Archive for the ‘International Economics and Development’ Category
Return of the Neo-Malthusians
This Earth Day we heard various commentators bemoan the growth in population, consumption, and carbon emissions driven by fossil fueled technologies. Once again we are told that this is unsustainable, that we are running out of resources, prices are inevitably headed up, and, worse, such consumption reduces both environmetal and human well-being. In this worldview, industrialization and economic development were fashioned in the Devil’s crucible, and that de-industrialization and de-development will be our saviour.
I have started a series of posts at Master Resources that compares the above Neo-Malthusian view of industrialization, economic growth, and technological change against empirical data on human well-being from the age of industrialization. The first post revisits the bet made in 1980 by Julian Simon and Paul Ehrlich on the direction of commodity prices, and examines long term trends in the prices and affordability of various commodities. Specifically, for metals, I look at trends going back to 1800, while for food I examine trends from 1900 onward. Parts II and III will compare long term trends in population, consumption, economic development, and carbon emissions against trends in human well-being for the world (from 1750 onward) and the United States (from 1900 onward). Finally, Part IV will provide an explanation as to why empirical data is at odds with the Neo-Malthusian worldview.
Part I, which examines the Simon-Ehrlich Bet in the context of long term trends in the prices and affordability of various commodities, is here.
Earth Day Links
Today is the 40th anniversary of Earth Day, a time to highlight and discuss ways to work toward a cleaner planet. Cato’s energy and environment research promotes policies that would help protect the environment without sacrificing economic liberty, goals that are mutually supporting, not mutually exclusive.
- Why we should thank capitalism for environmental gains: “It is businessmen — not bureaucrats or environmental activists — who deserve most of the credit for the environmental gains over the past century and who represent the best hope for a Greener tomorrow.”
- Finding the right balance: “Today, America’s environment is cleaner—and Earth Day has indeed helped ensure that. …We should renew our promise to keep the environment clean—without adding to human misery or stalling improvements in the human condition.”
- Want clean air? Try this.
- Is high-speed rail really an environmentally friendly alternative to driving and air travel? “Planners have predicted that a proposed line in Florida would use more energy and emit more of some pollutants than all of the cars it would take off the road.”
A Disappointing Start in Piñera’s Chile
The presidential election in Chile that brought Sebastián Piñera to power last month was good news for Chile and the region. It confirmed once again that Chile is Latin America’s most modern country, one in which Chileans chose a center-right candidate to lead the country after 20 years of center-left governments that by and large stuck to the free-market model set in place in the 1970s and 1980s and that has made the country one of the most economically free in the world. In Chile, what’s at stake in presidential contests is not a radical change of the rules of the game, but rather policies that build on or depend on high growth. Chile’s mature democracy and economy serve as a model for Latin America.
But in just over a month of being in office, Piñera has made two decisions that disappointed his supporters both inside and outside of Chile who believed that he would reinvigorate the Chilean economy and stand firmly against the populist-authoritarian model that Hugo Chávez has exported to the region. Piñera backed the re-election of José Miguel Insulza to head the Organization of American States and has proposed a tax increase on large companies. Insulza and the OAS are widely and correctly viewed as having been silent, incompetent or complicit in the face of repeated violations of basic democratic and civil rights by populist governments in the region. Whatever the domestic political reasons for Piñera’s decision, countless Latin Americans who cherish their rights—not the least of whom are Venezuelans, Hondurans, Bolivians and Ecuadoreans—were disillusioned by the endorsement of Insulza.
On Friday, Piñera proposed to “temporarily” raise taxes on large companies from 17% to 20% (and to increase mining royalties and to permanently increase tobacco taxes) to finance Chile’s post-earthquake reconstruction needs. But a number of Chile’s leading economists are criticizing the tax increase and point to other sources of revenue that would be less damaging to growth. Hernán Büchi, a finance minister in the 1980s, and Luis Larraín, head of Chile’s free-market think tank, Libertad y Desarrollo, have both written op-eds in recent weeks pointing out that one of the country’s main problems has been the steady drop in productivity in recent years. Piñera was elected on a platform to increase productivity. A tax increase would aggravate the problem. According to Büchi, 20 years of center-left governments reduced Chile’s ability to eliminate poverty and followed a path that was politically easy and consistent with their ideology: “It would be a bad omen if the first measures of a government that should represent change in this regard, went down the same path.” Larraín adds that the tax decision will reveal Piñera’s governing approach, in which there is a real danger of avoiding necessary reforms and a president content with simply being a better administrator. We shall see.
