data by school sector are very difficult to obtain. However, it appears that private school students achieve better academic results, on average, than public school students, and are more likely to complete school to Year 12. This effect remains even after controlling for family background, including income

Fact 5: Private school students have better post-school outcomes.
Private school students are more likely to participate in post-school education and are less likely to be unemployed.

Fact 6: Parents choose private schools for many reasons, not just academic performance.
Surveys indicate that private school parents believe that these schools provide a better environment for their child to achieve their potential, and better discipline and school order

The report then goes into more detail about these findings. Some of them are particularly interesting, especially the evidence that public schools are just as costly as private schools. This fact remains hidden from the public, because they don't pay towards the cost of providing the education.

Table 1. Expenditure per student in public and private schools
Year .... Private ($) .... Public ($) ... Public adjusted* ($)
1990 ... 4080 .............. 4064 .............. 4463
1992 .......4371 .............. 4421 .............. 5037
1994 ...... 4972 .............. 4757 .............. 5428
1996 ..... 5632 .............. 5063 .............. 5772
1998 ...... 6728 .............. 5615 .............. 6457

The report elaborates on Fact 3 above, and shows how private schools are not at all elitist:
Surveys of parents of children in independent private schools have indicatedthat these families often take on a second job primarily to cover school fees and expenses. If this is the case, the figures presented here will be deceptive because a sizeable proportion of the households in the higher income bracket might be there only because a second income is required to meet school fees. Another misunderstanding behind the claim of elitism is that private schools select the brightest students, which explains their superior academic performance. In fact, very few private schools are academically selective. In the majority of cases, entry is comprehensive and the only criterion is the ability to pay the requisite fees.
And then .. the evidence that seems to show quite convincingly that private schools outperform public schools, gathered from NSW TER scores.

Table 3. Average Tertiary Entrance Rank (TER) by school type, 1994 and 1996
Type of school............... Average TER 1994 1996

Public school .......................................... 44.25 45.10
Catholic systemic private school .............. 52.00 50.35
Catholic independent private schoo ......... 60.95 60.15
Other independent private school ........... 69.85 70.55

And as for school retention rates:
The information on school completion is unequivocal, however. Private schools have higher retention rates to Year 12. In private schools, retention to Year 12 is 84.2% and in public schools it is 66.4% (ABS 2000).
And its not that private schools use more resources. Student to teacher ratios are identical between public and private schools:
The superior academic performance of private schools is often attributed to
the selection of students with strong academic abilities. As noted earlier, this is rarely true. Another common explanation is that private schools achieve better results because they have more financial resources. However, data on expenditure per student in the different school sectors show that public schools spend more per student than do private schools.

Likewise, there is virtually no difference in pupil-teacher ratios between public and private schools—15.0 pupils per teacher and 14.9 pupils per teacher respectively (ABS 2000).
Then it explains how private school students go on to have a better future than public school students. Particularly revealing are the proportion of students at either end - those that go on to higher education, and those that are totally unemployed.

Table 4. Destination of school leavers by school attended in previous year, 1998, per cent of school leavers
Year 12 School Leaver .................... Year 10/11 School Leaver
Public(%) Private(%) ......................... Public(%) /Private (%)

Higher education 37.6 61.2 .............. 1.9 / 3.2
TAFE or equivalent 20.0 16.8 .............. 29.4 / 52.8
Other study 3.2 5.9 ............................... 4.4 / 9.1
Employed 25.7 12.6 .............................. 28.2 / 17.7
Unemployed 9.2 1.7 ..................... 23.3 / 14.1
Not in the labour force 4.3 1.8 .............. 12.8/ 3.1

And the conclusion summarizes the findings once again very eloquently, my emphasis in bold:
Conclusion: As it stands, the school system is inequitable and inefficient—public school parents do not get the quality of education they should expect, and private school parents are forced to double-pay for their children’s education, less a small subsidy.
To achieve fairness in funding, new thought is required. Possible alternatives to the current arrangements include education bursaries for all children or education tax rebates. By directing public funding of education through parents rather than through the education providers, parents can exercise greater autonomy and choice.

As for the quality of education, the evidence strongly suggests that private schools offer their students something that goes beyond financial resources and the influence of family background. What this might be is still a matter for discussion and an important area for future research. There are a number of points on which public schools and private schools might differ, including the quality and dedication of teaching staff, autonomy of the principal, and variations in curriculum and instruction.

