Tag Archives: free markets

Firefighting and the free market

I mentioned it in ’08. This news report reminded me of the same-

Gene and Paulette Cranick, of South Fulton, Tennessee, US, lost their home after officers were ordered by bosses not to extinguish it.

Fire fighters only arrived when the flames spread to the property of a neighbour, who had paid the fee. However, they continued to refuse to help the Cranicks.

[…]

Rural residents can gain access to the service by paying the annual fee. But “if they choose not to,” Mr Vowell said, “we can’t make them”.

Mr Cranick said: “I thought they’d come out and put it out, even if you hadn’t paid your $75, but I was wrong.” His wife said the couple had offered to pay the fire fighters whatever was necessary for them to extinguish the flames, but the officers refused.

Though this is not an example of a private firefighting service, it is an example of a voluntary service fee vs. forced taxation. Once you are ready to accept the risk of a fire completely burning down your house rather than pay for the service, you only have yourself to blame if the risk materializes. Though as Caplan says in the post I linked to previously, the department could have charged a heavy “emergency fee” to put out the fire.

People who react with a “how can you let this happen” are the ones who abhor the free market and the responsibility it places on individuals. It’s either this or Bloomberg confiscating your salt shaker and the government deciding how fat you are allowed to be, by proxy of course.

Too much to lose

CNBC ran a show – Meeting of the Minds: The Future of Capitalism – last night. It had a power packed panel pontificating on the causes and effects of the recession, and the road ahead. My first impression was – crazy minds. I changed my opinion somewhat, but not much, by the end of the show. The only people who were talking some sense were Welch and El-Erian.

Welch talked, among other things, about what level of government-as-a-percentage-of-the-economy would people be comfortable with – 30 from the current 15 or so? He was worried about an attack on meritocracy, and the size of government.

Asness wasn’t too optimistic. He was the one, if you remember, who wrote the open letter to Obama.

El-Erian talked about how savings is important when it comes to growth. Further, he made an important distinction between what “ought” to happen, and what is “likely” to happen. He also talked (I think it was him) about the “rule of law,” the sanctity of contracts and property rights.

Pandit said he isn’t aware of any textbook or theory about the present mess (and he’s the head of the world’s largest bank).

Fink of Black Rock is a very irritating character. So were his ideas, none of which I recollect.

Shelly of Ogilvy and Mather is fascinated with people getting “permission” to “feel.” She also loves “plans.”

Morial believes in “fair” growth. He grudgingly accepts that a meritocracy is needed, but he is not in favor of an “aristocracy.”

Eight people talked for an hour, and I don’t recollect a single good, concrete idea that came out of all the pontification. The minds could have done something better with their time.

Its depressing to see that no one in the business world, particularly the so called “big” organizations is willing to stand up for absolute rights. All of them accept regulation, accept the theory that society can choose how to distribute wealth (Welch), accept the role of the government in the economy in various ways. Most of them have too much invested in the present system to speak their mind (Asness agrees that if the government is only planning to take over the economy in the short run, there’s nothing wrong with it). Not a good sign.

On eating cakes

The TOI front page edit yesterday-

…The time has come to also say no to corruption. The strongest signal Sonia Gandhi and Manmohan Singh can send out to venal netas and their babus is to pack the cabinet with honest and efficient men and women. Let us not continue with ministers who have so brazenly bled the system…

It’s time we jettisoned our politics of cynicism for a politics of conscience. We are aware that the pundits will laugh this off as the naivete of the hopelessly idealistic, and say “that’s not how the system works”. But change comes because someone somewhere has the courage of conviction—no matter how foolish—to tilt at windmills.

The TOI thinks its being “idealistic.”

Here’s today’s edit

The Left strategy, which was formulated by CPM general secretary Prakash Karat and accepted without any visible opposition by all allies including the CPI, was to project before voters a third front as the alternative to the Congress and the BJP. This front was nothing but a pre-election coalition of convenience consisting of parties…

It is now known that not all in the party agreed with the central leadership’s decisions to withdraw support to the UPA government on the nuclear deal issue and champion the third alternative. Pragmatic state leaderships that run governments don’t seem to share the ideological stubbornness of the likes of Karat.

