"That’s the real lesson. Market power in technology is temporary because the underlying technology isn’t."

"History, it turns out, didn’t end for Big Tech. ...

"Take Alphabet, which took plenty of flak for its control of the search engine market. Dominance, sure. But forever dominance?

"OpenAI’s new AI-enabled Atlas browser directly threatens Google’s Chrome browser, as well as its search business, by replacing the URL bar with conversational AI. What Washington lawyers couldn’t do to Google, technological competition just might. ...

"The cycle endures: IBM begat Wintel, which begat Google—and now OpenAI is queuing up next. These 'forever companies' are discovering that in tech, forever lasts about 20 years, and the bill for staying that long runs to roughly half a trillion bucks a year. ...

"That’s the real lesson. Market power in technology is temporary because the underlying technology isn’t.

"Even if these winners of the past are also the winners in futurity, they will find themselves utterly transformed by the AI revolution as they provide users with new kinds of value."

~ James Pethokoukis from his post 'The “Forever Company” Myth About Big Tech Didn’t Last Forever'

"When politicians start talking about competition, economists ought to get a little bit nervous."

"It’s fair to say that economists like competition.
    "It’s also fair to say that when politicians start talking about competition, economists ought to get a little bit nervous.
    "People can have very different understandings of the same word. ... At the heart of the difference – while trying to avoid the boring bits – is how we understand the term competition. Is a competitive market one where there is some ‘right’ number of companies, of the ‘right’ sizes relative to each other? Or is a competitive market [an open market —] one in which no special permissions are needed to set up shop and every firm always needs to be looking over its shoulder?
    "Sometimes, the two amount to the same thing. ... But not all competitive markets, by the one definition, are open by the other. And not all open markets are ‘competitive,’ if we measure things by counting companies. Openness matters more – both when thinking about customers’ experiences, and about government policy. ...

    "When markets are open, underperformance by existing competitors ... is potential profit for new entrants – and better service for customers. ...

    "And that gets us back to my worries when politicians start talking about enforcing more competition. ... If the Government wants to focus on openness [on reducing barriers to entry], it could do much good. ...  There are no shortage of places to shine a flashlight. ...

•     "Successive Commerce Commission market studies identified regulatory and policy-based barriers that make it incredibly difficult, if not impossible, for new firms to compete with incumbents.
•     "The market study into building materials noted the lack of land zoned for new big-box retail suppliers ...
•     "The commission’s final report into grocery retail found a similar problem. ...
•     "Similarly, the commission warned that regulatory barriers hinder competition in banking. ...
•     "Opening a new pharmacy is tied up in weird regulations about who is allowed to own pharmacies. ...
•     "Many occupational licensing regimes look an awful lot like cartels organised to protect incumbents. ... I wonder [for example] why anyone should need special permission to be a real estate agent. ... Are we quite sure that regime is still needed?

    "It is a target-rich environment, if we are thinking about openness. ....

"The Government could help to bring down prices and improve the products on offer for consumers if it focused on ensuring market openness. Political campaigns against existing businesses may be more tempting, but they will do less good."

~ Eric Crampton from his article 'When politicians campaign on competition, be very worried'

Tech billionaires aren't crawling to Trump because they're powerful, argues Johan Norberg in this guest post. It's because they're weak...

The Flattery Towards Trump Reveals Fear

by Johan Norberg

TECH MOGULS AREN'T FLATTERING TRUMP because they're drunk on power, but because they're afraid. The political arbitrariness that began with Biden risks becoming even worse with Trump.

Mark Zuckerberg, Jeff Bezos, and Elon Musk were among the guests at Donald Trump’s inauguration. 

At Trump's inauguration, the new president was surrounded by a grinning, applauding Forbes list. Among them were the world’s three richest men, Elon Musk, Jeff Bezos, and Mark Zuckerberg, as well as relatively less wealthy figures like the CEOs of Apple and Google. Sitting in more prominent seats than the incoming cabinet members, it certainly looked like the happy plutocrats had bought themselves a president.

They all donated to the inauguration fund and have, in other ways, signalled an approach. Bezos blocked the Washington Post’s official endorsement of Kamala Harris, and Zuckerberg admitted that Facebook became too woke and now needs to be more Texas.

Is the U.S. on its way to becoming a tech oligarchy? Biden’s speechwriters are among those warning of a tech-industrial complex with so much power that they threaten to disable democracy.

As a liberal, I’m conflicted. The only thing worse than a Trump administration run by big corporations is a Trump administration not run by big corporations. Since their position isn’t built on charming inflamed MAGA fans, but on solving technical and business problems in a global economy, they will exert a moderating influence. When Trump wants to imprison opponents, stop global trade, deport all migrants, or invade Greenland, they will try to get him to count to ten (though I no longer dare rule out anything regarding Musk).

Tesla’s 15% stock increase after Trump’s victory shows that someone's proximity to power is disturbingly valuable.

On the other hand, it’s impossible not to feel deep concern when the most powerful state and the largest capital are in the same boat. Tesla’s 15% stock increase after Trump’s victory shows that someone's proximity to power is disturbingly valuable. When I recently interviewed Musk, he said the state should act as a referee but not interfere in the game, which was wise. But it doesn't get better when a player wants to play referee.

Money doesn't buy elections—after all, Harris had more than the eventual victor—but it can buy influence with its recipients. Especially with someone as notoriously "transactional" (we used to say unprincipled) as Donald Trump. Just a year ago, Trump wanted electric car supporters to "rot in hell." Today, he is pro-electric cars, “I have to be because Elon endorsed me very strongly.”

But unsuitability is not the same as oligarchy. In fact, tech companies haven't assumed this role because they're so strong, but because they're so weak.

THIS IS MISSED IF YOU simply follow stock prices, but the big change in recent years is that Big Tech has gone from being everyone’s hero to everyone’s villain. After Trump’s 2016 victory, previously friendly Democrats started seeing social media as sewers of disinformation and demanded strict content control. The Biden administration also launched potentially devastating antitrust proceedings.