One of the key factors in the superior performance of private schools seems to be the better discipline and order in private schools. It is clear that the order or ‘ethos’ common in private schools establishes an environment in which academic and other abilities are best fostered and most valued. It is acknowledged here that private schools have greater scope to determine their discipline policies. Yet it should also be recognised that it might be precisely this freedom and independence that is pivotal. Private schools also compete for students and therefore for funding. This compels private schools to keep standards high. Still another feature of private schools is the higher level of satisfaction and involvement of parents. Public schools, if they are to achieve parity with private schools, might look to emulate the characteristics of successful private schools.

Rather than regarding private schools’ success as being at the expense of public schools, it is time to think about how to ensure that all children gain the quality of education available to the children in private schools and the handful of exceptional public schools. Such evaluation is being hindered by the lack of available information about school performance. While the stalemate between the holders of this information and researchers is maintained, however, we can only demonstrate what is not most important to a child’s education with little chance of identifying what is.

Wednesday, January 10, 2007

Regulation vs Freedom: the parking industry

Warning : Long Post !
After recent debates with colleagues over how parking spots should be allocated, I thought I'd summarize the debate held in this post.

On one side of the debate, are people who argue for the status quo:
  • A situation where each local council is the planning authority and state governments are the owners of the roads.
  • Local councils decide on where to place parking signs to indicate the restrictions on use of a particular parking spot.
  • If a parking place has no sign at all, then it is by default an "unlimited" parking space. It is free for all to use, and has no time limit. These constitute the vast majority of parking spots in residential areas.
  • Local councils hire an army of parking inspectors to monitor, patrol and enforce the parking restrictions. Inspectors have the power to distribute on-the-spot fines and penalties to motorists.
  • Residents who live in inner city areas, especially near busy commercial strips where parking is scarce, can apply to council for a local permit, allowing them to park in the allocated permit zones.
  • Parking meters (several thousand dollars each) can be installed in commercial districts so that motorists can pay a form of rent for the time used in that space. Motorists can only pay these with small change in the form of coins.
  • Outside shops and warehouses, there are often designated "loading zones" for commercial couriers/vans/trucks to collect and drop off items, with a 15min or 30min time limit.
I put forward many reasons why the above approach has been wasteful, inefficient, poor at allocating parking spaces, costly, hard to enforce and overly complex. But lets ignore the results for a moment, and look at it from a theoretical point of view. Despite whatever amount of effort, study, consideration and planning a government will put into these measures, they end up allocating the parking spaces in a way that is worse than if they didn't exist at all.

The benchmark for saying the allocation is better or worse ? Well, its people's levels of happiness and satisfaction with the results.

What is the actual reason behind these controls and regulations in the first place ? I don't think there is any debate about it. It is purely to allocate parking spaces as effectively as possible. i.e to give the spaces to those who most demand (or need or require or want) them.

Lets look at the underlying economics and the key definitions. Parking spaces are a commodity (land) in demand by motorists, and there is a limited and almost fixed supply.

I say the supply is almost fixed, because it is quite possible for an entrepreneur to build car parks on private property and increase the supply of parking spaces. On the other side of the equation, you have the forces of market demand. The definition of this is really the aggregate of all the people in the economy who place *some* value on parking spaces. Don't be mistaken for thinking that a person's demand is something simplistic and easy for a government body to estimate and thus manage. A person's individual valuation is based on a myriad of complex factors which they themselves only know about:
  • The location of their destination
  • What time of day they would like to park their vehicle
  • For what duration they expect to park their vehicle
  • How often they need to park near that destination (i.e daily for places of employment or homes)
  • How safe and visible the parking place appears to be for them and their car.
  • How much distance they are prepared to walk from the parking space to their destination, which itself can depend on:
    • Weather conditions (rain = preference to walk less distance)
    • How much time they have to spare.
    • Whether they need to carry items (heavy items = preference to walk less distance)
    • Their physical condition, or any disabilities that may hinder them
    • Whether they enjoy the exercise and act of walking itself
Now given how complex an individual's valuation is, imagine the complexity of accurately estimating an entire population's valuation and demands are. It cannot be done at all, by no genius, mastermind, politician, bureaucrat, traffic engineer or central planner. So for a central authority to be responsible for the regulation and allocation of spaces is going to be an abysmal failure right from the word go.

