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Lois Lerner, IRS division head, pleads the Fifth Amendment

May 23, 2013

President Obama’s key IRS lackey, Lois Lerner, heads the IRS division accused of targeting conservative groups and individuals in the run-up to the 2012 presidential elections. Yesterday she was required to attend a hearing of the House Oversight & Government Reform Committee. She did so reluctantly, looking and outfitted like any senior bureaucrat in Stalin’s USSR. Her demeanor and stance left little doubt about which party she votes for in any national election.

‘I have not done anything wrong’, Ms. Lerner told the committee, in an opening statement. Nevertheless, she declined to answer questions under oath, invoking her Fifth Amendment right against self-incrimination.She stated that she would not testify because lawmakers had accused her of making false statements to Congress about IRS targeting of conservative groups. This statement alone – which arguably constituted a waiver of her Fifth Amendment right – may constitute grounds for recalling Ms. Lerner and requiring her to testify before the Committee at a later date.

Although pleading the Fifth is not itself conclusive evidence of misbehavior, it is widely regarded as such. It is commonplace in criminal trials involving Mafia dons and other low-lives who mingle criminal with non-criminal behavior. Increasingly, the Imperial Presidency is morphing into the Cosa Nostra as it engages in threatening behavior right on the edges of the law. Middle range enforcers such as Lois Lerner are usually the first to fall before the FBI reaches upwards to those right at the top of the pyramid.

Like Cosa Nostra, the White House has developed a convenient strategy for evading ultimate responsibility for such behavior:

“President Obama’s former senior adviser, David Axelrod, told MSNBC recently that his guy was off the hook on the IRS scandal because ‘part of being President is there is so much beneath you that you can’t know because the government is so vast.” ‘The Unaccountable Executive’, The Wall Street Journal, May 23,2013

President Nixon once used the same defense. However, once all the president’s men collapsed like dominoes, as the investigstion advanced, Tricky Dick finally decided to take the fall and boarded Air Force One for one last time, heading out to San Clemente while relying on phlebitis and President Ford to protecty him from further probes.

President Obama may find himself in the same predicament, as his second term stumbles on, unless he chooses to admit wrong-doing and stops playing around on the outer edges of the law.

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Posted in economics of John Maynard Keynes, political corruption, political philosophy, progressive socialism, redistributive politics, relevance of economic knowledge, Uncategorized | 2 Comments »

Tunisia: another Arab Spring turns into a Winter of Discontent

May 22, 2013

Since the 2011 revolution, Tunisia has been consumed by a struggle between liberals and the moderate majority Nahda Islamist party as the country moves to finalize a new constitution and prepare for elections. But, as in other Arab states in transition, dealing with the more radical Islamists, the puritanical Salafis, poses the biggest challenge to any form of democracy.

Tunisia’s secularists view a strict, austere Islam as alien to the country’s relatively open and moderate culture, as well as devastating towards the wealth-creating tourist industry. But the Salafis deploy much-needed social welfare programs to attract young Tunisians for whom Nahda is insufficiently Islamist and insufficiently successful in terms of job-creation.

Tunisia has become a fertile environment for radical fundamentalism. Weapons from the poorly-handled revolution in Libya have found their way to Tunisia and jihadi fighters have holed up in a region on the border with Algeria. Moreover, the civil war in Syria has attracted recruits from north Africa, including many Tunisians. Hardened jihadists eventually return to their homeland and turn their guns onto their own governments. Tunisia could easily become yet another welcoming watering hole for al-qaeda terrorists.

All this was entirely predictable when the Arab Spring began. Foolish Western governments that ignored trusted allies and fostered revolutions that brought them down, will suffer long-term for such short-sighted betrayals.

Hat Tip: ‘War within Islam’, Financial Times, May 22, 2013

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Posted in political philosophy, progressive socialism, redistributive politics, relevance of economic knowledge, Uncategorized, war and peace | 1 Comment »

Britain should exit the European Union

May 13, 2013

Fortunately for Britain, the European Union does not prohibit member countries from seceding. No Abraham Lincoln sits in Brussels, willing or able to wage a war of continental aggression, should Britain decide to leave an organization that imposes net economic costs upon it.

The economic case for exit is now dominating debate across the Pelagic Isle. The large single market of the EU has brought benefits to Europe’s many small economies,especially those with a relatively large industrial base. It is bringing transfer benefits to the profligate PIIGS who are exploiting the charity of German savers. The UK, however, is a large economy with a small industrial base. It is fully capable of correcting its own fiscal excesses, especially under Conservative Party governance. For the United Kingdom, the regulatory burden of the single market massively outweighs the benefits.

The key assumption that underpins this judgment is that Britain – in the absence of becoming a member of the European Economic Area – Norway, Iceland and Liechtenstein – would still enjoy access to free trade with the European Union. This assumption is highly probable, since Germany and the Netherlands – the two best functioning EU economies – would welcome open access to the large British market. A negative trade shock imposed on the UK is in the economic interest of no EU economy, however perfidious, Albion may be regarded by some of its former allies and enemies.

Article 50 of the Treaty on European Union, one of the two treaties known together as the Lisbon Treaty, provides the option for an exit. Negotiations would be required between the British government and the various European institutions. Most likely, Britain would secure an exit placing it into a comparable situation with Switzerland i.e. a bilateral free trade deal. This would be a sweet deal for a country that desires to retain the City of London as Europe’s major financial center, and to evade the strangulation of the financial transactions tax and European-style banking regulations that the EU bureaucracy is panting to impose.

So, contrary to the advice given today by President Obama to Prime Minister David Cameron in the Oval Office, my advice is that Britain should exit now, without attempting to reform the EU from within. A country operating outside the euro-zone has precious little leverage to secure a deal that will weaken the social market philosophy that now dominates euro-land. Remember that Britons are still predominantly Anglo-Saxons, Prime Minster Cameron, and that their ties remain closer to North America and other former colonies than to Old Europe.

Hat Tip: Wolfgang Munchau, ‘Lawson is right – Britain does not need Europe’, Financial Times, May 13, 2013

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Posted in Bank Regulation, do well while doing good, political philosophy, property rights, relevance of economic knowledge, Uncategorized | 1 Comment »

Sir Alex Ferguson: the bagpipes honor a remarkable career

May 12, 2013

As an Englishman residing in the United States, I have retained an abiding love for the beautiful game – soccer – a game that has yet to reach its true status in the United States. Soccer is a game for extremely fit men (and women) who can stay on the field for a full 90 minutes of fast, highly-skilled movement. Soccer players do not retire to an oxygen tent after 5 minutes on the field as do so many American footballers. I doubt if anyone carrying in excess of 200 pounds has ever played for a premier soccer team. No 450 pound body-armor-protected fatties for the beautiful game. Soccer players do not require continuous radio contact so that the manager can tell them which is left and which is right, and where to move on every play. For the most part, they have sufficiently high IQs that they can think for themselves within a general strategy defined by the team manager.

Throughout my time in Virginia the team that I have supported is Manchester United, the Red Devils, a team that has dominated the English soccer scene for the past 26 years. Throughout that time period, Man U has been managed by Alex Ferguson, now Sir Alex Ferguson, who announced his imminent retirement last week at the age of 71 years, after 1,500 games in charge of what has become one of the world’s richest and most popular sports clubs. Few Britons have been more successful, in any sphere, in recent times.

His longevity as manager is a mark of this success. There are twenty clubs in the Barclay’s Premier League. Over the past year alone, 8 of these clubs have sacked their managers. Many others have faced speculation about their imminent demise. Only Sir Alex, a Glaswegian Scot from the blue-collar shipyards of that famous city, has been entirely secure, so secure indeed that he has been privileged to choose his own successor, and has been elevated to the Man U board of directors following his retirement. Sir Alex has earned job security and widespread respect because he is a winner. Under his leadership, the Red Devils have lifted 38 trophies – Premier League, F.A. Cup and European Championship – a record that no future manager is ever likely to match.

