Yearly Archives: 2014

The Venezuelan experiment – proving what everyone already knew

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The Venezuelan experience is an example endlessly repeated about how the politics of resentment, the natural home for the socialist ethos, leads to ruin for everyone within such communities, aside from its political leaders or their friends. And so Venezuela, which is an example in so many different ways, but here we are looking only at price control:

Two years before his death, Hugo Chavez tried to repeal the law of supply and demand. . . . Chavez despised the law because he believed it robbed the poor and unjustly profited producers. . . .

In its place, he persuaded the Venezuelan legislature to enact the 2011 Law on Fair Costs and Prices, a price-setting mechanism to ensure greater social justice. A newly created National Superintendency of Fair Costs and Prices was empowered to establish fair prices at both the wholesale and retail levels. More than 500,000 price edicts have been issued. Companies that violate these price controls are subject to fines, seizures and expropriation.

And the results. This is from The Guardian who may report but being good leftists probably don’t really understand what’s gone wrong:

“Battling food shortages, the Venezuelan government is rolling out a new ID system that is either a grocery loyalty card with extra muscle or the most dramatic step yet towards rationing in Venezuela, depending on who is describing it. . . .

Registration begins at more than 100 government-run supermarkets across the country on Tuesday and working-class shoppers – who sometimes endure hours-long queues at the stores to buy cut-price groceries – are welcoming the plan.

“The rich people have things all hoarded away, and they pull the strings,” said Juan Rodriguez, who waited two hours to enter the government-run Abastos Bicentenario supermarket near downtown Caracas on Monday, then waited three hours more to check out….

Patrons will register with their fingerprints, and the new ID card will be linked to a computer system that monitors purchases. The food minister, Félix Osorio, said it will sound an alarm when it detects suspicious purchasing patterns, barring people from buying the same goods every day.

Re The Guardian story, what is most revealing of all is its last para:

Defenders of Venezuela’s socialist government say price controls imposed by the late President Hugo Chávez help poor people lead more dignified lives, and the United Nations has recognised Venezuela’s success in eradicating hunger.

Do you think the idiot who wrote this story and ended it this way has learned a thing. He lives somewhere else but in spite of the evidence he has reported still thinks what Chavez did helped the poor. With morons like this around, the next Venezuela is just around the corner.

The will to create meets the will to destroy

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Being on the left is in part a fashion statement for our elites so it’s interesting to see how this is coming back to bite amongst the techno geeks in San Francisco. This really is a story about the cultural mayhem overtaking the US where once upon a time achievement was actually admired. Kevin Rose has been a successful funder of start-ups so now he finds that Anti-Tech Protesters Are Telling Kevin Rose’s Neighbors That He’s A “Parasite”. Here’s the leaflet being distributed outside his home:

kevin-rose-flier

Kevin is, of course, amongst the one percent, the point-one percent, but that is the nature of achievement. It brings its rewards and if he is going to be drinking coffee someone else will have to serve it to him. What Kevin Rose does is demonstrate most definitively that some people are actually better at things, smarter, more gifted, hard working. Others are less so of each and possibly all of these and therefore do not receive the material and social rewards that seem to accrue to Kevin. Envy, resentment, dissatisfaction all accrue instead and make up the majority of the Obama constituency. You can tell these people all you like that their own good fortune relative to every past civilisation is a result of the efforts of Kevin Rose and those like him but they could not care less. They wish only to destroy not what they cannot have themselves, but what they cannot be themselves. It is an existential recognition that others are better than them and therefore the promise of fairness and equality is exposed, so far as they are concerned, in all its emptiness. These are people of the deepest hatreds and nothing can be done to make those hatreds go away.

And as for the material rewards of success, it is likely we don’t know the half of it. This article on Mike Judge, a pillar of the Silicon Valley establishment, who worked his way up through hard work, endeavour mixed with an inordinate amount of genius, shows what extraordinary rewards there are for success. The article begins:

The Goolybib party is well under way, and you can smell the self-congratulatory excess. The company, which says it “disrupts digital media” to “make the world a better place,” has just been purchased by Google for $200 million, and its cofounders are celebrating their good fortune with an extravagant bash in a sleek modern mansion. The place is packed with signifiers of contemporary success: reflecting pools, floor-to-ceiling windows, white leather sofas. Venture capitalists work the crowd, chatting up billionaires. Guys in hoodies are slurping liquid shrimp from test tubes (it’s a Wylie Dufresne concoction, $200 a quart). A dozen twentysomething dudes play Battlefield 4 on an ultrathin 55-inch flatscreen. Kid Rock gyrates in a fog-machine cloud atop an elaborately lit stage in the backyard.