There’s something amusing here, apart from the “fact” that this analysis of the Left’s defeat is dead wrong – the editor is simply seeing what he wants to see.

As far as I know, both “idealism” and “ideology” share the same etymological roots, the word “idea.” So its amusing, again, to see amnesia in action. Yesterday, it was all about idealism; today its all about pragmatism with “ideology” being “stubborn” (I am not supporting Karat). TOI needs to make up its mind. Some “pundits” would say compromising with “venal” politicians – being pragmatic – is a good thing.

Corruption does not always mean stealing when no one’s watching. It can also occur in the open, with newspapers applauding it. Like George Will writes in this Washington Post column (via Cafe Hayek)-

The Troubled Assets Relief Program, which has not yet been used for its supposed purpose (to purchase such assets from banks), has been the instrument of the administration’s adventure in the automobile industry. TARP’s $700 billion, like much of the supposed “stimulus” money, is a slush fund the executive branch can use as it pleases. This is as lawless as it would be for Congress to say to the IRS: We need $3.5 trillion to run the government next year, so raise it however you wish — from whomever, at whatever rates you think suitable. Don’t bother us with details.

This is not gross, unambiguous lawlessness of the Nixonian sort — burglaries, abuse of the IRS and FBI, etc. — but it is uncomfortably close to an abuse of power that perhaps gave Nixon ideas…

The Obama administration’s agenda of maximizing dependency involves political favoritism cloaked in the raiment of “economic planning” and “social justice” that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail. The administration’s central activity — the political allocation of wealth and opportunity — is not merely susceptible to corruption, it is corruption.

More wisdom from the Times – Kamal Nath is a free marketeer

Kamal Nath entered politics courtesy Sanjay Gandhi, Indira Gandhi’s younger son, and he strongly believed in the Gandhi scion’s socialist vision. Today, Nath represents everything that is ‘free-market’.

Nath, who has won eight elections from the backward and predominantly tribal constituency of Chhindwara, was in 2004 assigned the job of projecting the country’s free-market image to the world.

And Hitler was a saint.

Gloom

To put things in perspective, a couple of paragraphs from 18th century French economist Turgot. From the Mises blog

The general freedom of buying and selling is therefore the only means of assuring, on the one hand, the seller of a price sufficient to encourage production, and on the other hand, the consumer, of the best merchandise at the lowest price. This is not to say that in particular instances we may not find a cheating merchant and a duped consumer; but the cheated consumer will learn by experience and will cease to frequent the cheating merchant, who will fall into discredit and thus will be punished for his fraudulence; and this will never happen very often, because generally men will be enlightened upon their evident self-interest.

To expect the government to prevent such fraud from ever occurring would be like wanting it to provide cushions for all the children who might fall. To assume it to be possible to prevent successfully, by regulation, all possible malpractices of this kind, is to sacrifice to a chimerical perfection the whole progress of industry; it is to restrict the imagination of artificers to the narrow limits of the familiar; it is to forbid them all new experiments; it is to renounce even the hope of competing with the foreigners in the making of the new products which they invent daily, since, as they do not conform to our regulations, our workmen cannot imitate these articles without first having obtained permission from the government, that is to say, often after the foreign factories, having profited by the first eagerness of the consumer for this novelty, have already replaced it with something else. It means forgetting that the execution of these regulations is always entrusted to men who may have all the more interest in fraud or in conniving at fraud since the fraud which they might commit would be covered in some way by the seal of public authority and by the confidence which this seal inspires, in the consumers. It is also to forget that these regulations, these inspectors, these offices for inspection and marking, always involve expenses, and that these expenses are always a tax on the merchandise, and as a result overcharge the domestic consumer and discourage the foreign buyer. Thus, with obvious injustice, commerce, and consequently the nation, are charged with a heavy burden to save a few idle people the trouble of instructing themselves or of making enquiries to avoid being cheated. To suppose all consumers to be dupes, and all merchants and manufacturers to be cheats, has the effect of authorizing them to be so, and of degrading all the working members of the community. [emphasis mine]

From an ET interview of former RBI governor YV Reddy-

I think we can see some contrasting situations. While the UK is more transparent on public ownership, the US is somewhat reluctant. There is an increasing reference to the Swedish experience. When Sweden had a banking crisis, its government took over the banks temporarily, cleaned them up and handed them back to the private sector.

