That's all folks

Μεσοπρόθεσμο Πλαίσιο Δημοσιονομικής Στρατηγικής 2012-2015 - Κεφάλαια Α & Β

Από Nastrogher

Ο περιβόητος νόμος προβλέπει τα ακόλουθα:

• Σύσταση εταιρείας-ταμείου μορφής Α.Ε. με αποκλειστικό σκοπό την "αξιοποίηση" των περιουσιακών στοιχείων που ανήκουν εξ ολοκλήρου στο Δημόσιο με αποκλειστικό σκοπό την αποπληρωμή του χρέους. Δηλαδή όλα τα χρήματα πάνε στους δανειστές (Άρθρο 1 - παρ.2)
• Η διάρκεια λειτουργίας του ταμείου είναι ουσιαστικά απεριόριστη (Άρθρο 1 - παρ.6)
• Στο ταμείο μεταβιβάζονται ό,τι είναι δημόσιο υλικό και άυλο, όπως δικαιώματα χρήσης, λειτουργίας, αποθεματικά κ.α. (Άρθρο 2 - παρ. 4).
• Συνδυάζοντας τις παρ.5 & 7 του Άρθρου 2, προκύπτει ότι το ταμείο παίρνει όλα τα έσοδα από τα περιουσιακά στοιχεία του Δημοσίου, αλλά το δημόσιο συνεχίζει να βαρύνεται με τα έξοδα και τις δαπάνες λειτουργίας. Δηλαδή, πχ, το ταμείο παίρνει τη ΔΕΗ, δίνει όλα τα έσοδα (από λογαριασμούς και ό,τι άλλο) στους δανειστές και όλο το κόστος λειτουργίας της ΔΕΗ παραμένει στο κράτος, το οποίο έτσι αυξάνει το χρέος του, που θα πρέπει να πληρώνεται από το ταμείο.
• Αν υπάρχει μισθωτής σε ακίνητο του Δημοσίου, το ταμείο τον πετάει έξω κατά παρέκλιση κάθε άλλης διάταξης (Άρθρο 2 - παρ.9). Δηλαδή αν κάποιος έχει νοικιάσει ένα ερείπιο του Δημοσίου και δώσει πχ. 1εκ ευρώ για να το ανακαινίσει, το διώχνουν με αποζημίωση 2 ενοίκια.
• Οι εταιρείες που περιέρχονται στο ταμείο απαλλάσσονται από κάθε φόρο (Άρθρο 2 - παρ.11). Δηλαδή παίρνει την εταιρεία το ταμείο, τα έσοδα τα δίνει στους δανειστές χωρίς να πληρώνει τον παραμικρό φόρο και τα έξοδα τα πληρώνει το κράτος (υπενθυμίζω Άρθρο 2 - παρ.5 & 7).
• Οι αποφάσεις του ταμείου λαμβάνονται από επταμελές συμβούλιο εμπειρογνωμόνων (Άρθρο 4 - παρ.1). Τα τρία μέλη υπάγονται (Άρθρο 3 - παρ.11) από τα μέλη της Ευρωζώνης και της Ευρωπαϊκή επιτροπή. Τα 3/7 είναι μειοψηφία, αλλά στην Ελλάδα ποτέ δεν συμφωνούμε μεταξύ μας. Συνεπώς από τους 4/7, αν δεν είναι ομόφωνοι (δεν μιλάω για δοσίλογους, απλά για διαφωνία) θα γίνεται αυτό που λέει η τρόικα.
• Το ταμείο θα μπορεί να εκδώσει ομόλογα με την εγγύηση του Ελληνικού Δημοσίου (Άρθρο 5 - παρ.3)
• Και κάτι λίγο περίπλοκο. Συνδυάζοντας τις παρ.3 & 4 του άρθρου 5, δίνεται η δυνατότητα στο ταμείο να εκδώσει ομόλογα και να επαναγοράσει παλαιότερα ομόλογα σε χαμηλότερη τιμή. Εκ των υστέρων φυσικά το ποσό που θα απαιτηθεί να πληρώσει το Ελληνικό Δημόσιο θα είναι τα ομόλογα που έχει στην κατοχή του το ταμείο στην κανονική τιμή. Δηλαδή, στερείται η δυνατότητα από το Ελληνικό Δημόσιο (που την έχουν όλοι οι άλλοι) να αγοράσει από την δευτερογεννή αγορά το δικό του χρέος σε χαμηλότερη τιμή (όπως έκανε η ΕΚΤ). Σε αυτή την περίπτωση θα πληρώσουμε και το παλαιό και το νέο χρέος, αφού τα ομόλογα εκδώθηκαν με την εγγύηση του Ελληνικού Δημοσίου.
• Το ταμείο θα μπορεί να τροποποιεί κατά το δοκούν τα καταστατικά των εταιρειών που παίρνει στην κατοχή του (Άρθρο 9 - παρ. 1). 
• Ως δημόσια ακίνητα νοούνται και τα ακίνητα των δήμων (Άρθρο 10 - παρ.1)
• Οι συντελεστές δόμησης για εκτός σχεδίου ακίνητα είναι μεγαλύτεροι από αυτούς που προβλέπονται (Άρθρο 11 - παρ.4 Γ1). Αυτό συνιστά αθέμιτο ανταγωνισμό για τους παρακείμενους επιχειρηματίες.
• Παραχώρηση χρήσης αιγιαλού και παραλίας (Άρθρο 14)
• Δεν βλέπω πουθενά να εξαιρούνται τα σχολεία και τα νοσοκομεία, όπως εξαιρούνται οι αρχαιολογικοί χώροι (Άρθρο 11 - παρ.3). Δεν ξέρω αν θα μπορούν να ιδιωτικοποιήσουν τα σχολεία (κόστος +8χιλ για κάθε παιδί) και τα νοσοκομεία, όπου σε συνδυασμό με το Άρθρο 9, παρ.1 θα μπορούν να τροποποιήσουν το καταστατικό και να μην δέχονται το ΕΣΥ, αλλά και να μην συμβάλλονται με τα δημόσια ασφαλιστικά ταμεία. Απ' όσα διαβάζω, θα μπορούν.

