Salt

Salt is the only rock we eat, and Mark Kurlansky has written a world history of salt that anyone who proposes to understand business, politics and history should read this book next.  I bought it about eight years ago, and lent it to others, including a grade school daughter, who have read it and praised it.  I finally got around to reading it.  Stunning!

Trade, trade patterns, politics, war, society, culture all have been one way or another grounded in salt trade for millennia.  Although plentiful, salt was easy to control, or hard to acquire, thus being a medium of oppression throughout history.  Mahatma Gandhi was a negligible figure until his march on the salt works.  Then Britain got vicious.

The book is a fast read full of great observations: how the English saltworks at Cheshire, where brine pools formed allowing salt to be extracted through wood fired evaporation method, might be more competitive if coal could be found closer.  A prospector hit rock salt 90 feet down while looking for coal, and abandoned the search.  Of course, this explained why brine pools formed, water sluiced under ground through salt veins and then appeared above ground as brine pools.  It a classic example of failing to see the forest for the trees, the search for coal went on.  Perhaps it was the countless people employed evaporating brine that drove the myopic search for coal, but in time it did dawn on someone to just dig up the rock salt and skip the evaporation.

For we free marketers the book is especially telling for its description of property rights, natural rights, the violation thereof, the paradox of less government equalling more prosperity and security, innovation and entrepreneurship, distribution and other topics upon which the self-employed are keen.  Particularly edifying is the story of the Hanseatic League, a rather seaborne nation with representatives in ports, which developed a reputation for quality and ethics admired by all.  It is another example of anarchy in action, order out of chaos.  Sadly as the league grew in wealth, they began to use violence instead of trade to enforce their views, and they went into decline, since english and dutch were better at violence than the Hanseatic "nation."

Although Kurlansky does not point out the parallels to salt and the modern drive t control oil, the comparison is inescapable.  His history of France, the taxes on salt, the monopolies and violence very much mirrors USA today, with similar interference in the drug trade in America.  Others have pointed out how theft of retirement funds by government in pre-revolutionary france led to revolution, we can add salt tax as another.  It is scary to observe the parallels.  The revolutionaries abolished the hated salt taxes, but as revolutions go, Napoleon reinstated the salt taxes with a vengeance.  It should not be surprising that if the tea party revolutionaries are successful, we'll see much worse than we've seen under  Clinton/Bush, etc.  History teaches us that.

I regret I did not read this book years ago, get to it next.

Bookmark this post --- Email this post

Arguing Free Markets Vs Capitalism

Brian bird-dogged a post by a fellow of the name Hugh Aaron over at the Biznik site who reflects on career and capitalism...  I reproduce here with my comments between the   ***  ***

Being a product of the capitalist system, born into it, raised in it, educated in it, I never questioned its morality. 

*** I wish you first defined your term, since capitalism has about 2 dozen distinct versions, depending on who you are talking to... but from the rest of your post it seems you are talking about the “liberal-mercantilist” version which is a fairly common understanding.  How did it come to pass that as you were being educated, you did not come to question and test the system in which you were raised?  This seems unlikely.***.

I saw that it created a disparity in income and standard of living among the population but I attributed it mostly to the difference in individual native ability or education or just plain luck. Living in Chicago during my college years I saw the enormous slums and riots there more the result of racial prejudice than of the system. In other words the opportunity to succeed was always there; it's the American ethic.

***It would seem to me a system that supports the evil of racial prejudice is something to question, indeed. ***

Believing this as gospel after graduating college I went to work for several different companies, both large and small, in various industries for the next twenty years.  There I observed that the incomes of the top managers and owners were far beyond anything that I could aspire to, at least as an employee. The solution would be to somehow start my own business, as my father did. And the underlying assumption was that money would determine the measure of my success. After all, it defined the American free enterprise ethos.

I was a perfect candidate to achieve that success. I was a believer in the system without regard for, or really awareness of, its negative aspects. It was total acceptance; I had faith in its rightness as if it were a religion. 

