"End lending altogether" - Waldman

I've been wondering why we shouldn't bust our criminal banks immediately and replace them with a system that simply transfers money. For a half-serious proposal to end lending altogether, see Naked Capitalism on Steve Waldman.

Evolution Inaction

Some time ago, on this forum, Sackerson discussed the disdain that the ancient Greek philosophers had for those who actually made things, dismissing them as 'artisans', and noted that this attitude appeared to be alive and well in the UK, where engineers are treated much worse than their counterparts in Germany.

As early as 1959, C.P.Snow noted in 'The Two Cultures' that engineers and scientists were not considered 'real' academics at universities. That attitude is alive and well still, and the ranks of academic administrations are full of professors of education, philosophy and psychology.

The recent bailouts in the US add another data point. Wall Street, which produces nothing, was given over $350 billion with no conditions, yet the auto industry was raked over the coals for asking for $25 billion in loans.

I don't think that it is a coincidence that the amazing US Constitution was written by men who were not only were versed in the classics, but knew the science and mathematics of their day.

It is a fact that most of the ruling elite in China have engineering degrees, as do many of the business leaders in Japan. The CEO's of BMW and Volkswagon have always been doctors of engineering.

I am convinced that one of the reasons for our current problems is that our social and political structures have not adapted to the Scientific and Industrial Revolutions. While living in imagination may be more fun than being constrained by reality, we need leaders who can make the hard decisions.

A hand hovers over the chain

Marc Sobel:

Do I understand the net of this posting to be that the US is much more vulnerable to a quick run on the debt, i.e. being mainly financed by short term debt which constantly has to be rolled over ?

Brad Setser:

Yes, that risk is rising...

Read the whole thing here.

Taxation is inflationary, not deflationary

I've often wondered whether that's the case - now the Mogambo Guru says so. If taxes cut our take-home income, we insist on more income to make up for it.

Jealousy

The WSJ has published a list of the 200 best jobs (htp: Paddington). This should stimulate about 5 of the Seven Deadly Sins. Some surprises - e.g. a teaching assistant is 21 places above a teacher - though I do know a teacher who gave up to become an assistant. Find where you are in the pecking order - happy seething!

01. Mathematician
02. Actuary
03. Statistician
04. Biologist
05. Software Engineer
06. Computer Systems Analyst
07. Historian
08. Sociologist
09. Industrial Designer
10. Accountant
11. Economist
12. Philosopher
13. Physicist
14. Parole Officer
15. Meteorologist
16. Medical Laboratory Technician
17. Paralegal Assistant
18. Computer Programmer
19. Motion Picture Editor
20. Astronomer
21. Petroleum Engineer
22. Insurance Underwriter
23. Web Developer
24. Physiologist
25. Bank Officer
26. Architectural Drafter
27. Broadcast Technician
28. Stenographer/Court Reporter
29. Medical Secretary
30. Geologist
31. Publication Editor
32. Vocational Counselor
33. Aerospace Engineer
34. Jeweler
35. Dental Laboratory Technician
36. Electrical Technician
37. Musical Instrument Repairer
38. Audiologist
39. Bookkeeper
40. Anthropologist
41. Nuclear Engineer
42. Medical Records Technician
43. Librarian
44. Market Research Analyst
45. Dental Hygienist
46. Purchasing Agent
47. Set Designer
48. School Principal
49. Industrial Engineer
50. Medical Technologist
51. Archeologist
52. Tax Examiner/Collector
53. Dietitian
54. Typist/Word Processor
55. Chiropractor
56. Hotel Manager
57. Chemist
58. Personnel Recruiter
59. Psychologist
60. Technical Writer
61. Occupational Therapist
62. Electrical Engineer
63. Optometrist
64. Speech Pathologist
65. Financial Planner
66. Museum Curator
67. Zoologist
68. Pharmacist
69. Judge (Federal)
70. Clergy
71. Civil Engineer
72. Office Machine Repairer
73. Social Worker
74. Mechanical Engineer
75. Newscaster
76. Piano Tuner
77. Industrial Machine Repairer
78. Flight Attendant
79. Advertising Account Executive
80. Artist (Fine Art)
81. Telephone Installer/Repairer
82. Attorney
83. Bookbinder
84. Stockbroker
85. Communications Equipment Mechanic
86. Appliance Repairer
87. Fashion Designer
88. Corporate Executive (Senior)
89. Occupational Safety/Health Inspector
90. Photographic Process Worker
91. Podiatrist
92. Optician
93. Author
94. Cosmetologist
95. Computer Service Technician
96. Insurance Agent
97. Compositor/Typesetter
98. Engineering Technician
99. Architect
100. Psychiatrist
101. Dentist
102. Agricultural Scientist
103. Orthodontist
104. Automobile Assembler
105. Barber
106. Teacher's Aide
107. Bank Teller
108. Disc Jockey
109. Construction Foreman
110. Cashier
111. Physical Therapist
112. Public Relations Executive
113. Precision Assembler
114. Receptionist
115. Telephone Operator
116. Airplane Pilot
117. Conservationist
118. Sewage Plant Operator
119. Railroad Conductor
120. Sales Representative (Wholesale)
121. Real Estate Agent
122. Shoe Maker/Repairer
123. Veterinarian
124. Forklift Operator
125. Photographer
126. Vending Machine Repairer
127. Teacher
128. Buyer
129. Electrical Equipment Repairer
130. Shipping/Receiving Clerk
131. Recreation Worker
132. Furniture Upholsterer
133. Advertising Salesperson
134. Construction Machinery Operator
135. Respiratory Therapist
136. Farmer
137. Surveyor
138. Heating/Refrigeration Mechanic
139. Tool-And-Die Maker
140. Reporter (Newspaper)
141. Janitor
142. Physician (General Practice)
143. Nurse (Registered)
144. Plumber
145. Carpet/Tile Installer
146. Physician Assistant
147. Electrician
148. Dressmaker
149. Guard
150. Highway Patrol Officer
151. Drill-Press Operator
152. Travel Agent
153. Automobile Body Repairer
154. Waiter/Waitress
155. Machine Tool Operator
156. Surgeon
157. Aircraft Mechanic
158. Truck Driver
159. Salesperson (Retail)
160. Glazier
161. Choreographer
162. Chauffeur
163. Bartender
164. Undertaker
165. Machinist
166. Bus Driver
167. Photojournalist
168. Correction Officer
169. Maid
170. Actor
171. Drywall Applicator/Finisher
172. Plasterer
173. Nurse's Aide
174. Police Officer
175. Stevedore
176. Carpenter
177. Stationary Engineer
178. Dishwasher
179. Meter Reader
180. Bricklayer
181. Firefighter
182. Child Care Worker
183. Painter
184. Nurse (Licensed Practical)
185. Nuclear Decontamination Technician
186. Butcher
187. Automobile Mechanic
188. Sheet Metal Worker
189. Mail Carrier
190. Construction Worker (Laborer)
191. Ironworker
192. Roustabout
193. Welder
194. Garbage Collector
195. Roofer
196. Emergency Medical Technician
197. Seaman
198. Taxi Driver
199. Dairy Farmer
200. Lumberjack

