A Mexican Easter

Poor Mexico: "So Close To America, So Far From God."

The Easter holidays and Mexico City would not be complete without Labor protests in the Zocalo. Mexican President Calderon is the target and so is the “war on drugs” he declared in 2006 — a struggle that has so far seen more than 30,000 killed, many as a result of turf battles between the cartels.

The frustration I have is with the failure of many here in Mexico City to understand that the Obama administration has been highly sophisticated in its understanding of the complex social, economic and political problems engulfing Mexico. The administration also has a real appreciation of the American contribution to the crisis — both as the biggest market for Mexican narcotics and as the biggest exporter of guns to Mexico.

Quietly and carefully the administration has been trying to edge Calderon towards reform — of the judiciary, of money-laundering regulations, etc. It has also emphasized — again carefully and quietly — that the war on drugs must be accompanied by a real civil society and development strategy. And it has acknowledged publicly the problem of gun smuggling into Mexico from the United States, and has tried to do something about that but is hampered by American domestic politics.

Royal Wedding: A Word From Our Sponsor

The Daily Caller and the Guardian kindly published the following by Patrick Basham and myself

“Prince William and Kate Middleton’s impending nuptials are more important to the average American than to the average Briton — an unforeseen financial opportunity that, sadly, both the royal family and Prime Minister David Cameron have failed to exploit.

The announcement of the royal engagement wasn’t just news in America; it was a sensation. Americans have proudly claimed Kate as one of their own — after all, she is a distant relative of George Washington. Transatlantic affection for the monarchy is exhibited most literally by the “Harry Hunters”: young American women attending UK colleges for the sole purpose of spending their weekends frequenting Prince Harry’s favorite London hangouts.

In striking contrast, the contemporary British attitude towards the royal family is a schizophrenic mix of disdain and deference. As The Economist recently documented, although the proportion of Britons who want to abolish the monarchy has lingered around 30 percent for decades, indifference and ridicule have risen significantly. Prince Andrew hasn’t helped in that regard. Membership in the anti-monarchy group, Republic, spiked following the engagement announcement.

Ordinary people seem underwhelmed by the sumptuous celebration. Comparatively few traditional street parties have been organized despite Downing Street and several government departments feverishly urging participation. A third of local authorities have received no street party applications at all. The cold reality is that many plan to flee the UK for this particular “bread and circuses” event. Thomas Cook’s bookings for April have risen 35 percent and Ryanair’s bookings are up 65 percent for the period.

What explains this transatlantic disconnect? On the British side, austerity and straitened economic circumstances are making people feel far from ready to party. This may be a national celebration but many Britons have little to celebrate in their own lives. And some clearly feel that this costly event is being used by the establishment to distract them from the hard choices ahead.

There are three reasons why Americans are comparatively enthusiastic about the royal wedding.

First, Americans have historically exhibited an even greater interest than the British in glittering celebrity (especially celebrity drenched in centuries-old tradition).

Second, America’s deeply rancorous red-blue partisan divide has heightened many Americans’ appreciation for a non-political, party-neutral head of state, a figurehead that keeps a country united.

And, third, this particular wedding resonates with the American passion for upward social mobility. It’s hard to think of anything less American than a hereditary monarchy. But what’s particularly appealing to such an aspirational society is the idea of moving on and moving up.

In a recent TV interview, a young American woman observed about the future queen, “She’s not from a higher-placed family; that speaks to the American Dream where you can be anything you want to be.”

But very few Americans know that, in Orwellian fashion, the royal family is “paying” for the £30 million wedding out of its taxpayer-provided allowance, with taxpayers directly footing the bill for the extra policing and road closures, which will total more than £5 million. To add economic insult to injury, Downing Street invested tens of millions of pounds leveraging the wedding by promoting Britain as the tourist destination that foreigners already know it to be.

Then there’s the significant hidden economic cost to local councils and businesses of the paid public holiday the prime minister granted for the wedding. According to the CBI, the extra bank holiday will cost the economy £6 billion in lost productivity.