***We tend to admire a system that works for us, and denigrate those who cannot advance in a system that does not work for them.***

So after two decades of being a cog working for other companies, I went into business, a manufacturing business, where I thought I would have total control over my destiny, and where nothing I did could harm anything or anyone else so long as I was honest and acted within the law. I couldn't have deluded myself more.

While I was in business – having sold the business I'm now retired – you might say I was a type A personality, driven, meeting crises head on, hiring and firing people strictly from the point of view of whether they benefited the enterprise or not. We polluted the air, generated toxic waste which ended up in landfills, and sold materials which often caused environmental damage, and even health risks. Nothing that we did was illegal. Everything we did was sanctioned by our government and our community and considered beneficial to the economy and the nation.

*** Very well put.  You might read The Transformation of American Law, 1780 to 1860 by Morton Horwitz to see how, case by case, property rights were destroyed by government to yield the result you precisely describe: originally the litany of abuse you outline would have resulted in tort, restraint, and reparations.  The American government changed all that, and what you described followed.***

And in some sense it was. Our company gave people employment; it manufactured much needed industrial products; it paid ever increasing taxes to our town and the nation; it contributed to the general prosperity of the community. Indeed it was a typical capitalistic model to be emulated. 

***Precisely the rationale that led to the destruction of the protections of common law we once had in USA.  And the argument is rooted in survivorship bias, “since I was successful, it must have been good.”***

Yet, gradually, as over the years I witnessed our success, I began feeling something was wrong. Something was incorrect with the model, and with my thinking. I began questioning my original concept that capitalism had no downsides.

***Bertolt Brecht said, recapitulating Catholic theology, a man can reform his life with his dying breath.***

I began to be bothered seeing my workers, many years older than myself, doing difficult physical work at a time when they should be easing off. I began to worry whether they could maintain their standard of living when they retired. I came to realize my company was no more than a dictatorship in which no one had any say. And I came to be concerned with where our waste hauler dumped our waste. And on a personal level, I began to see that my family was paying a price as a result of my relentless driving, and dedication to the business. Materially, they were better off than most of the people in our community, in our nation, but on an emotional, human level they were deprived. This was perhaps the worst negative of all for being a capitalist.

***This is a matter of choices, not a system.  ***

I know of no other economic system that offers more than capitalism. I recall as a young man during World War II admiring the Communist system because in theory it was supposed to equalize the distribution of wealth. Our nation, the world, was just recovering from a destructive depression in which poverty was the norm. Many questioned our system then. 

***This contradicts your opening statement that you never questioned the system.  Not to be picky, but you need to tighten up this schtick. There are better systems than capitalism, one being the free market.***

Of course, in Soviet Russia under its dictatorship the government never practiced what it preached and it failed to recognize the inherent human need of its citizens: personal incentive. And personal incentive, for whatever gain whether money or the simple desire to do good, is the main feature of capitalism, the force that drives it.  We now know that political freedom is not necessary for capitalism to thrive. Witness China today.

***Well, now, as one who was there doing business while the gang of four was in power, and still there, I have to disagree.  Deng Xiaoping based his reforms on consultations with Hong Kong and Singapore leaders...  the practical fact is under Communism the Chinese presently have political freedom superior to what we have presently in USA, and their economy and wealth distribution attests to it.  The labels don’t work... China was hardly ever really communist, and it is hardly capitalist... it is enjoyng the accident of too small of a ruling elite to do much damage to what is in essence largely a free market.***

Under capitalism there's also the assumption that money is the driver. One would think so after seeing the outrageous incomes paid to corporate CEOs these days. Not necessarily so. In Japan, for instance, the CEOs are not motivated by money. Exorbitant salaries are peculiarly American.  I discovered that while managing my company being creative in meeting the challenge of succeeding was far more gratifying than the large income I was drawing. And eventually I found that bringing all the employees into a unified effort and cultivating their trust and devotion to our cause by opening our books and consulting them at every turn, listening to their ideas and implementing them, was the most satisfying reward I ever received in running the business.

