Threat to Democracy in Chile

Contrary to the claims of the usual suspects, the threat comes from the political left;

While other schools have been under student occupation for weeks, petitioning education reform, students occupied Manuel de Salas [high school] for the first time this year Wednesday night. In this case, education reform —the theme of many “tomas”— was a secondary issue in comparison to concerns about the presidential primaries that will be held across the country this weekend.

“Sunday, they have authorized primary elections and the high school is one of these (voting) places,” student Gabriela Zunida told The Santiago Times. “We do not support these elections.”

At the school, 118 protesters were detained for disrupting the public order in a future polling location, All protesters were released the day they were detained, said Carabineros Director of Communications Jose Mora.  

According to Chilean law, armed forces and police would stand guard at polling stations on Friday in preparation for Sunday elections to ensure the voting areas are not tampered with prior to the arrival of voters. Following violent interactions between police and “encapuchados,” or hooded protesters, President Sebestián Piñera ordered high schools designated as polling sites and occupied by students, to be cleared early — by 3 a.m. Thursday.

For those without a scorecard; President Sebestián Piñera is not a man of the left. He's usually called a 'conservative'. He's the one standing up to the protesters who are saying, "We do not support these elections.”

Uhh, guys, 'cut-throat' is an unfortunate choice of words

One could have headlined this story as Viva Batumi!, since it tells the story of the transformation of Josef Stalin's Georgia homeland to a tourist destination--in Stalin's day, and for decades after, most people wanted to go the other direction; out of the USSR;

Subtle, Batumi is not.

A decade ago the city was a dingy and impoverished corner of the former Soviet Union. Today, it is a brash gambling town of bright lights and flashy casinos.

Welcome to the Las Vegas of the Black Sea.

Entrepreneurs in the Soviet Union of Stalin (who knew a thing or two about 'untrammelled power') would be in danger of being summoned to secret police headquarters where a bullet to the back of the head was a distinct possibility. Clearly a fate worse than today;

But the glitzy new face of Batumi has a flip side.

During a decade of untrammelled power, high-level corruption and cronyism within the [President Mikhail] Saakashvili government grew.

....Many poorer and older Georgians felt ignored and left out of Mr Saakashvili's US-style turbo-capitalist economy.

....Batumi is a test bed for Mr Saakashvili's brand of Western capitalism. And that not only includes American-style cut-throat free markets but also means promoting European attitudes of tolerance towards minority groups. 

Which seems to be BBC-speak for;

This region is home to Georgia's largest community of Muslims, who've been here since the 16th Century, when the area was part of the Ottoman empire. After the collapse of the Soviet Union in 1991, the Georgian Orthodox Church became an increasingly important part of the newly-independent state and of Georgia's national identity.

Muslim Georgians started converting back to Christianity but today around 30% of the population is thought to follow Islam.

Yet, from where are all the tourists coming to gamble in the casinos?

It has helped Batumi become a booming destination for tourists from nearby Turkey, where gambling is illegal.

According to the manager of the Peace casino, 95% of his customers are from Turkey. 

Muslim Turkey. Voluntarily going to Georgia. The BBC bills this as a problem for Muslim rights.

Sgt. Grover, USMC

In his entertaining memoir, A Personal Odyssey, Thomas Sowell relates something he learned while in the Marine Corps in the early 1950s;

Some people were surprised that I dared to give Sergeant Grover a hard time, on this and other occasions, especially since he was a nasty character to deal with. Unfortunately for him, I knew that he was going to give me as hard a time as he could, regardless of what I did. That meant that it didn't really cost me anything to give him as hard a time as I could. Though I didn't realize it at the time, I was already thinking like an economist. Giving Sergeant Grover a hard time was, in effect, a free good and at a zero price my demand for it was considerable.

The anecdote came to our mind this week while watching testimony in the George Zimmerman case in Florida. The prosecutor has been parading witnesses in front of the jury for several days, ostensibly to prove his theory of the shooting of Treyvon Martin; it was murder. However, every witness was turned by the defense, under cross examination, into supporting the defense's contention that it was a case of self-defense.

Presumably, the prosecutor, being intelligent enough to get into law school, pass his courses and also the bar exam, can see the logic of the evidence he himself has brought into the courtroom.  In fact, the first prosecutor to evaluate this evidence declined to bring any charges against Mr. Zimmerman for this very reason. It was only after a firestorm of racial animosity--the young man who was shot being African American, the shooter not--erupted, fed by some opportunistic attorneys and television commentators, that that decision was re-evaluated and Mr. Zimmerman was indicted on a charge of murder.

That that charge is a 'free good', at a 'zero price' from the perspective of the prosecutor has become painfully obvious to any objective observer. In fact, it's even better than a 'free good', since to decline to prosecute would have subjected him (and his political/legal career) to the same barrage of racial venom seen after the initial decision. A 'price' he has apparently decided is higher than the damage to his professional integrity from bringing a case to trial he knows he will lose.

The suspicion can't be ignored that the judge presiding in the case has also made a similar decision. Though clearly not as intelligent as the prosecutor and the defense attorneys, and a very weak personality--she appears to be a mere spectator in her own courtroom, while the attorneys control what goes on--she has to see that the prosecutor is not making a case at all against Zimmerman.  Certainly not one even close to being beyond a reasonable doubt--his legal burden of proof.

There are however costs to these decisions, probably in the millions of dollars.  But, these costs are borne by the taxpayers and Mr. Zimmerman, not by the decision makers themselves. The incentives facing the prosecutor, the judge, even the defense attorneys who are being paid to exercise their skills in the courtroom are at odds with whatever benefits the people of Florida are getting from this farcical show trial now playing out over national television.

Speaking of which, the television networks covering all this have their own incentives not to spoil the fun. They're getting free programming material. Better than a soap opera that they'd have to pay someone to write and act out on camera. Which, we suspect, would come as no surprise to Thomas Sowell.