Someone has got to mix and serve the liquid shrimps in those test tubes if these others are to drink $200 a quart concoctions. Such is the unfairness of life. But beneath it all, there is the creative will that underpins the entrepreneurial drive and talents that set those who make it apart from those who don’t, mixed of course, with a heavy dose of luck. Judge was the inventor of Beavis and Butthead and much else. His life was the farthest thing imaginable from having been born with a silver spoon in his mouth. It is instead about the genius and insight that allowed someone who was just no one at all to make himself into what he is today. The final paras of an article you should read in full.

Judge himself has become something of a startup CEO. But Judge does it his way. His indie production company, Ternion Pictures, which he cofounded with Altschuler and Krinsky, runs lean. When Judge made Extract for a modest $8 million—one-fifth the budget of a typical Hollywood comedy—he raised private financing so he could retain more control.

“I started out making these little cartoons, working on my own, and suddenly I’m in charge of 60 people,” Judge says. “I don’t like telling people what to do. But I do really like building something and making it work.”

He likes to build and make things work. Others, as Kevin Rose has discovered, like only to destroy.

Apocalyptic idiocy

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This comes from the advertising notice for the latest Spectator which is an interesting summary of where we now are. For myself, I remain the deepest kind of sceptic, having cut my teeth on predictions of famine, resource depletion and ecological disasters for over fifty years, not a single one of which has ever turned out to be remotely true. Both of The Spectator authors unfortunately accept there may be something to this global warming creed. Seems a weak position from which to start but maybe when in the grip of such delusion, that is the only available course.

The hype around Monday’s IPCC global warming report was the usual alarmist nonsense. The real story lay in the small print. In our cover piece this week, Matt Ridley has done the digging and found that the authors of the UN climate consensus have now accepted what Nigel Lawson has argued for years: that we may not be able to do much about the planet warming, but we can adapt to it. The apocalyptic scenarios need never emerge, as long as we take the right action.

Meanwhile, Bjørn Lomborg exposes the true green scandal. When Rowan Williams talks about climate change, his assumption is that it hurts the poorest hardest. There’s much truth in that, says Bjørn, but what the alarmists don’t realise (or don’t want to accept) is that green policies inflict far more harm on the poor than the global warming they are trying to avert. Access to cheap and plentiful electricity is one of the most effective ways to escape poverty; green energy is neither cheap nor plentiful.

But for more of this apocalyptic doomsaying, let me take you to a book written exactly a century ago, and to its introduction dated 21 March 1914. Reading the economics of the past is beneficial for a hundred reasons (see my Defending the History of Economic Thought) but one of the most important is that it takes you out of the time in which you live and allows you to look at things in a wholly different way. This is from the preface of a book titled, The Nation’s Wealth which was written by L.G. Chiozza Money:

That the conditions of British wealth are static is a common and dangerous assumption. That assumption is challenged in this volume. The British national economy is revealed as a thing of uncertain equilibrium, the future of which it may be beyond the power of the British people to determine. From a careful examination of the facts of the case, the conclusion emerges that as modern British wealth depends upon a peculiarly good supply of coal, and as the duration of the Coal Age is uncertain, it is the supreme duty to regard the present as a preparation, during which it is necessary to train our people, and so to mould our social and industrial institutions, that the nation may be fortified for that scientific future as to which, while are many uncertainties, there is one absolute certainty – that Coal will pass. [My bolding]

Those absolute certainties! Six months later, his world would be plunged into a different kind of disequilibrium but in the meantime the absolute certainty was that coal would run out and soon. A century later, coal has not run out, there is something like 500 years’ worth of the stuff in easy reach, never mind all of the other forms of carbon-based energy. The effort is therefore being made to rid us of carbon-based energy through another kind of apocalyptic vision, one about as accurate as the one held by L.G. Money a century ago.

So if there is one absolute certainty it is this: these same apocalyptic the-end-is-nigh types will be forecasting the end a hundred years from now just as they will be there two hundred years from now and so on ad nauseam ad infinitum.