***In retrospect, does it bother you that your employees, given your transparency, fully aware of your operations and all the implications,  failed to vioce any objections to the exploitation litany you outlined above?***

But we must understand that living in a capitalist society requires a trade off. To succeed in business involves sacrificing such responsibilities as being with one's family often when they need you, of putting aside personal feelings and empathy when they interfere with the bottom line, 

***Just so, but who said we are obliged to participate in such a system? Do we not have many examples of alternatives in play, such as the Sikhs, Orthodox Jews, Amish and countless individual others who eschew the capitalist system yet thrive in family and fortune?***

of being single minded of purpose while failing to consider a larger purpose, the community, of trying to destroy one's competition who is seeking to destroy you.  

***Competition means to “strive with” not combat, “fight with.”  You do not see competitors like Michael Phelps trying to drown the other swimmers, he studies other swimmers to see how he might do even better.  It’s not what you think that makes you happy or unhappy, it is what you do.***

Capitalism is no nirvana. It is very hard on its participants, but you'd never know it they way it is touted in the media. I encourage people in business who accept blindly the demands of capitalism, whether leader or worker, to compromise. Remember who you are, and those who love and depend on you. Don't let the system make you become someone else.

***Hang on, since you are admittedly late to the game of reflection on the system, and since you insist you have little in the way of reflective capabilities, should you not first spend some time reviewing some working options to capitalism rather than lay down some platitudes?  In a few weeks there is the Mises University that you would find enlightening. It may help you to see that one need not at all participate in capitalism, a system that is well and truly as evil as communism.  It is bad advice to suggest people should continue in an evil system, but behave themselves.  Check out the alternatives, such as free markets (properly defined) and see if you might offer better advice.***

Bookmark this post --- Email this post

April 2010 Census IMEX Report

We see a slight dip in both imports and exports for USA in April of 2010.  From this link you can find massive info in USA trade with the rest of the world, and of course domestic trade.

Bookmark this post --- Email this post

Pendulum Swinging Back?

The Soviet Union lasted on about 70 years, and after about 70 years of "govt is the solution to all of our problems" is the pendulum swinging back?

From Lew Rockwell come a couple of stories...

One, prosecutors, who railroaded a innocent man into prison, are being questioned about it.  That has never happened before.  In fact, the fast track in politics is to be a prosecutor and railroad someone innocent, (Rudy Guiliani) or many innocent people (Janet Reno) or cover up something big (Arlen Spector).

Two, a news station covers a story about a man who defended himself against murderous gunmen with his own gun.  Although fairly common, such stories never made it to the news, but did last night in Miami.

OK... this does not a trend make...  but books and stories abound regarding the cost of benefits, the unfunded liabilities of cities to the govt unions.  Cities such a Vallejo and Los Angeles California are facing bankruptcy for inability to pay for their promises to retirees.

For decades politicians gained votes and money by voting for money for public employees.  What politician cared in the 60s, 70s, 80s, 90s that the policy was foolish and unsustainable.  By the time the taxpayer figured it out, the politician would be long gone.

To sell the electorate on ever expanding the public employees benefit package, the public had to be sold a vision of the cop and fireman as selfless superhero.  Job well done!  Indeed, part of the compensation package of being a police or fireman is the awesome respect given to these people.

But now this monopoly on violence is costing too much.  Just as the Meiji restoration signalled the end of the Samurai, perhaps the coming changes in USA will see the public employee pass into some mythic hero status, in essence stripping the retirees one way or another of their golden rice bowl (rationing, inflation or raw cutbacks) but leaving the reputation as a consolation prize.

