The Bear’s Lair: Bureaucrats grinding the faces of the poor

The OECD recently published a paper on taxation and economic development that claimed that the propensity of poor countries to tax less than rich ones is a contributor to their poverty. Thus, by raising taxes to Western levels, they could develop their economies. This view is not surprising from an organization of international bureaucrats, but it is the reverse of the truth. I thus thought it worth setting out the correct picture. Continue reading

The Bear’s Lair: Will Britain 2019 follow Czechoslovakia 1948?

It appears increasingly likely that the British people will be forced into a “People’s Vote” re-running the Brexit referendum of 2016. For those of us around during the Cold War the term “People’s Vote” has a familiar ring, similar to the “People’s Republics” and People’s Democracies” of Communist tyranny. This therefore begs the question: is Britain in 2019 to suffer the same fate as Czechoslovakia in 1948? Continue reading

The Bear’s Lair: The decline of good economics

William Hogarth - Gin Lane

There are many reasons why the Industrial Revolution happened in Britain in 1775-1850, but among the most important is the quality of economic thought among British policymakers of that period. Adam Smith, Thomas Malthus and David Ricardo gave them an excellent grounding in free market economics, and few statesmen of that period opposed their doctrines. Alas, over the last two centuries the quality of economic discourse has steadily declined. Spurious economic theories have appeared, and statesmen seem determined to avoid the correct ones. Continue reading

The Bear’s Lair: The decay of property rights

New York Mayor Bill de Blasio claimed last week that there was plenty of money for his pet projects, but it was “in the wrong hands.” In response, the Wall Street Journal, supposedly the voice of capitalism, gave a turgid list of rich New Yorkers’ charitable donations while blasting the inefficiencies of de Blasio’s administration. Both sides are wrong; in a well-run system, property rights should be inviolable regardless of what owners do with their property. That’s tough to defend when funny money has unfairly rewarded speculators – yet another reason to return to sound policies. Continue reading

The Bear’s Lair: Getting to Brexit in a naughty world

As I write, the key vote on Theresa May’s quasi-Brexit deal with the EU is set for January 15. This column has previously advocated voting for May’s deal on the grounds that it offers the most certain progress towards Brexit, but the European Commission has booby-trapped it, so that there is a chance of Britain being marooned in a hellish twilight limbo, half-in and half-out. On the other hand, honest, rational Brexiters are far short of a majority in Parliament so if May’s deal fails, there will not just be dirty work at the crossroads, but dirty work all over the landscape. This column thus attempts to advise on tactics, in a world even naughtier than usual. Continue reading

The Bear’s Lair: Heaven preserve us from a flat world!

Thomas Friedman’s 2005 best-seller “The world is flat” asserted that we were moving inexorably towards globalization and that barriers to trade and people movement were disappearing, as would many aspects of sovereignty. It is now clear that this process produces a political reaction, in which ordinary people protest vehemently against the flattening of their planet. We should rejoice: a flat world would be a tyranny, and the bumps in our current planetary economic system are all that protects us from this nightmare. Continue reading

The Bear’s Lair: Looking forward to Dow 11,000

It has been a bad December for the stock markets, but pundits across the land are predicting a recovery in the new year from this terrible drop. Short-term market fluctuations are unpredictable, but the reality remains: owing to decades of funny money the market has got far ahead of its equilibrium value, which is now around 11,000 on the Dow, half the present level. It is worth examining what a world with Dow 11,000 will look like. Continue reading

The Bear’s Lair: No, Mr. President, there isn’t a Santa Claus

President Trump’s economic policies are mostly very sensible, yet in two areas he has indulged in wishful thinking, proclaiming essentially that Santa Claus will bail out the United States. One is fiscal policy, where he has not restrained spending nor produced any plan beyond faster economic growth to solve the nation’s yawning budget deficit. The other is monetary policy, where he rails against the Fed’s attempts to restore sanity, and believes its job is to act as Santa Claus, bailing the U.S. out of recessions. Well, Mr. President, there is no Santa Claus. Continue reading

The Bear’s Lair: The madness of cities

Charles Mackay’s 1841 masterpiece asserted that the “madness of crowds” created “extraordinary popular delusions” that led to investment bubbles and crashes. Recent events suggest that when those crowds congregate in cities, rationality flies out of the window, and delusions infect the entire urban body politic. Rationalists, dwelling in leafy suburbs or deep in rural hideaways, need to find ways for their calm consideration not to be outvoted by the passions of the urban mob. Continue reading

The Bear’s Lair: Central banks must be rule-bound, not independent

Retiring Senator Jeff Flake (R.-AZ), apparently concerned about President Donald Trump’s influence in all areas, wants legislation to make the Fed truly independent – of Congress as well as the President, presumably. However, independent central bankers like Ben Bernanke and Mark Carney have been responsible for most of the truly lousy monetary policy of the last two decades. Rather than mandating Fed independence, therefore, Congress must establish rules, constraining the Fed to observe monetarily responsible behavior. Continue reading