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Euro

UK: The Potential for Productivity

HSBC has decided to keep its headquarters in London after Brexit. Given HSBC's historical ties to Hong Kong, that is no surprise.

Hong Kong shows that even a tiny island with slightly less government than its surroundings can become an economic powerhouse. Having less government than China turned this island into one of the dominant business, financial, cultural, and trade centers in the world.

Hong Kong's per capita income is around $35k a year. China's is recently UP to a laughable $7k a year.

Hong Kong is full of wealthy and productive entrepreneurs and businesses. The few wealthy in China are largely crony capitalists, skilled primarily at using political connections to get special favors.

HSBC knows this: It won't matter how easy the EU makes internal trade among European countries. It won't matter if the EU develops a single legal code, or a single "simplified" European language. Being absorbed into a single, monolithic, big government, overregulated, cronyist disaster will not help England. Being free to lower regulation, make independent trade agreements, and allow innovation and cultural development will.

China may succeed in reabsorbing Hong Kong, forcing Hong Kong to adopt China's inflationary currency and dumbed down language, in the hope that doing so will bring Hong Kong's skill and wealth into China. But the main advantage that Hong Kong has that China doesn't: less government. If you add Chinese cronyism, state propaganda as "education", and inexplicable central planning (e.g. ghost cities) to Hong Kong, you'll just lower Hong Kong to China's level. Or you might just empty it of talent, as all the productive people leave to seek opportunities where hard work and innovation pay off.

During the last decades, the EU has partially succeeded in doing just that with the UK. It turned one of human history's most vibrant centers of innovation into a backwater of welfare socialism and crony capitalism.

The UK has the incredible opportunity to become Europe's Hong Kong. It must first reject any bad trade deals with the EU. The EU's "free trade" is nonsense. It is, in fact, highly closed trade. It's free trade and movement of labor within Europe, in exchange for massive restrictions on trade and movement of labor from outside of Europe.

The UK should seek trade relationships with productive, capitalist(ish) economies like the U.S., not with Europe's hubs of laziness and socialism. Second, it must reduce its own regulation and taxes. It can become a place that attracts and keeps entrepreneurs and innovative businesses, instead of repelling them as it does now.

If the UK remains courageous, rejects restrictive trade deals with nonproductive countries, refuses to bail out foreign nations, and lowers its own taxes and regulations, it can become to Europe what Hong Kong became to China.

In Liberty,

Arvin Vohra
Vice Chair
Libertarian National Committee

FTSE 100: The Wrong Measurement

Many economic "experts" are fixating on FTSE 100 as the primary indicator of the UK's economy. When the FTSE 100 is down, they panic. When it rebounds, they rejoice.

The fact is: they are looking in the wrong place. The FTSE 100 measures the hundred wealthiest companies - not the 100 most innovative ones. The new, innovative, largely undiscovered small startups will be the drivers of growth in the UK's new, innovative economy. Those businesses are not part of the FTSE 100; most are not publicly traded at all. They are small startups that will be the next large job creators.

The majority of new jobs in America come from small businesses. The same is true in the UK, and will become increasingly true as the UK's economy moves away from large crony capitalists and towards entrepreneurial startups. New jobs in the UK will come from innovative small businesses, not from businesses that have the ability to get special favors from EU regulators.

Some economists have suggested that the FTSE 250, which looks at the 250 wealthiest companies, is a better measure. It might be, but not by much. The companies that will make the UK's new, independent economy great might show up in the FTSE 10,000 (if it existed). But in reality, most of those companies are not even publicly traded.

Some of the FTSE 100 companies are not even UK companies, and are headquartered elsewhere in Europe. Some of the fluctuations in their stock prices simply reflect the fact that without the UK, the lazier economies in Europe will lose one of their biggest crutches. In other words, if their stock prices fall, that doesn't necessarily show a lack of faith in the UK; they show a lack of faith the socialist economies in the rest of Europe. Investors realize that without the UK shouldering a huge portion of the burden (1/6th of the EU economy), the EU won't last.

A government bailout or similar "stimulus" will certainly help the FTSE 100 companies - at the expense of the innovative entrepreneurs who could actually build the economy. It amounts to replacing EU special privileges for large businesses with UK special privileges for large businesses. It creates unsustainable, bailout-based jobs, instead of meaningful, lasting, productive jobs. That's a lateral move at best.

Instead, the UK should reject crony capitalism, eliminate regulations on small entrepreneurs, and reduce the taxes that stifle innovative small businesses. That means more innovation, better products and services, and more real jobs.

If the UK can disentangle itself from the EU crony capitalism and UK crony capitalism, and move towards a capitalist and innovative economy, it will soon see a massive resurgence in jobs and economic growth. This will be true economic growth, without crony capitalist strings attached.

In Liberty

Arvin Vohra
Vice Chair
Libertarian National Committee

Sell Sovereignty Rights

Imagine if you knew someone with a house made of solid gold. Imagine if he had run out of food, and had no income. Would you buy him food for the next ten years? Or would you suggest he sell a small piece of his house, and pay for his own food?

