Category Archives: International

More Interconnected than Most People Think

From page 70 of Johan Norberg’s 2020 book, Open: The Story of Human Progress:

What we now think of as Western civilization is a combination of a philosophical heritage from the Greeks, religions from the Middle East, creatively interpreted by Romans in what is now Turkey, and scientific ideas borrowed from the Arabs and the Chinese. We got our alphabets from the Phoenicians, and our numbers are called ‘Arabic numerals’ because we learned them from mathematicians in Baghdad, who got them from the Indians.

New EU Tech Rules will Chill Innovation and Harm Consumers

This is a press statement originally posted at cei.org.

The European Union today announced new rules it claims will change the way technology companies operate. The EU says the Digital Services Act and the Digital Markets Act “will create a safer digital space for users” and “level the playing field so that digital businesses can grow.”

Vice President for Strategy Iain Murray said:

“The European Union’s proposed new powers allow it to treat American tech firms as cash cows, to be fined whenever it finds them guilty of providing too much discretion to consumers or allowing too much speech. Its proposed veto on acquisitions will also chill innovation in the European tech sector as it will make the prospect of significant rewards for an acquisition-based business strategy less likely. Europe will act as an anchor on tech innovation, slowing progress and reducing consumer welfare worldwide. The incoming Biden administration should avoid making the same mistakes.”

Senior Fellow Ryan Young said:

“The European Union’s two proposed tech regulation bills have two fatal flaws. One is that, on purpose or not, they are trade protectionism under another name. Many of their provisions are aimed at the large U.S. tech companies. Taking them down a notch would give an opening to EU-based tech companies, the thinking goes. As with President Trump’s trade wars, this will harm consumers without actually helping the industry. The two bills also leave in place the EU’s stifling regulatory culture that is the root cause of Europe’s lack of tech sector innovation.

“The second fatal flaw is that the EU’s proposals would actually lock in the existing American firms’ dominance. They are the only companies that can afford the massive content moderation costs the EU is demanding, or the large fines. Startups that might one day dethrone today’s giants cannot afford these costs, and may not even bother trying to compete.”

Read more:

Book Review: Philip Freeman – Celtic Mythology: Tales of Gods, Goddesses, and Heroes

Philip Freeman – Celtic Mythology: Tales of Gods, Goddesses, and Heroes (Oxford: Oxford University Press, 2017).

An entertaining collection of retold Celtic myths. I listened to the Audible version. Freeman offers some historical and cultural analysis to go along with the stories. The added context makes it easier to appreciate stories with cultural norms very different from ours. It also puts them in proper historical context, mostly stretching across a period stretching from Ireland and Britain’s time at the periphery of the Roman Empire up until Northern Europe’s economic revival around the time of Charlemagne.

The cultural and textual similarities to Nordic myths and Icelandic sagas was surprising. They are both very violent. Women are relegated to the sidelines, but occasionally flash independence and deviousness. And they are clearly honor and kin-based cultures. This was more for fun than for research for me, but there is plenty there at both levels.

Then again, during this period and after, as Michael Pye argues in The Edge of the World, the areas ringing the North Sea were almost their own distinct civilization, just as was the Mediterranean region to the south. The sea connected the British Isles to what is now northern France and Germany and the Lower Countries, whose traders would later form the Hanseatic League. Norway and Sweden were on the eastern edge of this ring. And Iceland was settled by their more adventurous sailors, and brought their language, customs, and stories with them. The Celtic tradition Freeman shares is distinct, but also part of this larger whole.

Book Review: Ben Wilson – Metropolis: A History of the City, Humankind’s Greatest Invention

Ben Wilson – Metropolis: A History of the City, Humankind’s Greatest Invention (New York: Doubleday, 2020).

A wide-ranging world history told through the lens of cities. Wilson bounces around between Asia, Europe, and America, and concludes in Lagos, Nigeria, which is well on its way to becoming one of the world’s major urban centers. Wilson feels at home discussing subjects as diverse as the Epic of Gilgamesh and its relationship to Uruk, the first big city; coffeehouse culture in 18th century London, with its undercurrents of political dissent and rebellion against social norms; the bombing of Hiroshima and Nagasaki, and their fast but difficult recovery; and the birth of skyscrapers in jazz age New York and the dashed grand plans for remaking social orders in glass and steel. For a Brit, he is also surprisingly well-versed in the early history of hip-hop.

Wilson is a cheerful tour guide and has a conversational prose style that reads quickly. Metropolis would go well with any number of books, ranging from James C. Scott’s Against the Grain about the close relationship between early agriculture, the first cities, and the first governments; Monica Smith’s very similar Cities: The First 6,000 Years; and The Death and Life of Great American Cities by Jane Jacobs, the influential urban economist who took on Robert Moses’ machine politics in New York City in the mid-twentieth century.