Under the floorboards

The Contrarian Investor reports that the Chinese will have difficulty stimulating demand within their own country, if the Western buying spree stalls. Poverty, compulsive saving by those who can, and stacks of cash hidden under corrupt officials' floors mean that helicopters filled with banknotes won't tempt the population to get out and blow their wads.

In-Equitable treatment

Victims of Equitable Life are to be paid off by the taxpayer, says the FT.

Equitable Life ran a with-profits fund, a form of collective investment that only goes up (as long as you maintain it to the end of the agreed term). Once awarded, bonuses on with-profits funds cannot be taken away. EL's undoing was that, like some other companies, they dragged in extra pension business a long time ago on the selling point of guaranteeing (in their case) a 12% annuity rate when the plans matured. That is, for every £100 in the fund, the life time income would be £12 per year.

When we moved from a high inflation/high interest environment to low/low, this promise became a ticking time bomb. When annuity rates generally have dropped to 6% or less, you need to double the fund to create the same income. So since there wasn't enough in the kitty, EL had either to renege on the guaranteed annuity rate (GAR), or take away much of the bonuses already awarded. I believe they tried both approaches and the courts wouldn't let them.

This GAR depth-charge was well known, or should have been known, to actuaries. The IFA network I was with in the 90s used to have a shortlist of approved companies (including non-commission payers) for each product, and at some point EL quietly dropped off the list. If outsiders could see the disaster looming, we have to assume the technical advisers on the inside knew even better what would happen. Yet EL carried on awarding bonuses to investors as though nothing was wrong.

Now, it seems compensation is to be paid because industry regulators failed to spot the coming crisis and step in. It's as though houseowners could sue the police for not stopping Bill the Burglar. Perhaps it helps EL investors' case that so many of them happen to be lawyers and journalists?

However, what is sauce for the goose is sauce for the gander. The same arguments can be applied to victims of the mortgage mis-selling of the past few years. For Equitable Life, read banks; for investors, read borrowers. And in both cases, it's the same regulator now.

Compensation, please.

Why can you stand up in buses?

How come coaches, taxis, even airplanes have seat belts, but many buses don't - and allow standing passengers, to boot? Yes, buses are safer than cars - but.

Unity rebuts

The drugs debate continues. Some will say that I have misunderstood the thrust, the tendency of the original 15,000-word salvo; others may say that some subsequent participants did not thoroughly read or understand Theodore Dalrymple's 1997 contribution (he does tend to over-write, I grant you).

Misunderstanding is an important factor. I remember the confused glee of a group of 15-year-olds when cannabis was reclassified as a Class C drug - they were part of a project I was involved with, rehabilitating youngsters for college and work (lovely kids, essentially). They didn't understand the rubric, but they thought they understood the message that dear hip Tony Blair was sending. Though the message was not aimed directly at them, of course, but to their middle-class fellows. Who gives a damn about pasty, ill-nourished white trash, self-protectively aggressive black thuglets-in-training, and Muslim kids for whom only born-again Islam is the way off bud? They don't vote, much less contribute to Party funds.

And when cannabis was re-elevated to the minor peerage, it was ostensibly for the benefit of young people, but perhaps also - perhaps more - for the readers of the Daily Mail.

Though it may be step-by-step rather than in a single bound, crossing the Rubicon is a momentous decision. Though it may be slice by slice, the salami will get eaten. Policy-makers, policy-proposers, note that you may be more sensitive to the faults of present arrangements than to the defects of the alterations you propose; and a process may be easier to start than halt.

Common Sense?

An open letter that I received via email:
____________________________
To: Troy Clarke President
General Motors North America

Response from: Gregory Knox, Pres.
Knox Machinery Company
Franklin , Ohio

Gentlemen:

In response to your request to contact legislators and ask for a bailout for the Big Three automakers please consider the following, and please pass my thoughts on to Troy Clark, President of General Motors North America.

Politicians and Management of the Big 3 are both infected with the same entitlement mentality that has spread like cancerous germs in UAW halls for the last countless decades, and whose plague is now sweeping this nation, awaiting our new "Messiah", Pres-elect Obama, to wave his magic wand and make all our problems go away, while at the same time allowing our once great nation to keep "living the dream"...

Believe me folks, The dream is over! This dream where we can ignore the consumer for years while management myopically focuses on its personal rewards packages at the same time that our factories have been filled with the worlds most overpaid, arrogant, ignorant and laziest entitlement minded "laborers" without paying the price for these atrocities...this dream where you still think the masses will line up to buy our products for ever and ever.

