The Trump Card

To many, the world has stopped making sense. People "out there" have lost their minds. Brand new political parties are winning big elections, Britain voted leave and of course, Donald J. Trump.

To me, this all makes perfect sense. While I did not think Trump was going to win, I did believe he had a much better chance than many were expecting. What did I know that so many missed?

Indeed, why did trump win? What will happen in 2020? It wasn't the Russians. Yes, I'm sure they try and influence elections where they can and I'm sure they try and sow instability in their rivals' turf. But to say they were able to swing the whole election with some social media bots is asinine. Advertisement is not hypnotism and we don't need such an outlandish explanation to explain why Hillary's campaign and candidature were so lacklustre and why Trump's message had legs when there is a much better explanation staring us in the face.

The real reason Trump won is the same reason Bernie almost got the Democratic nomination. It's the same reason why Jeb and the rest of the establishment tanked. Of all people, Hillary really should have known: it's the economy, stupid.

Living in Obama's recovery USA, I could see a lot of anecdotal evidence of people struggling. College grads working multiple bar jobs and moving back in with their parents and Uber drivers explaining how they used to be retired. Work trips to Ohio and Michigan really opened my eyes to a recovery that wasn't

There are lies, damned lies, and then there are statistics. Government economic data is thoroughly biased as evidenced by the changes to the formulae for inflation, GPD and unemployment that always coax out better numbers than the older formulae. Hedonic substitutions then really allow the bureaucrats to cheer-lead the economy. Shadowstats, economists or the Austrian school and contrarian thinkers had it right: the Fed's unprecedented inflationary policy had brought the good times back to Wall street, but on Main street, unemployment was still north of 10% and and inflation was a lot hotter than 2% (making real GDP negative).

One other person saw all of this: Donald. He called the stock market a "big fat ugly bubble". He said unemployment was more than 20%. He said America was no longer great. Hillary, on the other hand, stood on Obama's shoulders, who said that Trump was "pedaling fiction". But the rust belt knew what reality they were living. They voted against four more years and for something different. Anything different.

Almost as soon as he had won, Trump changed his tune and declared victory. The big fat ugly bubble was now a bull market. The worst economy in history was now the best economy in history. Excitement about tax cuts and deregulation changed sentiment and the stock market reached record highs while unemployment reached new lows. However, the underlying economy was still the same. Nothing of substance has changed. The deficits are bigger, people are still struggling, waiting for Trump's America to arrive. It's not coming. Trump's irrational cheer-leading leads me to my next prediction: Trump is toast.

Trump will be a one-term president. Trump's 2020 slogan of "Keep America great" will be another four more years the electorate won't want. As the recession worsens and the data becomes undeniable, the voters will be ready to bring in anyone, as long as they are everything that Trump is not. America is going to lurch hard to the left in 2020. Of course, that won't work either.

Similarly, and for similar reasons, the rest of the west will lurch left and right, sliding ever farther from the centre and down the slope towards totalitarianism. In some places it will be universal socialism and in others, nationalist socialism.

Our only hope is to recognise and refute this trajectory. The only answer that works is real free market capitalism. Not the crony, over-regulated special interest system we have today, but the true free markets that made us rich in the first place. Getting there will not be easy. After all, we need a recession. We might even need a depression. The real economy has been so screwed up for so long by so much bad macro policy and regulation that the transition must now be long and arduous. So much debt now has to be written down. So many people expecting a social safety net will have to be let down. So many malinvestments have to be liquidated and re-allocated. If that sounds grim, I assure you it could and might be worse. After all, 2035 might start to look a lot like 1935.

San Jose, January 24th 2019

TLDR: Economic issues are the root cause of the west's political instability

The Dismal Science?

The march of progress in my lifetime has been astonishing. The fact that I and almost everyone else can walk around with an incredibly fast and compact computer that can access most of human knowledge in my pocket was beyond our imagination even as late as the 80s when I was born.