How has he achieved such success? Hard bloody work is one answer. Sir Alex is not some Spanish, Portuguese or Italian playboy management consultant, like Jose Mourinho. He is a rough-hewed, gritty, foul-mouthed Scot, prepared to apply the dreaded ‘hairdryer’ to under-performing stars during the half-time interval, even to kick a soccer boot at the head of one of his most famous stars, David Beckham, when the occasion so deserved. Sir Alex controls everything in his club, from brand-management, to talent-spotting, to the players’ tea. When Wayne Rooney experiences the ‘red mist of rage’ on the soccer pitch, he knows that he will be benched by his manager and that he will experience a much more dreadful red-rage from that fearsome Scot, once he returns to the dressing room.

Economy is another answer. Soccer management is about squeezing out more performance per salary pound than one’s highly competitive rivals. This Sir Alex has done, season after season, spending a lower proportion of the club’s revenues on wages than any other Premier League club. This achievement has attracted the attention of businessmen and political leaders, especially from those within his beloved Labour Party.In particular, Sir Alex and Tony Blair bonded deeply, each recognizing the leadership qualities of the other. Although Gordon Brown is a fellow-Scot, Sir Alex despised his shambolic leadership, though he was never tempted to cross party lines.

Sir Alex may be a committed Labour Party supporter, but that does not mean that he is anti-capitalist. Far from it. He embraced New Labour long before Tony Blair invented the name. English soccer would become the best, during his 26 year reign at Old Trafford, because it pays the most. The average weekly wage in the Premier League rose by 1,500 per cent between 1992 and 2010. Sir Alex accepted his fair share of the rewards. He named his mansion Fairfields, after the dockyard where his father once labored.

Most of all, Sir Alex’s success was based on an enthusiastic embrace of globalization. He inherited a squad that contained two Danes, four Irishmen, and 18 Britons. He leaves a squad with players from a dozen countries, including Serbia, Ecuador, and Japan. In this respect, the politician whom Sir Alex most resembles is not Tony Blair, but rather his Tory nemesis, Margaret Thatcher. Of course, Sir Alex claims to detest the Iron Lady, for her blue rather than his red color. Yet, in truth they are very similar. Both won global success through a combination of simple truths and relentless drive. Both revered aspiration and opportunity. Both made Britain great.

The man that I honor today is no Red Alex but rather he is the Iron Man.

Hat Tip: Bagehot, ‘The socialist international’, The Economist, May 11, 2013

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Posted in do well while doing good, property rights, relevance of economic knowledge, Uncategorized | 1 Comment »

College students should wake up to market signals

May 10, 2013

In general it is better from a job-seeking perspective to earn a college degree rather than a high school diploma. Unemployment is much more significant for the latter than for the former graduates. However, earning a college degree is no sure way to obtaining a job with good prospects in the post-2008 U.S. economy.

Unfortunately neither U.S. students nor U.S. colleges are well-tuned into the market-place that awaits those who work their way to a baccalaureate degree. One remarkable statistic indicates how far out of tune they are.

Over the next decade, American colleges will mint 40,000 graduates with a bachelor’s degree in computer science. The U.S. economy is slated to create 120,000 computing jobs that require such degrees. No one has to be a math major to do the math. The economy will create three times the number of jobs as we have people qualified to fill them. No wonder employers hunger for all those Asians from India and China who have a better grip on the U.S market-place.

Any youngster who grew up and went to school in the U.S. will have been educated in a system that has eight times as many high-school football teams as high schools that teach advanced placement computer science classes. How many of those students expect to make a lucrative career in sports? Do college students realize how many more graduates there are in languages, literature, history, sociology, and other liberal arts disciplines than there are jobs available relevant to those specialisms? A ratio of 100:1 would not be at all excessive. Yet still so many students come, like moths to the flame, unaware of the heart-break that lies ahead.