Don't even think about telling me I'm wrong. Don't accuse me of not knowing of what I speak. I have called on Ford, GM, Chrysler, TRW, Delphi, Kelsey Hayes, American Axle and countless other automotive OEM's throughout the Midwest during the past 30 years and what I've seen over those years in these union shops can only be described as disgusting.

Troy Clarke, President of General Motors North America, states: "There is widespread sentiment throughout this country, and our government, and especially via the news media, that the current crisis is completely the result of bad management which it certainly is not."

You're right Mr. Clarke, it's not JUST management...how about the electricians who walk around the plants like lords in feudal times, making people wait on them for countless hours while they drag ass...so they can come in on the weekend and make double and triple time...for a job they easily could have done within their normal 40 hour work week. How about the line workers who threaten newbies with all kinds of scare tactics...for putting out too many parts on a shift...and for being too productive (We certainly must not expose those lazy bums who have been getting overpaid for decades for their horrific underproduction, must we?!?)

Do you folks really not know about this stuff?!? How about this great sentiment abridged from Mr. Clarke's sad plea: "over the last few years ...we have closed the quality and efficiency gaps with our competitors." What the hell has Detroit been doing for the last 40 years?!? Did we really JUST wake up to the gaps in quality and efficiency between us and them? The K car vs. the Accord? The Pinto vs. the Civic?!? Do I need to go on? What a joke!

We are living through the inevitable outcome of the actions of the United States auto industry for decades. It's time to pay for your sins, Detroit ...

I attended an economic summit last week where brilliant economist, Alan Beaulieu, from the Institute of Trend Research , surprised the crowd when he said he would not have given the banks a penny of "bailout money". "Yes, he said, this would cause short term problems," but despite what people like politicians and corporate magnates would have us believe, the sun would in fact rise the next day... and the following very important thing would happen...where there had been greedy and sloppy banks, new efficient ones would pop up...that is how a free market system works...it does work...if we would only let it work..."

But for some nondescript reason we are now deciding that the rest of the world is right and that capitalism doesn't work - that we need the government to step in and "save us"...Save us my ass, Hell - we're nationalizing...and unfortunately too many of our once fine nation's citizens don't even have a clue that this is what is really happening...But, they sure can tell you the stats on their favorite sports teams...yeah - THAT'S really important, isn't it... Does it ever occur to ANYONE that the "competition" has been producing vehicles, EXTREMELY PROFITABLY, for decades in this country?... How can that be??? Let's see... Fuel efficient... Listening to customers... Investing in the proper tooling and automation for the long haul...

Not being too complacent or arrogant to listen to Dr. W. Edwards Deming four decades ago when he taught that by adopting appropriate principles of management, organizations could increase quality and simultaneously reduce costs. Ever increased productivity through quality and intelligent planning... Treating vendors like strategic partners, rather than like "the enemy"... Efficient front and back offices... Non union environment...

Again, I could go on and on, but I really wouldn't be telling anyone anything they really don't already know down deep in their hearts.

I have six children, so I am not unfamiliar with the concept of wanting someone to bail you out of a mess that you have gotten yourself into - my children do this on a weekly, if not daily basis, as I did when I was their age. I do for them what my parents did for me (one of their greatest gifts, by the way) - I make them stand on their own two feet and accept the consequences of their actions and work through it. Radical concept, huh... Am I there for them in the wings? Of course - but only until such time as they need to be fully on their own as adults.

I don't want to oversimplify a complex situation, but there certainly are unmistakable parallels here between the proper role of parenting and government. Detroit and the United States need to pay for their sins.

Bad news people - it's coming whether we like it or not. The newly elected Messiah really doesn't have a magic wand big enough to "make it all go away." I laughed as I heard Obama "reeling it back in" almost immediately after the final vote count was tallied..."we really might not do it in a year...or in four..." Where the Hell was that kind of talk when he was RUNNING for office.

Stop trying to put off the inevitable folks ... That house in Florida really isn't worth $750,000... People who jump across a border really don't deserve free health care benefits... That job driving that forklift for the Big 3 really isn't worth $85,000 a year... We really shouldn't allow Wal-Mart to stock their shelves with products acquired from a country that unfairly manipulates their currency and has the most atrocious human rights infractions on the face of the globe... That couple whose combined income is less than $50,000 really shouldn't be living in that $485,000 home... Let the market correct itself folks - it will.

Yes it will be painful, but it's gonna' be painful either way, and the bright side of my proposal is that on the other side of it all, is a nation that appreciates what it has...and doesn't live beyond its means...and gets back to basics...and redevelops the patriotic work ethic that made it the greatest nation in the history of the world...and probably turns back to God.

Sorry - don't cut my head off, I'm just the messenger sharing with you the "bad news". I hope you take it to heart.

Gregory J. Knox, President
Knox Machinery, Inc.
Franklin , Ohio 45005

Filling their boots and fleeing

Karl Denninger accuses the elite of delaying system rectification so they can get their money out of the country. Everybody who is anybody board the Gold Train, eh?

On a bad day, I'm half-inclined to believe it.

Smugness, alla Italia

Jonathan Russell writes in the Telegraph:

Spain's finances are in the dock thanks to Standard & Poor's, the spreads on Greek bonds have soared and Germany's economy is set to deteriorate faster than ours, according to the OECD. Suddenly the euro doesn't seem like such a one-way bet.

But where is the usual suspect, Italy, in all this euro-doom? Sitting pretty according to its finance minister Giulio Tremonti. The country didn't get involved in the sub-prime crisis and GDP figures could be significantly better than reported.

How do you work this out? "Our banks suffered little from the sub-prime crisis. There are few of them where English is spoken," he told Les Echos newspaper, no doubt not in English.
And GDP? "One should be suspicious of GDP figures …they do not include the informal economy."

The Italian "informal economy"? I'm sure there is another word for that.