Nevertheless, a savvy PR move saw the couple ask well-wishers to donate among 26 favored charities in lieu of wedding gifts.

But the savviest approach would have been to seek American corporate sponsors for the wedding.

Such a modern, ethical, and financially prudent move would have saved hard-pressed taxpayers tens of millions of pounds. And, it would have unleashed an unparalleled bidding war among American multinationals for the opportunity to market to a one-billion-strong global TV audience — a pot of gold that could have financed the royal family for many years to come.

As the young couple has no qualms about their opulent lifestyle being continually and involuntarily underwritten by British taxpayers, why should a single act of voluntary patronage by wealthy American corporations cause them sleepless nights on their taxpayer-subsidized honeymoon?

Americans are overwhelmingly drawn to a real-life British soap opera that combines celebrity, heritage, and the promise of a life less ordinary. Hence, the monarchy and the government’s missed opportunity both to democratize and to economize on William and Kate’s big day.”

Jamie Dettmer is a Democracy Institute Fellow and blogs at www.jamiedettmer.com. Patrick Basham directs the Democracy Institute and is a Cato Institute adjunct scholar.




Thoughts on a Great Society

I recall my first Fleet Street Editor, the inestimable Peregrine Worsthorne, warning the re-elected Thatcher Conservatives in the mid-1980s against “bourgeois triumphalism.” For Perry there was a major risk that buoyed by their third victory over Labour, the Conservatives would be excessive and go far beyond common sense and what was acceptable to the country.

They didn’t heed his caution and the result was Tony Blair and a long period of New Labour rule.

Later in 2005, Perry argued that Thatcher’s “ideological excesses left such a bad taste in the mouth of the English people as to make Conservatism henceforth unpalatable, except as a last resort in the absence of a less dire alternative”.

There are parallels today on this side of the Atlantic.

Since last November’s congressional elections, American conservatives, and particularly those on the libertarian wing of the GOP, have adopted a swagger and a triumphalism that’s likely to swell support for Barack Obama.

Buoyed by the Tea Party presence in the GOP caucus on Capitol Hill, and by a belief that their time has come, they are offering policy solutions for the federal debt and deficit that are increasingly at odds with majority American opinion.

Paul Ryan’s budget is a case in point. To argue for tax reductions for the super-rich while at the same time advocating the end of Medicare is just a vote loser, plain and simple. The claque surrounding Ryan can’t hear the noise of disapproval coming from ordinary Americans because of the noise they’re generating.

But a Wall Street Journal poll this week illustrates what the GOP risks by following Ryan’s policy prescriptions. Eighty per cent of Americans want Medicare and Medicaid left untouched.

Listening to Rep. Ron Paul the other night on Fox’s Hannity Show one realizes how far American libertarians are moving away from the European classical liberalism they invoke as their parent. Paul maintained that he would “shrink government big enough so we don’t have to have an income tax.”

Asked by an approving Sean Hannity how infrastructure and defense would be paid for, Paul responded: “Let it be through user fees, you know, gasoline taxes for your highways.”

I am not sure how that would work for the Pentagon. Would the defense secretary be able to bill the White House? How would the Pentagon maintain military readiness in the weeks and months the White House didn’t call on the military? Or maybe the way forward for Paul – and I don’t want to put words in his mouth – is not to have a standing army at all but be able to call up state militias when the nation needs to be defended.

And I am not sure I am so wrong about how Paul would respond. Ultimately what is being argued for is a turning of the clock back to the buggy and pony days of the Founding Fathers.

That is just unrealistic and anti-progress.

What Paul and fellow American libertarians at, say, the Cato Institute, appear now to advocate is not limited government but virtually no government. And that is not what their intellectual heroes wanted at all. It is a distortion of classical liberalism.

Take Adam Smith, for example. It is not the case that he was arguing for no government. Nor is it even the case that he thought government should just limit itself to defending the realm, protecting private property, maintaining law and order and administering the courts.

He saw a much wider role for government.

As retired economics professor Gavin Kennedy has pointed out, Smith was not a laissez-faire ideologue.

