We spent quite a bit of time discussing this on the podcast yesterday. It’s from the Washington Post and is written by Steven Pearlstein.
I have some real issues with his characterizations of Capitalism, especially where he tries to use events and problems to imply that Capitalism is less than moral.
I had hoped to write up something, but as happens more frequently here lately, life has intruded. However, a commenter to the WP article summed it up nicely for me:
Free markets don’t regulate my excesses, guarantee equal opportunity or fairly divide the economic pie. Yet Mr. Pearlstein seems to be arguing that if free markets don’t do these moral things, then they’re immoral.
So there’s the central fallacy in the debate as posited by Pearlstein: Your system doesn’t do what I want it to do so it’s bad, even though your system can’t do what I want it to do because that’s not its purpose or design. To illustrate, your religion is bad because it doesn’t promote gay rights like I want even though gay rights is an utterly foreign and inimical idea to your religion, whose purpose and design is to save souls. (This was the essence of CNN’s coverage of the papal conclave.)
See the problem? OK, another try: Free markets don’t make me use less gasoline, guarantee me a nice job in return for getting a degree in Latino Studies, or prevent Donald Trump from getting too rich compared to me. Therefore, free market capitalism is bad, or at least not moral. OK, but free markets don’t and can’t do any of these things, so your standards and measures are irrelevant and thus illogical, see? Why not measure the moral character of free markets by what they do? For example, free markets provide places where people can meet to voluntarily transact business without worrying about getting clobbered or expropriated by government or criminals. What’s immoral about that?
You’ve gotta hand it to the left: They really know how to enshroud a debate in illogic, falsehood and emotion. Take off those pinko-colored glasses, though, and you realize that the debate Pearlstein wants to have is nonsense: Free markets can’t, don’t and won’t do what he wants government to do because free markets are not government. Ergo, the valid and relevant issue is whether we all want government to continue doing all that it’s doing at the price we’re paying for government to do it. And I guarantee you that no one on the left wants to have that debate.
The commenter, Lavaux, does a pretty decent job of nailing the fallacy which Pearlstein and many critics of Capitalism (and many other issues as he demonstrates) suffer under – claiming that it is something other than it is and then attacking that “something”, or, as we usually say, using a strawman argument. Pearlstein, as Lavaux points out, is slashing at those strawmen throughout his piece.
Capitalism has become the “go-to” boogy man on the left. All sorts of things that have no relevance or aren’t a part of Capitalism are blamed on Capitalism. Usually, however, if you dig deep enough (sometimes you don’t have to dig at all) you’ll find the hand of intrusive government somewhere in the problem mix. That immediately takes it from the realm of Capitalism to all sorts of other nether regions which have nothing to do with with it.
But, you know that …. unfortunately, a vast majority of your fellow citizens don’t.
Thus the demonization of Capitalism and the exoneration of government continue apace.
So tell me again why the government can’t seem to get along with what it already gets?
Taking into account all taxes on earnings and consumer spending—including federal, state and local income taxes, Social Security and Medicare payroll taxes, excise taxes, and state and local sales taxes—Edward Prescott has shown (especially in the Quarterly Review of the Federal Reserve Bank of Minneapolis, 2004) that the U.S. average marginal effective tax rate is around 40%. This means that if the average worker earns $100 from additional output, he will be able to consume only an additional $60.
And yet the prevailing political attitude seems to be that of France’s “leadership”, i.e. government, has first claim on all your earnings and if you protest you’re “greedy”.
Speaking of France, California seems bound to duplicate its latest tax scheme:
Consider California, which just enacted higher rates of income and sales tax. The top California income-tax rate will be 13.3%, and the top sales-tax rate in some areas may rise as high as 10%. Combine these state taxes with a top combined federal rate of 44%, plus federal excise taxes, and the combined marginal tax rate for the highest California earners is likely to be around 60%—as high as in France, Germany and Italy.
Yet they wonder why people are fleeing the state.
Impact and implications?
