Daily Archives: February 16, 2009
We here at QandO are big fans of the free market. But there are lots of enemies of the free market and they’re not just ideologies or governments. Sometimes – no, many times – corporations or associations go into cahoots with government to use the power of government to limit competition. Here’s an example of that:
A lot of focus has been directed toward the destruction of the world’s forests during the past few decades. The truth is that deforestation is happening with alarming frequency. Millions of acres of forest land are harvested illegally throughout the world every year, which contributes significantly to global warming and the destruction of wildlife habitat. Because this activity adversely affects our environment, the National Wood Flooring Association worked diligently with several key organizations to promote the illegal logging ban with Congress. The ban was passed this past summer as an amendment to the US Lacey Act, which originally was mandated more than 100 years ago to prohibit the illegal trafficking of wildlife. This new amendment has expanded the Lacey Act to include wood and wood products. Specifically, the ban prohibits the import, sale or trade in the US of wood and other forest products that are harvested through illegal means.
This legislation is significant for a number of reasons. First, and most importantly, it protects our world’s forests from irrecoverable loss of trees and wildlife habitat. Second, it protects lumber buyers who verify the origin of lumber when importing wood into the United States from other countries. Third, it eliminates the influx into the US of low-cost, low-quality wood flooring produced from illegally harvested forests.
The penalties for noncompliance with this new legislation are severe. Penalties can include the forfeiture of the illegally harvested material, fines of up to $500,000, and jail time of up to five years. From a consumer’s perspective, however, the ban helps you have confidence that the wood you are buying is not depleting our world’s forests.
This is classic stuff. Let’s look at their three “benefits”, shall we? First this ban no more “protects our world’s forests from irrecoverable loss of trees and wildlife habitat” than a gun ban keeps guns out of the hands of criminals. That’s because those who do actually engage in what this association would label “illegal logging” will simply sell to someone else. It’s not like wood isn’t in huge demand throughout the world or something.
The second “benefit” is a “join our club or pay the price” benefit at best. The obvious implication is if buyers don’t “verify the origin” to the satisfaction of the association (and the law), they’re open to accusations that what they’re bringing in are “illegal” whether true or not.
And, of course, in reality it all boils down to the last “benefit”. In fact it is a benefit only for the industry at the heart of writing this legislation. You the consumer, on the other hand, won’t get what the NWFA considers to be “low-cost, low-quality wood flooring” because, well, they’ve decided it just isn’t a decision which should be left up to you.
This is what passes for a “free market” these days. In this case, restricting the flow of goods to you in the name of a greater good, when, in fact, the greater good is just an excuse not to have to compete in the market place. It places the consumer’s right of access to such goods in second place to the association’s desire to “benefit” from special legislation which restricts that right.
When the price of that flooring you have been planning to buy goes through the roof, you’ll now know why.
As the NY Times reports today in an article about Special Envoy Richard Holbrooke’s trip to the Middle Eastern region:
Mr. Obama has said that he will reach out to Iran for direct talks, and last week the Iranian president, Mahmoud Ahmadinejad, said that Iran was ready. The two nations have not spoken directly since the Islamic Revolution in Iran 30 years ago.
So how does one begin that sort of a dialog when the target of the talks sees any concession as a sign of weakness and views your chief ally in the region as a cancer which needs to be excised?
As discussed during the presidential primary and then during the campaign, what you don’t do is enter such discussions without some established preconditions. And you certainly don’t unilaterally concede anything, especially if such a concession would help speed Iran’s production of a nuclear weapon.
That’s why this report from the open source intelligence newsletter GeoStrategy Direct is rather disturbing. Speaking of the new Israeli government, it writes:
Just as Barack Obama entered office facing a massive economic crisis beyond the scope of his experience, likewise the new Israeli leader will have to make or delay making difficult strategic decisions from the minute he or she enters office.
Barak has already signaled what the new government can expect, officials here said.
The United States has abandoned its policy of sanctioning companies that aid Iran’s nuclear and missile program, they said.