Sour grapes

The government of Spain  tells nonagenarians they shouldn't have worked so hard when they were younger; because it now costs them money;

Verónico Martínez, 92, is the son of the blacksmith of Yetas. ....he and his wife Marcela Fernández spent their lives working the land: sowing potatoes, reaping rosemary and lavender. For 17 years, he also traveled to France for the grape and tomato harvests with a group of village men. Marcela went with him on eight occasions. "It was so we could make enough money to eat," she says in her thin voice. "Not because I liked it."

Never did they dream that, 40 years later, those two-day train trips followed by four months of back-breaking work would come back to haunt them. On April 30, a letter was mailed from the Social Security offices in Albacete. This letter .... was informing him that he was going to lose a third of his pension because of 79.66 euros a month that Marcela gets from France as a result of her occasional work there four decades ago. The couple were unsure how to interpret the administrative jargon, but the letter was not a mistake. It is one of many that are being sent out to villagers across Spain.

Verónico gets the minimum pension, 598.80 euros, and until now he was also receiving a supplement of 180.10 euros for having a dependent, Marcela, in his care. But this year, the small print in the budget includes an item that had slipped by unnoticed until a few days ago: any financial assistance by a foreign country to a dependent automatically means losing this supplement. With 79 euros and two broken hips, Marcela Fernández is now considered a self-sufficient woman. Not only that, but the couple must return the supplementary 720.40 euros that they have received since January.

Which means that depriving the couple of 180 Euros (about $250 USD) because of a pension of less than 80 Euros is a tax rate of about 225%.

On the Spanish poor.

Seems in poor taste

But the French can't tell the difference on their own? Quelle horreur;

French MPs have approved a bill forcing restaurants to label as "home-made" dishes which were prepared from raw ingredients in their kitchen.

The "fait maison" label on menus is aimed at curbing the practice of buying in pre-cooked meals from outside, microwaving them and passing them off as freshly made.

Restaurants marking dishes as "fait maison" fraudulently will be fined.

Bon appetit.

Don't tread on moi

Entre pneus? Non merci, not on your life. Goodyear is heading out, when (or, if) they can;

The factory is losing $80m a year, it says, and producing goods there is no market for.

The battle began back in 2007, when Goodyear announced plans to stop making cheap car tyres at the plant and focus on tyres for tractors and other farm vehicles.

....Unions refused. The next year they went to court to prevent the company laying off 400 staff, and won. Last year they helped scuttle Goodyear's plan to sell the factory to Titan, an agricultural tyre producer, in a deal that would have seen many more job losses (including voluntary redundancies).

It was in January that Goodyear finally announced its decision to close the factory, describing this as "the only possible option after five years of fruitless discussion".

But, not so fast;

"French law says if you want to put all these workers on the dole, you have to have a good reason," says Fiodor Rilov, the CGT union's lawyer. "This may be an American company, with a headquarters in the US but they are operating on French soil and they have to respect our social rules."

Sometimes called the Red Lawyer by the right wing press, Rilov is a key character in the drama unfolding in Amiens. The grandson of a Russian immigrant, he was born in London before moving to France, aged eight. He has a reputation as a workers' hero because of his track record in taking on several multinationals. He has often stalled or prevented layoffs and won compensation through his imaginative use of the Loi de Travail - France's fiendishly complex labour law, which runs to 3,371 pages. 

Wonder if that has any disincentive effect on potential investors in France?

War for Oil

Brusselscrats have surrendered in the olive-oil-on-the-restaurant-table-flap;

If the initiative had prospered, on January 1, 2014 every single restaurant from Athens to Helsinki would have had to eliminate the refillable oil dispensers that customers use to dress their salads or add flavor to their bread while they wait for the main course. Instead, establishments would have had to provide single-dose packages or sealed bottles to prove that there really is olive oil inside and that nobody has refilled the cruets with a lower-quality product.

Apparently European palates were thought not to be refined enough to taste the difference. In Portugal, at any rate, that's the law;

In January 2006, Portuguese law banned the traditional refillable oil cruets from restaurants. In general terms, this legislation is observed. [Lisbon restaurateur] Luis says it is more expensive this way, because each 250-centiliter bottle costs him a euro. A one-liter bottle is two euros, and before that, when he used to buy the olive oil wholesale from his village, it was even cheaper. "But it's the law," he shrugs.

....Producers defend the law. In recent statements to the daily Diario de Notícias, a spokesperson for the Federation of Oil Cooperatives of Portugal said that ever since the legislation went into effect, "the quality of the product that is served at Portuguese restaurants has gone up significantly and if prices have gone up significantly too, that means that what used to be served was not oil."

The above is under the headline; 

Pricier salad, happier producers in Portugal.  

We wonder, who is it who polices the bottlers?

And steppe on it

Or in it, more likely, when it is discovered that money trees don't grow in Russia;

Last week at the St. Petersburg Economic Forum, President Vladimir Putin announced plans to uncork the National Welfare Fund, or NWF, and spend 450 billion rubles ($13.6 billion) on three major infrastructure projects in the near future.

One of them is a new high-speed rail line to connect Moscow and major cities to the east: Vladimir, Nizhny Novgorod, Cheboksary and Kazan.

Right now one can find flights between Moscow and Kazan for $69. We wonder how the financing plans will fare with that reality;

Russian Railways ... officials stress that at this point what they have for the project is preliminary calculations and political will. As for financing, it is clear that even if the whole sum announced by President Vladimir Putin were to materialize for the Moscow — Kazan rail line, it will only cover roughly half of the needed amount.

Seventy percent of the total sum required to build the line is meant to come from state funds, and the rest is to be provided by private investors, banks and other sources.....The money could originate from other sources as well, officials have said. This includes budget funds, money coming from the NWF, the Pension Fund, the Russia Direct Investments Fund, investments from companies — Russian Railways being one of them —  as well as loans from state and private banks, said Alexander Misharin, first vice-president of Russian Railways and head of Skorostniye Magistrali, a subsidiary of the state rail monopoly which is in charge of high-speed rail development.

"We have to start the project and then the cash will grow around it," Misharin said.

Of course, that's the way it always happens, build it and they will come. Says so in all the prospectuses for business ventures--which is what a railroad is.

