This week (I thought it was today, but the first post was on Tuesday 24 June 2007), marks the first birthday of the spike. It’s been a fun ride, so far, with lots of interesting discussion, entertaining fights and illuminating argument. Some 30 000 unique visitors have come by, of which 20% constitute a hard core of regular readers. The average month entertains about 4 000 unique visitors with around 8 000 unique page views. This is more than I’d hoped for, from such an eclectic, general-interest one-man-show such as the spike.

I have readers in 160 countries, including the Faroe Islands, Congo, Rwanda, Kazakhstan, Grenada, Montenegro and Guam. South Africa accounts for about half my visitors, followed by the United States, United Kingdom, Canada, Australia, Germany, Norway, India, Ireland, France and the Netherlands.

Of the 510 posts to date, the most popular were about the David Bullard affair. If anyone doubts his claims to popularity, don’t. He’s more popular than teen sex (see below).

Another ongoing favourite is the collection of cool computer mods posted back in August last year, and augmented by another brilliant steampunk job in April this year.

Other popular posts have been about teen hanky panky (who’da thunk?), why I don’t buy orthodox global warming alarmism and the case of the non-endangered polar bear, a controversial view on child labour in China and what, if anything, we should do about it, as well as a tribute to Kevin Carter’s photojournalism. And who can forget the charming personality and intelligent discourse of Miss South Carolina? She was just a silly segue from a serious piece on George W Bush; who would have thought anyone could be more popular than the Chief?

Though one of my core interests, economics, is further down the list if you rank individual posts, it does turn up in the search terms used to find the spike. Other than my name, popular search words include “public perception nuclear”, “gold stuff site:ivo.co.za”, “rising oil price inflation”, “al gore investment company”, “zimbabwe failed state”, “food inflation + underlying causes”, “resolution recycling”, “global warming”, “arguments against global warming”, “100 scientists bali”, and, of course, “david bullard”.

I’d like to thank everyone who contributed to the 1 153 comments received to date, and the many sites that have discussed or linked to my posts. Many great points have been raised, and much healthy debate fostered. They have broadened my thinking, honed my arguments, and generally been a lot of fun. Thanks for taking the time to have these discussions. This toast is to you.

PS. It seems the WP-Footnotes plugin does something evil with character encoding in Safari, or spews out garbage upon returning to the body copy. It works on Firefox and Opera, which is where I usually preview posts. Sadly, the plugin author’s wep-page doesn’t render in Firefox 3.0. I’ve removed the footnote and added a paranthesis in the first sentence to resolve this problem, and won’t be using this very useful feature in future. Annoying.

Now why would anyone want to think South Africa is in deep crisis? If yesterday’s open letter to Jacob Zuma by Alec Hogg wasn’t enough to convince you, how about a deadly shootout between opposing police forces?

It appears there is now open warfare between the South African Police Service (SAPS) and the Johannesburg Metropolitan Police Department (JMPD). The former is the national police, run by fat-cat gangsters. The latter are a bunch of glorified traffic cops, most related to each other, who spend their days getting fat, extorting bribes, and beating up girls in bars.

Writes the Sowetan’s Mfundekelwa Mkhulisi:

Members of the South African Police Services (SAPS) fired rubber bullets during a stand-off with their Johannesburg Metro Police Department (JMPD) counterparts on the M2 Highway in Johannesburg last night.

“Metro police blocked the flow of traffic on the M2 and when police intervened they fired live ammunition and police returned with rubber bullets,” police spokesman Julia Claassen said.

The entire city centre came to a grinding halt, as bystanders fled for their lives and hid under their cars. The Times reports that a police spokeman couldn’t get to the scene, and couldn’t get a report on the gun-battle because police officers had switched off their cellphones. Its coverage, by Werner Swart and Thabo Mkhize, also says one cop may have died in the stand-off:

Protesting Metro police caused chaos yesterday when they sealed-off the Johannesburg CBD, preventing thousands of motorists from leaving the city centre and sparking a deadly clash with the South African Police Service.

The violence may have resulted in the death of one metro officer, but the SAPS were unable to confirm this last night. Seven metro officers were injured.

