Monday, November 24, 2014

So why should we care about Sutton? [updated]

In our office, sexual harassment is marked out of 10. 

There are people who care about Roger Sutton, about Ian Rennie and Gery Brownlee the rest of the big-government crew drawn wriggling into the light by the complaint about Sutton, about the “debate” about sexual harassment it has supposedly begin and the “conversation” about state services procedures it has apparently inspired.

I am not among them. Nor is anyone around my office.

Sutton should be shamed not for what he allegedly did in the privacy of CERA’s Christchurch offices, but for what he and CERA’s officer’s have done to Christchurch.

If Sutton and his motley crew had simply sat on their hands that would have led to fewer complaints. They stuck them instead into everyone else’s business – achieving their apparent goal of all-but ending the business of business in central Christchurch.

Thank goodness then that there are businessmen around like Richard Driver who, while Sutton played games, got on with doing what Christchurch businesses urgently need: building buildings.

Driver’s drive illustrates the different between the central planning and private enterprise.

More than anyone else, Diver has been disrupting the tidy plans of the bureaucrats by throwing up buildings faster than they can blink. They had this lumbering Blueprint plan for the city core. But Diver has raced ahead, populating Victoria St with 10 office developments in quick succession - half of them now open, half on the go - creating his own alternative CBD on the city's northern corner… It is going to be a proper community. The cool corner of the city to be in. And it is halfway there already. While the central city? The only office workers going into the official rebuild area are government employees and the major banks, says Diver

Victoria St is becoming the place for business to be in Christchurch. Mind you, it could have been elsewhere…

Walking down Victoria St, it is marked just how advanced it looks. Then to discover that Diver had tried to be a first mover in the Blueprint's City Mall, and now is being stymied in the health precinct as well, it does raise some questions.

It sure does…and some folk I know were saying this would happen soon after the quakes…but then they were just ideologues - apparently.

Predictably, people like

Diver soon became a problem for the “official rebuild” - the Blueprint masterplan drafted by the Christchurch Central Development Unit (CCDU), the specially set-up arm of the Canterbury Earthquake Recovery Authority (CERA)…. the grumble became that Victoria St was being allowed to run riot, siphoning money away from where the government plan wanted it to go.

“Planners” wanna plan. Meanwhile, entrepreneurs get on with delivering what folk actually want – often with the “planners” like Sutton and Brownlee as a major impediment.

So I don’t care what happened in CERA’s offices, except perhaps that it reveals the sort of egos who make it to the top of the bureaucratic tree.

Not long before [CERA/CCDU/CCC/Uncle Gerry Brownlee and all] issued their "blueprint" a group of out-of-town media were invited by Earthquake Minister Gerry Brownlee to see the progress [writes Herald journalist John Roughan]. Sutton joined us for coffee in the delightful little mall of shipping containers that private enterprise had created amid the demolition cranes and debris. I expressed disappointment at the wider scene and he replied with a sarcastic reference to the design of downtown Auckland.It was a surreal moment. Nobody knew what to say. What can be said to someone who raises the aesthetic deficiencies of Queen St when the core of his city is lying in ruins all around?
He didn't seem accustomed to criticism, he was used to being admired.
He was capable of saying strange things about himself. A few months ago he was quoted in the Herald on the subject of work-life balance.
His was a hard job, he said. "It has been busy. It is stressful. I try and manage myself; while I work long days I try to keep the weekends to myself. I enjoy the outdoors here - that wellness stuff. I do actually sit down every week and my PA makes me fill out a table of how many times I actually had proper exercise, how many pages of a novel have I read and how many proper interactions with friends have I had ... " …


… The nature of Sutton's departure has exposed weaknesses that probably affected his performance in other respects too. The Government decided some time ago to bring CERA into the Prime Minister's Department next year and Sutton was unlikely to see out his contract to 2016.
The head of the department has given him a parting hug this week but those who appointed Sutton should review their selection techniques.
If they looked past his long curls and other quirks at the time, they ought now consider whether those were not signs of strength but flagged a need for affection that has not served us well.

As Hayek once observed, in a bureaucratic system “the worst get on top” – and they lack all conviction.

While making things difficult for those getting out and doing things, Sutton’s CERA itself is all at sea, says Hugh Pavletich.

This organisation is filled to the gunwales with redundant Wellington bureaucrats and a large contingent of wordsmiths manufacturing progress fiction.
    Recovery Minister Gerry Brownlee ran the show … badly … with Roger Sutton playing very much a subservient “Yes Minister” role….
    Tedious (John Lennon style … “All you need is love”) and time wasting policy papers and public relations fiction do not build affordable housing and repair broken cities.
    Mr Sutton was never interested to learn why Christchurch housing is internationally rated “severely unaffordable.” Hardly a sexy subject of course. Not surprisingly … he made it clear he wasn’t interested in what I had to say !
    As former Speaker of the United States House of Representatives
Tip O'Neill said …  “Perception is reality in politics.”
    Roger Sutton had learnt that much. But only that much.

The real issue .. the long-term dysfunctional Christchurch Council
The real issues … being a long-term
dysfunctional Council …  meaning that the earthquake costs will likely be in the order of a staggering $40 - $50 billion, when they should have been somewhere between $15 - $20 billion, have been ignored to date.
    This was clearly all beyond Sutton’s comprehension.
    Brownlee proved incapable of learning anything either … as Chair of Parliaments 2007 / 2008 Commerce Committee Housing Affordability Inquiry, as I explained late 2012 within
Housing: Mr Key – Get on the Programme .
    Not surprisingly, Brownlee is being jettisoned as Recovery Minister. “Can-kicker” Key has even had more than he can stand. That’s how bad it is.
    I had written on these serious issue back June 2011 (soon after Sutton’s appointment at CERA) for Interest Co with
OPINION: Hugh Pavletich accuses Christchurch City Council of blindness, blunders and chain dragging; calls for effective leadership, 'open land' policy and bendy zoning.
    What did these realities have to do with a broad governance and management leadership more interested in perception ... and masking constant failure ?
    “Image” has been what it’s all about.
    This was helped in no small measure by a docile gullible and infantile local mainstream media. ….

The CCC’s Dalziel and Edwards ineptly protect Sutton
Remarkably … the Christchurch City Council still appears to have learnt nothing.
    Mayor Lianne Dalziel and Chief Executive Dr Karleen Edwards clearly participated in the Sutton “snow job”, with a “convenient” media release Monday 17 November (the day of the media fiasco) …
'Statement from Christchurch Mayor and City Council CEO' .
    It is useful to read the Dalziel/Edwards drivel in full, to illustrate the extent of inept media manipulation and what lengths the Authorities at central and local level went to, in vainly attempting to protect the bureaucrats and in masking the real problems and issues.
    Talk about dumb…

Christchurch’s problems and solutions are well known
What needs to happen in Christchurch was clearly spelt out at the
4000+ strong Peoples Protest 1 February 2012 and amplified a few months later with ‘Christchurch: The Way Forward.’
    These are issues Dalziel and Edwards chose to ignore since taking office, simply because they are not prepared to take on the bureaucrats…
    At central level,  there has been an urgent need for political leadership, to start us on the path of progressively de-risking New Zealand’s metros.
    This is essentially making them increasingly affordable and mobile, as Alain Bertaud, former Principal Urban Planner with the World Bank makes clear within the introduction to
this years Annual Demographia Survey.
    Mr Bertaud (with his delightful wife and fellow researcher Marie-Agnes) spoke to them at the Christchurch City Council late July, as part of a hugely successful 3 city New Zealand speaking tour. Deputy Prime Minister Bill English and Labour’s Housing Spokesman Phil Twyford met with the Bertauds as well.
    Unfortunately Dalziel and Edwards still appear more interested in constantly masking political and bureaucratic failure … and ignoring the issues that really matter…
    Generally, bureaucratic bungling … with its associated poverty creation and economic destruction … is a rather boring exercise.
   It is quite some job to get the public excited and energised about it. People getting increasingly angry and frustrated is about as far as it goes. They feel powerless and ignored by those in authority.
    The bureaucrats interests always seem to prevail … constantly protected by weak politicians across the spectrum.  