And as one of my earlier posts shows, they've also invested less than 1% of their officially-declared GDP in US Treasuries.

Happiness: a different doctor writes

I'm coming to the end of Phil Hammond's funny, outrageous, informative and wise book "Medicine Balls". Here's a bit (from p. 248) I'd like to throw into our communal soup:

There's no doubt that we're richer and living longer than we were in 1948, and the NHS can take some credit for that. But we don't seem to be any happier. Indeed, Labour has somehow contrived a health service where we have the best-paid doctors in the world and among the least satisfied. The research on happiness is pretty clear. Humans are social animals and are most content in communities where people unite around, and conform to, a shared ideal. We like to trust each other, we don't like change - particularly if it's constant and we don't understand it - but we're very resilient and adaptable if needs be. We're happier being involved and figuring out what to do ourselves rather than being dumped on from on high. More money, above a comfortable level, doesn't make us happier and neither does the aggressive, competitive attitude needed to earn it. Compassionate, positive people tend to be happiest of all, and also healthiest. If you can sort your brain out, your body tends to follow.

Drugs: a doctor writes

It's stuff like this (from 1997) that gives me pause for thought, whenever I'm tempted down the road towards the Hellfire Club (motto: Fay ce que voudras). The author has wide experience of the effect of drugs on his patients, in and out of the prison context, and if you've read him in the Spectator you'll know he's not remotely left-wing. It's long (4,700) but very readable, and still only a third the length of Unity's recent piece. Do give it a go.

Don’t Legalize Drugs

Theodore Dalrymple

Advocates have almost convinced Americans that legalization will remove most of the evil that drugs inflict on society. Don’t believe them.

There is a progression in the minds of men: first the unthinkable becomes thinkable, and then it becomes an orthodoxy whose truth seems so obvious that no one remembers that anyone ever thought differently. This is just what is happening with the idea of legalizing drugs: it has reached the stage when millions of thinking men are agreed that allowing people to take whatever they like is the obvious, indeed only, solution to the social problems that arise from the consumption of drugs.

Man’s desire to take mind-altering substances is as old as society itself—as are attempts to regulate their consumption. If intoxication in one form or another is inevitable, then so is customary or legal restraint upon that intoxication. But no society until our own has had to contend with the ready availability of so many different mind-altering drugs, combined with a citizenry jealous of its right to pursue its own pleasures in its own way.

The arguments in favor of legalizing the use of all narcotic and stimulant drugs are twofold: philosophical and pragmatic. Neither argument is negligible, but both are mistaken, I believe, and both miss the point.

The philosophic argument is that, in a free society, adults should be permitted to do whatever they please, always provided that they are prepared to take the consequences of their own choices and that they cause no direct harm to others. The locus classicus for this point of view is John Stuart Mill’s famous essay On Liberty: “The only purpose for which power can be rightfully exercised over any member of the community, against his will, is to prevent harm to others,” Mill wrote. “His own good, either physical or moral, is not a sufficient warrant.” This radical individualism allows society no part whatever in shaping, determining, or enforcing a moral code: in short, we have nothing in common but our contractual agreement not to interfere with one another as we go about seeking our private pleasures.

In practice, of course, it is exceedingly difficult to make people take all the consequences of their own actions—as they must, if Mill’s great principle is to serve as a philosophical guide to policy. Addiction to, or regular use of, most currently prohibited drugs cannot affect only the person who takes them—and not his spouse, children, neighbors, or employers. No man, except possibly a hermit, is an island; and so it is virtually impossible for Mill’s principle to apply to any human action whatever, let alone shooting up heroin or smoking crack. Such a principle is virtually useless in determining what should or should not be permitted.

Perhaps we ought not be too harsh on Mill’s principle: it’s not clear that anyone has ever thought of a better one. But that is precisely the point. Human affairs cannot be decided by an appeal to an infallible rule, expressible in a few words, whose simple application can decide all cases, including whether drugs should be freely available to the entire adult population. Philosophical fundamentalism is not preferable to the religious variety; and because the desiderata of human life are many, and often in conflict with one another, mere philosophical inconsistency in policy—such as permitting the consumption of alcohol while outlawing cocaine—is not a sufficient argument against that policy. We all value freedom, and we all value order; sometimes we sacrifice freedom for order, and sometimes order for freedom. But once a prohibition has been removed, it is hard to restore, even when the newfound freedom proves to have been ill-conceived and socially disastrous.

Even Mill came to see the limitations of his own principle as a guide for policy and to deny that all pleasures were of equal significance for human existence. It was better, he said, to be Socrates discontented than a fool satisfied. Mill acknowledged that some goals were intrinsically worthier of pursuit than others.

This being the case, not all freedoms are equal, and neither are all limitations of freedom: some are serious and some trivial. The freedom we cherish—or should cherish—is not merely that of satisfying our appetites, whatever they happen to be. We are not Dickensian Harold Skimpoles, exclaiming in protest that “Even the butterflies are free!” We are not children who chafe at restrictions because they are restrictions. And we even recognize the apparent paradox that some limitations to our freedoms have the consequence of making us freer overall. The freest man is not the one who slavishly follows his appetites and desires throughout his life—as all too many of my patients have discovered to their cost.

We are prepared to accept limitations to our freedoms for many reasons, not just that of public order. Take an extreme hypothetical case: public exhibitions of necrophilia are quite rightly not permitted, though on Mill’s principle they should be. A corpse has no interests and cannot be harmed, because it is no longer a person; and no member of the public is harmed if he has agreed to attend such an exhibition.

Our resolve to prohibit such exhibitions would not be altered if we discovered that millions of people wished to attend them or even if we discovered that millions already were attending them illicitly. Our objection is not based upon pragmatic considerations or upon a head count: it is based upon the wrongness of the would-be exhibitions themselves. The fact that the prohibition represents a genuine restriction of our freedom is of no account.

