Sardanapale

“You cannot bring prosperity by discouraging thrift.
You cannot help small men by tearing down big men.
You cannot strengthen the weak by weakening the strong.
You cannot lift the wage earner by pulling down the wage payer.
You cannot help the poor man by destroying the rich.
You cannot keep out of trouble by spending more than your income.
You cannot further brotherhood of men by inciting class hatred.
You cannot establish security on borrowed money.
You cannot build character and courage by taking away man’s initiative and independence.
You cannot help men permanently by doing for them what they could and should do for themselves.”

Rev. William J. H. Boetcker, 1916

(PS: this quote is sometimes wrongly attributed to Abraham Lincoln.)

When it comes to economic policy, I am impressed by none of the candidates for the US presidency.

But on energy, their proposals are downright idiotic.

With gas prices rising all the time, John McCain is calling for a moratorium on the 18.4-cent federal gas tax.

This is a misguided solution to a non-existent problem.

The rise in US gas prices is relative: Europeans would love to pay only $4 a gallon. And then is it such a bad thing?

With everyone, from Bush to environmentalists, rightly complaining that America is “addicted to oil”, lower demand should be welcome.

And McCain wants to spur consumption through lower prices…

Barack Obama, for his part, wants a new tax on the ill-gotten profits of those nasty oil companies.

This idea is even sillier than McCain’s. As the Wall Street Journal wrote recently:

“You may… be wondering how a higher tax on energy will lower gas prices. Normally, when you tax something, you get less of it, but Mr. Obama seems to think he can repeal the laws of economics.

We tried this windfall profits scheme in 1980. It backfired. The Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3% to 6% and increased oil imports from OPEC by 8% to 16%.

Mr. Obama nonetheless pledges to lessen our dependence on foreign oil, which he says “costs America $800 million a day.” Someone should tell him that oil imports would soar if his tax plan becomes law.

The biggest beneficiaries would be OPEC oil ministers.”

The Walll Street Journal also notes that the energy industry’s earnings are not as outrageous as people think.

Profits from the oil and natural gas industry over the past year were 8.3% of investment, while the all-industry average is 7.8% - and this was a boom year for oil.

An analysis by the Cato Institute found that between 1970 and 2003, the oil and gas business was “less profitable than the rest of the U.S. economy.”

As the journal writes: “These are hardly robber barons.”

Desparing to make any sense of the frontrunners’ energy programs, I turned to Hillary Clinton – who claims executive experience a pragmatic approach.

And it turns out she wants both a McCain’s style gas-tax moratorium and and Obama-style windfall tax on companies.

Far from repudiating her rivals’ follies, she compounds them.

How can such smart people trained at the best schools in the world (well, for Clinton and Obama, at least) come up with such dumb ideas?

The answer, of course, is that they want to get elected.

The idiocy of their proposals betrays not so much their own as their constituents’ ignorance.

I see this as another vindication of Bryan Caplan’s theory of “voter irrationality”.

The Wall Street Journal piece quoted is here. I recommend Caplan’s brilliant website.

“Food is a vital issue that must not be left solely at the mercy of the laws of the market and of international speculation”.
Michel Barnier, French agriculture minister

_________________________________________

Enemies of economic liberalism are blaming the current food crisis on markets.

Mass hunger has been added to the evils that capitalism is loosing upon the world - on top of poverty, exploitation, inequality, health hazards, and climate change.

This, of course, is nonsense: high food prices have nothing to do with selfish speculators or free markets. The reason is rising demand, mostly from fast-developing countries like China and India.

Governments, from alleviating the problem, have so far made it worse.

In the rich world, they are still paying farmers not to grow crops, not an ideal way to boost supply.

The US and the EU are also blocking food imports and subsidizing exports, which is destroying farming in the developing world.

And as everyone except officials seem to realise these days, subsidizing biofuels is crazy.

In America, ethanol soaks up almost 20% of corn production, and encouraging ever more farmers to grow for fuel, not food.

The EU, which mostly castigates US policies when they make sense, is following suit.

In the developing world, governments have dealt with the crisis in equally idiotic ways.