The Monday media circus
This week’s Sutton / CERA saga was different.
    It was pure theatre.
    Theatrical incompetence on a truly epic scale. 
     The only thing State Services Commissioner Iain Rennie failed to do in putting together the Monday media circus, was the appropriate theme music …
FREDDIE MERCURY: The Great Pretender – YouTube .
    John Cleese of the BBC sitcom 
Fawlty Towers and his pals certainly have serious competition in New Zealand. 
    Yet public opinion swiftly changed, as the truth bubbled to the surface soon after Mondays media fiasco.
    There is much more to come.
    Sutton was finished within 48 hours of it, due to the backlash.
    It was expected Iain Rennie, the State Services Commissioner would be gone by the Friday. He should have. But ‘can-kicker” Prime Minister John Key is not known for his decisiveness…
    Let’s be clear, Roger “Goldilocks” Sutton wasn’t all bad… It’s just that Sutton’s skills begin and end as a ‘public communicator.” That’s what his proper role should have been. 
President Harry Truman, had this to say on leadership

        “In reading the lives of great men, I found that the first victory they won was over themselves...
        self-discipline with all of them came first.”

Roger Sutton … and too, others involved …. do not pass the “Truman Test.”

So why should we care about Sutton?  “What needs to be understood,” says Hugh Pavletich for example, “is that this complaint against Sutton has potentially huge political consequences … on many fronts.”

Sutton going down in this fashion is just another illustration of the serious political and bureaucratic blunders and failures surrounding the Christchurch recovery. It could not be worse for both the Government and the Christchurch City Council. (Check out Hugh’s recent writings on the Christchurch situation at his Scoop Infopage.)
    Wasn’t it extremely odd last Monday with the media conference circus that
Dalziel and Edwards at the Chch City Council released this drivel pretty much at the same time.
    Why exactly was Brownlee jettisoned ? Why is it under the control of the PMs office ? What skills / capabilities are in the PMs office to control Central Government involvement ? Isn’t that odd ? What problems / cost blowouts don’t we know about ?
    My sense at this stage (and I could be wrong) is that the whole Monday media circus was orchestrated in fine detail by the PMs office (including the Sutton speech / Hollywood ramble and the Jo Malcolm show) so that Sutton was shown in the best possible light as he exited and Rennie did as he was told. The damage to the complainant, and too, the independence of the office of the CSS were likely judged by the PMs office to be “acceptable costs.”
    These are high costs. It sure makes me even more curious !
    But it has backfired on the lot of them …  big time. The wider media has an enormous amount of work to do, in getting to the bottom of this political and bureaucratic nonsense.

What would make anyone think they’re up to it?

UPDATE:  A fellow called Mark T makes this great comment on the great story about the great work done by Richard Diver in the face of CERA bungling and stupidity

First and foremost, achieving anything 'great' requires the bureaucrats to get out of the way and let something happen, rather than stifle it with complex rules that few can negotiate.
Secondly, the idea that a planner holding a gun to the head of property owners can create the 'great' would be laughable if the consequences weren't so tragic. Great cities develop organically, in response to trial and error, and changing market forces. It's not a matter of how good the planner is; the point is that no central planning can possibly co-ordinate the different needs and wants of thousands of individuals in a constantly changing environment and marketplace. The planners immunity to price signals makes good central planning literally impossible, regardless of how skilled they are or how good their intentions.
The planners utopian version of 'great' has become the enemy of property rights, and of progress. It's not only the enemy of the good, but also the genuinely great.
This has always been the way, but the aftermath of the earthquake have now made it particularly clear. If you don't get that now after reading articles like this, then you never will. Fortunately however more and more are now waking up to the reality.


Friday, November 21, 2014

Just a wee mini-ramble

When American presidents still remembered how things work…

The wonders of division of labour.
Extreme commute: From New Zealand to rural Iceland – BBC

“The purpose of [Putin’s] media offensive isn’t so much to present an alternative point of view as to create a parallel reality where crackpots become experts and conspiracy theories offer explanations for the injustices of the world. The target audience is Western citizens skeptical of their own system of government. The goal is obfuscation.”
Putin waging information war in Ukraine worthy of George Orwell – Lucian Kim, REUTERS

Irony alert: Islamic State is set to become the only 'state' to back its currency with gold (silver and copper) as it unveils the new coins that will be used in an attempt to solidify its makeshift caliphate.
ISIS Unveils Its New Gold-Backed Currency To Remove Itself From "The Oppressors' Money System" – ZERO HEDGE

“The financial system is lurching towards the next round of the Great Crisis that began in 2007… Moreover, this time around, entire countries are on the verge of being bankrupt.”
The Next Round of the Great Crisis is Just Around the Corner – Phoenix Capital Research, ZERO HEDGE

Still no philosopher-kings out there, notes Stephen Hicks:

World leader education

“As Reuters comment: The 2030 target should be fairly easy to meet. By then, the most manufacturing-intensive phase of China’s development will be complete and hundreds of millions more people will have been lifted into the middle class. Emissions are likely to stabilise by that date even without the joint statement.”
Analysis: ‘What China have really agreed to’ – Marc Morano, CLIMATE DEPOT
Watch: Morano on TV on China deal: ‘There is nothing here. China agreed to a non-binding deal to peak their emissions around 2030 — which is happening anyway’ – Marc Morano, CLIMATE DEPOT

Alex Epstein: “I have come to believe that the moral case against fossil fuels is not only false, but is the exact opposite of the truth. Fossil fuels don’t take a clean environment and make it dirty, they take a dirty environment and make it clean. They don’t take a safe climate and make it dangerous, they take a dangerous climate and make it safe. The industry doesn’t deplete resources, it creates resources out of once-useless raw materials.”

I confess, I’m one. This helped.
#Grubergate for Dummies  - POWERLINE

The dangers of hitchhikers.
Abe Listening to Krugman After Tokyo Limo Ride on Abenomics Fate – BLOOMBERG

It’s a common question…

“Mentions of Ayn Rand in the media show no sign of slowing down…”
Why Rand Still Matters – TIMES OF ISRAEL

“One of the underlying causes of the Great Recession and its abnormally slow recovery is a failure of leadership.”
America's Leadership Crisis--And Its Economic Implications  John Allison, FORBES

“When you’re slapped, you’ll take it and like it.” - Sam Spade (Humphrey Bogart)
30 Quintessential Noir Films For Noirvember – BUZZFEED

“For almost 60 years, he has been offering up a cash reward to anyone who could demonstrate scientific evidence of paranormal activity, and no one had ever received a single penny. But he hates to see them lose, he said. ‘They’re always rationalizing…’”
The Unbelievable Skepticism of the Amazing Randi – NY TIMES

I don’t know about you, but my first thought was “Why!?”
Nasa Funahara Creates Colorful Replicas of Famous Paintings Using Masking Tape – SPOON & TOMAGO

“It is believed the men may have become radicalised after repeatedly watching southern cooking shows.  They may also have downloaded recipes and cooking tips from the internet and stored them on secure hard drives.”
Potential Major Culinary Outrage in North of England Foiled – VIZ

The modern hausfrau:

By 2106, up to 16 US states will likely have or be considering legalising marijuana. “Do these developments mean that full legalisation is inevitable?”
Why Congress Should Legalise Pot – Jeffrey Miron, CATO

Grandmas Smoking Weed for the First Time

It lives again!
Frank Lloyd Wright's 'Usonian' house rises again in Arkansas – THE ART NEWSPAPER


Hat tips Anoop Verma, Dakta Green, Jeff Perren Novelist, The Undercurrent, Samizdata, Archinect]