It might be argued that the freedom to choose among a variety of intoxicating substances is a much more important freedom and that millions of people have derived innocent fun from taking stimulants and narcotics. But the consumption of drugs has the effect of reducing men’s freedom by circumscribing the range of their interests. It impairs their ability to pursue more important human aims, such as raising a family and fulfilling civic obligations. Very often it impairs their ability to pursue gainful employment and promotes parasitism. Moreover, far from being expanders of consciousness, most drugs severely limit it. One of the most striking characteristics of drug takers is their intense and tedious self-absorption; and their journeys into inner space are generally forays into inner vacuums. Drug taking is a lazy man’s way of pursuing happiness and wisdom, and the shortcut turns out to be the deadest of dead ends. We lose remarkably little by not being permitted to take drugs.

The idea that freedom is merely the ability to act upon one’s whims is surely very thin and hardly begins to capture the complexities of human existence; a man whose appetite is his law strikes us not as liberated but enslaved. And when such a narrowly conceived freedom is made the touchstone of public policy, a dissolution of society is bound to follow. No culture that makes publicly sanctioned self-indulgence its highest good can long survive: a radical egotism is bound to ensue, in which any limitations upon personal behavior are experienced as infringements of basic rights. Distinctions between the important and the trivial, between the freedom to criticize received ideas and the freedom to take LSD, are precisely the standards that keep societies from barbarism.

So the legalization of drugs cannot be supported by philosophical principle. But if the pragmatic argument in favor of legalization were strong enough, it might overwhelm other objections. It is upon this argument that proponents of legalization rest the larger part of their case.

The argument is that the overwhelming majority of the harm done to society by the consumption of currently illicit drugs is caused not by their pharmacological properties but by their prohibition and the resultant criminal activity that prohibition always calls into being. Simple reflection tells us that a supply invariably grows up to meet a demand; and when the demand is widespread, suppression is useless. Indeed, it is harmful, since—by raising the price of the commodity in question—it raises the profits of middlemen, which gives them an even more powerful incentive to stimulate demand further. The vast profits to be made from cocaine and heroin—which, were it not for their illegality, would be cheap and easily affordable even by the poorest in affluent societies—exert a deeply corrupting effect on producers, distributors, consumers, and law enforcers alike. Besides, it is well known that illegality in itself has attractions for youth already inclined to disaffection. Even many of the harmful physical effects of illicit drugs stem from their illegal status: for example, fluctuations in the purity of heroin bought on the street are responsible for many of the deaths by overdose. If the sale and consumption of such drugs were legalized, consumers would know how much they were taking and thus avoid overdoses.

Moreover, since society already permits the use of some mind-altering substances known to be both addictive and harmful, such as alcohol and nicotine, in prohibiting others it appears hypocritical, arbitrary, and dictatorial. Its hypocrisy, as well as its patent failure to enforce its prohibitions successfully, leads inevitably to a decline in respect for the law as a whole. Thus things fall apart, and the center cannot hold.

It stands to reason, therefore, that all these problems would be resolved at a stroke if everyone were permitted to smoke, swallow, or inject anything he chose. The corruption of the police, the luring of children of 11 and 12 into illegal activities, the making of such vast sums of money by drug dealing that legitimate work seems pointless and silly by comparison, and the turf wars that make poor neighborhoods so exceedingly violent and dangerous, would all cease at once were drug taking to be decriminalized and the supply regulated in the same way as alcohol.

But a certain modesty in the face of an inherently unknowable future is surely advisable. That is why prudence is a political virtue: what stands to reason should happen does not necessarily happen in practice. As Goethe said, all theory (even of the monetarist or free-market variety) is gray, but green springs the golden tree of life. If drugs were legalized, I suspect that the golden tree of life might spring some unpleasant surprises.

It is of course true, but only trivially so, that the present illegality of drugs is the cause of the criminality surrounding their distribution. Likewise, it is the illegality of stealing cars that creates car thieves. In fact, the ultimate cause of all criminality is law. As far as I am aware, no one has ever suggested that law should therefore be abandoned. Moreover, the impossibility of winning the “war” against theft, burglary, robbery, and fraud has never been used as an argument that these categories of crime should be abandoned. And so long as the demand for material goods outstrips supply, people will be tempted to commit criminal acts against the owners of property. This is not an argument, in my view, against private property or in favor of the common ownership of all goods. It does suggest, however, that we shall need a police force for a long time to come.

In any case, there are reasons to doubt whether the crime rate would fall quite as dramatically as advocates of legalization have suggested. Amsterdam, where access to drugs is relatively unproblematic, is among the most violent and squalid cities in Europe. The idea behind crime—of getting rich, or at least richer, quickly and without much effort—is unlikely to disappear once drugs are freely available to all who want them. And it may be that officially sanctioned antisocial behavior—the official lifting of taboos—breeds yet more antisocial behavior, as the “broken windows” theory would suggest.

Having met large numbers of drug dealers in prison, I doubt that they would return to respectable life if the principal article of their commerce were to be legalized. Far from evincing a desire to be reincorporated into the world of regular work, they express a deep contempt for it and regard those who accept the bargain of a fair day’s work for a fair day’s pay as cowards and fools. A life of crime has its attractions for many who would otherwise lead a mundane existence. So long as there is the possibility of a lucrative racket or illegal traffic, such people will find it and extend its scope. Therefore, since even legalizers would hesitate to allow children to take drugs, decriminalization might easily result in dealers turning their attentions to younger and younger children, who—in the permissive atmosphere that even now prevails—have already been inducted into the drug subculture in alarmingly high numbers.

Those who do not deal in drugs but commit crimes to fund their consumption of them are, of course, more numerous than large-scale dealers. And it is true that once opiate addicts, for example, enter a treatment program, which often includes maintenance doses of methadone, the rate at which they commit crimes falls markedly. The drug clinic in my hospital claims an 80 percent reduction in criminal convictions among heroin addicts once they have been stabilized on methadone.

