George Handlery about the week that was. Illusions might be bad but the fantasy of regulation is devastating. More state, more corruption. Bad governments, their taxes and those seeking relief. Street violence and video games. Freedom and maturity. Saving the failing now implies paying for ever.
 
1. Our view of the economy is governed by three fantasies. One is the currently unfashionable illusion of eternal boom. Second is the now dominant delusion of doom. Experience tells that these visions, while harmful, express errors that are ultimately self-healing. It is the third of the illusionary prejudices about which we need to worry. It is the illusion of regulation. Those infected by this fantasy assume that the current crisis could have been prevented and can be overcome by devising new regulatory instruments. Do you suspect that the crisis came about because existing regulations have failed? In that case you will be concerned by the effect of the rules about to be imposed upon us. Of the three illusions, the regulatory one is the most dangerous because its exaggerated assumptions become institutionalized. Therefore, the fallacy’s harmful consequences can not be overcome by nature asserting itself. Politics will make the correction of the wrong regulations long and tortuous.
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2. Swiss bank secrecy, more precisely “privacy”, became a subject of negotiations between government. Even Hitler and Mussolini have not achieves this much. The issue elicits the interest of major publications. This happens at a time when government interference in the economy is growing. Confused by the crisis, the public accepts the mixing of politics and economics. The Swiss case fits into the trend. Formally, the cause is an illegal practice of UBS (the largest wealth manager). Its employees (often Americans) have advised clients on how to evade US taxes. Through the IRS the US’ government – seconded by Germany – is involved in politicizing the problem. Especially in tax matters, America is inclined to project her national laws upon foreign entities and on US citizens abroad. (The latter are subjected to burdens that no normal state imposes.) The dispute now centers around the issue whether, by violating laws that are by some accounts centuries old, Switzerland is to deliver automatically the data on all US persons. Accordingly, every US person is a suspect. The Swiss are willing to give information only when a reasonable suspicion of a crime can be proven. The unmentioned problem of the Swiss is that the UBS and Crédit Suisse are held hostage by the US/IRS. Both have many billions of global client-money invested in the States. Regardless of the outcome, count on it that in the future, such investments will be significantly curtailed.
 
3. P.S. Hardly was item 2 finished, when this emerged. Obama – responding to the whispers of Sen. Levin types – has announced that the US is “ending tax breaks for corporations that ship our jobs overseas”. Furthermore, a measure laming those who have financial dealings abroad is on its way. The idea is the kind of economic suicide that can originate in a country in whose cities it is a problem to convert hard currencies. There are many “foreign” jobs in the US as well as the other way around. What America and the world economy need least are measures that complicate trans-border business. Such bureaucratic hindrances add to the cost of transactions. Insular folks who can make their suspicion of foreign economic activities into policy and those, who regard those active in such areas as economic criminals, do not increase revenue. They apply ruinous breaks on business. If the Levins’ prevail, those who can will make a wide circle to avoid America.
 
4. The First of May, the Christmas of the Left, is behind us. On the one hand, the celebratory marches led to speeches that pandered repackaged old and failed remedies. On occasion, an honest speaker skipped the newish spin and stood by the real agenda. As always, the interesting part of May Day has been the damage caused by the “spontaneous” demonstrations following the official program. We had a lot of that, including burned cars, torched buildings, and stones and worse hurled at police. Generally, the police were instructed to take the “incoming” and to react with a restraint that did not measure up to the actions of the ideologically endorsed vandals. (One was reminded of the story about “NATO and the Somali Pirates”.) The new element in the old story is the under-age of many of those apprehended. Being a minor gives protection. Apparently, however, some of those seeking the thrill of violence without commensurate consequences confuse reality with video games.
 
5. More from the May Day circus. A TV picture. A young adult, hit by a rubber bullet, is bleeding from his mouth. He exclaims that he has never seen anything “as brutal as this”. He might be suffering from the limited experience of the spoiled and the ignorant. Obviously, Kampuchea, the Holocaust and the Gulag have skipped his attention. Just as much as the rioter-in-a-victim-role conveniently overlooked the relationship between cause and effect, prolonged attack and self-defense.
 
6. To many, freedom means that those enjoying it are freed of obligations. To the extent that this view is accepted, the values that are expressed in codes of conduct will suffer. These protect all while they allow society to function without much formal coercion. The vacuum created by atrophying values will be filled. Forces that replace through their coercion what self-regulation failed at, will do this. This suggests a rule: “No society can be freer than it is mature”.
 
7. Could it be that German political culture is inclined to allow the extremes to function as the regulators of behavior? Today the distorted concepts of the extremists are “peace” and “harmony”.
 
8. Corruption is universal. Realistic comparisons do not regard “0” as the standard. They juxtapose degrees of corruption. The evidence suggests that corruption, the misuse of power, opportunity and trust, is part of human nature. If so, the degree and the frequency of corruption is related to situations that provide opportunities and it is also influenced by the community’s attitude toward abuse. A reoccurring element is that, the further removed the disadvantaged is to the one who has an opportunity to misuse his power, the greater the probability that the temptation to exploit will prevail over moral norms. This means that the more “state,” you have (permits needed for doing whatever is natural, and bureaucratic access to the economy and its fruits) the more corruption there will be. If this is so then, the current trend to increase the state’s role in the economy is bad news.
 
9. The state’s aid to some economic actors that are threatened by the crisis of confidence might have a justification. This excludes those undertakings whose ailment, while it coincides with the crisis, is unrelated to it. Saving non-viable enterprises means that a dead horse gets a vitamin C injection. Saving what is a subject to creative destruction implies endless future subsidies. Alas, the pressure groups that represent outdated industries are politically more effective than the firms they protect are viable economically. Therefore, we have a good chance of being preoccupied with this problem in the future.
 
10. Politics might save the economy from the crisis created by its Madoffs. Even so, once the situation is stabilized, the question will be “who will save the economy from the politicians”.
 
11. A bad sign from the Near East. Instead of arresting the visiting Bashir and demonstratively ignoring the ICCs indictment, the Arab world’s summit rallied in his support. Law, obligations and reason are generally sacrificed in places where the ideology of togetherness (based on “race”, secular or traditional religion) is the cement of the community. Even if an act is unacceptable from an outsider, as an insider, by being “one of us”, such people can count of solidarity. The support given to a genocidical murderer shocks. Nevertheless, consider that Bashir appeared at a gathering of tyrants: solidarity with a colleague in the same business is not quite surprising. There is also a warning in the tolerance shown for the Chief Butcher of Darfur. If the applied solution of a “demographic problem” is accepted in Darfur’s case then, once the time is made ripe through negotiations, Israel will be next.