Free Markets, Free People

capitalism


“You can’t make the poor rich by making the rich poorer”

That’s a quote from attributed to Abraham Lincoln* as delivered by Richard Epstein in his discussion of economic inequality (a meme that is all the rage right now). Interestingly enough, this interview was conducted and broadcast by PBS (as tree hugging sister notes “I’m sure whoever’s idea it was has been sacked. Along with all the llama trainers”).

In any event, this is as good a retort to the #OWS nonsense as you’ll likely find. Enjoy (HT: Insty):

Watch Does U.S. Economic Inequality Have a Good Side? on PBS. See more from PBS NewsHour.

ADDED: Although Epstein doesn’t say it explicitly, essentially he describes “economic inequality” as a benign effect, rather than a malignant cause. Understanding the difference leads to understanding why allowing for the greatest number of opportunities works better at increasing everyone’s wealth instead of trying to equalize outcomes.

* Thanks to DWPittelli for pointing out this misattribution in the comments (“It was the Reverend William John Henry Boetcker (1873–1962) who wrote “you cannot help the poor by destroying the rich” and 9 other related aphorisms in 1916. A printing error in 1942 led to the confusion between some Lincoln quotes and these Boetcker quotes.”).


OWS is a “teachable moment”

The Washington Time carries an editorial that discusses the ongoing Occupy protests and it contains a paragraph which I think is a good summary of why I want these things to go on and on and on:

Your efforts serve to paint a clear contrast between the two sides currently waging war for the future of America. On one side are those who believe in the income redistribution of socialism and feel entitled to “social justice,” fueled by a victim complex instilled in them by the very politicians who create and perpetuate their dependence. On the other side are the independent, self-respecting, hardworking Americans whose income and old-fashioned values of personal responsibility sit squarely in the cross hairs of the slackers and the Democratic Party that coddles them.

Many Americans are frustrated with the situation we now find ourselves.  And they want things changed, obviously.  But you have to ask yourself, as you look around, do I want it overthrown?  

In other words is the current system such that it needs to be entirely replaced?  That’s the Occupy movement’s belief.  It is, essentially, an anti-capitalist movement.  And that becomes clearer every day they thrash around looking for something fresh to scream about to keep themselves in the eye of the media.

For instance, today we hear about the announcement that the group who launched OWS is calling for a “Robin Hood tax”:

An anti-capitalist group which sparked the Occupy Wall Street movement has called for global protests Saturday to demand that leaders of the Group of 20 (G20) nations impose a "Robin Hood tax" on financial transactions and currency trades.

[…]

"Let’s send them a clear message: We want you to slow down some of that $1.3 trillion easy money that’s sloshing around the global casino each day—enough cash to fund every social program and environmental initiative in the world," the activist group said on its website,www.adbusters.org.

[…]

"As the movement matures, let’s consider a response to our critics," Adbusters said on its website. "Let’s occupy the core of our global system. Let’s dethrone the greed that defines this new century."

Take in the language.

“Casinos”.  “Robin Hood Tax”.  The inference are all quite clear.

That’s not the language that will endear a movement to most Americans.  Most Americans are not going to embrace an ideology that would condone redistribution like the OWS folks are talking about.  But that’s what continues to emerge as their answer to the world’s problems. 

The “greed that defines the new century” provides the communication power for their outreach among any number of other things. They have no clue what it might be like without that system though.   It is this system that has built the unprecedented wealth and standard of living that no “Robin Hood” could ever match.  But in reality, “Robin Hood” is a central character in their brave new world.  Robin Hood is government.

Their ignorance about how economies work knows no bounds apparently.  And they demonstrate that point fairly regularly.  Most Americans know what caused the wealth, affluence and power we enjoy, and it wasn’t redistribution of wealth through government.  In fact, as some polls have shown, it isn’t “Wall Street” most Americans blame for this – it is the very institution that OWS is calling on to impose the Robin Hood tax.

We often hear people talk about “teachable moments” when situations present themselves.   OWS is just such a moment.  It brings together a collection of misfits, malcontents and economic luddites whose entire mantra boils down to “we want what you have and that’s fair”.

Most people divest themselves of that nonsense when they’re about 7. 

Others like those involved in OWS are apparently forever slow learners.

And they therefore provide us with a wealth of “teachable moments” about why what they want doesn’t and won’t ever work.  That’s worth having them around for a while.

~McQ

Twitter: @McQandO


Misunderstanding Capitalism

Deepak Chopra has, for some reason, come to be viewed as an intellectual by many.  For the most part I don’t get it.  