And no matter what they do, someone takes a swipe at them. When platforms became cosily progressive and moderated more content (even stories that turned out to be true), the right started seeing them as leftist censorship machines. Republicans like J.D. Vance and Josh Hawley demanded regulation and breakups. Trump threatened fines and monopoly laws to crush Amazon and Google. With few watertight principles for such power exercises, there are real risks of political arbitrariness. During the election campaign, Trump threatened to imprison Zuckerberg for life.

Tech giants suddenly realised they had lost all political allies.

This is especially dire as they simultaneously face existential risks in key foreign markets. Regulation-happy EU threatens their business models. Many were also shocked last year when Brazil's Supreme Court responded to Musk's refusal to block a series of X accounts by shutting down the entire platform and freezing Starlink’s assets—a completely different company with other stakeholders.

If Big Tech wants a chance in international battles over antitrust, censorship, and taxation, they need the U.S. on their side. Zuckerberg explicitly stated this in his recent repentance speech. The world wants to censor us, and “the only way we can counteract this global trend is with support from the American government.”

This isn't about people who love Trump. Except for Musk, none of the major players supported him before his victory. On the contrary, they’ve long fought against him but lost and are now pleading for mercy—and protection. Musk’s new role made it even more important to be there as a counterbalance to him since he's a tenacious critic who, among other things, has said that Amazon is a monopoly that needs to be broken up. Contrary to the notion of a homogeneous flock of bros, these men are jealous rivals vying for each other’s market shares. And suddenly a new Chinese AI model comes along that threatens all their inflated valuations.

So, the tech moguls aren't flattering Trump because they’re power-drunk, but because they’re scared. Bezos doesn’t humiliate himself with an ingratiating Amazon Prime documentary about Melania Trump because he can do whatever he wants, but because he can't.

The sad spectacle of the past few weeks has many calling for a mightier state to put the plutocrats in their place. On the contrary, I feel an urgent need for a few more independent billionaires who aren’t subject to such political arbitrariness that they constantly anxiously follow political trends.

* * * * 

Johan Norberg is a Swedish author and historian of ideas, devoted to promoting human progress, economic globalisation and classical liberal ideas.

This post is translated from Blacksmith, where it first appeared.

"Finance Minister Willis: my first recommendation is to replace your advisers with ones who do not represent the interests of the biggest monopolies and duopolies in NZ."

"[Bill] English had an Academic Advisory Group when he was Finance Minister, which included me. Willis dumped it. Her adviser outside the Beehive is the NZ Initiative ... a lobbying group for our biggest corporate monopolies.
    "Its board includes Scott Perkins ... a Non-Executive Director of Woolworths. Another Board member is Chris Quinn, who is Chief Executive of Foodstuffs ... Barbara Chapman, another Board member, is former Chair of one of the Big Banks.
    "Can you believe it? This is the Board of the outfit who our Finance Minister takes advice from about how to break-up monopolies? Fletcher Building is a member of the Initiative. I was there around 8 years ago when Key was PM, and the CEO of that company ... lectured me how NZ's infrastructure was 'amazing' and not in need of any significant repair. Air NZ is a member. ANZ is a member. ...
    "So Finance Minister Willis, my first recommendation is to replace your advisers with ones who do not represent the interests of the biggest monopolies and duopolies in NZ."

~ Robert MacCulloch from his post 'Finance Minister Willis Challenges DownToEarth.Kiwi to give her "ideas" about how to Break Monopoly power in the NZ Economy. Here they are.'

"Though it's tempting to [always] blame the government for getting in the way of business, there's a lot about Kiwi business that is about getting in the way of itself."

"[T]hough it's tempting to [always] blame the government for getting in the way of business, there's a lot about Kiwi business that is about getting in the way of itself. ... The Mood of the Boardroom Survey & recent remarks by some of this nation's CEOs reflect on the (dubious) quality of New Zealand's boardrooms more than anything else. Namely that most are woke & weak. ...
    "NZ's Big Corporate CEOs will not themselves push productivity-enhancing reforms in their own firms ... They'd prefer, instead, to be Mr Nice Person. Look at the qualifications of many of them - the typical one being in Accounting. Other than that, its law. Lawyers often get on Boards because Kiwi firms want someone to help with compliance - not a person with imagination about where the future of the company should be. ...
    "Before the Productivity Commission was de-commissioned, it identified lack of 'managerial capability' as a contributor to our low productivity. ... Many of our CEOs & Boardrooms are not capable. ... The staff can't make up for a boss who is the wrong boss. ... "

~ Robert McCulloch from his post '"The Mood" of NZ's (Weak and Inbred) Boardrooms reflects on their own ineffectiveness, which has cut productivity, not on our MPs' quality'

Occupational Licensing: Teachers union against more teachers

"What’s better, no teacher or a recently retired, though now deregistered one?

'An Otago principal facing relief staff shortages would rather use unregistered teachers than send his students home.. . . [But] PPTA Te Wehengarua president Chris Abercrombie said the “ad hoc” response ... meant thousands of young people would not be taught by trained and qualified subject-specialist teachers. . . [And] PPTA Otago regional chairman Kussi Hurtado-Stuart said the loosening of regulations [allowing this] was a 'short-sighted solution.'

"Surely a recently retired, albeit no longer registered, teacher would be better than no teacher? ..."

~ Ele Ludemann, from her post 'Union’s politics showing,' in which she submits "the union’s anti-Government politics" are on display here. I'd suggest however that this is less about the union's politics, and more about simply protecting its turf. Just like all occupational licensing.

Mush ado about ACT's (revised) Treaty Principles Bill.

 

Cartoon by Nick Kim

We now have our first look at the wording to be used in ACT's proposed Treaty Principles Bill. 

You'll recall that the aim of the Bill is not for Parliament to redefine Te Tiriti, which lacks too much to ever become a fully-founding document in any case, but to define —for the first time — the Principles that Geoffrey Palmer and followers began inserting into law without definition, and without any guidance to the courts. Which left the courts (and the self-serving Waitangi Tribunal) to simply make them up. And has transformed Te Tiriti into a welfare cheque for tribal leaders.