We have seen incredible advancements in all the hard sciences. I can appreciate this mostly in my own field, computer science, with which I am most familiar. But there is one field where we have not advanced. Worse still, we have regressed and have all but lost many important advancements of the 19th and 20th centuries and gone back into erroneous pseudo-science. This is the sorry state of economics today.

A bold statement from a non-economist to be sure. Although my field is computer science, I have more than a passing interest in economics. Having consumed dozens of books and other content on the subject over a decade, my confidence was buoyed when a Harvard economics professor admitted that my grasp of the subject went far beyond the layman's. But I am not here to commit the logical fallacy of arguing from (non) authority. Let my arguments stand on their own merits. I look forward to their refutation.

So I am not an economist, nor do I desire to become one. Yes, I could become a "proper" economist and apply to some revered institution. But it is those institutions that are the problem I am writing about here. Economics as a science has regressed, and the professors are to blame. What good would it do to get their recognition, when they are in error?

If this sounds crazy, then good. The suggestion that the established academic consensus on an entire subject is largely mistaken is a wild one that should be taken in with wild skepticism. But this would hardly be the first time that the academic consensus was wrong, and thinkers and commentators on the fringe were proven right in the end. There are today, two main schools of thought in the subject: the Keynesian school and the Austrian school. The former dominates academia, government and the mainstream profession. The latter is a small minority who have been able to further the subject.

Indeed, the Austrian school, through proper understanding of the business cycle, malinvestments caused by cheap credit and the damage done by forgetting to consider both the seen and the unseen effects of government intervention, was able to predict the 2008 crisis, and is predicting the next crisis which has started to unfold now. The Keynesian school, championed by professional morons like Paul Krugman and Ben Bernanke, was blindsided in 2008 and actually think that the problems were solved and no repeat crisis is on the horizon. But track record aside, the Keynesian school can be shown to be wrong by logical praxeological (human action) analysis.

Obsessed with complex mathematical models that prove results that are not reproducible in the real world, the academic mainstream have been unable to condemn, and worse, have often championed economic ignorance and nonsense that had been settled by the science in the 19th and 20th centuries. It is no wonder then that today economic ignorance is rife and worsening. People obsess about income distribution and imagine wealth a fixed pie. People think that inflation comes from employment. They think that the minimum wage raises living standards. They think that tariffs are paid by foreigners or that they help domestic industry. Mercantilist views are widespread and Malthus' thesis is alive and well. Krugman himself shows off his ignorance when he writes that a catastrophic alien invasion would be a boon to the economy as do the central bankers and politicians who think that consumption is key and demand somehow drives everything.

And this ignorance, trickling down from the professors and policymakers has a real impact. We are witnessing an increase in barriers to trade, protectionism, nationalisation of industry as well as never-normalised interest rates.

Economics has been derided as the dismal science, but it is only in a dismal state. When truly understood, economics is not heartless. It isn't about money. It is about humans and how they behave. Unfortunately, the coming crisis will not be one of conviction on behalf of the professors. Capitalism looks likely to get the blame again, and we look likely to double-down on the terrible ideas of these clueless socialists. Maybe when that fails even worse, we will finally be ready to listen to the Austrians.



Harrogate, December 23rd 2018

Swinsty resevoir

TLDR: Economics professors give economics a bad name

Bubble Bath

Looking at the Maltese skyline, one was hard pressed to find a view devoid of a crane. The construction industry has been the biggest industry in the country since the end of the socialist era. Indeed this made sense, a lot of pent-up demand was unleashed as the economy started to prosper and people stopped fleeing the malaise and started returning in larger and larger numbers.

But looking around today, one sees not a crane in every direction, but ten. Property construction, redevelopment, urban expansion and encroachment on ODZ areas are now happening everywhere. If you ask around, people are starting to sense that we have reached bubble proportions. But why? Why now and not ten years ago? What has changed? What’s going on? Is this normal?

To the inquisitor, a number of answers are ready supplied by eager opinionators. They are all wrong, and the real culprit escapes the blame. One popular explanation is greed. Greedy people, greedy developers, short-sighted profit-seeking, greedy politicians accepting bribes from greedy developers who only want to get rich quick. This is only half right. Yes developers are greedy, yes politicians are greedy. We are all greedy. We all want to get rich. The quicker the better. But why are we suddenly all so much greedier than before? We are not.

