Friday, 8 February 2013

SUZUKI SAMURAI: “I met a young fellow called Nath”

Our roving Asian correspondent Suzuki Samurai (you know who we mean) gets a lesson in obedience over a beer.
I met a young fella the other day called Nath (pronounced Nat), a twenty-year-old who speaks bang-on English. Nath teaches at another school not far from me. He asked me to come and meet his students, which I agreed to do as most of the time outside working hours I spend on nothing more important than counting my navel fluff. I got to Nath’s school at 5pm, as agreed (which surprised him), and entered what appeared to be a rather decent house. In fact it was a ruin rather than a house. (Houses in Cambodia doubling as shops, offices, schools and government buildings … or is it the other way round?)
Anyway…Packed into these unlined, concrete boxes with concrete and dirt floors and filthy ‘classrooms’ were up to sixty wide-eyed, bushy-tailed teenagers marvelling at the foreigner in their midst.  (I really am quite spectacular in these parts, one reason I hang around). I answered the usual ‘where you are come from’? ‘why you go to Cambodia’ broken English stuff, asked a few questions of my own and departed. All very nice.
I met Nath again on Sunday evening – his only day off - for a quiet few at the local tent (bar). He told me there are 700 students attending this school of his (this is a house remember) and that he gets paid $50 per month for six days a week of sixty students.
“Tough job,” I said pouring ice-cold beer down my neck.
Shrugging, he answered, “It’s ok, it doesn't cover my costs each month but I like it.”
With a change of subject I asked, “So what’s it like being a teenager in Cambodia”?
“Well, it’s hard to have an opinion.  You are not supposed to question you parents, especially your father … that’s why nothing changes.” Then he started to talk full time, so I let him, only interrupting to order more beer.
“If your father thinks you should work on the farm growing rice, you have to do as he says. If I want to do something different with my life, I had to talk to my mother about it, and she would kind of tell him in little pieces. He thinks me learning and teaching English is a waste of time, and a waste of his money. I want to tell him that I want to have a different life, but I can’t because that would be rude, and other people will look down on me for doing it. So I just shut up. Most kids live a life like this, and the old people are getting angry because they think that the way they did things was better.”
He went on, “I was a monk; from age fifteen to eighteen. I didn't really want to but my parent s said that if I become a monk then they will be blessed; which is what a son should do to return the favour to them of being born and raised by them.”
“How was that, I asked?”
“Kind of strange when I look back, all we used to do is sit around memorizing the old Buddha language, and going to pray for people; in return they would give us food, or money. Monks can’t eat after noon, only in the morning. Females are not allowed to touch monks, you can only touch your mother in special circumstances like when she is sick, but you have to ask the leader first.”
I grinned and asked, “You were a youth, but you couldn't touch a female? - “Did you think about girls/women?” I asked in a tone so as not to be too crude, even for me.
“No,” he said emphatically, “I never thought about that kind of thing; I don't know why, but for those three years I just didn't .”
“There must have been a lot of meditation,” I said, seeing if he’d pick it up. “Yes, we meditated all the time.” (Obviously not.)
He finished by tell me, “I want to have my own school one day, but first I have to find a way of getting money; I thought of buying a tuk-tuk and driving it to Phnom Penh.”
I suggested that he’d make a great tuk-tuk driver as his English would do him well with the tourists.
His face lit up like a Christmas tree.
As parents do in China, Cambodian parents put enormous obligation on their children, trying to keep them very close and somewhat ignorant. They do this openly and deliberately, telling them that everything they do is for their children, and they do it so that the children can keep them in their old age. The ignorance aspect they might do by not letting them have independence until they get married, and even then it spills over.
Even when it comes to things like getting a driving license, or insurance, or opening a bank account, it is usually the father who organises everything and structures it to keep everyone in need of them. This situation is fading away, but it is only fading away very slowly.
Not everyone can be a tuk-tuk driver in Phnom Penh.


Interplanetary Cessna

Software engineer Glen Chiacchieri asks the pressing question on everyone’s mind:

“What would happen if you tried to fly a normal Earth airplane above different Solar System bodies?”

The answer, courtesy of xkcd, is this…


… reasons for each of which—fascinating reasons—are given here.

[Hat tip Shutists]


The Errors of Keynes

A guest post by Philip Bagus on the appearance of a new book demolishing the pseudo-economics of John Maynard Keynes—in whose name a mountain of debt and a pseudo-golden shower of paper money has been pissed out in recent years to “save the world,” to no positive effect whatsoever.

_KeynesThe Austrian School of economics has provided the world with devastating critics of Keynes's magnum opus The General Theory of Employment, Interest and Money for a long time. Friedrich A. von Hayek, Jacques Rueff, Henry Hazlitt, Murray Rothbard, Ludwig Lachmann, Ludwig von Mises, George Reisman and William Hutt have already provided important arguments against Keynes and Keynesianism.

Now we can add a new name to that distinguished list. In 2012, Juan Ramón Rallo has published a new Austrian critique of TGT in Spanish with the title Los Errores de la Vieja Economía (The Failure of the Old Economics) in honor of Hazlitt's work The Failure of the 'New Economics'.

