Don’t Bet on China

Business Cycles, Mercantilism, Protectionism
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China is widely viewed as a “threat” to the US because of its perceived rapid and unstoppable economic growth. This is, in my view, doubly confused. First: if the premise were true, this would be good, not bad. Second: I don’t think China is in such great shape. Unfortunately.

Some free market economists think otherwise. Peter Schiff “predicts that China will overtake the U.S. in terms of Gross Domestic Product before 2020.” Jim Rogers thinks “China will likely constitute tomorrow’s most powerful nation-state.”

I’ve been working for years now for a company with factories and extensive dealings in Taiwan and China. It’s been my opinion for some time that China is a primitive basket case. Land is leased, not owned. The communist party corruption is everywhere. The Asian mentality is far different than the western one; they are less innovative, more subservient and servile, more order-following, more collectivist and less individualistic. Poverty and peasantry are rampant. Asians are far more racist and superstitious than Americans (everyone is more racist than Americans in my experience). You have to get permission for everything. There are currency controls. Contracts are not respected–they are signed because they are viewed as red tape and then they start being renegotiated the next day. And on and on.

In my view, America is, for all our faults, still, by far, the strongest and best large economy in the world. Who can match the US? Canada is too small. Japan is not quite our size and has its own problems. Europe is like an older, more kleptocratic version of the US–and is probably second best in the world. South America is a basket case of banana republics. Africa is even worse. Russia and Central Europe?–mired in pessimism and corruption and the tendrils of the wreckage of communism. Of the rest, I think India has a better chance than China, for two reasons: they speak English, and they inherited the English property rights system–unlike in China where you still have to lease land from the state for 50 years instead of buying it. And I think India is a basket case too, unlikely to improve much for many decades. So the US is and will remain preeminent, in my view–despite all our problems. (See also Jonathan Bean’s America’s Hidden Strength: Babies, Immigration; Joel Kotkin, Why America Will Still Lead the World in 2050, Reason.tv; David Brooks Relax, We’ll Be Fine (News of America’s death is greatly exaggerated. In reality, the U.S. is on the verge of a demographic, economic and social revival); and Glimmers of Hope (The fiscal future of the developed world looks bleak, but the British coalition should give us hope.) Unfortunately, this will allow our parasitical state to maintain its warfare-welfare state (see my post Hoppe on Liberal Economies and War).

An American friend of mine living in China sent me some of his thoughts, which I provide, with editing, and anonymously, below:

China is [screwed], I tell you. This place is one big pile of poo. Jim Rogers and Peter Schiff are wrong, at least about China. Jim Chanos is right! [See also Jim Rogers: China not in a bubble, Chanos couldn’t spell China; China May ‘Crash’ in Next 9 to 12 Months, Faber Says. Also note: Mark DeWeaver, who has written for the Mises Institute before, recently gave a speech about Chinese monetary policy.  There’s some interesting meat in both the audio and corresponding slides.]

…

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The Legal Labor Cartel

Political Correctness, Private Security & Law, Protectionism, The Basics
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“The truth is that legislatures and Courts have made lawyers a privileged class, and have thus given them facilities, of which they have availed themselves, for entering into combinations hostile, at least to the interests, if not to the rights, of the community – such as to keep up prices, and shut out competitors. The natural result of such combinations also is, that the mass of the members will do more or less to screen individuals from suspicion. The consequence is, that the people have imbibed an extreme jealousy towards them…. Now if the profession were thrown open to all, lawyers would no longer be a privileged class – they probably could no longer enter into combinations that would be of any avail to them, and the jealousy of the people towards them would be at an end.” Lysander Spooner, To the Members of the Legislature of Massachusetts, August 26, 1835.

Lawyers, like doctors, are part of a class of people who must join what amounts to a labor cartel in order to lawfully ply their trade. Bar associations have territories, and they drive up the price of legal services in those territories by limiting entry by service providers. Talk of the lawyer’s “professional responsibility to provide legal services to those unable to pay” stems from guilt about this anti-competitive status quo in the legal services market. Why should lawyers owe anyone relief if they didn’t first create the burden to be relieved? …

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Counterfeit Property Rights

IP Law, Protectionism, Victimless Crimes
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One of the reasons to oppose intellectual property is that it assigns partial ownership rights to real, tangible, and already-owned property to non-first-comers. For example, that copy you made of Microsoft Office, although you own the disk, you are restricted by law in how you may use this disk, e.g. installing the program, or selling it.

In some cases, IP laws assign a complete ownership, as demonstrated this week when Brooklyn District Attorney Charles Hynes obtained the permission of certain trademark owners to redistribute seized counterfeit clothing items which didn’t belong to either party on condition that their trademarks and identifying labels be removed from the articles.

What I would like is to hear an explanation for is this inconsistency– if there was a counterfeited Nike ‘swoosh’ label once attached to this sneaker, now that it has been removed, why is the sneaker still being treated in the eyes of the law as the rightful property of Nike?