Quotes of the day: On deflation

imagePictures of people not buying due to falling prices


“Economists have come up with the bizarre concept that falling, or even stable, prices squelch demand and deter consumption. The idea is that if consumers know that something will cost less in the future (even if it's just 2% less) they will defer their purchases indefinitely, perhaps waiting for the cost of their desired product or service to approach zero. They argue that this can push an economy into a deflationary spiral of falling prices and diminished demand which may be impossible to escape.
    “But this idea ignores the time value of a product or service (people will tend to pay more for something they can enjoy sooner rather than later) and the economic law that shows how demand goes up as the price falls. But common sense has absolutely nothing to do with the current practice of economics. Instead, the dominant argument is that inflation is needed to seed the economy with demand. 
    “However, this argument is merely a smoke screen. The only thing that inflation can do is to help governments spend.”
- Peter Schiff, ‘Governments Need Inflation, Economies Don't

“Traditionally, deflation has been defined as a decrease of a supply of money which has previously been artificially inflated.”
- Jörg Guido Hülsmann, Deflation & Liberty

“There are two kinds of ‘deflation’: progressive and destructive. Central banks and their 'stabilisation' make the first impossible, and the second more likely.”
- Peter Cresswell

“Thanks to the spread of electricity and other such wonders in the final quarter of the 19th century, prices dwindled year by year at a rate of 1.5% to 2% per year. People didn’t call it deflation – they called it progress.”
- Jim Grant, ‘We’re in an Era of Central Bank Worship

“Deflation is usually thought to be a synonym for falling prices. There could be no more serious error in all of economics. Calling falling prices "deflation" results in a profound confusion between prosperity and depression. This is because the leading cause of falling prices is economic progress, whose essential feature is an increasing production and supply of goods and services, which, of course, operates to make prices fall.”
- George Reisman, ‘The Anatomy of Deflation

“Both deflation and inflation are … zero-sum games. But inflation is a secret rip-off and thus the perfect vehicle for the exploitation of a population through its (false) elites, whereas …the true crux of deflation is that it does not hide the redistribution going hand in hand with changes in the quantity of money. It entails visible misery for many people, to the benefit of equally visible winners. This starkly contrasts with inflation.”
- Jörg Guido Hülsmann, Deflation & Liberty

“As for mass unemployment: If there is a deflation, in the correct sense of a decrease in the quantity of money and/or volume of spending, then falling prices, so far from being the cause of deflation/depression are the way out of it. … Confused concepts result in catastrophic consequences.”
- George Reisman, ‘Deflation & the Gold Standard

“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”
- Henry Hazlitt,’ Economics in One Lesson

“You should not be afraid of deflation. You should be afraid of policies attempting to fight it.”
- Mike “Mish” Shedlock, ‘Is Debt-Deflation Just Beginning?


The One Statistic Climate Catastrophists Don’t Want You to Know

Guest post by Alex Epstein

Alex Epstein’s much-anticipated book The Moral Case for Fossil Fuels has now been released by Penguin. Climate scientist Patrick Michaels reviewed it as, “simply the best popular-market book about climate, environmental policy, and energy that I have read.  Laymen and experts alike will be boggled by Epstein’s clarity.”
   “By explicitly holding human life as his standard of value, “ says reviewer Erin Connors, “Epstein argues that what makes the industry virtuous is its ability to improve the life of human beings. While other books may offer a defence of the industry by pointing to economic or political benefits, Epstein goes on offense and shows that the fossil fuel industry is actually good.”
    “We—the men and women in the fossil fuel industry—promote human flourishing.”
Here’s a small sample.

If you ever get asked the vague but morally-charged question “Do you believe in climate change?” someone is trying to put something over on you.

Climate change is a constant of nature and everyone agrees that fossil fuels have some impact on our naturally variable, volatile, and often vicious climate.

The question is whether change will have a catastrophic impact—one so bad it justifies restricting the only practical way to get energy in the foreseeable future to the 3 billion people who have next to none of it: fossil fuels. (No country relies on the sun and wind for energy, but rich countries can afford to pay tens or hundreds of billions to install and accommodate allegedly virtuous wind turbines and solar panels on their grids.)

The real issue is climate catastrophe. I’m not a climate-change sceptic. I’m a climate catastrophe sceptic—and here’s one graph that shows why you should be, too.

No, it’s not showing temperatures have gone up half a degree in the 80 years we’ve used a lot of fossil fuels, which is barely more than they went up the prior 80 years. Nor does it show temperatures have flattened in the past eighteen years—while  the world’s leading climate catastrophists predicted dramatic, accelerating, runaway warming. Dr. James Hansen predicted that temperatures would increase between two-and-a-half and five degrees in 20 years!

Okay, I’ll show that graph, too—here it is:

Sources: Met Office Hadley Centre HadCRUT4 dataset; Etheridge et al. (1998); Keeling et al. (2001); MacFarling Meure et al. (2006); Merged IceCore Record Data, Scripps Institution of OceanographySources: Met Office Hadley Centre HadCRUT4 dataset; Etheridge et al. (1998); Keeling et al. (2001);
MacFarling Meure et al. (2006); Merged IceCore Record Data, Scripps Institution of Oceanography

But that’s not the graph that really matters. There is no intrinsically perfect global temperature and, if there was, we would expect it to be warmer. Until it became politically correct for temperature trends to warm, people around the world prayed for far more warming than we’ve experienced. There is no time in human history when it has been considered “too warm” for human beings.

What matters is this: is the climate becoming more or less liveable? The key statistic here, one that is unfortunately almost never mentioned, is “climate-related deaths.”

The best source I have found for this data is the U.S. Office of Foreign Disaster Assistance and Centre for Research on the Epidemiology of Disasters International Disaster Database (OFDA/CRED EM-DAT), based in Brussels.1 It gathers data about disasters since 1900.

Here is a graph comparing CO2 emissions, the alleged climate danger, to the number of climate-related deaths, which reflects actual climate danger to humans. It’s striking—as CO2emissions rise, climate-related deaths plunge.

Sources: Boden, Marland, Andres (2013); Etheridge et al. (1998); Keeling et al. (2001); MacFarling Meure et al. (2006); Merged IceCore Record Data, Scripps Institution of Oceanography; EM-DAT International Disaster DatabaseSources: Boden, Marland, Andres (2013); Etheridge et al. (1998); Keeling et al. (2001); MacFarling Meure et al. (2006);
Merged IceCore Record Data, Scripps Institution of Oceanography; EM-DAT International Disaster Database

To make matters better, in reality the trend is even more dramatically downward, as before the 1970s many disasters went unreported. One big reason for this was lack of satellite data—we can now see the whole world, enabling us to track icecaps and disaster areas with relative ease. In 1950, if there was a disaster in the middle of what is now Bangladesh, would information have been accurately collected? In general, we can expect in more recent years, more deaths were recorded and in earlier years, fewer deaths were recorded. For some countries there is simply no good data, because in underdeveloped places like Haiti or Ethiopia we do not even know exactly how many people lived in a particular place before a disaster struck. Today we have much better information—and because disaster statistics are tied to aid, there is incentive to over-report.

And the more we dig into the data, the stronger the correlations get.

Here are a couple of striking numbers from the data: in the decade from 2004 to 2013, worldwide climate-related deaths (including droughts, floods, extreme temperatures, wildfires, and storms) plummeted to a level 88.6 percent below that of the peak decade, 1930 to 1939.2 The year 2013, with 29,404 reported deaths, had 99.4 percent fewer climate-related deaths than the historic record year of 1932, which had 5,073,283 reported deaths for the same category.3

That reduction occurred despite more complete reporting in recent times, an incentive to declare greater damage to gain more aid, and a massively growing world population, particularly in vulnerable places like coastal areas, .

imageThe climate catastrophists don’t want you to know this because it reveals how fundamentally flawed their viewpoint is. They treat the global climate system as a stable and safe place that we make volatile and dangerous. In fact, the global climate system is naturally volatile and dangerous—we make it liveable through development and technology—development and technology powered by the only form of cheap, reliable, scalable reliable energy that can make climate liveable for 7 billion people.