The officials said the new Obama administration of has decided to end sanctions against Iranian government agencies or companies that aid Teheran’s missile and nuclear program. The officials said Israel has been informed of the new U.S. policy.
“We were told that sanctions do not help the new U.S. policy of dialogue with Iran,” an official said.
Barak confirmed the new U.S. policy. In an address to the Herzliya Conference on Feb. 3, Barak said Washington did not say whether it would resume sanctions against Iran.
“Barak”, of course, is Israeli Defense Minister Ehud Barak. And, if true, you might imagine he and Israel are less than pleased. Trying to put a positive face on it Barak says:
“We must arrive at a strategic understanding with the United States over Iran’s military nuclear program and ensure that even if at this time they opt for the diplomatic option, it will only last a short time before harsh and necessary sanctions are imposed.”
Indeed. The stated reason for the lifting of the sanctions is they’ve been unsuccessful in stopping Iran’s pursuit of nuclear weapons. Unasked, however, is how successful they’ve been in delaying their acquisition? The removal of sanctions and the removal of all negative consequences for companies who supply such technology will certainly provide the incentive necessary for those companies to speed that pursuit along, won’t it?
How will the unilateral lifting of sanctions be viewed by Iran?
Well consider the internal politics of the country. You have an increasingly unpopular president under fire for his aggressive rhetoric and posture being challenged by a more moderate candidate. You also have a population that is growing tired of its isolation and the hardships imposed by sanctions. And there are rumors the ruling mullahs may not be particularly pleased with him either. Pressure is building against Mahmoud Ahmadinejad and some believe there is a distinct possibility that he can be defeated in June.
Suddenly, without any direct negotiations or concessions on the part of Iran, sanctions are lifted by the US. It seems to me Ahmadinejad could make a credible claim that his posture is responsible for the US caving and lifting the sanctions. He can claim, regardless of the truth of the claim, that his confrontational attitude is what brought the change. The message? The US is weak and confrontation works, reelect me.
And in the real world, results speak for themselves.
More aggressive and belligerent language, a campaign boost to a declared enemy of the US, faster realization of nuclear weapons for Iran, heightened tensions with Israel (not only from Iran but with the US), and a deteriorating situation in the Middle East. All that from a guy who says one of his signature issues is nuclear nonproliferation.
[HT: Gateway Pundit]
Venezuelan voters approved a referendum to end term limits on Sunday, paving the way for Hugo Chavez to perfect his dictatorship:
President Hugo Chavez says a referendum victory that removed limits on his re-election is a mandate to intensify his socialist agenda for decades to come. Opponents warn of an impending dictatorship.
Both sides had called the outcome of Sunday’s vote key to the future of this South American country, split down the middle between those who worship the president for redistributing Venezuela’s oil riches and those who see him as a power-hungry autocrat.
“Those who voted “yes” today voted for socialism, for revolution,” Chavez thundered to thousands of ecstatic supporters jamming the streets around the presidential palace. Fireworks lit up the Caracas skyline, and one man walked though the crowd carrying a painting of Chavez that read: “Forever.”
The constitutional overhaul allows all public officials to run for re-election as many times as they want, removing barriers to a Chavez candidacy in the next presidential elections in 2012 and beyond.
“In 2012 there will be presidential elections, and unless God decides otherwise, unless the people decide otherwise, this soldier is already a candidate,” Chavez said to applause. First elected in 1998, he has said he might stay in power until 2049, when he’ll be 95.
Hmmm. Maybe those “critics” are onto something, eh?
At their campaign headquarters, Chavez opponents hugged one another, and some cried. They said the results were skewed by Chavez’s broad use of state resources to get out the vote, through a battery of state-run news media, pressure on 2 million public employees and frequent presidential speeches which all television stations were required to air.
With the courts, the legislature and the election council all under his influence, and now with no limits on his re-election, officials say Chavez is virtually unstoppable.
“Effectively this will become a dictatorship,” opposition leader Omar Barboza told The Associated Press. “It’s control of all the powers, lack of separation of powers, unscrupulous use of state resources, persecution of adversaries.”