Φοβάμαι, δεν ελπίζω, δεν είμαι ελεύθερος...

Unhappy schmuck

Joseph Stiglitz Asks $1 Million in Suit Against Ex-Divorce Lawyer

Sitglitz, economist and promoter of the happiness index, is unhappy.

He is suing his former divorce lawyer because he ended up having to share his Noble Prize award money with his ex-wife.

Stiglitz, a bankster apologist, must be applying some kind of Keynesian earnings multiplier here, since, according to Bloomberg, Stiglitz is asking a federal jury in Washington to award him more than $1 million in damages from his former lawyer, who he says failed to file divorce papers in time to prevent his second wife from claiming part of his $300,000 Nobel Prize money. 

Before the Judge in the case nixed the ideas, Stiglitz initially sought $5 million and suggested that he could testify as his own damages expert.

Without transparency, accountability, and good governance, Africa's future will continue to remain bleak.

Foreign Aid and Underdevelopment in Africa

By Mathew K. Jallow

The African continent has struggled with chronic poverty and under-development since the advent of political independence more than fifty years, and many Africans view this problem as one of Africa's own making. African development experts and academics have blamed foreign aid for the continued and seemingly intractable development crisis confronting the continent. Africa's war on poverty is perceived as amounting to begging and submissiveness, leading to reforms that have made Africans poorer. The contention among many African experts is that the more the developed north co-operated with the south, the poorer Africa became. And increasingly, even tangible western generosity has failed to impress many Africans. Foreign aid has generally benefited the ruling elites in Africa, by among other things, enabling and perpetuating corrupt governments' hold on power, and by extension, entrenching the pervasive underdevelopment. Over the past five decades, foreign emergency assistance to Africa has helped to avert hardship for many of Africa's poor, but failed to promote any significant economic development. Foreign aid is provided with the conviction that real economic development begins when the emphasis is placed on providing aid to poor rural and urban communities.

Providing assistance to Africa's poor is a noble cause, but the five decades long campaign of aid has turned out to be what one critic called “a theater of the absurd.” To-date, the record of western aid to Africa has been significant, amounting to more than $500 billion between 1960 and 1997, which is the equivalent of four Marshall Plans being pumped into Sub-Saharan African. And today, the national budgets of most Sub-Saharan African countries are dependent on foreign aid for up to eighty percent of the annual budgets. Apart from the relief aid and economic development, foreign aid assistance was also provided to support reforms and policy adjustment programs. And between 1981 and 1991 alone, The World Bank provided $20 billion towards Africa's structural adjustment programs. The purpose of the programs was to make public institutions, government agencies, and bureaucracies in Africa more transparent, effective, efficient and accountable. It is baffling that Africa still suffers from a poverty trap, considering the depth of governments' corruption and the missing billions in export earnings from oil, gas, diamonds and other resources. The idea of foreign aid was compatible with the central theme of economic development, and was accepted as a possible escape from the chronic underdevelopment that is characterized by undeveloped infrastructure and dualistic economies. The persistence of the deplorable economic conditions in Africa has become the primary reason for the relentless search for realistic and durable solutions to the continent's development woes, even as the need for aid is intermittently reinforced by the fact that Africa's underdevelopment is accentuated by periodic global economic recession.

When it was conceived after World War II, U.S. foreign aid was designed to serve two conceptually interdependent, but potentially conflicting set of goals: first, the diplomatic and strategic goals that advance U.S. short-term political and long term strategic interests; and secondly, the development and humanitarian goals that sought a long-term economic growth, political stability, and the short-term alleviation of suffering. The U.S. Foreign Assistance Act of 1973 stressed the need to promote equity, minimum standards of living and per capita growth. Since then, the U.S. foreign assistance statutes have gone through several changes; each with its own objective and some would argue, defined by global politics rather than by any humane consideration. The concept of “Basic Human Needs,” under the U. S. Foreign Assistance statutes, can be seen as paradoxical if one considers the foreign assistance legislation as the expression of the primary function of foreign aid. The position of the U.S. as observed by development experts is that developmental and humanitarian programs received substantial funding only when they coincided with U.S. diplomatic and strategic interests. And despite the massive injection of aid over the past five decades, Africa, rather than achieve economic growth and development, has become more dependent, with standards of living experiencing a net decline. Studies show that there is overwhelming evidence that foreign aid has helped to under-write the misguided policies of the corrupt and bloated government bureaucracies across Africa. The Oxford International Group study revealed that the external stock of capital held by Africans in overseas accounts, was between $700billion and $800 billion in 2005, and nearly 40% of Africa's aggregate wealth was stacked in foreign bank accounts in Europe, United States and Japan. Africa's foreign assistance is significant when we look at the overall economic situation, and African governments have become dependent on aid for the survival of their people and governments.

Dictators and Disasters

A disaster waiting to happen

The impact of a disaster on a country’s citizens may have more to do with politics than nature

By  Brady Yauch.

If an identical earthquake struck two different countries of the same economic standing, but of a different political makeup, would the results be the same? And if one country was founded on a democracy, while the other was led by an autocrat, who would be worse off? Two professors, writing in Foreign Affairs, provide a convincing argument that citizens living under a democratically-run government would be much better off than those living under the rule of an autocrat.