A further problem with government control is that even if the outcomes are abysmal, suboptimal, wasteful and inefficient, there exists no mechanism at all to end or remedy the status quo. The only way, is for an overwhelming majority of the public and the media to lobby a government to change the situation. Otherwise, bureaucrats and ministers will continue to assert that the regulations are in place to improve the situation and that they are vitally needed to address the issue of scarce parking places.

I'm not debating that parking places aren't scarce. But to hear a central planner claim that he is the only mechanism by which they can effectively get allocated is wrong. Especially given that centuries of human economic development under free markets have shown the exact opposite.

In the parking industry, we do have the market based option of allowing entrepreneurs to perform assessments, evaluate the market, look at an area and decide if a car park could be profitable and what amount consumers would be willing to pay per space per hour, and at what times of day it would be most in demand. They would weigh these up against the costs of building a car park, the costs of hiring an attendant, the costs of security and lighting and electricity, and then ultimately decide if the project should go ahead or not. The entrepreneur should be applauded because he is reacting to the information set available, and is driven by real market forces. Of course, his motives would be driven by profit, but profit cannot be captured unless there is a strong demand for a limited or scarce resource. Profit is indeed a good thing, because it justifies the very existence of an enterprise. It it wasn't profitable, then it shows that it was a bad decision, a bad venture, and a poor allocation of resources. Under the free market, everybody seems to be smart enough to avoid building car parks in country towns. When entrepreneurs and investors have to place their own money on the line, they don't throw it into risky and unprofitable ventures. If they do, they go broke instantly which is a good thing, because it shows how unprofitable and unnecessary that venture was.

Constructing a car park in a country town is a poor allocation of resources. The market judges it to be providing something that is not so scarce, and barely be willing to pay for it. Building a car park in downtown San Francisco, even at a cost of several million dollars, could be an excellent allocation of resources, as parking spaces are extremely scarce relative to the thousands of commuters and automobiles there who are willing to pay upwards of $50/day to park a vehicle.

So there exists a free market mechanism for allocating spaces. People often complain that its hard to find a spot in a particular low density suburb or shopping district, but this is often superficial, because they wouldn't be willing to pay $5/hr to park their car.

*IF* they, along with enough people were that willing, then entrepreneurs would be building a 5 storey car park so they could charge such an amount. The market forces in downtown Tokyo or London actually drive prices upward as populations and wealth grow, and the demand to work or shop downtown booms. We've seen property prices boom in western cities, yet people don't have the idiotic knee jerk reaction of suggesting that government planners should allocate land for homes and offices and shops. Could you imagine living like China does now, where you cannot own a property, and there is a 50 year limit of allocating homes to people, after which you are evicted ? It creates a lot of misery and unhappiness.

So whats wrong with private property for parking spaces ? Whats wrong with people following their rational valuations and purchasing land or paying rent on spaces that they need ? Whats wrong with the owners of parking spaces deciding on who may use it, or when they may use it, or how they can ask people to pay to park there ?

At this point in the debate, I have been accused of assuming that everybody would act and think like me. I strongly disagree, because I take a position where I admit that I cannot possibly know how other people think or act, or what kind of valuation they place on certain things. I was told that other people are often stupid, ignorant, irrational, make bad decisions, selfish, and that I was trying to overlook that.

But the only assumption I make is that they are rational in the economic sense, and that human action is purposeful and done according to that person's own personal and unique valuations and subjective preferences. By exposing a person to the consequences of their actions, they suffer the risks and uncertainties of that action, and the likely rewards or damages that accompany them, and that is a valuable mechanism in a free society. People learn things and develop their decision making process over time.

If a stupid person goes to the casino to earn a living, they are faced with the consequences - a high chance of bankruptcy. If a wise person invests in shares and superannuation over a long period, they have a high chance of financial security and wealth. If a stupid person eats cheeseburgers and coke, they will have cholesterol problems sooner or later. If a smart person eats healthy and exercises, they have a better chance of a healthy life. In todays world, there are a range of doctors, financial advisers, books, journals, newspapers, internet and mass media which help people be informed of these matters.

People still take harmful substances, young kids drive like maniacs, people gamble heaps, some people smoke heaps etc etc. Because any reasonably informed and intelligent person sees these as scary, stupid, risky and dangerous actions, they have no problem saying "government should ban it". This is where a huge rift emerges between the 2 sides of the debate. My opponents think they know better, think that they should have some control over all other people in society, and think that simply by a government making a harmful or unpopular action illegal, that all people are suddenly well informed of the dangers, and have learnt, and will stop the harmful action.

