Free Markets, Free People
Here’s how markets work. From Toyota:
It said today it will not release its proposed mass-market mini e-car, the eQ. The reason: there’s no demand for it, not while battery technology is failing to provide comparable range to a tank of petrol. The natural gas boom in the US has seen prices of the fuel plummet, in turn reducing the cost of electricity generated by burning it. The Japanese car maker said today it will release 21 hybrid gas-electric models in its line-up by 2015.
“The current capabilities of electric vehicles do not meet society’s needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge,” said, Uchiyamada, who spearheaded Toyota’s development of the Prius hybrid in the 1990s.
Here’s the market not working because of government intrusion (and ownership):
Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.
Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.
It currently costs GM “at least” $75,000 to build the Volt, including development costs, Munro said. That’s nearly twice the base price of the Volt before a $7,500 federal tax credit provided as part ofPresident Barack Obama‘s green energy policy.
A pity these things have to be continually pointed out. But, of course, it won’t stop those who want government to decide what we should be driving instead of consumers and think subsidies will foster that desired behavior.
Two non-partisan government agencies — the Congressional Budget Office in Washington, D.C. and Parliament’s Select Transport Committee — conclude that during the next decade at least, the giveaways will have little impact on sales of plug-in hybrid and all-electric vehicles, or on gasoline consumption and greenhouse-gas emissions. Their main beneficiaries: affluent purchasers who’d buy the vehicles anyway.
“… during the next decade at least …?” Love that caveat, don’t you? They never work if it is something consumers don’t want. See current example for proof. In the case of the market, it’s moved on … and much faster than government can react. As usual, government has backed a loser.
The frenzy over shale gas deep under Ohio and other states has the makings of a different kind of rush on the nation’s highways. Businesses, cities, metropolitan transit systems and even school districts across the nation are edging toward a switch from diesel and gasoline to natural gas. Converting cars and light trucks to use either gasoline or natural gas is expensive. And heavy trucks designed specifically for natural gas also cost more than conventional diesels. But at current prices, engines that can run on natural gas cut fuel bills in half or better.
And GM has the Volt. You have to laugh at the fact that the central planners invariably always get it wrong.
You’d have think we’d have learned that by now, wouldn’t you?
You can wade through all the trash he throws up there as a preface to his central point, but I’ll save you the trouble. Writing in the WSJ, Andy Stern says:
The conservative-preferred, free-market fundamentalist, shareholder-only model—so successful in the 20th century—is being thrown onto the trash heap of history in the 21st century. In an era when countries need to become economic teams, Team USA’s results—a jobless decade, 30 years of flat median wages, a trade deficit, a shrinking middle class and phenomenal gains in wealth but only for the top 1%—are pathetic.
This should motivate leaders to rethink, rather than double down on an empirically failing free-market extremism. As painful and humbling as it may be, America needs to do what a once-dominant business or sports team would do when the tide turns: study the ingredients of its competitors’ success.
No poisoning the well there, huh? The “conservative-preferred, free-market fundamentalist, shareholder-only" model? Really? Where?
And why was it “so successful in the 20th century” and why is it having problems now? Well that’s a fairly easy question to answer. What happened increasingly in the 20th century that is at an all time high now?
Answer? Government. It has increased dramatically in both size and intrusiveness. We don’t have a “free-market” system anymore. Haven’t for quite some time. It’s a convenient shibboleth used by opponents of free markets such as Stern. We have a government that has, in the century cited, turned it into crony capitalism. Any resemblance here in the 21st century to a “free market” model is purely coincidental. And we now have a debt drag imposed by out of control government spending that has finally topped our total yearly GDP.
As usual, with those who think China has figured out how to build the socialist dream, they never figure in the damage done to the model that was “so successful in the 20th century” because doing so kills their entire premise. Government is their vehicle to both wealth and social justice. They have no concept of how markets work so are gullible enough to still believe that central planning, properly done, can work. And they take the fact that China has risen economically as proof of their premise.