Book Review: Muhammad Yunus – Banker To The Poor: Micro-Lending and the Battle Against World Poverty

Muhammad Yunus – Banker To The Poor: Micro-Lending and the Battle Against World Poverty (New York: PublicAffairs, 2007)

Yunus is a Bangladeshi economist who did much to popularize microlending—small loans to budding entrepreneurs in the developing world. He won the 2006 Nobel Peace Prize. This is his autobiography.

While his bottom-up approach to development is a massive improvement from the top-down model favored by economists such as Jeffrey Sachs and organizations like the World Bank, Yunus is not without his critics, and was touched by scandal in recent years. Now 80 years old, he is mostly retired.

Though not entirely objective, this is a good introduction to how a creative, entrepreneurial approach can have a large positive impact on philanthropy and economic development. There are lots of ways to cook an egg. Yunus’ recipe is one of many that are not perfect, but are still part of a healthy diet.

Further reforms must operate not just in finance or in this or that policy area, but also at the institutional level, such as property rights protections, and in culture, such as a general sense that openness, innovation, and commerce are good things, and corruption should be resisted, rather than tolerated.

Book Review: Adam Minter – Junkyard Planet: Travels in the Billion-Dollar Trash Trade

Adam Minter – Junkyard Planet: Travels in the Billion-Dollar Trash Trade (New York: Bloomsbury, 2013).

Waste not, want not. Minter’s tour of the global scrap and recycling industry is fascinating. He grew up in the industry, as the son of a scrapyard owner in Minnesota. As Minter got older and learned the business (and dealt with his father’s messy personal life), he discovered a whole world based on turning trash into treasure, and parlayed that into a journalism career, based in Shanghai. The amount of creativity and hidden efficiencies he finds are a source of optimism. A dreary-sounding dirty job turns out to be vibrant, innovative, and highly globalized.

At the same time, Minter is realistic about his industry. There are some shady goings-on in the circuit recycling and scrap metal industries in China, including corruption, dishonesty, and worker mistreatment. On balance, the ingenious ways entrepreneurs find to reduce, reuse, and recycle waste are good for the environment. But there are still some problems, especially in China. While these abuses are almost certainly greener than shutting down these industries would be, there is room for improvement.

If there is a lesson to be learned here, the most effective way to make sure people are responsible environmental stewards is to allow them to make a profit, and allow them to be creative. As in so many other policy areas, progress happens from the bottom up, not the top down.

Minter recently published a sequel of sorts, titled Secondhand: Travels in the New Global Garage Sale.

Book Review: Judith Herrin – Ravenna: Capital of Empire, Crucible of Europe

Judith Herrin – Ravenna: Capital of Empire, Crucible of Europe (Princeton: Princeton University Press , 2020).

Less a history of Ravenna, than a history of Europe from about 390 to 813 AD. Herrin’s history ranges from Late Antiquity (Early Christianity in Herrin’s terminology) up to Charlemagne. Ravenna is more of a constant background character in a larger narrative than the star.

Ravenna has a fascinating place in history, and I would have loved to have learned more about the city itself. As the Roman Empire’s focus moved east, the city of Rome lost its luster. Ravenna became something of a second capital city on the Italian peninsula. Emperors would live their entire lives in or near Ravenna, perhaps visiting Rome once or twice in their reign to give a ceremonial appearance before the Senate, which still existed, but had no purpose other than to keep Rome’s remaining wealth squabbling with each other rather than with the Emperor.

But the Empire’s center of gravity continued to move east past Ravenna, to Constantinople. Ravenna never really got its due as the capital of a major empire. First, Diocletian split the Empire into separate Eastern and Western halves in the late third century AD. This would have been Ravenna’s best time to shine, but it was always overshadowed by Constantinople, the Eastern capital. Then the Western half collapsed in 476, and Ravenna slowly descended into obscurity—though as Herrin shows, for this entire period, and for centuries to come, it was still home to fascinating figures and power struggles.

Herrin does not go into great detail about Ravenna’s layout, architecture, daily life and culture, economy, intellectual life, geography, or much else about he city. But she does an excellent job on her narrower focus of monarchs and politics. The amount of times Ravenna changed hands between Romans, Byzantines, Goths, and eventually proto-national dynasties is astounding. Ravenna might rarely have been the center of attention, but it was nearly always part of the action. Most of Herrin’s narrative centers around powerful rulers.