But alas, even today, children under 18 drink, smoke, have sex. Young adults take drugs. Young men are known to speed and drive aggressively. Even grown grandparents often gamble. So now, on top of doing something harmful to themselves, they are breaking the law. So clearly, the regulation didn't work, didn't educate, and didn't even improve the situation. Now in addition to being faced with the health costs of smoking, or drugs or whatever, the individual is faced with a threat of police violence, confiscation of their property and money (fines) and even an end to their freedom of movement (prison) simply because they did something stupid and harmful to themselves.

I believe victimless crimes such as these should not be crimes at all.

Lets get something straight though. Government should be focusing on enforcing and preventing crimes that do have victims. Acts of violence, theft, manslaughter, sexual abuse, assault and battery. These are capital crimes and should be the sole focus of law enforcement authorities.
Enforcing drug laws, road laws, smoking laws, alcohol laws etc are extremely costly and take up to half of the police resources.

Anyway, back to the issue of parking.

Of course, fans of government regulation will continue to provide dozens of examples of stupid people doing stupid things to try and convince me that my opinions are based on some false assumption where everybody is an intelligent and informed person. If people don't know better, then they believe that someone (the nanny state) has to immediately step in and make all the harmful actions illegal.

They say that without parking signs, people would be selfish and not "share" the parking space around. I counter that by saying that even with parking signs, people don't simply go home when the time limit lapses, but rather, they either receive a penalty notice from a parking inspector, or they waste time and petrol by returning to their car in time to drive around the area and find a different spot. People don't keep their cars in busy shopping or work areas for no reason. They arrived their for a certain reason which is known only to them. Whether it be a meal at a restaurant, a walk, shopping, groceries or even an 8 hour work shift, that is their own information.

The other flip-side of the coin is the scenario where I've seen huge public car parks and streets at night that are mostly empty of parked cars (low demand) but yet the parking meters still apply to regulate the allocation. How foolish indeed, when government bureaucrats claim the meters were needed to distribute and allocate the "scarce" parking places. But late at night, these resources are no longer scarce relative to demand, and a private business wouldn't even bother trying to charge rent on such a parking spot. The cost of hiring a night attendant exceeds the amount of money the business would earn, so they'd just leave it open. Of course with private multi-level car parks, they simply close the gate. But street parking and public car parks could easily be unregulated and free at night, even if private owned.

Government regulation is not sympathetic or responsive to individual customers. Under a free market, customers can express their disapproval of parking fees or restrictions by voting with their money. They can abstain and stop parking at a place. The business needs revenue, and it has to adapt by lowering prices or providing a better service than its competitors.

De-regulation, privatization and freedom would not be a utopia. I am not going to make such wild claims. How can everybody be happy when supply is scarce ?

  • If there are a limited number of parking spaces in downtown London, and millions of people would love to park their cars there for different purposes and different reasons, as they follow their own preferences. When you have a scarce resource and high demand, you gotta let the market allocate it. If you held an auction for a parking space outside a department store downtown, people would bid ferociously for it, perhaps paying $20,000 to own land for their car.
  • In most quiet suburban areas, it would be great, it would be pretty similar to what we have now.
  • In busier urban streets, people would find parking spaces aren't always available and either try to build a garage/driveway on their land, or purchase the parking space on the street level for their own use. An auction system could sell this off and land owners would probably be willing to pay several hundred dollars to purchase this. Its clear that they already are willing, because when a property goes to auction, it is a big selling point if it has a garage or double garage.
  • In shopping districts, if they are busy enough, private businesses will open car parks and charge people a certain rate depending on demand (i.e depends on day of the week, time of the day).
    • Business owners and shop owners would also have an incentive to own the land and provide it to customers and delivery vehicles, to help their business operate. They would be willing to buy on-street parking spaces.
    • Shoppers and employees would be motivated to arrive early, get a spot with no time limit or if there are none, park in the cheapest car park around. This form of competition would force car park owners to compete for business and drive prices down.
    • Shoppers and employees would typically park their cars there for as long as they need, but no longer. People eventually go home.
See ? Free markets really can work out something. Land for parking spaces is no different to land for homes, or offices, or theme parks, or shops. Why not allocate it the same way ?