As the climate-related death data show, there are some major benefits—namely, the power of fossil-fuelled machines to build a durable civilisation highly resilient to extreme heat, extreme cold, floods, storms, and so on. Why weren’t those mentioned in the discussion when we talked about storms like Sandy and Irene, even though anyone going through those storms was far more protected from them than he or she would have been a century ago?

I have debated representatives of the three leading environmental organizations in the world—Greenpeace, Sierra Club and—including’s Bill McKibben, the leading environmentalist in the world today—and every time, I have repeatedly mentioned the climate liveability statistics. I raised it to Bill McKibben before I debated him and half a dozen times during my debate with him—he didn’t acknowledge it. He just called it “one number.” Yeah, one number, based on billions of empirical observations, that destroys billions of dollars worth of speculation.

Why? Because the dogma that man is ruining the planet rather than improving it is a religion, a source of prestige, and a career for too many people. But for the rest of us, the statistic climate catastrophists don’t want us to know is very, very good news.

Alex Epstein is an expert in energy and industrial policy, and the President and Founder of the Center for Industrial Progress—an organisation sowing the seeds of energy enthusiasm to counter the tide of climate alarmism. His writings on energy and energy policy have been published in The Wall Street Journal, Forbes, Investor’s Business Daily, and dozens of other prominent publications. He has become the leading free-market energy debater, having debated Bill McKibben, Greenpeace, Occupy Wall Street, and other environmentalist groups. He is a Principal blogger for MasterResource, the leading free-market energy blog.
    Mr. Epstein’s monthly podcast, “Power Hour,” features discussions with leading energy thinkers. Mr. Epstein’s writings on philosophy, business, and energy have been featured in 10 books, including, most recently, Why Businessmen Need Philosophy.
    This post originally appeared at the Cato at Liberty blog.


Thursday, November 20, 2014

Japan’s Abenomics Death Spiral

The Berlin Wall hasn’t been the only near-scientific experiment in recent decades testing political and economic ideologies to destruction. As Peter Schiff writes in this Guest Post, in recent years Japanese Prime Minster Shinzo Abe (pronounced Ar-Bay) has turned his country into a virtual petri dish of Keynesian ideas. The result, as even he has now had to concede -- and as has been reported many times here at NOT PC --  is a rolling economic disaster.

As Japanese Prime Minster Shinzo Abe has turned his country into a petri dish of Keynesian ideas, the trajectory of Japan's economy has much to teach us about the wisdom of those policies. And although the warning sirens are blasting at the highest volumes imaginable, few economists can hear the alarm.

Data out this week shows the Japanese economy returning to recession by contracting for the second straight quarter (and three out of the last four quarters). The conclusion reached by the Keynesian apologists is that the benefits of inflation caused by the monetary stimulus have been counteracted, temporarily, by the negative effects of inflation caused by taxes. This tortured logic should be a clear indication that the policies were flawed from the start.

Although the Japanese economy has been in paralysis for more than 20 years, things have gotten worse since December 2012 when Abe began his radical surgery. From the start, his primary goal has been to weaken the yen and create inflation. On that front, he has been a success. The yen has fallen 23% against the dollar, and core inflation, running slightly negative in 2012, has now been "successfully" pushed up to 3.1% according to the Statistics Bureau of Japan.

But there is no great mystery or difficulty in creating inflation or cheapening currency. All that is needed is the ability to debase coined currency, print paper money or, as is the case of our modern age, create credit electronically. These "successes" should not come as a surprise when one considers the relative size of Abe's QE program. For much of the past two years the Bank of Japan (BoJ) has purchased about 7 trillion yen per month of Japanese government bonds, which is the equivalent of about $65 billion U.S. [ref: Forbes 9/24/14, Charles Sizemore] While this is smaller than the $85 billion per month that the Federal Reserve purchased during the 12-month peak of our QE program, it is much larger in relative terms.

The U.S. has roughly 2.5 times more people than Japan. Based on this multiplier, the Japanese QE program equates to $162.5 billion, or 91% larger than the Fed's program at its height. But, according to IMF estimates, the U.S. GDP is 3.3 times larger than Japan. Based on that multiplier, Japanese QE equates to $214.5 billion per month, or 152% larger. And unlike the Federal Reserve, the Bank of Japan hasn't even paid any lip service to the idea that its QE program will be scaled back any time soon, let alone wound down.  (As Charles Sizemore says on examining the data, "If you want a 'risk free' trade for the remainder of this decade, it would be this: short the yen.")

In fact, Abe's promises to do more were spectacularly realized in a surprise move on October 31 when the BoJ, claiming "a critical moment" in its fight against deflation, announced a major expansion of its stimulus campaign. (The fact that official inflation is currently north of 3% - a multi-year high, seems to not matter at all.)

At the same time the BoJ also announced its intention to roughly triple its pace of its equity and property purchases on Japan's stock market. According to Nikkei's Asian Review (9/23/14), the BoJ now holds an estimated 7 trillion yen portfolio of Japanese stock and real estate ETFs. Even Janet Yellen has yet to cross that Rubicon.

And what has this financial shock and awe actually achieved, other than 3% inflation, a weaker yen, a stock market rally, and continued international praise for Abe? Well, unfortunately nothing other than a bona fide recession and a growing threat of stagflation.

The weaker yen was supposed to help Japan's trade balance by boosting exports. That didn't happen. In September, the country reported a trade deficit of 958 billion yen ($9 billion), the 27th consecutive month of trade deficits. The deterioration occurred despite the fact that import prices rose steeply, which should have reduced imports and boosted exports. And while some large Japanese exporters credited the weak yen for easier sales overseas, small and mid-sized Japanese businesses that primarily sell domestically have seen flat sales against rising fuel and material costs.

But price inflation is not pushing up wages as the Keynesians would have expected. In August, Japan reported real wages (adjusted for inflation) fell 2.6% from the year earlier, the 14th straight monthly decline. This simply means that Japanese consumers can buy far less than what they could have before Abenomics. This is not a recipe for happy citizens.

Japanese consumers must also deal with Abe's highly unpopular increase of the national consumption tax from 5% to 8% (with a planned increase to 10% next year). The sales tax was largely put in place to keep the government's debt from spiraling out of control as a result of the fiscal stimulus baked into Abenomics. And while economists agree nearly universally that the price increases that have resulted from the sales tax have caused a sharp drop in consumer spending, they fail to apply the same logic that price increases due to inflation will deliver the same result.

keynes_stupid_buttonA bedrock Keynesian belief is that falling prices create recession by inspiring consumers to delay purchases until prices fall further. According to the theory, even a 1% annual drop in prices could be sufficient to decimate consumers' willingness to spend. Conversely, they believe rising prices, otherwise known as inflation, will spur spending, and growth, as it inspires people to buy now before prices rise further. But if consumers have clearly been put off by rising prices due to taxation, why would they be encouraged if they were to rise for monetary reasons? Don't look for an explanation, there isn't any. In reality, as any store owner will tell you, shoppers shop when prices are low and stay at home when prices are high.

Despite the bleak prospects for Japan, Abe continues to bask in the love of western investors and alleged economists. In an October 6 interview with the The Daily Princetonian, Paul Krugman, who has emerged as Abe's chief champion and apologist, responded to a question about the European economic crisis by saying "Europe need something like Abenomics only Abenomics, I think, is falling short, so they need something really aggressive in Europe." A Bloomberg article ran on November 18 under the headline "Abe's $1 Trillion Gift to Stock Market Shields Recession Gloom." So according to Bloomberg, Abenomics is not responsible for the country's fall back into recession, which hurts everyone, but it is responsible for the surging stock market, which primarily benefits the wealthy.