The American market-place is increasingly dependent on information technology. Employers are looking for hires who know enough about how these information systems work to function effectively in such an environment. Such hires are not restricted to engineering and programming functions. Suppose that you are in sales and a customer asks you how long a certain digital project is slated to take. Unless you understand the principles and machinations of coding you can only guess an answer. And guessing will not promote your career.

So canny students who want a job in media, technology,or a related field would do well to forego time on the sports field in order to learn a basic computer language. Teach yourself just enough of the grammar and logic of computer languages to be able to see the big picture. Become acquainted with APIs. Dabble in a bit of Python. Immediately you have opened the door to lucrative job opportunities. Once you can claim familiarity with at least two programming languages, start sending out those resumes. And you will receive a great deal of interest from would-be employers, excited to find a nugget of gold among all that worthless ore.

Hat Tip: Kirk McDonald, ‘Sorry, College Grads, I Probably Won’t Hire You’, The Wall Street Journal, May 10, 2013

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Posted in do well while doing good, relevance of economic knowledge, Uncategorized | 1 Comment »

The left has gained no benefit from the 2008 crisis

May 8, 2013

The financial crisis of 2008 has been touted worldwide as a failure both of an economic system and a political system. More specifically, the apparent inability of democratic politics to handle its aftermath has threatened to undermine the consensus on liberal democracy and lightly regulated capitalism that emerged following the collapse of the Berlin Wall.

Contrary to many expectations, however, political groupings of the left have derived no benefit from the crisis. Socialist movements have waited for more than a century for capitalism to collapse from its own internal contradictions. Yet, when that prospect appeared likely to occur on their watch, leftist governments – especially in the United States and the United Kingdom – vied with each other to avert such a collapse by shoveling public money at the capitalists.

The ‘change you could believe in’, brought to the political arena by Barack Obama and by Francoise Hollande, was principally that they were not their predecessors. The failure of such leftist politics has now opened up opportunities for new political groupings – the Tea Party in the United States and the United Kingdom Independence Party in Britain – designed to destabilize the existing two party systems.

Such new groupings are disparate in nature, seemingly devoid of any unifying political program. What they have in common, however, is a new nationalism:

“Yet they share a resentment of others supposedly responsible for our problems – a media and a political class that supposedly fails to acknowledge popular concerns, and foreigners who do not share our culture or our heritage. United only in grievance, they are so varied because by their nature they can be only national.” John Kay, ‘Sinister or silly, protest politicians are united in grievance’, Financial Times, May 8, 2013

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Posted in economics and public choice, media rhetoric, relevance of economic knowledge, Uncategorized | 1 Comment »

The Chinese Dream of Premier Xi Jinping

May 7, 2013

During his first weeks in power, Xi Jinping, the new head of the ruling Communist Party, has promoted a slogan designed to unite an increasingly diverse nation: The Chinese Dream. News bulletins across the nation are full of his dream, evoking its American equivalent. A talent show on television is looking for ‘The Voice of the Chinese Dream’.

Unfortunately,Xi Jinping’s dream falls somewhat short of the aspirations outlined so eloquently by Thomas Jefferson in The Declaration of Independence and by James Madison in the Constitution of the United States. It does indeed encompass the pursuit of happiness: ‘To meet our people’s desire for a happy life is our mission.’ Unfortunately, it falls well short of any desire to promote individualism, and especially to advance the liberty of each individual from the reach of the Communist Party.

Instead, Xi Jinping’s dream incorporates a troubling whiff of nationalism and of a repackaged form of authoritarianism. It is no coincidence that Mr. Xi’s first mention of his dream of ‘the great revival of the Chinese nation’ came in November 2012 in a speech at the national museum in Tiananmen Square, where an exhibition called ‘Road to Revival’ lays out China’s past suffering at the hands of colonial powers and its rescue by the Communist Party.

In bowing towards a renewed nationalism, Xi Jinping is already courting China’s armed forces. In December 2012, on an inspection tour of the navy in southern China, he spoke reverently of a ‘strong army dream’. Suggestively, he told the generals that the spirit of a strong army lies in resolutely obeying the orders ofd the Communist Party. The Chinese dreams, he stated is an ideal. Communists should have a higher ideal, and that is Communism.