Higher labor-income and consumption taxes also have consequences for entrepreneurship and risk-taking. A key factor driving U.S. economic growth has been the remarkable impact of entrepreneurs such as Bill Gates of Microsoft, Steve Jobs of Apple, Fred Smith of FedEx and others who took substantial risk to implement new ideas, directly and indirectly creating new economic sectors and millions of new jobs.
Entrepreneurship is much lower in Europe, suggesting that high tax rates and poorly designed regulation discourage new business creation. The Economist reports that between 1976 and 2007 only one continental European startup, Norway’s Renewable Energy Corporation, achieved a level of success comparable to that of Microsoft, Apple and other U.S. giants making the Financial Times Index of the world’s 500 largest companies.
Yet we continue to try to recreate Europe’s debacle here.
The economy now faces two serious risks: the risk of higher marginal tax rates that will depress the number of hours of work, and the risk of continuing policies such as Dodd-Frank, bailouts, and subsidies to specific industries and technologies that depress productivity growth by protecting inefficient producers and restricting the flow of resources to the most productive users.
If these two risks are realized, the U.S. will face a much more serious problem than a 2013 recession. It will face a permanent and growing decline in relative living standards.
These risks loom as the level of U.S. economic activity gradually moves closer to that of the 1930s, when for a decade during the Great Depression output per working-age person declined by nearly 25% relative to trend. The last two quarters of GDP growth—1.3% and 2.7%—have been below trend, which means the U.S. economy is continuing to sink relative to its historical trend.
But your political and financial lords and masters know best, don’t they? Just ask them. They continue down this road despite the fact the destination is in plain sight in Europe and it isn’t pretty.
Occam’s Razor states “entities should not be multiplied unnecessarily.” Said another way, the simplest explanation is usually the most likely explanation. In this case the simplest explanation is incompetence. But is it really incompetence? With the European example staring them right in the face it’s hard to believe anyone is that incompetent. The conclusion to their policies have already been proven to be a disaster.
So one has to being to consider other possibilities when those who are pushing the policies seem oblivious to the obvious.
You have to begin to wonder if it is a problem of hubris. I.e. “the only reason it hasn’t worked before is we weren’t in charge”. We’ve seen that in any number of instances throughout history where discredited or obviously illogical ideological ideas were tried and they again failed.
Or you have to consider the words “by design”. But then you’re stuck with trying to come up with a valid reason “why”. Recreating Europe’s debacle, or Japans’s or, for heaven sake, our’s in the ’30s would seem to be something smart politicians would attempt to avoid.
But here we are.
Economic growth requires new ideas and new businesses, which in turn require a large group of talented young workers who are willing to take on the considerable risk of starting a business. This requires undoing the impediments that stand in the way of creating new economic activity—and increasing the after-tax returns to succeeding.
And yet, we see a government bent on erecting even more impediments via increased taxation, costly new laws and onerous regulation.
Isn’t it about time we demanded to know “why?” More importantly, maybe we should ask whose side they’re on.
My friend George Scoville wrote a Black Friday-appropriate post on a problem with gift-giving, which touches on a broader point that libertarians should heed.
A microeconomics paper that’s bounced around econ-blogs for several years says gift-giving causes a huge deadweight loss: when someone else picks a gift for you, it may not be what you would have bought for yourself when you would have bought it, which normally implies that goods and services are being distributed inefficiently.
If that’s true, then Christmas is a tremendously wasteful institution, within an order of magnitude of the income tax, and we’d be better off giving each other cash gifts.
First, on a technical note, that paper was written in 1993, before Amazon wish lists and social media made it easier to detect people’s interests and needs, so perhaps we’re getting better at matching gifts with recipients.
More importantly, the paper fell short of meaningfully capturing deadweight loss, because it focused entirely on the value of the goods. Gift economies mostly operate on another kind of supply and demand: the desire for social cohesion, meaning closer relationships with family, friends, and other peers.
This is no trivial matter: relationships with people we can count on make us happier, healthier, and more successful. Anything that helps to build and cement those bonds is valuable, and while some academics and marketers try to quantify that value (it may be more than you’d think), the normal rule is that relationships of trust should not be fungible with cash. All societies have some social taboo against trading off the sacred and the mundane, which sometimes leads to absurdly stupid conclusions, but also allows people to build trust without worrying that anything intimate or of an extremely hard-to-price value (what’s the rest of your life worth?) will be easily sold for any of the mundane things that can be bought with cash.