In Hazlitt's time, Keynes's program was still revolutionary and described by Hazlitt as a kind of “New Economics” that broke with the insights of classical economics and especially with Say's Law. Now, Keynesianism is mainstream. Keynesianism, and especially its main idea that spending reduces unemployment, is still taught in universities, applied by grateful politicians, and prominently defended by the 2008 Nobel Prize winner Paul Krugman.

Indeed, the immediate political response to the current financial crisis in the Western World was inspired by Keynes’s General Theory. A second Great Depression was to be prevented and Keynes's insights applied. Governments engaged in loose monetary policy combined with fiscal stimulus in response to what, through Keynesian eyes, appeared to be a bubble caused by reckless speculation, which was in turn inspired by animal spirits. Thus, even if Rallo's book were just a summary of the old arguments against The General Theory, the moment for publication would be more than appropriate, since the ideas of the past are still the praxis of the present.

Yet, Los Errores de la Vieja Economía is much more than a summary and synthesis of the old arguments by the aforementioned Austrian authors. Rallo builds upon, combines, and develops these arguments in a systematic way. Most importantly, he adds his own innovative ideas to develop a devastating case against Keynes.

Rallo's critique, employing Austrian economic theory, is rigorous, systematic and exhaustive. Significantly, Keynes's ideas are not twisted or distorted. The absence of strawman arguments makes Rallo's attack against the core of Keynesian beliefs stronger than most. Rallo also does not search for terminological contradictions and inconsistencies. In this sense, Rallo's critique is more profound and devastating than for example the parts of Henry Hazlitt's brilliant critique that emphasize Keynes's inconsistencies, imprecision, and explanatory fuzziness. Rallo has a great and genuine interest in giving a clear and coherent picture of Keynes's reasoning and presents Keynes in the most favourable light.

Let's have a look of some of Rallo's arguments, beginning with Keynes's famous critique of Say's Law. Keynes's distorted version of Say's Law in his General Theory states that supply creates its own demand. Rallo vindicates Say's Law in its original version: In the long run, the supply of a good adjusts to its demand. Ultimately, goods are offered to buy other goods (money included). One produces in order to demand, which implies that a general overproduction is impossible.

Hazlitt, Henry

Say's Laws leads us straight forward to the most innovative argument in Rallo's book that addresses the old argument against hoarding. Even harsh critics of Keynes, for example from the monetarist or neoclassical camp, admit that Keynes was at least right in that hoarding is a destabilizing and dangerous activity.

Rallo, however, proves and emphasizes the social function of hoarding. To demand money is not to demand nothing from the market. Hoarding is the natural response of savers and consumers to a structure of production that does not adjust to their needs. It is a signal of protest to entrepreneurs: “Please offer different consumer and capital goods! Change the structure of production, since the composition of offered goods is not appropriate.”

In a situation of great uncertainty, it is even prudent to hoard and not immobilize funds for the long run. Rallo provides us a visual example. Let's assume that uncertainty increases because people expect an earthquake. They start to hoard, i.e., they increase their cash balance, which gives them more flexibility. This is completely rational and beneficial from the point of view of market participants. The alternative is to immobilize funds through government spending. The public production of skyscrapers is not only against the will of the more prudent people; it will also prove disastrous if the earthquake is realized.

Hoarding is an insurance against future uncertainties. Rallo argues that, if the demand for money increases (i.e., liquidity preference increases) due to the precautionary motive, short-term market rates of interest tend to fall, while long-term rates increase. People invest more short term and less long term in order to stay liquid. This leads to an adjustment of the structure of production. More resources will be used for the production of the most liquid good (i.e., gold in a gold standard), and for the production of consumer goods. The structure of production shifts toward shorter and less risky processes reducing longer and riskier ones. Hoarding, therefore, does not cause factors of production to be idle that shouldn’t be. Factors are just shifted toward gold production and shorter-term projects. Rallo insists that it is not irrational to hoard. Indeed, when long-term projects are maintained and economic conditions change, projects might have to be liquidated suddenly. For example, the earthquake would destroy the skyscraper in progress.

It should be noted that most Austrians do not hold a hybrid liquidity preference / time preference theory of interest. For Rallo the interest rate, or the structure of interest rates, is determined both by time preference and liquidity preference. Most Austrians defend the pure time preference theory of interest. My own position on this question can be found in this article co-authored with David Howden. Due to uncertainty an actor prefers to be liquid rather than illiquid. Due to time preference an actor prefers to be liquid rather sooner than later. Therefore, the yield curve tends to be upward sloping. When uncertainty increases, the yield curve tends to get steeper. In a financial crisis, however, another effect tends to prevail over this tendency. When society is in general illiquid, the high demand for short-term loans, the scramble for liquidity, tends to cause a downward sloping yield curve.

Idle resources are another important topic in Rallo's book since Keynes recommends inflation in the case of idle resources. Rallo asks why factors are unemployed and comes to the result that their owners demand a price for their services that is higher than their discounted marginal value product. In these circumstances, inflation implies a redistribution in favour of the owners of those factors, or a frustration of attempts to restructure, i.e., the economy suffers from forced saving or capital consumption.

