Garrison Lovely on X - "Seems like more people should be talking about how a libertarian charter city startup funded by Sam Altman, Marc Andreessen, and Peter Thiel is trying to bankrupt Honduras. Próspera is suing Honduras to the tune of $11B (GDP is $32B) and is expected to win, per the NYT 🧵"
TracingWoodgrains on X - "This mindset is as alien to me as it is frustrating.
Situation: some libertarians want to live in line with their ideals. They go to immense trouble to buy some virtually unused plots of land, put in years of effort with the government of a developing country to get permission to build on it, and get to work.
A new "center-left" socialist government comes in. It breaks the contract, aiming to destroy their ability to build a city on property nobody else had cared to use, undoing years of work. What Lovely frames as a city trying to bankrupt Honduras is a group of people doing everything they can to play by the rules, to find a way within the system to live according to their ideals, only to see the rules change ex post facto. There is an incredibly simple route for the Honduras socialists to avoid losing the lawsuit: they can honor their contract. Even if you are opposed to the ideals of the people working to build the charter city, you should welcome experimentation. If they fail, they burned their own time, effort, and money to try something, and you get an example of their failure to point to forever after. And if they succeed? You don't have to visit, work with, or pay any attention to their city. Meanwhile, they can provide opportunity to, and investment in, a struggling area. In the name of anti-colonialism, socialists want the entire world to live by their ideals. In the name of democracy, they want to shut down experiments run by people they disagree with. In the name of fairness, they want to break promises, then cry foul when people try to hold them to those promises.
In a sense, I agree with Lovely here: Interested people should be talking about how socialists in Honduras are trying to shut down a promising experiment ex post facto, and how the charter city is aiming to persist regardless. I'm just not convinced the narrative is anywhere near as flattering for those socialists as he would hope. Let people experiment. Let them work to build and live in line with their ideals. Let them try. And for heaven's sake, don't hit them, then cry foul when they hit back."
Governments don't need to honour contracts (at least when the left approves), because power relations means unfavourable agreements can be torn up
Scott Alexander on X - "You can read some of my previous writing about this case at https://astralcodexten.com/p/model-city-monday-9423… , but my impression is you're uncritically buying the Honduran socialists' propaganda version of this conflict.
A more pro-Prospera/balanced version: investment courts are a useful vehicle to prevent countries from inviting international investment, then stealing it as soon as it materializes. Countries voluntarily sign on to these courts to allow them to credibly commit to protecting investors, should those investors pour money into the country. In 2009, the socialist president was couped by the military after he refused to comply with a Supreme Court order not to try to overstay his term limits. In the process, he had tried to fire the rest of the government when they resigned in protest or wouldn't carry out his orders. The Supreme Court ordered his arrest, and the military couped in sympathy with this. Coups are bad in general but in this case I think just saying "it was a coup so they're evil" is extremely deceptive. Democratic elections were then held (which the socialists boycotted), producing the government that approved Prospera. 78% of Congress approved the law to create charter cities with an explicit guarantee that they would protect it for fifty years. They enshrined this in various bilateral treaties with developed countries doing the investment, and within international investment law, because investors wouldn't invest without this. Prospera wasn't directly involved in these negotiations, but *after* Honduras had made all these guarantees to other people, they got together and invested about $100 million in building a new city on a greenfield site in Honduras, at the government's invitation. After a few years, the wife of the socialist who got couped was elected, and her government tried to seize the city without compensation. Prospera sued in the exact international court that the agreement which created them said they should sue in. This was one of several (I think 9, but might be wrong) different suits that different people lodged against the socialist government for trying to nationalize their infrastructure projects in Honduras without compensation. Prospera doesn't actually want the $11 billion, it wants for the socialists to stop trying to seize their stuff and leave them in peace. I believe it has said many times that the second the socialists agree to leave them in peace, they will drop their suit (and I would be disappointed in them if this wasn't true). The socialists have instead announced that they have no obligation to follow any treaties or international law, and they will continue seizing these 9 projects (including Prospera). They refused to send a lawyer to defend themselves in international arbitration, and so the arbitration court ruled against them. The arbitrators can't actually seize the budget of Honduras, but countries that follow the international treaties that established the international court will now be allowed to take whatever Honduran government money is in their countries in order to pay back their investors. There are a bunch of people who hate charter cities because they feel "colonialist" and they would rather these countries languish in poverty than touch "polluted" first world market structures. They have dominated the news coverage on these issues. You can reach out to anyone at Prospera and they would be happy to tell you their own side. Otherwise, I'm not sure what you want - for international investment law not to exist? A world where countries can woo investors by saying "please build infrastructure within our borders, we promise we won't steal it" and then immediately turn around and steal it? Where it's illegal in the court of public opinion to even attempt to create institutions to get around this problem? All this does is ensure that nobody will ever invest in developing countries ever again. There *are* things in the general vicinity of this that are moral gray areas. If some corrupt dictator promises a foreign country all of his country's oil for cheap, costing the country its most valuable resource, can later governments go back on this? I think international law (and the broader court of public opinion) include some mechanisms for dealing with this, but I admit that if those mechanisms fail it's a really hard problem. But this isn't one of those problems. Prospera hasn't taken any resource except a few hundred acres of previously unoccupied land (which they bought at market price from previous owners). This is the easiest, most slam dunk version of this generally-difficult-sort-of-question you could imagine."