The gilded monuments of princes

Are also subject to the laws of supply and demand, as the Greeks are finding out;

ATHENS—A global boom in commodity and scrap metal prices isn't making Andreas Varelas, deputy mayor of the Greek capital, very happy these days.

Although the city's recycling division, which he heads, has more than tripled its annual profits in the past two years selling scrap metal on the world market, the boom also has a cost: thieves have been pilfering the city's bronze statues and melting them down for cash.

Busts of the creator of Zorba the Greek, El Greco, José Marti and Simón Bolívar, along with various war heroes and resistance fighters have gone missing, presumably sold for scrap.  As well as manhole covers, storm drains, wire cables and church bells.

 ...says Mr. Varelas. "When you think that bronze sells for a few thousand euros a ton, that creates an incentive. One of these busts represents a day's work for the thieves."

No mostrarles el dinero

Just give it to them directly, rather than filter it through Spanish politicians, bureaucrats and union bosses;

Employment Minister Fátima Báñez announced on Monday that Spain would be receiving 1.5 to 2 billion euros of EU funds to help combat youth unemployment. The total amount that the EU is planning on spending on the problem, assuming that the plan is approved by the European Council this week, is expected to reach six billion euros.

Báñez made the announcement after meeting on Monday with the prime minister, Mariano Rajoy, and the leaders of Spain’s main labor unions in the Moncloa palace. 

Wouldn't even have to drop it from helicopters, just ask unemployed Spanish youths (something like 60% of their total) to register for the largesse. Then divide the number of applicants into the money made available to get each recipient's amount, and mail them a check or deposit it into their bank account. Stimulus accomplished.

Comment dites-vous fraudes en anglais?

She didn't look a day over forty;

A Parisian mother has taken helicopter parenting to a preposterous extreme. The 52-year-old woman was so desperate for her daughter to score high marks on the Bacchalauréat, France’s equivalent of the SAT, that she disguised herself as a high school student and attempted to take the English portion of the exam for her.

The woman, who is referred to as Caroline D in news reports, caked her face with makeup and donned Converse tennis shoes and low-waist jeans to trick exam supervisors into thinking she was her 19-year-old daughter, Laetitia, according to the British Telegraph.

....but a savvy supervisor recalled a much younger looking woman taking a philosophy exam under the same name a few days earlier.

Exam officials decided to let the mother finish the exam to avoid disrupting students and four police officers reportedly intercepted the cheating mom as she walked out the door.

Is Jamie Galbraith literate?

Never let it be said that we deny anyone the opportunity to clarify their insults. Comes Jamie Galbraith to defend(?) himself:

The actual allusion is to Kurtz, in Heart of Darkness. Nothing especially to do with slavery -- though possibly worse.

Got it.  Milton Friedman wasn't a slave master, he was worse; Kurtz, with a heart of darkness. That casts an entirely new light on Prof. Galbraith, all right.

Missing the Aeroflot

Oh, ho, ho, irony! Oh, no, no, we don't get that here.

--C.D. Bales to Roxanne

Whatever else, one can't fault Edward Snowden in the irony department;

MOSCOW (AP) — A plane took off from Moscow on Monday headed for Cuba, but the seat booked byNational Security Agency leaker Edward Snowden was empty, and there was no sign of him elsewhere on board. His whereabouts were unknown.

Had he gotten to Cuba, his whereabouts would definitely have been known...to Cuban intelligence services. They don't let anyone escape their attention while there. As Chilean diplomat Jorge Edwards described the experience in his memoir Persona non Grata;

I was very much affected by the feeling of being watched by the police at all times, and this had gone so far as to cause me persistent insomnia and physical difficulty in breathing, together with pains in the chest and the sensation of being on the point of having a heart attack.

And he was protected by diplomatic immunity! The CIA and State Department ought to leave no stone unturned in facilitating Snowden's entry into Cuba; he become a real expert on surveillance there.

Unfashionable bag

But, business is business, says Anya Hindmarch (and the devil takes the hindmost?);

The handbag entrepreneur and mother-of-five told MPs the “suffocating” regulations could force employers to hire men over women.

Mrs Hindmarch, 45, told the Commons Business Innovation and Skills Committee: “There is a brown envelope flashing above every woman's head in terms of tribunal threat. I think it [regulation] could end up working against women, unfortunately.

“As a woman, a mother-of-five and an employer of a lot of women with children, it would end up making you make a choice between employing a man or a woman.

“You probably might pick the easier route because the regulation and consequential cost and eggshell treading would just be too onerous. I cannot say strongly enough that any more regulation will cripple this country. We are so over-regulated.”

In this case it's maternity leave and its repercussions that make employing women more costly. What does a country with a governmental committee on 'business innovation and skills' expect?

Blame it on Rio

Brazil's politicians may have scored an own goal, as the fans are in a frenzy;

It was an apparently innocuous R$0.20 rise in the cost of a bus ticket in São Paulo that sparked mass protests that have since swept through at least twelve Brazilian states. On Monday, an estimated 200,000 people took to the streets in São Paulo and Rio alone, in protests larger than any witnessed in Brazil since those against President Fernando Collor in 1992.

The Movimento Passe Livre (Free Fare Movement) and its sympathizers continue to call for the increase to be reversed and for free public transport to be implemented, which has been achieved in some cities and discussions have progressed in others.

Now however, the protests have taken a much wider form, allowing Brazilians to vent their anger and frustration at the state of the country, from the country’s multi-billion-dollar hosting of the World Cup and poor public services, particularly health and education, to rampant political corruption and police brutality.

Brazil is also hosting the 2016 Olympics.  The people seem to have a different opinion of the benefits of spending billions to accomplish that too.

Lección de elasticidad

At the box office in Spain;

“We are in a state of panic.” The reaction of the president of the Spanish film producers association (FAPAE), Pedro Pérez, to the estimate of last weekend’s takings at the Spanish box office, could not have been blunter.

“It has decreased more than 30 percent compared with the worst figure in history; we have gone down to receipts of 2,150,857 euros,” Pérez said, after speaking at the Madrid de Cine-Spanish Film Screenings event in the capital this week.

