Category: free trade & free markets

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free trade & free markets ideological culture national politics & policies

Firing People for Fun & Profit

After winning the New Hampshire primary last night, Mitt Romney charged that “some desperate Republicans” have joined forces with President Obama “to put free enterprise on trial.”

Newt Gingrich calls Romney a “vulture capitalist” and blasted his work as CEO of Bain Capital as “bankrupting companies and laying off employees.” Rick Perry snidely attacked Mitt for “all the jobs that he killed,” adding “I’m sure he was worried he would run out of pink slips.”
Presidential Candidate Mitt Romney
A Wall Street Journal report quoted Jon Huntsman: “What is clear is [Mr. Romney] likes firing people.”

So, did Romney say “I like being able to fire people”? What he said was, “I want individuals to have their own insurance. That means the insurance company will have an incentive to keep you healthy. It also means if you don’t like what they do, you can fire them. I like being able to fire people who provide services to me.”

I, too, like being able to fire companies who don’t adequately supply the services I demand.

Yet, what about Romney’s work at Bain Capital?

Bain Capital took firms having trouble making a profit and attempted to make them more profitable. Sometimes that meant cutting back the work force to avoid bankruptcy, where everyone would lose their jobs. Sometimes it meant cutting up a company and its assets and selling them to entrepreneurs who could do better.

Not all businesses succeed. No surprise, then, that politicians used to spending a seemingly unlimited supply of other people’s money regardless of performance fail to understand this simple reality.

To his credit, Ron Paul defended Romney, saying of Gingrich, Huntsman and Perry, “I think they’re wrong. They are either just demagoguing or they don’t have the vaguest idea how the market works.”

Or both.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets ideological culture

Downs and Ups

We hear more about inequality when times get tough than when the economy is booming.

This suggests most people are satisfied with positive growth, but that, when the opposite occurs, some fall back to covetousness and envy. When dissatisfied, we look around for someone to blame.

So what’s roadblocking the long-run upward trend?

There’s the recent bust in the ol’ boom-and-bust. But there’s a deeper problem here. Maybe.

Sheldon Richman, editor of The Freeman, notes that America’s upward mobility is stymied by a whole heckuva lot of government intervention . . . and that a New York Times story about how Americans “enjoy less economic mobility than their peers in Canada and much of Western Europe” should surprise no one, for America isn’t “the land of the free” and Europe isn’t exactly  “socialist” — it’s more a case that the “economies of America, Canada, and Europe are all variations of corporatism, in which government power primarily benefits the well-connected and well-to-do.”

America differs from Europe in the particulars of its interventionism, not in kind.

Still, things could be worse. Veronique de Rugy, writing in the February Reason (not yet online), shows that downward mobility was in evidence pre-Bailouts. Of 1999’s 675,000 millionaires, only 38,000 remained millionaires in 2007.

That, surely, is enough 1 percenter income decline to satisfy your worst schadenfreude.

On a brighter note, de Rugy insists there’s still dynamism in the American economy, and that the lowest income earners had, during the same pre-bust period, made substantial gains.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies too much government

Ups and Downs

Inflationism is the ideology of increasing the money supply to spur economic activity and “growth.” In the 19th century, economists were generally against it, though certain “innovators” (cranks) thought that increasing the supply of money would “increase aggregate demand” with no bad repercussions. “Cross of gold” kind of nonsense; “free silver” idiocy.

In the 20th century, alas, inflationism went mainstream.

Today, a few respectable economists — high-profilers like the New York Times’s Paul Krugman and U.C. Berkeley’s Brad DeLong, for example — embrace inflationism. Occasionally their arguments sound sophisticated, but all are just warmed-over rehashes of very old errors.

It’s the economic equivalent of the “perpetual motion machine”: the eternal quest to get something for nothing, progress on the cheap. It inevitably fails — but only after fooling people by “working” for a while.

Reason’s Tim Cavanaugh, discussing declining housing prices, notes that “it’s becoming harder for the Fed, HUD, the Treasury Department and the National Association of Realtors to pretend the 25-year real estate inflation was anything but a $15 trillion rip-off.” He welcomes the deflation of housing prices. The idea that one’s house should increase in value by always increasing in price — that’s really just a recipe for social disaster. It endured as long as it did only “through government subsidized debt.”

Thank Congress; thank their Fannie and their Freddie; thank the inflationist Fed.

