Life, Liberty & The Pursuit of Happiness

China Goes Brazilian

by AW

John Lee, author of Will China Fail? writes in his article Is China Really An East Asian Success Story

McKinsey & Co suggested that the average Total Factor Productivity of large state-owned and state-controlled industrial firms was half that of privately owned firms. Bear in mind that the 152 centrally managed state-owned-enterprises or SOEs are the most efficient of the state-owned and state-controlled entities. Even then, 80% of profits from all centrally managed SOEs come from fewer than a dozen firms such as China Mobile, Sinopec, and China National Petroleum Corporation—all operating in virtual monopoly environments.

In other words, the vast majority of even the centrally managed SOEs, despite easy credit and protected environments, are poor performers. Most of the approximately 120,000 provincial state-owned or state-controlled enterprises and collectives perform even worse. To put the situation in perspective, China’s overall use of capital is twice as inefficient as India’s when measured in terms of capital inputs used to produce additional output.

The absolute size of China means that even if its economy falters, China will continue to be a major presence in the region. However, given the weaknesses in its economic strategy and civil society, we need to consider the possibility that China is becoming more like an unbalanced South American giant such as Brazil than an East Asian success story such as Taiwan and South Korea.

A Lynch Mob! ... and the disengagement of private enterprise

by Rakinder Grover

A good article by David R. Kotok in The Big Picture compares the recent action in the House of Representatives with that of a lynch mob.  Besides the issues of the violation of the rule of law, the abrogation of contracts and property rights, that have been raised by some over the last few days, he also highlights the real and immediate risk of businesses becoming extremely cautious.  Careful, lest their profit seeking activity attract the ire of a populist lynch mob, private enterprise is likely to try and stay as far as it can from government. With the expanding scope of government, that is becoming increasingly harder to do, so the risk translates to a retrenchment of private enterprise unsure of the rules, risks and rewards.  This does not portend well for economic recovery, innovation and freedom in general.

Self Ownership - A Novel Idea?

by Anisha Kahai

Why is the simple philosophy of Liberty so hard for so many people to get? Isn't it the most natural, logical way to think? Here is an elegant attempt at making these ideas accessible.

Ascendancy of Marxism?

by Rakinder Grover

Karl Marx's Das Kapital has had unusually high sales this year, reports the BBC.  The impending fall of capitalism?

India's "Kelo" Imperils Private Property Rights

by Anurag Wadehra

The Indian Supreme Court recently dismissed a complaint against the local state government  of Andhra Pradesh for acquiring land for a private corporation [Andhra Pradesh Infrastructure Investment Corp.]. Echoing the alarming Kelo ruling of the U.S. Supreme Court, the Indian counterpart ruled that any project which brings foreign exchange and creates employment is for “public purpose”. This opens the door for more forceful land acquisitions by the Indian government often in cahoots with the large corporations.

While the Indian left has never been one to champion the sanctity of private property, this ruling will clearly empower them to slow globalization and industrialization. They only have to point to the extortion tactics of the industrialists who will now get the government to do their bidding. Instead these corporations should be buying the private property for their use directly from the current owners at market prices . The conflict behind this false dichotomy of "Farmer versus Factory" has now been legalized. Expect more public agitation in the years to come.

Fortunately, there are a few who see this issue clearly and understand its import. Here is an opinion in a leading Indian newspaper (Mint WSJ) that nails the issue:

A judge is not a socialist planner—he or she is not supposed to evaluate costs and benefits of a project, but to administer “rule of law” so that citizens’ legitimate expectations are met. Such a legal system was the foundation of the West’s rapid economic growth; India deserves nothing less.

Keeping the Web free from the FCC

by Rakinder Grover

L. Gordon Crovitz's editorial in the WSJ last week warns of the law of unintended consequences potentially playing out in the current attempts by Internet activists to keep the Web free. The FCC ruled against Comcast a few days ago and is now regulating how the company manages traffic on its network. Crovitz gives the example of regulation of the railway industry in the late 19th century and says that the recent ruling suggests that the FCC sees the Web as a "common carrier", a phrase used to justify government regulation of industries. 

With regulation comes micromanagement, higher prices and the stifling of creativity and innovation.  When applied to the Internet it could also mean limiting "speech" and the flow of ideas.  Proponents of "net neutrality" and free access to the Web should think about how that sounds.

Excerpts from the editorial:

...the Web needs more investment to keep capacity growing faster than Web developers find ways to use it. This is harder as large-bandwidth movies and music migrate online. It will be harder still if potential investors conclude that pricing and network management will be regulated by anything other than supply and demand.

Government's role on the Web is to ensure more competition and more consumer choice, not less competition and diminished consumer choice by turning the Web into a regulated industry. The Internet has become one of the most powerful innovations of our time, in part because it hasn't been burdened by government intervention. Those of us who want to keep the Web free should remember that the best way to keep an industry free is simply to keep it free.

