Companies & Regulation

In an alarming trend, individuals, companies and institutions that have committed no crime are increasingly finding themselves subject to public witch-hunts on ill-defined ‘ethics’ charges. The practice is gaining traction in several countries, though it remains unclear who has the authority to rule what behaviour is ethical and what is not.

An essential component of a free society is independent press. It plays a central role in preventing both state actors and private interest groups from pursuing their own interests through state power too aggressively. Journalists independent from political and economic power work effectively through two main channels: detecting and uncovering actual offenses, and safeguarding against further offenses. Interestingly, free press does not have to be crowded out by state-run pseudo-tax paid channels.

Each employed Slovak worker will pay about a week’s take-home pay in extra taxes so that their government can bribe Jaguar into creating a few jobs located in Slovakia (for a while). We present lessons this teaches us, one for each day of such week.

Economists are often accused (especially by other disciplines) of exaggerating the virtues of the market and of systematically downplaying the chances of a successful government intervention. In this view, economists are “market believers” and “state sceptics”, which is then reflected not only in research, but also in teaching and policy advice.

It is true that economists deal with the causes and consequences of state failure more intensively than other social scientists. Economic analysis of government failure has become an important research program over the course of the second half of 20th century.

Nevertheless, the label of unilateral market orthodoxy does not really stick. A look at the ngram statistic (courtesy of Google’s digitization project) reveals that the term “market failure” appears in the literature much more frequently than “government failure”. Given the prominent role played by the state in our economic system, it is apt to ask: Why is government failure so little discussed?

Earlier this week, Russian borrowers with Euro or Dollar mortgages called upon Putin to relieve them of their now increased interest payments. Banks should bear the costs, whilst the borrowers bore the benefits until now. We show that this bailout is just a repeated story of bank and government bailouts of recent years.

According to several reports, EU Commission President Jean-Claude Juncker is planning to introduce a 300 billion-euro investment package this Wednesday (November 26th). The idea is to establish a European fund that will assume liability risks on behalf of private investors. Only profitable projects would be eligible for the guarantee; the profitability of individual projects is to be pre-determined by EU bureaucrats. This presupposes too much of President Juncker and his team. They purport to possess knowledge that they cannot possibly have. Unprofitable investment projects do not become socially profitable just by being financed by the state. When the bureaucracy starts acting like a bank, it transfers risks from real banks onto ordinary citizens. Once again.

The new Nobel Memorial Laureate is one of prime architects of modern regulation of markets. To many that will make him a social engineer. However, as modern EU governments’ budgets are increasingly suffering from similar problems of failed previous regulation and self-regulation, his voice should increasingly be heard also in the European fiscal realm.

A famous economist, author of even more famous economics textbooks, is calling for an end to corporate taxation. Not because he has been bought by the corporate world and multinational companies, but because it makes economic sense. Perhaps most surprisingly – it should make sense even to left-leaning thinkers.

After many Occidental countries imposed sanctions on some Russian businesses, Russia has retaliated by restrictions on some Occidental ones. Trade wars rarely work. However, a new fiscal phenomenon has appeared: affected EU companies seek compensation from the state for loss of markets. Should they get it?

Central Banking
Confidence in the ECB wobbles as commentators on all sides question the effectiveness of supposedly growth stimulating new policies.

Markets and Investment
At least two big takeover deals are being negotiated in Europe now, both with heavy government involvement. The strategies adopted by the French and UK governments may appear to differ but at heart they are very similar.