They have fixed prices, punished “hoarding” (punishable by life imprisonment in the Philippines), and restricted exports.

All of this, of course, reduces incentives for farmers to grow more, making the problem worse.

Government could and should do something to alleviate shortages and stave off mass poverty, but interfering with price signals and castigating “speculators” is exactly the wrong way to go about it.

Here are a couple of good articles I’ve read on the subject recently – in the The Economist and The Wall Street Journal.

Let me know about any other I may have missed.

During my recent trip to the Balkans, I was struck by the attitude of people towards communism.

In that country, which endured the most stifling brand of totalitarianism for decades, there is no sense that its passing was a milestone.

Communism is not popular, but neither is it regarded as absolutely evil, like Nazism in Germany, or fascism in Italy or Spain, or apartheid in South Africa.

I visited a fortress that was used as a jail and torture center until 1968. The row of empty cells contained no explanation, and conveyed none of the horror they had seen. Robben Island it wasn’t.

In Enver Hoxha’s house – which has been turned into an “ethnographic museum” – there was no sense that one of Europe’s worst dictators lived there.

I could not imagine Salazar’s family home being turned into the replica of an ordinary Portuguese house in the early 20th century. When I asked the guide how the people view Hoxha, she said some remembered him fondly, others not.

She pointed to a bunch of flowers placed on a table by local admirers for the 23rd anniversary of his death.

Some of the people we spoke to were not shy about noting some of the achievements of the old regime. One pointed out that it had educated a country that was 80% illiterate in 1945. There was no crime or prostitution under the communists, he said.

Our hosts described Hoxha as a tyrant, but they insisted that nothing was black and white. Yes, socialism was an abject failure, but it had positive aspects.

The worst our guide was willing to say about it was: it looked great on paper, but the reality didn’t match the ideals. Unlike fascism, the ideology itself is not stigmatized.

This, of course, is partly a question of generation. Younger people did not mention the positive side of communism. But neither do they see 1992 as a watershed.

All, young and old, insist on the corruption of the current leadership. You might say: it is understandable for people to highlight the problems they face - those of today, not those of the past.

Current leaders don’t deserve to be thanked just because they are not communist. All very true. Similarly, it would be absurd to ignore the failings of the ANC for the sake of the past struggle against apartheid.

But the comparison with South Africa highlights a big difference. Few of those who criticize Mbeki, Zuma et al would have anything good to say about apartheid; the same is not true of communism is that small country.

Communism, on the other hand, is controversial. It is not taboo, something that must be condemned in polite society – that would attract the comment “inveigh against it” in Flaubert’s Dictionary of Received Ideas.

I see this as another example of what Jean-François Revel called communism’s “most favored totalitarianism” status.

Before taking a two-week vacation, I thought I’d mention a leader by The Economist, in which the paper clarifies its position on financial regulation.

In recent weeks it had appeared to look favorably on much stricter controls, but this piece warns officials against overdoing it:

“Regulators cannot know how trust will ebb and flow as new markets develop the experience and practice they need to work better. They therefore cannot predict the peril of new ideas. They have to let new markets develop, or stifle them.

The system learns—dangerous junk bonds are reborn as respectable high-yield debt; bankers will now be scared of extreme leverage—but it is delicate, as the world learned last summer. The regulator is condemned to muddle through.

The notion that the world can just regulate its way out of crises is thus an illusion. Rather, crisis is the price of innovation, so governments face a choice.

They can embrace new financial ideas by keeping markets open. Regulation will be light, but there will be busts. The state will sometimes have to clear up and regulation must be about cure as well as prevention.

Or governments can aim for safety and opt for dumbed-down financial systems that hobble their economies and deprive their people of the benefits of faster growth. And even then a crisis may strike.”

The whole leader is here, and links to an interesting article on financial regulation.

PS: Never mind the text opposite. I don’t have time to do any translating before leaving, and just copied and pasted something in French to fill the space.

I profess my ignorance, for once (I usually keep quiet about it).

Would someone help me understand what’s so new about the current financial crisis?

Why should the classic pro-market view on such things – that the state usually makes things worse by stepping in – no longer be valid?

