Yes of course Donald Trump is wrong about Nafta

More interesting is why Trump is wrong about Nafta:

Recently, Donald Trump made a strong claim about the North American Free Trade Agreement (NAFTA) in an interview on CBS 60 Minutes:

“It’s a disaster. … We will either renegotiate it, or we will break it. Because, you know, every agreement has an end. … Every agreement has to be fair. Every agreement has a defraud clause. We’re being defrauded by all these countries.”

And we have an, admittedly incomplete as yet, theory for why we think businessmen are often quite as bad as they are at economics. We would expect them, given that they are usually playing in the private sector, to be rather better than they are at how private markets work. And certainly someone in Trump’s industry should understand public choice arguments.

But our theory is that so much of what a business actually does is trying to beat economics that the knowledge of the underlying theory rather gets missed. Just as one example, every business is trying to gain market power, the ability to set prices. From the economic theory point of view this is a very bad idea: and it’s the competition that markets provide that stops every business from gaining that market power.

And something similar happens with trade: when running a business you are obviously going to try to reduce your inputs. Of anything: one of the ways to succeed is to minimise inputs. And yet when we talk about the whole economy, about trade, the aim and point of the entire exercise is to maximise those imports, those inputs. That’s why we’re doing it, to gain the maximal amount possible of the resources and labour of foreigners that our people get to consume.

So, much of the time, running a business is trying to beat economics. Thus a businessman can often have a distorted idea of what desirable economic policy is.

There are those who will make the leap from this claim to the one that therefore we must regulate businesses because they are “anti-economic”. To which we would respond yes, of course , we must do so. And we do do so, we insist on competitive markets which is exactly the correct antidote to such attempted behaviour.

EU Inners and Outers

The City Corporation hosted a gathering at the Guildhall last Thursday to discuss, from a financial services perspective, what the Prime Minister should be seeking in his EU negotiations and the consequences of Brexit, should that come about.  The eight invited speakers were supposed to be balanced between those leaning towards staying, the Inners, and those leaning towards leaving, the Outers.  Given the funding, it was no surprise that the majority were Inners.  Indeed, according to Mark Boleat, Chairman of the Corporation’s Policy and Resources Committee, who introduced the conference, the status quo is well-nigh perfect so far as the City is concerned.  Apparently, the Brussels regulators now follow the City’s advice like lambs following their shepherd. Perhaps the single market for financial services could be hastened a little but the important thing, we were told, was to remain within it.  Dr. Pangloss would have been proud.

Interestingly, the few words of dissent from the Outers produced more applause than anything from the Inners.  But this was shadow boxing. There was little attempt to answer the questions: just the ritual “leaving is too risky” and “Europe will drag the UK down in global terms” arguments from the two sides.  The only speaker to land a punch was David Campbell Bannerman, ex-UKIP and now Tory MEP, speaking from the floor and dismissing one speaker’s contribution as undiluted self interest.

In essence, the big companies and organisations, City Corporation, CBI, unions, Whitehall, are mostly Inners whereas SMEs, including those in the City, and their representatives, IoD, Chambers of Commerce, are mostly Outers.  Some portray that as the old guard versus the future.

There is a vague wish that the UK government can protect the City in the way the French protect the Common Agricultural Policy but no one suggested how that could be done.

The most substantial issue proved to be the Euro.  The double majority rule that protects the non-Eurozone countries from being out-voted by the Eurozone ceases to apply once the current seven of the former shrink to three.  Furthermore, the other EU members have made it clear that they dislike the principle and even Lord Hill, the UK Commissioner, would not support it being extended to non-financial matters.  Since, when the current troubles subside, it is a racing certainty most of the current outsiders will join the Eurozone, the UK can look forward to being out-voted on almost everything and losing out, as we now do, in the EU Court of Justice.

So the bottom line, whatever the outcome of the referendum, seems to be that the UK must, in the longer term, accept the Euro or leave the EU.  A stark choice.

There is greater joy in heaven over one sinner that repenteth etc…..

Someone seems to have got the message:

Bono illustrated the shift in thinking that has taken place in his remarks.

“I’m late to realizing that it’s you guys, it’s the private sector, it’s commerce that’s going to take the majority of people out of extreme poverty and, as an activist, I almost found that hard to say,” he said.