The other even more popular wrong answer points the accusing finger at the foreigner. I have been repeatedly told that the passport scheme specifically has resulted in an additional 10,000 rich new citizens who are buying up everything in the country. This is plain wrong as only a couple of hundred passports have been issued under citizen-for-investment scheme, besides which almost all of the newly minted citizens have availed themselves of their EU rights and moved on to where they really wanted to go in the first place.

If it’s not the passport scheme, it is other foreigners, Italians, Brexiteers, Germans, eastern Europeans and asylum seekers all moving here by the tens of thousands to grab a piece of Birkirkara while the going is good. This notion ridiculously overstates the demographic trends, which although the growth rate has increased significantly, the population has yet to breach the half million mark.

So if it isn’t speculators or foreigners or foreign speculators who is it that is to blame? The answer is to be found between the ears of a Italian man in Frankfurt. The reason for the extremely rapid rise in asset prices in Malta is the European Central Bank.

Turn the way-back machine back to 2008. The financial crisis was turning into the European debt crisis and Malta officially joined the Eurozone on January 1st. The debt crisis had been caused by earlier action by the ECB and the Fed to ‘save’ the economy from the dot-com bubble bursting almost a decade earlier. The far-too-low rate of interest in the Eurozone created massive construction booms in the PIGS countries and massive overborrowing by their governments and municipalities.

Malta was saved all this turmoil. Having the Maltese Lira, governed out of Valletta we played no part in the mania. The currency was pegged to the Euro to be sure, but interest rates kept pace with inflation reasonably well. But when we joined the Euro and suddenly interest rates collapsed at Frankfurt’s direction, trouble started brewing. And this is crucial - bubbles take time to form. Our property bubble didn’t materialise on joining the Euro on January 1st 2008. Ten years of negative real interest rates later, and now Malta resembles the 2008 Costa Brava.

The ECB would scoff at this. They would point out, rightly, that I do not have an economics degree, and that they, the experts, know best and have everything in hand. This would continue their remarkable streak of getting everything wrong all the time. The current ECB interest rate is at 0%, which makes the official real interest rate in Malta somewhere close to -2%. This insane interest rate alone is enough to fuel a speculative mania. However, the real interest rate is much much higher.

The official inflation rate of less than 2% is bullshit. The ECB is constantly reworking the formula, adding hedonic adjustments and substitutions to arrive at this absurdly low number. Indeed, at 2% inflation, Malta has seen rent prices increase at a rate of 47% in the years 2013 to 2016. That alone would blow the 2% number out of the water. So with real inflation running somewhere in the double-digits, the 0% interest rate becomes a dangerously irresponsible policy prescription.

Ah, but you say. Malta is not the only country in the Eurozone. What about the other 18 members? Well, of course you cannot compare Malta to Spain, which had a property boom go bust in 2008. Nor could you compare it to Germany, which has had much lower inflation. You could compare it very easily to the other country that joined the Euro on January 1st 2008, our sister in the sea, Cyprus. And wouldn’t know it, many Cypriots are starting to wonder if their unprecedented property boom is now a bubble. Two other countries Slovenia (joined the Euro in 2007) and Slovakia (joined 2009) are also experiencing bubble-like tendencies in their markets.

I haven’t seen this movie, so I cannot tell you how it ends. Well, not exactly, I have seen pretty much every bit of crap this director has put out and I know how it ends. The boom will bust and property prices will attempt to return to their inflation-adjusted trendline with a healthly pendulum overswing to the downside on the way. Until the ECB saves us again from a disaster of their own creation by going even easier for even longer.

At some point however, one straw is one too many and the camel’s knees buckle and collapse. Asset prices collapse and bankruptcies usher in a period of depression or the Euro is finally printed into oblivion.


