Category: Current Affairs

The Road to Socialism and Back: An Economic History of Poland, 1939–2019

For four decades during the latter half of the 20th century, Poland and its people were the subjects of a grand socio-economic experiment. Under the watchful eye of its Soviet masters, the Polish United Workers’ Party transformed the mixed economy of this nation of 35 million into a centrally planned, socialist state (albeit one with an irrepressible black market). Then, in the closing decade of the 20th century, under the leadership of Polish minister of finance Leszek Balcerowicz, the nation was transformed back into a mixed economy.

In this book, we document the results of this experiment. We show that there was a wide chasm between the lofty goals of socialist ideology and the realities of socialism as the Polish people experienced them. We also show that while the transition back from a socialist to a mixed economy was not without its own pain, it did unleash the extraordinary productive power of the Polish people, allowing their standard of living to rise at more than twice the rate of growth that prevailed during the socialist era. The experiences of the Poles, like those of so many behind the Iron Curtain, demonstrate the value of economic freedom, the immiserating consequences of its denial, and the often painful process of regaining lost freedoms.

That’s the opening to an excellent new book (pdf) from the Fraser Institute written by Boettke, Zhukov, and Mitchell. More than an economic history of Poland, this book is also a very good introduction to the economics of socialism.

What is the optimistic case for Kenya?

That is the topic of my latest Bloomberg column:

…a locale with a reasonable level of English fluency and an attractive year-round climate will get a lot of attention — and that nicely describes Kenya. Kenya also had a growth rate of about 5.5% last year, despite negative shocks to the prices of imported food and energy. Since 2004, growth rates have been in the range of 4% to 5%.

Kenya also has some geographic advantages. It has an extensive coastline on the Indian Ocean, and research suggests that landlocked countries have worse economic performance. Countries with a coast also find it easier to stay in touch with the rest of the world, and Kenya has relatively easy access to China and India, large markets and sources of capital. In the current geopolitical climate, East Africa is attracting more interest from more sources than is most of West Africa.

In terms of scale, Kenya’s population of about 57 million cannot compete with Nigeria’s 222 million. But East Africa, with almost 500 million people, has a larger population than West Africa.

And if you are looking for the case against, yes there is one:

That said, expensive energy — due in part to taxes and poor regulation — has been a growth drawback.

There are other elements of the case against Kenya. It has had difficulty attracting foreign direct investment, even compared to other African nations. Corruption, regulatory barriers to entry and political instability remain concerns and cannot be dismissed lightly.

Recommended, worth a ponder, there are further arguments at the link.

Nigeria floats its exchange rate

Nigeria has officially floated its naira currency after years of sticking with a hard peg that spooked investors and drained dollars from the economy.

The development means buyers and sellers of foreign currency in the official FX market are now allowed to quote rates they find comfortable in the FX market, as against previous practice where rates were dictated by the Central Bank of Nigeria (CBN).

The Investors & Exporters (I&E) window is now quoting a range of between N750 and N755/$, according to customers who cited emails received from their banks.

That implies a 21 percent decline in the naira compared to the previous rate of N463/$ which the Central Bank of Nigeria (CBN) is still quoting as the I&E rate on its website. However, the last time the CBN updated the rate was June 9.

Here is the full story, this is indeed big news and word on the street is that further important reforms are on the way.

Germany poll fact of the day

In Germany, the far-right party Alternative for Germany (AfD) party is gaining popularity, with a recent poll putting it in second place – ahead of Chancellor Olaf Scholz’s SPD.

A YouGov poll published on Friday (9 June) found that 20% of German voters would give their vote to the far-right AfD, making it the second-strongest party behind the CDU (28%) and ahead of Scholz’s SPD (19%)…

“We have a unique selling proposition. As opposed to everyone else, we say that sanctions don’t mean harm for Russia but for our own population,” Tino Chrupalla, co-chair of the party, told ZDF.

Do note this:

The number of asylum claims in Germany has increased by 80% between January and March 2023 compared to the same period last year, according to the Federal Office for Migration and Refugees.

And this:

The AfD, which disputes that human activity is a cause of climate change, has also tapped into concerns among some voters about the cost of the transition away from fossil fuels.

AfD leader Tino Chrupalla said more voters appreciated that the policies of the Greens, Scholz’s junior coalition partner which wants a swifter shift away from hydrocarbons, brought “economic war, inflation and de-industrialisation.”

Here is the full story.  Have a nice day…

The new public library?