But, I think, globally there is no consensus on how these things should be treated. My understanding is that there is a consensus that banks need to be treated as public utilities. Once you term something as a public utility it has to be owned and managed by the government. Otherwise, it has to be intensely regulated. I think the banking industry is likely to be treated as a public utility.

My monopolistic “public utility” managed fourteen power cuts in a single day. The situation is only going to get worse.

I didn’t know Swapan Dasgupta could write like this. He sounds like an out-of-power US Republican discovering the virtues of free markets, and predicts an economic collapse of the UK, and India-

Since they discovered the welfare state as an alternative to Soviet-style Communism, socialists have successfully spread the message that a “caring state” is more important than either families or social communities. In Britain, the state intrudes into every sphere of life from healthcare and education to providing unemployment benefits and pensions. It even tries to prescribe social attitudes. The result is a gargantuan bureaucracy and government spending that equals half the GDP of an economy that shrunk 3.5 per cent last year.

Britain is approaching an economic nightmare. But it is curious that its tax-and-spend profligacy is the ideal of those who tom-tom “inclusive growth” in India. Last week, Rahul Gandhi admitted that 90 per cent of welfare spending is frittered away in waste and corruption. However, rather than balk at this outrage, both he and his economist Prime Minister have preferred a bigger role for government over more incentives to individuals and families. The PM doesn’t believe that a low tax regime is a moral imperative of good governance; to him good economics is mega spending.

In comparative terms, India is still a notch below Britain in both prosperity and economic promiscuity. But if a fragile and self-serving coalition assumes power after May 16, increases budgetary expenditure dramatically – which it surely will do-and adds to the already unsustainable fiscal deficit, Indians may once again experience that sinking feeling of the 1970s. The entrepreneur-driven national exuberance of a year ago may well be subsumed by a sense of helpless decline.

Actually, it will be worse than Blighty. The British state is well-meaning but bloated, plodding and intrusive; India’s will be uncaring, inefficient, corrupt and increasingly criminal.

Cynicus Economicus is angry

Most alarming of all, the greatest and most listened to cynicism is coming out of China – who see the QE policies of Western governments for what they are – harbingers of inflation. How desparate is it when it takes a totalitarian state to ram the truth home?

This is why I am writing an unusually angry post. I am sick of the lies that issuing forth, and I am sick and tired of the way in which the insiders appear to win, regardless of the cost to the rest of the economy. I have watched in horror as these bailouts have chewed up the wealth of the Western economies, both present and future wealth. I have watched in horror as governments have issued ever more debt to support their profligacy and support insolvent banks. I have watched in horror as central banks have commenced monetising government debts, and likely engineering inflationary defaults whilst risking eventual hyper-inflation.

Above all, it really does appear that governments and central banks are willing to sacrifice ever greater swathes of the economy to rescue incompetent and insolvent financial institutions. The only explanation that fits the facts is the grubby clubbiness of the system. It is not the great New World Order conspiracy, but rather the conjunction of interests between well placed individuals. Each, in their own way, moving forwards for their own personal gain. It is not the activity of great conspirators, but rather the collective movement of little men, of people who can think only of their personal gains. Money, vanity, power.

Turgot is right about the government, isn’t he.

“Black market”

“The black market is a market. There is nothing “black” about it. A black market price takes into consideration the risk. When the blackness is taken away from this market, then prices will probably drop.”

Ludwig von Mises, The Free Market and its Enemies