Here’s my piece from the Fin on Thursday
The global financial crisis that began early in 2008 has put many of the seemingly unstoppable processes of globalization into reverse. The volume of international trade has fallen sharply, and that of international financial transactions even more so. The banks and financial markets that seemed to define the global economy have retreated into the arms of national governments.
There is one striking exception to this pattern of retrenchment. According to the TeleGeography Global Internet Geography Research Service, international Internet traffic has grown at an annual rate of 74 percent in 2009, well above the 55 percent growth measured in 2008.
In part this is a matter of momentum. The huge growth in capacity that was already committed before the crisis ensured that growth could continue. Although new investment in fibre optic capacity has slowed as a result of the crisis, the system has proved capable of absorbing massively greater traffic.
But there are more fundamental forces at work here. Although the Internet and its main manifestation, the World Wide Web depend on physical communications networks and commercial service providers, they are not, in the end, about cables and modems.
The Web is a set of protocols and social institutions for the expression and exchange of ideas of all kinds, whether expressed as text, audiovisual material or software. Ideas are public goods. They can be shared without losing value, and they cannot easily be restricted. The Web is a prime example of a global good, one which benefits people everywhere in the world and depends for its value on contributions made all over the world.
The fact that the spectacular expansion of Internet activity has continued, and even accelerated through the financial crisis shows that the global exchange of information does not depend, in any important way, on the global financial sector. Most Internet innovations have been developed on a non-profit basis, and even for-profit companies like Google maintain strong independence from the short term demands of financial markets.
On the other hand, the productivity of the real economy, and therefore the financial sector depends hugely on innovations that have arisen from the growth of the Internet. The first-generation innovations of the Web in the 1990s universally adopted by business and governments. Now they are shifting to ‘Web 2.0’ technologies, including wikis, blogs and web-centric applications.
There has, then, been a huge shift in the location of innovation. Many of the innovations that have driven productivity growth over the past two decades depend on public goods mostly produced outside the market and government sectors.
When we compare the huge social and monetary cost of the global financial crisis with the huge and continuing benefits of the global exchange of information, almost all of it given away free of charge, a striking paradox emerges. With a handful of exceptions the innovators who gave us the Internet received little or nothing in the way of financial reward.
Leading figures like Tim Berners-Lee, the initiator of the World Wide Web have become famous, but not, at least by the standards of the global financial sector, wealthy as result. And the thousands of contributors whose efforts turned these innovative ideas into reality have received little more than a warm glow of satisfaction.
Meanwhile, the innovators who gave us such boons as the CDO-squared, the option-ARM mortgage and the stapled security have walked away, collectively, with billions in salaries, bonuses and share options, leaving the rest of us to clean up the mess they created when the whole edifice of collapsed so spectacularly a year ago. ??Even during the dotcom boom, when financial markets were eager to finance Internet-based innovation, their efforts were spectacularly misdirected. Billions were hurled at ludicrous ventures like the on-line sale of pet food. Meanwhile, the innovations that were to produce the Web 2.0 wave, such as the first blogs and wikis, were being developed without any significant input of credit or venture capital.
This contrast raises questions about the way we organise our economic system , the way we regulate financial markets, and the incomes derived from those markets. If monetary returns are weakly, or even negatively, correlated with the value of social production, there’s no reason to expect financial markets to do a good job in allocating resources to supporting innovation.
?As a result, it seems unlikely, that the massive incomes generated in the financial sector to reward financial innovation are beneficial to anyone except, of course, the recipients.
John Quiggin 
What a lot of questions. In order, then.
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Alice,
I do not see a libertarian government being much different to any other – just less willing to intrude, less willing to tax and less willing to spend. It should be (like any other) democratically elected and capable of being voted out – just as any other.
As for the rest – socialists do believe in the right to tell others what to do, just to lesser extent than the others you mentioned. A truly libertarian government would believe in that even less. It is not that wildly different.
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Freelander,
You have not read as widely as you seem to believe you have. In any case, I believe I answered your question in my reply to Alice.
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Crispin,
I believe that we have been “designed by millions of years of evolution” to be capable of making most decisions for ourselves and, combined with the social conditioning that we encounter from birth, this makes us capable of making the vast majority of our decisions independent of the coercive power of government. Perhaps you disagree and contend that we need to be forced to do the right thing. I do not share this dim view of human nature.
