Club Troppo

Why "shouldn’t we look forward to a freer, more egalitarian world of tomorrow in which people are allowed to live where they want?" asks Matt Yglesias. If neoliberalism is about removing all barriers to market transactions then removing restrictions to migration should be top of the list.

According to Michael Clemens, restrictions on emigration from poor countries to rich countries is one of the greatest distortions to the global economy. Clemson suggests that the gains from the emigration of less that five per cent of the population of poor countries would exceed those from removing all policy barriers to the movement of goods and capital.

In a recent piece for the Drum, Jeff Sparrow wrote about the tensions between neoliberalism and conservatism. In rich countries, immigration is one of the major sources of tension. Conservatives worry that immigration will undermine social norms. Migrants will bring their own moral codes and will demand that the host country’s laws and institutions respect them. Conservatives fear that the difference between right and wrong will increasingly be seen as a matter of opinion. And without a strong moral framework to keep unruly passions in check, social order will break down.

There’s also resistance from the left. As a commenter on Yglesias’ blog put it: "This call for free immigration only serves to lower the standard of living developed countries, increased immigration only serves to depress wages, dilute union membership and strain the social safety net."

But even if that is true, the comment expresses a shocking disregard for the welfare of some of the world’s most disadvantaged people. According to Clemens, migration is one of the most effective ways of improving the welfare of people in the world’s poorest nations. On the issue of Hati he writes:

… migration and remittances have been responsible for almost all of the poverty reduction that has happened in the island country over the past few decades. They have done enormously more good than any policy intended to reduce poverty inside Haiti during that time. Any poverty-reduction strategy for Haiti going forward that does not include what has been Haitians’ most successful poverty-reduction strategy to date is not a serious one.

It’s not just the left who see a tension between freer migration and the welfare state. In 2004 Britain’s Telegraph declared: "the fundamentals of the immigration issue are straightforward. Milton Friedman, as is his habit, summed the whole problem up years ago, in just 10 words: ‘You cannot simultaneously have free immigration and a welfare state’."

The Telegraph’s solution is to allow migrants to come, but deny them access to welfare benefits. But carried to its logical conclusion, that might lead to a kind of welfare feudalism where migrants end up paying for the generous welfare entitlements of existing inhabitants of the host country. And that’s a debate we had here at Troppo a few years ago.

Ayn Rand’s 1957 novel Atlas Shrugged is so popular even Angus & Robertson stock it. And now after years of rumours, it’s finally become a movie. That’s odd because it’s longer than Tolstoy’s War and Peace and climaxes with a philosophical speech that runs for 70 pages. Most critics despise it — as Jason Steger told the ABC First Tuesday Book Club: "The writing is unbelievably repetitive, tedious, banal. The ideas in it are crass".

Somehow, the global financial crisis triggered a resurgence in sales of the novel. Nobody knows how many people are actually reading the book, but fans clearly think it’s relevant to the problems of today.

What’s weird about this is that Rand’s philosophy is a kind of inverted Marxism. Without an understanding of Marx, it’s impossible to understand what Rand is on about. In a world where even China’s communist party has converted to free market economics, it’s odd to read a book by a free market evangelist who takes Marx so seriously.

Marx argued that labour was the source of all value. "Capital is dead labour," he insisted. Dead labour "that, vampire-like, only lives by sucking living labour, and lives the more, the more labour it sucks." It is labour that creates the capitalist’s machines and once created, the machines drain work of its creativity, skill and purpose.

But for Rand, it is workers who feed off capital. Productivity increases when scientists, inventors and engineers develop new technologies. As her fictional her John Galt puts it: "The machine, the frozen form of a living intelligence, is the power that expands the potential of your life by raising the productivity of your time." Without the benefit of this technology, ordinary labourers would either starve or be forced to live like medieval peasants. As Galt says: "The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all of their brains."

Atlas Shrugged is about what happens when the creative minority go on strike.

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Strange things happen when you check the links on your site. Proceeding from a nice statement of classical liberal principles to the Mont Pelerin Society we find The Winners of the 2010 Hayek Essay Contest.

And the winner is…Toby Evans of Australia.

Whoever he is, you can probably meet him at the Mont Pelerin Conference in Sydney next month because part of the prize is a ticket to the event. This year the international guests will include Peter Boettke of  The Austrian Economists, now Coordination Problem and Terence Kealey ($4 well spent). 