As the article notes, however, everything is not peaches and cream for Chavez. Venezuela’s economy, which is so heavily dependent on oil revenues, lies in shambles, beset by low oil prices, rampant inflation, and little prospect for relief. According to Michael Shifter of the Inter-American Dialogue in Washington:
… the global financial crisis and the plunging price of oil, which accounts for 94 percent of Venezuela’s exports and nearly half its federal budget, will limit Chavez’s ability to maintain the level of public spending that has fueled his popularity.
Without oil revenues to prop up the socialist spending regime, Chavez will have to resort to other means of stabilizing the economy. Because producers of wealth are so politically disfavored in Venezuela, and there are myriad obstacles to successfully operating any businesses, Chavez’s options for economic recovery are limited:
“Venezuela faces serious problems no matter what today’s results were. Later this year, economic problems are going to be felt more acutely.”
Venezuela, the fourth-largest supplier of crude oil to the U.S., depends on oil for 93 percent of export revenue and half the government’s budget. Prices for crude have plunged 74 percent since touching a record in July.
“Now we’re going to see what’s beyond this campaign and what he does when he takes the economy into account,” [Enrique] Alvarez, [head of Latin America fixed-income research at IDEAglobal in New York] said.
The adjustments to economic policy will probably include raising taxes and devaluing the currency to cover a public deficit now that his marathon political campaign is out of the way, said Alberto Ramos, Latin America economist at Goldman Sachs Group Inc. in New York.
Raising taxes is de rigueur in such circumstances, but not likely to generate much revenue. After all, the government has taken over the most lucrative part of the Venezuelan economy, and people and businesses who don’t earn much don’t have much to pay to the government. Taxes are not going to solve any problems.
Without any real economic engine to fund socialist programs, therefore, Chavez won’t be able to buy votes anymore. Instead he will have to find another way to garner (or manufacture) public support if he wants to remain in power. And there isn’t any doubt that he wants to remain in power.
The most obvious way for Chavez to accomplish this feat to convince the country that his leadership is indispensable to the country’s fortunes. That line of argument is already a staple in his rhetoric — i.e. that success of the Bolivarian Revolution depends on Chavez exercising ever increasing power — so the foundation has been laid. However, it was much easier to sell that idea when the oil revenues were pouring in. With a looming fiscal crisis at hand, and the prospects of economic improvement looking dim, a call for new leadership will likely grow louder.
Ironically, the path to permanent power for Chavez was described by socialist activist Naomi Klein in her book “Shock Doctrine: the Rise of Disaster Capitalism.” In what has become the bible for the anti-capitalist/ant-globalization movement, Klein
… explodes the myth that the global free market triumphed democratically. Exposing the thinking, the money trail and the puppet strings behind the world-changing crises and wars of the last four decades, The Shock Doctrine is the gripping story of how America’s “free market” policies have come to dominate the world– through the exploitation of disaster-shocked people and countries.
Her theory rests on the premise that democratic obstacles to corporate domination are swept aside in times of severe crisis (e.g. Iraq war, Katrina, tsunami in Sri Lanka), allowing global moneyed interests to swoop in and take control of the economy. She often cites Milton Friedman and the “Chicago Boys” dealings with Pinochet as an example of how capitalist forces purposely, and sometimes violently, undermine the will of the people when they are at their weakest in order to introduce reforms that actually serve the interests of the elite rather than the people. In spite of her historically challenged maunderings (Friedman only met Pinochet once for an hour, and wrote him a letter), Klein does hit on an important point: crises are routinely used to further the power of the elites. Klein just identifies the wrong parties. It is typically the government elites who profit from these crises.
Take, for example, how our own government has seized upon the current fiscal crises to shove a giant social spending bill down our throats, plunging future generations into massive debt, and centralizing control over the lives of individual Americans:
Last year the US economy was hit with one shock after another: the Bear Stearns bail-out, the Indymac collapse, the implosion of Fannie Mae and Freddie Mac, the AIG nationalisation, the biggest stock market drop ever, the $700bn Wall Street bail-out and more – all accompanied by a steady drumbeat of apocalyptic language from political leaders.