Honestly, I find the concept of IP laws to be illogical in any of its various manifestations whether copyright, trademark, patent, or otherwise. This is not to say that I condone either fraud or misrepresentation, both of which can be reduced to theft– the obtainment of property without the consent of the owner. But merely producing and offering for sale an article of clothing that resembles the output of another producer doesn’t violate anyone else’s rights, even if for the sake of argument we were to concede with sloppy semantic quibbles that it “harms” the potential sales of the other party, since the other party does not enjoy a right to not have his sales diminished by competition.

This is all beside the point that in the common arrangement where counterfeit goods are offered for sale, both the buyer and seller are well aware that the goods are knock-offs, and we can safely assume that no fraud or misrepresentation has transpired.

To conclude, after being robbed suffering a coerced charitable giving, the de facto owner was made further victim to kidnapping and is now serving a seven month prison sentence. As is usually the case, existing positivist law has enshrined principles antithetical to property right in the name of property rights.

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Stop the ACTA (Anti-Counterfeiting Trade Agreement)

IP Law, Mercantilism, Protectionism
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I blogged a year ago about the “Secret intellectual property treaty [that] could profoundly change life on the Internet.” At the time, the text was still secret but it was believed that the treaty: “seeks to set forth standards for enforcing cases of alleged copyright and patent infringement.” Now, as Cory Doctorow notes in How ACTA will change the world’s internet laws, the text has been leaked. This thing is bad. America and the west have long tried to extend the reach of their mercantalist IP laws — they use the WTO to twist the arms of other countries, etc. (see, e.g., my previous posts Hatch’s “International IP Piracy Priority Watch List”; IP Imperialism (Russia, Intellectual Property , and the WTO); Russian Free Trade and Patents; Bush Wants More Jailed Citizens in Russia and China; China, India like US Patent Reform).

The ACTA is also similar to another arcane law, the Digital Millennium Copyright Act (DMCA), which, under the guise of protecting “property rights,” snuck in provisions that criminalize even the mere possession of technology that can be used to circumvent digital protection systems (see, e.g., my post TI Uses Copyright Law to Attack TI Calculator Enthusiasts). Likewise, under the guise or protecting property rights in inventions and artistic works (patent and copyright), it “seeks to provide legal authority for the surveillance of Internet file transfers and searches of personal property”. As one group notes, “ACTA goes way, way beyond the TRIPS (the copyright/patent/trademark stuff in the World Trade Organization agreement), creating an entirely new realm of liability for people who provide services on the net”. More invasion of personal liberty and property rights in the name of false, artificial property rights.

So the ACTA is like a hybrid of previous efforts: it is as abusive and insidious as the DMCA, and covers patents as well as copyrights. And it will apply worldwide. This is culmination of America’s efforts use of the WTO to extend western style IP rights worldwide. As Doctorow notes, this is “a radical rewriting of the world’s Internet laws, taking place in secret, without public input. Public input? Hell, even Members of Parliament and Congressmembers don’t get a say in this. The Obama administration’s trade rep says that the US will sign onto ACTA without Congressional debate, under an administrative decree.”

For detailed comments on the ACTA, please see the following report:

James Love, Comments on ACTA Provisions on Injunctions and Damages (pdf), KEI Research Note (Knowledge Ecology International, April 6, 2010).

[cross-posted at Mises blog]

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Net Neutrality Developments

Mercantilism, Protectionism, Technology
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net neutrality pictureIn recent years the “Net Neutrality” movement has gained steam. This is an effort by various statists, interventionists, do-gooders, meddlers, and techno-ignoramuses who seek to have the government forbid network providers (e.g. cable companies, telcos, and wireless carriers) from selectively blocking certain types of Internet use–for example, to require companies to give Web users equal access to all content, even if some of that content is clogging the network. Of course, as I noted on A Libertarian Take on Net Neutrality, the network neutrality movement is unlibertarian. There is nothing wrong with price discrimination or with charging different prices for different levels of service. As some anti-corporatist types are only too eager to point out, without state intervention the major telcos might well not have as much monopolistic power as they currently do. But it doesn’t make much sense to urge that the state engage in further intervention to fix the problem of previous state intervention. It is state intervention that is the problem.

In the latest development on this front, as reported in U.S. Court Curbs F.C.C. Authority on Web Traffic, cable company Comcast Corporation had challenged the F.C.C.’s authority to impose Net Neutrality rules. Last week, a federal appeals court ruled in Comcast’s favor, holding that F.C.C. regulators have limited power over Web traffic. As the article notes, “The decision will allow Internet service companies to block or slow specific sites and charge video sites like YouTube to deliver their content faster to users.”

Libertarians should not leap for joy, however. The court merely held that current federal statutes do not happen to give the F.C.C. quite enough authority to regulate Internet companies in this manner. They didn’t say it would be unconstitutional or even unwise. So all Congress has to do is pass a law. And they’re good at doing that.

Update: See my posts Kinsella on This Week in Law discussing IP, Net Neutrality; Against Net Neutrality; and Fernando Herrera-Gonzales’s articles Net Neutrality: Unwarranted Intervention and Opening the Internet — with an Axe.

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