The Bear’s Lair: Gosplan economic approach doing real damage

A new McKinsey’s report, featured in the Financial Times, shows that over the past 25 years, the dominance of large companies has increased, as has the share of capital returns in the economy, while wage levels have risen far less than productivity. The FT’s solution to this is more state meddling, with redistributive policies to move income from large corporations to poor individuals.
I would suggest that the solution is the opposite: give up the state meddling of the last 25 years, most particularly the Gosplan approach to setting the prices of key inputs. Continue reading

The Bear’s Lair: Serfs do better after pandemics

The Black Death of 1348 was a gigantic human tragedy, but for most of those involved and their descendants, it had one enormous silver lining: serfs’ rights and living standards soared to previously undreamed-of levels in the following 150 years, as labor shortages took hold. As we emerge from a similar albeit thankfully less severe pandemic, an equivalent rise in living standards is unlikely. Nevertheless, for the “serfs” employed by large companies in big cities, there may be some upside. Continue reading

The Bear’s Lair: One-party governance kills economic progress

The United States is currently in a situation where, after a short and beleaguered period of partial opposition control, one party controls the Presidency, both houses of Congress, much of the judiciary, the media and the tech sector. We have seen such dominance before in Britain: in the Whig Supremacy of 1714-62 where with Royal support Britain became a one-party state; the Industrial Revolution was thereby delayed by half a century. We should examine the structural reasons why this happened and their applicability to our day. Continue reading

The Bear’s Lair: We are re-running 1973-74

Although it represented my youth, I am by no means nostalgic for 1973-74. In Britain, it gave us a banking crash, the 3-day week, the lead-up to 25% inflation and the most left-wing Labour government Britain ever had. In the United States, it gave us the nullification of 1972’s landslide election victory, a resurgence in commodity inflation, a Presidential resignation and “Whip Inflation Now” buttons. Globally it gave us the 1973 oil crisis, the first major crack in Western political/economic hegemony. I had hoped we had left that period behind forever, but alas we seem fated to repeat it, albeit with different details. Continue reading

The Bear’s Lair: How can we de-corporatize?

The 25-year asset bubble has caused a crescendo of corporatism, as large corporations, their values swollen by asset price inflation, have sought to impose themselves on our lives. Their interaction with the left of politics has been especially poisonous, with “corporate-woke” schemes generated by top management threatening to eliminate the interests of the shareholders who are nominally their masters. Is this our future, or will we find a way to defeat it? Continue reading

The Bear’s Lair: After Globalization

As predicted in these columns a decade ago, globalization did not work, and has now gone the way of the dinosaur. It is not however clear what will replace it. The international institutions are still there, exerting their influence like stegosauri who missed the memo about the end of the Jurassic. Western “woke” governments are planning ever more elaborate schemes to combat climate change. That suggests that, to succeed, a country needs to be both well-run and isolated from international advice. Continue reading

The Bear’s Lair: Dogecoin beats the digital dollar

The Fed, the People’s Bank of China and the Bank of England are planning digital currencies linked to their currencies. Their real objective is to stop people using cash so they can create even more distorted interest rate structures. Their new constructions will thus combine the insecurities of digital currencies with the Gosplan approach to monetary management that is now so popular. Dogecoin, started as a joke and with money creation controlled by an algorithm, will be a much better store of value than these central bank constructs and will protect the public against the tyranny of bureaucrats. Continue reading

The Bear’s Lair: Liquidate, liquidate, liquidate

The above was the supposed advice of Treasury Secretary Andrew Mellon to President Herbert Hoover after the Wall Street Crash of 1929. It was good advice, which Hoover did not follow, thus landing the country in a decade of Great Depression. However, if Mellon’s advice was good after the crash, how much more intelligent would it be to follow it before the bubble has burst, as today? Continue reading

The Bear’s Lair: A re-focus on dividends

U.S. corporate earnings and the stock market in general have become divorced from reality, with corporations increasingly ignoring stockholders in favor of a politically correct “woke” agenda. This is dangerous for society and it is not capitalism. The solution is for stockholders, investment analysts and designers of tax codes to focus laser-like on dividends. Actual cash payments to shareholders, generated through earnings, are the best way to keep the system honest and functional. Continue reading

The Bear’s Lair: Brexit may re-kindle global innovation

1938 Lagonda V12

Peter Thiel is not alone in wondering where all the major technological innovations went. From the other end of the political spectrum Chicago professor Robert Gordon wrote a best-seller “The Rise and Fall of American Growth” speculating that U.S. productivity growth is slowing to zero. Yet if you look back, from the Industrial Revolution until at least the 1950s, Britain was the “skunk works” or prototype producer of a high proportion of major technological innovations. Then in 1973, Britain joined the European Union, which appears to have had the same deadening effect on British innovation as the Whig Supremacy of 1714-60. With Brexit, will we see a renewed innovation take-off? Continue reading