Jeremy Kauffman 🦔 on X - "Lefty journalist: long viral thread on how evil American libertarian billionaires are trying to bankrupt Honduras
Scott Alexander: *incredibly detailed rebuttal of how that's not true*
Journo: I don't have time to respond to this rn"
Scott Alexander on X - "- Re 1: see my last paragraph. I agree that this is a flaw in the concept of contracts. But not allowing someone to make binding contracts is crippling them pretty hard - see the story of Parfit's Hitchhiker. As I understand it, international arbitration law (the system Prospera sued in) already has provisions that "our country only agreed to that deal because of corruption" is a defense against having to honor a deal. AFAIK Honduras did not try to argue that these provisions applied in the arbitration case we're discussing. I don't know enough about international law to know how good or fair or comprehensive these provisions are. If I were designing a system from the ground up, I would have some group that declares countries too corrupt to deal with beforehand, so that investors can avoid any country sanctioned in this way (and be confident that they could deal in good faith with non-sanctioned countries). I don't know to what degree there are already rules like this. But as I said in my last paragraph, I feel like whatever we think about edge cases, this isn't one of them - since Honduras isn't giving Prospera a scarce resource, but rather letting them build something entirely new.
- Re court packing: yes, AFAICT the court was packed. This wasn't done because of charter cities, it was done because of a police reform law, although it later benefitted charter cities too. Court packing is bad and I am against it. But IIUC, this is the third Honduran court packing in twenty years (possibly second, I can't tell if the 1998 and 2001 ones were parts of the same process), and this isn't even counting the socialists' decision to simply ignore the Supreme Court without even bothering to pack it. Nobody cared about any of this until it resulted in charter cities, at which point they decided that this court packing (but not any of the others, and certainly not the currently-in-power socialist party's defiance of their own inconvenient Supreme Court rulings) was outrageous enough to invalidate the charter cities law (but not any other policy by the relevant court?). To put this in proportion, none of the three Honduran court packings even made it into this recent NPR article on court packing trends in Latin America https://npr.org/2024/08/12/nx-s1-5069716/opinion-supreme-court-packing-latin-america . I'm not trying to excuse court packing, but I think a policy of "you can break your word if there was a packed court somewhere upstream of the decision" means that half of Latin American countries can go back on any policy they've made over the past few decades (and maybe the US can break all international commitments it's made post FDR?)
- I don't know who you mean by the other charter city people who are skeptical of Prospera. I know Mark Lutter from CCI was a bit skeptical, because he believes charter cities need to be based around some sort of very convincing economic thesis (eg a port, or a mine, or something else that will bring them profit right away) and can't just coast on a policy of "well, we'll be safer and less corrupt and have better rule-of-law, and if we build it eventually businesses will come". I'm mostly on his side here, but part of why I'm so upset about attempts to appropriate Prospera is that even though they are trying to do things on Hard Mode, they've succeeded surprisingly well and a lot of people and businesses *have* come to them. I still think there are structural obstacles that will prevent them becoming the Singapore v. 2.0 that Mark wants, but the team is good people and they've done good work and they don't deserve this kind of treatment...