Not enough Paz Vega films?  Or, maybe it's not supply, but demand;

“We have to fight back with aggressive pricing policies,” said Pérez. “If people aren’t going into theaters at the moment because they think the cinema is expensive, it doesn’t matter what we think: we have to act accordingly.”

Pérez said he recognized the impact of the 13-point hike in the VAT rate, from eight to 21 percent, but stressed that his decision to lower prices was essential.

A near tripling of the tax rate, and fewer people buy. Imagine that.

Amateurish

Is, as amateurish has done, in the defense that the cartel in restraint of trade known as the NCAA is putting up in the Ed O'Bannon case now before a court in California. As this Wall Street Journal story puts it;

The NCAA includes many provisions about amateurism in its 439-page Division I manual but lacks a hard-and-fast definition of the word. Essentially it says that an amateur is an athlete who (a) is not a professional, and (b) abides by the NCAA's rules of amateurism. Those rules can change, and often do.

The NCAA's tenets of amateurism sometimes appear to shadow the winds of public perception.

Which is why university Athletic Directors interviewed during televised college football and basketball games always refer to 'the student athlete'. They need to keep the perception alive that what the fans are seeing has nothing to do with commerce, but everything to do with education.

It's clear that the NCAA has been willing to add benefits to the bare-bones notion of amateurism. Where it has drawn a hard-and-fast line: linking athlete compensation to the laws of supply and demand. That is the battlefield where the O'Bannon case is being fought.

....The NCAA has long employed, in essence, two operating models: a professional one when it negotiates business contracts, and an amateur one when it distributes the fruits of those contracts. The O'Bannon plaintiffs want the NCAA to more closely align its distribution methods to its business operations.

Ramogi Huma, a former UCLA football player and president of the National College Players Association, is rooting for the plaintiffs, and for something he said has been missing on the athletes' side of the NCAA equation: free enterprise.

"What is evil," Huma asked, "about Americans getting what they're worth?"

And since a large percentage of those athletes are African Americans, what's up with the Al Sharptons and Jesse Jacksons of the world being MIA in this battle?

Good citizenship

In New Zealand even the burglars report suspicious deaths to the police;

A terrified burglar in New Zealand called police after he bumped into a hanged body while prowling around a darkened house.

....He ran home and telephoned police to report the grisly find and turn himself in.

....The body in the house was that of a man who is believed to have committed suicide.

Officers who were trying to contact the man's relatives confirmed that his death was not considered suspicious, and said the case would be handed over to the coroner.

[Police] Sgt [Freda] Grace said that in the circumstances it is unlikely the 21-year-old burglar will be charged, but he would be given a stern warning.

The world's upside down.

Not making them like they used to

Communists.  In Chile. They're issuing requests to Michelle Bachelet the leader of the left-wing coalition in the upcoming presidential election;

The PC [Partido Comunista] program team created a list of seven desired focus points ranging from a new constitution, changes to the current pension system and social issues like education and improved health care in Chile. Also highlighted were labor reform, human rights, decentralization and strengthening Latin American foreign policy.  

Juan Gajardo, PC representative, told The Santiago Times that the party would be most insistent on constitutional change and tax reforms. 

The PC supports changing the constitution through drafts created by a constitutional assembly, a group of citizens elected by the public, as well as academics and experts in constitutional reforms. 

[Guillermo] Teillier, however, expressed his apprehension with legality of a citizen assembly, as it is currently not considered in the constitution.

Teillier, the president of the PC, wants to observe the constitution! Maybe he learned what happens to guys who don't.

'Why' the headline?

The Wall Street Journal's Holman Jenkins Jr. has an opinion piece today with the headline, The Young Won't Buy Obamacare. There is a bit about that in the body of the article, that Obamacare is going to be asking 'the young' to increase their spending (for other people's healthcare, not their own) from about $800 per year to over $5,000, but that's hardly the meat of the piece.

A better headline would have been, Why Healthcare Costs so Much, because that's the question Jenkins answers; It's that consumers of healthcare rarely pay directly for it, and thus the monitors of the spending aren't as effective in keeping down costs as they could be.

In the automobile market, dealers publish prices on their websites and in ads that are always lower than the sticker prices. Why?

Independent websites like Edmunds.com, AutoTrader.com and Kelley Blue Book publish detailed pricing information for consumers and do so for free. Why?

The answer is obvious. Consumers want such information and businesses see opportunity in providing it, even for free, in order to attract eyeballs for advertising.

Such information doesn't exist in health care because consumers don't demand it, because somebody else is almost always paying for our health care. Those of us who aren't subsidized directly by Medicaid, Medicare and the Veterans Administration are subsidized through the tax code to channel all our aches and pains through a third-party payment mill, disguised as employer-provided "insurance."

 Which provides the explanation of the games people play regarding spending on medical treatment, such as;

Medicare is portrayed as getting the best deal from the system because Medicare pays less per service. But remember how the system works. Who's to say Medicare doesn't pay less per procedure because it's being billed for many more procedures, because that's how providers are allowed to maximize their revenues from the payer known as Medicare?

In fact, plenty of evidence suggests this is exactly how Medicare operates. And Congress understands as much, hence the 25% cut in physician reimbursements it keeps threatening to impose is informed partly by expectations that physicians could maintain their incomes by charging for more services.

The young aren't covered by Medicare are they?

Occupy Fire Island

And if you teach at NYU, they'll make it easy for you do so;

 The house, which is owned by John Sexton, the president of New York University, was bought with a $600,000 loan from an N.Y.U. foundation that eventually grew to be $1 million, according to Suffolk County land records. It is one of a number of loans that N.Y.U. has made to executives and star professors for expensive vacation homes in areas like East Hampton, Fire Island and Litchfield County, Conn., in what educational experts call a bold new frontier for lavish university compensation.