“Creating” money and loosening credit tends to nudge up prices . . . but not all prices equally. It signals people to over-invest in certain sectors, often real estate. This creates a sector boom . . . that then must “bust.”

The alternative? The honesty of sound money.

This is Common Sense. I’m Paul Jacob.

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First Amendment rights free trade & free markets general freedom government transparency

Secret Censorship

“There are so many things about this story that are crazy,” according to a detailed and exasperated report at Techdirt.com, “it’s difficult to know where to start.”

What story? The one you’ve probably heard nothing about.

Back in late 2010, the federal government seized Dajaz1.com, a popular Internet blog devoted to hip hop. The Justice Department and U.S. Immigration and Customs Enforcement (ICE) shut down the website domain claiming it was infringing on music copyrights. ICE “put up a big scary warning graphic on the site, suggesting its operators were criminals.”

The government then failed to abide by the legal requirements for filing an asset forfeiture case, conducting a secret legal effort, instead. Motions, hearings, and court decisions were filed in secret and placed under “seal,” denying the website owners and their attorney any opportunity for challenge.

Freedom of speech? Due process of law? Obliterated. And yet, earlier this month, the government admitted it had no legitimate case, no probable cause to go after this website in the first place, and, after a year of censorship, finally returned the web domain to its rightful owners.

That a website can be seized by our government, without a charge being publicly made and the crime proven in a fair and open court of law, is absolutely frightening.

What’s even scarier, though, is that legislation currently being considered by Congress — Protect IP and the Stop Online Piracy Act — would give the federal government even more sweeping powers to regulate and control the Internet.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies porkbarrel politics too much government

Water’s Value — in a Desert

It’s a dam shame.

There are plenty of private sector dams in the U.S., but the biggest are federal government projects, like those on the Columbia and Colorado rivers. These government-run outfits aren’t “free,” though. Indeed, they often prove to be good examples of typical government operations, providing special favors to some people at the expense of others.

Take the Hoover Dam, cherished as the nation’s highest symbol by MSNBC’s Rachel Maddow. The dam supplies water and electricity to Las Vegas, Nevada — at cut rate prices. A typical family in Las Vegas pays half for water what the same family would pay in Atlanta, Georgia, despite the fact that Atlanta gets 13 times more precipitation. These cheap rates have predictable consequences — overuse, for one. Which then leads local water authorities to foist on consumers some heavily intrusive conservation rules.

Andrew Wilson, in a report for the Property & Environment Research Center, writes that “A market-ready solution for Las Vegas water,” though not often talked about, would have far fewer negative consequences. And it’s not a difficult idea as such: “discard the historic cost-based pricing model and move instead to a pricing system that recognizes the scarcity value of water.”

Raising the prices for water and electricity to Las Vegas (and, for that matter, electricity to favored Bonneville Power Administration customers in the Pacific Northwest — along with many other federal government “business” products) would not only help forestall shortages and draconian lawmaking, it would be equitable. There’s no reason for the rest of the country to be, in effect, subsidizing Sin City.

Or any other city.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Pacé Richard Dreyfuss

In Suffolk County, Massachusetts, a new wrinkle on the old Producers-like scam hit the spotlight as a grand jury indicted Daniel Adams, a film impresario with several films under his belt, on ten counts larceny and false claims to the state in the financing of two movies set in the Cape Cod area, The Golden Boys (2008) and The Lightkeepers (2009).

According to Boston.com, Adams is charged with taking “advantage of a state incentive that allows film makers to apply for a tax credit equal to 25 percent of eligible production expenses. But prosecutors said he deceived the state about his expenses, claiming, for instance, that he paid [actor Richard] Dreyfuss $2.5 million, when in fact he paid him only $400,000.”

Adams has pleaded not guilty, and his legal standing is for a jury to decide.

More important is the general policy — funding movies is just not a legitimate use of tax money.

The only possibly legitimate argument for taxation is that the forcibly extracted money serves all the people it’s extracted from, by fulfilling very general, truly public interests. Making movies is not that.

One wag notes that “[t]he real crime is that a movie starring Richard Dreyfuss ever qualified for taxpayer funds in the first place.” That sounds almost like a criticism of Dreyfuss. Hey, I like the actor.