The Bill's proposed wording is grouped under three headings, to match the three Treaty/Tiriti articles: 

1. Civil Government; 
2. Rights of Hapu and Iwi Māori; and
3. Rights to Equality.

David Farrar has helpfully laid out the proposed wording against both ACT's initial proposal and the official "Kawharu" translation of Te Tiriti. It's quickly apparent that the weasel words of "partnership" and "participation" haven't been slipped in. And that "protection" only occurs in association with the word "rights," as it did in the original document. But also that a whole lot of precision has been lost. Much has been added to dilute the impact of the previously clear exposition of principle. Politically-necessary mush perhaps, but mush is mush, gumming up the finely-grinding machinery of law.

And what's been lost, I think, is the clear Lockean principle of the Treaty: i.e., that tribal sovereignty was being ceded in return for protection of natural rights, including the right to private property. In which case, is anything to be gained by the Bill?

Let's have a look article by article ...

The First Article is the sovereignty article. About who governs. Which this says, in so many words. But in bending over backwards to avoid the 's' word, a whole lot of mush has been added. Remember that good, objective law should be rights-based, and allow you to know in advance what you can and can't do by law — and since law is, or can be, a matter of life and death, one needs to know with precision. So what the hell does "in the best interests of everyone" mean precisely? How will the courts decide (since it is they, and the Waitangi Tribunal who will interpret this in their own best interests) what should be done for "the maintenance of a free and democratic society."

The Second Article used to be known as the Property Article. The recognition of the property held by tribes and tribal leaders,  and the insistence that government agents would have a coercive monopoly in buying it from them. So, about property rights, and how they're transferred. The Bill however now suggests the principle to be drawn from this clause is one about rights in general. Which is a different thing (especially since bogus "rights," requiring the labour of others, are being constantly added and expanded).

"The Crown recognises the rights that hapū and iwi had when they signed the Treaty." What were those rights? More mush. The Bill would again require the courts and Waitangi Tribunal to decide — oh, and they will! And remember that these are phoney collective rights, not individual rights. (And to thrive here as equals, as I've said before, we need to take off our collectivist lenses.)

And what's this? "Those rights differ from the rights everyone has a reasonable expectation to enjoy ..." Really? Oh: " ... only when they are specified in legislation, Treaty settlements, or other agreement with the Crown."  Ah: meaning that any explicitly race-based legislation etc. has to be explicit in its racial favouritism. Which is probably about as much as one can now expect, but much less than one would have hoped for. 

And, as everywhere else in New Zealand law, property rights have disappeared.

This Article has suffered the least damage in the re-write. And as an added bonus, the concept of "duties" has been lost, and "protection" clarified to be about protection by law, an equal protection, not about unspecified welfare claims for "ordinary New Zealanders," i.e., Māori (which is how this clause has begun to be interpreted by activists and the Tribunal). So maybe an improvement through the added mush — though a clear contradiction with the second article: how, for example does one enjoy "the same fundamental human rights without discrimination" if government can legislate for collective 'rights' for hapū and iwi that "differ from the rights everyone [else] has a reasonable expectation to enjoy"?

The answer, of course, is at the back of the next Tribunal report. Just under the money-amount awarded to claimants.

Remember that the words "the principles of the Treaty of Waitangi" have been inserted at the heart of every second bill that's passed through Parliament, so any mush injected here would infect every second law everywhere.

And it's now full of mush.

That's not an improvement.

The Bill may not be successful by the standard of "will it be passed into law." But it's already wildly successful by the standard of "let's talk about these made-up principles, and about what they should be."

But I'm not sure these re-writes should be part of law.

"The failure to distinguish between economic power and political power leads people to believe that large corporations have grown through coercion."

"Many people distrust Big Business: Big Tech, Big Pharma. Big Oil, even Big Grocers – any large corporations. They believe these companies have grown big by exploitation and coercion that they are able to perpetuate due their sheer size. Therefore, these people think the government should control these companies’ size to ensure 'fair competition' and to prevent monopolies. [The reaction to the recent discussions about supermarket 'monopolies' is an example] .... [C]ommentators relish the prospect that using (non-objective) ... laws, the government could cut [supermarket chains] to size ...
    "Those distrustful of Big Business fear that large corporations grow too 'powerful” and therefore can coerce and control us to do business with them, to buy their products and services, and to prevent us from competing with them. However, that fear is misplaced. Corporations, small or large, in free and semi-free countries (absent government intervention) don’t have the power to coerce. They cannot prevent anyone from acting or to force them to act against their will.
    "As Ayn Rand has observed, the only power business has is economic power: the power to produce and trade, which depends on its ability to obtain the voluntary co-operation of others through persuasion. ... Only the government possesses political power: the power to use physical force, or the threat of it, to restrain and punish those who initiate it.
    "The failure to distinguish between economic power and political power leads people to believe that large corporations have grown through coercion. ...
    "[A]bsent government favours and protectionism, companies grow large because they act morally. It means that they are productive: they continually develop and produce [and sell] goods and services that customers value. ... Only with the government’s help – protectionism and cronyism [and the RMA] – could [supermarket chains] coerce: to prevent competition from entering its markets, charge artificially high prices, sell subpar products, and to provide lousy customer service. ...
    "Instead of condemning Big Business, we should appreciate large corporations for producing the material values we need and want.
    "But we should condemn the government for initiating force to interfere in markets."

~ Jana Woiceshyn from her post 'In Defence of Big Business'

UPDATE: Why is there a "cosy duopoly" of Big Grocers here in New Zealand? Simple: the bureaucratic costs for new competitors to enter our distant market are too damn high, making a significant barrier to entry. (Call it bureaucratic drag.) Eric Crampton excerpts 

"a Jaw-dropping bit "from the Grocery Regulator on this, in interview at Interest.co.nz:

" 'What we've been told by these players is when they come and they want to open up a large store in New Zealand, the cost to get a spade in the ground is double that of Australia,” he says in a new episode of the Of Interest podcast. 

  " 'Now that is significant. And when they look at 'do we open up a store in Wagga Wagga or Tamworth or wherever in Australia' versus coming to open up in Auckland where there is massive demand or any of the other centres, really, the cost is double that of Australia. And the timeframe often is more than double as well. So when they do their business cases, they look at that and say, 'well, we're going to be better off by going elsewhere rather than here.' Now the government is saying that they're going to change things to make New Zealand more competitive for international players. And that's really what we're looking at.'
    "The Commerce Commission released its first annual grocery report on Wednesday which revealed ComCom’s efforts to boost grocery competition over the past year hasn’t had much impact'."

Later in the podcast, he says that Costco would already have expanded to more places in NZ if expanding in NZ weren't so freaking hard.
    It shouldn't be surprising that the grocery regulator hasn't chalked any wins as yet. The real problem is largely out of the regulator's hands: RMA, Overseas Investment Act, Council processes.

The emphasis there is mine. Eric's post has more detail on council clusterfucks.

Busting labour monopolies. Case study: Occupational Licensing

"Occupational licensing is costly for both consumers and aspiring workers, but results in measurable benefits for existing market practitioners. Occupational licensing persists even though its costs very likely outweigh its benefits.
    "Occupational licensing makes it illegal for an individual to work in a profession before meeting minimum entry requirements set by the government. ... The minimum entry requirements often include paying fees, meeting minimum levels of education and training, passing exams, and meeting other requirements such as having a minimum age or possessing 'good moral character.'
    "Several dozen occupations, such as physicians, dentists, barbers, and cosmetologists, are licensed [along with] florists, interior designers, and ocularists. ... Many professions such as massage therapists, funeral directors, and athletic trainers, are licensed ...
    "Active market providers make up the largest percentage of licensing board membership. Many licensing board members own or have financial ties to schools that directly benefit ... Applicants for licenses are also future competitors of existing practitioners. Licensing board members can financially benefit from limiting entry into the profession by imposing expensive requirements. Consequently, licensing board members do not typically separate the public interest function of licensing boards from their own private interests. ...
    "The commonly stated objective of occupational licensing is to limit harm to consumers from poor quality service. ... But licensing has very clear negative effects. ...
    "Research confirms that licensing raises the prices of licensed services by anywhere from 3 to 13%. ... Studies estimating the effects of licensing in the 21st century often find little evidence of benefits for consumers. ...
    "[E]stimating the average effects of licensing on quality may not fully capture losses in access to service from reductions in the number of professionals. This has come to be known as the 'Cadillac effect' ... [L]icensing limits consumers to either purchasing services from providers meeting standards set by licensing boards (Cadillacs), or not purchasing services at all. This may encourage consumers to seek services in the underground economy, or to encourage consumers to do the services themselves. ...
    "[L]icensing boards [also] force consumers to purchase services meeting a standard that is not in the consumer’s best interest. ... [O]ccupational licensing reduces labor supply by as much as 29%. Occupational licensing restrictions can also limit the number of immigrants working in a licensed profession. ...
    "[T]here is very little evidence that licensing helps consumers. What is clearer is that licensing does indeed benefit existing practitioners."

~ Edward J. Timmons, from his post 'Occupational Licensing'

"Much of the mess we are in can be blamed, in my view, on lawyers ... "

"In [New Zealand], much of the mess we are in can be blamed, in my view, on lawyers (and judges). ...
    "It was Geoffrey Palmer, a lawyer, who designed the original Resource Management Act, and it is David Parker, a lawyer, who's currently drawing up plans to implement wealth and capital taxes as part of the Labour Party's platform for the 2026 election. The current Chair of Kiwi Rail is a lawyer. His Deputy Chair is a lawyer. Most of NZ's big firms have boards dominated by lawyers (and accountants) who have no shop-floor experience in the industry in which "their" company is working. How have they got their jobs? From what I have learned, mostly by networking & schmoozing. Is this a world-wide phenomena? No. Who do companies like Tesla have on their boards? To give you a flavor, folks like Mr. Gebbia, co-founder of Airbnb, and Mr. Straubel, founder of Redwood Materials, a firm working to drive down the costs and environmental footprint of lithium-ion batteries by offering sources of anode & cathode materials from recycled batteries. ...
    "What has been the objective of those sitting in the Auckland law firms quietly earning incomes of way over $1 million a year? To maximise their fee income, of course. The legal & regulatory structures that have promoted monopoly power in NZ, the frameworks that govern race-relations, and the mountains of red-tape we all must navigate, have been made deliberately divisive, deliberately ineffective, and deliberately onerous by Kiwi lawyers, all to generate more disputes & work for law firms and their partners. The profession that has ground NZ's economy to a halt has been our legal profession — all in the name of its ... quest for higher incomes."

~ Robert MacCulloch from his post 'God Save New Zealand from Lawyers'

In intellectual property, words matter

Photo by Irina_drozd

"Words matter. ...  Intellectual Property (IP) policy can be ill-served by some habitually used but ... not descriptively accurate vocabulary. ...   

    "Here, in my view, are a few too frequently used and usually misleading words [that] misrepresent the IP system and are even less relevant to the economics of innovation and creativity. The use of these words has real-world consequences ...
    "Fortunately, there are better word choices available. Here are a few terms I propose should be permanently 'out' and potential replacements that I believe would help to counteract anti-IP narratives....

OUT: Reward (Synonyms: Bonus, Prize)
Even when promised in advance of the result, a reward is generally understood to be a discretionary bonus. This is distinctly different than a “right” that is consistently and reliably available whenever the necessary conditions are met.

IN: Right (Synonyms: Title, Claim)

Defined as, “Something that one may properly claim as due.” Also, “the property interest possessed under law or custom and agreement in an intangible thing….” ...

OUT: Incentive/Incentivise (Synonyms: Induce, Incite)

Provides “a stimulus, a motive, a goad, or a bonus.” Also, “To make someone want to do something… especially by offering prizes or rewards.”

IN: Enable (Synonyms: Facilitate, Empower, Equip)

“A person or thing that makes something possible.” IP rights enable allocation of resources to long-term, resource-intensive, high-risk investments. ...

OUT: Monopoly (Synonyms: Cartel, Syndicate, Oligopoly)

“A single seller in a market or sector with high barriers to entry, such as significant startup costs, whose product has no substitutes.” Does an exclusive ownership right represent a monopoly? More below.

IN: Ownership (Synonyms: Title, Proprietorship)

“The act, state, or right of possessing something.”

IN: Exclusive/Exclusivity (Synonyms: Incompatible, Undivided)

“Unable to exist or be true if something else exists or is true.” “Excluding or having power to exclude others, or something that is limited to possession, control, or use by a single individual or group.” ...

"The habitual – and I believe largely unthinking – use of the words 'reward,' 'incentive,' and 'monopoly' among IP professionals has contributed to fundamental misperceptions of IP rights and the IP system. These contribute to systemic misunderstandings of the economics of innovation and creativity. Dropping these words from our IP vocabulary will make policy discussions more accurate and understandable for policymakers, economists, and the public, and better policy decisions will result...."

~ Patrick Kilbride from his article 'Words Matter: A Proposal to Change the Vocabulary of IP'

Fletcher Building: "NZ's most useless company"

"Is [Fletcher Building] the only Private Monopoly in the World that can't make a buck? It is time to break up NZ's most useless company. ... 

    "It is time to break up Fletcher Building & end the dubious Fletcher legacy on this country. ... My grandfather ... joked how there was a time when Sir James Fletcher was a National Party supporter but then 'tore his pants climbing through the fence' when Labour came to power and he wanted building contracts from that government. The company has always enjoyed huge monopoly powers. These days, it has shown a special skill at wielding those powers but struggling to make a buck. ...
    "It's not the low paid workers in this country who are responsible for our appalling productivity growth. It is the bosses - the management - the CEOs and the Directors of many of the our largest companies - who are failing us due to their ineptitude. When the boss is the wrong person, nothing else works no matter how good the workers on the ground. The Empire State building took just over one year to build - starting in 1930 and opening for business in 1931 (that includes the digging of the foundations). Nearly a century later, how long has it taken Fletcher Building to build the piddly-little Convention Centre? Nearly 10 years and counting."

~ Robert MacCulloch, from his post 'Fletcher Building: is it the only Private Monopoly in the World that can't make a buck? It is time to break up NZ's most useless company.'

Sources:

• Fletcher Building chief executive Ross Taylor confirms he's retiring as company posts $120 million half-year loss
• Gib shortage: Call for change in leadership at Fletcher Building

BOOK REVIEW: 'The Capitalist Manifesto: Why the Global Free Market Will Save the World,' by Johan Norberg

The IEA's Kristian Niemitz reviews Johan Norberg's important new book.

I first came across Johan Norberg almost exactly 20 years ago, when the German translation of his book In Defence of Global Capitalism came out. The book argued that globalisation was a success story. In large parts of the developing world, poverty, infant mortality and illiteracy were falling, life expectancy was rising, nutrition was improving, and democracy was spreading. These positive trends were, according to the younger Norberg, likely to continue, and they were not a product of chance. They were a result of the spread of capitalism.

At the time, this was considered an outrageous thing to say.... The almost universally accepted conventional wisdom of the day was that “globalisation” meant the exploitation of poor countries by multinational corporations, and that the world was going from bad to worse. ...

With his most recent book The Capitalist Manifesto: Why the Global Free Market Will Save the World, Norberg goes back to the beginning.... The era of “globalisation” is generally said to have started around 1990, so when In Defence of Global Capitalism came out, it was still in its relatively early stages. We now have three decades to go by. What happened in those three decades?

Quite a lot. 

• Extreme poverty fell from 38% of the world’s population to less than 10%, 
• child and infant mortality fell from 9.3% to 3.7%, 
• global life expectancy increased from 64 years to over 70 years, 
• illiteracy dropped from 25.7% to 13.5%, 
• child labour decreased from 16% to 10%, and so on, and so forth. 

The countries and regions which performed best are the ones which did precisely the opposite of what the anti-globalisation movement wanted them to do, while the most spectacular counterexample is the movement’s erstwhile poster child of Venezuela. ...

There are genuine problems, though. In some Western countries, NIMBYism is driving up the cost of housing. This makes it harder for people to move to where the best job opportunities are, and it gives younger generations a worse deal. In addition, the extension of occupational licensing is erecting market entry barriers. None of this has anything to do with “neoliberalism” or “hyperglobalisation”, though – quite the opposite....

But have classical liberals benefited from this, in any way? Has being right made us more successful in winning over hearts and minds? Are there more people now who embrace free-market capitalism, or who at least accept that, even if they don’t like it, it is the most powerful motor of economic and social progress known to man?

Very far from it ... in addition to the anti-capitalist Left, we have also seen the rise of an anti-liberal Right. ... Where In Defence of Global Capitalism was able to concentrate on one enemy, The Capitalist Manifesto has to fight a two-front war. Some chapters are primarily aimed at the anti-capitalist Left, others are primarily aimed at the anti-liberal Right, and some could apply to both in roughly equal measure. ...

• Chapter 3 concentrates on the ... misplaced nostalgia for the economic structure of the postwar decades ... Norberg shows that automation and productivity improvements have contributed far more to job losses in the manufacturing industries than free trade, and that ... the same processes that make some jobs redundant also lower consumer prices and thereby make us richer, [creating] demand for new jobs in other sectors ...
• Chapter 4 addresses the old Marxist idea that wealth must be built on exploitation, but also some of the more recent literature on inequality, such as Thomas Piketty’s Capital in the Twenty-First Century and The Spirit Level by Kate Pickett and Richard Wilkinson. In market economies, people do not get rich by exploiting others. They get rich because they offer something that lots of people are prepared to pay for. Left-wing celebrity authors like Michael Moore and Bernie Sanders understand that perfectly well when it comes to their own book sales, but they are not capable of extending that logic to entrepreneurial activities. ...
• Chapter 5 picks up another perennial Marxist theme: the idea that capitalism supposedly leads to greater and greater industry concentration over time. ... The best antidote to worrying too much about market concentration, though, is to read an article from 20 or 30 years ago that was worrying about the same thing. This is because a lot of the behemoths of yesteryear have since faded into obscurity. ...
• If there is one thing those of us on the pro-globalisation side were wrong about 20 years ago (and in Chapter 7, Norberg is very open about that), it was our belief that freer trade and freer markets would lead to the spread of Western liberal values, and Western-style liberal democracies. In China, this has clearly not happened. Under Xi Jinping, China has gone into reverse, both in terms of economic and political liberty. However, none of this means that economic nationalists, who seek to decouple Western economies from China, are right.... 
• One of the weirder phenomena of the past five years or so was the rise of a new wave of militant, anti-capitalist eco-movements: the Greta Thunberg movement, Extinction Rebellion, Just Stop Oil, and their various offshoots and counterparts in other countries. It is weird because it happened after the environmentalist side had already won the debate on climate change. ... On green issues, anti-capitalists are as wrong as they are about everything else. As Norberg shows in Chapter 8, market economies can and do address environmental problems very effectively.