N.Y.U. has already attracted attention for the multimillion-dollar loans it extends to some top executives and professors buying homes in New York City, a practice it has defended as necessary to attract talent to one of the most expensive cities on earth. Mortgage loans to Jacob Lew, a former N.Y.U. executive vice president, part of which was eventually forgiven, became an issue during Mr. Lew’s confirmation hearings as treasury secretary this year.

The 1% are different from you and me.

You can't make an amulet...

In Tsarist Russia, without painting eggs.  Faberge eggs;

The jeweler and entrepreneur Carl Faberge fashioned his eponymous eggs from gems and precious metals in his St Petersburg workshop.

The first one was presented by Tsar Alexander III to his wife, the Empress Maria Fedorovna, at Easter in 1885, an annual tradition which his son Nicholas II followed with eggs for his mother and wife each Easter Sunday.

Not quite good luck charms for them, as it turned out;

It is claimed that after the Russian revolution the Romanov women sewed them into their clothes to protect against theft and the rounds of the Bolshevik firing squad pinged harmlessly off them. But they were run through with bayonets instead. 

Then the precious collectibles were sold into the West to help finance Lenin's economics fantasies. The funds not going even close to far enough.  Now, a different kind of Russian oligarch is again buying;

The baubles...now belong to Viktor Vekselberg, an oil and gas tycoon who has a fortune estimated at $18bn (£11.5bn) and is often described as Russia's richest man.

In 2004 he paid $100m for nine imperial eggs - a collection second only in size to the 10 held by the Kremlin Armoury Museum in Moscow.

What else is he going to spend on, a soccer team?

"If you compare with the situation in Russia 25 years ago, in socialist times, then everyone was of course equal... We broke one system and we have just started on a new system," Mr Vekselberg said.

"Of course we have some negative results of that transition system - we have a big gap between a small group of rich men and the biggest part of the population, who are not so wealthy, but this is a process and I believe this gap will be reduced," he said. 

Own up to it!

Home ownership might cause unemployment, according to this from Warwick's Andrew J. Oswald;

Switzerland has 3% unemployment and 30% home ownership, while Spain has 25% unemployment and 80% home ownership.

Not convinced yet? (and Oswald doesn't think you should be by that);

... we take many decades of data from US states, which as a federally organised nation state, offers a useful spatial mini-laboratory for econometric work on unemployment rates, and we then estimate state panel unemployment equations. We adjust for state fixed effects, for year dummies, and for the demographic and educational composition of the people who live in the different states.....

• A doubling of home ownership is associated with more than a doubling of the long-run unemployment rate.

Curious...but;

We are not sure what explains our correlation. But we show, using various micro data sets, that higher home ownership leads to lower labour mobility, greater commute-to-work times, and a lower rate of business formation. Our hunch, on which further work will be needed, is that the housing market exerts powerful externalities upon the labour market. This would not have surprised Milton Friedman, who, in his writings on the natural rate of unemployment, emphasised the need for labour mobility in an efficient economy.

Does it surprise anyone that there's a 'road...hell...good intentions' argument to be made?

Tax breaks offered by many governments acted to destroy large parts of the early 20th century private rental housing market. If we are right, these kind of tax breaks have worrying consequences.

We believe these issues merit more attention from economists.

No kidding.

Who'd a thunk it?

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” 

--Adam Smith, Wealth of Nations

Today's illustration that old Adam knew of what he spoke comes from The Wall Street Journal, which details the travails of Tesla Motors' attempts to sell their high end electric autos online, bypassing local dealers who've captured the regulators and legislators in their states;

David Westcott, chairman of the National Auto Dealers Association who has a Buick-GMC dealership in Burlington, N.C., said Tesla's effort to sell direct to consumers was important to all dealers and something the national association was watching.

"The system has worked for a long time," he said. "We only want Tesla to play by the same rules," Mr. Westcott added.

The rules that result in higher prices for consumers, he means, but didn't say. And it isn't just in North Carolina, but virtually everywhere.

Bill Wolters, who leads the Texas Automobile Dealers Association and helped to defeat the Tesla-led proposal [to sell their vehicles through online orders], said he is worried that GM or Ford might want to offer direct sales as well, cutting perhaps 15% out of the dealer business and putting thousands of business owners under.

 And depriving millions of car buyers the pleasures of negotiating sales with dealerships?

It's So Peaceful in the Country

The country is Chile.  There's an election. The candidates respect one another (and their constitution that Augusto Pinochet bequeathed to them);

The Alianza debate, which featured Andrés Allamand of the center-right National Renewal (RN) party and Pablo Longueira of the right-wing Independent Democratic Union (UDI), was the first in the political bloc’s 24-year history. Until this election cycle, the coalition had bypassed the primary system altogether, with party officials choosing a nominee behind closed doors.

Still, the conservative candidates did not treat the new format as an opportunity to take jabs at one another. Rather, the evening was marked by broad ideological agreement and a civil, reserved tone.

On the issues, both Allamand and Longueira stressed their support of free markets.
Longueira said that competition has provided Chileans with an “historical leap” in social and economic conditions. The UDI candidate also stressed that it was the role of the government to increase competition among private enterprises.

Even among schools, as;

On education, both candidates agreed even more wholeheartedly, defending the status quo, notably the subsidized school option — which is funded by a combination of public and private funds.

The 'subsidized school option' means 'vouchers for school choice', which about half of Chile's families take advantage of. The also have a private social security option, highways and waterworks. All seemingly popular, since even the Socialists who were elected president, Ricardo Lagos and Michelle Bachelet, didn't change them.

As the song has it, you really ought to try it.

Chile in the 80s, and beyond

When last we left our continuing review of James Rolph Edwards' Painful Birth: How Chile Became a Free and Prosperous Society, Chile had recovered from a serious recession in the mid 1970s and was enjoying annual real GDP growth of almost 7%. As we mentioned, Chile's path wasn't always smoothly upward, and a mistaken monetary policy tactic--pegging the Chilean currency to the US dollar in 1979--was a disaster waiting to happen.  Which it did after Paul Volcker slammed on the monetary brakes in the United States in 1981 in order to break the inflationary spiral that had developed in the U.S.