Tuesday, January 09, 2007

Movie review: Blood diamond

Saw the film a couple of days ago, and was impressed. Just a word of warning. It stars Leonardo Dicaprio as the lead actor, but don't expect this to be your typical "Action" film, its much more of a brutal and gritty war film with no comedy or romance whatsoever.

From the start to the end, there are dozens of scenes of mass murder and gunfire. The plot is set against the backdrop of Sierra Leone's civil war in 1999, where the rebels (RUF) slaughtered villages and kidnapped slaves from those who voted for the government. They use the slaves to mine diamonds, but seeing as diamonds purchased from conflict zones such as Sierra Leone were banned, the diamonds were smuggled to Liberia who would then claim they were mined in Liberia and export them to European and Western markets.

The money raised by the rebels was used to purchase more heavy weapons, slaughter enemies, blow up government buildings and take over the country. Up to this point, the movie seems devastatingly accurate and confronting about the realities in Sierra Leone.

But the script writers unfortunately tried to embed their own political bias and analysis into this movie in quite a few scenes. The main message was that "we", the Western world, despite the ban on diamond imports from conflict zones, were partly to blame for the violence. I say partly to blame, because the film definately places the majority of blame on the violent militias who brainwash children into becoming soldiers and engaging in slavery and savagery against each other.

Nevertheless, one character in the movie, playing a journalist said that nobody in the Western world would ever buy diamonds again if they knew the truth. A couple of other scenes try to draw a connection between the slave labor used to mine diamonds and Western diamond traders selling diamonds to women in boutique stores. And the most overt display of bias was the closing scene before the credits, where a black screen with text announced that since 2002, all Western nations signed an agreement to further regulate and ban imports of diamonds from conflict zones, followed by a message that since 2002, Sierra Leone has been at peace, hence trying to draw a link between the two news items which really have very little to do with each other.

Behind this misplaced idea is the firm belief, popular amongst left-wing circles, that westerners, white and affluent people, are to blame for a lot of the world's conflicts simply because we like to purchase resources such as oil, diamonds, gas and metals. Africa and the middle east are 2 such regions which are abundant in some of these precious resources, and under free markets, huge amounts of these resources would be purchased by foreign states in exchange for billions of dollars. Anti-globalisation freaks believe that somehow, these billions of dollars go towards fuelling conflicts, where tribes, gangs or militias often fight over land. This is pretty much what the script writer's of Blood Diamond are trying to say.

So the implication is .. Africans would be better off, living in more peaceful surrounds, if they didn't have an abundance of valuable diamonds and minerals in their countries ?

Are they somehow better off if billions of foreign dollars didn't flow into their country which *can* be used to then build housing, infrastructure, schools and hospitals ?

Of course not. People can use their savings to purchase things that they value to increase their happiness. The only shame is the violent conflicts which tear Africa apart create a higher demand for weapons and tanks instead of other goods and services.

Do the script-writers somehow believe that if Africa remained dirt poor and never received money for exporting precious commodities, that the violence would end ? The Rwandan genocide of a million Tutsis didn't require tanks and machine guns. The Hutu extremists simply used machettes and knives. Throughout North and South America, there are millions of firearms, yet we don't see bloodthirsty militias roaming the streets and massacring scores of innocent people.

Monday, January 08, 2007

The Enron collapse- a case *for* not against free markets

I'm a believer in free markets. No.. scratch those words. Belief is something you have in an uncertain concept, like "I believe in global warming".

Instead let me say, I appreciate, understand and endorse the proven superiority of free markets. No situation or scenario exists where government control, regulation, or ownership of an enterprise can be said to be superior to the free market alternative.

Having said that, that doesn't mean that there aren't a lot of total ignoramuses in the world, with a 5-second attention span who can readily list some news item or company name as if it were proof positive that free markets cause suffering, exploit consumers, are greedy and reckless, trash the environment and/or don't care about society. In fact, this set of beliefs is so widespread, it forms its own ideology and mass movement - hence the anti-globalisation crowd.

This crowd is angry, passionate, but has the shortest attention span possible. Rather than writing an essay, article or book to justify their beliefs, they resort on shallow catch-phrases and expect the words "Nike !!", "McDonalds!!", "Halliburton!!" or "Enron !!!!" to win over opponents.