Edinburgh, November 7th 2018


 

 TLDR: The ECB is the reason why Maltese property has gone ballistic

Central Blunder

Friends who bother enough to listen to my whining tend to think me an extremist. All this talk of dismantling the welfare state, repealing harmful licenses and regulations and taking the power away from the executive and giving it back to the market is scary. So if I were to be more moderate in my demands to address all these mistakes in our present sociocapitalist arrangements and content myself with only one issue and one campaign, I do not hesitate to say it would be directed against central banking. No other flaw in our system causes more damage, in my view.

Central banking is a relatively recent innovation. It is not the oldest “central banks”, the Dutch Wisselbank, the Sveriges Riksbank or the Bank of England of the 17th and 18th centuries, but rather that same Bank of England’s 1844 monopoly charter that started the idea that a nation can and should have only one currency issued by only one bank. This monopoly on the supply of money is at the heart of the problem with central banks.

The other main problem, is the usual hubris that comes along with central bureaucracy, the idea that some genius can concoct a better outcome than the market. Always use the right tool for the job. A hammer is the right tool for any job and anything can be used as a hammer. The central bank has two related tools at its disposal: interest rates and money printing. And boy, do they use them!

Without any competing banks to issue any competing currencies and with the law enforcing the payment of debts, display of prices and the settlement of all contracts and taxes to be in the monopoly central-bank issued currency, the amount of money issued by the central bank (mostly done only digitally) and the amount of interest it charges commercial banks for money advances have an enormous impact on the economy and society at large.

The central bank’s tool is in a sense just one: inflation. Inflation in the original and correct meaning of the term, is an increase in the money supply. Such inflation causes increases in prices, often in unpredictable ways. This is not just “inflation”, now redefined as an increase in the price of consumer goods, although it does plenty of this. This type of price increase is part of most western central bank’s stated goals: the ECB’s 2% inflation target and the Fed 2%-ish target. I won’t spend too much time here analysing why paying 2% more per year for rent, petrol or food does anyone any good (it doesn’t). Another stated policy goal of our central banks is to create a wealth effect by boosting asset prices. That’s a nice way of saying that they want to make people spend money they don’t have because of the confidence they get from seeing the prices of their stocks and real estate artificially high. Great policy, genius.

Of course, these asinine policies have the desired effects. Stock market and real estate bubbles cover up a steady decay of the real productive economy. When interest rates are artificially low, people are forced to make investments they would otherwise never make. Hair-brained schemes like $300m meal-kit companies and mortgages for unemployed imprisoned felons get funded. The ultimate and predictable cause of the 2008 crisis was the too-low-for-too-long interest rate policy designed to stimulate the USA out of the dotcom bubble crash (itself the result of central bank stimulus).

Oh and how little we’ve learned. 2008 ushered in an even more ridiculous zero-and-negative-interest-rates-for-a-decade policy. This, obviously, created a massive rise (inflation) in asset prices, leading to a totally predictable crisis coming soon to a newspaper near you. These over-inflated asset prices create wealth disparities that fuel popularity for socialism. They prevent younger and less wealthy individuals from acquiring assets in the first place while benefiting those who already have the assets and a pile of debt. They do this in plain sight, and who do we blame? Speculators. Foreigners. Foreign speculators even more so. Greedy banks and corporations. All the while missing the elephant in the room: the central banks whose “independent” policy actions are the only thing keeping the bubble economy from imploding (yet) and from keeping their sponsor, the government, solvent.

And this is why I say central banks are our biggest problem. Because apart from creating bubbles and panics, apart from preventing failed companies that make bad use of the factors of production from going bankrupt and releasing that capital for new businesses, the central banks enable their biggest fan, the government, to take on mountains of debt and spend gazillions of eurodollars.

If we take away the central bank monopoly, if we return to the relatively recent past where several banks competed to issue currency and boasted about the amount of reserves they had and strength and constancy of their issued notes, we would instantly defang government excess. Where now we have no choice but to use the increasingly worthless currencies spewing forth from profligate central banks, we could choose among the safest, soundest most reputable banks in a market of confidence.