As Madsen Pirie of this parish is wont to say, the way to reduce poverty is by buying things made by poor people in poor countries.

But there is more to this than just our being correct and Bono now becoming correct. For the UN and the global illuminati are currently congratulating themselves on having met the Millennium Development Goal of halving absolute poverty. And are now designing the next set of goals in order to abolish it in its entirety. Yet absolutely none of the meeting of that MDG came from anything that the UN of those illuminati did. And not even from the eyewatering overseas aid target of 0.7% of GDP, a target which the UK is almost alone in actually meeting. And there’s a problem with this.

That problem being that while abolishing absolute poverty is absolutely the thing to be trying to do, none of the mechanisms being suggested by the UN/illuminati to reach that goal actually have anything to do with how we reached the previous one. They’re muttering about inclusive development and reducing inequality. When what is needed is yet more globalisation and trade. Or, in simpler terms, just buy the damn stuff made by poor people in poor countries.

We think (and hope) that the true abolition of absolute poverty will happen. But it will be in spite of, not because of, these lovely plans that are being drawn up. Because none of those plans actually ask people to do what we do know actually works: please people, go shopping!

Rather waving the bloody shroud, isn’t it?

Whenever the budget of a bureaucracy is cut (and cuts here means “less than an acceptable rate of growth”) then the cuts will be implemented in the most useful and obviously visible service that that bureaucracy is supposed to provide. This is not a new observation and we have no intention of trying to claim credit for it.

The reason is twofold. The first is the obvious one that if some mild brake is applied to, say, the council’s leisure budget then reducing library opening hours, or ceasing to purchase new books, gets the local paper (and MP) nicely roused to shout about it. Curtailing the supply of choccie bikkies at council meetings just wouldn’t create the same public outrage.

The second is that of course that a bureaucracy’s reason for existence is to be a bureaucracy. What service, if any, it emits is the least important thing about it. Most certainly less important than the continued existence of meetings at which there may or may not be choccie bikkies.

This is all we need to know to explain this story:

The Labour-run Newcastle Under Lyme Borough Council has told grieving relatives that no one can be buried in any of their eight cemeteries for three weeks, blaming funding cuts.

Sticking the bodies of the recently departed into holes in the ground is not a difficult nor expensive endeavour. This is precisely why we delegate the task to the local municipality. But if there is to be even the whiff of a cut to the overall budget it is those bloody shrouds that will be waived to the distress of the relatives of the departed. Cause the maximum pain: to fail to do so would be to betray all bureaucracies everywhere.

It is true that said council is currently advertising for a fitness trainer. But we do think that’s rather the long way around of trying to reduce the pressure on the space in the graveyards.

Mariana Mazzucato’s interesting economic argument

Alberto Mingardi, one of those we around here think to be a top bloke, has an excellent analysis of the rather, umm, interesting economic ideas of Mariana Mazzucato over at Cato. Mazzucato it the one who insists that because all of the components of the Apple iPhone had their start in some government research grant or other then the government should be owning a piece of Apple.

To really cover the issues with this line of thinking please do read the whole of Mingardi’s piece. For a flavour though, he notes an interesting thought. Which is that this obviously didn’t happen with the original Industrial Revolution because government didn’t fund anything other than the military and the debt back in those days. So it’s clearly not necessary that government fund research, despite Mazzucato’s insistence that it must. And we can then go one step further: not that government has its mitts all over 40% of everything in the economy it would really be rather surprising if something as complex as a smartphone didn’t have some fort of series of connections to said state. Because it’s got connections to rather large parts of that economy that the state has its mitts all over, of course.

Again, well worth reading.

And we must also turn to a more speculative reading of this situation. Do understand that this is entirely opinion. And it is our opinion that it’s a very interesting fact that the first governmental R&D funding organisation to adopt Mazzucato’s prescriptions is that of the European Union. The latest round of EU funding for R&D will indeed insist that the EU should take part in any financial rewards that develop out of any research or even D that it has funded.

And the original research by Mazzucato that led to the conclusion that this should be done was funded by the EU. An EU which we very well know would love to have its “own resources”, that is funding that it doesn’t get by going cap in hand to the national governments.

Again, let us be very clear indeed that this is opinion and opinion only, but we are of the opinion that there’s a very definite whiff of policy driven evidence making in the air.