This article is set in Canada, but some of these developments are more general:

Vicky Varga, a twenty-four-year veteran of Edmonton Public Library, described how the city had moved toward fully integrating social work into the activities of its main library branch. “People really do seek this out, because it’s the last truly public space, as I’m sure everybody in this room knows,” she said…

Every library branch in every city has its own specific issues, but in conversations with workers across the country, the broad strokes of the crisis are the same. Librarians say they’re seeing more people with more complex needs than ever before. In Toronto, the number of recorded “incidents,” a term which includes violent, disruptive, or threatening events, spiked from 7.16 per 100,000 visits in 2012 to 35.74 in 2021. In Edmonton, where librarians are offered training to administer naloxone, 2022 saw ninety-nine opioid poisonings across the system. On Vancouver Island, some workers went on strike for nearly two months over workplace concerns and a lack of wage growth. In a letter to library trustees, they argued that “management has refused to agree to many important proposals—including solutions to workplace violence and mental health impacts.” Library workers across the country report being attacked, spat on, threatened, sexually assaulted. They describe the emotional toll that results from not having the necessary resources to help the people who come to them, day after day. They talk about picking up the phone to call for help and realizing that nobody’s coming.

Here is the full piece by Nicholas Lune-Brown and Dorothy Leung, in The Walrus, and interesting throughout.  Via (the excellent) The Browser.

Mark Zandi on changing odds of recession

Taken from Twitter:

What recession? The consensus view that recession was virtually a slam dunk looks increasingly off base. Yes, there will eventually be one, but odds that a downturn is dead ahead are receding. There are a bunch of reasons why the economy is hanging tough. Here are my top three…

First, excess savings. Consumers couldn’t spend as they typically do during the pandemic as they were stuck at home. At the peak, excess savings amounted to 10% of GDP. Consumers have since been using the savings to supplement their purchasing power and calibrate their spending.

Second, labor hoarding. Businesses desperately want to avoid layoffs. Even before the pandemic they had big trouble finding and retaining talent. They also know that the labor shortages will be a perennial problem as the boomers are retiring and immigration is impaired.

Third, low leverage. Households and businesses have borrowed prudently, and their debt service burdens are historically light. They’ve also locked in the previously low rates. Some low income households and PE-acquired businesses have overdone it. But they are the exception.

I remain agnostic on these questions, but I would note that “conditional on inflation coming down from five percent” would be a useful qualifier for some of this discussion…

The nuclear polity that is Georgia

The first new nuclear reactor built in the United States in more than 40 years is now up and running in Waynesboro, Georgia. After more than a decade of construction and spiraling costs, Plant Vogtle Unit Three, the first of two new reactors at the site, started producing power at its full capacity in May. It’s expected to come online this month after a final round of tests.

The completion of the new reactors is a major milestone not just for the long-delayed project but for nuclear energy in the United States. The new units at Plant Vogtle were the first nuclear construction approved in decades and are the country’s only new reactors in progress.

Here is the full story.  Better than nothing, but not entirely encouraging either.  Elsewhere, transmission builds (non-nuclear) are declining

The international competition heats up

Chinese startup MiniMax, working on AI solutions similar to that of Microsoft-backed OpenAI’s ChatGPT, is close to completing a fundraising of more than $250 million that will value it at about $1.2 billion, people familiar with the matter said.

The deal comes amid a global AI buzz kicked off by ChatGPT that has spread to China, shoring up stocks in artificial intelligence firms and prompting a flurry of domestic companies, such as Alibaba (9988.HK), Huawei (HWT.UL), and Baidu (9888.HK), to announce rival products.

Here is the link.  And here is a Chinese professor from Fudan, critical of all the money being poured into LLM research in China, comparing it to Mao’s Great Leap Forward.

You have to be very critical of all sources from China, no matter what they say.  Still, in terms of expected value I know what is the correct bet here, namely that China is a current and very active competitor in this arena, even if they are behind America so far.

Then there is the open source model Falcon, which is receiving very good reviews from multiple sources, such as this:

If you don’t already know, Falcon is from…the UAE.  Get the picture?

My excellent Conversation with Seth Godin

Here is the audio, video, and transcript from a very good session.  Here is part of the episode summary:

Seth joined Tyler to discuss why direct marketing works at all, the marketing success of Trader Joe’s vs Whole Foods, why you can’t reverse engineer Taylor Swift’s success, how Seth would fix baseball, the brilliant marketing in ChatGPT’s design, the most underrated American visual artist, the problem with online education, approaching public talks as a team process, what makes him a good cook, his updated advice for aspiring young authors, how growing up in Buffalo shaped him, what he’ll work on next, and more.

Here is one excerpt:

COWEN: If you were called in as a consultant to professional baseball, what would you tell them to do to keep the game alive?

GODIN: [laughs] I am so glad I never was a consultant.

What is baseball? In most of the world, no one wants to watch one minute of baseball. Why do we want to watch baseball? Why do the songs and the Cracker Jack and the sounds matter to some people and not to others? The answer is that professional sports in any country that are beloved, are beloved because they remind us of our parents. They remind us of a different time in our lives. They are comfortable but also challenging. They let us exchange status roles in a safe way without extraordinary division.

Baseball was that for a very long time, but then things changed. One of the things that changed is that football was built for television and baseball is not. By leaning into television, which completely terraformed American society for 40 years, football advanced in a lot of ways.

Baseball is in a jam because, on one hand, like Coke and New Coke, you need to remind people of the old days. On the other hand, people have too many choices now.

And another:

COWEN: What is the detail you have become most increasingly pessimistic about?