According to Alastair Smith and Alejandro Quiroz Flores, two professors of politics at New York University, while governments are unable to prevent earthquakes and other natural disasters, they are certainly capable of preparing for them—and in this regard, based on the amount of casualties from major earthquakes, democratically-elected governments fare much better.

To support their argument, they highlight the huge disparity in casualties from this year’s earthquakes in Haiti and Chile. Haiti was rocked by 7.0-magnitude earthquake that brought the country to its knees and killed approximately 222,000 people, while Chile, just one month later, suffered a an 8.8-magnitude earthquake—approximately 500 times stronger than that in Haiti—that killed only 500 people.

“Why the disparity?” they ask.

The authors believe it’s easy to suggest that the overall wealth of a country is the key determinant in its ability to prepare of earthquakes. But wealth, while it certainly plays a role, is not nearly as important as the politics of a country. The authors, pointing to other earthquakes in Peru, San Francisco Mexico and Pakistan, show that earthquakes—when they occur in non-democratic governments—often produce far higher casualty counts than those in democratic political systems.

This is not just a matter of coincidence, they believe.

“In a democracy, leaders must maintain the confidence of large portions of the population in order to stay in power,” they write. “To do so, they need to protect the people from natural disasters by enforcing building codes and ensuring that bureaucracies are run by competent administrators.”

Politicians in democracies run the major risk of losing their jobs if they fail to either properly enforce safety codes or competently manage in the aftermath of the disaster. For example, the authors say, statistics show that, while 39 percent of democracies experience anti-government protests within any two-year period—that rate nearly doubles after a major earthquake. Furthermore, between 1976 and 2007, 40 percent of democratic nations replaced their leader in any two-year period—yet 91 percent of them did so following a major earthquake.

So, it seems, a government’s natural emergency preparedness can determine its own survival.

In start contrast, non-democratic regimes—where, like democracies, the rate of anti-government protests almost doubles after major earthquakes—the rate at which these governments are deposed increases far less, from 22 percent over any two-year period to 24 percent following a major earthquake.

“Political survival lies at the heart of disaster politics,” the authors conclude. “Unless politicians are beholden to the people, they have little motivation to spend resources to protect their citizens from Mother Nature, especially when these resources could otherwise be earmarked for themselves and their small cadre of supporters.”

Worse, with a higher casualty count, undemocractic countries are able to appeal for a much larger amount of aid money. In un-democratic countries, this large inflow of foreign aid can then “enhance a nondemocrat’s hold on power if they are used to buy off supporting elites,” the authors write.

“Given such incentives, autocrats’ indifference to disaster-related deaths will continue.”

Welcome to the wacky world of foreign aid

Foreign aid discredits itself

By Brady Yauch

After recent evidence showed that China was receiving hundreds of millions of dollars in foreign aid funds to fight diseases such as malaria that were almost non-existent in the country—and at the expense of other developing countries suffering thousands of deaths from these same diseases—there are new reports revealing that this is just the tip of the iceberg and that China is receiving billons of dollars in foreign aid each year. Many are now asking why, when China spends billions of dollars on lavish projects such as the 2008 Olympics and the Shanghai Expo, it deserves any aid at all.

According to the Associated Press (AP), China received $2.6-billion in aid funds from donor countries in 2007-2008. Of this, Japan handed over $1.2 billion, with Germany giving about half that amount, followed by France and Britain. The U.S gave China $65-million in 2008 to promote safe nuclear energy, health, human rights and disaster relief.

The report also says China is one of the biggest borrowers from the World Bank—taking out about $1.5 billion a year.

The foreign aid handouts to China come as the country holds more than $2.5-trillion of foreign reserves and, hands out itself, billions of dollars in aid to less developed countries. According to Deborah Brautigam’s, “The Dragon’s Gift: The Real Story of China in Africa” China gave more than $2.5-billion in aid to African countries alone in 2009—along with $375-million in debt relief and more than $1.5-billion in concessional loans from its export-import bank.

China has also recently pledged to give $10-billion in concessional loans to Africa.

And last year, China spent hundreds of billions of dollars on its own stimulus program to combat the global economic downturn of 2008.

China's Commerce Ministry defends taking foreign aid, saying the country is still a developing country with 200 million poor people and major environmental and energy challenges.

China is not the only questionable aid recipient under fire. British aid to India is reportedly about to be slashed after years of strong economic growth in India.

Defending their honour, Indian officials jumped the gun and said India could do without the aid money.According to the Financial Times, India's finance minister, Pranab Mukherjee called Britain’s aid to India “peanuts” in proportion to overall aid. He said he would rather surrender such funds if the British government decided to cut it.

In recent years India has also whittled down to six the number of countries “allowed” to give it foreign aid. The fact that India is picking and choosing which countries can give it aid money suggests that foreign aid is used primarily for geopolitical power politics and not poverty alleviation. It also raises the question of who, exactly, needs who in this relationship.

Furthermore, India, like China, is itself, a foreign aid donor, giving money to countries such as Burma and Afghanistan and in sub-Saharan Africa.

More profoundly, aid to booming countries like India and China, who still claim millions of poor, raises the inevitable question: who, ultimately, is responsible for the development of a country’s poor, particularly when that country is flush with cash?

According to AP, China is particularly adept at presenting itself as either a global power or poor developing country, depending on the circumstance.

“It is proud of having lifted half a billion people out of poverty and is beginning to flex the muscle that comes with being an economic power,” the report says. “Yet when, for instance, it is called on to agree to binding reductions in carbon emissions, it replies that it can't because it's still a developing country.”