Enabling currency competition will do more than any other policy I can think of to solve our biggest problems. Note, that this will also have to come with an end to bank deposit guarantees to be effective. If the regulators, so obsessed with breaking the free market with “anti-monopoly” regulation would instead focus on our biggest and most problematic monopoly they might not be quite as irritating. And if these central blunderers think they are so clever, think that their degrees and Philips Curves are so grand, why is it that they are so afraid of a little competition?

Bhubaneswar, October 1st 2018

Alas, nobody is still alive to remember what could be accomplished without a central bank

TLDR: Central banks are the biggest problem in our economy

Democratic Fascism

From each according to his ability, to each according to his need. This, most agree, is the fundamental tenet of socialism. Socialism, despite being the single most deadly ideology in human history, despite leading to tyranny and misery every single time it has been tried, is experiencing a revival with renewed enthusiasm, particularly in places hitherto relatively unscathed by it's pestilence.

No country is entirely socialist or entirely capitalist, so it is hard sometimes to nail down the criteria of what makes a country socialist. Proponents of socialism claim that Norway and the Netherlands are socialist countries, while detractors prefer Venezuela and North Korea as good examples. Based on Marx' maxim that I started this article with, we can ascertain that  policies and economies are more or less socialist depending on their propensity to redistribute money and material goods or services from one group of people to another, to limit or eliminate profits and private property and increase the amount of central planning and central direction of the economy. This broad definition of socialism is widely accepted by both supporters and detractors of socialism.

So which countries are socialist? Or rather which countries rank highest on the socialist scale? By these criteria, it is clear that Venezuela and Cuba, having very large portions of the economy run directly by the state, nationalised industries and state run services are very socialist countries. By this measure we can also see that North Korea is far more socialist than South Korea or even China as in the former's case, the state virtually runs the entire economy whereas in the latter's case, there is a large thriving private sector where capitalists are allowed to allocate the factors of production in pursuit of profits.

What about the Nordic countries and the Benelux? While they have high redistribution rates (high taxes and 'generous' welfare programs), government involvement in the economy is low with even most schools and hospitals being in private hands. Private property and profit-seeking enterprise is not only tolerated, but encouraged. In Europe, The Netherlands (which I am most familiar with, having lived there) is by our criteria far less socialist than France, Spain, Italy, Greece or even the UK.

It is also often argued, by the advocates of socialism, that the horrific totalitarian regimes of the Soviet Union, Nazi Germany, Mao's China or Pol Pot's Cambodia were not socialist. The Soviet Union, they say was communist, not socialist. The soviets themselves disagreed, communism was the utopian ideal they had not yet reached, and described themselves as socialist republics. Indeed, the near total ownership of the economy by the state and the daemonisation of profit-seeking capitalists leaves little doubt to as to where they stand on our scale.

Although thoroughly explained by Hayek's Road to Serfdom, many still do not recognise that the German Nationalist Socialist party was a socialist party. Hitler’s economic policies championed state direction and Capitalism, which according to Hitler was run by a cabal of Jews, was derided as the biggest evil in the world. The Third Reich featured many government infrastructure programs, price controls, industry nationalisation and widespread economic regulation. The main difference between the Soviet Union and Nazi Germany was that one embraced the ideology of universal socialism, whereas the latter embraced national socialism. As Hayek also explains, redistributive policies and nationalised industries always lead to nationalism and friction with extra-national people within and without the state's borders. The more that is done by the state and the less left to the individual, the more important it becomes to define who is part of the state and who is not.

There being almost 200 countries in the world, it will take too long here to investigate and rank each one on our socialism scale. Ranking high on the socialist scale are fascist kleptocracies like Iran and Zimbabwe that use state interference in the economy to benefit a small elite instead of the unwashed masses. Lower down on the socialist scale there are southeast Asian countries whose citizens have low levels of political freedom, but high levels of economic freedom.

So given that the most socialist countries in the world today, and in the past are and have been the worst places for people to live in general and given that these places have seen rampant human rights abuses and the highest levels of inequality and human misery and murder, why would socialism appeal to anyone? I think the fundamental reason for the appeal of socialism and the general low opinion of capitalism is due to the fundamental error of attributing values to ideologies instead of to the outcomes they produce.