Galla Placidia (d. 437 AD), the daughter of the Gothic emperor Theodosius I and regent to Valentinian III, emerges as a powerful figure at a time when women rulers were extremely rare. She spent part of her early life in the household of the Roman general Stilicho (d. 408), who became a de facto emperor. She was captured by the invader Alaric’s army, and married the Visigothic king Ataulf, becoming their queen. After he was murdered, she eventually married the Roman emperor Constantius II, with whom she had a son, Valentinian III, and served as his regent.

Theoderic the Great (d. 526) was an Ostrogothic king who filled the power vacuum left by the fall of Rome, and fought off the Byzantines, as Eastern Empire had come to be called. As an Arian Christian, he played an outsize role in early Church schisms, which the Arians lost.

Justinian (d. 565) was Byzantine emperor about a generation after Theoderic’s time. He came as close as anyone to reuniting the two halves through his general Valisarius, though he ultimately fell short. He also issued an influential law code in 525, and the Hagia Sophia was built during his reign—though far from Ravenna.

After Justinian’s death, the Lombards (“long beards”), thought to be of Scandinavian origin, took over Northern Italy, including Ravenna. They were in turn displaced by the Merovingian dynasty, which ruled over large pats of what is now France, and then the Carolingian dynasty, which takes its name from its founder Carolus Magnus, which translates from the Latin as “Chuck the Great.” He is today known as Charlemagne.

Charlemagne represents a lot of things. Two of the most important are the power struggle between church and state, and the power dynamics between East and West. Ravenna was home to the Byzantine papacy from 537 to 752, when it moved back to Rome under Stephen III. This represented a shift in the center of gravity from the East back to the West. In 800, the pope crowned Charlemagne on Christmas Day in St. Peter’s Basilica—in Rome, not Ravenna. This was another data point for the Western revival. It also marked a shift in power from church back to state.

A third Carolingian theme is European unification. After centuries of squabbling between Romans, Byzantines, barbarians, the Catholic Church, the Orthodox Church, and Muslims, Charlemagne centralized power over the whole region in himself. And again, Ravenna did not play a starring role. The main locations for this drama were in Rome and Aachen, Charlemagne’s rising capital to the North that had its own symbolic significance. But Ravenna was right there in the middle, taking it all in.

Herrin’s book might have done with either a different title, or with more attention paid to the city in its title. But it is still an excellent history about a period and a city that do not get enough attention from either historians or their readers.

EU’s Antitrust Charges against Amazon at Odds with Reality

This is a press release originally posted at cei.org.

The European Commission today announced it was charging Amazon with antitrust violations, accusing the retailer of using data from third-party sellers to benefit its own retail offerings.

CEI senior fellow Ryan Young said:

“Whether intentionally or not, the EU’s antitrust case against Amazon is trade protectionism by another name, at a time when the global economy cannot afford it.

“It also falls for the relevant market fallacy. This is using fancy terminology to say that Amazon dominates an unrealistically narrow market. In this case, the EU argues that Amazon dominates ‘marketplace services’ and ‘online platforms.’ Amazon is, in fact, a low-margin retailer. And it has a roughly 1 percent global market share. It sells things in a variety of ways, and people can buy them in a variety of ways—or not, as they choose.

“Amazon has made retail more competitive. Amazon’s third-party seller services give smaller businesses access to a global market they did not previously have. Traditional large retailers, such as Walmart and Target in the U.S., have expanded their online options to compete against Amazon. So have grocery stores—which is important in the age of COVID. It is difficult to make an argument that these developments have harmed consumers or producers.”

Read more:

New CEI Paper: Antitrust Policy in Europe, Lessons for America

Today, CEI is releasing a new paper on antitrust policy in the European Union by Swiss competition commissioner Henrique Schneider. Europe’s approach to competition policy, as antitrust policy is known there, tends to be more active than in the United States. Schneider provides some useful lessons for policy makers in the U.S. as enforcement ramps up on this side of the Atlantic.

One lesson is a version of the relevant market fallacy, the EU’s bizarre distinction between online and offline businesses. A second lesson is that reversing the burden of proof in court cases is a bad idea—which the EU does to many online businesses in competition cases. A third lesson is that antitrust policy can have protectionist effects, even if that is not the intention.

With a Google case already filed, a Facebook case likely on the way, and other companies such as Amazon and Apple also being investigated, Schneider’s description of European policy gives an example of what the U.S. should avoid.

Strangely, European antitrust policy treats companies differently based on whether or not their business model is online-based. Nearly every business is at some in-between point on the spectrum between being entirely online and entirely offline. More fundamentally, being online or offline does not change the nature of business transactions. People exchange value through buying and selling—and that’s it. Whether they are done in person or on a computer does not matter. Exchange is exchange.