Claiming to be a “developing” country in order to bring in cash, while offering subsidized loans and cheap financing to projects in Africa and Southeast Asia for geopolitical reasons, provides more than enough evidence for developed countries to turn off the foreign aid taps immediately to countries like China and India. If these countries truly care about their poor, they can raise living standards for their citizens through political and economic reforms internally, without needing to go to the world with begging bowls.

Creating precedents

The Gaddafi indictment is arbitrary, political and counterproductive

By Daniel Hannan

International law has ceased to be international. Where it used to be about relations among states, it is nowadays about human rights violations within states – which suits its practitioners down to the ground, as it gives them virtually unlimited jurisdiction.

For hundreds of years, we operated on the basis of the clearly understood principle that crimes were the responsibility of the states on whose territories they were alleged to have taken place. International law applied only to those issues which were, by their nature, international. William Blackstone saw it as covering just three areas: safe conduct passes; the treatment of ambassadors; and piracy on the high seas.

Under this traditional definition, Muammar Gaddafi might have been arraigned at virtually any point in the 1980s or 1990s. He practised the modern equivalent of piracy, sponsoring international terrorism. He disregarded the rules of international diplomacy, protecting the official who had murdered a British policewoman by firing at her from the Libyan embassy. He abused the notion of a safe conduct pass to remove that official from Britain.

At no stage did international judges issue a warrant for his arrest. Neither the Yvonne Fletcher murder, nor the revelation that Gaddafi had armed the IRA, nor even the Lockerbie atrocity prompted an arraignment. Now, though, the International Criminal Court has indicted the deranged colonel, not for his many violations of national sovereignty and diplomatic conventions, not for his global depredations, but for internal repression. His attacks on Libyan civilians, they say, constitute murder.

If so, then he should be tried in Libya. It is curious enough to see judges at The Hague presuming to overturn the legal system of an independent nation. But to see them doing so while ignoring the violations which actually fall under the normal definition of international law is alarming.

You might feel that I am nitpicking. Gaddafi is plainly a very bad man, so does it much matter how he is brought to justice? Isn’t it more important that he get his deserts morally than legally?

No, it isn’t. The objection to Gaddafi is precisely that he is a tyrant, that he rules arbitrarily, that Libyan courts are instruments of his regime. When we engage in political prosecutions of this kind, we drag ourselves down to his level. For this is, by any definition, a political prosecution. What has changed in the past couple of months is not that Gaddafi became nastier, but that the international community, frustrated by its ability to remove him, decided to “send a message”.

We should hold ourselves to a higher standard.

The Iron Law of Intervention

Price Gouging Laws Hurt Storm Victims

By Art Carden

How many people see natural disasters like the tornadoes in Tuscaloosa, Alabama, and Joplin, Missouri, and say, “we should be working to impede the recovery and make life harder for storm victims”? Probably no one. How many people see prices rise after natural disasters like the tornadoes in Tuscaloosa, Alabama, and Joplin, Missouri, and say, “we should prosecute ‘price gougers’!”? Probably a lot. And yet prosecuting price gougers makes life harder for storm victims.

Why do prices rise so radically after storms? There’s a three-word answer: supply and demand. After massive storms, demand for tree removal services rises. Demand for building supplies rises. Demand for electric generators rises. Demand for basic groceries rises.

At the same time, supply of these goods and services might be falling. First, some of them might simply be destroyed. If a tornado knocks out a shopping center, a handful of grocery stores, all the hardware stores, lumber yards, and a handful of construction companies, we simply have less stuff to go around.

Second, the people who might provide the goods and services essential for disaster relief might have problems of their own. If it’s a contractor from the affected community, then he might be dealing with the destruction of his own property. People from outside the affected area have their own crises to deal with. I forget where I first read this, but someone has wisely pointed out that in post-disaster situations rising prices perform vital economic triage by showing which uses of resources are now high-value and which uses of resources are now low-value.

2,000 Yrs. in One Chart

23% of all Goods, Services Made Since 1 A.D. Were Produced This Decade!

by M. Perry

The chart above is from The Economist and shows a "population-weighted history of the past two millennia" based on "economic output" and "years lived."  According to The Economist:

"By this reckoning, over 28% of all the history made since the birth of Christ was made in the 20th century. Measured in years lived, the present century, which is only ten years old, is already "longer" than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010."

It also looks like more economic output was produced in the 20th century than in the previous 19 centuries combined.

To Big Not to Fail

Nationalizing China

by Patricia Adams

In March, while clamping down on simmering protests in China following the Arab Spring, the Chinese government's top legislator told 3,000 deputies at the National People's Congress that it would brook no challenge to the Communist party's authority. "We have made a solemn declaration," stated Wu Bangguo, chairman of the National People's Congress standing committee, in affirming China's "five noes" -no multiparty elections, no diversity in guiding thought, no separation of powers, no federal system and no privatization.

In the past, the Chinese government had denied that it had a policy of squeezing out the private sector. This unofficial policy, which entrepreneurs dubbed "Guo jin min tui" -literally "the state advances as the private sector recedes" -has since become a household term that serves the government well: To assert its authority, the government now unabashedly declares that its absolute control of all power centres in Chinese society includes the private sector. China is heading for a degree of government ownership and central planning unseen since Mao's passing.

The extent to which the Chinese government believes that a few people at the top of the government hierarchy can micromanage an economy for 1.4 billion people became clear with the recent release of the government's latest five-year plan. Many governments think they can pick a few winners in their economy. China's central government thinks it can pick 750 of them, and plans to provide them with the support needed to make theirs a self-fulfilling prophesy. More, China thinks it can pick losers -it found 426 of them -and will ensure their demise.

