Category: Free Markets

Even Alibaba Entrepreneur Jack Ma Cannot Speak His Mind in Communist China

(p. A1) Chinese President Xi Jinping personally made the decision to halt the initial public offering of Ant Group, which would have been the world’s biggest, after controlling shareholder Jack Ma infuriated government leaders, according to Chinese officials with knowledge of the matter.

. . .

In a speech on Oct. 24 [2020], days before the financial-technology giant was set to go public, Mr. Ma cited Mr. Xi’s words in what top government officials saw as an effort to burnish his own image and tarnish that of regulators, these people said.

At the event in Shanghai, Mr. Ma, the country’s richest man, quoted Mr. Xi saying, “Success does not have to come from me.” As a result, the tech executive said, he wanted to help solve China’s financial problems through innovation. Mr. Ma bluntly criticized the government’s increasingly tight financial regulation for holding back technology development, part of a long-running battle between Ant and its overseers.

. . .

During his 21-minute speech, he criticized Beijing’s campaign to control financial risks. “There is no systemic risk in China’s financial system,” he said. “Chinese finance has no system.”

He also took aim at the regulators, saying they “have only focused on risks and overlooked development.” He accused big Chinese banks of harboring a “pawnshop mentality.” That, Mr. Ma said, has “hurt a lot of entrepreneurs.”

His remarks went viral on Chinese social media, where some users applauded Mr. Ma for daring to speak out. In Beijing, though, senior officials were angry, and officials long calling for tighter financial regulation spoke up.

After Mr. Xi decided that Ant’s IPO needed to be halted, financial regulators led by Mr. Liu, the leader’s economic czar, convened on Oct. 31 and mapped out an action plan to take Mr. Ma to task, according to the government officials familiar with the decision-making.

For the full story, see:

Jing Yang and Lingling Wei. “China’s President Personally Scuttled Record Ant IPO.” The Wall Street Journal (Friday, Nov 13, 2020): A1 & A9.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the story has the date November 12, 2020, and has the title “China’s President Xi Jinping Personally Scuttled Jack Ma’s Ant IPO.”)

Tariffs Create Incentive to Drink Higher Alcohol Wine

(p. A1) Washington put 25% tariffs on wine from France, Spain, Germany and the U.K. in October 2019 in retaliation for subsidies they made to European aircraft man-(p. A9)ufacturer Airbus SE, arguing they hurt Boeing Co. But it applied only to wine with alcohol content of 14% or less.

What followed was a textbook lesson in tariff economics. Before, America imported about $150 million a year in European wine that exceeded 14% alcohol, Commerce Department data show. In the 12 months since the tariff took effect, that rose to $434 million.

For the full story, see:

Josh Zumbrun. “America Taxed Your Favorite Bordeaux? Try One With More Alcohol.” The Wall Street Journal (Friday, Nov 20, 2020): A1 & A9.

(Note: the online version of the story has the date November 19, 2020, and has the title “The Tale Behind StubHub’s Sale: How Eric Baker Bought Back the Ticket Seller.”)

Federal Sugar Quotas Increase Demand for Corn Syrup, Increasing Suffering from Gout

Corn syrup is a substitute for sugar. Federal sugar import quotas increase the price of sugar. As a result, the demand for corn syrup increases. The result, as affirmed in the article quoted below, is an increase in Americans suffering from gout.

(p. 32) As the British and American historians Roy Porter and George Sebastian Rousseau write in “Gout: The Patrician Malady” (1998), the disease, cast by some as “a quasi-deity born of the union of Bacchus and Venus,” appeared to reach epidemic proportions in 18th-century England as more people attained affluence.

. . .

The disease has not been banished to the past, nor is it any longer the exclusive insignia of rich white men (if it ever really was). From the 1960s to the 1990s, the number of sufferers more than doubled in the United States, and that’s continued to rise.

. . .

According to data collected by the National Health and Nutrition Examination Survey (NHANES), as of 2016, around 9.2 million American adults, 5.9 million men and 3.3 million women, were living with the disease, making up 3.9 percent of the adult population, and another 32.5 million (14.6 percent) exhibited hyperuricemia, elevated levels of uric acid, putting them at risk.

. . .

Some scientists point (p. 34) to the dramatic rise in rates of obesity — from 13.4 percent of adults in 1980 to 42.4 percent in 2017-18, again per the NHANES — since excess weight depresses kidney efficiency, and to the likely not unrelated introduction, in 1967, of high-fructose corn syrup, which can cause the body to produce higher levels of uric acid, and its wholesale embrace in the early 1980s by the American food industry and then the world.