One wonders how much more bad news must come out of the Japanese experiment in mega-stimulus before the Keynesians reassess their assumptions? Oh wait...I'm sorry, for a second there I thought they were susceptible to logic. But those who are not blinded by left-wing dogma should take a good look at where the road of permanent stimulus ultimately leads.

imagePeter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital, best-selling author of six books, including How an Economy Grows and Why It Crashes, Crash Proof 2.0: How to Profit From the Economic Collapse, and The Real Crash: America's Coming Bankruptcy---How to Save Yourself and Your Country, and host of the syndicated Peter Schiff Show—and one of the few who famously predicted the collapse of the American housing bubble.
A longer version of this post can be found in Euro Pacific Capital's Global Investor Newsletter.

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NOT PJ: Sexist Pigs in Space

This week saw a perfect storm of spacefaring milestones, loud shirts, and crying. It was enough to bring Bernard Darnton (right) out of retirement.

Last week’s landing of the Philae spacecraft on the comet Churyumov-Gerasimenko gave us insights into not just the earliest epoch of the solar system but also the postmodern political universe.

Through the comet lander’s separation, descent, and landing sequence, project scientist Dr Matt Taylor gave a television interview explaining the progress of the spacecraft, its experiments and scientific goals. He concluded his interview by saying, “everyone should enjoy it because we’re making history.”

Not everyone enjoyed it. Because, as well as landing a robot spacecraft on a comet five hundred million kilometres away, he was also wearing a saucy shirt. Twitter, that bastion of reasoned debate, erupted in a shitstorm. Or #shirtstorm.


The tweet at the eye of the storm was snarky, but not unhinged. Unhinged is where the debate quickly headed, aided by both man-hating identity-warriors, desperate to be offended, and woman-hating trolls, desperate to offend, a cyclone of artificial anger fuelled by artificial hurt.

Shortly afterwards, Taylor apologised. All of this would be understandable if Dr Taylor had actually done something nasty, like land his probe somewhere it wasn’t wanted. Instead, he is guilty of that most modern of crimes, wearing an amusing shirt. Or, more to the point, a very unamusing, oppressive, patriarchy-reinforcing shirt that tells girls they’re not welcome in science.

By the way: if you want one of your own, you’ll have to make it yourself but you can order the fabric on the web. If it’s men you’d rather objectify this Christmas, there are plenty of other pin-up fabric options for the lady or out-and-proud homosexual in your life. The International Union of Lesbian Rocket Scientists is split between those who want to order a souvenir set of sexy shirts and those standing with their Twitter sisters, who are not gonna take it any more.

Closer to home, another sexist pig got his comeuppance on Monday. Roger Sutton was forced to resign as head of the Canterbury Earthquake Recovery Authority. You’d think it would be because, four years after the earthquake, Christchurch still looks like the surface of a comet, five hundred million kilometres from civilisation. But no. Sutton is supposedly guilty of calling a senior CERA staff member “sweetie.”


That doesn’t sound like a firing offence to me and rumours of worse are swirling. But even if Roger Sutton were actually Jack the Ripper, and what we’ve seen were a plea bargain down to the lesser charge of ‘male patronises female,’ the fact that this justification can be used with a straight face is telling. It’s supposed to sound reasonable that calling someone “sweetie” is a resignation offence. The zeitgeist quote from the Stuff article: “I will become a better person. I'm going to tell fewer jokes.”

Offence-taking has become a trump card in modern political debate, an attempt to silence dissent. But it shouldn’t be. Claiming to be offended is just whining, and in the words of Stephen Fry, “so fucking what?”

There’s nothing wrong with saying what you think about a political or religious claim, a dirty joke, or a comedy shirt, but it should be the start of a debate, not the end. Rose Eveleth’s initial criticism could have started that debate: is the dearth of women in science and technology due to Matt Taylor’s shirt? No, of course it bloody isn’t.

But, more interestingly, is there a dearth of women in science and technology? Does it matter? Is there a gender bias in science? How do three-year-old girls who want to know how everything works turn into sixteen-year-old girls with no desire to attend a physics class? And just how casual are casual Fridays at the European Space Agency?

Those who leap to offence don’t care about actually answering the complex questions and today we’d rather judge people on trivia than their real achievements.

It doesn’t matter whether you oversee the exploration of a comet left over from the formation of the solar system, or whether you oversee the smothering of a city that was already on its knees, success or failure in your chosen path is irrelevant in today’s sensitive, censorious society. Just maintain the inoffensive veneer, sweetie.

Bernard Darnton writes regularly for NOT PC. He promises.


Wednesday, November 19, 2014


Sorry to be away so long. Been busy.

But the news of Labour’s new leader so excited me I felt I had to return!

No, not really. I’m about as inspired by him as everyone else has been. Which apparently isn’t very much.

Even Russell Brown is underwhelmed, blogging before catching a plane that

Labour's leadership result and the means by which it was achieved both seem disastrous for the party and for the prospects of the centre-left.
    Little didn't win the support of the party or the caucus, he loses his electorate more badly every time he contests it, and he's vowing to dump all the intellectual capital built up by David Parker. I can't see any good thing about this.

The comment is made more underwhelming still by observing that anyone who has formed the view David Parker has amassed “intellectual capital” is already fairly easily excited.

Mind you, even Red  John Minto is underwhelmed, reckoning Little election foreshadows

a Labour Party which seeks power not because it has a policy programme to make a big difference for working New Zealanders but because senior Labour MPs hope they will soon get another turn to run the free market economy and receive the baubles of power which go with it.

Not all bad then. And maybe some truth there emerging there from a somewhat jaundiced direction.

Mind you, the spin that Little was only voted in by union delegates is not quite true, not if you look at the third ballot anyway.

The man almost got a majority in his caucus.

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Thursday, November 13, 2014

Q: So why aren’t ordinary people earning more money? A: The dismal failure of the Keynesian Consensus

Bill Bonner

American voters don’t like the Republicans any better than they like the Democrats. But last week, Obama and the Dems were held responsible for the economy.
    They got off easy. A hanging would have been more appropriate.
    We have mentioned many times how U.S. median household income is now lower than it was when the 21st century began. The median household had $57,000 in income when the big ball came down in Times Square and closed out the 20th century. Today, it has $52,000.
    Stocks are substantially higher. So are corporate profits. So why aren’t ordinary people earning more money?
    After all, we live in the greatest economy man has ever created. More people have more money than ever before. So there’s plenty of capital to fund new enterprises.
    Also, more people have college degrees. So there’s no shortage of educated people to fill office seats. And there are more scientists and engineers busy developing new drugs, new machines and new chemicals.
    The economy should be exploding with growth, jobs and higher incomes for everyone.
    And don’t forget there are more people than ever before whose explicit role in our economy is to make things better – more government agencies, more programs and more bureaucrats…. 
    Surely the combined efforts of so many smart people have resulted in a better economy?
    Apparently not.

Instead of producing general prosperity, their combined efforts have instead concentrated it.

Since 1979, incomes of the top 1% have gone up three times. But when you get down to the average American, his income has gone down over the last 35 years. At the bottom – where you find the poorest 20% of the population – incomes have gone down an unbelievable 60%….
    For some, the frustration is unbearable. In 2001, about 16 men out of every 100,000 killed themselves. Now, the figure is 25 out of every 100,000 – a 56% increase.
“Stimulus” Claptrap
You’d think this kind of feedback would force economists and politicians to take notice. They might want to reconsider the policies of the last few decades…

Read more at ‘The Keynesian Consensus Has Been a Dismal Failure.’