The winners include coal mines, perfumes, electric cars, airports and wildflowers. "National champions" and other state-owned companies operating in winning sectors get free land, cut-rate financing, instant approvals, guaranteed domestic markets and expedited stockmarket listings. The losers -they include companies in disposable foam plastic dinnerware, vertical gas water heaters and cardboard detonators -get nothing but a date by which they must terminate operations.

China's micromanagers also have a third category -a kind of purgatory -for industries that will be tolerated for a while. These include villa-type real estate developments, golf courses, artificial leather, certain types of toothpaste and small versions of the winners -small coal mines, for example. These tolerated sectors -typically in the private sector -will receive no government favours and are expected to disappear over time.

China, disdainful of what it sees as the West's weakling management of its economies, is confidently taking the helm of its own. As put by Prime Minister Wen Jiabao at last year's National People's Congress, "The socialist system's advantages enable us to make decisions efficiently, organize effectively and concentrate resources to accomplish large undertakings."

China's liking for national champions -state-owned companies that are typically also traded on stock exchanges -is easily understood. According to one study of the decade ending in 2008, its national champions' assets, sales and R&D expenditures grew on average 25% a year, while their profits grew at an astonishing 40% a year. From the Communist party's perspective, national champions and top-down planning have another advantage -they provide the party with control that would be impossible if people and industries could act independently.

The architect of China's top-down plan is its National Development and Reform Commission. This all-powerful agency, easily the world's largest planner, itself operates at the very highest levels in the Chinese hierarchy -directly under the State Council, China's Cabinet. This is the agency that issues the country's fiveyear plans (the 12th five-year plan has just begun), that both plans and manages China's economy, and that epitomizes the China model, the envy of much of the world for its readiness to act decisively.

Yet top-down decisive action -when detached from market demand -also has large, less-easy-to-measure downsides. China's ghost cities provide the most spectacular example of central planners that got it wrong - entire cities able to house tens and even hundreds of thousands each that remain mostly deserted years after their completion. Less well known are the high-speed rail lines that run devoid of passengers, the four-lane highways devoid of cars, the airports devoid of planes and the hydro dams devoid of water.

China's signature Three Gorges Dam, the world's largest and once the epitome of the China model, now symbolizes the folly of central planning - a Shanghai daily even called it "that monstrous damming project" - because it has failed to achieve any of its major goals, including flood control, navigation, and the provision of cheap power. There is, in short, no way of knowing whether the immense gains that central planning conferred on the national champions exceeded the immense costs that central planning imposes on the rest of the economy.

And now China is taking central planning to a new level through guo jin min tui. Through this creeping nationalization of the existing private economy, the Chinese planners expect the winners to absorb many of the small industries in purgatory, adding to the heft of the winners while eliminating the small fry and streamlining the industrial sector. China's planners are taking other steps, too, to ensure that the private sector recedes.

Foreign competitors to China's national champions will generally be restricted by being prevented from operating in China in competition with Chinese companies. The only exception to this rule involves Western companies with technologies that Chinese champions need. In such instances, the Western firm would be allowed in, as a junior partner to the Chinese national champion, on condition that it turn over its technology to China.

Western firms have been accepting China's terms. In high-speed rail, for example, foreign companies such as France's Alstom, Germany's Siemens and Japan's Kawasaki had until recently controlled about two-thirds of the Chinese market. In 2009, the Chinese government changed the rules, requiring them to provide their technology to state-owned Chinese corporations in exchange for the right to bid on future rail projects. These multinationals now account for less than 20% of the Chinese market. The national champions, meanwhile, not only dominate the local market, they are now competing against their junior partners in foreign countries, most recently having won contracts in Australia and New Zealand.

In another example of how the private sector is giving way to state producers, foreign multinationals until recently held 75% of China's wind market. They're now down to 33% or less, having failed to win a central government-funded wind energy project since 2005. China accomplished this feat using sticks and carrots. The big carrot: China offered the stateowned companies' customers lavish subsidies that effectively squeezed out foreign manufacturers. The big sticks: The government slapped a 70% local-content requirement on the foreigners and hiked tariffs on imported components.

Not surprisingly, Western companies -feeling unwanted -have begun to pull up stakes in China. Which suits China just fine. Its planners take the goal of guo jin min tui seriously -the state advances as the private sector recedes. The question that remains: Will the current helmsmen of the Chinese Communist economy fare better than their predecessor, Great Helmsman Mao? The answer may lie in an alternative meaning for guo jin min tui that Chinese citizens understand all too well. The phrase can mean both "the state advances as the private sector recedes" and "the nation advances as the people fall behind."

First Principles

Nature, Nurture, Nature, Nurture

Curious little article here in The New York Times: “Genetic Basis for Crime: A New Look.”

by John Derbyshire

The tainted history of using biology to explain criminal behavior has pushed criminologists to reject or ignore genetics and concentrate on social causes: miserable poverty, corrosive addictions, guns. Now that the human genome has been sequenced, and scientists are studying the genetics of areas as varied as alcoholism and party affiliation, criminologists are cautiously returning to the subject. A small cadre of experts is exploring how genes might heighten the risk of committing a crime and whether such a trait can be inherited.

And so the wheel turns. In economics you have the business cycle. In the human sciences you have the nature-nurture cycle.

Two or three hundred years ago it was all nurture, so far as enlightened people were concerned. From John Locke to Karl Marx, human nature was merely the impress of social or economic forces on a waiting slab of wet clay, a blank slate. The effect might be for the better (Hobbes) or for the worse (Rousseau), but the finished human being was seen as a molded thing shaped entirely by circumstance or education.

