Drew Carey on Free Trade

Drew Carey in another installment of his series at Reason.tv takes a swing at the U.S. protectionists' (Obama-types) fear mongering over NAFTA.



Something that's rarely understood by protectionist all over the world is that the biggest source of "job losses" is technology, not free trade agreements. The emergence of Digital Cameras have dented the guys who sell films. small-time Christmas/Vesak-card vendors are feeling the pinch because of SMS. Does this mean these technologies need to be banned, discouraged or taxed away at least until "everyone adjusts"? Protectionist usually don't say stuff like that.

In all economic activity, whether you buy this soap over that one, or go to KFC instead of McDonald's, you create winners and losers. Should you be fined for picking one over the other? Free Trade (or international trade) just allows you to do this across a political border. There's nothing special about international trade, that isn't also true about domestic trade, except for the fact that governments have introduced barriers. I agree with those who say, that the source of much of protectionist opposition to free trade comes from the fact that in international trade, the trading partner is a "foreigner".

If you haven't already, go See the video. It's drew carey! (I love that end bit)

Related Link :Tyler Cowen : This Global Show must go on

P.S : Now that the primaries are over, Obama is a "pro-growth, free-market guy". Heh.

What's Sri Lanka's gas tax?

As readers of this blog would know, I have been trying to figure out what the total tax for petrol and diesel in Sri Lanka. I put the question out in a related article in LBO. Some people responded, you can read them here. I'm reproducing, without permission, the comment by ddm (who, by the way, I wish blogged more) :

given the frequent changes it's hard to keep track, but the best source is the customs website's tariff calculator. It's not 100% up to date but it's the closest freely accessible source of tariff information.

Before the change in May it was something like this;

Petrol - customs duty of Rs.5 per litre and a surcharge of 10% on this Rs. 5 which makes it R.s 5.50 per litre. Excise duty of Rs. 20 per litre, VAT 15% (in the last budget it was brought down to 5% but I'm not sure where this stands at the minute), Ports and Airports levy 3% and social responsibility levy of 1.5%. This is when petrol is completely imported as it is done by LIOC.

So if petrol costs Rs. 127 per litre CIF, the taxes on this would be Rs.38 at 5% VAT at Rs. 57 at 15% VAT.

According to Customs there are no tariffs, VAT, or any other levies on crude oil imports - and CPC refines 50% of its petroleum from crude oil imports (but still pays the VAT, excise on the petrol retail price).

For Diesel, again prior to changes in March, there was no customs duty or VAT, there was a Rs. 2.50 per litre excise duty, 3% PAL and 1.5% SRL.

But do check out www.customs.gov.lk - it's a great eye opener about how restrictive our import regime is. [link]

So, according to this, before the increase in May (Which was a whopping 37% for Diesel and some 23% for Petrol) The total tax is about 30% of the retail price of petrol at 5% VAT and about 44% at 15% VAT. TheIndian article, which quotes an Association of Indian Chamber of Commerce official is probably just about right when they say the total tax for petrol in Sri Lanka comes to about 37% of the retail price. That's high.

More on petroleum on deaned.

p.s. : Blogging is slow these days. I'm suddenly very busy and every time I do blog, I can think of 100 other things I "should" be doing. So if this doesn't update often, don't be surprised.

War against Men

According to the Daily Mirror all Sri Lankan males (and some females) are criminals. Here's a report,

Women and Child Bureau (WCB) is filing legal action against Sri Lankans appearing in pornographic videos and pictures on the internet violating the Indecent Publication Act of 1983 Article No. 23.

On information provided by anonymous sources, the WCB was conducting investigations into the people posing for illegal video and pictures for internet websites, CI, Buddhika Balachandran of the WCB said.

“Most of the people have been posted on the internet didn’t know about it,” CI Balachandran said. The WCB is using the provisions made in the legal system and will take legal action against the relevant parties.

Initial investigations which began a month ago have found 20 cases but he thinks the issue to be deep-rooted with many other cases, CI Ariyaratna said. The WCB hopes to charge the maximum fine of Rs. 10,000 with a definite jail sentence of more than one year for the parties who are found guilty he said.