The side effect of the cure for inflation being recession. The higher the inflation, the worse that recessionary side effect. With Chilean monetary policy being determined by the Federal Reserve in the USA, and Chile's inflation rate being much higher than that in Volcker's country, Chile's recession was much more severe than America's. It hit in 1982-83, and was brutal.  GDP dropped over 13%, as once again demand for Chilean copper dropped drastically, as it had in 1975.

The Chilean public was understandably outraged, and Pinochet had to make some changes in his economic team, including sacking the Minister responsible for the currency peg. The Chilean peso was freed from the U.S. dollar, tariffs were again lowered, more corporations were privatized,  double taxation of corporate profits was eliminated and rates were lowered.  Maybe most importantly, the law requiring wages to be indexed to the prior year's inflation was eliminated.

Even more innovative--Chile, like many Latin American nations had borrowed heavily in foreign markets, and many firms were on the brink of default--the Chicago Boys instituted a program of  equity (stock) swaps of that debt.  As Prof. Edwards tells it:

As a policy, it worked extremely well, contrary to the predictions of the critics. In 1982, Chile had a foreign debt burden equivalent to $17.4 billion in U.S. dollars, one of the highest per-capita in the world.  Yet in only four years, 1985-1989, $10.5 billion of this debt was retired, mostly thought various forms of debt-equity swap, and the country had built up $9 billion in foreign exchange reserves. Exports expanded and the country prospered.

Chilean productivity boomed and real GDP grew at a compound rate over 6% for the rest of that decade. In stark contrast to what was happening to all other Latin American nations during this time. Nor, contrary to left wing spin, was the increased prosperity confined to the better off in Chile.

Finally, the last gift from Pinochet to his nation was the restoration of democracy.  Losing a plebiscite in 1988 that would have given him another decade in power, Pinochet stepped down.  Even though in doing so he knew he was going to be opening himself to retaliation by disaffected socialists.  And not just in his own country.  When, elderly, he traveled to the United Kingdom for medical treatment in 1998, a Spanish court issued a warrant for his arrest on the dubious grounds that Spanish citizens had been murdered in Chile when he had been president. Pinochet's last years were spent defending himself from that, and other charges.

But, as it says on the plain marble slab that covers the remains of the architect Christopher Wren in the basement of St. Paul's Cathedral in London, If you need a monument, look around. Chile has been a functioning democracy for about a quarter century now. Even when Socialist governments were elected they didn't attempt to undo the free market reforms of Pinochet and his Chicago Boys--one such Socialist, Ricardo Lagos, still brags that he privatized the Pan American highway!

Chile has a sound (privatized) social security system, school choice for even its poorest students, freedom from the fear of the midnight knock at the door that was the fate of most people who suffered the kind of nightmare that Salvador Allende wanted to impose. Quite a monument if one isn't afraid to look around...and see.

Sympathy for el diablo

One of the great ironies ignored by most people of the left, is that Fidel Castro admired Francisco Franco. What ought to be obvious is that both men were traditional Spanish caudillos, strongmen. What is different about the two is the enemies they had.  In Castro's case largely imaginary, but in Franco's well documented to have been allied with Joseph Stalin.  Now comes a book published in Spanish and Chinese highlighting the role played by Mao's forces in the Spanish Civil War; Los brigadistas chinos en la guerra civil.

"If not for the fact that we have the Japanese enemy in front of us, we would surely go join your troops," wrote Mao in an open letter to the Spanish people on May 15, 1937. Some Chinese nationals ended up going anyway. Hwei-Ru Tsou and Len Y. Tsou, a Taiwanese couple living in the United States, chanced upon the photograph of an Asian soldier in a book about the 50th anniversary of the International Brigades. They were surprised. Then, deploying all the perseverance of doctors in chemistry, they spent the next 10 years conducting research in three continents, and located around 100 Chinese combatants. 

Franco actually was beset by foreign enemies, which he managed to defeat. Castro, far more ruthless and totalitarian, opportunistically created his foreign devil  because it made him the beneficiary of the Soviet Union's largesse. Both the CIA and the State Dept. were pro-Castro in 1958, even arranging for sympathetic journalists to get to Castro's military camp in the Sierra Maestre. Had Castro been something other than a megalomaniac he could have taken power in Cuba and had a perfectly civil relationship with the USA.

Franco's enemies were not of his own making, as this book makes clear;

Only two Chinese nationals were in Spain when war broke out. One, Zhang Zhangguan, had been a traveling salesman there since 1926. The other one, Zhang Shusheng, spoke fluent Spanish and was thus sent to a fully Spanish army unit, the 195th Brigade of the 50th division. The others trickled in from the United States and Europe, especially France. They were huagong, unskilled workers who had been recruited by Western powers in China to come and work after World War I. Most were Communist party members, like many of the nearly 35,000 individuals from 53 countries who made up the International Brigades, born out of a political decision by the USSR and the Communist International.

The quiet, mysterious Bi Daowen was another example of Asian support for anti-Fascism. An Indonesian doctor born to Chinese parents who kept in touch with Indonesian pro-independence groups back in the Netherlands, where he studied, Bi Daowen arrived in Spain in September 1937, sent by the Communist International, where he worked as a liaison until the 1960s. He came and went and was spotted in China, Russia, Czechoslovakia and his native Indonesia.

That was an example for Castro.  After consolidating his hold on Cuba he tried exporting his brand too, with his most notable failure being in Chile in the 1970s. A story almost as well hidden as this one about Mao and Spain.

Burying the lede

David Henderson provides a link to a 2008 ABC News story on NSA surveillance of international telephone calls that hides the most important fact until deep within;

Some times, Kinne and Faulk said, the intercepts helped identify possible terror planning in Iraq and saved American lives.

"IED's were disarmed before they exploded, that people who were intending to harm US forces were captured ahead of time," Faulk said.

Instead, ABC peddled the line that the NSA was listening in to the conversations of ordinary Americans back then--which begs the question of why the latest revelations by Edward Snowden are getting any attention at all NOW:

"These were just really everyday, average, ordinary Americans who happened to be in the Middle East, in our area of intercept and happened to be making these phone calls on satellite phones," said Adrienne Kinne, a 31-year old US Army Reserves Arab linguist assigned to a special military program at the NSA's Back Hall at Fort Gordon from November 2001 to 2003.