In contrast, when factors of production adjust their prices, i.e., wages fall back to their discounted marginal value product, aggregate demand does not fall as Keynes suggests. On the contrary aggregate demand increases, because total production increases.

Rallo goes relentlessly after other Keynesian concepts. The famous “investment multiplier” requires idle resources of all factors of production. More precisely, for Keynes to be right you need voluntary unemployment of all factors of production plus idle capacity in consumer goods' industries. If there is no voluntary unemployment of all factors, government stimulation of new projects will lead to bottlenecks as factors are bid away from profitable investment projects. If all types of factors are idle, but there is no capacity in consumer goods industries, then government stimulus will raise prices of consumer goods and lead to a shortening of the structure of production. If, however, there is a general idleness of factors and idle capacities in consumer goods industries, why is there no voluntary agreement between owners of factors of production and entrepreneurs?

Another important Keynesian idea that Rallo tackles is the famous liquidity trap. A liquidity trap exists when, in a depressed economy, interest rates are very low. In such a situation Keynes regards monetary policy as useless, because speculators will just hoard newly produced money. Speculators will not invest in bonds because they are at maximum prices and will fall when interest rates finally rise. At this point monetary policy becomes impotent. Public spending becomes necessary to stimulate aggregate demand.

Rallo shows that after an artificial boom, in a situation where there are many malinvestments and a general over-indebtedness in the economy, there is indeed almost no demand for loans even at very low interest rates. We are actually faced with an illiquidity trap, as agents struggle to improve their liquidity. They want to reduce their debts and not take on more loans. The monetary policy of low interest rates actually worsens the situation, because with low interest rates, there is no incentive to prepay and cancel debts (because their present value is raised). The solution to this situation of general uncertainty is hoarding, stable institutions, the liquidation of malinvestment and the reduction of debts.

High uncertainty does not imply high unemployment, since even under high uncertainty the reduction of prices for services of factors of production renders profitable new projects. Under high uncertainty, these projects will be gold production (in a gold standard) and the short-term production of consumer goods.

As Rallo points out in contrast to Keynes, it is not aggregate supply or aggregate demand that is important, but their composition. If, in a depression with a distorted structure of production, in a liquidity trap situation, aggregate demand is boosted by government spending, the existing structure cannot produce the goods that consumers want most urgently. The solution is not more spending and more debts, but debt reduction and the liquidation of malinvestments to make new and sustainable investments feasible.

In contrast, for Keynes, the problem is always insufficient demand. So what can we do if consumers and investors do not buy the goods of that companies offer, but instead hoard? Well, Keynes recommends lowering taxes and interest rates, to devalue the currency, or that the government buys the products for consumers. But, why, asks Rallo, should consumers and investors buy goods they don't want?

Keynes’s answer is that otherwise unemployment will increase. Rallo responds astutely: But if a person is forced to buy with his salary something that he does not want, why shall this person work at all? The alternative to forced buying is to lower wages to their discounted marginal value product, which increases production and demand. As Rallo points out, society does not get richer if the government induces or forces people to buy goods they don't want. Thus, for Rallo the essence of Keynes’s General Theory is the following: when people do not want to buy what is produced, the government should force them to act against their will.

The insights from Rallo's book presented here are only a small selection. Rallo also offers an analysis of Keynes's main definitions and the theoretical errors behind them, such as their pro-consumption bias. He provides an Austrian analysis of financial markets, discussing the interrelations between the yield curve, interest rates, the discount rate, the structure of investment, the liquidity trap and the stock market. He analyses real and nominal wages, business cycles, political implications, and intellectual predecessors of Keynes's General Theory using Austrian theory. Also very useful is Rallo's guide for readers of The General Theory that makes reading and spotting Keynes’s main mistakes, chapter by chapter, easy and efficient. As a plus, at the end of the book, Rallo also provides a critique of the IS-LM model developed by John Hicks and Franco Modigliani which formalized Keynes's theory and is still taught at universities around the world.

Rallo's book on Keynes's General Theory is full of brilliant insights and provides the most powerful and complete case against Keynes currently available. The well-written Los Errores de la Vieja Economía will be the future reference for scholars and layman alike looking for errors in Keynes's thinking and today's policies. The main downside of the book is that it is written in Spanish. Hopefully, the work will be available in other languages soon.

Philipp Bagus is an associate professor at Universidad Rey Juan Carlos. He is an associate scholar of the Ludwig von Mises Institute and was awarded the 2011 O.P. Alford III Prize in Libertarian Scholarship. He is the author of The Tragedy of the Euro and coauthor of Deep Freeze: Iceland's Economic Collapse, both of which are available in English.
See his
website. Send him mail. See Philipp Bagus's article archives.
This review first appeared at the Mises Daily.

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Thursday, 7 February 2013

DOWN TO THE DOCTOR'S: Peter Schiff Talks With Doug Casey

Libertarianz leader Dr Richard McGrath has been watching videos…

I don't normally submit two offerings in a week, but I just have to share this with readers. It's an interview conducted by Doug Casey with Euro Pacific Capital CEO Peter Schiff.

