On Innovation

Two articles in the Wall Street Journal this week have got me thinking about the subject of innovation, or the lack of it, in Western economies today. The first was this article in the Wall Street Journal quoting molecular geneticist Jan Vigj in his book The American Technological Challenge who said that the number of inventions in America has dropped markedly since 1970 [and hat tip to Mark Steyn who said a similar thing in his book America Alone]. The second article was this one about Uber, the Internet-based taxi booking service that is challenging regulators and established taxi companies in 100 cities and 36 countries around the world.

To understand why the West is not innovating, we need to go back to the Renaissance to appreciate why the West has been so economically successful in the first place. Economic historian Niall Ferguson has identified six 'killer apps' that he believes underly the enormous growth of Western economies over the past 500 years, viz. political and economic competition, the scientific revolution, the rule of law, modern medicine, education and the work ethic. Ferguson expounds on his theory in his book, Civilization, and goes on to say that the erosion of these achievements is responsible for the decline of the West in recent decades relative to emerging economies such as China, which have increasingly adopted these values.

In my view Ferguson's six killer apps can be further reduced to just three things - individual rights, capitalism and the rule of law. In other words, the classical liberal values that became entrenched in the political and economic systems of Britain and the Netherlands in the 17th Century through the writings of John Locke, and that were picked by in the 18th Century in America by the likes of Alexander Hamilton, Thomas Jefferson and James Madison.

The innovative human mind is like a packet of dried seeds - without the right soil, water and sunshine, they will either remain inert or any shoots that do sprout will soon wither and die. The environmental conditions in which the human mind flourishes are the freedom to live and work as one chooses (subject only to the right of others to do the same), the freedom to enjoy the fruits of one's labour, and the protection of laws that guarantee these freedoms for all people. These are the classical liberal values mentioned above that we have so abrogated in the West today. It is little surprise, therefore, that we are losing our innovative edge.

The exception over the past decade or two has been in the realm of information technology and the Internet. Often compared to the 'Wild West', the on-line world has remained lightly regulated with few barriers to entry or innovation. On-line businesses like Uber are able to innovate precisely because they sit outside the highly-regulated traditional markets they are challenging. In the West we have in effect two parallel operating environments - the traditional political and economic environments in which innovators face huge regulatory hurdles in getting their products and services to market, and the on-line environment in which heavy-handed government involvement has been largely absent until now.

The United States provides the starkest example of this dichotomy. Traditional 'bricks and mortar' markets such as banking, manufacturing, transportation and medicine are subject to overbearing bureaucratic control and as a result American companies in these sectors are struggling to maintain their global leadership. Most economic growth in the United States in the last couple of decades has come from lightly-regulated 'digital' sectors such as software, entertainment and on-line services. But this is starting the change. The desire of Western governments to heavily regulate even the on-line world is starting to choke innovation in these sectors.

Western governments, including that in my own country, New Zealand, like to think the answer is more government. They like to think they can pick winners and encourage innovation through government investment and subsidies to certain industries. But history shows us that governments are poor gamblers when it comes to innovation. The clearest example of this in recent years is government investment in so-called 'green' businesses such as solar panel manufacturers. In the United States and Europe in particular, such investments have been disastrous.

Governments have a role to play in providing the fertile environment for innovation, i.e. in maintaining the institutions that uphold the classical liberal values that are responsible for Western political and economic success, but the most important thing they can do to encourage innovation is simply to get out of the way.

UKIP challenges cosy centre-left-right political establishment

This week saw the UK Independence Party (UKIP) defy predictions and the serried ranks of its opponents to win the largest share of the UK vote for the European Parliament. In doing so, UKIP had to overcome an unholy alliance of all other political parties and every mainstream media outlet that rallied against it. During the election campaign UKIP candidates and supporters were repeatedly slandered but it was to little effect as more than four million voters cast votes for the party portrayed as comprising so many looneys and racists. UKIP support has been built on disaffection with Britain's membership of the European Community and admiration for the no-holds-barred style of its leader, Nigel Farage. Its policies, far from being lunatic fringe, are now being firmly embraced by the other political parties.