Kinne described the contents of the calls as "personal, private things with Americans who are not in any way, shape or form associated with anything to do with terrorism."

Which, if true, wouldn't have resulted in IEDs being discovered and disarmed before killing and maiming Americans. The 'everyday, average, ordinary Americans' were speaking Arabic and calling into, or receiving from, a war zone. The 'Kinne and Faulk' pair were Arabic trained for that purpose, not for what ABC was trying to sell;

Faulk says he and others in his section of the NSA facility at Fort Gordon routinely shared salacious or tantalizing phone calls that had been intercepted, alerting office mates to certain time codes of "cuts" that were available on each operator's computer.

"Hey, check this out," Faulk says he would be told, "there's good phone sex or there's some pillow talk, pull up this call, it's really funny, go check it out. It would be some colonel making pillow talk and we would say, 'Wow, this was crazy'," Faulk told ABC News.

 Crazy indeed; pillow talk on an international phone call.  Almost makes one suspicious it was designed to mislead anyone who might have been listening, or been in code.  Even if the 'whistle blowers' ABC is promoting, were correct that these were innocent people with no connection to terrorism (and how would they know that?), it seems a low cost--how many Americans even speak Arabic?--for the benefits to the Americans whose lives were saved as a result of the program.

No new Milton Friedman?

It was recently asked at Econ Journal Watch, why we did not have one today. Well maybe we have someone close, what with the new paper by Greg Mankiw demolishing the left wing case for income redistribution, and doing so like a perfect gentleman. For instance, to the argument that high income people owe their good fortune to the services government provides, he asks;

This line of argument  raises the empirical question of how large the benefit of government infrastructure is. The average value is surely very high, as lawless anarchy would leave the rich (as well as most everyone else) much worse off. But like other inputs into the production process, government infrastructure should be valued at the margin, where the valuation harder to discern. As I pointed out earlier, the average person in the top 1 percent pays more than a quarter of income in federal taxes, and about a third if state and local taxes are included. Why isn’t that enough to compensate for the value of government infrastructure?

Then he goes further, by noting that government has been engaged in less and less infrastructure provision, and more and more redistribution of income, anyway. So, if that infrastructure is so important, why are the incomes of the 1% increasing as fewer government resources are directed at assisting them?

He also attacks the 'Rawlsian'  argument that government redistribution can be thought as a kind of insurance that everyone should be happy to pay for, to avoid being one of the poor;

Yet take this logic a bit further. In this original position, people would be concerned about more than being born rich and poor. They would also be concerned about health outcomes. 

Consider kidneys, for example. Most people walk around with two healthy kidneys, one of which they do not need. A few people get kidney disease that leaves them without a functioning kidney, a condition that often cuts life short. A person in the original position would surely sign an insurance contract that guarantees him at least one working kidney. That is, he would be willing to risk being a kidney donor if he is lucky, in exchange for the assurance of being a transplant recipient if he is unlucky. Thus, the same logic of social insurance that justifies income redistribution similarly justifies government-mandated kidney donation. 

No doubt, if such a policy were ever seriously considered, most people would oppose it. 

No doubt indeed.

The Occupy Wall Streeters aren't going to be very happy to read his conclusion that those of the 1% who earned their way there by being CEOs of large firms (even financial firms), probably did so because they provided good value for their services.

We eagerly await Paul Krugman's fit of apoplexy.

Art in the New Chile

In a prior post we linked to the audio interview by Eleanor Wachtel with Chilean novelist Alberto Fuguet, who credits Augusto Pinochet with changing the country for the better.  Making it more liberal and open, even allowing a non-politicized art to arise in place of the old--especially the nostalgic 'Magic Realism'.

Following immediately after Fuguet's interview, at the same site, is one with young film maker Sebastian Silva, in which he discusses his 2009 movie, La Nana (The Maid). The story based on his own family's experience with  their long serving domestic. Silva's film nicely illustrates Alberto Fuguet's point.  While Silva pays some lip service to it being about a third world social problem, it really isn't political at all.

Chekhov or Ibsen could have written the script--though it's stylistically different.  The story is about a maid in  upper middle class Santiago who has served one family for over 20 years, getting older and having some medical problems.  The mother in the household realizes that Raquel needs some help coping with a large workload, and brings in another maid to help.  Which Raquel sees as a threat to her position, so she sabotages the women she sees as her possible replacement.

Until one arrives who is strong willed and self-confident enough to defeat Racquel.  Instead of being competitors, they become close friends. The strength of the simple story is in the interpersonal dynamics of a large household. Not at all magical, but realism.  Conventional art, and a refreshing change from the numerous portrayals of Chile as a repressive society.

Theory of Regulatory Cab-ture

George Stigler is entitled to laugh from the grave, as London's transportation professionals joust over who should get to drive in bus lanes;

My cabbie didn't seem concerned about losing his primacy on the roads anytime soon, however. Pulling up to the Add Lee [car hire] offices, just in time, he jerked his chin towards the entrance: "They may have a lobby, this mob taking over. But so have we."

What does the Add Lee CEO think?

Mr. Griffin says he'd be just as happy to see the Court of Appeals kick black cabs out of the bus lanes—similar to New York, where yellow cabs do not enjoy the privilege of running up reserved bus lanes to skirt traffic—as he would be to see private-car services allowed in.

"To us, it's a logical argument," he adds. "If you try to define what is a taxi and what is a private hire, what functions we carry out—you'd think, to a layman on the street, they'd be the same product. Therefore how is it not anticompetitive to favor one over the other?"

As the author of the piece (Anne Jolis) points out, it's been anti-competitive since King Charles I in 1635.  Back then it was the water-taxi men with their lobby getting the privileged monopoly, but political fashions were different and eventually;

 In 1637 he [Charles] proclaimed that just a few hired coaches were so "very requisite for our Nobility" that "there should be a small competent number allowed for such uses." He followed up shortly with Royal preferences on horse specs and buggy make. After the Interregnum, Charles II issued more licenses, and licensing fees and standards, with preference to "ancient Coachmen or such Coachmen as have suffered for their service and affections to" the King or his late father.