. . .

(p. 35) The disease remains mysterious in its onset. Beyond genetic factors, high-fructose corn syrup poses a greater danger than a lobe of foie gras, cutting across class lines.

For the full story, see:

Ligaya Mishan. “The Disease of Kings.” The New York Times Style Magazine (Sunday, November 15, 2020): 32 & 34-35.

(Note: ellipses added.)

(Note: the online version of the story was updated Nov. 14, 2020, and has the title “Once the Disease of Gluttonous Aristocrats, Gout Is Now Tormenting the Masses.”)

“When I Knew More Thank Hayek” AIER YouTube Video

The American Institute for Economic Research (AIER) premiered on Mon., Jan. 4, 2020, a neat YouTube video they created based on a shortened version of my article “When I Knew More Than Hayek.” [Hayek, Covid & The Use of Knowledge in Society | Kate Wand via @youtube] #Hayek #localknowledge

Water Entrepreneurs in Kathmandu: “The City Depends on Us”

(p. 1) KATHMANDU, Nepal — It had been 11 days since a ruptured valve reduced Kupondole district’s pipeline flow to a dribble, and the phones at Pradeep Tamanz’s tanker business wouldn’t stop ringing.

A Malaysian embassy residence had run perilously low on water, and the diplomats wanted to shower. They’d pay extra for a swift delivery. A coffee processing plant was on the verge of shutting down production after emptying its storage tank. It, too, would shell out whatever amount of money it would take. Across the neighborhood and other parts of the city, the calls were coming in so feverishly that Sanjay, a tanker driver, jokily wondered if he might get carjacked. “This is like liquid gold,” he said, jabbing at his precious cargo, large amounts of which seeped from every hatch. “Maybe more than gold.”

Dashing from filling stations to houses and factories and back, Mr. Tamanz tried to meet demand. His (p. 6) three tanker crews slept in one or two-hour spurts, often in the cramped, refrigerator-sized truck cabins, and kept the tankers on the road for up to 19 hours a day. He fobbed off business to competitors, an unusual practice in the cutthroat world of Kathmandu tanker men, and even sounded out a mechanic about converting a flatbed truck into a new tanker. With fat profits pouring in, the young businessman figured it might soon repay its cost.

But no matter how hard the crews worked or how furiously they pushed their lumbering vehicles over the potholed roads, there was no satisfying the city’s needs. The going was too slow. The water shortage too severe. By the time the pipeline was fully restored, some households had subsisted on nothing but small jerrycans for almost an entire month. “You know it’s not even peak season, but this is what happens here,” Mr. Tamanz said. “Just imagine what things would be like if we didn’t exist?” He trailed off as his phone rang once more.

In Kathmandu, as in much of South Asia and parts of the Middle East, South America and sub-Saharan Africa, these men and their tanker trucks sometimes prevent entire cities from running dry. Without them, millions of households wouldn’t have sufficient water to cook, clean or wash. Or perhaps any at all. And without them, an already deteriorating infrastructure might break down completely, as the tanker men know well. “The city depends on us,” said Maheswar Dahal, a businessman who owns six trucks in Kathmandu’s Jorpati district. “There would be disaster if we didn’t do our work.”

For the full story, see:

Peter Schwartzstein. “Merchants of Thirst.” The New York Times, SundayBusiness Section (Sunday, January 12, 2020): 1 & 6-7.

(Note: the online version of the story was updated on January 13, 2020, and has the title “The Merchants of Thirst.”)

“Publicly Held Companies Will Play the Political Game”

(p. A11) Mr. Chitester was probably the only PBS or NPR station manager who didn’t believe public radio and television should receive subsidies from American taxpayers. But he had a skill in short supply among the pro-capitalist intellectual class: He knew how to popularize free-market ideas, which many thought couldn’t be done on television.

He confesses that he isn’t sure he’d even heard of Friedman when Wallis put the two in touch. But Mr. Chitester says he devoured Friedman’s 1962 book, “Capitalism and Freedom,” and went to meet Milton and his wife, fellow economist and collaborator, Rose, at their San Francisco apartment.

An hour into the conversation, Mr. Chitester brought up a section in the book where Friedman talks about the responsibility of business—also the theme of Friedman’s famous 1970 New York Times essay, “The Social Responsibility of Business Is to Increase Its Profits.” Mr. Chitester described his dilemma: “I said to Milton, based on your philosophy, I shouldn’t be asking companies for money, and if they take your advice, they’re not going to give me any.”