It’s awkward when people give each other cash as gifts even if the amount is equal, and gift exchanges in which only one side puts any thought into it show unequal empathy. If you put a lot of thought into anticipating someone’s wants, and that person gives you a very generic gift, it’s like being put in the Friend Zone.
The point of gifts is to trip a hardwire in the brains of social mammals: cycles of giving and gratitude that go beyond simple reciprocity. When you’re trading cash, everyone is acutely aware of the value of what’s been exchanged, and there’s no fudge factor in the brain for “the thought that counts.”
That’s something we disagreeable, rationalistic libertarians should keep in mind, because the gift economy is a powerful force in human relations that resists and resents the intrusion of market forces, even if markets efficiently bring us the gifts.
So how did the great Wal-Mart protest go?
According to the Bentonville-based company, roughly 50 people who are actually on Walmart’s payroll joined today’s “walkout” nationwide. The protest organizers say “hundreds” participated. Even if 1,000 took part, that’s still less than 1/10 of 1% of Walmart’s 1.4 million associates.
If you can’t find 50 disgruntled employees in an organization of 1.4 million, well, you’re a refugee from the real world.
But look at that last number. 1.4 million people have jobs because of Wal-Mart. Then there’s the downstream effect – suppliers, etc. My guess is you’re looking at an organization responsible or at least partially responsible for 3 to 5 million jobs in this country.
And yet it is under attack.
Now, there were protests at Wal-Mart stores. But what should be clear is they weren’t protests by Wal-Mart’s vast majority of associates.
The “organization” which organized this flop, “OUR Wal-Mart”, is calling it a clear success. I mean what else would they call it? The fact that it only drew 50 employees in protest (50 who I assume are now ex-employees) seems to have been waived away for the fact that there were some protests.
Woo – hoo.
So who were the protesters? You’ll enjoy this:
Seems strange then that, according to organizer OUR Walmart’s website, the group speaks for actual Walmart employees. In the “About Us” sectionof its website, this not-for-profit describes its mission as follows: “We envision a future in which our company treats us, the Associates of Walmart, with respect and dignity. We envision a world where we succeed in our careers, our company succeeds in business, our customers…” (Italics mine.)
OUR Walmart was listed as a subsidiary of the United Food and Commercial Workers Union (UFCWU) in a 2011 Department of Labor filing. While the union disputes that the two organizations are one and the same, one thing is certain: The organizers of today’s protest represent not Walmart employees, but employees of grocery stores that compete with Walmart.
Oh, I’m shocked, shocked I tell you. Members from a union that represents the workers of stores that compete with Wal-Mart? Ah, of course – OUR Wal-Mart.
[W]hile the anti-Walmart movement claims to be about helping Walmart employees get better health care, improved working conditions, higher pay–not to mention preventing our children from the temptation of petty thievery—it’s really primarily about stopping the threat of cheap groceries–the same ones that go a long way towards helping cash-strapped Americans put food on the table.
Emphasis mine … and the reason, as mentioned yesterday, is this model works. It appears, at least superficially, that all but 50 Wal-Mart employees agree. Given the consumer reaction to the protests (uh, nil, nada, zip – didn’t slow down sales a bit), it’s rather hard to understand how any sane person could call the protests a success. But then no one said those who put together OUR Wal-Mart are sane, did they?
Not surprisingly, a union’s hand is found in a movement deceitfully claiming something that isn’t true and trying to cause problems for a company that employs a huge number of Americans and is responsible, at least partially, for the jobs of a huge number more.
And, watching these shenanigans, you can’t help but believe that unions are desperate – very desperate. Here’s a company which is offering the same products as their union stores offer at significant discounts and that’s an obvious threat to their continued employment. So they think nothing of starting a “movement” that is union backed and likely union financed to undermine that company by enticing workers, who apparently aren’t at all as disgruntled or as upset as this group has claimed, into a job action that’s guaranteed to be against their best interests and that would likely get them fired.