Some things seem to need no explanation, but are not obvious at all on reflection and, if you wonder about them, suggest something of interest about the economic system. Consider the question of why the informal economy is so small, leading to the question of how much more productive the formal economy must be than the informal economy to make sense of how little informal economic activityy there is. See over the fold for the full argument.
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George Soros picked up the idea of  the open society from Karl Popper at the London School of  Economics and he spent a great deal of money promoting the idea through Open Society Institutes in Eastern Europe.

Lately he has moved on to target market fundamantalism as the great threat to human welfare and he is backing this with real money to set up another Institute to address the  issue. This is  the text of one of his talks in a recent series delivered in Budapest.

I define market fundamentalism as the undue extension of market values to other spheres of social life, notably politics. Economic theory claims that in conditions of general equilibrium, the invisible hand assures the optimum allocation of resources. This means that people pursuing their self-interest are indirectly also serving the public interest. It gives self-interest and the profit motive a moral imprimatur which allows them to replace virtues like honesty, integrity, and concern for others.

I have got a problem with the way that so-called market fundamentalism is depicted by critics like Soros and Kevin Rudd. I think they have not laid a glove on classical liberalism which includes a moral framework and a legal framework as well to limit the damage that people may do if they have no regard to the consequences of their actions.

As for the decline of  public morality which Soros attributes to the rise of market fundamantalism, this can just we well be attributed to the rise of Big Government, plus  the kind of conservatism that Hayek deplored in his famous  piece “Why I am not a conservative”, add the welfare state mentality (and the unhelpful concept of social justice) and the activities of the radical adversary culture.

Club 1:Azerbaijan, Bangladesh, Cameroon, China, Cuba, Djibouti, Egypt, Indonesia, Jordan, Malaysia, Mali, Nicaragua, Nigeria, Pakistan, Philippines, Qatar, Russian Federation, Saudi Arabia, Senegal, South Africa, Sri Lanka.
Club 2:Bolivia, Brazil, Gabon, Ghana, Guatemala, India, Japan, Madagascar, Mauritius, Mexico, Peru, Republic of Korea, Uruguay, Zambia
Club 3:Canada, France, Germany, Italy, Netherlands, Romania, Slovenia, Switzerland, Ukraine, United Kingdom of Great Britain and Northern Ireland.

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Interesting to see that the ACT party , led by Rodney Hyde, has a slice of the action in New Zealand. The party is described as the most free market party to have seats in Parliament anywhere in the world. When I ran into Rodney Hide at the Mont Pelerin conference in Christchurch 1989 he had some hair on his head and he was just starting to read Human Action the magnus opus of von Mises. He was a determined man so he probably read right through to the end. Good luck! Good to see that Roger Douglas is on the team as well.

What shape is the income distribution of Andrew Leigh’s dreams? Even he doesn’t know. "I don’t have a strong sense of what the right level of inequality is", he writes. "Indeed, I’m not even sure I have the right intellectual framework for answering the question."

The question is Andrew Norton’s. In the comments threat of recent post on ‘progressive fusionism’ he writes:

…‘progressives’ tend to think that there is a correct distribution of resources that can be decided in advance. However, in practice they tend to be very vague about what this correct distribution would actually look like. Andrew Leigh, for example, has written much about inequality of income, always with the assumption that less inequality is the correct outcome, but never saying what level of inequality would satisfy him.

So how should a ‘progressive fusionist‘ answer the question? The Cato Institute’s Will Wilkinson suggests that a new alliance of progressives and classical liberals might combine John Rawls’ ideas about justice with Friedrich Hayek’s ideas about markets. From this perspective, it’s not possible to decide on a correct distribution in advance. That’s because the question isn’t a purely philosophical one. On its own, Rawls’ theory doesn’t tell you what shape the income distribution should be.

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If you’ve ever been quoted out of context by journalist you’ll know what it’s like to be a fictional character. As a therapist to troubled inhabitants of fictional works, I see what happens when authors abuse characters who are often finer human beings than themselves.

The intelligent and tough-minded Mr Gradgrind is a typical example. Most of you know him only through the confused and sentimental writing of Mr Charles Dickens. In Hard Times, the hapless Mr Gradgrind can hardly open his mouth without inviting some sarcastic commentary from the author. But is Mr Gradgrind able to take the same liberties with Mr Dickens? If only.

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Bad news for me, as seen on Toothpaste for Dinner: