Tag Archives: political economy

Stability vs Prosperity and Sovereignty

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It appears that Mark Carney, Bank of England Governor, prefers stability at the expense of British prosperity and national sovereignty. He said last Tuesday that

uncertainty surrounding the outcome of the coming referendum on Britain’s future in Europe is already being felt in financial markets, and that a vote in favor of leaving could cause a short-term hit to the wider economy.

A possible departure represents “the biggest domestic risk to financial stability,” Mr. Carney said, with potential consequences for Britain’s balance of payments with the rest of the world, its housing market, foreign investment and its banks.

“It is a risk to domestic financial stability, and it has some potential to amplify pre-existing risks to financial stability[.]”

Of course things will be turbulent during the transition from EU member, subject to lots of EU regulation that runs contrary to British law or what the Brits would prefer to be British law (things like being required to spend British taxpayer money as benefits to non-citizens and to non-citizen family members not even resident in Great Britain—Prime Minister David Cameron’s tentative agreement with the EU is only a temporary measure).

Don’t want the uncertainty of the outcome of the referendum? Then Carney should get behind the exit and reduce the uncertainty.

What would the British get from leaving the EU? Quite a lot. London’s financial district would be free to operate on free market principles, not EU rules. Great Britain’s tax laws would be set according to what’s good for Brits and British business and for attracting foreign businesses and investment, not according to protecting precious continental jurisdictions from the evils of tax competition. Great Britain’s private enterprises would be free to operate in accordance with British law and not EU regulation.

What would the British lose from leaving the EU? Those impediments. Not much else.

Staying in the EU would provide a strong measure of economic stability; those rules are established and well understood. But that stability is only intermediate; the EU will dissolve in the foreseeable future. The current refugee flow crisis is not the threat, though, for all the press it’s getting. No, the threat is exactly what the British would be avoiding if they succeed in leaving: economic dissolution. That threat was made manifest by the Panic of 2008 and emphasized by the Greek default crisis. These exposed the utterly differing and irreconcilable economic philosophies of the constituent members.

The transition ensuing from that dissolution will be far more destructive than any sneezes from a Brexit in the next couple of years.

The PRC’s Economic Malaise

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Andrew Browne had some thoughts in a recent Wall Street Journal article. PRC’s Premier, Li Keqiang, wanted to do some serious revamping of the nation’s economic structure and deemphasize a massively overbuilt industrial capacity, shifting the economy more toward consumer production and consumer spending. His words—”This is not nail-clipping; it’s like taking a knife to one’s own flesh”—were reminiscent of his predecessor’s actions. Zhu Rongji eliminated 30 million jobs in an actual overhaul attempt in the ’90s.

Thirty million jobs. That sounds like a lot, but with a workforce of roughly 800 million and roughly 95% employment (because, of course), those 30 million represent just 4% of the workers overall. That’s a sharp cut, but as job cuts go during downturns, it’s not that sharp.

But even that much was too much for Li. Or rather for PRC President Xi Jinping.

[H]igh-level economic policy-making and its practical implementation, once the preserve of the State Council headed by the premier, have increasingly fallen into the hands of Communist Party committees led by President Xi Jinping.

And

…Xi’s political preoccupations: to strengthen the party…to root out challenges to the régime, and to avoid social instability that could in any way threaten the party’s hold on power. If that means delaying unpopular economic adjustments, so be it.

“The party’s hold on power:” read that as Xi’s hold on power, say I. And the people of the People’s Republic can go hang.

Stem the Flow of Migrants

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That’s what the EU is trying to persuade Turkey to do according to a Wall Street Journal article.

Before I get into that, there are a couple of points of clarification that are necessary. First, there is confusion on the part of the WSJ and/or the European Union leadership regarding who it is that’s traveling. Most of the present flow consists of refugees, not migrants; although there are certainly migrants in the mix, along with terrorists.