All in all, the slightly older Norberg skewers the bad of ideas of the 2020s as effectively as the young Norberg skewered the bad idea of the early 2000s.

>> FULL REVIEW HERE: PART ONE  AND PART TWO.

Some Fundamental Insights Into the Benevolent Nature of Capitalism

Just what it says on the label--the book the heart of which F.A. Hayek reckoned
every "fully trained commentator ought to read if he wants to talk sense" [PDF copy here]

"By the 'benevolent nature of capitalism,' I mean the fact that it promotes human life and well-being and does so for everyone. There are many such insights, which have been developed over more than three centuries, by a series of great thinkers, ranging from John Locke to Ludwig von Mises and Ayn Rand. I present as many of them as I can in my book 'Capitalism.'
    "I'm going to briefly discuss about a dozen or so of these insights that I consider to be the most important, and which I believe, taken all together, make the case for capitalism irresistible. I'll discuss them roughly in the order in which I present them in my book. Let me say that I apologise for the brevity of my discussions. Each one of the insights I go into would all by itself require a discussion longer than the entire time that has been allotted to me to speak today. Fortunately, I can fall back on the fact that, in my book at least, I think I have presented them in the detail they deserve.

"1) Individual freedom—an essential feature of capitalism—is the foundation of security, in the sense both of personal safety and of economic security. Freedom means the absence of the initiation of physical force. When one is free, one is safe—secure—from common crime, because what one is free of or free from is precisely acts such as assault and battery, robbery, rape, and murder, all of which represent the initiation of physical force. Even more important, of course, is that when one is free, one is free from the initiation of physical force on the part of the government ...
    "The fact that freedom is the absence of the initiation of physical force also means that peace is a corollary of freedom. Where there is freedom, there is peace, because there is no use of force: insofar as force is not initiated, the use of force in defence or retaliation is not required. ...

"2) A continuing increase in the supply of economically useable, accessible natural resources is possible as man converts a larger fraction of the virtual infinity that is nature into economic goods and wealth, on the foundation both of growing knowledge of nature and growing physical power over it. ...

"3) Production and economic activity, by their very nature, serve to improve man's environment. This is because from the point of view of physics and chemistry, all that production and economic activity consist of is the rearrangement of the same nature-given chemical elements in different combinations and their movement to different geographical locations. The guiding purpose of this rearrangement and movement is essentially nothing other than to make the chemical elements stand in an improved relationship to human life and well-being. ...

"4) The division of labour, a leading feature of capitalism, which can exist in highly developed form only under capitalism, provides among other major benefits, the enormous gains from the multiplication of the amount of knowledge that enters into the productive process and its continuing, progressive increase.

"5) At least since the time of Adam Smith and David Ricardo, it has been known that there is a tendency in a capitalist economy toward an equalisation of the rate of profit, or rate of return, on capital across all branches of the economic system. ... The operation of this principle not only serves to keep the different branches of a capitalist economy in a proper balance with one another, but it also serves to give the consumers the power to determine the relative size of the various industries, simply on the basis of their pattern of buying and abstention from buying ...

"6) As von Mises has shown, in a market economy, which, of course, is what capitalism is, private ownership of the means of production operates to the benefit of everyone, the non-owners, as well as owners. The non-owners obtain the benefit of the means of production owned by other people. They obtain this benefit as and when they buy the products of those means of production. To get the benefit of General Motors' factories and their equipment, or the benefit of Exxon's oil fields, pipelines, and refineries, I do not have to be a stockholder or a bondholder in those firms. I merely have to be in a position to buy an automobile, or gasoline, or whatever, that they produce....

"7) A corollary of the general benefit from private ownership of the means of production is the general benefit from the institution of inheritance. Not only heirs but also nonheirs benefit from its existence. The nonheirs benefit because the institution of inheritance encourages saving and capital accumulation...

"8) Under capitalism, not only is one man's gain not another man's loss, insofar as it comes out of an increase in overall, total production, but also—in the most important cases, namely, those of the building of great industrial fortunes—one man's gain is positively other men's gain. This follows from the fact that the sheer arithmetical requirements of building a great fortune are a combination of the earning of a high rate of profit on capital for a prolonged period of time, and the saving and reinvestment of the far greater part of the profits earned, year after year....

"9) As von Mises has shown, the economic competition that takes place under capitalism is radically different than the biological competition that prevails in the animal kingdom. In fact, its character is diametrically opposite. The animal species are confronted with scarce, nature-given means of subsistence, whose supply they are unable to increase. Man, by virtue of his possession of reason, can increase the supply of everything on which his survival and well-being depend. Thus, instead of the biological competition of animals striving to grab off limited supplies of nature-given necessities, with the strong succeeding and the weak perishing, economic competition under capitalism is a competition in who can increase the supply of things the most, with the outcome being practically everyone surviving longer and better. ...

"10) And now, once more with credit to Mises, so far from being the planless chaos and 'anarchy of production' that is alleged by Marxists, capitalism is in actuality as thoroughly and rationally planned an economic system as it is possible to have. The planning that goes on under capitalism, without hardly ever being recognised as such, is the planning of each individual participant in the economic system. ...