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So just how much do “adjustments” adjust down the CPI? [updated]

The Consumer Price Index (CPI) is used as a benchmark for policymaker’s worldwide and influences trillions in payments, including:

  • calculating cost-of-living adjustments
  • deciding on central bank interest-rate rises, and changes (or not) in LVRs
  • calculating payments on inflation-protected securities
  • determining pay-bands in public and private entities
  • cost-of-living adjustments to collective bargaining agreements
  • determining tax brackets and numerous tax-related levels (exemptions, for example)

Since economists are largely concerned with “real” prices (actual prices scaled by inflation as measured by the CPI), any error in the calculation of real prices introduces a bias that propagates to every corner of economic thought. This is a central flaw in economics that largely explains the gap between actual human experiences (“Wow! Things are expensive!”) with central bankers gambling our collective future on fighting “deflation.”

Yet while just a 1 percent difference in the CPI makes a trillion dollar difference in these changes and payments, the adjustments made in calculating the CPI are too often simply taken for granted.

The biggest change is probably what’s called Hedonic Quality Adjustments, wherein raw price data is manipulated so that  large increases in the actual prices of certain products can be transformed into decreasing prices when calculating the Consumer Price Index – and even a 400% price increase can be transformed into a 7.1% Decline.

So just how much do “adjustments” adjust down the CPI?

… today we will look at an index compiled by PriceStats, an off-shoot of MIT’s Billion Prices Project, which scrapes the internet for prices and compiles a daily index that aims to track inflation in real-time.
    The time series eschews
hedonic and seasonal adjustments and relies on sampling over 5 million products to produce a very different look at inflation (US official CPI included for comparison):

Since starting calculation of the index in mid-2008, PriceStats inflation series has remained consistently above the official US CPI. Considering the differences in methodology this provides an estimate to how much Hedonic Quality Adjustments have been used to understate the head-line CPI figures.

UPDATE: To keep the perspective on just how much the price of technology is falling – how dramatic the fall -- check out the cost of computing power equal to an iPad 2 through the decades:

Graph showing the falling cost of computer power


Quote of the Day: ‘In the modern age war is futile…’

“In the modern age war [is] futile because the winning power would gain nothing by it. In the economically interdependent world of the twentieth century, even powerful nations needed trading partners and a stable and prosperous world in which to find markets, resources, and places for investment.
    “To plunder defeated enemies and reduce them to penury would only hurt the winners. If, on the other hand, the victor decided to encourage the defeated to prosper and grow, what would have been the point of a war in the first place? Say …  that Germany were to take over Europe. Would Germany then set out to ransack its conquests? 
    “‘But that would be suicidal. Where would her big industrial population find their markets? If she set out to develop and enrich the component parts, these would become merely efficient competitors, and she need not have undertaken the costliest war of history to arrive at that result. This is the paradox, the futility of conquest – the great illusion which the history of [the British] Empire so well illustrates.’
    “The British, [so argued Norman Angell], had kept their empire together by allowing their separate colonies, notably the dominions, to flourish so that all had benefited together – and without wasteful conflict.
    ‘If the Statesmen of Europe could lay on one side, for a moment, the irrelevant considerations which cloud their minds, they would see that the direct cost of acquisition by force must in these circumstances necessarily exceed in value the property acquired.’”

- Margaret MacMillan, The War that Ended Peace: How Europe abandoned peace for the First World War

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First image from a comet!


It doesn‘t look like much of a photograph, but just think about where it was taken!

This is the amazing first image from the Philae lander as it drops away from the Rosetta spacecraft on its journey to land on comet 67P/Churyumov-Gerasimenko, the most daring robotic space landing everMovie Camera.
    The body of Rosetta is in the upper right-hand corner of the image, with its solar panel stretching into the centre of the frame. The sun peeks in from the left, blanked out at the middle where its brightness overwhelms the camera.

Read more at New Scientist: ‘First image from comet lander as it drops to surface.’

And the Guardian: ‘Rosetta comet landing: everything you need to know.’


Wednesday, November 12, 2014

Quote of the Day: On Inflation

“The definition of inflation as rising prices says absolutely
nothing about any specific cause of rising prices. It implies,
therefore, that inflation can be caused by anything that
raises prices. Having accepted this definition, it is no
wonder that people are confused about inflation.”
- George Reisman, Capitalism: A Treatise on Economics


“Abenomics” is testing nonsense to destruction

Japan’s irrational terror of “deflation” encouraged Japanese voters to favour Prime Minister Abe’s experiment with “reflation”—an experiment being performed on an unprecedented scale.

Economist Ludwig Von Mises used to say trying to “reflate” the money supply after a catastrophic deflation was like reversing your car over someone after just running them down, and thinking that would make them feel better.

“Abenomics” is testing that to destruction.

Japan is where the Keynesian economic model rubber hit the road. In April 2013, the Bank of Japan announced a staggering $1.4 trillion QE program.
    In today’s world of Central Banking madness, $1.4 trillion no longer sounds like an insane amount. So let me put this number into perspective…
    $1.4 trillion is…

  1. The equivalent of 24% of Japan’s total annual economic output.
  2. Enough to fly every human being in Japan to California for a 2-week vacation.
  3. The equivalent of writing a check for $11,200 to every man, woman, and child in Japan.

Moreover, with $1.4 trillion, you could…

  1. Buy Australia’s entire economic output for a year.
  2. Fund NASA for the next 82 years.
  3. Treat every person on the planet to a $200 five-star dinner at one of New York’s top restaurants.

imageThe program however has been a complete failure. Japan’s GDP growth accelerated for only two quarters before turning down again. The misery index in Japan has hit a 33-year high as households were crushed by rising prices.
    Even exports, which were supposed to be the primary beneficiaries of a weakening Yen, have tanked. According to CLSA, real exports remain 16% below the 2008 peak in real terms. Sony, the once great electronics giant of Japan slashed its profit outlook by 70% and cancelled its dividend for the first time in
50 years.
In simple terms, Abenomics has failed to revitalise Japan. In very specific terms, a single QE program equal to over 24% of Japan’s GDP FAILED to generate sustainable growth in GDP, jobs, or even exports.
    So what did the Bank of Japan do?
    It increased its QE efforts.
    It is now clear that Central Banks will do absolutely anything but admit failure.

Anything but challenge their faith-based model.

When evidence meets faith, it doesn’t stand a chance.
    When a year and a half of aggressive quantitative easing failed to produce a recovery in private demand for funds, the government should have realized that the answer to the economy’s problems was not in monetary policy and shifted its focus to the second and third arrows of Abenomics.
    But the reflationists in academia and bureaucracy who are unable to accept that monetary policy is powerless in a balance sheet recession have basically said that if one pill doesn’t cure the patient, try two, and if two don’t work try four, 16, 256....
    Most patients would start to question the doctor’s diagnosis before they agreed to swallow 256 pills. But such voices have been erased from Japan’s policy debate….
     For those who believe monetary policy is always effective, no amount of evidence that there are times when monetary policy does not work will convince them otherwise.

Ironically, instead of boosting the economy, Abe's latest lunacy will merely lead to even greater Japanese economic devastation and the inevitable quadruple dip. That, or an outright economic depression, one from which the country will not emerge.

Oh, and from the Herald this morning: ‘NZ dollar soars to 7-year high against weak yen.’

“Soaring” being a relative thing in a currency war.

Tuesday, November 11, 2014

We will remember them

History’s most disastrous, most tragic, most pointless mass slaughter finally ground to a halt on the 11th hour of the 11th month of the Year of Destruction 1918.

“Utterly incredible,” confided Arthur Ponsonby to his diary on 13 August 1914 …

The long expected European war has come. A dozen or so diplomats, a score of ministers, and two or three monarchs have been offending one another, so to make things straight they have ordered out millions of peaceful citizens to go and get massacred. The Government have been telling us lies and we believed them. We were committed and we did not know it, so without being attacked or our own interests in any way threatened we joined in. It is an end of Liberalism, of social reform, of progress itself for the moment. And no one can see what the future has in store.1

This year the Tower of London put on an extraordinary display to commemorate just some of those slaughtered millions: 888,246 ceramic poppies, one for each Commonwealth soldier killed in World War I, filling the moat surrounding the Tower. And each evening, during the weeks leading up to Britain’s Remembrance Sunday, someone would read a list of some of the World War I dead. The picture above shows what the Tower looks like now.