The clash came after hundreds of metro policemen, in full uniform, blocked access to highway on-ramps and off-ramps ringing the city last night, in protest over a salary dispute with their employer.

SAPS officers fired rubber bullets to disperse their unruly metro colleagues, said spokesman Supertintendent Eugene Opperman.

He said the metro officers returned fire with live ammunition. The police are now investigating cases of attempted murder against the metro police officers.

Terrified motorists told The Times how officers had threatened motorists and brought traffic to a standstill. At some intersections, officers used concrete bins to block the path of motorists trying to make their way home.

Here’s the Mail & Guardian Online’s take on the story:

Protesting metro police officers fired live ammunition at South African Police Service (SAPS) members in Johannesburg on Wednesday.

SAPS Gauteng police spokesperson Superintendent Eugene Opperman said the police had been forced to fire rubber bullets at metro police members who had blockaded the city, causing traffic gridlock.

Seven metro police officers — three women and four men — were injured during the police action, Opperman said.

The exchange occurred in the Eloff Street/M2 highway area.

The protests were triggered by complaints over salaries and nepotism. Strikers said they would not return to work until their grievances had been addressed.

Major roads and highways were blocked, causing traffic havoc.

Said Opperman: “The SAPS deplores the conflict-seeking type of protest by the Johannesburg metro police.

Come foreigners! Come football fans! Welcome to our fair land, and bring your euros with you! (Dollars can be exchanged for real currency or a flack jacket upon arrival at OR Tambo International Airport. Even Metro cops won’t accept dollars for bribes.)

If I were an honest cop in that department, I would resign in disgust, today, and publicly announce this fact. Anyone who doesn’t, deserves the stigma of being a Johannesburg Metropolitan Pig Thug.

More than that, this appalling behaviour calls for the immediate disbandment of the Metropolitan Police. Arrest anyone who took part in the protest, and lock them up. Make sure they never work in a position of responsibility again, lest innocent companies (such as private security firms) accidentally hire disgruntled homicidal maniacs.

The concept of a Metro police force is a good one. A national force isn’t very good at local policing, traffic management and by-law enforcement. After all, they have police commissioners to catch. But when local police start shooting at national police, something appears to be somewhat wrong. I don’t mean to whinge, you understand, or sound pessimistic, but perhaps someone over at SA Rocks can explain how else one should feel about this sort of thing, or exactly what we should do about it. Other than grin, bear it, and send Nelson Mandela birthday wishes.

I’ve sent him a wish. It read, “Sorry, Madiba, that you had to live to see this.”

Considering specific corruption cases in isolation may provoke outrage, but it’s a cop-out. It’s a defence mechanism against despair. Because a full litany of the depth of the crisis in South Africa makes depressing reading. Alec Hogg, the editor in chief of Moneyweb, writes such a litany in his open letter to ANC president Jacob Zuma, prompted by the finding in a recent survey that nine of every ten South Africans consider corruption to be a way of life.

The letter is worth reading in its entirety, if only to be reminded of the weight of evidence against individuals involved in public and private corruption in recent years — some of whom remain unmolested by public reproof or legal censure.

I’m doubtful whether it will have much impact. The fact that Hogg feels the need to resort to transparent flattery, and to gloss over Zuma’s own proximity to, tolerance for, or involvement in corruption, suggests that he knows the letter will not find a sympathetic ear. Nonetheless, it is a letter that had to be written, and should be read. Widely. Well done, Alec.

Free market advocates often hear the charge that they don’t care about the poor. That their belief in the power of markets driven by self-interest and the profit motive implies they’re selfish and egotistical. That the rich exploit the poor. That without government help, the poor would starve.

“Bah!” says the research data, “Humbug!”

Those who place themselves on the right of the political spectrum, according to the General Social Survey in the United States, “are happier, more generous to charities, less likely to commit suicide - and even hug their children more than those on the Left.”

The article in the UK’s Daily Mail is written by Peter Schweizer, a research fellow at the Hoover Institution at Stanford University. It begins light-heartedly, but makes a few telling observations.