50 heeded the siren song and are likely now trying to figure out how to claim unemployment compensation.
And, they have the UFCWU and their apparent inability to think critically to thank for their folly.
Hey, maybe they can go apply at the union stores. I’m sure they’re hiring, huh? I’m equally sure they’re more than eager to hire someone who walked off their last job.
Jordan Weissmann has a piece in The Atlantic entitled “Who’s Really to Blame for the Wal-Mart Strikes? The American Consumer.”
While I will admit that the demands of the American consumer being partly responsible for the wage scale paid by Wal-Mart, I frankly see no consumer liability in that responsibility. Wal-Mart saw a need, constructed a model and has successfully fulfilled that demand. And last I checked, no one has twisted anyone’s arm or marched them into Wal-Mart and made them take a job.
The American consumer’s role? It is like us saying “you can have open borders or you can have a welfare state, but you can’t have both”. You can demand the lowest prices or you can demand “mom and pop” be saved and pay their workers more (but then you have to commit to voluntarily doing business and paying higher prices) but you can’t have both.
Weissmann is essentially claiming that the consumer is to blame for impending strikes by demanding lower prices. Lower prices mean lower pay and because Wal-Mart isn’t paying a “living wage”, it’s employees are striking. Again it’s a part of the left’s disingenuous”fairness” argument.
But by now, that low-price, low-wage model has become the industry standard among discount retailers, or at least close to it. The median retail worker earns $14.42 an hour, but at big box chains, the pay is significantly lower (the notable exception being Costco, which commendably pays its employees a living wage). Walmart, for instance, says it pays full time sales associates $11.75 an hour on average. But independent analysis peg the figure much lower, closer to $9. According to IBISWorld, that puts it a bit behind companies like Home Depot and Lowes, but ahead of its nearest competitor, Target, which has managed to put a more fashionable face on the same abysmal pay for its workers.
First a “living wage” is different for different people. If husband and wife are both working, the one working at Wal-Mart may be supplementing the higher wage of the other spouse. Who is to say what the Wal-Mart employee earns isn’t sufficient to live quite well on? If it is a teenager living at home, what’s a “living wage” to him or her? What, in fact, the Weissmann’s of the world are claiming is that any wage paid to anyone should be sufficient to “live on” based on whatever arbitrary standard they choose to apply. My reaction? None of your business – everyone goes to work and accepts the wages they do for their particular reasons. If they aren’t satisfied, then they can leave.
That brings us to point two, if you don’t like the pay at Wal-Mart, seek a job at another employer. I doubt that most “big box” companies look at their employees as permanent. Wal-Mart and others are, for many, a stop on the way (for experience) to higher paying jobs. If it’s not, if it is all someone is qualified to do, then that’s their problem, not Wal-Mart’s and not the shopping public’s. My suggestion is to seek out further training or schooling elsewhere. But it isn’t the job of the public to subsidize your wages just because you think you’re worth more than you really are.
Wal-Mart doesn’t exist to pay a “living wage”, whatever that is. It exists to serve it’s customers and turn a profit. It is that profit that allows them to provide what is demanded by their customers and to pay their employees. If wages are too low, workers will likely look to an alternative for employment. Yet, somehow, Wal-Mart remains fairly consistently fully staffed.
Like it or not (and the complainers usually don’t) that’s the model. It works. It provides consumers what they demand.
But that’s not what the fair police want, you see. And that’s where you see this sort of an argument:
There are many reasons why pay in retail is often paltry. Among them, it’s a low-skill industry with high turnover and a lot young workers. But the sector’s utter lack of of union presence certainly plays role. And for that, we can thank both Wal-Mart and Washington. From its earliest days, Wal-Mart has taken fiercely antagonistic stance towards organized labor, keeping its stores union free by using every ounce of leverage Congress has given employers — so much so that, in 2007, Human Rights Watch called the company “‘a case study in what is wrong with U.S. labor laws.”