I think the economic consensus is mostly reflecting this idea of "high quality investment good, low quality investment neutral to bad". So is Prospera high quality investment? I think so! The whole point of the charter city is to make a region where it's easier to start businesses without one million different types of corruption and theft that prevent people from starting or hosting businesses in Honduras. I don't think you can argue this corruption and theft doesn't exist - our whole discussion is about the Honduras government trying to steal a business without compensation, in the context of a court case where they're doing this to eight other businesses. This has already caused universities, hospitals, factories, etc to pledge to relocate to Honduras (some of them might have reneged after the socialists started threatening Prospera, I'm not sure, and one university wimped out for PR reasons after journalists wrote too many hit pieces, but there are still a couple of pledges like this). This is totally different from a casino or some extractive oil thing where they're going to send the oil back to the First World and pay the locals pennies on the dollar. But also, I feel like we're missing the point here even defending it at this level. Yes, you can find a couple of fringe economists who say maybe investment isn't good for the economy. Okay, I can find a couple of fringe economists who say maybe health care spending isn't good for health (I had a debate with one a few months ago... imagine that Honduras paid a US pharma company for drugs and vaccines, and then the US pharma company stole the money and refused to provide the treatments. It is not exculpatory AT ALL to say "Well, a few fringe economists believe health care doesn't work, so if you believe them then in some sense I never really hurt anyone". It's not even exculpatory to say "Well, yes, this kind of theft means nobody will ever provide health care to developing countries again, but in some sense if you believe fringe economists, then that's good, because health care spending doesn't work, so we're actually just saving them time and trouble." It's the right of the people making the buying decisions to decide for themselves whether to bet their people's lives on those fringe economists, not the right of other people to use a fringe position to justify thefts that make it impossible for anyone to try acting according to the consensus position ever again!
- I think talking to Prospera would be helpful... Erick Brimen, their CEO, is a pretty compelling guy. He's from Venezuela, he saw what happened there (the socialists ruling Honduras now are allied with Venezuela's Maduro) and he just has a really principled commitment to trying to save other people/countries from the same fate. I think it's hard to listen to his story and still think that the socialists and hit piece writers here are on the side of the angels...
there's a HUGE difference between accepting the risk - or even accepting the risk and not feeling sorry for the victims - versus actively carrying water for the dictators and supporting what they're doing and trying to justify it to your audience."
Simon on X - "That line about the land being "usurped" is insane lmao. It wasn't even a forced sale. They just went on the market and bought a bunch of land as a private party"
TracingWoodgrains on X - "Right. They didn't usurp anything. They bought land, spent years working through governmental red tape to use it in a creative way, and began using it. Bizarre framing."
theficouple on X - "Unpopular opinion: If you make $150,000 a year but still live paycheck to paycheck? You might have a spending problem, not an income problem. Do you agree?"
united states - Does the average income in the US drop by $9,500 if you exclude the ten richest Americans? - Skeptics Stack Exchange - "A leftist friend of mine shared this meme:
Averages are tricky like that
The average income in the United States is 74,500$.
Excluding the top 10 Americans, it's only 65,000.
Excluding the top 50, it drops to 48,000$.
Excluding the top 1,000, it drops to just 35,500$
It alleges that the average income in the United States drops by $9,500 if you exclude the ten richest Americans, $25,000 if you exclude the 50 richest, and $39,000 if you exclude the 1,000 richest. Is this true?"
"This is false because the "starting" value used by the meme is the median value, not the mean, of household income in the United States (as seen in this chart Real Median Household Income in the United States, showing $74,580 for 2022) The reductions are made as though that value was an average, not a median. While excluding outliers can change an average substantially, it affects the median only very slightly. It also appears that the ostensible reductions from excluding the "top" earners are based on counting total wealth, not yearly income-- which is itself at least an order-of-magnitude error. The 10 highest income Americans do not average $95,000,000,000 in annual income. From the chart Mean Family Income in the United States you can see that mean family income (as opposed to median) is actually 126,500. This is income and not wealth, but even if we are as generous as possible to the original graphic and assume we can just deduct total wealth of the top X, we see that excluding the top 10 reduces the mean to $116,000, and reducing the top 1,000 reduces to $87,000. As percentage reductions, these are much less dramatic-- and the resulting mean is still higher than the (all but unchanged) median. But remember, even these values are comparing apples (income) to oranges (total wealth)-- the total share of annual income going to the very wealthiest is much smaller."