It would seem that those who believe in the altruistic power of government merely shift their own feelings of reponsibility (or guilt) onto others. They feel they have the right to force their own notions of what is good, and what needs doing, on their fellow citizens, so they don’t have to bear the cost themselves.

By contrast, capitalists recognise that poverty is good for neither the poor nor the rich. You can’t get rich selling stuff to people with no money. They also can, and do, organise well-targeted charity intervention, promoting voluntarily the things they believe will help other people. Nobody has to accept the charity, and nobody is forced to pay for it against their will. If it doesn’t work, they pull the plug, and the freed capital is allocated to where it might do more good. Just like in the real world. That’s why it works.

What, then, explains the apparent leftward tilt of so many non-governmental organisations and charities? Perhaps they recognise that it is far easier just to get money from government, than to have to answer to private donors who actively manage their charity funding. Perhaps they seek to profit themselves from the “generosity” they enforce on others, and fail to recognise that the funding they draw a salary from has to be created by someone in the first place. Perhaps they just feel the selfish need for self-validation. “Look how unbearably good I am!”

Meanwhile, they apologise for having babies (truly, a friend of mine did so the other day!) and alarm those who share their pessimistic world-view with stories of population explosions and running out of resources. Who was it that said, “If he be like to die, he had better do it, and decrease the surplus population”? Oh yes, that was Scrooge, in Charles Dickens’ rendition of the fictional character.

The survey data quoted by Schweizer puts larges holes in the popular notion that free-market capitalists are simply greedy, or define their self-interest narrowly, or have a “stuff the poor” attitude towards the world. On the contrary: those on the left who (incorrectly) call themselves “progressive” or “liberal” are more likely to fit the generalisation of self-absorbed misanthropy.

Private charity, whether inspired by religion, personal morals or economic interests, predated the modern welfare state by centuries. It now has formidable competition, however, from monopoly services funded by the taxes of the rich. Let’s hope the private charity of generous capitalists doesn’t bleed to death, as the welfare state cuts away at the tastier bits of the goose that lays the golden eggs.

Last week, the Financial Mail led with a lengthy cover story on the oil price and its implications for the South African economy. It contains some very enlightening facts, such as a chart which shows that for every ten units of fuel South Africa uses for a unit of production, the United Stats uses only nine, and both China and the world average operate more efficiently, at eight units. Ours is a much more energy-intensive economy than even the United States. (So why exactly there’s a windmill on the graphic is beyond me.)

Our consumption of oil since 1980 is up by 60%, compared to 20% in the US, and minus 20% in many European countries. In an energy intensive economy that actually grows (unlike, say, Europe), this is to be expected, and in itself is a positive sign. But the article is right to point out that both of these facts put us at a comparative disadvantage when global oil prices rise.

What the article neglects, however, it to consider consumption as a function of price, which in South Africa is controlled by the state. Our fuel, like our electricity, has been kept cheap compared to competing economies, which means that we can — or could, until recently — afford to favour energy over other resources such as time, labour, or high-technology, to drive production. (Much of this is because our fuel tax is comparatively low. Still 27% too high, of course, as pointed out in a previous post, but much less than in many other economies.)

What is disappointing is that instead of a focus on how businesses can reduce fuel as a component in production, or a discussion of price, price controls and how they might affect both suppliers and consumers, the article spends much of its time talking up the alarmist scenarios of the Association for the Study of Peak Oil and Gas, known as ASPO. Price deregulation is relegated to a short sidebar by a different writer, which predictably notes that lifting price controls in a steeply rising market is likely to be a political non-starter.

ASPO is an outfit born out of “Peak Oil” alarmism, a group of assorted environmentalists, socialists, economic illiterates and special-interest lobbyists, who have been whingeing for decades about a looming peak in oil production. I’m pleased to see at least one oil company CEO, Tony Hayward of BP, has taken on ASPO president Kjell Aleklett, in a wager reminiscent of the famous bet between Paul Ehrlich and Julian Simon, on a similar subject: the scarcity of natural resources. Simon won that bet handily, and I’d urge Hayward to take Aleklett’s complaint about the low prize pot (or rather, barrel) at face value. Double up. Go all in. Maybe set something up so others can buy shares in the bet too.