Each one of them representing a human life snuffed out.

If there had been a poppy for all the sixteen million souls snuffed out during the mass slaughter,2 and another 100 million more for the souls taken in the following influenza epidemic3, the ceramic poppies would have buried the tower and the reading would have taken not just a few weeks, but more than thirty years – around the time it took for the forces this war unleashed  to embark on another Great War that unleashed many more destructive forces, killing many millions more.

Those dozen or so diplomats, score of ministers, and two or three monarchs still have an awful lot to answer for.

1. Quoted in Hell-Bent: Australia's leap into the Great War, by Douglas Newton
2. Ref: ‘World War I casualties’ – Princeton.Edu
3. Ref: “1918 flu pandemic” – Wikipedia

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Berlin Wall: Weasel Vs Hawk

Andrew BatesWas it some kind of "collective will" that caused the Berlin Wall to fall, or some kind of individual agency that pushed it over? Our guest poster Andrew Bates characterises the makers of these two arguments as Weasels and Hawks respectively.

London’s normally excellent paper City AM also publishes a fellow called Dr John C Hulsman, described as “a life member of the Council on Foreign Relations,” and a political consultant “explaining American politics and policy to the wider world, while also assessing the broad contours of the new multi-polar era we find ourselves in.” In other words, a long-time member of the Weasel vanguard.

For the 25th anniversary of the fall of the Berlin Wall, City AM have published Hulsman’s take on ‘Fall of the Berlin Wall’: “The weary West,” he says, “has forgotten how it won the Cold War.”

Mark Steyn has also written an essay to commemorate the occasion, ‘The Will to Fell.’ Steyn could fairly be called a Hawk.

Click here to read more ... >>


Monday, November 10, 2014

The Economics Behind the Fall of the Berlin Wall

Much of the media discussion around the twenty-fifth anniversary of the Berlin Wall’s fall focusses on American military politics and the politicians of the time. But to truly understand why the Soviet system in Eastern Europe collapsed, says Ryan McMaken in this guest post, we must look to Mises’s pioneering work on economic planning.

Today marks the twenty-fifth anniversary of the fall of the Berlin Wall. Like most historical events that are commemorated as if they took place on a single day, the fall of the Berlin Wall on November 9, 1989, was just one of many interrelated events that led to the end of the system of Soviet client states in Eastern Europe, and to the end of the Soviet Union itself, in December of 1991.

With the fall of the wall, East Germans, who had lived under severe restrictions on travel and emigration, were able to freely travel to West Berlin, which continued a chain of events already begun earlier that year in which many anti-Soviet dissidents throughout Eastern Europe became emboldened and met with unprecedented success. Meanwhile, East Germans flooded into neighbouring countries by the thousands, seeking refuge from Soviet-sponsored oppression in Austria and West Germany.

Why It Was Different in 1989

Throughout the mid-twentieth century, Eastern Europe was home to numerous anti-Soviet revolts and acts of civil disobedience. In Hungary in 1956, Prague in 1968, and especially in Poland throughout the 1970s and 1980s, resistance flared up, but was reliably crushed with Soviet-sponsored martial law and outright military intervention.

But in the summer of 1989, the Poles held an election that essentially overthrew the Soviet-approved regime in Poland. This, time, however, instead of sending tanks to crush the Polish agitators, the USSR did nothing.

By November of that year, dissidents had noticed a trend of Soviet inaction. Hungary and Czechoslovakia haphazardly opened their borders, allowing East Germans to stream into Austria and on to West Germany. East Berliners began to demand free passage to the West. The opening of the wall soon followed.

Americans today, and especially American conservatives, like to claim that the end of the Soviet bloc and the Soviet Union was America’s doing; that the Soviet oligarchs feared American military might, and simply decided to give up and vote themselves out of existence, as they did two years later. This tale makes for nice domestic propaganda in America, but the fact that regimes virtually never just “give up” without firing a shot when faced with a threatening foreign power makes it rather unlikely.

We are far more likely to find an answer if we ask ourselves not why the American state was so strong in the 1980s, but why the Soviet state was so weak. If the Soviets were more than capable of maintaining “order” in Eastern Europe during the 50s, 60s, and 70s, why was it unable or unwilling to do the same in the 1980s?

Click here to read more ... >>


“Tear down this Wall!” [updated]

Sitting on my shelf at home is a small piece of concrete covered on one side in paint. I got it in Berlin in 1990. It's a piece of the Wall: the symbol for decades of the regime it protected, that finally fell 25 years ago today.

Nothing more defined the nature of the regime than the prison wall it was; nothing was more historically significant in the last half-century than its fall.

Behind the Iron Curtain for which the wall was the symbol –”a symbol of the tyranny of the totalitarian state under which the individual was viewed as the property of the state” – “a breathtaking moral obscenity, a manifestation in concrete of the philosophy on which it was built” -- over a hundred million people were enslaved, and hundreds of millions more were threatened by the regime’s bellicosity.

Few opportunities exist in the social sciences to observe what was virtually a controlled experiment on contrasting ideologies.  It was individualism versus collectivism, both starting out of the ruins of postwar Germany. On one side of the Wall, the shining socialist state of East Berlin, run “scientifically” by planners with guns; on the other the freedom and individual rights of the capitalist West.

If it had been a properly controlled experiment, it would have been stopped early for being too cruel.

One telling fact tells the whole story: Nobody was ever shot trying to escape into the literal prison camp of East Berlin.

The socialists of all parties had argued that whatever short-term misery might be “necessary” to effect the transformation of Eastern Europe, that scientific socialist planning would soon “bury" the West. Walking along Berlin streets just a year after the fall, you could see that the only thing the socialist east was ever able to produce well. Lined up in car parks along the Unter Den Linden in 1990 were the automotive fruits of the 45-year experiment was misery. BMWs, Audis, Porsches, Mercedes – shining, expertly engineered, and affordable -- and Trabants, which smelled of nothing so much as poverty.

It never changed or improved. It didn’t need to. Like all socialist production, it enjoyed -- quite literally -- a captive market. And it was awful.

The collapse of socialist Eastern Europe – and with it what should have been the utter collapse of the hypothesis that socialism could produce anything other than human misery – came as an utter shock for most learned types in the west.  As late as 1989, the author of the best-selling economics textbook by Paul Samuelson, the one still fondly remembered by Prime Minister John Key, declared magisterially that “the Soviet economy is proof that, contrary to what many sceptics had earlier believed, a socialist command economy can function and even thrive.”

It came as no surprise to followers of Ludwig Von Mises, who had explained way back in 1920 that socialism would eat itself and the people whom it enslaved – that it couldn’t plan, it couldn’t produce, that it couldn’t calculate -- that it was and always would be both morally depraved and economically unsustainable. Seven decades later, after all the Eastern Bloc capital had been consumed, he was proved emphatically correct.

(Yet Samuelson’s textbook in revised editions is still both a best-seller and a prescribed texts at many universities. Von Mises by contrast is still largely unknown by today’s intellectuals, and his books are untaught at nearly every major university. Go figure.)

The Eastern Bloc “superpower” was always full of bluster. What was revealed revealed when the Wall came down was that it wasn’t an economic power at all. It was a complete and utter basket case.

It was a basket case economically AND environmentally.

In Moscow, soon after the collapse, I saw old ladies outside Metro stations on the sidewalk selling used soap.  That was how bad things were economically.  In Magnitogorsk, the soviet engine of steel production, no-one could even see the black ooze that filled streets and rivers because of the smoke.  In Dzherzhinsk, the Soviet chemical capital, the toxic waste of dumped chemical weapons were all too visible.