Gnostic Noah

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Noah, at least as a film, was an incoherent mash, or so I thought. But here is an analysis that provides an actually insightful look at the film and what it was about that goes off in a direction I would have neither the knowledge nor the background ever to have recognised. This is what good criticism is about. You learn something you didn’t know before and some work of art is interpreted in a way that takes you closer to what the artist had intended. The review is titled Sympathy for the Devil. This is the core insight:

In our day and age we are so living in the leftover atmosphere of Christendom that when somebody says they want to do “Noah,” everybody assumes they mean a rendition of the Bible story. That isn’t what Aronofsky had in mind at all. I’m sure he was only too happy to let his studio go right on assuming that, since if they knew what he was really up to they never would have allowed him to make the movie.

Let’s go back to our luminescent first parents. I recognized the motif instantly as one common to the ancient religion of Gnosticism. Here’s a 2nd century A.D. description about what a sect called the Ophites believed:

“Adam and Eve formerly had light, luminous, and so to speak spiritual bodies, as they had been fashioned. But when they came here, the bodies became dark, fat, and idle.” –Irenaeus of Lyon, Against Heresies, I, 30.9

It occurred to me that a mystical tradition more closely related to Judaism, called Kabbalah (which the singer Madonna made popular a decade ago or so), surely would have held a similar view, since it is essentially a form of Jewish Gnosticism. I dusted off (No, really: I had to dust it) my copy of Adolphe Franck’s 19th century work, The Kabbalah, and quickly confirmed my suspicions:

“Before they were beguiled by the subtleness of the serpent, Adam and Eve were not only exempt from the need of a body, but did not even have a body—that is to say, they were not of the earth.”

Franck quotes from the Zohar, one of Kabbalah’s sacred texts:

“When our forefather Adam inhabited the Garden of Eden, he was clothed, as all are in heaven, with a garment made of the higher light. When he was driven from the Garden of Eden and was compelled to submit to the needs of this world, what happened? God, the Scriptures tell us, made Adam and his wife tunics of skin and clothed them; for before this they had tunics of light, of that higher light used in Eden…”

And just one more bit but if these things interest you, read the full text:

The world of Aronofsky’s Noah is a thoroughly Gnostic one: a graded universe of “higher” and “lower.” The “spiritual” is good, and way, way, way “up there” where the ineffable, unspeaking god dwells, and the “material” is bad, and way, way down here where our spirits are encased in material flesh. This is not only true of the fallen sons and daughters of Adam and Eve, but of fallen angels, who are explicitly depicted as being spirits trapped inside a material “body” of cooled molten lava.

Admittedly, they make pretty nifty movie characters, but they’re also notorious in Gnostic speculation. Gnostics call them Archons, lesser divine beings or angels who aid “The Creator” in forming the visible universe. And Kabbalah has a pantheon of angelic beings of its own all up and down the ladder of “divine being.” And fallen angels are never totally fallen in this brand of mysticism. To quote the Zohar again, a central Kabbalah text: “All things of which this world consists, the spirit as well as the body, will return to the principle and the root from which they came.” Funny. That’s exactly what happens to Aronofsky’s Lava Monsters. They redeem themselves, shed their outer material skin, and fly back to the heavens. Incidentally, I noticed that in the film, as the family is traveling through a desolate wasteland, Shem asks his father: “Is this a Zohar mine?” Yep. That’s the name of Kabbalah’s sacred text.

I disliked the film because it did not conform to the biblical text either in relation to the story or the message. But as it turns out there is a lot more not to like than one would have ever known. The message of the film will pass everyone’s understanding other than the vegan nonsense so it is really not much more than an empty frame with no more influence on our culture than any other science fiction pot boiler. It is not its influence on anything that is troubling but as one further sign of our already existing decadence that makes the film notable. And I doubt that had those who financed the film known its true underlying message that it would have led them to hesitate for a second. Undermining the religious teachings of the West is the temper of the times in which we live which is a large part of the reason why our civilisation is in such peril.

Keynes and the coming Chinese recession

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I realise I haven’t been haranguing you about the menace of Keynesian economics for a while so thought I’d remind you of its enduring horrors as there is unanimous agreement that Australia has to get its fiscal house in order. The origins of that disorder are, of course, in the Keynesian policies put in place during the GFC. Just hearing about Kevin Rudd’s 48-hour decision process for the pink batt adventure is a reminder of just how useless, in terms of productivity and real growth, almost all government spending is. A perfect paradigm example. Past the first ten percent, government spending is unproductive whatever other benefits there may or may not be.