"11) I turn now to the subject of monopoly. Socialism is the system of monopoly. Capitalism is the system of freedom and free competition....

"12) Capitalism is a system of progressively rising real wages, the shortening of hours, and the improvement of working conditions. ...

"13) Finally, my last point: a one-hundred-percent-reserve, precious-metals monetary system would make a capitalist society both inflation-proof and deflation/depression-proof. ...

"Here, for lack of time. I must close. I'd like to do so by saying that if you've found my talk today to be of interest, I hope you will explore the matters I've discussed, at greater length and in detail in my book. Its entire sum and substance can be understood as a systematic exposition of the benevolent nature of capitalism."

~ George Reisman, from his pamphlet 'Some Fundamental Insights Into the Benevolent Nature of Capitalism'. Read it all on the web here. And for the full(est) argument, head to Reisman's full book-length argument in Capitalism -- on free PDF here, on Kindle here, hardback here, or paperback here: Vol. 1 and Vol. 2.

"The essence of the strike, then, is the resort to coercion to force unwilling exchange or to inhibit willing exchange."

“Rarely challenged is the right to strike. While nearly everyone in the population, including the strikers themselves, will acknowledge the inconvenience and dangers of strikes, few will question the right-to-strike concept....
    "This is not to question the moral right of a worker to quit a job or the right of any number of workers to quit in unison. Quitting is not striking, unless force or the threat of force is used to keep others from filling the jobs vacated. The essence of the strike, then, is the resort to coercion to force unwilling exchange or to inhibit willing exchange. No person, nor any combination of persons, has a moral right to force themselves—at their price—on any employer, or to forcibly preclude his hiring others....
    "Lying deep at the root of the strike is the persistent notion that an employee has a right to continue an engagement once he has begun it, as if the engagement were his own piece of property. The notion is readily exposed as false . . . A job is but an exchange affair, having existence only during the life of the exchange. It ceases to exist the moment either party quits or the contract ends. The right to a job that has been quit is no more valid than the right to a job that has never been held."

~ Leonard Read, from his 1969 The Coming Aristocracy

"Unionism...[utilises] crude doctrines of sheer force, constraint of anybody and everybody who stand in the way of the immediate end, limitation of numbers and excessive prices built up on monopoly. . . 

    "[T]he labour of the country never can obtain for itself, except at the expense of other labour, more than the free and open market will yield. . . . Extracting more . . . is very near to dishonesty, since he is forcing this higher price at the expense of others. . . .
    "If the employer had behaved badly, the true penalty would fall upon him; those who wished to leave his service would do so . . . That would be at once the true penalty and the true remedy. Further than that in labour disputes has no man a right to go. He can throw up his own work, but he has no right to prevent others accepting that work. 

    "Force rests on no moral foundations."

~ Auberon Herbert, composite quote from his his 1891 'The True Line of Deliverance,' and his 1908 'A Plea for Voluntaryism' 

[Hat tip Gary Galles]

 

"We do not train teachers in a way that adequately prepares them for the classroom"

"We do not train teachers in a way that adequately prepares them for the classroom.... high-quality teaching depends on high-quality training.
    "It does not take academics to train teachers. What it does take are people who know how children learn, and can impart that knowledge to teachers-in-training....
    "We should relieve university lecturers involved in teacher training from any expectation to be ‘research-active’. That would make it easier for institutions that don’t have research-active staff to have postgraduate teaching qualifications approved. [Above all, t]o improve the quality of teacher training, we must break the universities’ near-monopoly on initial teacher education and open the door to competition..."

~ Michael Johnston, from his op-ed 'It doesn't take academics to train teachers'

"Nobody has yet come up with a credible case for amalgamating Radio New Zealand and Television New Zealand."

"Nobody has yet come up with a credible case for amalgamating Radio New Zealand and Television New Zealand. Even so, the merger proceeds apace, costing the taxpayer a ridiculous amount of money – to no good end. No one truly believes the quality of the broadcasting product will improve. The present audiences of both networks have longstanding gripes with the overall direction of their public broadcasters, but the response of those in charge has been to double-down on the very policies their audiences find most objectionable....
    "Citing the growing strength of the purveyors of misinformation and disinformation on social media, government mouthpieces have presented the new 'entity' as the place where New Zealanders anxious to learn what’s really going on can go to for 'the facts.' They are being encouraged to think of the new entity as a sort of beefed-up version of the Prime Minister’s infamous 'podium of truth' during Covid.
    "God save us!"
           ~ Chris Trotter from his post 'More Than One way to Skin A Cat'

"In fact, the primary problem in the Soviet Union was socialism."

"One of the common denominators between Leninists and government interventionists in the West is the belief that the problems of monopoly are the problems of ownership: only private monopolies acting out of greed are harmful. These institutions are suppressing scientific and technical progress, polluting the environment, and engaging in other conspiracies against public well-being.
    "Government monopolies, however, were believed to be ethical and upright; they substituted the 'greed' of the profit motive with a 'societal interest.' Yet group bureaucrats who manage and operate the public sector are no less self-interested than those who manage and operate private business. One important difference exists, though: unlike private entrepreneurs, they are not financially responsible for their actions and they operate without institutional constraints of cost control that private property and competition induces. The enlightened minds of planners and technocrats cannot overcome the problem of economic calculation without market signals.
    "'The failure of socialism in Russia, and the enormous suffering and hardship of people in all socialist countries, is a powerful warning against socialism, statism, and interventionism in the West. 'We should all be thankful to the Soviets,' says Paul Craig Roberts, 'because they have proved conclusively that socialism doesn't work. No one can say they didn't have enough power or enough bureaucracy or enough planners or they didn't go far enough.'...
    "A common mistake Western observers made was to think the Soviet Union's fundamental problem was a lack of democracy. They completely overlooked that the institutional structure of the political system cannot overcome the problem inherent in an economic system with no means of rational calculation. The Soviet Union had a number of leaders who promised political reform, but none was able to put bread on the table. In fact, the primary problem in the Soviet Union was socialism."