From that, it’s easy to see the moral distinction among the three concerning their “right” of entry into any nation of the EU or into the EU generally. Terrorists have no right to do anything but die. Migrants have no moral right to enter a nation that doesn’t want them—the nation is sovereign over its own territory; sovereignty is the purpose of borders. It’s a highly useful thing, from a mutual prosperity perspective, to permit an influx (and outflow) of migrants, but that utility is purely…utilitarian. There is a moral obligation to permit entry of refugees, but that entry cannot be without limits and controls: the receiving nation must be able to set the conditions under which the refugees can enter, under which they can stay, and for how long they can stay, or else the nation will be unable to handle those refugees in anything approaching a humane manner.

Within that, then, there’s this about the EU’s pushing Turkey to impose a metaphorical, if not physical, barrier on the flow of refugees (not “migrants”) at the Turkish borders.

In a draft statement to be adopted later on Monday, the [EU] leaders are set to tell migrants that the route north of Greece is completely closed, a move that without Turkey’s help will leave huge numbers of people trapped within the already overwhelmed country.

Here’s Belgian Prime Minister Charles Michel:

There is only one possible solution: make sure the Schengen borders are perfectly hermetic against uncontrolled and illegal migrant flows[.]

Sure. And do what with them? The originating situation does not permit them to go back. Where they are cannot sustain them.

What the EU is proposing (instead?) makes little sense. They want Turkey to agree to take back refugees that have already made it into continental Europe (even Metropolitan Europe, to stretch an analogy), including Greece, and the EU will accept via direct transport (no harrowing and dangerous overland treks) “registered” refugees taken straight from UN-run camps in Turkey.

This raises a couple of questions. One is the nature of that registration: on what basis is the UN registering anybody, on what basis is the UN vetting anybody who’s being registered, on what basis do we even trust the UN to make a serious attempt at vetting? The other question concerns Turkey: the take backs and the direct-from-camp transports amount to little more than swaps of one population for another. How does this help Turkey deal humanely with the existing supply of millions of refugees already within its borders? There’s no easing of stress here.

Here’s an example of that stress, in one Turkish border town. Kilis sits within kilometers of the Syrian border and so is an early stop on refugees’ travels.

Home to about 100,000 Turks before the Syrian war, Kilis is straining from the arrival of more than 125,000 Syrians. The town’s water and sewage systems are struggling to cope. Schools are filled to capacity. Although Turkey is developing plans to build more classrooms, for now many Syrian children roam the streets, stay at home, or spend their days working in shops, cafes, and factories.

It’s been downhill from there, for the local Turks, for the refugees, for the nation of Turkey.

The Need for a Republican President

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The need is starkly illustrated by a couple of developments involving cases, the Supreme Court, and Justice Antonin Scalia’s death.

One development is this:

Dow Chemical Co had agreed to pay $835 million to settle a class-action case rather than risk an appeal without the conservative justice.

The other is this:

The state Rifle and Pistol Association decided against filing a petition asking the Supreme Court to hear the case fearing the conservative Scalia’s death will make winning the case virtually impossible.

[Rifle and Pistol Association President and National Rifle Association board member, Tom] King said his lawyers advised that going forward could damage the case because the High Court at the very least would likely deliver a split 4-4 decision that would leave the law in place.

This puts a very high premium on electing a Republican president, so we have a good chance of nominating and confirming a conservative judge to the Supreme Court.

The Left’s Iron Curtain

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…is getting a bit taller. I wrote earlier about the Democratic-Progressive Party’s wish to erect an Iron Curtain to keep American companies from leaving for more economically (read: tax) sound environments. Now, Democratic-Progressive Party Presidential candidate and proud Progressive Hillary Clinton is enlarging her Iron curtain. Clinton now is proposing this:

Companies that move jobs and production out of the US would lose previous years’ tax breaks under a proposal Democratic presidential candidate Hillary Clinton released Friday during a speech in Detroit.

The US would seek to “claw back” previous tax incentives for research and development and for domestic manufacturing associated with facilities or jobs that move abroad.

On top of that,

The Clinton campaign didn’t have an estimate of how much money its tax plan would generate for the government.

Of course not. The purpose isn’t to recover monies foregone as incentives to do this or that, it’s strictly to imprison private enterprises within the US, Soviet-style—because private enterprises aren’t jobs factories, rather they are, according to this candidate, jobs welfare programs.

Remember this in the fall.