The closest equivalent to UKIP in New Zealand is New Zealand First, which, like UKIP, is anti-immigration and built around an almost cultish devotion to its leader, Winston Peters. I think what makes UKIP and New Zealand First appealing to a small but significant segment of the population is that they both defy the traditional stereotyping of the left-right spectrum. Both parties derive their support as much from 'working class' and Labour Party supporters as from the well-heeled and Conservative/National Party supporters. What I enjoy about UKIP's success is that it sends a strong message to the political class that the traditional assumptions about what constitutes a Labour or Conservative voter are no longer valid.

Recently a friend of mine called me a 'libertarian conservative' and I pointed out to him that the term is an oxymoron. The current political system in most Western nations is heavily statist and crony-capitalist and no one would seriously describe it as libertarian. Conservatism, by definition, is about supporting the status quo. Really, I am a radical. I want to see radical change to our political and economic systems and I find that often I have more in common with radicals of the left than conservatives of the centre-right.  I believe there is a significant and growing segment of the population in most Western nations who believe as I do - people who want both social and economic freedom, who distrust state intrusion into their lives in both work and personal arenas.

I wouldn't describe UKIP as libertarian but it is certainly more radical than either Labour or the Conservatives and any party that seeks to overturn the cosy centre-left-right arrangement that passes for political pluralism in most Western nations has some appeal to me.

Michelle Obama's Pathetic Hashtag Photo Won't Help Kidnap Victims

My teenaged daughter has been invited to attend a protest march against the kidnapping of more than 200 Nigerian schoolgirls by Islamist militant group Boko Haram. The name Boko Haram means 'non-Muslim teaching is evil' and the group believes that Islam forbids the education of women entirely, which is why it targets girls in Nigerian state schools as kidnap victims (although the group's willingness to sell the girls into slavery suggests a more mercenary motive).

The protest will take place at Parliament Buildings in Wellington and has been organised by fellow pupils at her inner city girls school. To her credit, my daughter has decided not to join the protest, not because she doesn't care about the fate of the kidnapped girls - on the contrary, she is very upset by the matter - but because she realises the futility of protesting in New Zealand about the actions of terrorists half the world away. What these protestors want to achieve is unclear, unlike the aims of the kidnappers.

But as futile as the actions of these protestors are, they don't compare to the pathetic frivolousness of Michelle Obama's hashtag photo opportunity shown below. The US president's wife insults the victims of this horrible religious violence precisely because she is one of the few people in the world who has the ability to influence the outcome of this event.

There are only a handful of countries capable of rendering assistance to the kidnap victims. The United States, obviously, is one of these, but don't hold your breath waiting for President Obama to act. The President has shown himself to be a moral weakling where foreign policy is concerned. In Benghazi, he wasn't willing even to go to the aid of his own consular officials when the embassy there was attacked by an Al Qaeda militia on September 11, 2012. His so-called 'red-line' on the use of chemical weapons in Syria has counted for nothing, and his bluster on Ukraine is rightly treated as irrelevant by Russian leader, Vladimir Putin.

The first United States president to take his country to war against an external enemy was Thomas Jefferson, and the enemy in that case was Islamic pirates on the Barbary Coast who were kidnapping and enslaving American sailors. There is much that Jefferson would not admire today about the republic he helped establish but I think the thing he would least admire is the current president's lack of moral courage on matters of foreign policy. President Obama should be guided by the example of America's third president and take the fight to these Islamic extremists, wherever they are hiding, and his wife should drop the social media frivolity and urge her husband to grow a backbone.