Deservedly ours!

by Reena Kapoor

By now most of you (in California) know that Prop 98 lost and Prop 99 won. See Anurag's excellent post below for analysis of why this is such a terrible outcome.  Prop 98 had issues and perhaps in some ways it's understandable why it lost. For one it latched a rent control phase-out on to itself.  While rent control is a terrible idea and should be abolished (not only is it a slap on private property rights, it only serves to create greater shortages), politically it became the millstone that sank this proposition. 

On the other hand Prop 99 won and that is truly alarming. By voting for it the people of CA have played straight into the hands of the government & rich developer nexus that is responsible for much eminent domain abuse. In CA now you can be the owner of a building that stands in the way of some redevelopment scheme and the developer and the government of CA can force you out at anytime - against your will and without just compensation. 

One other terrible consequence of eminent domain abuse is that it disproportionately affects poor and lower middle class neighbourhoods for several reasons i) developers don't live there ii) that's where "gentrification" projects are most likely to happen, iii) lower cost of land ensures larger profit margins for developers iv) revenue (read: taxes) paid into goverment coffers from these areas is augmented significantly and finally v) poorer property owners cannot afford expensive lawyers and negotiators to fight on their behalf.  Note that I am not against "gentrification" at all as long as there is no property rights abuse and people who own the land are justly compensated at market rates for their property.  

A couple of pieces of data I would like to see are i) how much money are developers feeding into the campaigns & coffers of politicians who supported Prop 99?  ii) what is the differential between what developers pay for property under threat of an eminent domain taking vs. market rate?

George Bernard Shaw once said, "Democracy is a device that insures we shall be governed no better than we deserve" and that's very true in the case of CA.  Although I suspect this quote applies to dictatorships too (how did they get there in the first place? after all Hitler was voted into power by his people, but that's for another day). In the meantime, I am going to ponder that quote as I tolerate the indistinguishable rants of Messrs. Obama and McCain until November. 

Drew Carey on Eminent Domain

by Reena Kapoor

Anurag's excellent post on CA Prop 98 and 99 on eminent domain abuse (the latter prop) generated a few comments and led me to this excellent video on Reason TV by Drew Carey.  Watch the video -- and lots more from Drew Carey.

Eminent Domain Double Speak: CA Prop 98 vs. 99

by Anurag Wadehra

The shrilling consequence of California-style direct democracy is that the propositions on the ballet are becoming increasingly obfuscated, with advocates for each prop trying to sugarcoat its words to attract as many flies as possible.

 

So, the pitch goes: all of you, who want to protect private property, raise your hand and vote to stop the abuse of eminent domain (or “takings”) power of the government. Now, for the question: will the real eminent domain reform prop please stand up? If you think you can spot the difference between the two propositions on the ballot by simply reading them, good luck. I did and my head hurt from the doublespeak.

 

Prop 98 claims – Vote to protect all property rights. While we are at it, we will phase out rent control.

 

Prop 99 claims – No, we are the ones who will stop government abuse of eminent domain.  Prop 98 is a scheme by landlords.

 

Here is a simple rule I follow when I can’t understand the political doublespeak: I identify who is speaking rather than what they are saying.  Then, by ignoring the words, I just look for what the folks seek to gain with their rhetoric . 

 

So, who are the supporters of Prop 98? The property rights organizations, tax payer groups, farm owners and small business owners. People whose property is the most likely target of abuse by the eminent domain clause – in a word, the landlords!

 

And, who is behind Prop 99? Governor Arnold Schwarzenegger, both State Senators, AARP, League of Women Voters of California, California Teachers Association, National Wildlife Federation, Renter Advocates, Labor Unions, every shade of consumer advocacy, civil and human rights that don’t normally agree on the issues - all are fierce in their opposition to Proposition 98. What is the common aim shared by them? 

 

They are all united in their belief that the “landlords” or the property owners should be defeated. Whatever the method, the property owners should be controlled, cajoled, subdued through direct action of the government.

 

Hang on! Wasn’t the whole point of proper eminent domain to protect the property owners from the abusive takings by the government? So, ironically, the supporters of Prop 99 ARE the government and their cabal from the left and they are going after the property owners in the name of stopping government abuse. Fox running the hen house!

 

This is the naked power of direct democratic action. Stripped of doublespeak, supporters of Prop 99 are saying: We, the government, propose to defeat the property owners who are defending against improper “taking” of their property by us (the government), in the very name of stopping government abuse of property takings (eminent domain)! We are stealing from you so others might not steal from you. We are doing this after all to stop the thieves.

 

The most egregious power play is “the poison pill” provision of Prop 99 that will nullify Prop 98 even if it is passed, as long as Prop 99 gets more votes.  Several other blogs have analyzed these propositions in depth in light of stated intent versus real impact these would have. However, the most interesting and thorough report of Californian eminent domain abuse is by the Castle Coalition, a project of Institute of Justice. It describes the powerful nexus between the goverment and the redevelopment machinery that abusively declares a swath of private land "blighted". Disarmed legally, the private property owners are then left with no choice but to sell to the developers.

 

So, if you haven’t guessed, my recommendation is say Yes on Prop 98, No on Prop 99