Then came Darwin with a persuasive theory to explain the great variety of living creatures. Biology now had a large organizing principle. Might that principle encompass human beings, too? Darwin certainly thought so. Though he was, for social and marital reasons, diplomatic in speaking about the matter, it is plain from everything he wrote that Homo sapiens was, for Darwin, just another branch on the tree of life, continuous with the higher animals.

Are we indeed in a continuous line of descent from beasts, or are we a new creation altogether? Religious folk line up on the latter side of the argument, but you don’t have to be religious to agree with them. Quantity begets quality; it may be that in attaining its enhanced complexity, the human brain crossed some threshold into a new dimension of awareness, like the first creatures that could see.

At any rate, biology ruled the latter part of the 19th century, when the human sciences were just emerging as empirical disciplines. Instinct theory in psychology, race theory in anthropology, and “social Darwinism” in political science all testified to Darwin’s influence.

In the first two decades of the 20th century a reaction set in, driven in part by progressivist social optimism, in part by a desire for more scientific rigor. Both factors were incarnated in Franz Boas, a key figure in the early 20th century’s steady drift away from biology in the human sciences. Boas’s 1911 study on the changing body shapes of recent immigrants to America was empirically rigorous and put the lie to at least the most extreme claims of racial anthropology. Yet that 1911 study had been preceded by a long paper trail of writings urging environmental explanations for human differences over biological ones.

Boas and his supporters won all their arguments in anthropology. At the same time John B. Watson was purging psychology of all notions of instinct or innate ability, creating the behaviorist paradigm that dominated that discipline though the next few decades. By the 1920s, in the USA at least, nurture had the upper hand and held it for 40 years. Anthropologist Leslie White wrote in 1949:

Betting for the Long Term

The New Commanding Heights

By ARNOLD KLING and NICK SCHULZ

In the early 1920s, the Russian economy was flagging, having been ravaged by years of war and political turmoil. In an attempt at revival, Vladimir Lenin initiated a series of controversial reforms, including permitting a bit of profit-making enterprise in some areas of the economy. This move naturally shocked many Bolsheviks, who had risked their lives in the Russian Revolution in order to advance communist principles. Eager to alleviate their concerns, Lenin addressed the communist-party faithful at a convention in 1922. He told them not to worry: The reforms were relatively modest, and the new Soviet state would always retain its control over what he called the "commanding heights" of the economy.

By "commanding heights," Lenin meant the critical sectors that dominated economic activity — primarily electricity generation, heavy manufacturing, mining, and transportation. Because these industries were the foremost drivers of employment, production, and consumption in Russia — and because they were the essential growth sectors in any economy of that era that sought to be called "modern" — government control of these particular sectors meant government dominance over the economic life of the nation. A communist government could afford to permit relatively free markets in less significant sectors, Lenin thought, because as long as it controlled those industries that formed the heart of the economy, it effectively controlled the whole.

Throughout much of the 20^th century, communist and socialist parties around the world continued to see government dominance of these industries as a key goal. The commanding heights of the economy became crucial battlegrounds in the struggle between advocates of central planning and defenders of market economics.

In America today, few people champion government control of the industries Lenin saw as the commanding heights. On the contrary, these sectors have been largely deregulated, and market forces have, for the most part, been permitted to govern their development for decades. Defenders of the market might therefore imagine that they have won, and that the struggles that remain are peripheral debates.

But such a declaration of victory would be dangerously premature. Over the past few decades, our economy has undergone some fundamental changes — with the result that the fight for control over the commanding heights of American economic life is still very much with us. And it is a fight that, at least for now, the free-market camp appears to be losing.

The commanding heights of our economy today are not heavy manufacturing, energy, and transportation. They are, rather, education and health care. These are our foremost growth sectors — the ones most central to employment and consumption; the ones that, increasingly, drive our economy. And it is in precisely these two sectors that the case for extensive government intervention and planning, if not outright control, is dominant — and becoming ever more so.

If there is to be any hope of reversing this trend, champions of market economics must come to see these two sectors as the front lines in the battle for capitalism. At stake is not only an ideological or theoretical point, but also American prosperity. The historical record makes this clear: In the nations where it was practiced, government control of the old commanding heights of the economy made those industries less efficient and less innovative — bringing overall economic performance down with them.

Today, America risks following the same course. Looking to the coming decades, it will simply not be possible to maintain a genuine free market — or a thriving, innovative, growing economy — if our education and health sectors are controlled by the government. Champions of the market thus have their work cut out for them. First and foremost, however, they must come to understand the central place that education and health care occupy in America's economic life.

AN ECONOMY TRANSFORMED

To discern where the heart of an economy lies, one must identify the sectors in which employment and consumption are focused, and in which growth is swiftest. In the case of our own economy, the data over recent decades clearly show the decline of the old commanding heights — manufacturing and heavy industry — and their replacement by "softer" sectors, especially health care, education, and government work.

Economists Michael Spence and Sandile Hlatshwayo recently devised a way of breaking the American economy into industries that produce tradable goods and services and industries that produce non-tradable ones. They calculated that, from 1990 to 2008, employment in the tradable sector edged up from 33.7 million to 34.3 million. Meanwhile, in the non-tradable sector — which covers most service-based businesses — employment rose from 88.3 million to 114.9 million. Thus the non-tradable sector accounted for nearly all of the job growth during this period.