It will come as no surprise to hear Peter Schiff extolling the virtues of purchasing gold as a hedge against the collapsing U.S. dollar, warning of the coming inflationary consequences of the QE3 printing of money tokens, nominating Ben Bernancke as the worst ever Chairman of the U.S. Federal Reserve, and predicting the demise of living standards for Americans and others who suffer under high-tax deficit-funded big government.

But did you know that Peter's father Irwin Schiff is (as Peter puts it) a political prisoner? At age 84, Schiff Sr. is serving a 13 year prison sentence for refusing to pay federal income tax and for contempt of court.

Watch and listen to Peter's version of how the various trials were conducted and why he believes his father is the victim of a miscarriage of justice.   

See ya next week
Doc McGrath

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Indonesia is … not well.

Sent through by our roving Asian correspondent Suzuki Samurai is this piece on Indonesia that appeared in The Diplomat:

Indonesia has made a remarkable comeback from being Southeast Asia’s economic basket case in 1998 to an emerging market whose economy has been growing annually at more than 5 percent for several years.


Yet, Indonesia’s economic growth is neither sustainable nor inclusive.


An inconvenient fact is that Indonesia’s economic growth is mainly driven by a commodity boom fuelled by China’s appetite for raw materials and global demand for biofuels [which bubble is soon to burst] …
    The other main driver of Indonesia’s economic growth is domestic consumption. This is mostly driven by easy access to credit cards.

Sounds a little too much like a rather large island just the other side of the Tasman, doesn’t it.



Yet again another Novopay pay round has been labelled a shocker, as “the Ministry of Education fielded hundreds of calls from school staff either not paid or underpaid by Novopay yesterday.”

As you might have noticed, a ministerial inquiry is about to be established to inquire why the centrally-planned, centrally-governed, one-size-fits-all system failed. 

Perhaps the first question to be asked is ‘why is such a system is even necessary?’

Schools have their own pay administrators, who currently spend around half their time making up calculating pay and the other half trying to remedy stuff-ups by Novopay. Why on earth not have them simply pay the staff from the school’s bank account, without any need at all for a centrally-planned, centrally-governed, one-size-fits-all payroll system?

Why not?

Because perhaps the second point to contemplate is that the problem with Novopay is not specifically a software problem at all.  I suggest instead it’s exactly what you’re expect of a centrally-planned, centrally-governed, one-size-fits-all system.

Which, when you think about it, is exactly what you have with the government’s centrally-planned, centrally-governed, one-size-fits-all mis-education system.

It’s just that  the failures with Novopay are far more obvious than the failures of the mis-education system itself.


Mainzeal is a symptom of a larger problem

When a large builder like Mainzeal falls over it causes a bigger splash than all the other smaller builders that have quietly retired, gone under, or moved their assets to Queensland—but the causes of their collapse is the same.

Questioners have been asking this morning how it could  happen just when rebuilding in Christchurch is just about to start?  How it could happen when Auckland has a serious housing affordability problem, and a  severe shortage of starter homes.

Let me venture a guess.

This is partly due to some poor management, as Brian Gaynor and others have hinted at, but it’s also a symptom of the facts contained in both questions.

How could it happen just when rebuilding in Christchurch is just about to start? Because, for two years, rebuilding in Christchurch has not been allowed to start—by order of the government. Another great example of the failure of central planning preferred by this government.

And how could it happen when Auckland has a serious housing affordability problem, and a severe shortage of starter homes? Simple. It’s happened because there is a serious shortage of starter homes being allowed to start—a great example of the collapse of the model for speculative housing* about which this government has done nothing but talk.

In other words, Mainzeal’s collapse illustrates the problems facing every builder in the country.

Add to that the fact that Mainzeal, like almost every other builder in the country, has taken the rap for leaky home problems caused by others, and it’s frankly no wonder at all that it’s gone down.

It’s caused a bigger splash, but every builder, developer and property investor faces the same problem.

I suggest you direct your anger at the appropriate suspects.

* What is speculative house building? It’s when Joe Builder buys a site, builds a house on it, and sells it to Mr and Mrs New-Home-Owner for more than he’s shelled out—giving him a small profit which he can use to build his next one. This is how “spec” houses have been built since Adam was a lad. Now however the cost to build a house outstrips even the cost people are prepared to pay for it. Meaning the model for spec building—the engine of affordable housing—is broken. And things won’t be fixed affordably until this model is repaired: As a simple measure of when affordable housing will be built again, it will be when the model for speculative house building returns.

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Tuesday, 5 February 2013

SUMMER SNIPPETS: ‘Parallel Motion: A Biography of Nevil Shute’

Snippets from my summer reading of Parallel Motion, a new biography of novelist Nevil Shute, author of A Town Like Alice, Trustee from the Toolroom, No Highway and many more novels showing the best of the human spirit.

Shute summed up the carefree days of peace before the First Wold War with the poem Romance by Eleanor Geach… [but for the schoolboy] Shute, as for millions of others, the attitude to the War [and to life] changed as the casualties increased…  His thoughts were no longer of a career on leaving school.  As he later wrote, he was ‘born to one end’: to go into the army and do his best before he too was killed…  The school casualties mounted almost daily with the names of older boys, whom he had known, being read out in Chapel, and realising that younger boys might one day be kneeling in remembrance of him.”

For Shute, as for the country as whole, the war had been a costly and devastating experience.  His beloved brother and many of his friends from school had been killed.  Indeed, some 320 [schoolmates] were killed during the First World War.  Shute had mentally prepared himself for the same fate but he had been spared; he was one of the reprieved.  He had a future and began to realise there was such a thing to be got out of life as fun.”

In early 1936, his aircraft design and manufacturing company Airspeed designed their new Envoy plane around the new modern Wolseley radial engine.
“So it came as a real blow when [Wolseley’s] Lord Nuffield announced in 1936 that they would cease making the engine, which had been developed at a cost of £200,000.  Nuffield’s decision arose from the system adopted by the Air Ministry.  The ordering procedure used I.T.P (Instruction to Proceed) contract terms.  This [heavily bureaucratic[ system specified a maximum fixed price which could, after investigation, be less.  Lord Nuffield got the I.T.P. contract documents for the Wolseley radial engine and realised the implications.  The terms would have required re-orientation of their offices with an army of accountants to keep track of production costs… So the aero engine project was abandoned, much to Shute’s dismay.  He regarded it as a major disaster for Airspeed, and decided that he must make an effort to see if Nuffield could be persuade to change his mind… Lord Nuffield received him courteously.  This was the same William Morris whom Shute, as a schoolboy, had watched building his cars in Longwall St, Oxford.  Recently ennobled, he was the head of a large manufacturing business that included Wolseley.  He listened carefully to what Shute had in mind and was sympathetic, but reminded Shute that he had the Air Ministry to thank for his decision to stop manufacture of the aero engines.  He was angry with the Ministry and told Shute he had ‘sent that I.T.P. thing back to them and told them they could put it where the monkey puts his nuts.’
… The Wolseley episode left a sour taste in Shute’s mouth… To his mind civil servants, with their restrictive practices and small-minded attitude, had deprived the country [at at time of impending war] of an excellent aero engine.”

1949 saw Shute piloting a tw0-seater Percival Proctor nicknamed ‘Item Willie” on the then difficult journey from London to Australia, stopping only for fuel and servicing along the way.
“[From the airfield] they took the bus into Athens so they could visit the Acropolis.  [His passenger] thought the Parthenon was one of the most beautiful buildings he had ever seen.  Shute said he preferred the Rockefeller Plaza, holding that it was a complete work of art, whereas the Parthenon was handicapped by being a ruin.”

61 days after leaving England, they cleared customs in Darwin.  After enjoying Australia climate, hospitality and friendliness  for a month he landed in Sydney, at Bankstown .  
“There he ran into trouble, not a good introduction to Sydney.  He was told he should have flown to Mascot.  He phoned the controller and said that Bankstown was his destination, that he had made forty landings in Australia and Bankstown was the forty-first: He would take the documents to the Custom House or they could come and get them, whichever they preferred.  He then rang off and went to lunch.
    “On his return, there was a message saying that unless he flew to Mascot immediately, police action would be taken… Customs [there] insisted on opening all his luggage and searching it—God knew what for, since he had been in Australia for a month… There he arranged with de Havilland for a programme of work to be carried out on Item Willie he thought would take rather more than a week… He would therefore have to stay in this unpleasant place for 10 days or so.  He wished to God he had never come south in this country, but passports, visas and aircraft permits to fly home could not be secured except in Sydney or Melbourne.  Sydney seemed to him to be an ugly, cheap city full of drunks.”

His impressions of Melbourne were vastly different, and he was to settle there the next year, just after the publication of A Town Like Alice.
“In mid-June 1950 Shute wrote to [long-time friend and adventurer Sir Alan] Cobham … saying he was packing up in England and going to live in Australia…  His decision to leave England was prompted by several factors, not least of which was a major public row over his petrol ration.  In Britain in 1950 petrol rationing was still strictly enforced [by the Attlee Labour Government], five years after the end of the War.  [Shute engaged in lengthy but essentially futile correspondence with “The Ministry” proposing an alteration in his “allocation” so he might travel for research, saying after sending one letter] he would watch for their reaction to his proposal with interest since the ability of the Government to conduct itself with good sense in such matters would seriously affect the decision he took whether to stay in England or go… Nearly a fortnight went by without a reply from the Ministry, which caused Shute to send a letter rebuking them for the delay which in business circles would be “regarded as an act of studied insolence.” … By the time he won [his third victory in eighteen months] he had made up his mind to leave England…  The row over petrol rationing, like the demise of the airship programme [which had been another lesson in militant bureaucracy], marked a turning point in Shute’s life…
    “Bureaucracy, always Shute’s bête noir, had raised its obstructionist head and inflamed his anger, vented in his letters to the Ministry…  He did not leave for the United States, as he told the Ministry, but Australia… He had been impressed with Australia during his visit there, more so with Melbourne than Sydney.  In his letter to the Society [of Authors] he said he reckoned he could get three good books out of  there which would probably take him five years to research and write, and five years was as far as anybody could see in those times.”