Big Data, Big Brother and Donald Sterling

This week I read an article about a Princeton sociology professor, Janet Vertesi, who tried to hide the fact that she was pregnant from those who use 'big data', which sounds really scary but is really just a silly neologism for an old concept - trawling databases to find correlations that are useful to marketing people, researchers, intelligence agencies and the like. This woman seemed to be most concerned about marketers targeting her with product offers, but that is not something that particularly worries me. The worst that can result from receiving emails or telephone calls from people trying to sell you things is that you buy something.

The real concern is not big data but Big Brother, such as when Vertesi's husband tried to buy $500 worth of Amazon gift vouchers on her behalf and was told the transaction would be reported to the authorities. I am aware that in New Zealand any financial transaction of more than $10,000 is required to be reported to government under the AML-CFT (Anti-Money Laundering - Counter-Financing of Terrorism) laws and I understand this is the same in most Western countries, but obviously in America the threshold is now so low it covers transactions that are the equivalent of a modestly-priced suit of clothing or a good restaurant dinner.

Why would the government be interested in such trivial transactions? In this case it was clearly the anonymity of the transaction that led to the government's interest. The purpose of AML-CFT laws, as the name suggests, is terrorism and money laundering, but as we know from the recent revelations of the likes of Edward Snowden the US Government has used the powers it has garnered under anti-terrorism laws for all manner of purposes. Initially the expanded purview of such laws was serious crime such as drug trafficking, but ultimately governments cannot resist using such powers for any purpose they deem fit. In the case of Kim Dotcom, we saw the full power of New Zealand's state security apparatus including our GCSB spy agency used in a case of alleged copyright infringement.

Another interesting case this week was that of Donald Sterling, the owner of the Los Angeles Clippers basketball team. Sterling came to our attention because his mistress released private communications in which Sterling objected to her bringing black men to Clippers' games. Clearly Sterling is a racist and, by all accounts, a sterling asshole, but as Mark Steyn points out in his blog, as bad as the comments Sterling made were, what the National Basketball Association has done to him is worse. Sterling made the comments in private and the NBA (which has fined him $2.5m and banned him from attending his own team's games for life) should have no interest in the matter. Neither should the media, especially the New Zealand media (many of which ran the story as their lead).

In the novel 1984, Winston Smith discovered that there is no freedom without privacy. If you cannot express your thoughts even to those whom you most trust without fear that you will be subject to a public witchhunt, or make a small, innocent purchase without inviting the surveillance of the authorities, then you don't have the freedom to think at all. And everything follows from that.

Royal Tour Reminds Us the Queen Should be our Last Monarch

You are no doubt already aware, irrespective of which country you are reading this in, that the Duke and Duchess of Cambridge are visiting New Zealand at this time. I have seen feature articles about the visit in the New York Times and Wall Street Journal and even in Spanish language newspapers, hence my certainty about your knowledge of their visit. The royal couple have brought their infant son, George with them. The Duke and his son are third and fourth in line to the throne of New Zealand, which as a former British colony shares its monarchy with other British Commonwealth nations.

Most New Zealanders support the monarchy out of sense of tradition and probably because they find it provides a reassuring continuity in a rapidly changing world. I don't, for the simple reason that I find it offensive that a family from the other side of the world is qualified by virtue of its blood line to be the heads of state of New Zealand and my own children aren't. Our constitution conventions say that in respect of the right to occupy our top political office, all New Zealanders are second class citizens.

I cannot understand why we retain this vestige of feudalism in the 21st Century. The members of the royal family have no qualifications to be our heads of state other than their ancestry, an ancestry incidentally that is full of despotic thugs who practiced every manner of heinous crime known to mankind - ethnic cleansing, genocide, mass torture - to maintain their grip on power. And this is not all ancient history - the wealth of the current royal family came from the wholesale theft of Catholic lands and other property after the so-called Glorious Revolution. 