We are accustomed to thinking that our country is in the midst of a long transition from an industrial economy to a "service" economy, and these figures would seem to confirm that perception. But the service economy is not what we often think it is. The images that most readily come to mind when we think of these sectors might involve retail sales, information-technology consulting, and financial services. But Spence and Hlatshwayo's work shows that, within the non-tradable sector, health care was easily the growth leader — increasing from 10 million to 16.3 million jobs, and accounting for almost 25% of total job growth in the past two decades. Government was second, growing from 18.4 million to 22.5 million jobs, and accounting for about 15% of total job growth. Of this expansion in government employment, nearly 70% was attributable to jobs in education. Today, the drivers of the American labor market are therefore clearly health, education, and government work; these sectors form the backbone of our post-industrial economy.

Everyone is entitled to his own facts

Economic Freedom and Quality of Life

Here’s a superbly done video – rich with facts – on the importance of economic freedom. 

Liberty Vs Dependency

MYTH AND TRUTH ABOUT LIBERTARIANISM 

By Murray N. Rothbard

Myth # 1: Libertarians believe that each individual is an isolated, hermetically sealed atom, acting in a vacuum without influencing each other. This is a common charge, but a highly puzzling one. In a lifetime of reading libertarian and classical liberal literature, I have not come across a single theorist or writer who holds anything like this position. ...

Libertarians are methodological and political individualists, to be sure. They believe that only individuals think, value, act, and choose. They believe that each individual has the right to own his own body, free of coercive interference. But no individualist denies that people are influencing each other all the time in their goals, values, pursuits and occupations. As F. A. Hayek pointed out in his notable article, 'The Non-Sequitur of the 'Dependence Effect," John Kenneth Galbraith's assault upon free-market economics in his best-selling THE AFFLUENT SOCIETY rested on this proposition: economics assumes that every individual arrives at his scale of values totally on his own, without being subject to influence by anyone else. On the contrary, as Hayek replied, everyone knows that most people do not originate their own values, but are influenced to adopt them by other people. No individualist or libertarian denies that people influence each other all the time, and surely there is nothing wrong with this inevitable process. What libertarians are opposed to is not voluntary persuasion, but the coercive imposition of values by the use of force and police power. Libertarians are in no way opposed to the voluntary cooperation and collaboration between individuals: only to the compulsory pseudo-"cooperation" imposed by the state.

Myth #2: Libertarians are libertines: they are hedonists who hanker after "alternative life-styles." This myth has recently been propounded by Irving Kristol, who identifies the libertarian ethic with the "hedonistic" and asserts that libertarians "worship the Sears Roebuck catalogue and all the 'alternative life styles' that capitalist affluence permits the individual to choose from." The fact is that libertarianism is not and does not pretend to be a complete moral or aesthetic theory; it is only a political theory, that is, the important subset of moral theory that deals with the proper role of violence in social life. Political theory deals with what is proper or improper for government to do, and government is distinguished from every other group in society as being the institution of organized violence. Libertarianism holds that the only proper role of violence is to defend person and property against violence, that any use of violence that goes beyond such just defense is itself aggressive, unjust, and criminal. Libertarianism, therefore, is a theory which states that everyone should be free of violent invasion, should be free to do as he sees fit except invade the person or property of another. What a person does with his or her life is vital and important, but is simply irrelevant to libertarianism.

It should not be surprising, therefore, that there are libertarians who are indeed hedonists and devotees of alternative lifestyles, and that there are also libertarians who are firm adherents of "bourgeois" conventional or religious morality. There are libertarian libertines and there are libertarians who cleave firmly to the disciplines of natural or religious law. There are other libertarians who have no moral theory at all apart from the imperative of non-violation of rights. That is because libertarianism per se has no general or personal moral theory. Libertarianism does not offer a way of life; it offers liberty, so that each person is free to adopt and act upon his own values and moral principles. Libertarians agree with Lord Acton that "liberty is the highest political end "-not necessarily the highest end on everyone's personal scale of values.

There is no question about the fact, however, that the sub-set of libertarians who are free-market economists tends to be delighted when the free market leads to a wider range of choices for consumers, and thereby raises their standard of living. Unquestionably, the idea that prosperity is better than grinding poverty is a moral proposition, and it ventures into the realm of general moral theory, but it is still not a proposition for which I should wish to apologize.

About the Health of the State

A Libertarian Theory of War

by Murray N. Rothbard

The libertarian movement has been chided by William F. Buckley, Jr., for failing to use its "strategic intelligence" in facing the major problems of our time. We have, indeed, been too often prone to "pursue our busy little seminars on whether or not to demunicipalize the garbage collectors" (as Buckley has contemptuously written), while ignoring and failing to apply libertarian theory to the most vital problem of our time: war and peace. There is a sense in which libertarians have been Utopian rather than strategic in their thinking, with a tendency to divorce the ideal system which we envisage from the realities of the world in which we live.

In short, too many of us have divorced theory from practice, and have then been content to hold the pure libertarian society as an abstract ideal for some remotely future time, while in the concrete world of today we follow unthinkingly the orthodox "conservative" line. To live liberty, to begin the hard but essential strategic struggle of changing the unsatisfactory world of today in the direction of our ideals, we must realize and demonstrate to the world that libertarian theory can be brought sharply to bear upon all of the world's crucial problems. By coming to grips with these problems, we can demonstrate that libertarianism is not just a beautiful ideal somewhere on cloud nine, but a tough-minded body of truths that enables us to take our stand and to cope with the whole host of issues of our day.

Let us then, by all means, use our strategic intelligence — although, when he sees the result, Mr. Buckley might well wish that we had stayed in the realm of garbage collection. Let us construct a libertarian theory of war and peace.