When Shute arrived in Melbourne there was quite a crowd of reporters at the foot of the gangway waiting to question him.  They wanted to know if it were true that he had ducked out of England to avoid high taxes.  Shute replied that the taxes in England were unpleasant and so was the current government’s experiment in socialism.  He added that he had also decided to come to Australia because everything about the country fascinated him—even the climate.”

“[In his autobiography, Slide Rule, Shute] dealt at length with the [1920s] airship programme and the rivalry between the [private] R.100 and [the government] R.101, and placed the blame for the R.101 disaster squarely on the civil servants and [Air Minister] Lord Thomson in particular.  Reflecting his experiences at that time and also probably his treatment at the hands of the Ministry of Fuel and Power, he wrote that ‘a civil servant or politician is still to me an arrogant fool until he is proved otherwise.’ …  Shute felt that a study of the accident could ‘provide data to rectify many of the ills that plague our democracy today.’” 

On the Beach was to feature a motor race towards the end and, early in 1956, Shute ordered a Jaguar XK140 sports car.  This was so that, he claimed, he could obtain first-hand experience of racing a high performance car… As he wrote in Slide Rule, ‘it is very good for the character to engage in sports which put your life in danger from time to time.  It breeds a saneness in dealing with day-to-day trivialities which cannot be got in any other way, and a habit of quick decisions.”

From his earliest days in Australia, Shute had taken an interest in the fortunes of young Australian writers…  He was on friendly terms with Robert Menzies, the Prime Minister, and also with Richard (Dick) Casey, then Minister of External Affairs… and sent off for publication … a memorandum he wrote to Menzies.  The purpose of the memorandum was to set out his thoughts, not only on creative writers, but also on artists and composers in Australia…
    “It was the purpose of the memorandum to show how Australian prowess in in the creative arts of peace might be nurtured and displayed to the world…
    “At the outset he said he did not believe it was wise to assist writers with any form of subsidy so they could write a book.  He reiterated what he said before—that is was best for the young man or woman who wanted to write to take a job in a commercial occupation and write in the evenings until the writing became more profitable.  That way the writer would get to know the characters of men and women during his or her formative years.  They were the raw material of stories…
    “A certain degree of success was of course necessary or the young writer would stop writing,  But too much encouragement from literary authorities, without corresponding support from the public, might induce in the writer an illusion that he was a superior person to the common man and a belief that, if they public would not read the pearls of wisdom he laid before them, they should be made to do so in their own interest.
    “Shute wrote [however] that subsidies from the [Commonwealth Literary] Fund should continue.  Such magazines gave useful encouragement to writers.”

In conclusion, Shute wrote that a person who was gifted with creative powers could usually exercise those powers in many fields of the world’s creative activities.  In his early years, his work on new aircraft designs was very satisfying to the creative side of his character and those years were followed by creating a new aircraft company and working it up from zero until it employed a thousand men in time of peace.  He went on to say that, compared to creative work of that magnitude, the writing of fiction stories seemed to him at the time to be ‘a pansy occupation’ and still did.  If the aircraft industry had continued as it was when he was a young man, when aircraft could fly within six months of first conception, then he might still be an engineer.”

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Why does Waitangi Day belong to one race?

Why does Waitangi Day belong to one race?

It could be an annual non-racial nation-wide celebration of everything we’ve achieved in this country, which in just over one-hundred and seventy years our we and our forebears have turned into one of the best little countries in the world. It should be a celebration of the bringing to these isles of British rights and the British rule of law, which in 1840 still meant something—and which have underpinned ever since our freedom and prosperity.

If any country has something to celebrate, it’s this one. Wet instead, tomorrow will be another annual diplay of attention-seeking race-based bitching.

Bitching, this year, about “current constitutional arrangements” (there is “no constitutional safety for Maori” says a Margaret Mutu eager for a future of permanent hand-outs under a Maori-Party negotiated constitutional coup d'état).

Bitching this year, as every recent year, for all beaches to be given in perpetuity into the hands of tribal chieftains.

Bitching this year, as every year, for more handouts, more special favours for those of a particular hue, more legal standing for all those well-paid, well-upholstered tribal chieftains sitting at the trough around the BrownTable.

Bitching, this morning, about which particular misbegotten crone will get to hold John Key’s hand as he walks onto the marae.

Why do we countenance it?

And why do we let the whole agenda for celebrating the birth of our country belong to one race?

Time for something different. Time for a proper national day, and to turn this one instead into a One Law For All Day.

Which would, in itself, be much to celebrate.


DOWN TO THE DOCTOR’S: Salinger: Distinguished Ambassador For The Panic Merchants

Libertarianz leader Dr Richard McGrath has been waiting for a break in the weather of climate misinformation.

Climate alarmist and sacked former NIWA employee Michael James Salinger has really outdone himself this time. On January 30, when the focus of much of the nation was on searing (for New Zealand, anyway) summertime temperatures and drought, Salinger opined from his ivory tower that temperatures could reach the high thirties and possibly the low forties.