“There were hundreds of miles of inter-city roads in need of construction and repair; scores of harbours that needed to be built and dredged; thousands of bridges in need of construction; hundreds of towns that need to be paved and have street lighting in place; thousands of ‘little school’ constructed and staffed with state-registered teachers; scores of palliative care hospitals established for those afflicted with ‘loathsome diseases’; scores of depots for stamping clothes with government quality marks; a network of post-offices established and organised; and likewise for all the other activities that Smith envisaged should be funded and managed by the state,” he writes.

Kennedy in his excellent blog of March 4th 2010, lists government intervention and actions Smith approves of in his main work, Wealth Of Nations:

“• the Navigation Acts, blessed by Smith under the assertion that ‘defence, however, is of much more importance than opulence’ (WN464);

• Sterling marks on plate and stamps on linen and woollen cloth (WN138–9);

• enforcement of contracts by a system of justice (WN720);

• wages to be paid in money, not goods;

• regulations of paper money in banking (WN437);

• obligations to build party walls to prevent the spread of fire (WN324);

• rights of farmers to send farm produce to the best market (except ‘only in the most urgent necessity’) (WN539);

• ‘Premiums and other encouragements to advance the linen and woollen industries’ (TMS185);

• ‘Police’, or preservation of the ‘cleanliness of roads, streets, and to prevent the bad effects of corruption and putrifying substances’;

• ensuring the ‘cheapness or plenty [of provisions]’ (LJ6; 331);

• patrols by town guards and fire fighters to watch for hazardous accidents (LJ331–2);

• erecting and maintaining certain public works and public institutions intended to facilitate commerce (roads, bridges, canals and harbours) (WN723);

• coinage and the mint (WN478; 1724);

• post office (WN724);

• regulation of institutions, such as company structures (joint- stock companies, co-partneries, regulated companies and so on) (WN731–58);

• temporary monopolies, including copyright and patents, of fixed duration (WN754);

• education of youth (‘village schools’, curriculum design and so on) (WN758–89);

• education of people of all ages (tythes or land tax) (WN788);

• encouragement of ‘the frequency and gaiety of publick diversions’(WN796);

• the prevention of ‘leprosy or any other loathsome and offensive disease’ from spreading among the population (WN787–88);

• encouragement of martial exercises (WN786);

• registration of mortgages for land, houses and boats over two tons (WN861, 863);

• government restrictions on interest for borrowing (usury laws) to overcome investor ‘stupidity’ (WN356–7);

• laws against banks issuing low-denomination promissory notes (WN324);

• natural liberty may be breached if individuals ‘endanger the security of the whole society’ (WN324);

• limiting ‘free exportation of corn’ only ‘in cases of the most urgent necessity’ (‘dearth’ turning into ‘famine’) (WN539); and

• moderate export taxes on wool exports for government revenue (WN879).

Yes, Smith quite clearly would have agreed with government regulation of the banks and hedge funds and mutual funds, etc to protect ordinary investors.

Medicare? Medicaid? How about “the prevention of ‘leprosy or any other loathsome and offensive disease’ from spreading among the population.”

Or how about the federal government being involved in education – something Cato and Paul have argued against. Well, yes, there it is — “education of people of all ages.”

It isn’t just Gavin Kennedy who dismissed the idea that Smith was a doctrinaire advocate of laissez-faire. Jacob Viner, one of the founding economists of the Chicago School, a mentor of Milton Friedman, makes the same points.

He notes among other things Smith’s support for “erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.”

A great society – that is what Americans want.



From Chasing Headlines To Squelching Them

A perusal of some of today’s headlines:

From Chasing Headlines to Squelching Them: BBC Presenter Andrew Marr admits he gagged his fellow journalists – where now for super-injunctions and High Court hush-hush orders?

How Would That Work? Tea Party favorite Ron Paul believes the Pentagon could be paid for through user-fees!

The Great Wall of China: “Whoever is elected President of the United States next year will be the last American to preside over the world’s largest economy.”

Barbour Drops Out:  Does That Take Race Out Of The Race?