~ Yuri N. Maltsev from his article 'The Decline and Fall of Gorbachev and the Soviet State.' Maltsev is a senior fellow of the Mises Institute, who worked as an economist on Mikhail Gorbachev's economic reform team before emigrating to the United States in 1989. The article is based on his introduction to the 1992 book Requiem for Marx

INFLATION: Critique of the "Cost-Push" Explanation in General

See earlier posts in this series about what doesn't cause inflation:

• INFLATION: A Critique of the "Profit-Push" Explanation
• INFLATION: A Critique of the "Crisis-Push" Doctrine
• INFLATION: The Elimination of "Less Supply" as a the Cause of an Inflationary Rise in Prices

"The supporters of the various cost-push doctrines recognise the validity of the formula for the general consumer price level*. However, they perceive the role of rising demand in a different way than do the supporters of the quantity theory of money. While the supporters of the quantity theory of money see more monetary demand as the cause of higher prices, the supporters of the cost-push doctrines see it as the cause of greater production and supply. In their view, more demand causes correspondingly more production and supply and therefore does not raise prices. The reason the supporters of the cost-push doctrines believe this is because they see the existence of unemployed labour and idle plant-capacity, and they assume that so long as unemployment and idle capacity exist, the effect of more demand is simply to enable more people to be employed and therefore for production to be increased. 

    "The supporters of the cost-push doctrines are willing to concede that more demand is potentially capable of raising prices. But that, they say, could happen only in the context of an economy operating at full employment and in which, therefore, supply could not be further increased in response to more demand. At that point, they are willing to admit, more demand would not be accompanied by more supply and would thus drive up prices. The expression they use to describe this situation of more demand raising prices at the point of full employment is, of course, 'demand-pull inflation.' At the point of full employment, they say, more demand 'pulls up' prices. This so-called demand-pull inflation is the only potential influence of more demand on prices that they recognise. To them, more demand as a cause of inflation means 'demand-pull inflation.'

    "Observe how the supporters of the cost-push doctrines think. They have decided that more demand is capable of raising prices only at the point of full employment. They have decided that short of full employment, the effect of more demand is not higher prices, but more supply.... The reason rising costs are taken as the explanation is because, in fact, the prices of many [mass-produced] goods are determined in the first instance on the basis of their cost of production, as I showed in Chapter 6 of this book.

    "Of course, I also showed that all prices determined by cost of production are still ultimately determined by supply and demand... Cost of production—and this point is relevant now—is always based on prices, including wages, which are the price of labour....

    "The fact that cost of production is not an ultimate explanation of prices constitutes a major logical deficiency of the cost-push doctrine. Because what the cost-push doctrine is actually claiming is that some prices rise because other prices rise, and it is content to leave matters at that. For example, the supporters of the cost-push doctrine blame inflation on such things as the rise in the price of steel or the rise in wages achieved by various unions. They do not offer any explanation of what makes possible the higher price of steel or the higher wages obtained by the unions. 

    "In fact, as already shown, what the cost-push doctrine boils down to is the claim that certain key prices, and this includes wages, rise arbitrarily, without any explanation other than the greed of those who raise them. The cost-push doctrine, in the last analysis, is a doctrine that tries to blame price increases on some form of arbitrary power. It tells us, in effect, that prices rise simply because some powerful people are making them rise.

    "Now it is true that in our present economic system, that is heavily overlaid with government regulations and controls—i.e., the so-called mixed economy—arbitrary [politically-protected monopoly] power does exist.... But this much can be said right now: The basic reason why arbitrary power on the part of sellers is not a sufficient explanation of rising prices is that such higher prices as it might bring about always cause reductions in the quantity of the good or service that can be sold and, therefore, act as a brake on any further such price increases. This is closely related to an even more fundamental objection, namely, that the cost-push doctrines are equivalent to an attempt to blame inflation on falling supply, which we have already seen is invalid. 

INFLATION: A Critique of the “Profit-Push” Explanation

See earlier posts in this series about what doesn't cause inflation:

• INFLATION: A Critique of the "Crisis-Push" Doctrine
• INFLATION: The Elimination of "Less Supply" as a the Cause of an Inflationary Rise in Prices

"According to the 'profit-push' doctrine [which we've heard most recently from politicians, union economists, and self-serving central bankers], prices rise primarily not because wages are rising but in order to increase the profits of 'powerful monopolists' and 'greedy big businessmen.' It is the push for ever higher profits, say the supporters of this doctrine, that initiates the so-called 'wage-price spiral'...

    "All things considered, it is probably by far the most popular explanation of inflation ... [but like all the other popular explanations] it ignores the fact that in the absence of rising [monetary] demand, rising prices reduce sales volume—that is, they reduce the quantity of goods that can be sold. The prospective loss of sales volume makes even a government-protected monopolist limit his price at some point....

    "This [is because] a rise in demand for [for the monopolist's products] is accompanied by an equivalent drop in the demand for other things. The effect of the drop in demand for other things is either to reduce the prices of other things or the supply of other things that is sold. In either event, the problem of inflation again does not come up—because we either have no rise in the general price level or one that can only be associated with a decrease in supply. 

    "In order for the [monopolist]’s rate increase to be connected with a problem of inflation, its customers must be in a position to enlarge their spending for [their products] without having to reduce their spending for other things. But this means they must be in a position to make a larger aggregate monetary demand. Consequently, the only possible explanation of how even protected legal monopolists could raise their prices in a way that is relevant to the problem of inflation is that of a growing aggregate monetary demand. And this, of course, in turn depends on an increasing quantity of money....

    "This is what is responsible for the rise in prices expressed in terms of paper money. The situation is comparable to selecting a melting ice cube as a unit of volume and then observing that all measurements of volume persistently increase....

    "Nevertheless, ... despite the fact that it is an effect, not a cause of inflation, many people, particularly in politics and in the news media, never tire of blaming rising prices on the rise in the nominal rate of profit and implicitly or explicitly demand that government controls be imposed to limit profits."

~ George Reisman, from pages 911-13 of his book Capitalism: A Treatise on Economics. Read it online here, or buy it here (currently at half-price!)