My objective is to tackle this ignorant mob of anti-globalisation activists head on. Actually, a lot of their rage and anger is justified at some of the abysmal outcomes and failures, but it is misdirected against capitalism and free enterprise. Contrast this mob with it's opponents. Whilst a large, often youthful, ideological and activist movement exists as fierce critics of capitalism, a much smaller but wiser scattering of writers, economists and historians remain to defend capitalism, and of course this doesn't occur through mass rallies, angry posters and bumper stickers and strong PR instruments, but through subtle teachings, texts and articles built upon years of understanding and careful study.

If only the angry anti-globalisation crowd were fully equipped with basic economic knowledge and looked at some of the details in each scenario that enrages them, they would be out in the streets protesting against governments, bureacracy and regulation and demanding a reduction in tariffs, quotas, taxes, regulations and government ownership.

I will debunk the American example of Enron, the most publicised and prominent scandal used as ammunition by the anti-globalisation and anti-capitalist left.

It is typically interpreted by the majority of people as being an example of corporate fraud, corruption and greed, which could have been averted by government intervention, regulation and ownership. An article in 2002 from the Von Mises institute refutes each of these myths, and shows that often, the opposite is the case:

The story goes as such: Enron was able to gain political favors by supplying campaign money to politicians from both major parties, thereby blinding these otherwise public-spirited people from performing their duties to the people.

Part of this story is true; Enron has given vast sums of cash to both Republicans and Democrats. While Democrats are presently attempting to link Enron and its chairman, Kenneth Lay, to President George Bush and Vice President Richard Cheney, they conveniently seem to have forgotten that Enron in 1997 contributed $100,000 to the Democratic Party immediately after President Bill Clinton directly intervened to help Enron gain a $3-billion project in India.

The problem here is that the politicians have it backward. The energy business, including oil and electricity, has been thoroughly politicized for about a century. Producers of electricity, despite what mainstream economists like Paul Krugman tell us, have been and continue to be heavily regulated, both by state and federal agencies. Electricity production has undergone some changes in its regulatory structure in recent years, but to call this process "deregulation" (especially in California, which launched a crazy quilt of reregulation that led to the recent energy crisis there) does violence to the language.

Producers of electric power are regulated in every sense of the word, from the fuel they use to the prices they can charge customers. Furthermore, the process is subject to the whims of regulators and politicians, and that makes it very difficult to plan for the long term, as the stroke of a politician's pen (like that of California Governor Gray Davis) can wipe out a lifetime of profitable investments.

Another widespread misunderstanding is that Enron supposedly was an example, even the embodiment of pure capitalism (unregulated and free from interference). Instead it was the absolute embodiment of crony capitalism:

One of the things that characterized the Enron enterprise was its freewheeling ways in financial markets. There is nothing in economic theory that declares free markets are only possible when entrepreneurs wallow in irresponsibility.

However, the Enron mess demonstrates that the marriage of reckless entrepreneurs and irresponsible government is always a recipe for disaster. During the late 1990s, the Fed engaged in unprecedented credit expansion. Of course, the flip side of credit is debt, and there can be no doubt that the freewheeling Fed also set the table for Enron's shenanigans.

The final blow to the "Enron represents free markets" myth is the action that Lay took as it became obvious Enron could not cook its books any longer. Lay phoned the U.S. Department of the Treasury to ask for help. (To its credit, the Bush administration did not attempt to bail out the rogue firm.)

There is no doubt that the Enron debacle is a disgrace, both to the executives who made these unconscionable decisions and to the federal and state governments that made that firm seem as though it was invulnerable to market realities. It is "crony capitalism" at its worst. Let us remember, however, that it was the politicians who corrupted capitalism, not the other way around.

Given that Enron was the perfect example of crony capitalism (along with the UN oil for food scandal), it should dispel any foolish and naive belief that a "partnership" or a harmonious and beneficial relationship should form between government regulators and bureaucrats, and large corporations where society, consumers and shareholders alike, will be best off.

This misplaced ideal is at the heart of social democratic doctrine. Social-democrats pay lip service and grudgingly admit that there is a role for private enterprise in a society, and free markets. After a century of mass starvation and death at the hands of communist ideology, you would expect no less.

But, they are quick to assert that firms, especially the larger ones, develop some kind of monopoly, or power over the populace and engage in acts of exploitation and harmful selfishness if they are left unchecked and unregulated. They do not even pause for breath before demanding that government regulators should have the ultimate say on the what/how/where and when a business can operate. All businesses must then operate within some regulatory framework.