This is impressive, but it is not certain that the results should be generalized. First, the patients are self-selected: they have some motivation to change, otherwise they would not have attended the clinic in the first place. Only a minority of addicts attend, and therefore it is not safe to conclude that, if other addicts were to receive methadone, their criminal activity would similarly diminish.

Second, a decline in convictions is not necessarily the same as a decline in criminal acts. If methadone stabilizes an addict’s life, he may become a more efficient, harder-to-catch criminal. Moreover, when the police in our city do catch an addict, they are less likely to prosecute him if he can prove that he is undergoing anything remotely resembling psychiatric treatment. They return him directly to his doctor. Having once had a psychiatric consultation is an all-purpose alibi for a robber or a burglar; the police, who do not want to fill in the 40-plus forms it now takes to charge anyone with anything in England, consider a single contact with a psychiatrist sufficient to deprive anyone of legal responsibility for crime forever.

Third, the rate of criminal activity among those drug addicts who receive methadone from the clinic, though reduced, remains very high. The deputy director of the clinic estimates that the number of criminal acts committed by his average patient (as judged by self-report) was 250 per year before entering treatment and 50 afterward. It may well be that the real difference is considerably less than this, because the patients have an incentive to exaggerate it to secure the continuation of their methadone. But clearly, opiate addicts who receive their drugs legally and free of charge continue to commit large numbers of crimes. In my clinics in prison, I see numerous prisoners who were on methadone when they committed the crime for which they are incarcerated.

Why do addicts given their drug free of charge continue to commit crimes? Some addicts, of course, continue to take drugs other than those prescribed and have to fund their consumption of them. So long as any restriction whatever regulates the consumption of drugs, many addicts will seek them illicitly, regardless of what they receive legally. In addition, the drugs themselves exert a long-term effect on a person’s ability to earn a living and severely limit rather than expand his horizons and mental repertoire. They sap the will or the ability of an addict to make long-term plans. While drugs are the focus of an addict’s life, they are not all he needs to live, and many addicts thus continue to procure the rest of what they need by criminal means.
For the proposed legalization of drugs to have its much vaunted beneficial effect on the rate of criminality, such drugs would have to be both cheap and readily available. The legalizers assume that there is a natural limit to the demand for these drugs, and that if their consumption were legalized, the demand would not increase substantially. Those psychologically unstable persons currently taking drugs would continue to do so, with the necessity to commit crimes removed, while psychologically stabler people (such as you and I and our children) would not be enticed to take drugs by their new legal status and cheapness. But price and availability, I need hardly say, exert a profound effect on consumption: the cheaper alcohol becomes, for example, the more of it is consumed, at least within quite wide limits.

I have personal experience of this effect. I once worked as a doctor on a British government aid project to Africa. We were building a road through remote African bush. The contract stipulated that the construction company could import, free of all taxes, alcoholic drinks from the United Kingdom. These drinks the company then sold to its British workers at cost, in the local currency at the official exchange rate, which was approximately one-sixth the black-market rate. A liter bottle of gin thus cost less than a dollar and could be sold on the open market for almost ten dollars. So it was theoretically possible to remain dead drunk for several years for an initial outlay of less than a dollar.

Of course, the necessity to go to work somewhat limited the workers’ consumption of alcohol. Nevertheless, drunkenness among them far outstripped anything I have ever seen, before or since. I discovered that, when alcohol is effectively free of charge, a fifth of British construction workers will regularly go to bed so drunk that they are incontinent both of urine and feces. I remember one man who very rarely got as far as his bed at night: he fell asleep in the lavatory, where he was usually found the next morning. Half the men shook in the mornings and resorted to the hair of the dog to steady their hands before they drove their bulldozers and other heavy machines (which they frequently wrecked, at enormous expense to the British taxpayer); hangovers were universal. The men were either drunk or hung over for months on end.
Sure, construction workers are notoriously liable to drink heavily, but in these circumstances even formerly moderate drinkers turned alcoholic and eventually suffered from delirium tremens. The heavy drinking occurred not because of the isolation of the African bush: not only did the company provide sports facilities for its workers, but there were many other ways to occupy oneself there. Other groups of workers in the bush whom I visited, who did not have the same rights of importation of alcoholic drink but had to purchase it at normal prices, were not nearly as drunk. And when the company asked its workers what it could do to improve their conditions, they unanimously asked for a further reduction in the price of alcohol, because they could think of nothing else to ask for.

The conclusion was inescapable: that a susceptible population had responded to the low price of alcohol, and the lack of other effective restraints upon its consumption, by drinking destructively large quantities of it. The health of many men suffered as a consequence, as did their capacity for work; and they gained a well-deserved local reputation for reprehensible, violent, antisocial behavior.

It is therefore perfectly possible that the demand for drugs, including opiates, would rise dramatically were their price to fall and their availability to increase. And if it is true that the consumption of these drugs in itself predisposes to criminal behavior (as data from our clinic suggest), it is also possible that the effect on the rate of criminality of this rise in consumption would swamp the decrease that resulted from decriminalization. We would have just as much crime in aggregate as before, but many more addicts.

The intermediate position on drug legalization, such as that espoused by Ethan Nadelmann, director of the Lindesmith Center, a drug policy research institute sponsored by financier George Soros, is emphatically not the answer to drug-related crime. This view holds that it should be easy for addicts to receive opiate drugs from doctors, either free or at cost, and that they should receive them in municipal injecting rooms, such as now exist in Zurich. But just look at Liverpool, where 2,000 people of a population of 600,000 receive official prescriptions for methadone: this once proud and prosperous city is still the world capital of drug-motivated burglary, according to the police and independent researchers.