Although he believes the fine was not tough and needs a revision, he was willing to take legal steps to deter people from encouraging and taking part in such videos and pictures.

According to him it was against the law for a Sri Lankan to be watching pornographic material [link]

Bugger. I can have sex, get married, booze, join the army but no says mommydaddy government, "you can't watch porn!".

[link sent in by Nm]

Postscript : DailyMirror is updating their site. That's great. But in the meantime (or most probably forever) they have broken all the old links. That's poor web strategy. Now all the old links need to be prefixed by a dailymirror.wijeya.lk address instead of the dailymirror.lk domain, which I assume is where the suppsed "2.0" site will be hosted.

The Ultimate Inconvinent Truth

Yet another one of those global warming hypocrisies, this time from the patron saint himself.

In the year since Al Gore took steps to make his home more energy-efficient, the former Vice President’s home energy use surged more than 10%, according to the Tennessee Center for Policy Research.

“A man’s commitment to his beliefs is best measured by what he does behind the closed doors of his own home,” said Drew Johnson, President of the Tennessee Center for Policy Research. “Al Gore is a hypocrite and a fraud when it comes to his commitment to the environment, judging by his home energy consumption.”

In the past year, Gore’s home burned through 213,210 kilowatt-hours (kWh) of electricity, enough to power 232 average American households for a month.

In February 2007, An Inconvenient Truth, a film based on a climate change speech developed by Gore, won an Academy Award for best documentary feature. The next day, the Tennessee Center for Policy Research uncovered that Gore’s Nashville home guzzled 20 times more electricity than the average American household.

After the Tennessee Center for Policy Research exposed Gore’s massive home energy use, the former Vice President scurried to make his home more energy-efficient. Despite adding solar panels, installing a geothermal system, replacing existing light bulbs with more efficient models, and overhauling the home’s windows and ductwork, Gore now consumes more electricity than before the “green” overhaul.

Since taking steps to make his home more environmentally-friendly last June, Gore devours an average of 17,768 kWh per month –1,638 kWh more energy per month than before the renovations – at a cost of $16,533. By comparison, the average American household consumes 11,040 kWh in an entire year, according to the Energy Information Administration. (read more)

What's the call-back procedure for the Nobel Peace Prize?

[link via India Uncut]

Bono

This really touched me..

Bono, lead singer of the rock band U2, is famous throughout the entertainment industry for being more than just a little self-righteous.

At a recent U2 concert in Glasgow, Scotland, he asked the audience for total quiet.

Then, in the silence, he started to slowly clap his hands, once every few seconds. Holding the audience in total silence, he said into the microphone, 'Every time I clap my hands, a child in Africa dies.'

From the front of the crowd a voice with a broad Scottish accent pierced the quiet ...

'Well, fookin' stop doin it then, ya evil bastard!' [link]

in all the funny places...

[Link via Atanu Dey]

Honest about Inflation

Unlike his Sri Lankan counterpart (who, in his defence doesn't have a clue about these things) the finance minister of Pakistan, Sayed Naveed Qamar, has admited that government is responsible for inflation in that country, which stands about an "all time high" of 11% (Sri Lankan inflation is at about 26% under a supressed index). Here's an excerpt from his budget speech :

There was a phenomenal build‑up in subsidies in the budget, which are largely responsible for this huge deficit. These subsidies, totaling Rs. 407 billion include; petroleum Rs. 175 billion; electricity Rs. 133 billion; wheat Rs. 40 billion, and textiles and fertilizers Rs. 48 billion, of which only Rs. 114 billion were provided in the budget;

(6) Largely due to an exceptionally high fiscal deficit, balance of payments is facing unprecedented deficit as well. The current account deficit is projected at $ 11.9 billion or 7 % of GDP;

(7) Reserves have declined from a high of $ 16.5 billion in October, 2007 to less than $ 12.3 billion as at end April 2008. This has put pressure on the exchange rate which has depreciated by nearly 6.4 % during July 2007 to April 2008;

(8) Much of the deficit had to be financed from borrowing from the State Bank, which is like printing more money. As much as Rs. 551 billion (up to May 2008) have been borrowed from the central bank, which is unprecedented in country's history. It is not difficult to imagine what this printing of money means. With more money and no new production, only prices are likely to increase, which is what is happening. We have to stop this process otherwise the inflation will be running much higher than what it is at present, and as I noted it is already highest in country's history. [link] (emphasis mine)

Monetary policy, especially when there is no central bank indepdence (like in Sri Lanka, possibly even Pakistan) is inevitably linked to fiscal policy. At least Naveed Qamar has the good sense to admit that. Someone forgot to tell this to Sri Lankan policymakers.