I’m reminded why when I read this Chopra statement on “The Mellow Jihadi” (disclaimer: The Mellow Jihadi does not agree with Chopra’s statement below):

Capitalism prevails as a system that once vied, supposedly, with Communism for world dominance, yet its deep flaws remain. Three come to mind. Capitalism discourages equal access to wealth, leading to enormous gaps between rich and poor. The free market lacks a conscience, giving rise to inequalities of education, health care, and job opportunities. Finally, capitalism if unchecked promotes corruption, both economic and political.

Capitalism is really given a bad rap here.   And it is mostly in word usage.  For instance “Capitalism discourages equal access to wealth”?

No.  It doesn’t.  What it requires is you earn your wealth, not have it handed to you.  I.e. it pretty much encourages hard work, sacrifice and innovation and rewards it with wealth if all goes well and people like what you do and want to buy it.   But the “deep flaw” here is you – the individual – actually have to initiate the action, do what is necessary to properly prepare yourself, work your butt off and hope you have done sufficient research and work to make all that pay off.  But it certainly doesn’t “discourage” anyone from earning wealth, it just makes no guarantee that all will share equally in wealth.  I see that as a feature, not a bug.  The enormous gaps between rich and poor can usually be traced back to enormous gaps in preparation, work ethic, and ability.  Btw, Mr. Chopra, in case you haven’t noticed, nature isn’t very good about “equality” either – when it comes to intelligence and ability.  Is that a “flaw” or reality?

Chopra goes on to say that “the free market lacks a conscience”.   Well that’s a straw man if ever I’ve seen one.  It’s a bit like saying a rock has no feelings.  A market operates without feelings, to include a conscience.  But that doesn’t mean that the society or culture in which it operates can’t do what it feels is necessary to ameliorate certain “inequalities” if it so desires.  That has zip to do with the market(s) other than they’re probably the fastest and best means to earn the wealth necessary to apply to the desired solutions.  It simply doesn’t follow logically that the functioning of markets somehow inherently means inequality of education, health care and job opportunities.  In fact history points to precisely the opposite being true.

Finally, Chopra, like many opponents of Capitalism, confuses the crony capitalism of today with actual Capitalism in its pure form.  Crony capitalism does indeed “promote corruption, both economic and political”, and we’re living through that today.  But Capitalism as a economic system doesn’t encourage either and, in fact, does its best to work around it via the market mechanisms that send the signals that encourage consumers to seek substitutes and/or alternatives when something doesn’t smell right.   But when government interferes, sets artificial bars to entry, writes legislation that favors large businesses that support powerful politicians, that’s not Capitalism.

The Mellow Jihadi quotes Winston Churchill with one of the better rebuttals:

The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

Enough said.

~McQ

Twitter: @McQandO


I want this shirt (update)

Sometimes as you wander through the vast reaches of the internet, you find something that makes you laugh out loud while at the same time creating an intense desire to own it:

Shirt

Brilliant.  And dead right.

UPDATE: It can be ordered here. (Thanks tkc)

~McQ


Bubble-headed nonsense from the left about income inequality

I

’m not sure what else to call it but it does indeed seem a fitting example of a discussion we recently had here about colleges failing to teach critical thinking.

Think Progress (of course) has a blog post headlined with “Income inequality in US worse than Egypt”.  Never let a crisis go to waste, huh?

First you are asked to believe that it is “income inequality” which is leading the pack of reasons the country wants Mubarak gone.  If not, what’s the purpose of the headline?

Secondly, there’s the equivalence this writer makes between the US and Egypt.   My guess Pat Garafalo has never been to Egypt (or perhaps even out of the US to a nation in which “poor” actually means poor) so he has no frame of reference in his comparison.  Its all about income inequality, that’s always "bad" and that is the leading reason for unrest, or so the reasoning, such that it is, seems to conclude.

Usually “income inequality” isn’t even on the radar screen when these sorts of things happen.  The grievances are more focused more generally on “freedom”, “liberty”, “oppression” and/or “democracy”.  You may, as you have in the case of Egypt, even hear “economic opportunity” as a reason.

No, “income inequality” is one of those terms the left likes to use as a sort of euphemism for “capitalist exploiters” – a part of their perpetual war on business.  “Capitalist exploiters” include any corporation and most business owners.  Of course they can’t use “capitalist exploiters” without revealing their game (and being dismissed out of hand), so “income inequality” has to do.   The implication, of course, is if we just took the money from those capitalist exploiters and spread it around (because, you know, those folks collect it and bury it in a coffee can in the back yard or stuff their mattress with it), all would be lovely.  