Of course, many addicts in Liverpool are not yet on methadone, because the clinics are insufficient in number to deal with the demand. If the city expended more money on clinics, perhaps the number of addicts in treatment could be increased five- or tenfold. But would that solve the problem of burglary in Liverpool? No, because the profits to be made from selling illicit opiates would still be large: dealers would therefore make efforts to expand into parts of the population hitherto relatively untouched, in order to protect their profits. The new addicts would still burgle to feed their habits. Yet more clinics dispensing yet more methadone would then be needed. In fact Britain, which has had a relatively liberal approach to the prescribing of opiate drugs to addicts since 1928 (I myself have prescribed heroin to addicts), has seen an explosive increase in addiction to opiates and all the evils associated with it since the 1960s, despite that liberal policy. A few hundred have become more than a hundred thousand.

At the heart of Nadelmann’s position, then, is an evasion. The legal and liberal provision of drugs for people who are already addicted to them will not reduce the economic benefits to dealers of pushing these drugs, at least until the entire susceptible population is addicted and in a treatment program. So long as there are addicts who have to resort to the black market for their drugs, there will be drug-associated crime. Nadelmann assumes that the number of potential addicts wouldn’t soar under considerably more liberal drug laws. I can’t muster such Panglossian optimism.

The problem of reducing the amount of crime committed by individual addicts is emphatically not the same as the problem of reducing the amount of crime committed by addicts as a whole. I can illustrate what I mean by an analogy: it is often claimed that prison does not work because many prisoners are recidivists who, by definition, failed to be deterred from further wrongdoing by their last prison sentence. But does any sensible person believe that the abolition of prisons in their entirety would not reduce the numbers of the law-abiding? The murder rate in New York and the rate of drunken driving in Britain have not been reduced by a sudden upsurge in the love of humanity, but by the effective threat of punishment. An institution such as prison can work for society even if it does not work for an individual.

The situation could be very much worse than I have suggested hitherto, however, if we legalized the consumption of drugs other than opiates. So far, I have considered only opiates, which exert a generally tranquilizing effect. If opiate addicts commit crimes even when they receive their drugs free of charge, it is because they are unable to meet their other needs any other way; but there are, unfortunately, drugs whose consumption directly leads to violence because of their psychopharmacological properties and not merely because of the criminality associated with their distribution. Stimulant drugs such as crack cocaine provoke paranoia, increase aggression, and promote violence. Much of this violence takes place in the home, as the relatives of crack takers will testify. It is something I know from personal acquaintance by working in the emergency room and in the wards of our hospital. Only someone who has not been assaulted by drug takers rendered psychotic by their drug could view with equanimity the prospect of the further spread of the abuse of stimulants.

And no one should underestimate the possibility that the use of stimulant drugs could spread very much wider, and become far more general, than it is now, if restraints on their use were relaxed. The importation of the mildly stimulant khat is legal in Britain, and a large proportion of the community of Somali refugees there devotes its entire life to chewing the leaves that contain the stimulant, miring these refugees in far worse poverty than they would otherwise experience. The reason that the khat habit has not spread to the rest of the population is that it takes an entire day’s chewing of disgustingly bitter leaves to gain the comparatively mild pharmacological effect. The point is, however, that once the use of a stimulant becomes culturally acceptable and normal, it can easily become so general as to exert devastating social effects. And the kinds of stimulants on offer in Western cities—cocaine, crack, amphetamines—are vastly more attractive than khat.

In claiming that prohibition, not the drugs themselves, is the problem, Nadelmann and many others—even policemen—have said that “the war on drugs is lost.” But to demand a yes or no answer to the question “Is the war against drugs being won?” is like demanding a yes or no answer to the question “Have you stopped beating your wife yet?” Never can an unimaginative and fundamentally stupid metaphor have exerted a more baleful effect upon proper thought.
Let us ask whether medicine is winning the war against death. The answer is obviously no, it isn’t winning: the one fundamental rule of human existence remains, unfortunately, one man one death. And this is despite the fact that 14 percent of the gross domestic product of the United States (to say nothing of the efforts of other countries) goes into the fight against death. Was ever a war more expensively lost? Let us then abolish medical schools, hospitals, and departments of public health. If every man has to die, it doesn’t matter very much when he does so.

If the war against drugs is lost, then so are the wars against theft, speeding, incest, fraud, rape, murder, arson, and illegal parking. Few, if any, such wars are winnable. So let us all do anything we choose.

Even the legalizers’ argument that permitting the purchase and use of drugs as freely as Milton Friedman suggests will necessarily result in less governmental and other official interference in our lives doesn’t stand up. To the contrary, if the use of narcotics and stimulants were to become virtually universal, as is by no means impossible, the number of situations in which compulsory checks upon people would have to be carried out, for reasons of public safety, would increase enormously. Pharmacies, banks, schools, hospitals—indeed, all organizations dealing with the public—might feel obliged to check regularly and randomly on the drug consumption of their employees. The general use of such drugs would increase the locus standi of innumerable agencies, public and private, to interfere in our lives; and freedom from interference, far from having increased, would have drastically shrunk.

The present situation is bad, undoubtedly; but few are the situations so bad that they cannot be made worse by a wrong policy decision.

The extreme intellectual elegance of the proposal to legalize the distribution and consumption of drugs, touted as the solution to so many problems at once (AIDS, crime, overcrowding in the prisons, and even the attractiveness of drugs to foolish young people) should give rise to skepticism. Social problems are not usually like that. Analogies with the Prohibition era, often drawn by those who would legalize drugs, are false and inexact: it is one thing to attempt to ban a substance that has been in customary use for centuries by at least nine-tenths of the adult population, and quite another to retain a ban on substances that are still not in customary use, in an attempt to ensure that they never do become customary. Surely we have already slid down enough slippery slopes in the last 30 years without looking for more such slopes to slide down.