[link via LBO]

Sri Lankan Petrol : Higher in than the U.S.

Seriously, have you ever wondered why the price of Petrol in Sri Lanka exceeds that of the United States? let's do the math,

1 Liters of Petrol in Sri Lanka costs about Rs.157 (Ceylon Petroleum Corporation prices)
1 gallon of Petrol (gasoline) in the U.S. costs about $4 (average price everywhere)
1 gallon (U.S.) = 3.785 Liters (ref.)
So 1 Liter of Petrol in the U.S. would cost : $4/3.785 = $1.057
in Sri Lankan rupees that would be : Rs.113 (at 1 LKR = 107.85 USD)

In other words petrol costs nearly 40% more in Sri Lanka than in the U.S. for a country where gasoline prices are set more or less by the state. The important question is why?

Well, for starters taxes seem to be lower in the U.S. averaging 47 cents to the gallon. This includes both sales and federal taxes, which comes to about a bit less than 12% of the total selling price whereas in Sri Lanka, total tax apparently comes to around 37% of the total price. (I'd be much obliged if anyone could confirm that figure).

The tax burden says nothing of that 7 Billion rupee loss incurred by the state-run CPC this year, which will inevitably have to be financed by the tax payer.

Another reason could be that while the U.S. gasoline market is dominated by privately owned firms which responds to market incentives, to invest in efficiencies whereas Sri Lanka market is state-dominated. This makes changing prices a politically motivated exercise, where as in the U.S. this happens daily (or very often) according to market conditions. Messing up with market signals, especially holding down prices artificially while incuring losses, like the practice in Sri Lanka makes necessary long-term investments on efficiency, etc. improbable. The result is at the end of the day they have lower prices, while we have higher ones.

In short, Sri Lankan policymakers can't escape the mess they have made in policy, however much the world crude oil prices have gone up. In economic development, that's what matters most -- policy. Not Oil prices, George W Bush, or some secret neoliberal plan to take over the world. Just how you work shit at home. Our policies suck at that and that's why we are poor.

Related on Deaned, Sri Lanka's retarded Oil policy.

Panties for Peace

Apparently, it's a campaign to support women in Burma. Here's from the Panties for Peace website,

The Panties for Peace campaign plays on the regime leaders’ superstitious fear that contact with a woman’s underpants will rob them of their power. Women around the world are asked to post their panties to local Burmese embassies in a bid to strip the regime of its power and bring an end to its gross violations of human rights, especially those committed against Burma’s women. [link]

Great, I'm starting the Sri Lankan chapter. So ladies, please peel em off, make sure they are clean and send them in. Can't you even do that for Burmese peace? Condition : I'll need photographic evidence of ownership.

[link via TimesEye]

Why British left India

According to an email that was sent to me, it's not because of Subash Candra Bhose, Bhagath Singh or even Gandhi, it's because of...


Jawaharlal Nehru Ji.

Steven Colbert could be a libertarian

Having the Libertarian presidential candidate Bob Barr on his show, Steven Colbert, the American satirist said the following,

"I, myself, am a Libertarian," he said. "I don't want big government to infringe on my right to tell other people how to live. [link]

Colbert, of whom, I'm a big fan was obviously kidding. I mean, that's what he does. But funnily enough, he could be a libertarian. A weird one, but still a libertarian.

See Libertarianism, is quite explicitly a political philosophy. A subset of moral philosophy and not an overarching social Philosophy. This essentially, I believe, is the difference between Classical Liberalism and Libertarianism. The former covers a range of things while the latter only deals with the proper role of violence in social life. That is, it only concerns with how the monopoly of force, vested in the state, should be used -- the primary and only concern of politics.