The fundamental axiom of libertarian theory is that no one may threaten or commit violence ("aggress") against another man's person or property. Violence may be employed only against the man who commits such violence; that is, only defensively against the aggressive violence of another.[1] In short, no violence may be employed against a nonaggressor. Here is the fundamental rule from which can be deduced the entire corpus of libertarian theory.[2]

The New Dealers

FDR and the Collectivist Wave

By Ralph Raico

In granting official diplomatic recognition to the Soviet Union in November 1933 Franklin Roosevelt was "unintentionally," of course, returning to the traditions of American foreign policy.

From the early days of the Republic, throughout the 19th century and into the 20th — in the days, that is, of the doctrine of neutrality and nonintervention — the US government did not concern itself with the morality, or, often, rank immorality, of foreign states. That a regime was in effective control of a country was sufficient grounds for acknowledging it to be, in fact, the government of that country.

Woodrow Wilson broke with this tradition in 1913, when he refused to recognize the Mexican government of Victoriano Huerta, and again a few years later, in the case of Costa Rica. Now "moral standards," as understood in Washington, DC — the new, self-anointed Vatican of international morality — would determine which foreign governments the United States deigned to have dealings with and which not.

When the Bolsheviks seized power in Russia, Wilson applied his self-concocted criterion, and refused recognition. Henry L. Stimson, Hoover's secretary of state, applied the same doctrine when the Japanese occupied Manchuria, in northern China, and established a subservient regime in what they called Manchukuo. It was a method of signaling disapproval of Japanese expansionism, though there was no doubt that the Japanese soon came into effective control of the area, which had been more or less under the sway of competing warlords before.

In later years, Roosevelt would adopt the Stimson doctrine of nonrecognition and even make Stimson his secretary of war. But in 1933 all moral criteria were thrown overboard. The United States, the last holdout among the major powers, gave in, and Roosevelt began negotiations to welcome the model killer state of the century into the community of nations.

Recognizing Soviet Russia

To the Soviet negotiator, Foreign Minister Maxim Litvinov, FDR presented his two chief concerns. One had to do with the activities of the Comintern. This worldwide organization is often ignored or slighted in accounts of the interwar years, but the fact is that the history of the period from 1918 to the Second World War cannot be understood without a knowledge of its purpose and methods.

With his seizure of power in Russia, Lenin turned immediately to his real goal, world revolution. He invited members of all the old socialist parties to join a new grouping, the Communist International, or Comintern. Many did, and new parties were formed — the Communist Party of France (CPF), the Communist Party of China (CPC), the Communist Party of the United States (CPUSA), and so on, all under the control of the mother party in Moscow (CPSU).

The openly proclaimed aim of the Comintern was the overthrow of all "capitalist" governments and the establishment of a universal state under Red auspices. Hypocrisy was not one of Lenin's many vices: the founding documents of the Comintern explicitly declared that the member parties and movements were to use whatever means — legal or illegal, peaceful or violent — that might be appropriate to their situations at any given time.

This was the stark specter facing the non-Communist nations in the decades before World War II: a power covering one-sixth of the earth's surface had at its command a global movement that was fighting to wrest control of organized labor everywhere, fomenting revolutions in the colonial regions, vying for the allegiance of the western intelligentsia, and planting spies wherever it could — all with the goal of bringing the blessings of Bolshevism to the all of the world's peoples.

The first commitment FDR asked of Litvinov was that the Comintern should cease subversion and agitation within the United States. This the Soviet minister readily agreed to. When, less than two years later, Washington complained that Russia was not living up to its agreement, Litvinov, in true Leninist fashion, denied that any such pledge had been given.

Barack Gorbachev

Adjusting to the Global Reality

By Leon Hadar     

The political leaders and the generals were continuing to debate on whether to start pulling out the troops from Afghanistan at a time when political power was being consolidated by a relatively young reformer interested in mending relations with the rest of the world and despite the growing recognition that the war there was lost.

But finally, in April 1988, Mikheil Gorbachev, the leader of the USSR, introduced a timetable for the departure of Soviet forces from Afghanistan, announcing that the withdrawal of about 100,000 troops will start in the following month. It took Gorbachev another four years to complete the withdrawal from South Asia while he was also trying to manage the gradual erosion in Soviet hegemony in Central and Eastern Europe and the broader restructuring of the global position of the Soviet Union.

Gorbachev and most of the leaders in the Kremlin “were convinced that we did not need Afghanistan and had no business being there,” a former Soviet advisor told journalist and author Michael Dobbs. “We would have lost the war anyway,” he explained. “We should have learned from the British that Afghanistan is a country that cannot be conquered.”

Yet even an open-minded reformer like Gorbachev was not ready to admit that a superpower like the Soviet Union had suffered a military defeat in Afghanistan, and insisted on spinning as a success what amounted to the failure on the part of Moscow to impose its will on the country, not to mention the enormous losses in life and money.

That in retrospect, Gorbachev’s Vietnam in Afghanistan is starting to look more and more like Obama’s Afghanistan in, well, Afghanistan, brings (once again) to mind George Santayana’s warning that “Those who cannot remember the past are condemned to repeat it” (although it should probably be changes to “do not want to remember”). In both cases, political leaders found it difficult to extract their country from costly military quagmires.

But the dilemma facing Gorbachev in the late 1980s and Obama in the beginning of the second decade of the 21st century goes beyond failed military interventions in Afghanistan. In both cases, leaders of great powers experiencing erosion in its economic power and the overstretching of its military are forced to adjust an outdated global strategy to the changes in its military and economic capabilities.

Ironically, many observers have been comparing the current political upheaval in the Arab World to the growing pressure for liberalization in Central and Eastern Europe in 1989, celebrating the so-called Arab Spring as another post-Cold-War victory for the U.S. and its push for democracy and free markets.