“Bob, don’t worry about it,” Friedman reassured him. “Businessmen don’t like me anyway.” The economist elaborated. “He said private owners—those who own their own companies—they will be sympathetic. But corporations and publicly held companies will play the political game.” In other word, they’d be shy about supporting such a project lest it hurt them when seeking government funding.

. . .

. . . [Chitester] offers two suggestions for those dreaming about doing what he did.

“First,” he says, “you have to be a storyteller. Think of the people that have had meteoric rises to celebrity. They’ve been excellent storytellers. Free-market preachers if you will.”

. . .

. . . [second] to hopefully get people to think at least initially that I’m a nice person,” he says. “Because if they don’t think I’m a nice person, there’s nothing on the face of the earth I can do that will likely persuade them to listen to what I have to say.”

For the full interview, see:

William McGurn, interviewer. “THE WEEKEND INTERVIEW; The Man Who Made Milton Friedman a Star.” The Wall Street Journal (Saturday, Oct 31, 2020): A11.

(Note: ellipses, and bracketed words, added.)

(Note: the online version of the interview has the date Oct. 30, 2020, and has the same title as the print version.)

The Friedman book mentioned in the passage quoted above is:

Friedman, Milton. Capitalism and Freedom. Chicago: The University of Chicago Press, 1962.

Chinese Communists Have Failed to Reform Toward Free Markets

(p. B6) China is the only major world economy reporting any economic growth today. It went first into Covid-19 and was first out, grinding out 3.2% growth in the most recent quarter while the U.S. shrank 9.5% and other advanced economies endured double-digit declines. High-tech monitoring, comprehensive testing and aggressive top-down containment measures enabled China to get the virus under control while others struggled. The Middle Kingdom may even deliver a modest year-over-year economic expansion in 2020.

This rebound is real, but behind the short-term numbers the economic restart is dubious. China’s growth spurt isn’t the beginning of a robust recovery but an uneven bounce fueled by infrastructure construction.

. . .

An honest look at the forces behind China’s growth this year shows a doubling down on state-managed solutions, not real reform. State-owned entities, or SOEs, drove China’s investment-led recovery.

. . .

For years, the world has watched and waited for China to become more like a free-market economy, thereby reducing American security concerns. At a time of profound stress world-wide, the multiple gauges of reform we have been monitoring through the China Dashboard point in the opposite direction. China’s economic norms are diverging from, rather than converging with, the West’s. Long-promised changes detailed at the beginning of the Xi era haven’t materialized.

Though Beijing talks about “market allocation” efficiency, it isn’t guided by what mainstream economists would call market principles. The Chinese economy is instead a system of state capitalism in which the arbiter is an uncontestable political authority. That may or may not work for China, but it isn’t what liberal democracies thought they would get when they invited China to take a leading role in the world economy.

For the full commentary, see:

Daniel Rosen, and Kevin Rudd. “China Backslides on Economic Reform.” The Wall Street Journal (Wednesday, September 23, 2020): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Sep. 22, 2020, and has the same title as the print version.)

“The Last Bastion of Freedom in the Chinese-Speaking World”

(p. A14) The new security rules for Hong Kong that China passed this week — without input from the city’s Beijing-backed leadership — have made Mr. Xi’s promise of autonomy under the “one country, two systems” framework seem hollow. And it has raised fears that China will move more aggressively to bring Taiwan, too, under its control.

. . .

In recent weeks, China has buzzed Taiwan’s territorial airspace almost daily. It accused Taiwan’s president, Tsai Ing-wen, of carrying out a “separatist plot” by speaking at an international democracy forum. It has warned the Taiwan government to stop providing shelter to Hong Kong political activists, who are flocking to what they call the last bastion of freedom in the Chinese-speaking world.

For the full story, see:

Javier C. Hernández and Steven Lee Myers. “Taiwan Sees Ominous Signs for Its Own Autonomy.” The New York Times (Thursday, July 2, 2020): A14-A15.

(Note: ellipsis added.)

(Note: the online version of the story has the date July 1, 2020, and has the title “As China Strengthens Grip on Hong Kong, Taiwan Sees a Threat.”)

Despite Global Trading Routes, in Year 1000 Most Ordinary People Rejected the Unfamiliar

(p. C8) Valerie Hansen’s “The Year 1000: When Explorers Connected the World—and Globalization Began” is a gripping account of exploration and ingenuity, sweeping across the economic alliances and great networks of trade that connected disparate regions around the globe. By touching down in different parts of the world at that precise moment, Ms. Hansen reveals the social and economic changes that linked individuals and societies in astonishing ways.