The fact remains that economic opportunity is lacking in Egypt not because of “capitalist exploiters” but because of government oppression and favoritism. 

Somehow though, and certainly there are problems with government intrusion here, what has gone on in Egypt is relevant to what is going on here and the proof is “income inequality”.  Make the connection for heaven sake – what’s wrong with you?

Garafalo takes a wave at trying to sound fair about his point, but remember, to swallow this whole you have to believe two things – one, that economics is a zero-sum game, so if the rich are getting richer the poor must get poorer and two, there is no opportunity for the poor to better their condition.  The rich are just making it worse and worse for the poor by earning taking more than their “fair share”.

Anyway, Garafalo says:

The Gini coefficient is used to measure inequality: the lower a country’s score, the more equal it is. Obviously, there are many things about the U.S. economy that make it far preferable to that in Egypt, including lower poverty rates, higher incomes, significantly better infrastructure, and a much higher standard of living overall. But income inequality in the U.S. is the worst it has been since the 1920′s, which is a real problem.

Using that, I’d have to guess that the former Soviet Union and it’s bloc of Eastern European satellites had very low Gini coefficient scores, wouldn’t you?

See, this is “equality” for equality’s sake.   It’s nonsense.  It is the turning of a concept from a positive to a negative.   We have all been promised something very profound in the country – equal protection under the law and equal opportunity to pursue “happiness”.  Yet it is something the left constantly and consistently pushes as a different message.  It doesn’t just want equality in opportunity – it want’s equality of outcome.

That’s why you continue to see long boring posts written about the subject of “income inequality”.  It is how the left justifies further intrusion by government and taking from those who “have” to give to those who “don’t have”.   It’s about time we made it clear that other than the leftist chorus, no one else is buying into their preaching.

Oh and the big finish to the Garafalo piece?

Yale economist Robert Shiller has said that income inequality “is potentially the big problem, which is bigger than this whole financial crisis.” “If these trends that we’ve seen for 30 years now in inequality continue for another 30 years…it’s going to create resentment and hostility,” he said. But tax and spending policies that provide adequate services and allow for economic mobility — along with a robust social safety net — can head off trouble that may come down the road.

“Bigger than this whole financial crisis”.  It will create “resentment and hostility”.  There may be “trouble … down the road”.

Really?

Have you freakin’ people looked around you and figured out yet how well everyone – in comparison with most of the rest of world – live here?   This constant refrain from the left is as tiresome as it is wrong.  It’s nonsense on a stick.  But you will continue to hear them whine about it for the foreseeable future because it is a way for them to justify taking your money for their purposes and sounding noble about it.

~McQ


27% say government should manage economy

I’d like to say I’m “shocked – shocked I tell you”, but in all honesty I’m not.  Rasmussen reports that:

More than one-out-of-four Americans (27%) think the government should manage the U.S. economy, according to a new Rasmussen Reports national telephone survey. Nearly as many (24%) say it’s better for the government to stay out of economic decisions altogether.

First, just off the top, I can’t imagine how 27% can think the government would do a good job managing the economy except via abject ignorance about how the economy actually works.  Secondly, if they’re at all literate they must know that some of the worst economic failures as states have been those in which the government managed the economy.  And if they follow world events even in passing, they can find current examples of that failure in Cuba, Venezuela, Zimbabwe and North Korea to name a few.

So you’d have to figure they at least have some cognizance of what “government management of the economy” means to hold such a belief, right?  If so, then other than faith, what do they base their opinion upon?  Certainly not facts – or even success stories.

They remind me of people who begin smoking fully aware of all the awful things that tobacco use will eventually do to them and somehow naively believe they’ll be the exception to the rule.  One has to assume they have discovered a way that government management of the economy can work and are simply waiting for the right time to spring it on us all.

Or perhaps they’re just young, inexperienced and enamored with the theory.  I guess everyone goes through a period of kumbyah economics  where one believes that if everyone would just work hard and share and let a benevolent government manage it all, we’d live in an earthly paradise.  But I never thought as many as 27% wouldn’t outgrow that.

Even more disturbing is the fact that more think the government should manage the economy than think it should stay completely out of it.  I’ll bet that wasn’t at all the case in the 18th or 19th centuries.   In those days our ancestors were of the opinion the less government the better.  What a novel thought, huh?  And with that freedom they built a nation that is the envy of the world – at least for the time being.  Until that 27% have their way.