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Freelander,
I think you have the causation the wrong way around. People, through their normal interactions with other people create things that we can regard as markets. They are no more to be worshipped than the people that interact with that framework are to be worshipped. If you care to make a graven image of a government and worship that I cannot (nor would I choose to) stop you.
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Alice,
You provide in that comment a perfect example of some of the deficiencies of our current government. Even if they have economic theories that (to quote MoSH above) “the majority of economists agree” with they cannot even do that. You seem to think that there is a government somewhere that can be trusted to finally get it right. Given your (and my) experience in this area I see no justification for that position.
All too cryptic for a simple mind like mine I am afraid. Leaves me speechless.
@Freelander
“Irony alerts” are for those of us who like to indulge in a little sarcasm occasionally Freelander! (lest we be misinterpreted…)
Andrew: to believe the Darwinian evolution of social hunter-gatherers living in bands of a few hundred has equipped our species in such a way that the right decisions for 4 billion people will just ‘fall out’ from the bottom up is magical thinking of the most superstitious kind. Fortunately although superstitions are often popular, libertarianism appeals only to a tiny coterie, so it may not be the most dangerous variety of irrationalism.
@Andrew Reynolds
Then it follows Andy that you dont believe in a total absence of regulation – you beleive in “less” regulation, for even a libertarian government must have some powers?
My question is more about the degree. De-regulation in yoyur eyes may look totally different in another persons eyes and to hold on to a mantra of “de-regulation” does not set any goals about an appropriate level of regulation and to take it to an extreme is, of course, no regulation at all….in which case even a libertarian government is not required. There is no point whatsoever in a libertarian government with no powers at all.
Do you see my point Andy? De-regulation hence means aboslutely nothing unless the goals are defined. De-regulation for whom? De-regulation in what way? De-regulation to what degree? And when we get there to a less regulated state…who will say “Right – we have arrived there at the desirable level of regulation. We no longer need to “de-regulate.”” The level is correct. Then how do you convince all those libertarians out there, who subscribe to the current mantra of “de-regulation” to give up their slogans Andy?? Or do we let them have a free reign until even a libertarian government is stripped of all power.??
That is my question to you.
Freelander,
That, in your case, is probably an advantage.
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Crispin,
To imagine, then, that the same evolution has fitted a few people to be able to understand and control the needs, desires, hopes and dreams of those same 4 billion people is, to me at least, far more superstitious than the belief than those 4 billion are capable of doing it for themselves.
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Alice,
I am, by nature and nurture, a Burkean conservative (not a political Conservative). I see this as a process – one where regulation is gradually reduced over decades. For anyone to say they know exactly what regulations need to be removed to achieve nirvana is exactly as silly as those that would imagine that there could be one new set of regulations to be introduced to achieve the same effect.
This process would not, and could not, be driven by a coterie of libertarians acting alone. It would need the informed consent of the governed. Again, I cannot see that deregulation imposed on the populace without their informed consent would be of any use whatsoever.
@Andrew Reynolds
“Again, I cannot see that deregulation imposed on the populace without their informed consent would be of any use whatsoever.”
But surely this is exactly what has and is happening. The populace have frequently made their feelings known about deregulation but they have not been given a choice. They have bee propagandarised rather than informed and they have resisted the deregulation mantra. Little good it has done them. The latest example of ignoring the populace is on the matter of executive remuneration. I have started to read the recent draft report and an not too impressed with the selective and distorted presentation of ‘evidence’ and research. None too impressed with the ineffective recommendations either.
Freelander,
Perhaps. Take that argument up with the government. I am trying to make a case by reasoned argument, not force anything down anyone’s throat.
If you are arguing, as you seem to be, that deregulation is wrong because it is not popular then I would argue that that is not a case – the people have been wrong before. That said, if I were in a position to make changes (which I am not) I would not seek to make those changes without the broad, informed, consent of the governed.
That would make any such attempt little better than the communists, Nazis and other socialists that have tried to make serious, even radical, changes while simultaneously suppressing dissent.