Of one thing, one can be absolutely certain. Xi Jinping’s dream falls well short of any notion of the rule of law. The rule of law can only come to China when dictatorship collapses. And Xi Jinping’s dream does not carry with it any notion whatsoever of a martyr’s death.

Hat Tip: ‘Xi Jinping and the Chinese Dream’, The EconomistMay 4, 2011

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Posted in nature of an autocracy, political philosophy, progressive socialism, relevance of economic knowledge, Uncategorized, war and peace | 2 Comments »

Cyprus should reunite

May 5, 2013

Greek Cypriots confront a grim economic future following banking collapse and bail-out by the euro-zone. Gross domestic product will decline by 15 per cent in 2013, by another 15 per cent in 2014 and perhaps by another 5 per cent in 2015..That is comparable to the decline over 1974-1975 following a failed Greek-led coup followed by a successful Turkish invasion and a Turkish-Cypriot-controlled north.

It will take many years for Greek-Cyprus to return to its pre-crisis level of gross domestic product. A more vibrant north currently rivals the lowered living standards of the south.

The island as a unified whole, however, would enjoy two promising sources of growth. One is the recently discovered Aphrodite gas field in the Easfrern Mediterranean. The other is tourism, an underdeveloped industry with plenty of scope for foreign investment.

Without reunification, both sources of wealth are unlikely to be tapped Both governments lay claim to the gasfield while the cheapest route for exporting the gas would through Turkey. Tourists shy away from unstable regions.

Whether Cypriots will respond to strong economic signals is far from certain. Cyprus, it is said, never misses an opportunity to miss an opportunity. However the combination of a Greek-Cypriot meltdown and the Aprhrodite gasfield may just suffice to return the crazy Cypriot people to to a modicum of rationality. Sometimes even irrational peoples recognize win-win situations.

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Posted in do well while doing good, relevance of economic knowledge, Uncategorized, war and peace | 2 Comments »

Affirmative action should be terminated

May 4, 2013

Above the entrance to the U.S. Supreme Court four words are carved: Equal justice under law. The message is perfect for a people that pursues inalienable rights to life and liberty and an imprescriptible right to property – even a society that once pursued such objectives very unevenly across the races.

It is tempting for some to request unequal treatment under law designed to benefit those treated badly in the past. Such indeed is a current occurrence in the United States with respect to certain ‘minority groups’. But what may be popular and widespread is fundamentally wrong.

Once equal justice under law has been established, it should never be violated again. For to violate the rule is to suggest that there is a better rule, which is untrue. No society can pursue the goals of life, liberty and property effectively in the absence of the rule of law. And those four words carved above the entrance to the U.S Supreme Court perfectly express the essence of the rule of law.

Hat Tip: Time to scrap affirmative action’, The Economist, May 4, 2013

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Posted in do well while doing good, liberty and classical liberalism, political philosophy, property rights, relevance of economic knowledge, Uncategorized | 2 Comments »

Illinois at last moves to control state pensions

May 3, 2013

Illinois has the dubious reputation of the worst state pension deficit in the United States: $98.6 billion.In part because of this, Standard & Poor’s gave Illinois the lowest credit rating in the nation.

Democrats, of course, control both the House and the Senate and the Governorship. So it is to their credit that the House has passed a bill to cut state pensions and to increase contributions. The Governor also supports the bill. The Senate is wobbling but may well endorse the bill.

Do not hold your breath readers, that commonsense is sweeping through Illinois. An 800 pound gorilla lurks in the shadows. The public sector unions threaten to sue the state for breach of contract should legislation go through. It is a truly hard battle to take down these dinosaurs who are the principal cause of such budgetary headaches.

Still there is a chance and that is much better than another roll-over by the state,

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Posted in budget deficits, do well while doing good, economics and public choice, relevance of economic knowledge, Uncategorized | 2 Comments »

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