If New Zealand was ever going to break its record temperature, it would be now, Dr Salinger said.

“Parts of the South Island could expect temperatures over 40,” said the Oracle.

Notice that this stranger to truth* carefully said nothing about global warming. Nothing that controversial, not openly. This was posed as just a simple prediction of temperature in a specific region of the country, a day or two out from the time period under consideration. From a visiting and consulting professor at Stanford University, no less. Whose predictions carry weight. A certainty, surely.

Living on the east coast of the North Island, in one of its hotter towns, my curiosity was stimulated. And worried.  I had fears of Masterton wilting under some seriously scorching temperatures.

So what happened?

Almost immediately, the local weather predictors rubbished Salinger's calculations. MetServices Ian Gall said he doubted whether temperatures would ever reach 35C, noting that a north-westerly wind would be required for this to happen. And WeatherWatch's Philip Duncan said simply:

I don't think it's going to happen.

He was right. The following day, Masterton's official temperature reached 32.2, the nation's maximum, but at least eight degrees cooler than Salinger's doomsday prediction. Eight degrees! Yet Jim and his fellow travellers want us to ditch our gas-guzzling forest-killing ice-cap-melting automobiles and instead ride bicycles made out of plywood because of a predicted one- or two-degree increase in global temperature over the next century! Can anyone else see the irony in this?

As I write this, Masterton is enjoying a thunderstorm and heavy rain that was too much for some of the guttering around my home, with rainwater spilling over the side despite my having cleared them of leaves a week or two ago. Sorry to have to tell you this Jim, but the heatwave is over. The temperature here is dropping to 23 degrees tomorrow and 20 the day after, and it's going to keep raining. Oh dear. So much for Jim - he can't even manage a simple weather forecast for two days ahead. Why on earth should we believe his predictions for the next century?

Furthermore, Jim doesn't even have the courage of his convictions. He wouldn't voluntarily pay a levy on his own use of carbon unless a gun was held to his head. To quote the man:

A "voluntary emissions scheme" is like asking me to pay voluntary taxes - I would probably not pay them!

And what would stop you paying of your own accord this tax you so desperately want the rest of us to pay, Jim? I know the answer: it's not the mitigation of CO2 emissions that concerns you, it's making sure that everyone (especially the rich) is sucked into paying this stealth tax. Well, something has to fund all that wealth redistribution doesn't it?

Can you imagine how many carbon credits Ayn Rand's industrialist hero Hank Rearden would need to find to keep the likes of Jim happy:

“He saw his mills rising in the darkness, as a black silhouette against a breathing glow.  The glow was the color of burning gold, and ‘Rearden Steel’ stood written across the sky in the cool, white fire of crystal.  He looked at the long silhouette, the curves of blast furnaces standing like triumphal arches, the smokestacks rising like a solemn colonnade along an avenue of honor in an imperial city, the bridges hanging like garlands, the cranes saluting like lances, the smoke waving slowly like flags.  The sight broke the stillness within him and he smiled in greeting  It was a smile of happiness, of love, of dedication.”

See ya next week!

Richard McGrath
Leader, Libertarianz Party

* Editor’s Note: You’d think Soapbox Salinger might have been more careful, having been sacked after talking in the Herald on Auckland’s so called “hottest day ever” back in 2009 -- “the highest since official NIWA records began in September 1868” said the Scare Merchant – a remarkable judgement based on one outlying reading in Whenuapai, a station which only existed from 1945 to 1993 and from 2005 to now.

Here’s Martha & the Vandellas:


Monday, 4 February 2013

SUMMER SNIPPETS: ‘Race and Culture,’ by Thomas Sowell

More snippets from my summer reading, this time from Thomas Sowell’s 1994 classic, Race and Culture: A World View.

The effectiveness of particular cultures for particular things can be of the highest importance.  Much—perhaps most—of human history cannot be understood without understanding such things as the conquest of ancient Britain by the Roman legions against a vastly larger military force, simply because the legions were a militarily superior organisation from a more advanced society.  It is not necessary to claim that a particular people or a particular culture is superior in all things or for all time.  On the contrary, world leadership in science, technology, and organisation has passed from one civilisation to another over the centuries and millennia of human history.  But neither is it necessary to deny the greater effectiveness of particular cultures for particular things at particular times and places—even if other contemporary cultures may be superior for some other things.”

Neither race nor related concepts can be used in any scientifically precise sense to refer to the people inhabiting this planet today, after centuries of genetic intermixtures.  The more generic term, race, will be used here in a loose sense to refer to a social phenomenon with a biological component, rather than make a dichotomy whose precision is illusory.”

The incidence of economically valuable skills no doubt varies from class to class, but it likewise varies from ethnic group to ethnic group and from nation to nation.  The difference is that ethnic groups and nations have an existence independent of arbitrary definitions based on skills.  Moreover, some immigrant groups begin at a lower socioeconomic level than that of the surrounding population and eventually rise above them, due to their skills, work habits, or other economic performance differences.  They have changed class precisely because of their skills, capabilities, or performance.”