Murray Rothbard, sums this up nicely in an essay about Myths and Truths about Libertarianism,

Political theory deals with what is proper or improper for government to do, and government is distinguished from every other group in society as being the institution of organized violence. Libertarianism holds that the only proper role of violence is to defend person and property against violence, that any use of violence that goes beyond such just defense is itself aggressive, unjust, and criminal. Libertarianism, therefore, is a theory which states that everyone should be free of violent invasion, should be free to do as he sees fit, except invade the person or property of another. What a person does with his or her life is vital and important, but is simply irrelevant to libertarianism. [link]

This means Libertarians are a diverse bunch. Practically anybody could become a libertarian so long as you don't want to use force -- directly by your own initiation or indirectly through the state -- to achieve your goals. So even a racist, or even someone like Steven Colbert could be a libertarian, although if you have those tendencies you probably wouldn't be.

Like my friend Ron Paul likes to remind us, freedom is a package deal. If you believe in it, you have to tolerate and accept the fact that people will do things you don't like.

The video featuring Barr and Colbert was in Youtube, but unfortunately it seems to have been taken down. You can see it from the Comedy Central site, but their player kind of suck.

Special Note : What may appear as peaceful activities by the state -- taxation, regulation of any kind is actually not peaceful. It's an initiation of force, think of what will happen if you don't pay your taxes (and you get caught) you will be forced to pay, if you don't do that, you will be put in jail and if you resist arrest, then a gun will be leveled to your head.

Ajay Shah on Sri Lanka's inflation

A few days ago Ajay Shah, of whom I refer to a lot on this blog, has yet another excellent piece on inflation. Given his experience in Indian monetary policy, I asked him what he thought of high inflation in Sri Lanka and repeated claims by the Central Bank of Sri Lanka they are not responsible for it. Inflation hovers around 25% according to a newer CPI(N) index which among other things, excludes alcohol due to moral reasons. The old Index, which is no longer published, should indicate a rate well above 30%, which is the highest inflation I have lived through.

Anyways, here's what Ajay had to say replying to my question on his blog, which I'm reproducing here in full :

Deane, I don't know a lot about Sri Lanka. I can see a few problems, though.

From 1/1/02 onwards, LKR depreciation has averaged 2.2% per year. This doesn't sound very good, at a time when inflation has been high. Could this be setting the stage for trouble in the form of a speculative attack and a large depreciation?

When inflation is at 25%, why should citizens hold currency notes or nominal bank deposits? What is the trigger at which dollarisation (or rupeeisation) takes off? When that happens, LKR money supply to GDP will drop, the revenue potential of the inflation tax will go down, and the government will then have to set about building a better fiscal system. But along the way, on this route, things could get very painful.

Either in such a crisis, or ideally before it, the government would have to evaluate a monetary policy reform. This involves rewriting the core legislation governing the central bank, and getting it going afresh. One possibility is to run a currency board - though a currency board to the Indian rupee might make more sense to the extent that Indian GDP probably has a higher correlation with Sri Lankan GDP when compared with the correlation against US GDP.

Are intellectuals in Sri Lanka thinking about these things? They should be. It's better to think through these things ahead of time. Crises are good times to do economic reform - provided fully articulated and well thought out reforms proposals are at hand and can be pressed into service. Else, crises can lead to all sorts of wonky ideas getting used.

I'm totally unsympathetic when central bankers make excuses about inflation not being in their control. Look around the world: There are a lot of countries, all of which are facing the same shocks, but inflation hasn't crossed 5% in lots of them.

There are two kinds of blunders taking place. One class of blunders is the intellectual one - of people who haven't properly figured out monetary economics being placed in roles of running central banks. The other kind of blunder is that of institutional design - of a central bank that is not properly structured to focus on the task of inflation. [link | comments section. we have seen this movie before, Ajay Shah June 7, 2008]

A few notes,

1. The question of why there wouldn't be market-led dollarization in high inflation is something I've thought about earlier. See my comments and LBO's fussbudget's thoughts here. What Ajay is saying is something like people holding less of Sri Lankan Rupees and more of some other stuff, like foreign currencies, which will make government financing debt through printing money less productive for the government, so they'll have to cut expenditure. But reaching to this level would mean enduring a very very painful period, which I'm hopeful we will manage to avoid. In Zimbabwe, where there's hyperinflation, there's a parallel black market trading in US dollars and other foreign currencies which is keeping the economy there still alive.
   