Seriously though – that number is a bit stunning.  27%.  More than a quarter of those polled actually expressed the opinion that we’d be better off if government managed the economy.  Does that bother anyone else?  And if so, how do you explain it?

27% of our countrymen think somehow government could do a better job managing the economy than markets. Markets which now manage, quite successfully mind you, billions of individual transactions a day in which the two (or more) voluntary participants part perfectly satisfied at the conclusion.  How would government do that better?  How would it better allocate goods, money, raw materials, etc., than does the market? What signals would it use to satisfy changing demand and ensure the right goods are produced at the right time and sent to the right place for the right price and at a profit which keeps the whole system moving in a positive direction?

I’m asking because I’d love one of the 27% to drop in an enlighten us poor rubes who just can’t seem to wrap our heads around the idea they’re backing in a positive way.  Then I’d ask them if they’d prefer Zimbabwe or North Korea to this poor benighted country and its ostensibly “free” markets.  Because obviously they can’t be happy here.

27%!?

Wow … a real head shaker.

~McQ


Natural disaster? It’s capitalism’s fault …

Strongman Hugo Chavez says the flooding in Venezuela that has resulted in 70,000 homeless and 32 deaths is easy to understand.  It’s the result of “criminal capitalism” and it’s effect on the world’s climate:

"The developed nations irresponsibly shatter the environmental order, in their desire to maintain a criminal development model while the immense majority of the earth’s people suffer the most terrible consequences," he said on Venezuelan television Sunday.

You may be wondering why this sort of stupidity is even worth mentioning.  It is worth mentioning because it is a sterling example of the nonsense that has been precipitated by AGW scaremongering that I discuss below.  This is a dictator’s excuse, however absurd it sounds, for his regime’s inability to control the flooding in his country. 

"The world’s powerful economies insist on a destructive way of life,” he said on Sunday. "And then refuse to take any responsibility."

I’m sure it doesn’t take much imagination to figure out what taking "responsibility" would mean. In the past this would be viewed as another in a long line of failed socialist dictators who, because of their crippling of their country’s economy, have rendered unable to cope with natural disasters. But with the convenient excuse of AGW to pin the blame on, and by extension the richer nations, shifting the blame is a natural.

Any bets as to whether this will be a topic in Cancun?

~McQ


Krugman’s latest pearls of wisdom

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.

~McQ


Government mandates and the law of unintended consequences

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.

/sarc

~McQ


Irony and the law of unintended consequences visit the UAW

You could also entitle it "meet the new boss, same as the old boss". What I’m talking about is a recent meeting between UAW bosses and GM workers. To say it didn’t go well would be a vast understatement)(via Sweetness and Light):

Workers at a General Motors stamping plant in Indianapolis, Indiana chased United Auto Workers executives out of a union meeting Sunday, after the UAW demanded workers accept a contract that would cut their wages in half.

As soon as three UAW International representatives took the podium, they were met with boos and shouts of opposition from many of the 631 workers currently employed at the plant. The officials, attempting to speak at the only informational meeting on the proposed contract changes, were forced out within minutes of taking the floor.

The incident once again exposes the immense class divide between workers and union officials, who are working actively with the auto companies to drive down wages and eliminate benefits.

Actively working with the auto companies? They are part owners now of the auto companies – they’re "management" for heaven sake.

Interesting how it suddenly looks when you’re on the "other side", huh?  And in the face of vociferous opposition, the UAW officials abandoned the podium.

All of this was written up at the World Socialist website.  There’s also a video which gives real credence to the story. In the beginning someone from the local is speaking. He or she (I really couldn’t tell which) then introduces the UAW international drones at about 2:48. As you watch it, it will remind you of some of the townhall meetings of last summer:

The article goes on to say:

Workers at Local 23 voted 384-22 in May to reject reopening a previous contract, which had guaranteed that wages would remain intact in the event of a sale. GM first announced its intention to sell the plant in 2007, threatening to close it if it did not find a buyer.

Despite overwhelming opposition by the rank-and-file, UAW executives secretly continued negotiations with JD Norman, which they outlined in a document sent to workers last week.

Pretty bad when your union which is now management sells you out, isn’t it?  To paraphrase one worker, “they’ll still have their jobs while they sell ours out”.  Wow – wasn’t that the argument against the hated “management?”  Heh …

Irony – it’s really something to be appreciated sometimes, isn’t it?  The UAW always wanted control of the auto companies didn’t it?  Now it has it – sweet, huh?  And private sector unions wonder why their membership is dropping like a rock.

~McQ

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