Fair enough, the ASPO alarmists, headed in South Africa by one Simon Ratcliffe, have been asked to inform the Thabo Mbeki presidency’s scenario planning exercise about their whacky, apocalyptic prophesies, so perhaps their arguments deserve to be better known, lest they become deluded government policy. But one would expect a finance publication to be a little more critical in its assessment of ASPO’s claims.

The Peak Oil paranoiacs say that much of what they predicted appears to be coming to pass. Well, that’s not quite true. They predicted that we’d run out of oil and have a crisis. Or more accurately, that we’d reach a production peak and then have a crisis. Price never really featured in Peak Oil alarmism until the oil price began its most recent run-up, when it became a convenient “told you so” data point.

The obvious response to their argument has always been: it doesn’t really matter if we’re running out of underground oil, if it becomes more costly to exploit, or if Americans are too stupid to use their own underground oil resources.

If scarcity does not increase, the case is trivial. There’s no problem. If it does increase, however, prices will simply rise. If prices rise, consumers will be forced to become more efficient, and more uneconomical resources such as tar sands and alternative forms of energy will become more profitable. Canada’s vast shale oil deposits, previously hard or impossible to mine, are being exploited at full steam (if you’ll excuse the pun). Even at the current meagre recovery rate of about 10%, they are second only to Saudi Arabia in their bounty. If the extraction technology improves, they could double proven global oil reserves. Their exploitation became economical only recently, so this kind of expensive production wasn’t even considered by the Peak Oil doomsayers at the time. Their simplistic argument, if I recall correctly, went something along the lines of “if it takes more than the equivalent of a barrel of oil to extract a barrel, it cannot be economically extracted”. Better technology, higher prices, economies of scale, or other forms of energy, never entered the static, linear systems in their muddled little heads. But then, perhaps that’s because they won’t profit from finding and producing energy. I sure hope they’ve sold their shares in the stupid companies that are flocking to Canada for a piece of the action.

So, the price mechanism works its magic once again, and the “crisis” is a non-event. Scarcity is the very reason the price mechanism exists; without scarcity, it couldn’t exist. Price has always managed to distribute scarce resources to where they are most productive. It has always motivated people to find alternatives, or find better, more efficient ways of doing things.

But that’s not what the ASPO people say. They posit two “scenarios”. The first is “business as usual”, in which all of us are complete idiots and sit around ignoring scarcity and rising prices until we starve or kill each other (or both). As if we aren’t smart enough to economise or seek alternatives. Every day, you can hear people talking of ways to save fuel, including fairly extreme measures like moving closer to work, or working from home. Why would fuel be something unique? Why would consumers be insensitive to price rises until there is “a big oil shock”?

Shocks are only likely to occur in regulated markets, where producers and consumers are not able to adjust to surpluses or shortages, because of artificial restrictions, prices, taxes or other market distortions imposed by the state. Last year, the oil price took a breather, to the consternation of market watchers, who found it hard to comprehend a market so badly distorted by regulation, subsidies and outright extortion by governments.

The other ASPO scenario is wholesale restructuring of the economy, central-planning style. A vast web of quotas, rations, subsidies and taxes should be created, all with draconian legislative force. Combined with “a huge investment” in energy austerity and alternative energy sources, this, ASPO says, will solve all our problems and make us live happily ever after. Why it considers expensive fuel a “crisis”, but shrugs off a “huge investment” as just some bitter medicine we’ll have to swallow, is never quite explained. And what happens if our “huge investment” turns out to be misdirected, is never considered. No, the socialist panacea prescribed by Dr ASPO will cure all our ills. After all, the government knows what is best, and can make our commercial choices for us, since we’re too stupid to look after ourselves.