As for a recantation from the economics community, not so much as a word. You do have to wonder if they are ever going to get it right. And if they don’t get it right, how policy is ever going to get it right. The latest episode of wrongheaded analysis shows up on the ABC with this story not about Australia but about China. Apparently the problem with the Chinese economy is debt:

In recent times, the boom has been sustained by an explosion in lending by banks and so-called “shadow banks”. If the current scale of lending proves to be unsustainable, could that end the boom and result in China becoming the next country to succumb to the impact of unproductive debt? [my bolding]

Ah, “unproductive debt”! What, pray tell, is that? It is, in fact, exactly what every pre-Keynesian classical economist warned against. It’s spending on non-value-adding forms of production, the usual object of government spending in virtually every one of its forms. There it is, the problem right before their eyes but invisible all the same. Whether one thinks of it in money terms, so that debt is taken on for forms of production which ultimately do not earn sufficient revenue to repay what is owed, or it is thought of it as using up productive resources in ways which do not replace the capital that has gone into that particular form of production, one way or the other the economy is going backwards and not ahead. Keynesian economics is poison but who’s to know? This is what the Chinese did:

The program clearly lays out how the Chinese leadership responded to the prospect of a global financial crisis and possibility of a world-wide depression. The response focused on a spending and investment program carried out on a scale never seen before in human history. Over the past five years, a new skyscraper has been built every five days in China – along with 30 new airports and 26,000 miles of motorways.

Well there was certainly an enormous quantum of resources used up which, incidentally, also happens in highly productive investments. In this case, however, there are the office building, there are the roads, there are the airports, but none of them will generate the revenue to repay their costs. A Keynesian program to the back teeth with predictable results, or at least predictable if you start with Say’s Law. Starting from Keynes it is all a mystery with no explanation. And where do they think it will end up:

Interviewing key players including former American Treasury Secretary Henry Paulson, former Chairman of the Financial Services Authority Lord Adair Turner and Charlene Chu, a leading Chinese banking analyst, reporter Robert Peston reveals how China’s extraordinary spending has left the country with levels of debt that many believe can only result in an economic crash with untold consequences for the world – particularly resource-driven economies like Australia.

If you thought the last five years were bad, apparently the next five will be even worse. Meantime, ending the reign of Keynes and return to classical economic theory would be a start in even understanding what’s going on never mind actually getting our economies untracked.

OK you cowards at the ABC – why don’t you invite him?

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Now here’s a Q&A that would get a record audience. As Andrew Bolt has asked, Margaret, why didn’t you invite me?. The invitations that were extended come 58 seconds into the presentation, saving you more than an hour of tedium. Here is Andrew’s comment:

Margaret Simons, head of Melbourne University’s journalism course, introduces ABC boss Mark Scott by noting that News Corp people had declined to debate him.

Funny, I didn’t get an invitation. Nor did Simons mention I’d invited Scott to put his case on The Bolt Report and he has refused.

Now this would be a heavyweight division contest. My suspicion, though, on why Andrew wasn’t invited is because they know that one-on-one and over the course of an hour he would absolutely take Scott to the cleaners even with Tony Jones in the chair.

The hits just keep on coming

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This is a modest blogsite which I do mostly for my own interest as a kind of intellectual diary but is not really done for others. I make no effort to let others know that I even do this which is why the explosion of hits this morning has taken my hit count to five times its previous max. This required a bit of investigation, and it has pleased me to the end of the earth that the reference came from Mark Steyn, bless him. The post was on Johnny, Get Your Gun-Free Zone, a reference to Dalton Trumbo’s eerie Johnny Got his Gun which I read in my bad old student days, and this is what Mark said on his link:

Yesterday the Supreme Court struck down key elements of US campaign-finance law. As a practical matter, I’m not a fan of “money in politics”, because, at least on the Republican side, with the “smart money” the money may be smart but the fellows who give it and spend it aren’t. However, in a country with a corrupt prosecutocracy and the most politicized judiciary in the developed world, a byzantine campaign-finance regime policed by a corrupt Justice Department is far worse than the problem it purports to solve. After a recent piece of mine, this Aussie blogger wrote that “a more self-conscious society would be embarrassed by what he is revealing“:

Although quite a bit of his post is about his own efforts in dealing with Michael Mann and the hockey stick, this story he tells about Dinesh D’Souza is incredible:

‘Take Dinesh D’Souza, one of those “political enemies” who’s managed to attract the attention of the feds. For a campaign finance “violation” of $15,000, he has already been handcuffed and perp-walked, bailed for half-a-million, lost his passport and freedom of movement, and requires permission from a judge even to travel from New York to Boston. This is disgraceful. Yet D’Souza now faces the choice between confessing to something or having his life ruined. This is a disgusting, capricious system of which Americans should be entirely ashamed.’