This view was popularized by Milton Friedman, who argued in his book “Free to Choose” that the Great Depression had been caused not by flawed markets but by the policies of the Federal Reserve.

The regulatory system, Friedman wrote, tends to blame

“all problems on external influences beyond its control and takes credit for any and all favorable occurrences.

It thereby continues to promote the myth that the private economy is unstable, while its behaviour continues to document the reality that government is today the major source of economic instability.”

Some commentators have used similar arguments in the context of the present crisis.

Alvaro Vargas Llosa, in the New Republic, argued that the Fed had created conditions for the turmoil through credit expansion, which encouraged reckless lending.

But the underlying problem, as Vargas Llosa sees it, is not so much the Fed’s decisions as its very existence: a financial system underpinned by the officials wielding monopoly power can never be as stable as one where private banks are free to issue money.

Vargas Llosa, of course, knows that abolishing the Fed but is inconceivable right now, but nevertheless calls for bold thinking:

“There are less dramatic measures that can be taken on the road toward a definitive solution. The most obvious one is to simply stop using the Federal Reserve to inflate the currency.”

The strange thing is, this classical view of the crisis is very much in the minority – even among analysts that are usually pro-market.

In The Wall Street Journal, Arthur Levitt Jr blames new fancy financial instruments for the debacle:

“The combination of structured financial products and subprime mortgages fundamentally changed the lending business.

No longer did those doing the lending have to expose themselves to the credit risks of the borrowers. Instead, they packaged their loans for sale to the investing public.

With no exposure, loan originators offered mortgages to just about anyone they could find.”

Levitt does not exonerate regulators, but he says their basic failure was not too much supervision, but too little – “regulatory underkill”, as he puts it.

The Economist, meanwhile, defends the emergency measures taken by the Fed to tackle the crisis: helping JP Morgan acquire Bear Stearns, lowering the discount rate, and offering $200bn in short-term loans to investment banks, etc.

The Financial Times‘ Martin Wolf – one of the most eloquent advocates for globalization – also seems to take a positive view of the Bear Stearns rescue and other moves by officials, and argues that the era of financial deregulation is over.

His point is best encapsulated by a banker he quotes: “I no longer believe in the market’s self-healing power.”

For these analysts, the rules of the game have radically changed: the financial system has become inherently unstable, and it is incumbent on enlightened officials to save it against itself.

I’m not dismissing such ideas out of hand.

But before I turn my back on Milton Friedman and give up on a central tenet of my faith in markets, I want to make sure it is truly obsolete.

You see, I have a sneaking suspicion that these guys are rushing into the protective arms of the state – as people tend often do in times of trouble. Help anyone?

I’m watching the race for the Democratic nomination with all the interest of a Liverpool Fan for the struggle between Manchester United and Arsenal in the English Premiership (except, of course, that McCain, unlike my favourite club, has a chance of winning.)

From this detached position, I confess a preference for Barack Obama – although this is due to Clinton fatigue on my part rather than an active appreciation of their rival.

The same reflex leads me to cheer any opponent of Manchester. OK: I’m dropping this tired metaphor NOW.

But such lack of enthusiasm for either candidate is much more of a problem for a liberal American than it is for a conservative European.

To get an idea of how frustrating it can be to feel cold about a candidate you’re supposed to love, I strongly recommend Jonathan Rauch’s latest column about his own “Obama resistance complex”.

As usual, it’s eye-opening and highly entertaining.

A recent article by John Gray in the Guardian attacks Richard Dawkins and other authors of recent books religion.

Between a (born-again) anti-market philosopher and a great scientific, my choice is clear.

So I was surprised to find myself agreeing with Gray.

His main idea is that, 9/11 notwithstanding, religion is not a force for evil in the modern world.

In the past century, the worst crimes against humanity have been committed by godless tyrants.

According to Gray, Dawkins, Christopher Hitchens, Martin Amis, Philip Pullman, Daniel Dennett and other foes of religion are fighting the wrong battle – often reproducing the fanaticism of their foes.