Ideas like socialism and capitalism don't have values. It is not correct to say that socialism is compassionate and capitalism is greedy. Only people have values. The reason that socialism always fails (and fails more the more it is applied) is the conceited idea that planners can do a better job of making decisions about where someone should work, what they should buy and from where, who deserves what portion of the fruits of their labour, what someone should learn and whether or not that person should be allowed to live at all better than those people involved can themselves. Inevitably, the planners get it wrong, and the more they try to achieve ‘social’ justice, the more they pervert actual justice and the more misery they sow into the ground.

So adding a word like "democratic" to an idea as flawed, dangerous and old as socialism will not change its outcome. Indeed one should not be distracted by political marketing labels such as "liberal", "conservative", "freedom" or "democratic". One should instead look at the policy proposals of parties and governments and ask: is this increasing the state's role in the economy or not? Such an increase, whoever it is who champions it, will always move you further down that road to tyranny and misery.

Porto, September 17th, 2018


 

The long downward road is paved with good intentions and tarmac

TLDR: Democratic socialism doesn't make socialism any better.

Paroli

Years ago, riding my bike down Utrechtestraat in Amsterdam, I came to halt having heard something I did not expect to hear. Something I hadn’t heard in a while and did not expect to encounter in Rembrandtplein. It was unmistakable and instantly recognisable; a language I and only a mere half million other people can speak. It was Maltese.

Maltese tourists in Amsterdam are hardly remarkable, but when one comes from such a small country, the sound of your countrymen tends to fill you with excitement rather than dismay. My serendipitous encounter made me feel happy to be part of such an exclusive club, a speaker of a linguistic gem of a language.

Maltese is itself unexpected. A semitic language that survived the 11th century Christian reconquest of southern Europe. For most of nine centuries, the language was not taught in schools, used in courts or even written down. Not the Norman French of the reconquerors, the Spanish that presided over the islands for centuries, the various Romance languages of the crusaders or even English was able to defeat Maltese. Unlike other non-sovereign languages in Europe like Welsh, Irish, Basque, Catalan, Occitan, Frisian and Swabian to name just a few, Maltese did not substantially decline and retained its semitic character.

However, since Maltese became a sovereign language, substantial concerns for its survival have emerged. Unfounded concerns, as the language’s ability to survive is clear, and these concerns have resulted in damaging policy actions by the government. Resources have been diverted to this culture war to rename streets and change road signs, with foreigners unsure how to get to Valletta and Gozo (now labeled Il-Belt and Għawdex) and locals not needing the signage in the first place.

Another salvo in the war against Maltese is the founding of the Maltese Language Council. This shows the conceited ignorance of the state. Here you have language, a beautiful, self-organising, bottom-up phenomenon that thrives if left unregulated. To then impose a top-down order from an all-knowing council is totally ignorant of linguistics and language history and is mired in the conceited belief that they can better steer the language then the speakers themselves. As the French and Germans can tell you, these language councils are at best, a waste of resources and at worst a danger to the vitality of a language. Ask an English speaker, and he might wonder what such a poorly-conceived council even was.

This culture war in favour of Maltese has in its crosshairs our other language, English. English has been so daemonised and marginalised that the level of English in Malta is actually deteriorating. Often, one can find old women who speak English more fluently than their granddaughters. In Spain, Germany, France and Italy, where the inhabitants traditionally speak very poor English, the situation is reversed. Levels of fluency are improving rapidly. In losing our claim to being a native English speaking country, we do great damage to our economy and culture.

English, after all, is not just another language. It just so happens to be the lingua franca of the world. When a Pole and a Portuguese person want to communicate, they will do so in English. There was a time when it would have been French and a time when it would have been Latin, but today it is English. Our ability to speak and write in native English is a coveted prize in this environment. The wealth of resources written in the English language dwarfs not just Maltese, but any other language on the planet. Indeed, more people speak English than any other language.