. . .

People navigated along the trading routes from China to the Persian Gulf and East Africa, and from Scandinavia to North America and the Caspian Sea, long before da Gama, Magellan and Columbus. But for most ordinary people life was still circumscribed. Globalization in 1000 may have opened the world to rulers—and busy ports and cities like Quanzhou and Bukhara may have hosted culturally and religiously diverse populations—but there was little sense of a wider, cosmopolitan embrace of a common humanity. “The most important lesson we can learn from our forebears is how best to react to the unfamiliar,” Ms. Hansen writes. “Those who remained open to the unfamiliar did much better than those who rejected anything new.”

For the full review, see:

Karin Altenberg. “Setting The Globe Spinning.” The Wall Street Journal (Saturday, May 23, 2020): C8.

(Note: ellipsis added.)

(Note: the online version of the review has the date May 22, 2020, and has the title “The Year 1000’ Review: Setting the Globe Spinning.”)

The book under review is:

Hansen, Valerie. The Year 1000: When Explorers Connected the World—and Globalization Began. New York: Scribner, 2020.

In Past Decade Bean-to-Bar Chocolate Makers Grow from Five to 250

(p. D1) According to the Fine Chocolate Industry Association, sales of premium chocolates grew 19 percent in 2018, compared with 0.6 percent for mainstream chocolate like the classic Hershey bar. Over the past decade, the number of small American bean-to-bar chocolate producers — the kind with cacao percentages and places of origin printed on those hyper-chic labels — has jumped from about five to more than 250.

. . .

(p. D4) The cacao beans (also called cocoa beans) are the seeds that grow inside the pod, surrounded by fleshy, juicy fruit that tastes a little like a mango crossed with a pear that was carrying a lychee. After harvesting, the beans are fermented for up to a week to develop their flavors, and dried.

To make chocolate, the dried beans are roasted, then cracked to separate the outer husks from the inner nibs, which have a nutty, earthy flavor and crunchy texture — and are excellent added to baked goods. The nibs are about half cocoa solids and half cocoa butter.

Chocolate makers grind the nibs into what’s called chocolate liquor, or chocolate paste. This liquor is ground again, along with sugar and other ingredients that might include milk powder to make milk chocolate, lecithin to smooth the texture, or vanilla for flavor.

. . .

The new wave of craft chocolate began with Scharffen Berger, founded in 1996 by Mr. Scharffenberger, a winemaker, and Robert Steinberg, who had studied at the famous chocolate shop Bernachon, in Lyon, France.

“When we started, there were only nine companies grinding their own cacao in the United States and they were all huge, except for Guittard,” Mr. Scharffenberger said, referring to the Guittard Chocolate Company, also in the San Francisco area. “We were the first new chocolate maker on the scene in 150 years.”

When Gary Guittard, the company’s fourth-generation owner, sampled some of Scharffen Berger’s chocolate, it spurred him to revamp his own production, in some cases going back to the way his great-grandfather made chocolate when he started the company in 1868.

“Scharffen Berger was the disrupter,” Mr. Guittard said. “Trying their chocolate was just terrible for me. It opened my eyes to a world of flavors that had been present in our chocolates 50 years ago, but that were lost. We had to change everything to get them back.”

Scharffen Berger was sold in 2005 to the Hershey Company, which moved the operation to Illinois. But other small bean-to-bar makers quickly followed Scharffen Berger’s lead. There are now more than 250 in the United States. And even though Brooklyn, contrary to popular belief, didn’t invent the bean-to-bar craze, it has several producers, including Kahkow, Cacao Prieto, Jacques Torres, Raaka and Fine & Raw.

. . .

A bean-to-bar maker makes chocolate from cacao beans. A chocolatier buys premade chocolate, then melts it and combines it with other ingredients to make confections like truffles or pralines. And this isn’t at all a bad thing: The best chocolatiers buy superb bean-to-bar chocolate as a starting point. (Many professional chocolatiers buy from Valrhona.) It’s just that making chocolate and making chocolate confections are two different skill sets.

For the full story, see:

Melissa Clark. “From Bean To Bar And Beyond.” The New York Times (Wednesday, February 12, 2020): D1 & D4-D5.

(Note: ellipses added.)

(Note: the online version of the story was updated Feb. 13, 2020, and has the title “Everything You Don’t Know About Chocolate.”)