This too was inevitable, and everywhere.


TODAY’S SOCIALISTS LIKE TO either forget or dismiss the results of the twentieth-century’s greatest and most disastrous political experiment, but in the collapse and in the reasons behind its inevitable collapse lie every lesson every student of socialism should have engraved on their soul. If they have one.

The simple lesson is this: "Man's mind is his basic tool of survival,” but “man's mind will not function at the point of a gun.”

Socialism [identified Ayn Rand] is the doctrine that man has no right to exist for his own sake, that his life and his work do not belong to him, but belong to society, that the only justification of his existence is his service to society, and that society may dispose of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good…
    The alleged goals of socialism were: the abolition of poverty, the achievement of general prosperity, progress, peace and human brotherhood. The results have been a terrifying failure—terrifying, that is, if one’s motive is men’s welfare.

Perhaps the single most astonishing result of the collapse is still the reaction of the intellectuals.  Anyone over twenty then who doesn’t yet get the lesson is confessing quite frankly that no fact can ever persuade them. They are self-admittedly intellectually dead.


Yet in the twenty-five years since the collapse, today’s intellectuals have evaded every fact that decades of socialism revealed, shunned every moral argument that explains the collective misery, and ignored every “prophet” whose predictions were proven correct.

They’ve wriggled, they’ve lied, and they’ve evaded.

They turned to environmentalism (ironically) to damn the production that proved impossible for socialism.

They turned to ‘multiculturalism’ to damn the west.

And, because “scientific socialism” was supposed to be based on reason (they claimed) they damned reason and embraced post-modernism –which allows them to damn the facts.

Anything to avoid the reality that the Wall’s Fall should have made obvious.

THE POST-COLLAPSE INTELLECTUAL embrace of post-modernism is no accident. The old socialists haven’t disappeared, they’ve mostly morphed into something else. As philosopher Stephen Hicks sagely observes in his book Explaining Postmodernism, “the failure of socialism made postmodernism necessary; the collapse of philosophy made it possible.”

In his book (which I thoroughly recommend), Hicks charts the failure and consequent “evolution” of socialism, which helps explain the apparent disappearance of the old “smokestack socialist”:


AS MY COLLEAGUE DR RICHARD McGRATH Richard McGrath said this morning, we should not let die the lessons of socialism, nor should we lose the memory of those who died trying to escape the East European slave pens.

They should be remembered, not forgotten.

“’Communism relied on watchtowers, snarling dogs, machine guns, and brick edifices topped with barbed wire,’ he said. ‘The Berlin Wall was the embodiment of this determination to rule by force. Today, twenty years since the wall was torn down, we should remember those East Germans who perished attempting to reach freedom in the West.’
    ‘The first person shot dead at the Berlin Wall was 24 year old Gunter Litfin, as he tried to swim across the Spree River on August 24, 1961. A year later, East German guards shot 17 year old Peter Fechter as he tried to scale the wall, and left him to bleed to death in that barren and desolate area of open land east of the Wall.”
    “The last person known to be killed at the Wall was 20 year old bartender Chris Gueffroy, shot ten times for good measure on February 5, 1989.”  

We should remember them, and their many brave confreres.

And perhaps, while remembering them, those who frequent Auckland’s Lenin Bar or Wellington’s Fidel’s Café -- or who wear a red star cap or a Che Guevara T-shirt -- might reflect on how long the authorities behind the Iron Curtain might have tolerated their petulant displays of dissent.

Remember these lessons because, as Richard Ebeling warns:

    Unfortunately, the Collectivist mentality did not end with either the fall of the Berlin Wall or the collapse of communism in the former Soviet Union. It remains alive and well …, with its insistence that the individual lives for and is to be sacrificed to ‘interests’ of the state.
    We still have our work cut out for us, to demolish the numerous political "walls" with which the government continues to enslave us through its police power in the growing interventionist-welfare state and the threatening economic fascist order.

And too the shaky philosophical foundations on which those walls are built.

** BONUS READING: How Reagan’s immortal words, quoted in this post’s title, almost didn’t make it into his speech at all

* * LEST WE FORGET. Is there a more fitting reminder of the oppressive nature of communism than the Berlin Wall itself?

UPDATE: Other good commentary around the traps:

  • “What is shocking but sadly unsurprising to me is this: after a seventy year experiment that lead to a hundred million deaths, we still have people in our universities and even on our streets who profess to be Marxists…. To this very day, our culture has not yet absorbed the lessons of Marxism, has not come to terms with the fact that it was not a noble experiment that failed, but rather a monstrous calamity that needs to be understood for what it was, lest it happen again.”
    A memorable anniversary, and those who would forget it – Perry Metzger, SAMIZDATA
  • “A genuine celebration of the dismantling of the Berlin Wall would call for a re-affirmation, not of the immorality of Communism, but of the morality of capitalism. That would help make the event a symbol, not just of Communism's fall, but of freedom's rise.”
    Fall of Berlin Wall Does Not Guarantee Freedom – Edwin Locke, AYN RAND INSTITUTE
  • “Today marks the 25th anniversary of the fall of the Berlin Wall. It did not fall, of course. It was felled. It was felled by ordinary East German men and women who decided they were not willing to spend the rest of their lives in a large prison pretending to be a nation. On the other side of the wall - the free side - far too many westerners were indifferent to the suffering of the east….
        “There were three key figures who stood against the détente fetishists, and in large part against the disposition of western electorates. Their names were Ronald Reagan, Margaret Thatcher and Pope John Paul II - all heroes in Eastern Europe to this day, yet, as Richard Fernandez notes, all absent from the coverage of today's observances. The A-list guest is Mikhail Gorbachev, whose plan was to preserve Soviet Communism by putting a cosmetic gloss on it. Today, the old passivity has returned: The Wall "fell".”
    The Will to Fell – Mark Steyn, STEYN ONLINE
  • “Much of the media discussion around the twenty-fifth anniversary of the Berlin Wall’s fall will focus on American military politics and the politicians of the time. But to truly understand why the Soviet system in Eastern Europe collapsed, we must look to Mises’s pioneering work on economic planning.”
    The Economics Behind the Fall of the Berlin Wall – Ryan McMaken, MISES DAILY
  • “But in the longer run, the battle between collectivism and a free individualism has been lost, as collectivism at the emoting booth has given every power of snooping and enforcement to the western tax state, short of shooting and torture…”
    Section 17: From Berlin Wall to 'The Lives of Others' – Mark Hubbard, LIFE BEHIND THE IRON DRAPE
  • “But it was the end of more than a 20th century story. Some of the East German protestors in the streets of Leipzig in early November carried banners that read, “1789-1989.” The storming of the Bastille in 1789 could be said to have marked the beginning of utopian revolutionary politics; now the storming of the Berlin Wall in 1989 marked its end. As Timothy Garton Ash observed, “Nineteen eighty-nine also caused, throughout the world, a profound crisis of identity on what had been known since the French revolution of 1789 as ‘the left.’”
    The Berlin Wall @25, Take 2 – Steven Hayward, POWER LINE
  • “On the 25th anniversary of the fall of the Berlin Wall, Ayn Rand Institute’s Yaron Brook gave a talk on the relevance of Ayn Rand’s We the Living. The talk, which was given in Berlin, was part of the “The Triumph of Individual Liberty” gala hosted by the Liberal Institute and European Students for Liberty. The audience received free copies of We the Living. Video of the talk is available here. [How appropriate that these two adaptations of Ayn Rand’s great anti-dictatorship, anti-communist novel be published exactly twenty-five years after the fall of the Berlin Wall.]”
  • “"Remembering the Victims of Communism," produced by Meredith Bragg and Michael C. Moynihan. About 4 minutes. Original release date was November 9, 2009 and original writeup is here:

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