What they don’t do is look behind the curtain. Stern talks about his trip there, “a trip organized by the China-United States Exchange Foundation and the Center for American Progress—with high-ranking Chinese government officials, both past and present.”
Yes indeed, very likely to see the underside of the economy is a show tour aren’t you?
A caller to Rush Limbaugh who spends a lot of time in China lays out the reality there:
CALLER: Because once you get outside of the main cities, there are still people plowing fields behind cows and oxen, still hand harvesting corn, grains, rice. I mean, it’s still very much a Third World economy once you get outside of the main cities.
RUSH: With a First World military.
CALLER: Yeah, that’s true.
RUSH: That’s where much of their spending goes. Their infrastructure is built on the cheap, too. Doesn’t take much wind to bring down some of their so-called powerful infrastructure. But, you’re right, and this is what President Bush was telling me, that the big challenge is keeping those peasants behind the oxen. Don’t [let] them into the city. The cities can’t handle them. The cities are teeming with people already. But it’s always been the case that there is this romance — the left has romance — with the romantic attachments to all these tyrannical communist regimes, and now they’re looking at China and you’ve got this Andy Stern guy and other people telling us, "This is what we need to be. We need to emulate the ChiComs. The ChiComs are doing it right."
This is simply the usual nonsense wrapped up in a little different packaging. It is the leftist dream – a strong central government planning the economy in which it ensures social justice as its highest priority (btw, China is an environmental disaster area, but you won’t hear that from the likes of Stern). And that doesn’t mean market capitalism, even if the Andy Sterns of the world want you to believe that.
While he avoids the obvious problem of government intrusion and its disastrous effect on the economy, he does touch on the political problem we still endure. We have politicians who prefer being Santa Claus to the Grinch and whose whole political horizon never goes beyond the next election.
But the central problem we have isn’t needing a new economic model. Instead we need to go back to the old one before it was corrupted and distorted by government. Instead of more government, as Andy Stern wishes, we need precisely the opposite – much less government.
If we want to regain our economic footing and dominance, what government needs to do is get the hell out of the way, get spending under control and pay down the debt (which should become its primary focus over the coming decades) to eliminate the debt drag it has created.
Other than that, it’s job is to be the night watchman, not Santa Claus. Our problem isn’t economic models. Our problem is exactly what Stern wants more of.
Obviously economics wasn’t his strong subject in whatever schooling he received and history was apparently completely skipped. How else to explain the utter nonsense he pushes in his article?
Sometimes it’s something which seems minor or trivial that sets this ‘wondering’ of mine in motion. I’ll read an article or short blurb which just makes me shake my head. For instance, from North Carolina:
Students in Johnston County schools looking to relieve chapped lips better have all their paperwork in order.
The News & Observer of Raleigh reports that the district has begun requiring a note from parents before it will allow students to bring Chapstick and other lip balms to school.
Schools spokeswoman Terri Sessoms says the policy was set by the county health department. Sessoms says parents were worried that children would share lip balm and spread germs.
It sometimes is a wonder to me that we’ve managed to make it this far in our civilization without the “benevolent hand of government” to guide even the tiniest things in our lives. Here we have a “county health department” deciding unilaterally to set policy without discussion or input from anyone. I assume, given the way this is written, that the schools are required by law to do what the county health department says to do.
But certainly they understand, given the policy covers the entire school district, that lipstick is just as likely to be shared (perhaps more likely) among girls? Any conspicuous outbreaks of illness or disease experienced to base this policy upon? Or is this just an normal, everyday, precautionary intrusion upon individual liberty?
And if the kids get a note from their parents, doesn’t that mean that the fears the policy is meant to address are now obviously circumvented by allowing the balm into the school and allowing it to be potentially shared? So why have the policy?
Yeah, I know, it seem not to be a big thing in the overall scheme of problems we face. And yes, you have to pick your battles and the hills you’re willing to die upon. But that doesn’t make the minor governmental bureaucratic intrusions any more palatable than the more major ones.
It is the little intrusions, piled one upon the other, that make government more and more a part of our lives. We spend more and more time complying with government demands and mandates every day – in areas where frankly, government has no business. And we, for the most part, meekly accept them.