Doctors, dentists, plumbers, electricians, drivers, pilots, forklift operators, builders, accountants, lawyers, architects all need to be licensed/certified/accredited by the state. They must operate in a sea of regulations relating to- equal opportunity, gender, sexuality, anti-discrimination, workplace safety, superannuation, payroll taxes, annual leave, public holidays, sick leave, company taxes, environmental impact statements, accounting and reports .. and more.

So instead of private enterprises simply being exposed to a range of complex and dynamic market forces, resources and costs, prices and constraints, opportunities and risks. They now have to wrestle with a straight-jacket of regulations and laws imposed by politicians. This situation alone, means that operating a business profitably and succesfully involves either

  • Sitting by and hoping that through good luck, the regulations will leave you alone to run your business in peace (rarely succesful)
  • Actively trying to lobby politicians, forming interest groups, engaging in massive PR efforts, funding political parties, to try and ensure that legislation and regulation will not harm your business, and in fact, often protect and promote your business.
The 2nd approach is very common, and the standard approach for all large corporations. But some of them take it to extremes. The greater the regulation in the industry, the greater the efforts by the business to lobby and grease palms and sway regulators. When it reaches this degree, its usually referred to as crony capitalism. Its kind of like paying off the mafia boss to leave you alone, or to beat up your competition. Thats what Enron was all about.

When things turn sour and such a partnership between the mafia boss and the business reveal abuses of customers, irresponsibility and dishonesty towards shareholders, and not providing the service its customers demand, how come the pundits respond to such a scenario by saying the mafia boss should have more control over the business ?

Yes, Enron was reckless. But it still managed to weave its way sneakily through the existing regulatory regime imposed by government. It complied with the existing financial regulations when it cooked the books. And there was very little room for competitors to step in and challenge Enron, because the mafia boss was protecting them in a heavily regulated market. In an unregulated market, frauds and failures like Enron get liquidated quickly and people move on.

Thursday, January 04, 2007

Feeding the hand that bites you...

Often, the saying usually goes the other way around. Its used to describe when a party turns against another who has been a true ally, friend or supporter.

This new saying of mine goes to the equally stupid and moronic strategy of trying to appease, placate, support and encourage another party which has been acting as an enemy. And that award goes to the US State Department, who continue to support regimes across the world who are less than friendly to the US government, or US population.

The latest Palestinian Media Watch update reports of how Fatah, often referred to as the moderate political party by Reuters, NY Times, AP and European/Arab leaders, openly boast that they hate America even more than Al-Qaeda and wish Al-Qaeda the best of luck in hurting George Bush. This comes immediately after the American government just poured another $50m of foreign aid down Fatah's throat and attempted to further support them to govern the Palestinian people.

Wednesday, January 03, 2007

Best parody ever

Finally, Mad TV have perfected to a tee, the art of mockery. And what better target than Michael Moore, fatso millionaire loudmouth.

The actor in the video understands Michael Moore perfectly. The compassionate head-tilt, the softly spoken voice, the seemingly innocent asking of loaded questions filled with dishonest assumptions and implications, the style of journalism which catches unsuspecting people off guard.

Enjoy !

Tuesday, January 02, 2007

Palestinians mourn the death of Saddam

Along with the Associate Press, the ABC and many other left-wing media outlets, the Palestinians are very upset over the death of their favorite tyrant, Saddam Hussein. Check out this image from AP, and see how they have butchered the English language in the caption.

Caption: A young boy holds a toy gun as a Palestinian man, right, speaks behind a portrait of late Iraqi leader Saddam Hussein at a memorial in the Dahaysha Refugee Camp in the West Bank town of Bethlehem,Sunday, Dec. 31, 2006. Hundreds of Palestinians flocked to the streets of the West Bank on Sunday to mourn the death of Saddam Hussein, setting up condolence tents and bemoaning the fate of their steadfast ally. (AP Photo/Alvaro Barrientos)

Firstly.. this is no toy gun as is plain to see. Secondly, despite the mainstream media and UN's insistence, does this look like a "refugee camp" to you ? Where are the makeshift tents and red cross barracks ?

If anyone follows the media coverage, they begin to see that every Palestinian village that is infested with terrorist groups and armed fanatics is typically referred to as a "refugee camp". Despite the fact that Palestinians have been living there for decades, they somehow manage to maintain the label "refugee camp" to evoke worldwide sympathy for a population who are hell-bent on violent terrorism and confrontation with all outsiders. Hence the affection towards Saddam.

I doubt the AP will be issuing a correction anytime soon.