GODIN: I think that our ability to rationalize our lazy, convenient, selfish, immoral, bad behavior is unbounded, and people will find a reason to justify the thing that they used to do because that’s how we evolved. One would hope that in the face of a real challenge or actual useful data, people would say, “Oh, I was wrong. I just changed my mind.” It’s really hard to do that.

There was a piece in The Times just the other day about the bibs that long-distance runners wear at races. There is no reason left for them to wear bibs. It’s not a big issue. Everyone should say, “Oh, yeah, great, done.” But the bib defenders coming out of the woodwork, explaining, each in their own way, why we need bibs for people who are running in races — that’s just a microcosm of the human problem, which is, culture sticks around because it’s good at sticking around. But sometimes we need to change the culture, and we should wake up and say, “This is a good day to change the culture.”

COWEN: So, we’re all bib defenders in our own special ways.

GODIN: Correct! Well said. Bib Defenders. That’s the name of the next book. Love that.

COWEN: What is, for you, the bib?

GODIN: I think that I have probably held onto this 62-year-old’s perception of content and books and thoughtful output longer than the culture wants to embrace, the same way lots of artists have held onto the album as opposed to the single. But my goal isn’t to be more popular, and so I’m really comfortable with the repercussions of what I’ve held onto.

Recommended, interesting throughout.  And here is Seth’s new book The Song of Significance: A New Manifesto for Teams.

Wheeling and Dealing: How Auto Dealers Put The Brakes on Direct Sales

Alexander Sammon attends the the annual convention of the National Automobile Dealers Association:

Now car dealers are one of the most important secular forces in American conservatism, having taken a huge swath of the political system hostage. They spent a record $7 million on federal lobbying in 2022, far more than the National Rifle Association, and $25 million in 2020 just on federal elections, mostly to Republicans. The NADA PAC kicked in another $5 million. That’s a small percentage of the operation: Dealers mainline money to state- and local-level GOPs as well. They often play an outsize role in communities, buying up local ad space, sponsoring local sports teams, and strengthening a social network that can be very useful to political campaigns. “There’s a dealer in every district, which is why their power is so diffuse. They’re not concentrated in any one place; they’re spread out everywhere, all over the country,” Crane said. Although dealers are maligned as parasites, their relationship to the GOP is pure symbiosis: Republicans need their money and networks, and dealers need politicians to protect them from repealing the laws that keep the money coming in.

The political power of dealers is why many states still prohibit car manufacturers from selling direct to the public, an absurd restriction that I have been complaining about for years. Some progress has been made but also plenty of pushback:

After years of litigation, Michigan, the birthplace of the dealership, recently agreed to let Tesla sell and service cars in-state. Half of states have loosened dealer protections more (red states, ostensibly “pro-business,” tend to have the most binding restrictions), but dealers are still making record profits. Even Florida Gov. Ron DeSantis, despite launching his presidential bid with Tesla’s Elon Musk, has raised millions from dealers and given no indication he’d veto two restrictive, dealer-sponsored bills passing through the Florida Legislature. (These bills would make it illegal for car manufacturers to set transparent prices and allow buyers to order EVs from legacy manufacturers online.)

Even “pro-business” Texas, which Elon Musk now calls home, and where Tesla and SpaceX are major employers still doesn’t allow Tesla to sell its cars direct to consumers. As a result:

Teslas made in Texas have to be shipped out of the state and then reimported across state lines to any buyers in Texas who purchase them online, one of many ridiculous workarounds born of dealer-protection laws.

Absurd.

Hat tip: Market Power.

Armin Rosen on the Saudi reforms

An excellent piece, to be read through in its entirety, here is one excerpt:

MBS is gambling that the fruits of openness and modernity can be reaped on Saudi terms, and that prosperity, stability, and a recharged, secularized sense of national purpose won’t shatter existing norms or generate dangerous civic appetites. The reforms have created a rising class of ambitious executives, entrepreneurs, and artists, and for now almost everyone seems to accept the idea of a national horizon defined by the wisdom and vision of a single family, and perhaps even a single man. His program has created an atmosphere muggy with floating potential, as the palace carries out an uncertain experiment on tens of millions of people. MBS’s subjects could be the engine and the beneficiaries of the only successful 21st-century governance project in any populous Middle Eastern state—or they could mark the disastrous limits of utopia declared from on high.

Recommended.

The debt ceiling deal

Ho hum.  Political bargaining, so what else is new?  Kicking fiscal problems down the road, so what else is new?  True permitting reform?  We’ll see how much they end up doing away with judicial review.

As I stated long ago, I don’t favor either having a debt ceiling or using such a debt ceiling for strategic purposes.  But this deal is not very different from what would have resulted from the normal appropriations process, is it?  All in all, not worth monkeying with the Constitution for, with such dubious elements as minting the coin, invoking the amendment, and so on.  The influence of Donald Trump really is spreading, isn’t it?  There may yet be a final round of drama, but the people who treated this event as the nothing burger it is were on the right track the whole way through.