In reality, this seemingly minor intrusion isn’t terribly different than the recent unilateral decisions made by the TSA to begin full body scanning and enhanced pat-downs. No discussion, a unilateral decision, and your job is to comply. The assumption made is the government has the right to make such decisions because their intensions are good and the public’s concerns are of, well, little concern.
And apparently, so is their liberty.
I noted yesterday that one of the more prolific hacks left off of Alex Pareene list (link in previous post) at Salon was Paul Krugman.
QandO has a long history of examining Krugman’s political thoughts and finding them mostly wanting. That’s not to say he’s a bust at everything he does – when he just talked economics he had some interesting things to say. But his venture into political advocacy has, shall we say, not helped his overall reputation in the least. One of the reasons is he’s prone to saying things like this:
The rich don’t necessarily deserve their wealth, and the poor certainly don’t deserve their poverty.
Don’t “deserve” wealth or poverty according to whom and by what standard, Mr. Krugman?
Who gets to decide what is or isn’t “deserved” if earned or obtained legally? And how does one make the blanket statement that “the poor certainly don’t deserve their poverty?” That, in many cases, is demonstrably false.
If we agree we are the sum of our choices in life, and those who’ve made consistently bad choices (drop out of school, take up drug use, commit criminal acts) end up in poverty, how is it they don’t “deserve” what they now suffer? Certainly I can think of examples of the poor who may be poor through no real fault of their own – the mentally deficient who haven’t the skills to earn high wages, etc. But for the most part, if everyone is offered essentially the same opportunities as others and they choose not to take advantage of them, how does one relegate their descent into poverty as “undeserved”? Especially when others in precisely the same circumstances make different decisions that raise them out of poverty?
What, in fact, that statement is meant to reflect is Krugman’s apparent belief that wealth is unequally distributed not because it is earned, but by an immoral and unfair system that needs to be fixed.
The market, in Krugman’s world, arbitrarily picks winners and losers and rewards them at whim apparently. Thus most of the rich and none of the poor “deserve” their financial status.
So this should come as not surprise:
Allow me to make a point: Economics is not a morality play. It’s not a happy story in which virtue is rewarded and vice punished.
The market economy is a system for organizing activity — a pretty good system most of the time, though not always — but not according to any moral significance.
Really? So nowhere in such an economy is honesty, fairness, good customer service rewarded with business over competitors who exhibit none of those virtues? Instead, it’s just a “system for organizing” where consumers buy from which ever vendor they first come upon without ever once considering those virtues as a reason for buying? Does the system punish those who act in what one could consider an “economically immoral” manner – i.e. in violation of the laws of economics” or screwing over customers? Does it not mostly reward those who act in a manner that most pleases their customers and helps their reputation?
How is that not evidence of a moral code operating within a given market?
Well of course it is – but such a code is inconvenient to the Krugman’s of the world, because admitting that markets, unimpeded by government intrusion, would reward or punish those who transgress its laws would mean the argument for more government intrusion would fall flat. And certainly, admitting that the rich “deserve” their riches as much as many in poverty “deserve” their poverty would again admit to a morality that precluded government making everything “fair” by it’s attempts to redistribute that “undeserved” wealth.
Those key premises are what Krugman and much of the left base their criticism of capitalism on, never once admitting that a) capitalism as it should exist doesn’t and b) the reason the markets may not seem to be “working” is because of the amount of distortion they already suffer from government intrusion.
Of course, it is the age old cycle many of us have come to understand – government declares something to be a problem, declares it is the solution, exacerbates the problem and again declares only it can fix it with even more intrusion.
“Morality” is, at a base level, “good and bad”. We label what we deem “good” as moral. The bad stuff is “immoral”. How one can observe real markets at work, where the basic transaction is a voluntary exchange of goods for money between two people (entities) and not recognize the basic morality of such an act wouldn’t understand morality if it bit them on the leg. Billions of those transactions will happen on this, Black Friday. Consumers will go to stores they trust from experience, buy from vendors with good reputations and the best customer service and reward them with their business. That decision is one based in morality in which the consumer weighs the options and picks the vendor who best exemplifies their moral ideal in the marketplace. If they’ve been burned in the past by store X, that store most likely will not get their business – a decision based on the moral judgment of the consumer.
