Those with an interest in conserving our oceans’ fish stocks and those with an interest in promoting private property should both be interested in my latest short study at CEI, “Give a Man a Fish.” Here’s the introduction:
Some policy makers and environmental advocacy groups are beginning to realize that the solution lies not in further government regulation, but in investing fishermen with property rights. However, government bureaucrats are also attempting to utilize this insight to gain even more power over fisheries, threatening to derail the momentum toward a more rational allocation of ocean resources. That would be bad news for both fish populations and the people who depend on them for their livelihood.
The oceans are an important source of food and income for people around the world. In 2007, proteins from fish accounted for 15.7 percent of the total global animal protein supply. In 2008, an estimated 44.9 million people were directly engaged in the fishing industry (both marine capture and aquaculture). However, the world’s fish stocks are not limitless, and are being depleted rapidly.
Two principal factors are at work. First, the billions of dollars in subsidies bestowed on the fishing industry by many governments makes overfishing profitable, even as per capita fishing yields decline. Second, the absence of property rights over fish in most countries means that there is no incentive for any party to husband this resource. In fact, the absence of property rights, combined with subsidies, creates a perverse incentive to deplete this scarce resource.
Attempts to prevent overfishing by promulgating regulations (which are often at odds with subsidies) have proved both ineffective and impossible to enforce. As long as the incentives are skewed by bad government policy, many fishermen will continue to work around regulations or simply neglect to report some of their catches—a practice known as “black” fishing that is all too prevalent. Ending subsidies and extending genuine property rights to fisheries will help solve these problems.
Thanks are due to my co-author, Roger Abbott, who provided much of the initial research effort, and to Michael DeAlessi, who wrote the definitive free market work on privatizing fish stocks, Fishing For Solutions, in 2003.
The Law of the Sea Treaty would drastically undermine American sovereignty, giving massive powers to the U.N. (aka the Dictators’ Club of New York), but the Senate is actually considering passing it — get this — as a tribute to Dick Lugar, whose voters unceremoniously dumped him last week. Seriously, couldn’t they just give him a medal? This is enough to make me think the House of Lords is a good idea.
In any event, Let Freedom Ring has an action site up on this – Let’s Lose LOST.
For further background, here are two studies from CEI on the subject of LOST that we issued when the George W. Bush administration was thinking about getting it ratified to curry international favor.
The latest edition of my colleague Wayne Crews’s annual snapshot of the regulatory state, “Ten Thousand Commandments,” is out. This year’s lowlights include:
- Estimated regulatory costs, while “off budget,” are equivalent to over 48 percent of the level of federal spending itself.
- The 2011 Federal Register finished at 81,247 pages, just shy of 2010’s all-time record-high 81,405 pages.
- Regulatory compliance costs dwarf corporate-income taxes of $198 billion, and exceed individual income taxes and even pre-tax corporate profits.
- Agencies issued 3,807 final rules in 2011, a 6.5 percent increase over 3,573 in 2010.
- Of the 4,128 regulations in the works at year-end 2011, 212 were “economically significant,” meaning they generally wield at least $100 million in economic impact.
- 822 of those 4,128 regulations in the works would affect small businesses.
- The total number of economically significant rules finalized in 2011 was 79, down slightly from 2010 but up 92.7 percent over five years, and 108 percent over ten years.
- Recent costly federal agency initiatives include the Environmental Protection Agency’s Mercury and Air Toxics Standards Rule and the Department of Transportation’s Fuel Economy Standards.
- While some people talk about Republican tentacles, this report clearly shows how vast the Leviathan of the federal government has grown, with its massive tentacles extending into every business — and every pocket — in the nation.
Direct link to the PDF is here.
With the prospects for a Greek pro-austerity coalition fading rapidly, here is a round-up of the most useful stories on the Greek tragedy:
- The BBC’s business editor, Robert Peston, asks if the Euro could survive a Greek exit. His comments on German reactions are key.
- A group of economists and financiers comment on what a Greek exit would mean. The consensus: economic disaster for Greece, but only a couple note that the Greek position right now isn’t exactly bread and roses.
- A useful note from JP Morgan that suggests that immediate losses from a Greek Euro exit could be around $400 billion.
- The suggestion that Greece could run out of money as early as tomorrow.
- In a leading indicator of capital flight, Greeks, Italians. and Spaniards have flooded into the London real estate market.
- Trading desks in London have started adding a shadow Drachma to their computer systems (and lots more in that excellent rolling blog from The Guardian).
- Drafts from Berlin suggest that Germany wants a Europe-wide bailout fund to stabilize the European economy after a Greek exit (now being elided to “Grexit” in City of London shorthand). This would mean non-Eurozone members helping pay for the costs of the Euro.
- Paul Krugman finally catches up to what the rest of us have been saying for some time.
- A straw that some are clutching at is that Greeks remain committed to the Euro, ignoring the role that it has played in their crisis.
- AEI’s James Pethokoukis points out the obvious — that a Euro recession could have significant implications for the presidential election.
For the record, here’s my two American Spectator articles on Greece, one from November last year. I wish I’d been more wrong.
The election results in Europe, we are told, are a vote against the austerity of “savage” spending cuts. Veronique de Rugy, in National Review Online, contested this claim, backing up her words with data. The Economist‘s Ryan Avent found her claims outrageous and presented data of his own to show that austerity was sooo there. Veronique has responded with more detail. Her case is essentially that in most countries, “austerity” has been implemented more in terms of tax rises than in spending cuts. The fact that the UK and France, both of which supposedly voted against austerity last week, have not actually implemented spending cuts, is best illustrated by this alarming chart.
It is important here to note that spending cuts are, in this debate, regularly portrayed as being harmful to GDP growth, as if shaving government expenditure results inexorably in a reduction in GDP. That is clearly not the case. The respected British economist Andrew Lilico, for instance, regularly points out that spending cuts in the Uk should lead to growth:
The key ways the government could raise the sustainable growth rate are as follows:
- Cut government spending relative to GDP. The government is already committed to cutting spending below 40% of GDP. If it succeeds, that could add 0.5% to annual GDP growth.
- Raise the efficiency of government spending. If public sector productivity grew as fast as private sector productivity, that could add 0.5% to annual GDP growth. Matching private sector productivity growth should be a modest target, since there is considerable scope for catch-up, with public sector productivity growth having dropped one third behind over the decade to 2007. To achieve private sector levels of productivity growth, use private sector methods – surplus/profit motives; competition; private sector management methods and cultures, etc.. These things will be desperately unpopular, politically. But they won’t be as unpopular as having the banks go bust again and the economy collapsing into another massive recession.
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In a column for the FT today, Wolfgang Munchau lays out what may be the only plausible solution to the Eurozone crisis – for governments like Greece to “default into” the European Stability Mechanism. The ESM could then issue bonds, thereby mutualizing the bad debt of the defaulting governments. The Euro survives, the PIIGS (Portugal, Italy, Ireland, Greece, Spain) get their debt off their books and can rebuild without having to do distasteful things like reform their labor markets, and the Euro project continues with its new Banking Union.
Except…
The great unasked and unanswered question with all of these schemes is: where is the money coming from? That’s not the same as the question who will buy this debt. Banks will, of course, if they have a clear idea of where the repayment and yield will come from. If it looks like the debt might not get repaid, they will require too high a yield, and the problem starts again. So who is the ultimate guarantor of this scheme? Together, the PIIGS supposedly contribute 37 percent of the ESM’s cash-flow, but that’s now, before the defaults which will require a much bigger capacity than the ESM’s current E500 billion capacity. France, which contributes 20 percent, is likely going to face similar problems given its likely electoral direction this year (Socialist President elected yesterday, socialist-communist-fascist dominated Parliament likely later in the year). So the answer will be, once again, the German taxpayer.
So the ESM banking union option once again collapses into the basic question — will the German taxpayer stand paying not just for the debts but the ongoing fiscal health of the profligate PIIGS nations? All indications seem to be no. So, despite being a seemingly plausible solution, the ESM banking union solution is probably doomed to failure too.
Of course, that doesn’t mean they won’t try it.
In a truly excellent column for the Financial Times today, John Kay lays out in a few hundred words a clear defense of the market economy against central planning. What I like most about it is that he tackles the question of “greed” (these days, it seems, the only deadly sin) head on:
The difference between North Korea and the US is not that one society offers more scope for greed than the other. In both countries, as in many others, there are greedy people and many who are not, and those who are greedy are disproportionately represented in the controlling elite. The difference lies in the channels of greed – the degree to which the quest for profit is directed towards the creation of new wealth rather than the appropriation of wealth already created by other people.