London cab fares have since been fixed by Act of Parliament and price competition is banned.  

Tradition being so important in England, that even the CEO of Add Lee wants to keep to some form of it;

But don't expect Add Lee to start lobbying for fully equal road-rights—namely, for private-hire vehicles to be legally flagged down on the street like regular taxis.

"I actually think the London regime is a great balance," says Mr. Griffin, citing the superiority of the Knowledge [exam for cab drivers] over sat-nav, and stressing that Add Lee is as concerned as anyone with "absolutely prevalent" illegal touting. "Plying for hire is something that should be the preserve of the black taxi."

Londoners who have stood in the rain without an available cab in sight might disagree. But if regulators ever did eliminate the cabbies' plying-for-hire monopoly, Mr. Griffin explains, Add Lee would also "effectively lose control."

Giving licensed private-hire drivers the same plying rights as cabbies would not only mean more choice for customers—it would cut out the legal need for middlemen like Addison Lee.

"From a business point of view," Mr. Griffin politely concludes, "we'd like to keep control." 

What's good for Add Lee is good for the country?

Chile's 'dirty secret'

In this 2010 audio interview with Canadian journalist Eleanor Wachtel, novelist Alberto Fuguet says that Augusto Pinochet's legacy is that he made the country more 'modern, open, liberal...very liberal.'  He was, 'A gift from our elders who tried to change the country [into Marxism]. They didn't change it, he did.'

The new Chile is one where 'People feel empowered. That they can have a future. They can make their own future, and also be part of the world.' Between Wachtel and Fuguet, it's agreed that's because Pinochet 'de-politicized' the country. Now young people don't even bother to register to vote. They don't want to. Unlike before the military coup when everything was up for grabs politically.

Earlier in the interview Fuguet had described the early 70s in Chile as, like 'a family fight' between members of the Chilean bourgeois; the kids of  lawyers and doctors.  It was definitely not the people, the proletariat, who wanted to make changes, but 'all rich kids'.

With Pinochet being like a step-father who has married your mother.  He comes from somewhere else and decides he has to impose order on the family that has become disorderly. Later commenting, 'The right won and maybe the biggest shock is they're not bad.'

Another amusing observation from Fuguet being that when Pinochet stepped down, a lot of left-wing papers that were good and had done well when Pinochet was available as an enemy, folded after he was gone, as they had nothing to write about anymore. Similarly, a 'new art' came into being.  The old art was political, 'Art was a cause.' After that cause went away, it opened up opportunities for writers of non-political work. 

Which brings us to a critic of Pinochet, Milton Friedman, who in two speeches given in Santiago in March 1973, warned young Chileans about their dictator.  He describes it in Two Lucky People;

I...talked on the fragility of freedom, emphasizing the rareness of free societies...and the role in the destruction of a free society that was played by the emergence of the welfare state. ...that their present difficulties were due almost entirely to the forty-year trend toward collectivism, socialism, and the welfare state, that this was a course which would hurt people not help them, and that it was a course that would lead to coercion rather than freedom....from their reaction [my argument was] obviously almost completely new to them. There was an attitude of shock that pervaded both groups of students at hearing such talk.

Was Pinochet listening to Friedman? 

Lo que hicieron bien en Chile

Mistakes were made.  They always are.  But after eliminating the lamented, by most Chileans, Allende administration, the military junta led by Augusto Pinochet did a lot of things right too.  As can be seen from James Rolph Edwards Painful Birth: How Chile Became a Free and Prosperous Society.

The major inherited problem being the high--several hundred percent per year--inflation that had been created by expanding the money supply to pay for the government's huge deficit.  Itself the result of nationalizations of private firms and farms that increased government spending to pay for the losses those inefficient, newly-public entities were producing.  Keep in mind that money losing businesses also don't pay taxes, so the effect on the government's budget was a double whammy; affecting both revenue and expenditure. The other big problem being the black market that had arisen thanks to the price controls instituted by the Allende regime.

Without any prodding from the Chicago Boys the military junta quickly abolished the price controls; goods once again became available in Chile's stores, the black market disappeared.  This seemed, according to Prof. Edwards, to have had a positive psychological effect on the people.

Also obviously required, the junta began to dismantle the socialized economy by returning nationalized businesses to private ownership.  Which returned proper profit and loss incentives to the economy, reversing the double whammy of revenue shortfalls and high subsidies due to unprofitable firms. Along with tax changes (replacing a national sales tax with a 20% VAT) they managed to reduce the budget deficit of 30% in 1973 to 5% in '74. By 1976 the budget was in surplus.

Trade was liberalized.  Tariffs drastically reduced, the artificially high Escudo was devalued. Interest rates were decontrolled. Required reserves for banks were lowered. But, in one crucial aspect the military's timing was very unfortunate. In the wake of the Arab-Israeli war, OPEC had begun to restrict the world's supply of oil and drive up its price, throwing the world into recession.  As an oil importer Chile wasn't spared.  Worse, world demand for Chilean copper dropped drastically. Real GDP declined 13% in 1975.

Not that this can be blamed on the Chicago Boys, as they weren't yet in positions of power when it started, and anyway it originated outside Chile. What could be attributed to Chicago economics was the more stringent monetary policy designed to quickly wring inflation out of the economy.  Combined with the previous (non-Chicago inspired) law requiring Chilean businesses to index wages they paid to the previous year's inflation rate, Chile got a shock treatment; unemployment rose rapidly and stayed high for far too long.

Had the Chicago Boys actually had a mandate to introduce a pure free market economy, they would have eliminated the law that had indexed wages to prior (higher) rates of inflation, eliminated the minimum wage law, and cut taxes (they had in fact been raised by the junta's first economic team). Still, Chile recovered from the '75 recession, and prospered; real GDP averaged almost 7% for six years.

More good news to follow.