The point is that no film, either starring the greatest of greats or the least of unknowns, should be financed with conscripted money.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Video: Rating Agency Madness

The seeds of disaster can often be found in good intentions — a simple regulatory requirement designed to avoid disaster — as explained by economist Lawrence White:

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folly free trade & free markets insider corruption national politics & policies

A $13 Billion Reward

The Federal Reserve, our central bank, hit the news big last week.

Beginning in August 2007 and continuing for the next two and a half years, the Fed lent the world’s biggest banks something like $7.77 trillion dollars at the barely perceptible interest rate of 0.01 percent. With that money, the banks bought Treasury bonds (federal debt) and made $13 billion in profit.

I reported on this multi-trillion-dollar loan figure in December 2008, a few weeks after the biggest day ever of Fed bailout fever. For some reason this information didn’t become widespread or understood until this December, when Judge Andrew Napolitano and Jon Stewart made a big deal of it on their respective TV shows, after Bloomberg reported the profits banks made off all that bailout money.

What does this figure represent? To me, it represents the outrageous amount of magic money a sick and corrupt fiat-dollar/bailout-based system of moral hazard requires when it implodes.

I think we can all justifiably roll our eyes, now, when some rah-rah boy for big government tells us how absolutely necessary it is to have a central bank. The old gold standard never fell apart this badly. The gold requirement itself placed a huge check on out-of-control banking.

But a $13 billion reward for the biggest financial mess in world history? That’s the very opposite of a check or balance on risk-taking, greed, or downright stupidity.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets

Trash Heap Economics

Andy Stern, writing in the Wall Street Journal, covers familiar ground. They do things better elsewhere. Give up, America: adopt a foreign ideology. His title/subtitle combo — “China’s Superior Economic Model: The free-market fundamentalist economic model is being thrown onto the trash heap of history” — provides a grand example of passive voice construction allowing evasion of the crucial elements: Who throws what away?

First, the what: “The conservative-preferred, free-market fundamentalist, shareholder-only model” described as “so successful in the 20th century” . . . with no discussion, absolutely none, as to what extent our business life is actually run by this “model.”

“Shareholder only”? Some of the biggest businesses in the U.S. are privately held, not publicly traded. Not a few huge and influential enterprises, like the absurdly mismanaged postal service, the disruptive Fannie and Freddie, and the morally bankrupt Federal Reserve are government-created and not public in the shareholder-model sense. Add in taxes, regulation, and a perpetual deficit government budget, backed by the inflationist Fed, and the truth pops up exactly opposed to Stern’s: America’s a very mixed “mixed economy.”

In this context, who holds to “free-market fundamentalism”? A number of people, almost exclusively on the outs. The richest and most powerful insiders work against free markets, no matter what they say. Hence bailouts, subsidies, and a whole lot of “planning.”

China may be “blessed” with a huge population aiming to get ahead and with a government that runs budget surpluses, while we are cursed, primarily, with continuous deficit financing of the federal government, and everything that entails.

The solution? Reassert the model Stern wants to chuck.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets ideological culture too much government

Lies and Denials

Politics is often the art of lying about the effects of policy, and Hugo Chavez, Venezuela’s Prevaricator-in-Chief, is a master politician. As consumer-price inflation hits a 27 percent per annum rate, he blames capitalism.

One report summarizes his position: “Mr. Chavez said the market had become a perverse mechanism where the big monopolies, the big trans-nationals, and the bourgeoisie, dominate and ransack the people.”

So he’s extended price controls from staples to all sorts of goods, with some prices being immediately subjected to a rate freeze. Big firms will have to report costs to the government, so bureaucrats can determine a “fair price.”

Were it not a ratcheting up of oppression and hardship, I’d say this is all getting rather funny. Price controls notoriously fail to achieve what they aim. In the United States, Nixon-era wage and price controls set stagflation into overdrive. Long lines at the gas pumps, shortages in supermarkets, and rising prices. What a mess.

There’s good theory to explain why price floors and price ceilings cause major problems. But according to the head of the country’s price control board, “The law of supply and demand is a lie.”

Hugo and his cronies deny the relevance of the central bank’s doubling the volume of money in circulation since late 2007. Supply of money increases? No possible effect on skyrocketing prices, supply and demand being a lie, you see.

Meanwhile, people have begun to hoard products. It’s now almost impossible to even find coffee in Venezuelan stores.

This is Common Sense. I’m Paul Jacob.