Left wingers don't understand the difference between net worth and income, and mean and median. That's why they're poor
CHARLEBOIS: These are Canada's 'Hunger Games' - "In 2023, while 13.5% of Americans households grappled with food insecurity— characterized by low or very low food security (USDA-ERS, 2024) — the rate in Canada was significantly higher at 22.9% (Proof Toronto, 2024). This suggests that food insecurity in Canada is a staggering 69.6% more prevalent than in the United States — a deeply unsettling statistic. The challenge of affording food in Canada is exacerbated by anemic food sales, particularly stark when compared to the United States, where grocery store sales increased by 1.8% in the last 12 months, according to the Federal Reserve Economic Data. In stark contrast, Canadian grocery store sales have plummeted by a worrying 3.2%, according to Statistics Canada ( see graph on retail sales ). One plausible explanation for this disparity lies in the higher interest rates in Canada, which likely impose a heavier burden on Canadian households than on their American counterparts, given that the average debt per household is considerably higher in Canada. The Bank of Canada’s pathway to achieving a more stable inflation rate without detrimentally affecting Canadians appears much narrower than that of the U.S. Federal Reserve, evidenced by the harsh reality of 10 consecutive rate hikes last year, compelling Canadians to economize particularly on food expenditures. It is becoming increasingly apparent that Canada’s per capita economy is contracting, devoid of the wealth creation observed in the United States. Notably, according to World Bank Data, in 2002, the United States’ GDP per capita was 56.6% higher than Canada’s — a record high during the tenure of another Liberal prime minister, Jean Chrétien. The current gap, at 53.07%, is perilously close to this historical peak ( see GDP Per Capita graph ). The primary drivers of GDP growth in Canada are currently immigration and public spending, with the government undertaking the bulk of economic heavy lifting. The situation is indeed dire. Moreover, the enthusiasm once held for the economic greening championed by the Trudeau administration is showing signs of significant fatigue. The carbon tax, Trudeau’s principal policy for fostering an eco-friendly economy, is increasingly losing traction due to the prevailing economic challenges... The failures of the carbon tax are emblematic of a broader trend in recent policymaking endeavours: The implementation of populist policies devoid of rigorous metrics for evaluating their success over time, all while constructing an expansive communications strategy designed to convince Canadians of the policy’s merits. The federal carbon tax is set to escalate to $95 per tonne by April 2025, marching inexorably towards the 2030 goal of $170 per tonne. Despite the mounting pressure, the Trudeau government has neglected to assess whether the policy meaningfully impacts our climate and emissions or to evaluate how the policy might influence the economy over time, with a particular focus on the ramifications for the agri-food sector — from farm to plate. The design of the rebate system ostensibly allows Canadians to overlook the real costs of this poorly-conceived policy. However, administering this massive program is not only costly, but also fails to leverage the Canadian economy effectively. It is imperative to devise policies that genuinely foster both economic and environmental sustainability for the nation."
Given all the fear-mongering about the US, this is ironic. Presumably Canadian companies and landlords are "greedier" than American ones. But this won't stop left wingers from continuing to demonise the US
This won't stop left wingers from pushing de-growth, since they will continue to claim that the problem is how a shrinking pie is cut, rather than the pie becoming smaller
Are Canadian ready for airport privatization? - "London City has spent tens of millions of pounds to build new aircraft berths and a parallel taxiway, and completed a major upgrade of its departure lounge, boosting its capacity by 30 per cent. In 2021, it replaced its aging 30-year-old analogue air traffic control tower with a fully remote digital tower, a first for a significant international airport. And the adoption of new scanning technology has reduced line-up times for passengers by 50 per cent on average, with the airport boasting in an April 2024 news release that it can get business and leisure passengers “from the entrance to the gate in 10 minutes.” While the airport has clashed with nearby residents and local governments over some of its expansion plans, it has racked up accolades from travellers, including being named the best airport in the United Kingdom by Conde Nast Traveller readers and the Daily Telegraph in 2022... “The highlight of the airport is the seamless security system,” she said, adding that travellers no longer have to remove liquids or laptops from their bags or take off their shoes like they do at other large airports around the world. London City is not the only airport Canadian pensions have taken stakes in over the years. From Sydney to Copenhagen, airports are an investment opportunity they desire, but one they have been unable to replicate in their home market, where a unique not-for-profit ownership model and fears of a public-to-private shift would be a losing political move have stymied previous talks about privatizing... The allure of airports for the pensions is twofold. On one hand, there are the healthy fees collected each time an airplane takes off and lands, not to mention a surrounding near-monopoly constellation of amenities — such as parking and rental cars — that offer steady earnings potential and growth opportunities. They also help the retirement funds satisfy long-term obligations to pensioners. Airports are infrastructure