In his book The God Delusion, Dawkins tries to refute this objection:

“What matters is not whether Hitler and Stalin were atheists, but whether atheism systematically influences people to do bad things. There is not the smallest evidence that it does.”

Dawkins, of course, is right to say that atheist does not lead to crime (as a heathen myself, I can only agree). But he is wrong to say that religion does.

He neglects the fact that opposition to religious freedom has characterized totalitarian movements since France’s Jacobin revolutionaries.

Opposition to church independence is not confined to totalitarianism.

It was a feature of the absolutist mindset that arose in 16th century England and 17th France.

In both cases, power-hungry monarchs sought to bring the clergy and dissident churches to heel.

The battle against bolshy priests was a also a fixture of 20th century tyrannies, as illustrated in Graham Greene’s masterpiece The Power and the Glory, about Mexico in the 1920s.

In fact, it is a basic tenet of all faiths that there is a higher law than the rule of the prince.

It is no accident that some of the most eloquent defenders of liberty have been devout men, such as Chateaubriand, Martin Luther King, Solzhenitsyn, and Desmond Tutu.

And the Catholic Church, unlike earthly powers, never made its peace with the Soviet empire, and elected at its head an anti-Communist committed to rollback before the US did.

You might object that although Christianity may now be compatible with liberal values, but the same is not true of Islam, which does not recognize the distinction between the private and public spheres.

This is debatable - I do mean “false”, but a point of debate. Experts are arguing whether Islam is inherently inimical to liberal values.

The Koran is a hodgepodge of baffling and contradictory precepts (like the Bible) where you can find quotes in support in support of pretty much anything.

As far as I’m concerned, I’ve met too many good people who call themselves Muslims to indict a whole faith with the crimes of a fanatical minority.

I agree with Gray: there are much worse things in the world than religion.

Dawkins is wasting his considerable intellectual and argumentative powers on a mild quirk of the human psyche.

Gray’s article is here.

Dawkins is always worth reading.

The French journalist Pierre Briançon is not impressed by 10 month of Sarkozy presidency:

“Truth be told, nothing much has happened in France since Mr. Sarkozy was elected on a promise of “rupture.”

Reports have been commissioned and ignored, ministers have been infantilized and silenced, while the president has faked action on all fronts, talking here and insulting opponents there with expletives no U.S.-based newspaper could print.

But true reforms have been rare and few.

The Sarkozy administration has made a few commendable inroads on topics that were long considered taboo. But their limited scale gives an idea of what passes for reform in France these days.

Train conductors have been asked to retire at the same young age (60) as anyone else, and not ten years earlier.

State-owned universities have been granted some degree of autonomy that might allow them, down the road, to — heaven forbid — compete with each other.

Neither the job-killing 35-hour week nor the populist, so-called wealth tax have been abolished, though their most absurd consequences have been curtailed by creating major loopholes.”

What else? Well, that’s it.”

His whole article, in the Wall Street Journal, is here.

David Mamet has officially renounced his former left-wing views. His apostasy in the Village Voice is well worth a read. Here are a few highlights:

“John Maynard Keynes was twitted with changing his mind.

He replied, “When the facts change, I change my opinion. What do you do, sir?”…

I took the liberal view for many decades, but I believe I have changed my mind.

As a child of the ’60s, I accepted as an article of faith that government is corrupt, that business is exploitative, and that people are generally good at heart…

But in my life, a brief review revealed, everything was not always wrong, and neither was nor is always wrong in the community in which I live, or in my country.

Further, it was not always wrong in previous communities in which I lived, and among the various and mobile classes of which I was at various times a part.

And, I wondered, how could I have spent decades thinking that I thought everything was always wrong at the same time that I thought I thought that people were basically good at heart? Which was it?…

I began reading not only the economics of Thomas Sowell (our greatest contemporary philosopher) but Milton Friedman, Paul Johnson, and Shelby Steele, and a host of conservative writers, and found that I agreed with them: a free-market understanding of the world meshes more perfectly with my experience than that idealistic vision I called liberalism.”

The Village Voice article is here.

On the same theme, I recommend the quote from Jean-François Revel on the opposite column.