How a so-called economist doesn’t understand the basic morality of markets seems a bit beyond me. Which is why I put Krugman in the hack category. That morality, which is plainly evident to me, is inconvenient to Krugman’s thesis that government must intervene in the economy. He can’t really point to any success stories (well he tries by saying, finally, that massive government spending for WWII brought us out of the Depression and that’s suspect), so he’s left trying to explain why it is government’s job to save us from the inherent unfairness of the market.
You have to leave a whole bunch of stuff out to do that. And you have to establish nonsensical premises like “the rich don’t necessarily deserve their wealth, and the poor certainly don’t deserve their poverty”, in order to advance your government intrusion thesis.
Thus the cycle repeats – government is again the only solution to the problem government created. After all, the markets put us 14 trillion in debt, not the profligacy of government – or so I fully expect Krugman to explain in some future bit of nonsense in the New York Times. It would make about as much sense as this nonsense.
Your “Econ 101” lesson for the day is a lesson politicians never seem to grasp, although they do love to harp on is “greedy corporations” outsourcing “American jobs”. In effect, they play off of free market decisions necessary to maintain competitiveness in order to characterize corporations as the bad guys (and, naturally, they and government as the white knights).
Of course the market decision I’m speaking of concerns doing what is necessary to remain competitive in highly competitive markets. And, one of the highest costs of production is headcount or the workers. So in a free market, competitive industries are going to seek the lowest cost possible for labor to remain competitive.
That may mean moving to a new country for labor intensive industries where labor costs are lower.
But sometimes it isn’t “greedy corporations” that drive American jobs offshore. Sometimes it is the US Government. Take light bulbs for instance:
The last major GE factory making ordinary incandescent light bulbs in the United States is closing this month, marking a small, sad exit for a product and company that can trace their roots to Thomas Alva Edison’s innovations in the 1870s.
Wait, you say, there’s still a demand for light bulbs! Of course there is – but thanks to government intrusion, that demand, by law, is only for a particular kind – not the incandescent types that we actually manufactured here. Instead of letting the market decide which type of light bulb it wanted, the government decided to mandate it. And what you are now allowed to “demand” is a compact fluorescent, or CFL.
What made the plant here vulnerable is, in part, a 2007 energy conservation measure passed by Congress that set standards essentially banning ordinary incandescents by 2014. The law will force millions of American households to switch to more efficient bulbs.
The resulting savings in energy and greenhouse-gas emissions are expected to be immense. But the move also had unintended consequences.
Rather than setting off a boom in the U.S. manufacture of replacement lights, the leading replacement lights are compact fluorescents, or CFLs, which are made almost entirely overseas, mostly in China.
Consisting of glass tubes twisted into a spiral, they require more hand labor, which is cheaper there. So though they were first developed by American engineers in the 1970s, none of the major brands make CFLs in the United States.
CFLs, as noted, are more labor intensive to manufacture than are incandescent bulbs.
China’s labor costs are far less than the US’s. Therefore, the US government’s mandate ending the use of incandesents by 2014 and mandating CFLs be purchased in their place drove the domestic lighting industry – and the jobs it produced – off shore. And all based on dubious science and the apparent belief that energy production is finite and waning.
Oh, and “how about those green jobs?” Another promise shipped off to China.
When you screw that CFL in some family in China will thank you. And when you pay your taxes some of which go toward unemployment benefits for former light bulb manufacturers here – make sure you thank the politicians for the job well done. I’m sure those former GE workers will.
As the health care debate has raged over the last year, one of the side benefits has been to watch the left make absolute fools of themselves trying to make it all about race. I mean to any impartial observer it is clear which side is obsessed with the issue – to the point of making statements like this:
“The conjunction of a black President and a female speaker of the House — topped off by a wise Latina on the Supreme Court and a powerful gay congressional committee chairman — would sow fears of disenfranchisement among a dwindling and threatened minority in the country no matter what policies were in play.”