investments, an asset class whose steady returns keep up with inflation and help pensions match their liabilities over the long term. One industry veteran said airport investments are like souped-up real return bonds (RRBs), an asset class gobbled up by pension funds specifically because it matches liabilities — what’s owed to future pensioners — that are indexed to inflation... Canadian pensions are far from the only institutional investors to spot the opportunity. Nearly 20 per cent of airports worldwide are now privately owned and more than 100 of those are owned by private equity infrastructure investors, according to a 2023 study published by the United States National Bureau of Economic Research. None are in Canada, and there is only one — Missouri’s Branson Airport — in the U.S. Most airports in the U.S. remain in state or local government hands, a situation often attributed to the unique tax-exempt treatment of bonds issued to finance public airports. Tae Hoon Oum, a retired professor at the University of British Columbia’s Sauder School of Business who helped create an international database to track airport performance and cost competitiveness, said Canada is late to the party when it comes to recognizing the benefits of privatizing airport operations. “The world has moved to a much better model. People who know airports, how it works in the airport industry, they know that we are falling behind,” he said, noting that airports in Australia were privatized by the early 2000s and that governments in Europe and the U.K. privatized airport operations as far back as the late 1980s and 1990s... Michael Weisbach, a finance professor at Ohio State University and co-author of the National Bureau of Economic Research study that found that airport volumes, efficiency and quality improve substantially under private equity ownership, said resistance to privatization is nevertheless a common response. “When you first hear about privatizing airports, your first reaction is, ‘Oh, my god, they’re going to fire a lot of workers, they’re going to compromise on safety,’” he said. “We looked as hard as we could to see whether there was any increase in safety violations or increase in accidents, or whether there were fewer employees, and we didn’t find any evidence of any of that.” Moreover, the study concluded that the net effect of a private equity acquisition of an airport is a rough doubling of operating income, mostly due to higher revenues collected from airlines and retailers in the terminal rather than cost-cutting. Other things that improved under new private equity management included better compensation for managers and more investments in new capacity and technology. “The facts are that the number of routes and the number of passengers go up, the profitability goes up, the passenger experience goes up,” Weisbach said, adding that “the cancellation rate goes down (and) safety is unaffected.”... Earlier studies have produced mixed results, but the National Bureau of Economic Research study, which used a database of 2,444 unique airports in 217 countries and had rare access to some private equity financial data, found stark differences in passenger traffic patterns, which increased more under private ownership than at government-owned airports. Private equity owners far outperformed even other forms of privatization on this measure. Satellite images showed that private equity owners tend to increase terminal size and the number of gates. Investments in such physical capacity mean an airport can bring in more passengers, who, in turn, spend more money in retail establishments and restaurants and on parking and rental cars. The study’s authors also noted that private equity owners tend to push for deregulation of government limits on fees... the Liberal Party has had a history of objecting to private interests in Canada’s airports. In the early 1990s, Jean Chrétien, while in opposition, called a Conservative government’s attempt to push through a long-term plan to involve private interests in the redevelopment of two terminals at Pearson airport — just ahead of an election —“indecent” and “immoral,” and he threatened to overturn it if he was elected."
Weird. Left wingers keep claiming privatisation always leads to higher costs and worse services. Trusting the science is only when it aids the left wing agenda
All Clear for Takeoff: Evidence from Airports on the Effects of Infrastructure Privatization - "Infrastructure assets have undergone substantial privatization around the world in recent decades. How do these assets perform post-privatization? This paper examines global airports. Our central finding is that the type of ownership matters: Volume, efficiency, and quality improve substantially under private equity (PE) ownership—both following privatization and in subsequent transactions—but there is little evidence of improvement under non-PE private ownership. This remains the case for airports sold in auctions in which PE and non-PE firms bid, mitigating concerns about selection. PE owners invest in new physical capacity and appear to negotiate more effectively with airlines, especially in the presence of a state-owned flag carrier. Higher prices and more retail revenue increase net income, with no evidence of cost reductions or layoffs. We find that improvements are concentrated when there is a competing airport nearby, under longer-term leases, and when the local government is less corrupt. One explanation for the failure of non-PE private firms to outperform government ownership is that they tend to target more corrupt locations."
Weird. I thought private equity just loots and runs
Tackling food insecurity needs more than charity — governments must also act
Naturally, the "solution" is free money and an expansion of government rather than axing policies like that carbon tax that increase the cost of food, or increasing competition in the grocery sector