Let’s assume the underlying assertion that supplies are on an irreversible, long-term, downward trend are true. They may well be (beyond the trivial fact that no resource is infinite), though that is far from the only reason prices are rising, and anyone who makes firm predictions on when critical depletion would make oil unviable as a source of energy is either brave or stupid or both. But that oil will one day be too expensive to profitably extract is not an unreasonable expectation. That this will inevitably be followed by “societal and economic disintegration”, however, as Ratcliffe once told MiningMX.com, does not follow.

The fact that ASPO’s preachers make only two prophesies is very revealing. Both are extreme. One is designed to put the fear of god into policy makers and the voting public, so they’ll buy the other as their only salvation. ASPO looks suspiciously like a lobby for all those companies that today can’t make an honest buck selling alternative energy solutions or more economical equipment. I hope the government treats them with as much skepticism as it would treat the oil industry: as just another pressure group, lobbying for preferential treatment for their vested interests.

If the presidency accepts ASPO’s doomsday scenarios as likely, and formulates policy accordingly, I sure hope you’re in on Tony Hayward’s bet. Spare cash will come in handy in a socialist utopia.

The fairest and surest way to resolve this “crisis” is simply to set the market free. Deregulate prices, even if they rise as a result, and even if they put inefficient companies out of business. People will make a plan. They always have. The world didn’t end when the horse became obsolete, or electricity replaced gas. It became better, healthier, more productive. Let alternative solutions to high-priced fuel fight it out on a level playing field, where nobody is forced to use anyone’s solution, no solution is unfairly advantaged or held back by subsidies or taxes, and no nanny-state restrictions are in play. May the best solution win.

Here’s a great little piece by Jeffrey A. Tucker, the editor of Mises.org, on the delusional and self-serving habit of politicians, journalists and dinner party guests to declare that this or that price movement is a problem, or worse, that it is “unfair”.

I’ll extract the most salient sections from the article:

What kind of theory of the world insists that houses and stocks always go up in price, whereas gas and grain prices always go down? That doesn’t really make sense. A price is not set by natural law, nor are price movements intended to follow a preset pattern like the movements of stars. Prices are nothing but exchange ratios — points of agreement between buyer and seller. They reflect many factors, none of them fixed parts of the universe.

So why do we expect some to rise and some to fall? It all depends on whether you are in the position of a producer or a consumer. As homeowners, we are in fact “producers” of our homes; that is to say, we are holding them with the expectation of someday offering them for sale. The same is true of our stocks. We already own them, so of course we want the price to go up. Then we can sell them at a profit.

On the other hand, on things we intend to buy, things like gas and grain, we want the price to be as low as possible. We want their prices to fall. That way we save resources.

So what’s at work here is self-interest. Think of the same situation from the point of view of someone who is a first-time homebuyer. Does this person want high prices or low prices? Of course the answer is obvious. This person wants the lowest price possible, so for this person this “housing bust” is not a bust at all. It is a boon. But once this person becomes a homeowner, matters change. Now he wants prices to rise.

Now think of the gas station owner. If it didn’t affect how much he sold, would this person want prices to rise or fall? Of course, he wants the highest prices possible.

[…]

It’s the same in all markets. We can see that it is perfectly absurd to attempt to fashion national policy around the interests of only one party to an exchange. To try to keep house prices high and rising cheats the first-time buyer. To keep them low cheats the current owner. To keep grain prices high helps grain producers but hurts grain consumers. Some gas companies might like high gas prices, but consumers hate them. On the other hand, gas prices forced lower by dictate might thrill consumers but producers might end up hurting so much that they shut down. That helps no one.

[…]

There is no way to observe an existing price and declare it just or unjust. As St. Bernardino — a shrewd observer of economic affairs — said,

Water is usually cheap where it is abundant. But it can happen that on a mountain or in another place, water is scarce, not abundant. It may well happen that water is more highly esteemed than gold, because gold is more abundant in this place than water.

The Late Scholastics, followers of St. Thomas Aquinas, all agreed that the just price has no fixed position. It all depends on the common estimation of traders. Luis de Molina summed up the point:

A price is considered just or unjust not because of the nature of the things themselves — this would lead us to value them according to their nobility or perfection — but due to their ability to serve human utility. But this is the way in which they are appreciated by men, they therefore command a price in the market and in exchanges.