Even if “shame” were the right word for the emotion they should be feeling, they’re not ashamed because it is not how they see it themselves.

No liberals other than Alan Dershowitz have a thing to say about the D’Souza outrage. And nor do many conservatives. Because this “is not how they see themselves”. But civilized societies do not do this over a $15,000 political-donation overspend. This system is evil.

It was, indeed, the absence of any further comment by anyone else anywhere that made me lose my bearings about this whole issue. How could this be happening to someone as prominent and important as Dinesh D’Souza without anyone but Mark Steyn saying a word. The reality is that no one is now safe.

The GST will not be raised

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Good!

DEPUTY Liberal leader Julie Bishop has ruled out accepting Treasury advice to expand the GST or re-index the fuel excise, as former treasurer Chris Bowen claimed the department “never” advised him to increase the consumption tax.

Treasury secretary Martin Parkinson last night warned that Australia must be prepared for a recession in the next decade and cannot rely on rising income taxes to restore budget health.

Dr Parkinson, whose term as Treasury secretary has been extended by Tony Abbott for six months to the end of the year, also argued for increases in the GST to ease the burden on personal and company income taxes.

So the question remains, why is Martin Parkinson being kept around till November? Is there really no one the Coalition can think of to put in his place? It is a worry that Treasury, as in all departments, promote clones of the people at the top so where are they going to find someone who has a feel for the private sector. Still, Peter Costello was Treasurer as recently as 2007 so there must be some plant of his that has grown into the job and can be put into this slot

An Australian balanced budget amendment

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I may have been too hasty in judging our Treasury Secretary. My own fault for taking the word of the SMH. I, of course, remain adamantly against raising taxes to fix our current problems and repeat what I wrote yesterday:

Stop fixating on the deficit. Do the specific things that make the economy work better. Lower public spending. Reduce regulation. Fix up IR. Encourage private industry in every way you can.

But with my morning reading of the AFR there was an important detail left out of the SMH story. The AFR headline reads:

Push to lift GST, cut income tax

This is, of course, different and even if initially the size of the tax take stayed the same this would be a genuine benefit, both in terms of economic prosperity and broadening the tax base.

But the problem remains how you could make such a shift stick. If we raise the GST, it will stay raised forever. But if we cut income taxes, it is not likely at all that they would stay down. Governments are revenue hungry and very weak on keeping the lid on expenditure. There really needs to be something in place to ensure governments do not pocket one tax increase and then go back to where we were on the others.

An idea whose time may have come is the notion of a balanced budget constitutional restriction on governments. It appears that some kind of critical mass may have taken place in the United States over whether enough states have passed a balanced budget amendment that must lead to a constitutional convention which will determine whether or not the federal government of the United States must by constitutional restriction maintain a balanced budget. The article is titled, Balanced budget convention gains steam as congressman calls for official evaluation and this is how it begins:

Rep. Duncan Hunter on Tuesday asked Congress to evaluate whether enough states have officially called for a constitutional convention to propose a balanced budget amendment — marking the next step toward what could be an historic gathering.

Mr. Hunter, California Republican, said Congress should take stock of where things stand after Michigan last week approved an official call for a balanced budget amendment convention. According to some analysts, Michigan’s move makes it the 34th state to request a convention.

For something as unconventional as the notion of a balanced budget amendment to have passed at different times and in different states through 34 different state legislatures shows there is an understanding of the problems that runaway federal spending has caused. The multiplying economic problems that have befallen one economy after another due to the insane levels of public spending after the GFC are due almost in their entirety to the spending that followed the financial crisis and not to the crisis itself. But you almost have to be a non-economist even to notice. Economists still think that C+I+G provides them with some form of understanding about what to do in recessions, with no lessons learned from the past five years.

Since we will already be having a vote on amending the constitution at our own next election, I cannot see why we shouldn’t include one on a balanced budget as well. If we really want to fix our governments’ addition to higher spending we will have to tie their hands. If they want the money they will have to raise our taxes. Then we’ll see just a tad more care in what they do and how they spend.