Andrew: the difference is that I don’t think there’s a magic system. I don’t even think there’s a best one, let alone a magic one. Different decisions need to be made at different levels, as befits a massively complex system. We don’t know a priori what levels suit what decisions: there’s an element of uncertainty and try-and-see about it all. Which probably makes me a Burkean conservative (with radical values, perhaps).
You think that the system will self-organise. It will if there’s a God who preordained it. Because the only other force available (evolution) did, and could, not.
Andrew: when I wrote the above I hadn’t seen your reply to Alice. I guess not all of us Burkean conservatives think alike!
Crispin,
I would agree – there is no magic system. As a result, I do not think that a government should try to impose one whether through social engineering (as the Conservatives try to) or through economic engineering (as the socialists and social democrats try to).
Andrew Reynolds, economic engineering is social engineering.
Andrew: I think we’ve milked this theme to death. I’m resisting a riposte ..
@Andrew Reynolds
“I cannot see that deregulation imposed on the populace without their informed consent would be of any use whatsoever.” So, given that this support is absent, you implicityl agree that “I cannot see that [the] deregulation [which has been]imposed on the populace without their informed consent [is] of any use whatsoever.”
I think we have agreement on that. Maybe you should be speaking out against it more loudly if that is the way you feel.
Freelander,
No – I will speak out to try to get what is there reduced to the point where the regulation is not subject to over-reach nor causing perverse incentives. That said, if you want to appeal in favour of over-reach and perverse incentives, go ahead.
@Andrew Reynolds
So, as with other libertarians, your claim that you wish to achieve your ends through democratic means, as opposed to simply having them imposed on an unwilling populace, are empty words. At least those who write libertarian philosophy tend to be more upfront. Many of them make explicit that they want constitutional and legal changes which would effectively impose their will and when it comes to democracy, they are all in favour as long as a democratic vote has to be unanimous, at the population level, before it has the ability to change anything. Charming.
Andrew – you have failed to answer my question. At what point does a libertarian government know when to stop with de-regulation before a libertarian government fails through lack of power//
At what pointn is there sufficient common sense in the ALS to know when to stop wailing for more de-regulation?/
I dont think the als HAS A CLUE because its esomething they have never discussed. They only have a one tack boat Andy and it cant turn if the winds change or the tides get messy. Thats the problem I have with them. Too damn simplistic for me Andy.
Alice,
The libertarian government would stop as with any other properly democratic government – when it loses the consent of the governed to proceed, as I indicated earlier. As for the ALS, the LDP or any other group of libertarians: you would have to ask them. I am not a member nor do I pretend to speak for them.
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Freelander,
Where are those “empty words”? I have indicated my preferred method of continuing. Perhaps you should revert to the speechlessness you indicated you had lapsed into earlier. The only words I see here empty of meaning (or at least most of them) seem to be yours.
@Andrew Reynolds
Don’t worry, my intention is not to have you admit the obvious. Something about leading, horses and water. Recognising this, I am simply laying out your distain for the populace’s wishes. One thing that amuses me about the right is their frequent description of their critics as ‘elitists’. Notice this last statement doesn’t automatically entail you. I have not seen you describe opponents as elitists. However, libertarians, in my experience, tend to be elitist, and a distain for the populace’s wishes is somewhat elite.
Freelander,
Straw, meet man.
If you find much in my argument that shows disdain for the populace’s wishes, please show it. Otherwise, I challenge you to answer any of my points. So far we have a simple failure on your part to do so as you seem to have an idea of a generic “libertarian” and seem perfectly content to throw barbs at that strawman.
@Andrew Reynolds
My view of libertarianism comes from libertarian’s own words, yours included. I have no need to demonstrate what I have already demonstrated. If you can’t follow it, that is hardly my problem. More importantly, I would be surprised if most others (except maybe libertarians) have any difficulties in following what I argued. Good luck and good night!
Freelander,
I had no problems following it. Your discussion (argument would be the wrong term) just had no relevance whatever to what I was saying, merely bringing out the tired old canards that I have seen repeated time and again. You have managed to introduce one innovation, though. You do not even seem to have bothered to think before repeating them.
@Andrew Reynolds
I could say that you make no reference to any of my statements. However, instead Good night and Good luck…