And what happened? Did the Republican administration summon up the spirit of Milton Friedman and cut government spending? Did it deregulate and privatise?
It did what governments actually do in a crisis – it seized new powers over the economy. It dramatically expanded the regulatory powers of the Federal Reserve and injected a trillion dollars of inflationary credit into the banking system. It partially nationalised the biggest banks. It appropriated $700bn with which to intervene in the economy. It made General Motors and Chrysler wards of the federal government. It wrote a bail-out bill giving the secretary of the treasury extraordinary powers that could not be reviewed by courts or other government agencies.
Now the Obama administration is continuing this drive toward centralisation and government domination of the economy. And its key players are explicitly referring to heir own version of the shock doctrine. Rahm Emanuel, the White House chief of staff, said the economic crisis facing the country is “an opportunity for us”. After all, he said: “You never want a serious crisis to go to waste. And this crisis provides the opportunity for us to do things that you could not do before” such as taking control of the financial, energy, information and healthcare industries.
That’s just the sort of thing Naomi Klein would have us believe that free-marketers like Milton Friedman think.
Of course, that isn’t how supporters of free markets behave at all. It is, however, exactly how someone like Hugo Chavez operates.
With the Venezuelan economy shrinking, and real suffering occurring on a growing scale, the opportunity is ripe for Chavez to further “reform” the country, and complete the Bolivarian Revolution as he has promised. That won’t save the nation from economic ruin, and indeed will probably hasten such an outcome, but it will provide the impetus for perpetual Chavista rule.
The economy is doing poorly? That’s because the revolution has not advanced far enough. Economy doing well? The revolution is working its wonders! Rinse and repeat.
Thus the keys to Chavez’s Bolivarian kingdom lie in the propagandistic message that only centralized and powerful leadership can provide adequately for all. Principles such as “fairness” and “equality” are used as bludgeons against any who dare step out of line. Individual achievement is sneered at as “selfish” and “against the common good.” The redistribution of any wealth created outside the government system (as all wealth created inside is confined to the governmental leaders) is touted as the only means of ensuring a safe and productive future for all. Capitalism is deemed the language of the oppressor, and blamed for any and all ills that befall the nation. Yet, despite all this rhetoric, things will never seem to get any better.
Poor, poor Venezuela. Thank goodness we won’t such stifling of economic welfare and individual freedom here.
In honor of Presidents Day, The Corner has a couple of posts about an underappreciated president, Calvin Coolidge. I like “Silent Cal” too, and there are a couple of anecdotes (hopefully not apocryphal) that I particularly like.
A lady was seated next to President Coolidge at a dinner party and chattered at him all night. He said nothing. Towards the end of the evening the woman told Coolidge she had a bet with a friend that she would be able to get Coolidge to say more than two words during the dinner party. He looked at her and said “You lose.”
The second one I found in the out-of-print book Presidential Anecdotes. President Coolidge and the First Lady were visiting a large chicken farming operation, and were being taken on separate tours. In the breeding area, the manager mentioned that each rooster was used to service a hen several times a day. The First Lady told the manager to please tell that to President Coolidge.
The manager did so. President Coolidge replied “Same hen every time?” The manager said, “No, different hen every time.” Coolidge then said “Make sure you tell that to Mrs. Coolidge.”
***Update*** I just discovered that there’s a new edition of the book Presidential Anecdotes. I have the 1981 edition, and it was updated in 2007 up through Bill Clinton.
While it was clear they wanted to write a gushing approval of his first days in office, even WaPo couldn’t quite bring themselves to “suspend disbelief” enough to do that.
I started chuckling at the second sentence:
But the presidency does not come with a magic wand; nor, we have learned, is Mr. Obama, however talented, a wizard.
They’re just “learning” that? My goodness, how in the tank were they?
Second discovery by WaPo:
The president’s admitted mistakes on nominations have served as a reminder that he is, after all, rather new to the game of national politics and the art of balancing the lofty aims of campaign pledges against the real-world demands of governing.