In essence what Weissmann is arguing is workers should be paid more than their worth in a competitive labor market (low-skilled young workers with little experience). It’s a matter of “social justice” – that nebulous term used to justify intrusion into markets because they “care” (with your money, usually). And their go-to vehicle for achieving this “social justice” and upsetting a business model that favors the consumer is the union. Other than grow fat and demanding, that’s what unions are there to do.
See Hostess and GM for how that usually ends up.
But to his point, there’s a reason Wal-Mart is “fiercely antagonistic” toward unions. That’s because unions would wreck the model they’ve so painstakingly put together over the years, the one which their customers demand. Customers don’t show up there because they love Wal-Mart. They show up because they get more for their hard earned money.
Unionize, demand wage and pension increases and all the other concessions that put GM in the poor house and Hostess out of business and you’ll find one thing to be true – Wal-Mart’s customers will go to Target. Or Kohls or some other “big box” retailer.
But they’re not going to pay higher prices. They like the model. It works for them and their situation. And they will seek out the next best alternative when and if they see prices go up at Wal-Mart.
So, perhaps it is time for those like Weissmann to figure out what Wal-Mart is – it is a store that offers deep discounts on thousands of items that its customers demand. Oh, and by the way, it also has employees who are paid according to that customer driven model. The workers have choices, if they’ve prepared themselves – work at Wal-Mart to gain experience and move on, or go do something else. For those who haven’t prepared themselves for anything else, it isn’t the customer’s job to subsidize their wages just because they believe they should get more even if they haven’t earned it.
But for those who can’t let this go, I have an idea. Each and every Wal-Mart store ought to establish at least one check-out line which is for those who want to pay the highest retail price found for the items they’re going to purchase. Wal-Mart could research that, have the cash register price the items according to that research and at the end the Wal-Mart associate could say to the person, “and you over-paid by $53.00, have a nice day.”
Wal-Mart would then promise to take the difference between their prices and the premium prices and apply it to the pay of all Wal-Mart associates.
How’s that for fair? And people in that line wouldn’t have to feel like hypocrites when they diss Wal-Mart for it’s presumably low pay while they continue to buy at the store.
Of course, that particular line would likely to look like something out of a Halloween display, all covered in cob-webs and the like.
In a case study of cutting your nose off despite your face, union members who walked out on strike at bankrupt Hostess Brands (makers of Twinkies and other well known products) and refused to return to work by yesterday have forced the company into liquidation. Of the 18,000 workers who will lose their jobs, about one-third were union members.
The company had offered a compensation package that had cuts (to include an 8% pay cut). These were necessary during bankruptcy reorganization to keep the company afloat. The union refused the package and walked out.
Apparently, 100% of nothing is much better than 92% of something … especially in this job market.
Congratulations Bakery, Confectionery, and Tobacco workers and the Grain Millers International Union, among others. You put the capital “S” in Stupid, Selfish and Shortsighted (a crown previously held by the former union members of Eastern Airlines).
But I’m sure this will somehow end up being blamed on “greedy Capitalists” and be declared a “market failure” by the usual suspects.
A law the country didn’t want and upheld by a ridiculous Supreme Court ruling is now beginning to have it’s predicted effect:
Some low-wage employers are moving toward hiring part-time workers instead of full-time ones to mitigate the health-care overhaul’s requirement that large companies provide health insurance for full-time workers or pay a fee.
Several restaurants, hotels and retailers have started or are preparing to limit schedules of hourly workers to below 30 hours a week. That is the threshold at which large employers in 2014 would have to offer workers a minimum level of insurance or pay a penalty starting at $2,000 for each worker.
The shift is one of the first significant steps by employers to avoid requirements under the health-care law, and whether the trend continues hinges on Tuesday’s election results. Republican presidential nominee Mitt Romney has pledged to overturn the Affordable Care Act, although he would face obstacles doing so.
That’s really going to help the job situation, isn’t it?
When is government ever going to learn that its intrusion into the private affairs of men always has consequences, and, when they are outside the legitimate function of government in a free society, the effect is usually negative.
Congratulations Democrats, you’ve done it again.