That, of course, is Frank Rich. And Mr. Rich has never met anyone who opposes what he supports that isn’t a racist, homophobe or, well, whatever it takes to dismiss them and ignore their arguments.
The proof of this, at least to Rich, is the fact that the majority of those who’ve turned out for Tea Party events are white. Therefore, it must be about race. Not about opposing ideas. Not about freedom. Not about liberty. Race obsessed leftists simply can’t see beyond the predominant color of the crowd. And Rich isn’t the only one, of course. Joan Walsh, infamous for her pronouncement that all who oppose Obama are traitors, has crawled out from under her rock again to add racist to her condemnation. She sort of tiptoes around it, but her intent is more than clear:
The “I want my country back!” rhetoric does reflect a mind-set in which one’s country has been taken away by … others. But in thinking about race this weekend, I got more out of a column by Ron Brownstein, which examined poll data showing that white voters — wrongly — tend to believe healthcare reform helped “other people,” not themselves.
Note the premise – the “I want my country back” isn’t driven by the obvious power grab made by government this year in a myriad of areas. Oh, no – it’s about race. And it’s about whites not being happy with becoming a minority and with seeing “other people helped”. Walsh is pretty sure “other people” is code for, well, you know. Their dissatisfaction couldn’t possibly be government, or politicians, or God forbid – Democrats – could it? And they certainly couldn’t possibly conclude that any help their family might get would be vastly overshadowed by what it will eventually cost them to obtain it where that might not be the case for “others” (regardless of race)?
Oh, no. It has to be about race.
By playing the race card, Walsh, Rich and Brownstein miss the point completely. Health care is only the current reason for the demonstrated dissatisfaction. Government expansion, cost and intrusion are the real issues driving these protests. Protesters are mad at those who are doing the expansion, intruding and the spending. And protesters really don’t care what their race might be. It isn’t about race – its about redistribution, intrusion, more government and more regulation. It’s about the increasingly bigger and more costly federal government and it’s attempt to build a dependent class while billing the rest of us.
One of the reasons the Democrats are losing independents in droves can be seen in statement’s like Rich’s and implications like Wash’s. When independents see a policy they don’t like and they dissent, the first thing they’re accused of is being a racist. It has to be true – the crowd is mostly white and the president is black. The independent knows perfectly well, of course, that race has nothing to do with the reason they’re protesting, yet the Richs, Walshs and Sharptons of the world (and yes, Rich and Walsh belong in the same class as Sharpton – race hustlers) insist that’s their primary motivation. It couldn’t possibly be anything any more noble.
Even though the Obama administration tried to stress the bill’s benefits to all families — insurance for folks with preexisting conditions, restrictions on companies dropping you when you get sick, letting kids stay on parents’ policies until they’re 26, as well as subsidies that will mainly go to middle- and working-class families (the poor are already covered by Medicaid) — a Gallup survey found that 57 percent of white respondents said that the bill would help the uninsured, and 52 percent said that it would improve conditions for low-income families. Only a third of whites thought it would benefit the country, and shockingly, only 20 percent thought it would benefit their family. (Nonwhites polled were more likely to say the bill would help their families.)
I hate to get into word parsing, but read that through carefully. In fact, click on the Brownstein link and read it as well. Note the final sentence above. Nonwhites polled were “more likely” to say the bill would help their families. That means a significant portion of nonwhites apparently said the opposite. So what does that make them?
These are the sorts of convoluted arguments one is forced to make when they’re a professional race-baiter. Well, if a majority of whites are racists if they oppose health care because (pick your reason from those listed in Walsh’s quote), then what are the minority of nonwhites who feel the same way? Or are they instead just ignorant? Misinformed? Stupid? Or could they too be worried about the eventual cost to them of the monstrosity the Congress passed and called “health care reform?”