How to spot a recession

Fire insurance claims. You'll recall that Ankh-Morpork burned down when the Tourist introduced an innkeeper to fire insurance. But it's not all fiction: it's odd how the last recession made textile warehouses explode into flame. This article relates recessions to car fires. But one can go too far: surely the recent recycling warehouse fire in New Zealand was entirely accidental. (UPDATE: and Findus' Crispy Pancake factory, too - htp: Henry North London)

Another factor is holidays. How many schools burn when they're empty?

We should therefore (a) all be rich and (b) never take a holiday, especially (not) with children.

ABC of inflation

Jesse lists postwar currency rots - not all of them in teeny-tiny banana republics. Argentina, Brazil, China - and loads of others.

Libertarianism, individualism - or survivalism?

If we insist that "we're all in the same boat", we shall all drown, because the one boat will sink. Those who hope to preserve civilization must accept that it is likely to sink into chaos in much of the world. The survival of some elements of civilization will require lifeboats that can be constructed only from communities, regions, perhaps nations, that are not now in overshoot. To preserve civilization at least some of these must choose to stay out of overshoot, establish independence in the production of food, energy, materials, and crucial manufactured goods, and defend their borders against the migrations that will tend to spread overshoot everywhere.

More here.

I've argued before now that we may need to move away from the "efficient" way to do things, towards the survivable way - click on the label below for some notes on what I call "Diversity, dispersion and disconnection."

History rhymes

The stock market is experiencing a snap-back rally, similar to what we saw in 1930, after the Crash of 1929.

You don't look that old.

Hickey: I wasn't around. They had a name for it, the "little bull market." It came about after the Federal Reserve slashed interest rates to 3.5% from 6%, and later to 1.5%...

More here.

Standing your ground

Libertarians enjoy challenging others' assumptions, and it's invigorating. But it's also time to challenge the assumptions of libertarians: freedom-lovers, make your case.

Here's a couple of shots between the redoubtable Devils' Kitchen and myself, from a couple of posts back. To me, this isn't about drugs, essentially; it's about whether we are, or can be, free.

Devil's Kitchen said...

Sackerson, "How is it reactionary to wish to protect young people from habits that impoverish and enslave them (and this is what black communities object to)? I think perhaps some libertarians haven't really defined what they mean by liberty."

I am all for proper drugs education; however, it is worth noting that I had a considerable amount of it, and it hasn't stopped me from taking just about every drug on the planet*.

And do you know what? I have never had to have any kind of hospital or other treatment; I have never lost a job; I have never even been late for work, after having taken drugs.

I have never assaulted anyone (most drugs, other than alcohol, put you in a frame of mind in which violence is the last thing you want to indulge in), nor hurt anyone, nor even caused a public nuisance whilst on drugs either.

I am not addicted to drugs either, despite heavy usage of a few of them (most are self-limiting, in that the effects begin to wane after a period heavy usage).

I have, on the other hand, laughed like a demon, make some excellent friends, danced, thrilled, been immersed in music in a way that's not possible sober, and had many fantastic times whilst on drugs.

You see, what I chose was to take the education that I was given, and the advice of friends, and my own experience, and indulge in a free and informed choice.

That is libertarianism, and it is still no business of yours what I put into my body, as long as I am willing to pay the consequences. And I am: that's why I am privately insured up to the hilt.

DK

Sackerson said...

DK: thanks for visiting, I'd have drawn a chalk circle if I'd known you were coming.

I agree that alcohol is pernicious and have argued that rather than attempt to ban it, we should reduce its availability a bit - currently you can get it from the supermarket, post office, petrol station etc. And it does make many people horribly aggressive, so there is an incentive for others to band together and act in this way.

I do understand that there are many functioning drug users (as indeed there are functioning alcoholics), and the question of product purity is certainly one of the arguments propounded for legalisation and regulation. Set against that is what might then happen. If the research referred to by Paddington above is correct, the tendency to addiction is genetic, so the principal factor is opportunity. If only 5% have the fatal flaw, and these products become as available as a six-pack of wife-beater from Tesco Express, we could go from thousands of addicts to millions.

So one issue is how do you weigh your wish for a certain kind of pleasure, against the awful suffering of some other people? Is this corner of libertarianism less a struggle to be free of oppression than it is callous selfishness?

And there is a deeper question of the founding assumptions of libertarians: are we really free and rational in any case? If half our behaviour is genetically determined, and much of the rest conditioned by social expectations, drug-taking is not the blow for liberty that it was represented to be from the 1960s onwards. You yourself say "...I chose was to take the education that I was given, and the advice of friends, and my own experience...", which makes me think that your "free and informed choice" was conditioned by the example and advice of your friends, and the opportunity to take part yourself. Indeed, this is how I started on cigarettes and it took me a decade to get back off them, so I have some idea how unfree we really are. You'll see from my next post that I query whether public schools such as Eton had a drug problem as early as the 1960s, and "as the twig is bent, so the tree will grow".

I think we are in an age where the Enlightenment philosophy is as under threat from geneticism (and determinism generally), as Creationism was when evolutionary theory was formulated. Sartre refused to accept Freud's theory of the unconscious, because it fatally undermined his own position on existentialist free will.

So I think libertarians should move from questions of law, taxation, social liberty etc to re-examine the ground they are standing on.

The public school connection

Gosh, people get fussed when you suggest that complete licence isn't a good idea. Where did that start? Apparently I'm a 95-year-old reactionary, and a 21-year-old "righteous" (same accuser).

In 1969, I went to Cambridge University for an interview, and met my friend who'd just gone up. In general conversation, he told me that a third of the undergraduates at his college were Old Etonians, and that they were (a) a tight clique and (b) well into cocaine parties. This, at a time when I'd only recently heard of "pot", which for me conjured up the mental image of a Marmite jar.

That's 40 years ago now, just about. Eton was criticised a few years ago for taking a tough line on drugs. Wrong issue: their critics should have asked them just how long the problem had existed. What was going on in the study and the common room? Just don't ask Dave.