Campaign rhetoric, most remember, which was steadfastly supported (and apparently believed) by the Washington Post. As most of us understood, but WaPo is now discovering, inexperience in national politics has its price.
The narrow and rushed passage of his stimulus package underscored the difficulty of living up to his grand promises of transparency; the campaign trail talk about not cutting deals behind closed doors yielded to the demands of the moment. And if it was this hard for Mr. Obama to lure Republican votes to spend money, how will he manage to entice Republican support to deal with even more contentious issues, such as climate change or health care?
Grand promises of transparancy that were additionally unfulfilled on two pieces of legislation which weren’t rushed – the equal pay and S-CHIP legislation. Neither were delayed the 5 days his campaign had promised voters for them to review the bills prior to signing. Neither required the rush they received. The stimulus bill is just the worst of the bunch.
And while it isn’t necessary to entice Republican support on the more contentious issues in order to pass the bills, such support provides invaluable political cover. Given how badly both Democratic Congressional leaders and Obama handled the bi-partisan effort on the stimulus bill, there’s nothing that says they’ll ever change enough to entice Republicans.
Then there is Timothy Geithner:
The immediate challenge for the new administration, one that is harder and more important than the stimulus measure, will be to bring stability to the nation’s banking system. On that task, “chastening” is a mild word to apply to Treasury Secretary Timothy F. Geithner’s debut of the administration’s plan. The president promised that his treasury secretary would offer “very clear and specific plans,” after which Mr. Geithner laid out a blueprint only. The result was to undermine both Mr. Geithner, who is abler than he seemed at the rollout, and the plan, which is more promising than its reception would suggest.
Geithner, the man who was so important to the bailout effort that his tax cheating had to be ignored, has been less than impressive. Perhaps that will change, but to this point, he has done little to inspire confidence either among voters or the financial sector. The WaPo’s declaration that Geithner is “abler than he seemed” has yet to be proved.
WaPo then leavens its criticism with some faint praise, overstating the importance of the first two bills signed. They were simply retreads of bills Democrats had tried to pass during the Bush administration. Unlike what the Post tries to imply, there was no real leadership exercised by Obama or his administration in their passage.
Unfortunately for Mr. Obama and the nation, the current economic situation does not allow for the usual margin of error; fairly or not, he will not be measured against normal historical standards. Sooner rather than later, he will have to find the right balance between reassurance and alarmism; sooner than in past administrations, he needs a full team in place.
Sooner is much preferable to later. Part of the problem we’re experiencing today is the alarmism being spread from the nation’s premier bully pulpit. “Catastrophe” is a word to be used sparingly from that platform and should be reserved for actual catastrophe. After calling for swift action and passage of the bill on Friday and claiming the nation couldn’t wait another hour, we understand now he won’t be signing the bill until Tuesday, a weekend Valentine get-away taking priority. That’s not leadership, and it certainly will cause critics to discount any such future warnings as more fear-mongering.
WaPo then contradicts itself:
Fortunately for the nation, while Mr. Obama has an experience deficit, he possesses a surfeit of smarts and steadiness.
He certainly has an experience deficit, and that is becoming increasingly apparent. However, given his recent penchant for alarmism as discussed in the article, it seems rather contradictory to then laud him for his “smarts and steadiness”. Smart and steady people don’t resort to fear-mongering to drive their agenda. However the unsure and inexperienced do.
WaPo then concludes that things will straighten out, and the nation’s optimism in Obama will be rewarded and, now that he has lowered expectations (through his alarmism), will patiently wait the years, not months, necessary to see the recession through. I find that to be mostly wishful thinking.
All totaled, the Washington Post, to use a phrase that has become rather trite in the last year, is trying to put lipstick on a pig. Following a WaPo article touting the passage of the massive pork laden spending bill as a “victory of historic proportion“, it stands to reason they’d try to double down on their presidential bet, hoping it all works out as they’ve imagined it will. But by their own words, the dream isn’t off to a good start.