I have a fond spot for Queen Elizabeth II and think she has done as good a job as any modern monarch could, but I think the institution should die with her. Charles, her heir, has proven himself unfit for the job, with his ill-advised, partisan meddling in political matters such as the climate change debate and his admiration for despotic Islamic regimes. And the idea that William and his son George have some sort of legitimate claim to be head of state of New Zealand, or any country for that matter, is utterly ridiculous.

Free Speech for Me, But Not for Thee

Give me the liberty to know, to utter, and to argue freely according to conscience, above all liberties. ~ John Milton

Milton meant the freedom to think and speak is the foundation of all other liberties and without this most basic of freedoms, we cannot be truly free. At one time this was a given in Western liberal democracies but recently we have seen a great deal of evidence that many in the West regard freedom of speech to be dispensable.

Last week the CEO of Mozilla, Brandon Eich, was dismissed by the company because five years ago he gave a personal donation to the National Organisation for Marriage (NOM), an organisation that supported Proposition 8 in the 2008 Californian state ballot opposing gay marriage. Now I happen to be a supporter of gay marriage, but I'm an even bigger supporter of free speech and of the right of anyone to support the political causes they choose. In case you think Eich's political views are irredeemably rightwing, I'll remind you that Barack Obama only came out in favour of gay marriage in May 2012 and was opposed to it prior to that.

As unreasonable as Mozilla's position is, there is an even more sinister aspect to this whole business. How did the media find out that Eich supported NOM? They discovered his donation because NOM's tax return was leaked to the Human Rights Campaign (HRC), NOM's main opponent in the campaign for Proposition 8, and published on HRC's website. The NOM return listing the donors appeared on the HRC website complete with obvious redacted codes that are placed on documents only after they are received by the IRS, so it must have been leaked by someone in the IRS. There has been no thorough or conclusive investigation into this leak, which is a serious criminal offence.

If you think all of this is acceptable then you need to imagine the boot being on the other political foot. Consider, for example, a conservative administration leaking the details of those who donated to women's groups that support abortion liberalisation. Would it be acceptable to hound a chief executive out of her job because she donated to such a group?

In New Zealand we are not immune from the same type of anti-free-speech witch hunts. Three years ago Employers and Manufacturers Assocation president Alisdair Thompson was hounded out of his job for making the point that women take more sickness leave than men because of their menstrual cycles. This is, of course, a statistical and medical fact but that wasn't any defence to the hysterical screams of the supposedly offended feminists. There are some things you just aren't allowed to say.

Free speech protections aren't for those things you want to hear. They are for the things you don't want to hear. I would have thought that was obvious. So when someone says, "I support free speech except for...," you know they are really saying they don't support free speech at all.

CIA Spying on Senator Feinstein A Step Too Far?

Just when you thought the revelations about out-of-control US government intelligence agencies couldn't get any more interesting, the latest news out of Washington DC has even hawkish conservatives shaking their heads in disbelief. It turns out that the CIA may have been illegally spying on the office of Dianne Feinstein, the geriatric Democrat who heads the Senate Intelligence Committee that audits the activities of the intelligence agencies themselves. The Feinstein allegations go further, that the CIA actually deleted documents from the senate committee's computers and destroyed documents on their own systems showing CIA malfeasance in its so-called rendition programmes where suspects were kidnapped by the CIA and taken to other countries for torture. These accusations are deliciously ironic because Feinstein has been one of the intelligence agencies' staunchest defenders against the revelations of whistle-blowers Bradley (now Chelsea) Manning and Edward Snowden.

Dan Carlin, the political and historical podcaster who is sufficiently well-regarded to have been asked to advise the US military on strategy, said in his most recent podcast that he believes the actions of the CIA might lead to President Obama's impeachment if it is revealed the president knew and approved what was going on (and the CIA has suggested this was the case). Even if that does not happen, it could lead to a constitutional crisis with Republican Senator Lindsay Graham saying 'Congress should declare war on the CIA.' As the CIA is part of the executive branch, this is a call for war on the White House.

I look forward to ongoing developments in this case.