Vast differences between the economic productivity of peoples from different cultures do not imply that these differences are permanent, much less hereditary.  Early nineteenth-century Germans were clearly well behind the English in industrial technology … yet within a century had surpassed [them].  So had the United States within the same span of time.  Much the same story could be said of Japan [and now China], which moved from imitator to initiator over the same span of time…
    “The normal tendency of economic processes is to disseminate technology, knowledge and skills from their place of origin to where they are lacking.  The law of diminishing returns means that the rewards of any factor of production tend to decline where that factor is abundant, and to be higher where it is more scarce.  Like water finding its own level, abundant factors tend to flow to where their scarcity makes their productivity and reward greater. Thus capital, skills, organisation, technology, or hardworking labour tend to flow to regions and cultures where they are are especially scarce.  But the very scarcity and value of these skills and traits mean that those who possess them are more likely to become more prosperous than the indigenous people of the recipient countries. Political reactions to these economic realities [on every continent and in every century] have often been very negative, and sometimes violent.”

Formal education, especially among peoples for whom it is rare or recent, often creates feelings of entitlement to rewards and exemption from many kinds of work… Such attitudes affect both the employed and the unemployed.  Even those educated as engineers have often preferred desk jobs and tended to ‘recoil form thee prospect of physical contact with machines.’  In short, education can reduce  an individual’s productivity by the expectations and aversions it creates, as well as increase it by the skills and and disciplines it may (or may not) engender…
    “It is understandable that Third World peoples who have been rules for generations by colonial bureaucrats sitting behind desk, wearing collar-and-tie and shuffling papers, should seek to imitate that role when they get the chance.  But the wealth and power of the imperialist nation that put the colonial bureaucrat there in the first place was not created by sitting behind desks and shuffling papers…
    “Both in underdeveloped countries and among many lagging groups in industrialised nations, there has developed a taste for easy, self-flattering courses such as Maori Studies in New Zealand, Malay Studies in Singapore, and a variety of ethnic studies. in the United States.  The claim is often made that the morale-boosting effects of such courses will enhance the students’ academic performance in other fields, but this claim is wholly unsubstantiated.  What is clear is that easier courses, whether in ethnic studies or otherwise, prove attractive to lagging groups…”

The stunning impact of immigrants in transforming whole economies [is not peculiar] to European immigrants.  In [most] parts of the world, modern economic development was largely the work of immigrants or foreign investors, with the indigenous population playing little or no role in the modernisation process.  [In 1914, for example, foreigners owned, in addition to two-thirds of Argentine industry, nearly three-fourths of Argentine commerce. Nor was this pattern unique in South America.] In colonial Malaya, for [further] example, Chinese immigrants provided much of the labour that developed that country’s giant tin industry, and immigrants from India manned the rubber plantations—both financed largely by European and American capital.Similar patterns of European capital and non-European immigrant labour combining to create economic development could be found from Fiji in the South Pacific to countries on the east coast of Africa and the Middle East.  Yet in these and other countries, the earlier or indigenous population has almost invariably come to resent these foreigners, whether sojourners or immigrants, who raised the economic level of their country. In a later period especially, after the actual origins of particular economic activities have faded into the mists of time, foreign groups have often been denounced for having seized control of  the nation’s industries and exploited its people.  It is as if businesses and wealth came into existence somehow and foreigners happened to take possession of them.”

Housing is a very heterogeneous product, ranging from hovels to mansions, so the supply and demand for this product in a culturally heterogeneous populations offers highly varied possibilities, as does the perception of the outcomes by heterogeneous observers.  Many observers have been appalled by the housing inhabited by people of a different class, race, or national origin.  Sometimes this has reflected simply a difference in income between the observers and the inhabitants, the latter being unable to afford anything better.  At other times, however, the hosing choices have reflected different goals, or different trade-offs among goals … [Men] living as immigrants or sojourners, for example …. saving to take money back home or to bring their families over to join them [will have a contrasting demand for housing to those who might criticise the living conditions they are prepared to accept] …
    “…. In short, for these groups such as Italian men [and middleman minorities overseas, such as the Chinese in Southeast Asia, the Lebanese in West Africa, or the Indians in East Africa … or during the mass emigration of Jews that transferred the centre of world Jewry from Eastern Europe to the United States], housing choices as of a given time reflected long-run plans as well as short-run trade-offs.  All this tended to be ignored by observers shocked at these groups’ housing conditions, and especially by social reformers determined to do something about it.
    “Seldom have the crusades of social reformers been directed toward enlarging the set of options available to the groups whose housing the reformers disapproved.  More commonly, housing reform efforts have reduced the existing options, whether by “slum clearance” programmes that destroyed “lower quality” housing, by building codes that forbade construction of housing without amenities prescribed by reformers, or by other regulations limiting the number of persons living in a given space to what reformers found acceptable.  In these ways, less fortunate groups were forced to pay more for housing that they themselves chose.  Their incomes could no longer be used to maximise their own satisfactions, according to their own values, but were partially diverted to making observers feel better.”

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