Bookmark this post --- Email this post

Alvaro Is Back With Advice on Inflation

The tactics employed to survive during high inflation were these:

You usually have a lot of time, or know someone who does; so you try to do things yourself (bye bye division of labor). 

Don't hold cash, buy stuff you really need and use.

I remember we didn't discard anything, we made a lot of things ourselves instead of buying them. 

We unpacked gifts with great care so the paper would be as new, and fold it carefully for later use.

We also saved glass jars and used them. I would "help" my grandfather to make peaches in syrup. I was just a small kid, so I wonder how much I really helped there. My grandparents also had a machine to make tomato pulp. This was canvassed into sterylized glass bottles (also saved). So we also saved the metal caps from soft drinks, to put on the bottles.

Clothes were mended. Sometimes leather patches on knees were applied when trousers were bought brand new for kids. This prevented holes. 

We would also paint the apartment where we lived ourselves. The division of labor was reduced as much as possible, there was much time but not much work or money.

It was very important to hedge from inflation. Monthly wages were rapidly invested in buying all that month's non-perishable grocery goods. Savings were held in US dollars, which are still believed to be a safer storage of value than the uruguayan peso.

Used clothes, toys and books stayed in the family as much and as long as possible, kids wearing hand-me-downs from elder brothers or cousins. My other grandparent loved reading and regularly bought books, which where then passed to my father and to my uncle. I still have some, including Ayn Rand's "The Fountainhead".

I remember when I was 20 and worked as a clerk in a supermarket, asking for an advance on my salary (this was quite usual back then) and using it to buy dollars. By the end of the month I had already recouped the spread between buy and sell prices. This was 23 years ago - how time flies.

So there you have it: spend as little as possible, conserve capital (in the form of goods), find ways to hedge from inflation (buy early, bulk, cheap exactly as much as you need), don't hold depreciating currency.

These were the guidelines. The rest followed (or didn't! ) according to the ingenuity, means and resoucefulness of each one.

I wonder how things are going to develop this time...

Bookmark this post --- Email this post

Customs Compliance And Penalties Webinar

For those who would like to get some insight into US Customs, enforcement and compliance Customs offers a Webinar for your edification.

Bookmark this post --- Email this post

Policy Laundering

There is a technique among govt workers  in which a policy that could not see the light of day in USA is promulgated in other regimes, so many that the USA alone becomes the odd man out.  Getting other regimes to adopt a policy is easy since they are mere satrapies run by cohorts from our elite schools. Given that the US Supreme Court predilections and obligations built into various international agreements rather assure USA will eventually adopt the policies, and the technique is so common, there is a term for it: policy laundering.

A perfect example is ACTA, having to do with intellectual property rights.  If you have the fortitude to slog through the technical arguments, you'll see why it is a bad idea.  If you have the fortitude to slog through, you'll see why in spite of the principled, important, cogent, germaine, logical arguments against ACTA, it just will not matter what the experts think, ACTA is a done deal.

Places like Hong Kong will find themselves harmed adopting policies designed to lock down USA.  All we can hope is Hong Kong is just kidding... they agree to ACTA, but will never enforce it.

Bookmark this post --- Email this post

Works For Me

Watching as much as I can stomach of the hearings in New York at the New School on the Econ crash and the role of the ratings agencies, it is crystal clear that those who support our hamiltonian system do so because it works for them, and no other reason.  These ever so unremarkable people made lots of money let anyone do whatever they like, because they made money.  When making lots of money it is very easy to say:

1.  I must be smart, because I make a lot of money.

2.  This is the best system, be use I make lots of money.

3. Anyone who disagrees is stupid and just doesn't know how to make money in the best system possible.

There is absolutely no recognition that there may be some other rubric besides money that indicates value.

When all is said and done, these fine investigators will smoke out some villains and some people will go to jail.  Next, congress will pass some laws that ever more crush freedom to, and freedom from, but freedom nonetheless.  Forexample, Mish is showing a new law that congress has passed...

Bookmark this post --- Email this post