Will this always be the case? Probably not, but the regional lingua franca shifts only very slowly, and this is the first time in history that there is a global lingua franca. So as the culture war continues and politicians add fuel to the fire to benefit from misplaced nationalism, English is further neglected in favour of Maltese and this economic and cultural advantage over our neighbours further subsides. Losing native access to the that incredible wealth of knowledge will leave us poorer, culturally and fiscally.

Add to this an erroneous fetish of Maltese language purity. Maltese, being cut off from the Semitic world for 900 years lacks a myriad of vocabulary that has been lost or was not needed at the time of our severance. Luckily, the language was able to thrive by co-opting romance words and remarkably even semiticising them. Luckily, no language council was able to prevent this from happening. The turn of the 19th century saw us leave the orbit of the Kingdom of Naples and lose direct contact with Sicilian and Neopolitan speakers. These next 200 years, representing almost a quarter of the time Maltese split from Siculo-Arabic are just as important for the development of the language as the previous 600. English words entering the language and being semiticised are scorned as illegitimate by the purist fetishists. In reality, these words are just as legitimate as the Italian loan words and artificially re-borrowed Arabic inkhorn words that they insist on.

This tendency to reject English borrowings (even if they are 200 years old), championed by the ridiculous council, and to favour Italianate and Semitic words that have never been part of the language, or have fallen entirely out of use, will do Maltese a lot of harm. By insisting that Maltese is written in a specific way, using specific words, the council (if successful) will eventually create two distinct languages. A written language that is as defunct as Latin and written Arabic and hopefully a still living vibrant spoken language outside of their control. These attempts to plow the sea, at taxpayer’s expense, showcase the ignorance and conceit of government intellectuals.

This linguistic nationalism also marginalises the native English speaking minority. These people are 100% Maltese, who happen to have English as their native tongue. Proponents of the culture war tar them as snobs and traitors. While I’m sure, some members of this minority might be guilty of snobbery, even treason, it is still shameful to marginalise the whole lot of them and treat them as foreigners in their own country, despite our constitution.

All this wasted effort in trying to protect a vibrant, living language in no real danger (apart from that posed by bureaucrats) at the expense of a valuable asset that is slipping through our fingers defies belief. Yes, one can be Maltese, and a native English speaker without being a snob. Yes, one can celebrate the amazing linguistic gem that is Maltese without trying to cage the bird and make it sing.

Siġġiewi, 27th August 2018

Building a wall around a language will not make it great

TLDR: Government efforts to favour Maltese over English will harm both languages

Government Inc.

Ever since Prussia put the welfare state into practice for the first time in 1883, the paternalistic facet of government has been actively running aspects of the economy like a monopoly corporation. This, the birth of the first socialist state, told the world that central direction is superior to the whims of the market and dared it to disagree. But when the jury came in, the facts spoke very disparagingly of Berlin, and Moscow, and Beijing, Hanoi, Warsaw, Havana, Phnom Penh, Lusaka, Caracas and everywhere else. Central direction didn't work and doesn't work.

Socialism was down, but not out. Everyone agreed, by 1989 that the government was very bad at running the means of production. Socialism had to change its definition, from the confiscation and central management and planning of a nation's resources, to a social safety net based on the confiscation and redistribution of the people's wealth to causes deemed worthy by the administration. This thinner definition of socialism is the one we have today. With the smallest of cursory nods to the undeniable history of the tyranny, murder and misery created by government control, socialism has given up on controlling the means, but clings on to the ends.

Unfortunately this break with the past has left several relics. A number of industries are administered and executed directly by government in a number of countries, including ours. Schools, hospitals, housing, energy, development projects and transportation are just some of the areas were the government competes with the private sector using taxpayer money or monopolises the delivery of a service completely. All of these endeavors are run at a loss and render a service inferior to private sector alternatives. Sometimes it is hard to even see or imagine a private-sector alternative, as it is crowded out by government provision.