Companies also move along the spectrum over time. Many traditional brick-and-mortar retailers are expanding their online presence, especially during the COVID-19 era. Amazon, on the other hand, is expanding its offline presence through its Whole Foods grocery stores and experiments with retail stores.

The real purpose of the EU’s online-offline distinction is likely not accuracy. It is to define a company’s market more narrowly. This makes it easier to find a monopoly. Left unsaid, of course, is that such a narrow monopoly does not cover the entire relevant market. This is another version of the relevant market fallacy.

That’s the first lesson. The second lesson concerns the burden of proof. For antitrust purposes, the EU’s online-offline distinction determines who bears the burden of proof. In most liberal countries, the accused are innocent until proven guilty. For digital businesses in EU competition cases, the burden is reversed. They are presumed guilty unless they can prove their innocence.

This is where antitrust policy unexpectedly intersects with trade policy. This is Schneider’s third lesson. Europe and the U.S. are already involved in a years-long trade spat, about which I’ve written here. The result so far has been tariffs added to more than $10 billion of goods from both sides. Schneider shows how, intentionally or not, antitrust enforcement can raise trade barriers without raising tariffs.

Most of the EU’s competition cases against digital companies have been against American companies such as Microsoft and Google. By fining companies, forcing product alterations, and other penalties, one effect of EU competition policy is to make EU-based technology firms relatively more competitive. In absolute terms, the market becomes less competitive. One company has been taken down, rather than another company building itself up. At best, this policy is misguided. At worst, it is a form of corporate welfare and trade protectionism.

As both Europe and the U.S. embark on a new era of more aggressive antitrust enforcement, officials on both sides should learn those three lessons about false distinctions and the relevant market fallacy, the burden of proof, and protectionist effects. Not only should the United States not be like Europe on antitrust matters, neither should Europe.

Schneider’s full paper is here. Wayne Crews’s and my paper on U.S. antitrust law is here. CEI’s dedicated antitrust website is antitrust.cei.org.

Tit-for-Tat Tariffs Don’t Work: Boeing and Airbus Show Why

A 16 year-long aerospace subsidies dispute between the United States and the European Union began another round this week. The U.S. claims that the EU’s Airbus subsidies are unfair. The EU argues that America’s Boeing subsidies are unfair. Both sides are right. But neither wants to admit that the other side has a point, too. The result has been tit-for-tat tariff increases and no subsidy reforms.

Today, the World Trade Organization (WTO) ruled that the EU may impose tariffs on up to $3.99 billion of American goods, because Boeing’s favorable tax treatment violates WTO rules.

This follows a 2019 decision allowing the U.S. to impose tariffs on up to $7.5 billion of EU goods due to the EU’s Airbus subsidies.

Boeing called today’s decision “irrelevant.” Last year, Washington state repealed the tax provision at the center of this decision. However, the larger sticking point in the dispute remains. Yes, this one tax break is gone, but Boeing still receives massive subsidies. That means the EU will not stop pressing the matter. Nor has the EU reformed Airbus’ special treatment. That means the U.S. won’t stop, either.

In addition to being ineffective, the tariffs are causing collateral damage to other industries that have nothing to do with the dispute, from French wines to American motorcycles. This deadweight loss matters at a time when the world economy is already hurting due to COVID-19.

The lesson both sides need to learn is, don’t copy other people’s mistakes. Instead, set a better example. Subsidized companies grow soft and lose their competitive edge. There is a reason why so much aerospace innovation these days, from space travel to supersonic flight, is happening outside of Boeing and Airbus’ subsidized comfort.

The right thing to do is for governments to stop subsidizing private businesses—even if the other side doesn’t. Set the right example. Boeing would likely do just fine without subsidies. They would certainly have far more incentive to improve their products and address their safety concerns than they do now.

And if Boeing can’t survive without subsidies, there is no shortage of entrepreneurs capable of unleashing engineering and manufacturing talent.

Either way, consumers and taxpayers win. Europe and Airbus can then either follow America’s positive example or be content with subsidized mediocrity. Realistically, they will very likely choose the subsidies. But we cannot let Europe’s mistakes be our own. The U.S. has been doing that for at least 16 years now, and we know it doesn’t work.

A modest starting point on the U.S. side would be closing the Export-Import Bank, which often devotes half of its business to securing below-market financing rates for Boeing’s customers, many of whom are state-owned. Boeing set record profits while Ex-Im was mothballed from 2014-2019, so we already know the company will do just fine without that multi-billion-dollar program.

For more on that idea, see my most recent Ex-Im paper.