Anyone who didn’t fall off the turnip truck last night knows the purpose of playing the race card as Walsh and Rich are doing is to stifle debate and discredit dissent (when you can’t fight their ideas, call ‘em racists). It doesn’t take long for such attempts to backfire on those making the groundless accusation. That’s because the people they continue to accuse of racism know quite well they’re not racists and that race doesn’t factor into their dissatisfaction at all. That allows them to reject the argument and those making it. And one by one, independents, many of whom were Obama voters, finally tire of the continued accusations thrown and the dismissal of their dissent and they desert the Democrats.
The funny thing? I expect the Walshs, Richs and Sharptons of the world to characterize their defection as being racist as well. I’ll be interested to see their explanation of how the racists managed, at one time, to overcome their inherent racism long enough to vote Obama into office. That should be quite a treat.
To me the UK has become the example of what can happen when you allow the state to begin to usurp liberties in the name of “safety” or “security”. What may first be given over to the state usually becomes an ever expanding list of things the state then feels enabled to intrude upon. The old “camel’s nose under the tent”. The latest example from Britain:
Health and safety inspectors are to be given unprecedented access to family homes to ensure that parents are protecting their children from household accidents.
New guidance drawn up at the request of the Department of Health urges councils and other public sector bodies to “collect data” on properties where children are thought to be at “greatest risk of unintentional injury”.
Council staff will then be tasked with overseeing the installation of safety devices in homes, including smoke alarms, stair gates, hot water temperature restrictors, oven guards and window and door locks.
The draft guidance by a committee at the National Institute for Health and Clinical Excellence (Nice) has been criticised as intrusive and further evidence of the “creeping nanny state”.
Ya think? Two things at work here – one of which we’re all familiar, even in the US. This is what? It is “for the children”. All manner of state intrusion is prefaced by claiming it is “for the children”. Which brings us to the second thing – the assumption by the state that parents are too dumb and inept to properly care for their children. While this is true of some, certainly, the standard is applied to all. And we’ve certainly seen evidence that the state is so much better, haven’t we?
So why does the state not only feel the necessity but right to intrude at such a level?
About 100,000 children are admitted to hospital each year for home injuries at a cost of £146m.
Oh, health care costs. And who controls the health care in the UK.
Why the state, of course. So of course it feels it has the right to intrude. When the state pays for health care, it assumes the “right” to tell you how to live your life and it also feels empowered to do what is necessary to make you do so in order to drive down costs, doesn’t it?
Well, it does in the UK. And we’re about to hand a similar power over to the state with this health care bill being considered. Our camel’s nose under the tent moment, if you will. In terms of intrusion, it may not be quite as bad as the UK’s – yet. But then they’ve had 60 years to get to this point.
One of the things I try to consistently feature here at QandO is the depth of intrusion of the federal government into our daily lives. Talk about “mission creep”. There’s little that we do any more that doesn’t seem to involve the government looking over our shoulder and I, frankly, don’t welcome that sort of monitoring or intrusion.
So if you’re planning on selling your kids old books (or anything else that a kid under 12 might use) and they haven’t been “tested” first, you’re liable to a $100,000 fine. Now I know you’re reading this and saying, “no way. Our government would be that intrusive”.
I guess the best way to counter that is with the CPSC’s own words:
This handbook will help sellers of used products identify types of potentially hazardous products that could harm children or others. CPSC’s laws and regulations apply to anyone who sells or distributes consumer products. This includes thrift stores, consignment stores, charities, and individuals holding yard sales and flea markets.
The next line of defense for those who support this level of intrusion, once that level of intrusion has been exposed in the government’s own words, is “well, how would they enforce it”?
It’s not a bad argument (the answer is selectively), but it misses the real point.
Obviously, it’s unlikely the CPSA goons are going to bust up your yard sale. But putting out a detailed booklet that reserves the right to do so is hardly encouraging about where the implementation of this legislation is heading.
It is about precedent. And, it’s about acceptance. When both are established, it doesn’t require much in the way of the imagination to realize that like any entity which seeks to increase its power, government will soon attempt to stretch the envelope just a little further (further precedent/acceptance).
Wash, rinse, repeat.