G8 Summit: Here We Go Again

Grand Hotel Kempinski, Heiligendamm, GermanyG8. 2 days. €100 million. 16,000 police. 11,000 demonstrators. 700 journalists. 1 Grand Hotel Kempinski located in the tiny seaside resort town of Heiligendamm, Germany, population 350.
I don’t pretend to know anything about globalization or anti-globalization. In my mind, years of media soundbites have somehow associated the clash with the age-old capitalism vs. socialism debate, complete with a mental image of Gordon Gekko making it at the expense of Third World subsistence farmers. Something like that.

McCloskey talks about the anti-capitalist “clerisy,” as she describes the academics and others who hold the bourgeoisie in contempt. Lindsey describes the way that post-WWII affluence in the United States helped foster widespread cultural experimentation and criticism, with protestors attacking the very capitalist institutions that enabled such experimentation and criticism. Muller offers an intellectual history of the controversy about capitalism. He shows, for example, how Joseph Schumpeter predicted exactly the sort of critical rebellion against capitalism that Lindsey chronicles. — Arnold Kling, The Great Tug-of-War

A person that makes a living surfing the world markets ought to know something about it, I guess. And since I know nothing, I was interested to read Arnold Kling’s recent articles:

I know I am supposed to present the other side of the argument for this Ivory Tower article, but the issue seems so mainstream and one-sided that everyone who wants to know about it has the information at their fingertips. There is even a movie starring Charlize Theron coming to theatres near you.
For all the good intentions, there seems to be a lot of ironic twists. For example, last week’s protests ahead of the meeting centered in Rostock, a town mentioned in an Economist article about Germany’s depressed eastern states:

Since unification, some €1.5 trillion ($2 trillion) has been transferred east. Western Germany still hands over 4% of annual GDP, a net €80 billion, to eastern Germany, which is not being weaned off subsidies. Average unemployment of 15.2% is twice the western rate, and far higher than most other bits of central Europe (see chart). Wages are about one-third lower than in western Germany.
The government wants to aim subsidies more sensibly. “We used to spray our funds evenly everywhere to kick-start consumption, but now we need to focus on investment in areas of growth,” says Mr Steinbrück. Productivity is one-third below western levels.

Another example is Venezuela:

If the rhetoric smacks of the 1960s, it’s because Mr. Chávez dreams of transforming Venezuela just as Fidel Castro did Cuba. Mr. Chávez has already sharply cut private companies’ role in Venezuela’s lucrative oil industry, and uses the state oil company to funnel billions of dollars to his social projects. He has nationalized the leading telephone company and the main electric utility. He speaks of wanting to drive a stake through the heart of capitalism, limiting the role of money and installing a barter system.
Now Mr. Chávez is taking his revolution to the Venezuelan countryside. “We must end latifundios,” he said in a televised speech in March, referring to large agrarian estates. “The people order it, and we will do it, whatever the cost.” Then he announced the seizure of a land area larger than the state of Rhode Island.
Since coming to power, the Chávez government has handed over 8.8 million acres, an area bigger than Maryland, for use by the poor. While much of this was state-owned land that was either idle or leased to ranchers, some 4.5 million acres were “recovered” from private owners, Mr. Chávez said recently. In some cases, the government compensated them. In most others, like Mr. Lecuna’s, it has simply turned a blind eye to land invasions.
The government bills land reform as a way to make Venezuela self-sufficient in food. But so far, the effect has been to undercut production of beef, sugar and other foods, as productive land is handed to city dwellers with no knowledge of farming. Established farmers and ranchers, fearing their land may be seized next, are cutting investment in their operations to a minimum.
The chaos in the countryside has contributed to shortages in basic items like milk and meat, a paradox in a country enjoying an economic boom traceable to high oil prices. Also spurring the shortages are price controls on certain foods that keep them priced below the cost of production. Meanwhile, 19%-plus inflation — as oil revenue floods the economy — spurs panic buying: purchasing price-controlled and other goods the shopper might not immediately need for fear of having higher prices in the future or not finding the items at all.
“You get up at dawn to hunt for a breast of chicken all over town. Housewives are in a foul mood,” says Lucylde González, a Caracas homemaker, who says she hasn’t seen an egg in a week.
After squatters took part of Mr. Lecuna’s land, his bank said he could no longer use what remained as collateral for loans, and asked him to put up a Caracas office building he owns instead. Mr. Lecuna says he can’t get financing from state banks, because they now won’t lend to farmers with more than 100 acres. He has stopped buying fertilizer and machinery. “I’m afraid of investing,” he says. In addition, kidnappings of farmers and ranchers for ransom are on the rise, and scandals have plagued the co-op program.
Mr. Chávez blames the shortages on “speculation” by distributors and producers. Agriculture Minister Elias Jaua recently called a news conference to deny there’s been any decline in food production during the eight years of Chávez rule. The central bank stopped publishing agricultural statistics in 2005. A private farm association called Fedeagro estimates Venezuela grew 8% less food last year than the year before, citing factors including the price controls, land seizures and the wave of kidnappings of farmers. — May 17, 2007, WSJ.com

Perhaps it is time to watch Commanding Heights online again, particularly the segments on 1990 Germany and Poland.

The Politics of Plenty

[Added 2007.06.08] Found an interesting tidbit in the Lexington column where they reviewed The Age of Abundance: How Prosperity Transformed America’s Politics and Culture by Brink Lindsey:

To Mr Lindsey, the two movements offered conflicting half-truths. The counter-cultural left combined genuine liberation with dangerous excess, while the traditionalist right mixed reaction with a desire to preserve some precious institutions, such as marriage. The left attacked capitalism while rejoicing in its fruits; the other side celebrated capitalism but denounced the social dynamism it unleashed. Both movements also swallowed an unhealthy dose of unreason. The Aquarians elevated distrust of authority to the status of dogma and “ransack[ed] ancient faiths for useful jargon” that might justify “getting high, getting laid and getting out of the materialistic rat race”. Evangelicalism, meanwhile, “marked a dismal intellectual regress in American religion [and a] blatant denial of scientific reality.” — The Economist