The government is really bad at running things. Even something as simple as delivering mail, it used to be said that "my local post office has four counters, unless they're really busy, then they have one". Pooling our resources centrally to then distribute them out again minus the administration fee is inefficient and requires planning. Planning is the ultimate conceit of the bureaucrat who thinks she can create a better outcome than the market. She cannot. With no profit motive and possibility of failure, government-run services ever increase their losses and decrease the quality of their services.This is logically inevitable when the entity's customers are not the tax paying consumers, but other bureaucrats who decide their budgets.

So privatise the lot of it. Sell the government enterprises at auction to the highest bidders and take the tax money that was wasted in their administration and use it to pay for a massive tax cut. As long as people are free to choose and regulation is light, competition and the threat of competition will create better schools, hospitals, power stations and airlines.. just like it does in every other untainted sector of the economy. Can you imagine the disaster that would be a government mobile device? Or supermarket? They can't even run a post office, why would we trust bureaucrats with the education of our children and our health?

The main objection to returning to the situation before the government took over these sectors (these sectors all started out as entirely private concerns) is "what about poor people?" Will a greedy, profit-seeking private interest look after the little guy? Whether this second, weaker definition of socialism, is indeed a good idea is a debate I leave for another occasion. The truth is you can be for providing housing, health-care, education and many other "rights" to unprivileged people without having the government run them. I am talking about the government running services, not providing a safety net.

The problem with poor people is that they don't have a lot of money. This might sound obvious, but the point is entirely lost on the socialists of today. Through government, that is the forceful confiscation and inefficient redistribution of wealth, we provide poor people with education, housing, health-care and a dozen other things. It would be much more logical, efficient and humane to provide them with money, and then allow them to purchase these services in a free market. Instead of relying on the "zipcode lottery" that means your children can go to a better school, or paying twice (once in taxes and once again) to send them to a private school, let us give everyone the same choices.

If we take all the money that is spent on poor people in welfare programs from pensions to schools to housing, and simply gave them the money, they would be among the highest earners in the country. You can be for welfare and against government administration of it. If you take the money spent/wasted on these services and gave it back to the people in the form of vouchers, they could then purchase these services in a relatively uninhibited free market. The resulting competition would increase quality and availability and reduce costs.

I would go one further. Instead of treating poor people like children, children who have the misfortune of having the worst parents in the country; the state, let us treat poor people with respect. A respect that says "you are poor, that may or may not be your fault, but here's some money to help you out". That is far better than saying "you are poor, live here, eat here, learn this, shut up". If you give poor people money instead of services then they are rewarded by their agency. They can make better or worse use of it and they have the constructive incentives that the cradle-to-grave welfare state denies them. This money, instead of the increasingly popular universal basic income, which incentivises leisure can come in the form of a negative income tax, that would at least not disincentivise working.

If we think so little of poor people that we do not trust them to make the right budgetary choices, that we think they will drink and smoke their money instead of spending it to send their children to school. Fine, vouchers will restrict their budget to the “correct” allocations. But please, let us not pretend that they are better served by the government rendering the service instead of them shopping for it with a voucher. It would be better and cheaper for everyone.

But do not give people a false choice! Voucher systems and privatisation have often failed in the past. The failure has been due to an inability for the government to fully let go. If an industry is privatised but still heavily regulated, the markets becomes tainted. If we are to privatize the public schools, they need to be free to experiment and innovate. The national syllabus needs to be scrapped. Why should everyone the same age learn the same Shakespeare play? Different schools could specialise and localise. What is true for schools is true for other industries the government has its tool in. Selling a monopoly to the private sector without opening up the sector to real competition by keeping the monopoly or through licensure will result in even worse outcomes.

Of course, any transition to a better state of affairs, where we abandon this soviet-style government provision in as many sectors as we dare should be gradual. Turbulence has a cost too, after all. A lot of bureaucrats need to lose their jobs and get new ones in the productive part of the economy. In many cases, deregulation, followed by privatisation of state assets and a gradual reduction of state subsidies and an increase in vouchers or a negative income tax can be phased in. Unfortunately, the zeitgeist seems to be dragging us back to an increase in state-run enterprise.



Amsterdam, July 11th 2018

The river Amstel

TLDR: The plight of poor people is not an excuse for government-run enterprises