At least temporarily. You may remember when we pointed our the story of the monks in Louisiana who were making coffins and the state was moving to stop them. Under Louisiana law, a place must be a “licensed funeral establishment” in which only “licensed funeral directors” may sell “funeral merchandise”.
Now everyone knows that around here we equate choice with freedom. And, what the state of Louisiana had done, at the behest of the The Louisiana State Board of Embalmers and Funeral Directors is place a restriction that set the bar to entry into the “funeral merchandise” business at a place where it essentially barred entry to anyone who wasn’t a licensed member of that guild. And, of course, the The Louisiana State Board of Embalmers and Funeral Directors controlled who did or didn’t get licensed.
So when the good brothers at St. Joseph Abbey began making hand crafted wooden coffins and selling them, they were in direct violation of the law the board had helped craft. More importantly, they were in competition with the carefully crafted state granted monopoly these people enjoyed.
They were told that the only choice they had was to do the following if they wanted to sell their caskets:
[They] must either give up the casket-selling business or become a licensed funeral establishment, which would require a layout parlor for 30 people, a display area for the coffins, the employment of a licensed funeral director and an embalming room.
That’s even though they only desired to make coffins.
When they refused, the board threatened.
[T]he Louisiana Board of Embalmers and Funeral Directors sent the monks a cease-and-desist letter, threatening thousands of dollars in fines and up to 180 days in prison based on a law prohibiting the sale of coffins without a funeral director’s license.
And then sued.
In July of last year, a Federal judge ruled in the Abbey’s favor, as we reported.
The monks won round one in July, when U.S. District Judge Stanwood R. Duval Jr. ruled Louisiana’s restrictions unconstitutional, saying “the sole reason for these laws is the economic protection of the funeral industry.”
So now the 5th Circuit has ruled and guess what? The monks have won again. And the 5th was not at all kind to the State Board or the state of Louisiana in its ruling:
In a sometimes harshly worded ruling, a panel of federal appellate judges Tuesday evening smacked down the Louisiana funeral board’s continued attempts to prevent the St. Joseph Abbey monks from selling their hand-crafted caskets. “The great deference due state economic regulation (does not require) courts to accept nonsensical explanations for naked transfers of wealth,” wrote Judges Patrick Higginbotham, Catharina Haynes and Stephen A. Higginson of the 5th U.S. Circuit Court of Appeals in New Orleans. “We insist that Louisiana’s rules not be irrational.”
The appellate judges sent the case to the Louisiana Supreme Court, refusing to consider the funeral board’s appeal of a previous court’s ruling that found it unconstitutional for the state to give funeral directors exclusive rights to sell caskets.
“Simply put, there is nothing in the licensing procedures that bestows any benefit to the public in the context of the retail sale of caskets,” U.S. District Court Judge Stanwood R. Duval Jr. ruled in July 2011. “The license has no bearing on the manufacturing and sale of coffins. It appears that the sole reason for these laws is the economic protection of the funeral industry,” which he wrote is not “a valid government interest.”
Of course, there’s no telling what the LA Supreme Court will do. However until then, the monks are free to sell their significantly less costly caskets in Louisiana without having to clear the high bar of entry set by the crony state.
Oh, and here’s the irony and another reason the court found for the monks:
“To be sure, Louisiana does not regulate the use of a casket, container, or other enclosure for the burial remains; has no requirements for the construction or design of caskets; and does not require that caskets be sealed,” according to the court. “Individuals may construct their own caskets for funerals in Louisiana or purchase caskets from out-of-state suppliers via the internet. Indeed, no Louisiana law even requires a person to be buried in a casket.”
As plain and transparent state enforced cronyism as one can find. There are certainly more, as we all know, and they’re practiced by all levels of government. But all of them, each and every one of them, should be identified, challenged and dismantled – root and branch. Government has no business using its force and power to protect businesses from competition because doing so limits choice and thereby limits its citizen’s freedom.
Cronyism has no place in a free society.
“Freedom is the right to question and change the established way of doing things. It is the continuous revolution of the marketplace. It is the understanding that allows to recognize shortcomings and seek solutions.”