A successful market economy emphasises the former and restricts the latter through rules and institutions, in a structure that has evolved slowly and requires constant defence against those who would use economic and political power to subvert it. Success or failure in that endeavour is the central explanation for why some societies are rich and others poor. Crony capitalism is very different from the market economy.
The point about institutions is important. Law and regulation alone cannot sustain a market economy, and indeed too often send an economy down the road to central planning. The institutions of liberty such as the rule of law, due process, high trust (lack of corruption, confidence in institutions, and so on), and lack of regulatory barriers to innovation are all necessary for a market economy to flourish.
Crony capitalism offends these institutions. Kay’s piece should be required reading for Occupy Wall Street demonstrators — and for presidential candidates.
One of the few virtues of the federal government has been its inefficiency. With functions spread out across different agencies and duplicated powers and responsibilities, it has often proved unable to harm the economy as much as it could owing to power games and competition among agencies. Now the president wants to change all that. He wants a ruthlessly efficient government to intrude in all aspects of our lives without internal checks and balances. An efficient government might have been a good thing 30 years ago, when the government was spending much less per person. Now that it’s spending over $30,000 per household, the prospect is terrifying.
Take, for example, the proposal to transfer the National Oceanic and Atmospheric Administration from the Department of Commerce to the Interior Department. It’s clear that President Obama wants to create a European-style Department of the Environment. The merger gives the environmental lobby a one-stop shop for everything outside the EPA. It also creates a powerful behemoth that will be all-too-ready to trample property rights in the name of the environment. The Interior secretary and the EPA administrator will form a powerful alliance in the president’s cabinet, and the chances of protecting the environment through responsible stewardship and free market methods will be significantly diminished as this new bureaucracy expands its power.
Meanwhile, the proposed merger of the subsidies arm of the Commerce Department with such entities as the U.S. Trade Representative, the Small Business Administration, the Export-Import Bank, and other market-complicating agencies creates what one commentator called “a corporate welfare Voltron.” The whole purpose of this department will be to interfere with the free enterprise system to the benefit of the political flavors of the month. Rent-seekers across the country will delight that the process of diverting taxpayer money into their pockets will become simpler and easier. That may be efficient, but is is not responsible government.
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David Hogberg of Investor’s Business Daily and The American Spectator has a very complimentary review of my book, Stealing You Blind: How Government Fatcats Are Getting Rich Off of You:
Two stellar books have been published this year examining the “Political Class,” that group of people which includes politicians and bureaucrats, but also and the businesses and labor unions that enable and benefit from them. They are Stealing You Blind: How Government Fat Cats Are Getting Rich Off of You by Iain Murray and Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Prison by Peter Schweizer. They make excellent books for Christmas even though they are far more likely to generate outrage than good cheer.
Murray’s book focuses largely on the bureaucracy and why they have become an increasing threat to our freedom and our pocketbooks. Bureaucrats have a huge incentive to increase costs. In government, a bureaucrat’s success — his pay raises and promotions — is determined not by solving problems but by finding more problems to justify ever larger budgets and staff.
Stealing You Blind makes a great Christmas gift for the small government fan in your family!
On Monday, I sent this letter to the editor of the Financial Times in response to an appalling column by former British apparatchik Jonathan Powell:
Dear Sir,
It was disappointing to see such a prominent former diplomat as Jonathan Powell subscribe to the notion that Anglo-US relations are reducible to the friendliness or otherwise between US and British leaders. In fact, Britain and the US are tied together by an almost invisible web of culture, shared experience, and history. Leaders on both sides of the Atlantic, such as the current President, have done their best to downplay or cut these links, but they do remain. They could indeed continue to form the basis for a profitable relationship between the two nations. If Europe does not want an independent, free-market-loving country like Britain as part of its monolithic customs union, perhaps the United States should invite Britain to join NAFTA, to form a North Atlantic Free Trade Agreement.
Sincerely,
Iain Murray
Free trade can play an important role in solving the world’s current problems. It is unfortunate that most countries (and in Europe’s case, the Eurozone) seem to be withdrawing into mercantilism.
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