Right now, many countries are in a similar position. Venezuela and Greece are the most well known, but dozens of other countries are struggling and demanding foreign aid.

But the fact is: they don't need foreign aid. They all have large quantities of the most valuable resource on earth: sovereign territory.

Normally, when you buy land, you don't also buy sovereignty rights. You cannot treat your house like a private country, setting your own laws, regulations, and taxes.

But any country can theoretically sell you those sovereignty rights. Sovereign rights over land have been sold many times in history. Obviously sovereignty rights are much, much more expensive, but that just makes them a great way for desperate countries to quickly raise capital.

Most countries have huge amounts of unused, state-owned land. Selling sovereign rights to that land to private companies would quickly raise billions of dollars in capital. For some countries, the sale of a small piece of sovereign land could eliminate their entire debt.

Other countries might consider selling sovereignty rights to current property owners. Those who already own large amounts of land or developments could also be interested in purchasing sovereignty rights.

Of course, the creation of new, private countries would benefit everyone else. How much would a hundred new Hong Kongs help the global economy? As private nations competed with public nations to offer better services, lower taxes, and lower regulations, it would force all countries to improve.

Citizens would also have more choice. You could choose to live in a private nation in which all drugs and all alcohol were banned. You could live in a nation where everything was legal. Because private countries would be smaller than public ones, you could easily leave or avoid countries whose rules you found objectionable.

Some private countries would look like Hong Kong. Others like Monaco. Others like Silicon Valley. And there would be plenty like nothing we've ever imagined before.

The U.S.government should first stop all foreign aid, and stop any direct or indirect funding of the World Bank or IMF. Then, encourage countries to sell sovereign territory, allowing the creation of many more private nations. Finally, we must politically pressure our own governments to extend preemptive and immediate diplomatic recognition to all new sovereign nations.

The benefits: more money for desperate nations...without IMF strings attached. More choice for citizens who want to move to an innovative, new nation...or a very traditional, conservative new nation. Many different experiments in governance, as we find new and better ways to run countries.

Small, private, entrepreneurial nations will revolutionize and improve governance just as much as small private entrepreneurial companies have repeatedly revolutionized and improved business.

In Liberty,

Arvin Vohra
Vice Chair
Libertarian National Committee

America-exit

Over 200 years ago, a group of British citizens chose to leave the British empire. They were tired of having to follows laws and regulations set down by people that they didn't vote for. They were tired of having to pay for massive debt. They didn't want anyone to tell them who they could buy from or sell to.

At the time, the choice to leave the British Empire must have seemed risky. It was a far larger and more powerful organization than the current EU. Choosing sovereignty over being part of a massive economic empire must have seemed crazy.

But those Brits who became the founders of the most powerful economy on earth, knew that control over your own destiny matters. They knew that allowing others to make bad policy was a horrible idea, no matter how economically powerful they pretended to be.

A few days ago, we saw that 17 million Britons still have the will to be free and prosperous. And they will have a chance to do so...if they can truly follow the example of the renegades who founded America. If they can prioritize freedom over welfare, innovation over regulation, and self determination over obedience, we'll see a new bastion of economic growth and innovation across the Atlantic.

In Liberty,

Arvin Vohra
Vice Chair
Libertarian National Committee

Brexit: The British Pound Will Be Fine

Fear mongers have said that the pound is "taking down the Euro." Nonsense.

Remember group projects in school, in which a few people would work together and everyone would get the same grade? You always wanted as many A students and as few D students as possible in your group.

The EU is like one of those groups. It had two A students: Britain and Germany. It also had 26 D students. Now one of those A students is leaving.

The pound is going down for a simple reason: investors are pulling out of crony capitalist companies whose primary value is special privileges from EU regulators. That lowers demand for those stocks, and thus lowers price.

Those investors have started looking for innovating and productive companies instead. In a few weeks or months they will find those companies. At that point, demand for those new stocks (and their prices) will rise.

But what about the euro? Why did the price of the Euro fall? If the pound falls, if anything, the Euro should go up. After all, the dollar and yen did, as people looked for temporary alternatives to the pound. If people believed in the EU, then nothing much would have changed in the euro.

The euro dropped because people don't want to invest in D student economies. A thousand fools don't make a wise man, and 27 D students don't make an A student. That's why the Euro has been steadily declining for years. Free trade is good; but welfare for lazy countries more than cancels out the gains from free trade.

Maybe Germany can carry the rest of Europe, keep bailing out Greece again, etc. Maybe it can't. Maybe it will also exit, and let the D student countries fend for themselves.

The fall in the pound is just temporary rearrangement. If Britain moves towards capitalism and away from welfare socialism, the demand for the pound will go right back up. But the euro?

It would require a massive movement away from current socialist policies and towards a massively freer market. No one would be happier than I if that happened in Europe. I would love to see modern Greece reach the work ethic and greatness of Ancient Greece; I would love to see a France that followed the effective economic policies of Bastiat. I would love an Italy as innovative, resourceful, and hard working as it was in the early Roman republic.

But I doubt that will happen until the EU finally goes the way of the USSR.

In Liberty,

Arvin Vohra
Vice Chair
Libertarian National Committee