Ronald Reagan — Address to students at Moscow State University, May 31, 1988
Remember the Orange Revolution? Believe it or not, it’s still pretty darned important.
We’re knee-deep in a presidential election. The European Union is witnessing a slow-motion meltdown. Syria is quickly becoming a bloody nightmare, while North Africa seethes under the vicissitudes of the Arab Spring. Iran marches closer to nuclear arms, and perhaps war with Israel. And Sino-Japanese relations threaten to simmer out of control. So why care about the Ukraine?
The simple answer is because Ukrainians have had a taste of freedom, and liked it, and we should encourage that journey towards liberalization to continue. We have an interest in such development – via free and fair elections, open markets and greater legal protections in its reformed court system – because this is how individuals become personally invested in the growth of the nation, and thus how liberty spreads. As President Reagan emphasized in 1981, “only when individuals are given a personal stake in deciding economic policies and benefiting from their success — only then can societies remain economically alive, dynamic, progressive, and free.” The more societies like that in the world, and especially in the Eurasian region, the better. And this is exactly where Ukraine is poised to go.
Unfortunately, we may be taking steps to discourage further liberalization in the form of a Senate resolution essentially demanding that Ukraine act exactly like a western democracy immediately or face consequences. The reality is that the former soviet republic of nearly 50 million souls is at a crossroads. Will they continue to move towards alignment with the West, or turn back towards familiar haunts in Moscow?
To be sure, the current government has expressed great interest in being integrated into the European Union, going so far as to ink an Association Agreement in March:
The Association Agreement creates a framework for cooperation and stipulates establishing closer economic, cultural, and social ties between the signees. Moreover, Brussels officials expect the document to promote the rule of law, democracy, and human rights in Ukraine.
This first step to entering the EU (which still needs to be ratified) requires a concrete demonstration from Ukraine that it is moving towards “an independent judicial system, free and fair elections and constitutional reform.”
These are exactly the sorts of reforms that serve to expand liberty. Indeed, as Ukraine has liberalized over the past two decades since independence, it has since fits and starts of great economic growth and expanded prosperity. For example, between 2001 and 2008, the economy expanded at an average rate of 7.5%, and despite a severe downturn in 2009, it has continued to grow with exports increasing by 30% in 2010 alone. Indeed, Ukraine is ranked by CNBC.com as the second best country for long-term growth in the world, right behind the Philippines. Ukraine has also begun to institute judicial reforms that promise to train better judges, hold them accountable, and strengthen the fairness of the system that has long been burdened with rampant corruption and cronyism. And for the first time ever, outside election observers will be allowed to monitor the parliamentary elections this month.
Yet, these necessary and welcome reforms lie on a fragile bed.
Ukraine has been moving toward a market economy since it declared independence in 1991. The way has been extremely difficult and bumpy. Twenty years after the beginning of market reforms, Ukraine is still struggling to build a strong, transparent, and sustainable economic system that can provide the Ukrainian people with economic prosperity and social security.
Moving towards greater integration with the West, via the EU, will strengthen that bed. Demanding that Ukraine act as a long-established western democracy right now, today, only serves to further weaken it :
Economics 101 defines the problem of scarcity as unlimited wants with limited resources, and, to paraphrase George Shultz, the laws of economics apply as much in foreign policy as they do at home. While it may be rhetorically satisfying and politically convenient for Americans to assert an equal commitment to every priority in Ukraine, ranging from democratic development to removal of weapons-grade uranium, the reality is that some priorities are achievable, at an acceptable cost and within a realistic timeframe, while others are not.
If we cannot advance all of our values and all of our interests all of the time, then we are left with the necessity of ranking our national priorities. While it is clearly important that Ukraine put an end to politically motivated prosecutions, it bears asking whether resources and attention from Washington that have been focused exclusively on this issue are crowding out other compelling U.S. national interests.
The Orange Revolution was not a battle or a war. It was, and is, a movement. Our national interests will always be aligned with fostering greater liberty, which is what the Orange Revolution movement is all about. Instead of throwing up roadblocks in the Senate, we should be helping build road signs that lead towards further peace, prosperity and freedom.
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?