   
2. Most Sri Lankan economists I've met have long being advocates of Central Bank independence. Some have articulated the need for institutional reform by way of going for a currency board or inflation targeting (discussed towards the end in this post). But most economists seem to be publicly mum on the issue possibly because they don't want to spoil the relationship they have with the Central Bank. I'm just speculating here, but this can be a real possibility given there aren't a lot of think tanks in Sri Lanka with economists in their payroll. I will discuss more CB reform later, although I have said many times it would be impossible to make significant reforms without first firing Cabraal (president's buddy) as governor of the Central Bank.
   
   
3. As we all know the Central Bank of Sri Lanka thinks inflation is a petroleum phenomenon. Unfortunately however, they don't quite articulate this theory very well, they should at least have produced a paper on this by now. Further, CBSL and it's governor have dismissed comparisons with other regional inflation rates as being incomplete because of the different ways in which the rates are being measured. While that is certainly true, you cannot possibly account for 20% point difference between Sri Lanka's inflation and say, Singapore's or India's for that matter in the differences of measurement. India in particular, should have similar consumption pattern to that of Sri Lanka.
   
   
4. Although there are some NeoKeynesians who still believe in cost-push inflation (Joe Sitglitz for example), not even Stiglitz will come to the CB's rescue as the Central Bank has managed to sustain high inflation for a long period of time, whereas Sitglitz beef with Milton's monetarism has to do with inflation at low levels. Bottom line is I know of no credible economist (even if stiglitz qualifies as being credible), who's willing to argue that high levels of inflation for a longer period of time is possible without significant growth of the money supply.
   
   
5. Thankfully the central bankers in Sri Lanka seems to be realizing this, although we haven't seen the effects of this recent (reported) monetary tightening reflected in the index just yet. Meanwhile, governor Cabraal keeps on harping that "core inflation" isn't all that high, although that too is about 9.6%.
   
   
6. My revised thoughts on the best institutional reform for Central Banks coming up soon.
   

Will there be a youth uprising?

A friend of mine commenting on my post about youth participation on the BB blog, contests my view that economic liberalization in Sri Lanka has made youth uprisings unlikely. She writes,

Economic Liberalization still remains, sadly, the dominion of cities & certain strata of society within those cities.

So the state is PRETTY MUCH the only opportunity for most young people, especially on the road to becoming young people where most of the education depends on the government. (Think free education policies, no teachers for English & Math etc… ;)

While it may not be the exclusive domain of the state, the state is definitely majority stake holder, unless & until these economic liberalizations you are talking about trickle down to the majority living without it! (taking my earlier example of education, you have to give them an opportunity that doesn’t cost too much to opt for private education, if the country can’t find enough English teachers for state schools!)

Money is the motivator, but money needs to go to everybody, not be hoarded by a few!

So true, young people are the present, agreed! But where is the present going to get them without a state that can back the initiative? Stopping youth uprisings is going to be quite hard in this context! [link]

My reply to Nipuni can be read on the same comment thread, but I want to expand on it here.

I agree that fruits of economic liberalization, the resulting growth has been largely concentrated in the Western Province and other urban places. In fact, earlier I've suggested quoting Shanta Devrajan, (World Bank chief econ geek) that the reason for this has been thattrade liberalization and deregulation which started in 1970s has benefited the western province who have been able to adjust with greater reliance on services and manufacturing industries. There haven't been any significant reforms, for example, in agriculture, where majority of the rural population depends on. This means that rural population is more dependent on government than others in terms of price supports, subsidies, and owing restrictive land regulations, etc which makes them enslaved to that in agriculture-based livelihoods (a grave mistake in my book, but that's another post)

I agree with her that education reform too has not come about and this is a place again, where rural youth in particular are made to depend on governments. I've long been an advocate of abolishing this fallacy called free education.

So as I mention in my reply to her, If Nipuni were to say that the greatest threat of a youth uprising is from lack of economic liberalization (which is partially related to lack of decentralization of political power, but economics matter more) I'd agree.

In fact, I think that the primal causes for both the Marxist insurgency of the JVP, and the rise of Tamil militancy which signaled the beginning of the 'ethnic conflict' (both examples of youth uprisings, so to speak) are essentially the same.

Both movement looked at the mainstream and saw no opportunities for them. One, the JVP, saw it as a class conflict, the rich dirty elites denying opportunity the rural mases. Whereas the Tamil militancy (including the LTTE, which was among many small militant groups at the time) saw it as the Sinhalese majority denying the Tamils opportunity, and therefore the conflict manifested itself in ethnic terms. The latter conclusion had more currency due to the discriminatory language policies practiced by governments of the day.

Now, at the time when the momentum for these violent movements was being built, Sri Lanka was nothing like a market-economy. The State was involved in almost everything. It was in fact the dominant employer. So if I was a young person in the early 70s, I can only look to the state to bring me prosperity, increase my quality of life, which every human being strives for. When those opportunities are denied to a section of people who can identify some commonality with others who suffer the same fate (i.e. rural youth in the case of the JVP, Tamilness in the case of the LTTE-types) it's not a mystery to me why they resorted to violence against this state and the status quo which they believed wasn't structured to bring about prosperity and justice for them.

Lot of other dynamics were in play of course, but this to me was one of the prime motivating factors. My contention is, that this is no longer the case.

Thanks to liberalization we have seen, with varying disparity, poverty rates reduced, incomes rise and private sector rising to be the dominant employer while the state has become less and less important in all aspects of life including development in general.

There is an enormous amount of internal migration that's taking place, which in my opinion might partially explain the disparity one sees of poverty rate aggregates outside the western province, since migrants tend to be young and the most educated of those areas, and therefore the highest income earners had they remained there.

So yes, I think that youth uprising, especially violent ones like we saw in the past, would be extremely unlikely. Because young people today don't suffer from the same lack of opportunities, or is at the mercy of the state in trying to bring them prosperity. Not many may explicitly think in those terms, but that's what's largely being happening in the country and indeed, around the world.

In fact I honestly believe that If the LTTE were to disappear today, there wouldn't be another insurgency owing to the facts I outlined above despite there being ethnic biases in the system, especially if the south learns to moderate it's own nationalist nutjobs. Unfortunately I don't think a a complete annihilation of the LTTE is possible without a huge loss of life, and short of something close to a genocide.

Wimal Weerawansa -- a true patriot in everything

I always kind of thought Nalin de Silva and his Jathika Chinthana (national visionaries?) chaps were a bit nuts. Now that I'm reading their blog, I can confirm -- they are retarded. I mean, in a good way. the blog is actually kinda funny.

See this post for example, congratulating Wimal Weerawansa for the patriotic act of postponing a meeting. The prize is this comment from anonymous (It isn't me, honest.) :

Eveything Weerawansa does is patriotic, including having sex with his wife/mistress.

We salute you comrade. Now all your young cadre will follow you in your great example of bravery and sacrifice for the sake of our motherland. We as a nation stand greatly indebted to you and your penis.

Update : Couple of people have emailed me, including someone supposedly from the Jathika Chintana proper denying their involvement in this blog. Word is, it's a neoliberal conspiracy engineered by the C.I.A to disrespect our great patriots.

Eelam declared

Well, at least that's what this should amount to. The government has made it a requirement for 'people of the north' to get special permission from the police to go to any place in the 'south'.

Here's a Sunday Times report,

Civilians in the north will be required to obtain Police passes to travel to Colombo or other areas in the south in terms of new measures introduced by the Government. This requirement will apply to those living in the districts of Vavuniya, Mannar, Kilinochchi and Mullaitivu. Those wishing to travel will be required to make a written application to the Police giving reasons for the visit, places where they would stay, the duration and intended date of return. [..]

“The pass system has already come into effect in the four districts,” Vavuniya’s Additional Government Agent S. Charles said yesterday. [..]

A Government official who did not wish to be named, said the new measures were intended to prevent infiltration of Tiger guerrillas into Colombo, its suburbs or other areas in the south. He said the string of recent bomb explosions necessitated the new move. “Now, any person in the north moving around without a valid pass from a Police Station will be liable for questioning or arrest in the south,” he added. [link] (emphasis mine)

In other words, all 'people of the north' now require a visa to come to the south. That should amount for something like a deceleration of a separate state, by the 'southern government'. I mean, even Indians can come here without a visa.

The constitution of Sri Lanka guarantees freedom of movement for all citizens, by denying this freedom of movement to people of the northern districts, the government accepts these districts no longer constitute the democratic socialist republic of Sri Lanka. If I was an Eelamist, I'd be partying today.

Sri Lanka now is one sad story. Rule of law is replaced by Rule of brutes, not even men. The constitution is ignored, elections are rigged, any Jack or Sunil on the road can strip search me if they wanted to. There's no privacy, no such thing called civil liberties and really, there's no dignity anymore. I've stopped complaining, because frankly I don't see anything changing nor do I know how to change things.

Maybe sanity will prevail and the supreme court will be made to intervene like the last time the Rajapakse administration decided to round up a bunch of Tamils in Colombo and give them a free ride to "where they came from". Or maybe, this time we'll just shrug and not say anything. Fear can do a lot to people. After all, you can technically argue that freedom of movement haven't been curtailed here, it's just been made really difficult and an ignoble exercise.

Peak Oilers -- Put your money where your mouth is

I knew the IPL was going to be a success, because lots of intelligent people were willing to invest their money in the gig. Now some people seem to think we are running out of oil and there are predictions of $200 barrel oil. So if you are one of those people, Art Carden of divisionoflabour has a great idea. He writes,

A few weeks ago, I read a round of prognostications about $150-a-barrel oil and resolved to test the theory by putting my part of our "economic stimulus" money in oil futures. After all, if the doomsayers are right and we are "running out of oil," then the price has nowhere to go but up. I haven't actually bought the contracts yet--I'll get to why not in a second--but July futures are at $138/barrel right now.

I've often said that you can tell whether prognosticators really believe what they're saying by looking at their portfolios (NB: our portfolio is very equity heavy and consists mostly of index funds; we're playing it by the book). Someone who is genuinely, completely, totally convinced that oil will be $200/barrel in December should act on their wisdom, load up on December crude oil futures (currently $137/barrel), make an absolute killing, and then use the money for whatever they want, like alternative fuel research. [link]

The whole thing here. Julian Simon would have been proud. Who's that? sigh. I don't know what they teach in schools these days. Here's a short premier.

Sri Lanka's retarded Oil policy

Now maybe it's just me, but it seems to me that the Sri Lankan Government's oil policy is a bit retarded. Let's summarize,

1. First, theres' a tax on Petrol (VAT, excise duties, so on)
   Some reports puts the proportion of the tax at about 37% of the total selling price which now stands at Rs.157 at state-owned CPC pumps.
   
   
2. Then, the earnings from petrol, subsidize Diesel.
   There is no real reason why diesel should cost less, but it does here in Sri Lanka. In some countries in fact, diesel is more expensive. Ironically, the richer sections in Sri Lanka have the diesel vehicles (thanks to a higher import duty on diesel vehicles) while middle and lower income earners who use motorcycles, three-wheelers, small vehicles, etc. are using petrol therefore subsidizing the rich kids. Some pro-poor policy.
   
   
3. Finally, the Ceylon Petroleum Corporation (CPC) makes a multi-billion rupee loss.
   The burden of which must be financed by the taxpayer -- which is basically everyone who buys anything. From January this year, the CPC has made a loss of about Rs.7 billion (700 Million US$)
   

So the policy is essentially this: you tax on one hand, and subsidize on the other. Taxpayer pays on both counts. That strikes to me as being rather retarded (or ingenious, depends on how you look at it).

Which other company you know does this kind of thing? I mean think, really. Can you even name a sillara mudalali (small shop owner) who'd practice this insane business model? If you could, then that person is probably out of business by now. That's a fundamental difference with governments and private initiatives.

In private enterprise, failure would mean closure. No more resources are spent on that failed project. In governments, failure usually means even more money and even more resources are spent on that project, compounding the problem.

This is especially apparent when CPC's only rival in the business, Lanka IOC managed to make a profit, without any freebies from the taxpayer. The reason for this has to do with incentives, while Lanka IOC faces market incentives, CPC doesn't. It faces political incentives, which are nearly always economically disastrous. LIOC's incentives tells them to diversify business, make productivity enhancing investments, etc. Whereas CPC's incentives instructs them to hold down prices, hire unnecessary labor, etc resulting massive losses.

To cut to the chase, yes, CPC should be privatized. There's no doubt about it. Why on earth would you, the beggars on the street, taxi drivers or anyone for that matter finance state blunders.

If you are waiting for the bright sunny day, where we'll have good governance and efficient state enterprises living the democratic socialist dream, sorry machang it ain't coming. It's time we realize that, dismantle the leftover socialism and take advantage of market efficiencies.

"Young people are the future" and related nonsense

My latest post for the Beyond Borders blog is on youth participation on policymaking, where I argue that what is required is more of an attitudinal change rather than an institutional change, which say allocate "youth quotas" in governance bodies, which in my opinion goes against democratic norms without being particularly effective, as the Sri Lankan experience clearly shows.

Read more from the BB Blog.

WTF Quote of the day

Comes from the Minister of Special projects,

Minister Mahinda Wijesekara says even Ministers should have a bit of fun as they could be the target of a bomb. [link]

I guess the Minister fellows are having a 'blast' these days.

Update (5th june, 1.27 am) : Here's a much more detailed article

[link sent by NM]

The trouble with Sri Lankan think-tanks

Is that they don't have their publications (research, policy studies, etc.) online.

Either they haven't really figured out that the web has significantly changed from 1999, or they think they will loose out on revenues. I understand partly, but really they are loosing out on a lot of impact by virtue of simply not sharing what the "tank" "thinks". If they did, media persons, students, foreign researchers, bloggers(yes, me!) would have been able to use some of their research much more easily.

As it is, I (and possibly many people) won't bother to buy any of their stuff. Not that it's necessarily too expensive, but who can be bothered?

I specifically level charges at Institute for Policy Studies(IPS), Point Pedro Institute, both of which seems to do decent work. Lirneasia seems to do a better job, but again, where is the research? happily, CPA is an exception.

My all-time favorite think-tank is Cato, now that's how it should be. Even my buddies at CCS gets somethings right on the web, but things could be better.

Privatize the CPC!

Finally some sense on Sri Lanka's idiotic energy policy. Muttukrishna Sarvananthan from the Point Pedro Institute says the needful. Here's a quote from an LBO report:

"Sri Lankan consumers of petroleum products are not only paying for the rise in international prices," Sarvanandan said.

"They are also paying for the bloated bureaucracy, corruption and wastages at the Ceylon Petroleum Corporation. Privatisation of the CPC is long overdue. " [link]

While we are at it, add to the shopping list the Sri Lanka Transportation Board, Railways and the Ceylon Electricity Board. All making billions of rupees in losses. The last couple of paragraphs of the LBO report is rather telling,

Dallas Alahapperuma revealed last week that the state-run Sri Lanka Transport Board lost 4.0 billion rupees last year, and had 37,000 employees and had 6,000 excess employees at least.

Meanwhile private buses ran at a profit. The state rail service had 17,000 employees, lost 8.5 billion rupees.

Last year Sri Lanka Railways charged ordinary citizens 50 cents a passenger kilometre while state workers were charged only 5 cents a passenger kilometre. Rail workers were charged only 3 cents. [link]

Do read the whole thing. It beats me why Sri Lankans don't seem understand that at the end of the day someone will have to foot the bill of all those billions of rupees worth of losses from state-enterprises and subsidies, that someone is you, the tax payer. and when your government is so populist that it doesn't want to raise taxes to match this enormous spending, the bills come home another way -- it's called inflation.

Related, The Biggest Big Government