Gas Prices: Boehner says it could lose Obama the election.






Iceland Spurns Rule of Law

Tea Party-inclined U.S. commentators have applauded Icelanders for their referendum decision this week to reject the latest plan to repay the UK and Netherlands some 4 billion euros that were lost by British and Dutch customers of Iceland’s banks when the country’s banking system collapsed in 2008.

Iceland’s Parliament backed the deal, but the country’s populist President, Olafur Ragnar Grimsson, refused to sign off on it – hence the referendum.

As far as some conservative commentators here see it, this all comes down to a rejection of the plutocrats and fat-cat bankers. Hurrah for the people!

But this isn’t about a bailout of Iceland’s bankers. It is about the rule of law, contractual obligations and treaty agreements voluntarily entered into by Iceland.

Sure the British Labour government back in 2008 behaved badly and foolishly. Then UK Chancellor Darling and his boss Gordon Brown were particularly bumptious in their invoking of anti-terrorism legislation to seize the remaining assets in the UK of the Icelandic banks.

They thought they could intimidate Iceland. Quite the reverse happened.

Darling and Brown were, of course, covering up their own incompetence and the failings of the UK Financial Savings Authority to act much more quickly. It had been known for months that Iceland’s banks were over-extended and ripe for a crash. The interest rates they were offering depositers in Icelandic banks in the UK and the Netherlands and elsewhere in Europe increasingly looked suspicious.

The plain fact is that Brown and Darling should have acted sooner – as the Germans did – in seizing assets. They had other legislation on the books to do this without using anti-terrorism legislation.

By the time they acted it was too late. Money was shifted bank to Iceland — admittedly not enough to cover the losses of British customers.

Even so, Iceland would seem to be in clear breach of their treaty obligations under the EEA deposit insurance rules they signed on to that require signatories to guarantee at least the first €20,000 of a deposit.

The deposit insurance guarantee is regulated by European Union Directive 94/19/EC and was incorporated into EEA law.

Iceland even adopted the directive as part of national law in 1999.

The British and Dutch are right in their reading of the EEA law.

Iceland claims the directive was never meant to be used to cover systemic failure. But there is no mention in the EEA legislation — or Iceland’s for that matter — concerning systemic failure.

Using a referendum to decide on whether to observe legal and treaty obligations is absurd and demagogic. And it is an awful precedent that civilized nations would do better to avoid.

Dislike of bankers and the whole sub-prime mess shouldn’t lead people to be cavalier about the rule of law.


Old San Juan

I am enjoying wonderful old San Juan and have loaded some pictures below. According to the last US census, 350,000 Puerto Ricans have left their enchanting island in the past few years. Such a shame but then the financial crash has been particularly harsh on the island’s economy.

Puerto Ricans didn’t have a sub-prime problem of their own but suffered fallout from America’s crash. And, of course, they had their own property madness with absurd prices and over-development of new homes. Apparently, San Juan alone has 20,000 finished but unsold new units.

Prices have dropped by about half but my island banker friends tell me that they will have to drop further — at least by another 20 percent before the bottom of the market is reached. That will take about another 12 months, they say. Auctions have started but there is still a lack of realism by the owners, who are placing too high reserves on their properties.

Anyway…here are some pics from the Gallery Inn in old San Juan. An excellent place to rest, enjoy good food and wine and conversation and enjoy tranquil surroundings.




Trump and the English Language

For those of us who miss having a President able to mangle and abuse the English language with aplomb because there is no Bush in the White House, the choice is obvious. There is, of course, Donald Trump, who displays his dexterity with the English language in an angry letter to the New York Times to complain about the coverage he gets from one of his pet peeves, columnist Gail Collins. Yup, that’s the one he says has a “face of a dog.”

He wrote: “Even before Gail Collins was with the New York Times, she has written nasty and derogatory articles about me. Actually, I have great respect for Ms. Collins in that she has survived so long with so little talent. Her storytelling ability and word usage (coming from me, who has written many bestsellers), is not at a very high level. More importantly, her facts are wrong!”