Awful Tax System Causing a Growing Number of Americans to “Go Galt”
Being an American citizen is an honor in many ways, but it is a huge millstone around the neck for highly successful investors and entrepreneurs because of an oppressive and complex tax system. This is particularly true for those based in and/or competing in global markets. Indeed, because the tax system (and regulatory system) is so onerous and because it is expected to get far worse in the future, a growing number of Americans are actually giving up citizenship and “voting with their feet.” The politicians view these people as “tax traitors” and are trying to erect higher barriers to hinder economic migration, particularly in the form of confiscatory “exit taxes” that are disturbingly reminiscent of the totalitarian practices of some of the world’s most unsavory regimes. The Wall Street Journal recently reported on this issue:
The number of American citizens and green-card holders severing their ties with the U.S. soared in the latter part of 2009, amid looming U.S. tax increases and a more aggressive posture by the Internal Revenue Service toward Americans living overseas. According to public records, just over 500 people world-wide renounced U.S. citizenship or permanent residency in the fourth quarter of 2009, the most recent period for which data are available. That is more people than have cut ties with the U.S. during all of 2007, and more than double the total expatriations in 2008. …Others are giving up their U.S. nationality to avoid tax increases in the U.S., as the government struggles under huge budget deficits. The top marginal tax rate is set to rise to 39.6% from 35% at the end of this year. A proposal to tax fund manager pay at ordinary income rates, instead of the 15% capital gains rate, is gaining currency in Congress. “Everybody sees the tax rates are going up. At a certain point, it gets beyond people’s pain threshold,” said Anthony Tong, a tax partner at accounting firm PricewaterhouseCoopers in Hong Kong. Unlike most jurisdictions, the U.S. taxes the income of citizens and green-card holders no matter where in the world it is earned.
Did the IMF Deliberately Exaggerate the 2008 Financial Crisis?
This month, two vice-presidents of the Czech National Bank (CNB) have made very serious allegations against the International Monetary Fund. Below is the summary of their claims so far:
- Speaking to the Austrian daily newspaper Der Standard on April 2, Mojmir Hampl, the vice-president of the CNB, said that the IMF under Dominique Strauss-Kahn “wanted to expand its role in Eastern Europe and obtain new financial resources.” Hampl claimed that the IMF exaggerated problems with the financial systems in Eastern Europe. “We have always emphasized that the instability of the financial system [in 2008] was a Western European problem. That proved correct… According to a recent EU report, only nine out of 27 EU member states did not have to introduce any financial stabilization measures [during the crisis]. All nine were new [mostly Eastern European] member states.”
- Hampl’s claim was echoed by his colleague, CNB vice-president Miroslav Singer, in today’s edition of the Czech daily Hospodarske Noviny. According to Singer, “I cannot say nice things about the IMF’s role in the 2008 crisis.” The Financial Times, Singer continued, carried a lot of nonsensical stories about the state of the Czech financial sector prior to the crisis. Instead of dispelling those stories, the IMF produced a study about the Czech Republic based on incorrect data and then leaked it to the Financial Times. “It is difficult to be certain… that the IMF wanted to harm the Czechs, Slovaks or Poles on purpose… More likely it was a combination of panic, lack of expertise and a desire to see problems everywhere.”
If true, these claims raise troubling questions about the incentives behind the largest increase of resources in the Fund’s history.
Exiled Iranian Journalist Awarded $500,000 Milton Friedman Prize for Advancing Liberty
Akbar Ganji, an Iranian writer and journalist who spent six years in a Tehran prison for advocating a secular democracy and exposing government involvement in the assassination of individuals who opposed Iran’s theocratic regime, has been named the 2010 winner of the Cato Institute’s Milton Friedman Prize for Advancing Liberty.
Ganji may be best known for a 1999 series of articles investigating the Chain Murders of Iran, which left five dissident intellectuals dead. Later published in the book, The Dungeon of Ghosts, his articles tied the killings to senior clerics and other officials in the Iran government, including former President Ali Akbar Hashemi Rafsanjani. Ganji was arrested for spreading propaganda against the Islamic system and “damaging national security.” He was eventually sentenced to six years in prison, much of it spent in solitary confinement.
Ganji was released from prison in March of 2006 and left Iran shortly thereafter. Many countries around the world offered him honorary citizenship, and he traveled extensively, giving talks promoting democracy in Iran and exposing major human rights abuses by the Iranian government. Despite his battle with Iran’s theocracy, Ganji remains steadfastly opposed to military action by the United States in both Iran and Iraq, saying “you cannot bring democracy to a country by attacking it.”
Established in 2002 and presented every two years, the Milton Friedman Prize for Advancing Liberty is the leading international award for significant contributions to advancing individual liberty.
The Friedman Prize biennial dinner and award presentation will be held at the Hilton Washington Hotel in Washington, D.C, on May 13, 2010. Reserve your table now to attend.
Journalists Condemn Attack on the Free Press in Ecuador
On Monday I wrote about an Ecuadorian court’s sentencing of Emilio Palacio, editor of the opinion section of El Universo, to three years in jail. Since then, the Inter-American Commission on Human Rights (IACHR) has expressed “profound concern” about the prison sentence for Palacio, and the Inter-American Press Association (IAPA) and Reporters Without Borders (RSF) have strongly condemned it.
Op-ed writers from leading national newspapers have signed a statement condemning the court’s decision. This statement was published in El Comercio, El Universo, Diario HOY and La Hora. So far 47 columnists have signed on. See an updated list here of those of us who express our solidarity with the accused journalist.
A Columnist Sentenced to Three Years in Prison in Ecuador
Ecuadorian President Rafael Correa has long labeled the free press as his “main enemy.” His attitude has unfortunately resulted in official intolerance of individuals critical of the government.
The latest example is that of Emilio Palacio, the editor of the op-ed page of El Universo — the newspaper with the highest circulation in the country — who was sentenced on Friday to three years in jail for an op-ed he wrote in August 2009. Palacio accused Camilo Samán, director of a state-owned bank, of having sent protesters to El Universo’s offices after the newspaper reported on possible acts of corruption at the bank. The President has repeatedly stated that Palacio should be punished for what he wrote. In a country where everybody knows that the courts are not independent of political power, it’s not surprising that the ruling went against the editor.
I have known Palacio since I began writing op-eds for El Universo in late 2006. Although we hardly ever agree on policy issues, I certainly don’t believe he (or anyone else) deserves to go to jail (and possibly pay a fine of $3 million) for expressing an opinion. (The court actually found Palacio guilty of libel, but even if we were to agree with that finding, the punishment surely does not fit the crime.)
Correa’s government has accused at least 31 people of offending “the majesty of the presidency,” jailing many of them for short periods of time. To do so, the President revived a law that the first military dictatorship of the 1970s put into place that made such an offense a crime and that was never taken off the books.
The government regularly vilifies its critics including journalists, university students, businessmen, and indigenous leaders. For example, during his weekly national radio shows, the President has attacked Carlos Vera and Jorge Ortiz, the two most popular news anchors in the country. The government’s frequent nationally televised messages (that every TV station on public airwaves is forced to broadcast) usually have the sole purpose of attacking a person or group that opposes official policy. Sometimes these messages were broadcast during Vera’s and Ortiz’s programs, thereby keeping their viewers from watching them. In 2008 Correa took over several privately owned TV and radio stations. Last year, he apparently had his eyes set on Teleamazonas, another TV station on public airwaves. In December, the government shut down Teleamazonas for three days and now has a frivolous legal case pending against it.
Sadly, Correa is following the pattern of his fellow populist Hugo Chávez in curtailing freedom of speech, though receiving virtually no international scrutiny.
Fidel Castro Endorses ObamaCare
As Dave Barry would say, I swear I am not making this up.
Yesterday, the Associated Press reported that the Western Hemisphere’s last unreconstructed communist dictator endorsed President Obama’s new health care law:
HAVANA (AP) — It perhaps was not the endorsement President Barack Obama and the Democrats in Congress were looking for.
Cuban revolutionary leader Fidel Castro on Thursday declared passage of American health care reform “a miracle” and a major victory for Obama’s presidency, but couldn’t help chide the United States for taking so long to enact what communist Cuba achieved decades ago.
“We consider health reform to have been an important battle and a success of his (Obama’s) government,” Castro wrote in an essay published in state media, adding that it would strengthen the president’s hand against lobbyists and “mercenaries.”…
“It is really incredible that 234 years after the Declaration of Independence … the government of that country has approved medical attention for the majority of its citizens, something that Cuba was able to do half a century ago,” Castro wrote…
Cuba provides free health care and education to all its citizens, and heavily subsidizes food, housing, utilities and transportation, policies that have earned it global praise. The government has warned that some of those benefits are no longer sustainable given Cuba’s ever-struggling economy, though it has so far not made major changes.
In recent speeches, Raul Castro has singled out medicine as an area where the government needs to be spending less, but he has not elaborated.
I’m sure the Obama administration and its echo chamber will nonetheless continue to claim that this is not socialized medicine.
Regardless of the Problem, the European Political Elite Thinks More Centralization and Bigger Government Is the Answer
Greece is in trouble for a combination of reasons. Government spending is far too excessive, diverting resources from more efficient uses. The bureaucracy is too large and paid too much, resulting in a misallocation of labor. And tax rates are too high, further hindering the productive sector of the economy. Europe’s political class wants to bail out Greece’s profligate government. The official reason for a bailout, to protect the euro currency, makes no sense. After all, if Illinois or California default, that would not affect the strength (or lack thereof) of the dollar.
To understand what is really happening in Europe, it is always wise to look at what politicians are doing and ignore what they are saying. Political union is the religion of Europe’s political class, and they relentlessly use any excuse to centralize power in Brussels and strip away national sovereignty. Greece’s fiscal crisis is simply the latest excuse to move the goalposts.
The Daily Telegraph reports that Germany and France are now conspiring to create an “economic government” for the European Union. Supposedly this entity would only have supervisory powers, but it is a virtual certainty that a European-wide tax will be the next step for the euro-centralizers.
Germany and France have [proposed] controversial plans to create an “economic government of the European Union” to police financial policy across the continent. They have put Herman Van Rompuy, the EU President, in charge of a special task force to examine “all options possible” to prevent another crisis like the one caused by the Greek meltdown.
…The options he will consider include the creation of an “economic government” by the end of the year. “We commit to promote a strong co-ordination of economic policies in Europe,” said a draft text expected to be agreed by EU leaders last night. “We consider that the European Council should become the economic government of the EU and we propose to increase its role in economic surveillance and the definition of the EU’s growth strategy.”
…Mr Van Rompuy, the former Prime Minister of Belgium, is an enthusiastic supporter of “la gouvernement économique” and last month upset many national capitals by trying to impose “top down” economic targets. Angela Merkel, the German Chancellor, has called for the Lisbon Treaty to be amended in order to prevent any repetition of the current Greek crisis, which has threatened to tear apart the euro.
Free Speech in Canada
Free speech isn’t exactly free in Canada, and even Glenn Greenwald and Mark Steyn agree on this point. When conservative commentator Ann Coulter (who can be uncivil, but shouldn’t be muzzled by the state for it) tried to give a speech at the University of Ottawa, she was warned by the political correctness police not to hurt anyone’s feelings:
I would, however, like to inform you, or perhaps remind you, that our domestic laws, both provincial and federal, delineate freedom of expression (or “free speech”) in a manner that is somewhat different than the approach taken in the United States. I therefore encourage you to educate yourself, if need be, as to what is acceptable in Canada and to do so before your planned visit here.
You will realize that Canadian law puts reasonable limits on the freedom of expression. For example, promoting hatred against any identifiable group would not only be considered inappropriate, but could in fact lead to criminal charges. Outside of the criminal realm, Canadian defamation laws also limit freedom of expression and may differ somewhat from those to which you are accustomed. I therefore ask you, while you are a guest on our campus, to weigh your words with respect and civility in mind. . . .
So much for inalienable rights.
Steyn highlights the view of the lead investigator of Canada’s “Human Rights” Commission: “Freedom of speech is an American concept, so I don’t give it any value.”
I would offer a rebuke, but Ezra Levant has done it better than I ever could. Crank your volume up, sit back, and enjoy:
Calling Out Trade’s Myth Makers
Organized labor’s trade “think tank” in Washington, the Economic Policy Institute, claims that currency manipulation is a major cause of the U.S. trade deficit with China, which (along with other unfair trade practices) accounted for 2.4 million American job losses between 2001 and 2008. EPI has been making similar claims for years, getting lots of media attention for its hyperbole, and providing smoke bombs for charlatan politicians to hurl into the discussion to obscure the public’s understanding of trade. For starters, as conveyed in this new paper, I am skeptical about the relationship between currency undervaluation and the trade account.
EPI’s methodology (to use the term loosely) is not to be taken seriously, though, because it derives from a simple formula that approximates job gains from export value and job losses from import value, as though there were a straight line correlation between the jobs and trade data. It pretends that there are no jobs created when we import, and that import value is somehow an appropriate measure of job loss.
The flaws of those assumptions are many, but perhaps the easiest one to convey is that most of the value embedded in imports from China is not Chinese. (The ensuing discussion is from a forthcoming Cato paper.)
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