[…]

Now, there are ways for a price to become a matter of injustice. It can mask fraud. The prices can result from or be influenced by some act of force, such as price controls or taxation or restrictions on supply and demand. Behind each of these, we find coercion, a body of people who are mandating or restricting in a way that is incompatible with free choice. Arguably, this is not just.

We can conclude, then, that to the extent we complain about unjust gasoline prices, we need to look at the restrictions on refineries or exploration or drilling, or examine the role that high gas taxes have in pushing up prices beyond what they would be under conditions of free exchange.

And as for those who believe that all prices should move in ways that benefit their own particular economic interests at the expense of everyone else, don’t confuse your agenda with a matter of justice. […]

This article makes a nice introduction for the coming week’s project: poking holes in last week’s Financial Mail cover story, Spillover: SA’s response to soaring global oil prices.

One Mike “Mish” Shedlock posted a pretty shattering take-down of Ben Bernanke’s latest blubbering about the housing market and the credit crunch. It’s hard to believe that a central banker in the US so completely fails to grasp basic economics. I’ve written before about the issue of central banking and inflationary monetary policy, and its culpability for the economic woes in the US and the world. That inflation is a deliberate policy of increasing the money supply, via low central-bank interest rates, and that a rising price level is merely an effect of inflation, which is to be expected when you increase the amount of currency in circulation, competing for the same amount of goods and services. (See here and here, for example, or spend an evening to read the Ludwig von Mises lecture notes I linked to here). But unlike Alan Greenspan, who simply worms his way out of accusations over his interest rate policy, Bernanke doesn’t even understand what inflation is, or how interest rates cause it. If he doesn’t grasp such elementary principles of central banking, why does he have the job?

The best quip is this:

This would be funny if it wasn’t pitiful. “A rough stabilization of commodity prices, even at high levels, would result in a relatively rapid moderation of inflation.” Translation: Inflation will stop once prices stop going up. Was that supposed to be a revelation? That was pathetic even for someone who thinks inflation is about prices.

That must be pretty embarrassing, if you’re the chairman of the US Federal Reserve. I entirely agree with Mish’s conclusion, too:

I have a simple solution for this madness: Want To Fix The Fed? Get Rid Of It.

That’s exactly the solution. If government price controls are a problem, causing either shortages (in the case of price caps) or surpluses (in the case of price floors), whoever thought it would be a good idea for the government to control the price of money and credit? That causes surpluses and shortages too, popularly known as “booms and busts”, or “the business cycle”. Except that business doesn’t cause it, but merely suffers the effects.

Via a mailing list I discovered a stunning series of photograhs of machinery taken at the Hagley Museum, set among beautiful gardens at the original gunpowder mill built by Eleuthère Irénée du Pont in 1803 in Delaware in the US. The museum includes several restored buildings, and offers a romantic, languorous view on America’s industrial past.

Selecting just one example of the photography was hard, because the composition, textures, colours and lighting in all shots are just beautiful — do view the rest of the set — but I particularly like this press:

The photographer, Harold Ross, specialises in techniques such as light painting, used in the Hagley series, and has a great porfolio at the Ross Studios website.

Who said machines are ugly? Who said Charles Dickens wrote all you need to know about the industrial revolution?

As of this week, I will be writing a weekly column on technology and telecommunications for old friends at ITWeb — a top technology news site in South Africa with readership that slightly exceeds that of this blog, albeit by only a few orders of magnitude. The idea is to comment on issues that come up in ITWeb news stories, through my usual political or economic policy lens. It will initially be published on Thursdays. I’ll still write a separate monthly column, “Backbite & Sneerwell”, in Brainstorm magazine (link for subscribers). After all, it dates back to 2001, and is my longest-running effort at commentary. I will also continue to write columns on topics other than technology in Maverick magazine.

Last week I wrote a trial run for the new column, on the monstrously bad idea of having the state establish a local set-top box industry for digital television because “we’re loathe to rely on foreign suppliers”. This week, The Spike proper begins, with a final stab at one of cabinet’s most deserving members, Poison Ivy.