Exhibit A: Industrial policy that protects the few at the expense of the many – Carrier keeps jobs in Indiana but on the backs of taxpayers and consumers

Image result for Carrier JObs

I just received an article from the Wall Street Journal that indicated that Carrier has agreed to keep roughly 1,000 jobs in a manufacturing plant rather than shift the employment to Mexico. Rather than celebrate this as a great example of private and public partnership and the deal-making style of Trump that successfully and benevolently puts Americans first, I am going to put a different, and perhaps unpopular, spin on this and call it what I believe it to truly be – arbitrary manipulation and industrial policy developed by government for the benefit of the few at the expense of the many.

Of course, the “saving” of 1,000 jobs is a positive thing on the surface, and it will no doubt lead to declarations of success and subsequently votes for the protectionist politicians who promoted it well into the future. Less visible will be the unintended consequences and foregone opportunities of non-government intervention. I will start with the obvious and work my way to the more philosophical, but just as important, reasons to decry, rather than to celebrate, such government interventions:

  • The 1,000 jobs were kept and promoted at a hefty price tag per worker. At a $7,000,000 tax incentive agreement, this works out to $7,000 per job “saved.” This means the rest of Indiana taxpayers are subsidizing this arbitrary policy. No doubt, you will find many lower-paid workers subsidizing their higher-paid brethren. I am sure the Indiana taxpayer could think of a million different things they could do with that $7,000 to help their own careers and families. This is the unintended consequences that are diffused and don’t get highlighted in the media that happens with industrial policy. This is also what happens when rent-seeking corporations get the ear of government officials who control too many of the levers of economic policy. They get to decide how to use our tax dollars and declare it a successful investment with little accountability or visibility to what ends those dollars could have gone to had they left them in our pockets.
  • The inability to shift labor to take advantage of wage rate/productivity imbalances leaves costs higher for American consumers in the long-run. Once again, this is government meddling in support of one small class of citizens at the expense of the many.
  • Preventing Mexico from taking advantage of their comparative advantages in their specific mixture of labor force participation, wages, and productivity will continue to put pressure on their citizens but not allowing them to grow economically, which further puts pressure on its citizens to immigrate. Being able to take advantage of cross-border trade is mutually beneficial and is not the zero-sum game that protectionists such as Trump believe it to be. The great irony is that plugging one “problem” of imbalanced trade only exacerbates another one of immigration- or at least in the sense that self-described American Economic Nationalists believe trade and immigration to be problems.
  • Sustaining or creating new abusive and arbitrary government power to take tax dollars from citizens in support of the few establishes/continues a dangerous precedence. What well-connected company or connected political body will take their turn next in using their connections to politicians to extract resources from the rest of us under the auspices of “America first?” Do we really trust the government to pick and choose these winners wisely and with all of our freedom, liberty, and economic interests in mind? I hope to someday make this a rhetorical question.
  • I keep coming back to this point from previous posts – but what right does the government have to tell me as a consumer where I can and can’t buy goods? By implication – browbeating, cajoling, and incenting them to stay (using my money) in America through taxpayer funds is ultimately an act to usurp my rights to buy goods from the provider who can make the highest quality good at the lowest cost and in the end is little more than theft of my resources to support their own arbitrary decisions.

Finally, freedom and liberty requires a tradeoff of uncertainty in outcomes that don’t always redound to every individual, but is the only way with which we can grow economically (and in turn emotionally and spiritually) in the long run. The fundamental question then becomes do we want to bequeath to our future generations and children an open and dynamic society where people are free to create the exciting and enriching occupations of the future, or do we want to confine them to the known quantities of the past and present?  We shouldn’t demand equality in outcomes, but rather demand the equality of opportunity combined with blind justice – good arbitration when conflicts arise over contracts between free people. Otherwise, we should keep government at a safe arm’s length that is akin to a good and impartial referee who knows a foul when it sees it and has a consistent redress for those fouls irrespective of the player that committed them. Instead, what we have these days is a referee who changes the rules in the middle of a game to the advantage of his favorite and most well-connected players. On this note of equality of opportunity and why it is extremely important, I land with a powerful excerpt from Deirdre McCloskey’s remarkable book, Bourgeois Equality, of which I have written more at length about in a separate post, but for today’s topic pull out this specific section:

The ideas of equality [in the English and Scottish Enlightenment period] led to other social and political movements not uniformly adorable. Hannah Arendt remarked in 1951 that ‘equality of condition…is among the greatest and most uncertain ventures of modern mankind.’ Alexis de Tocqueville had said much the same a century earlier. And Scottish equality has a harsh, even tragic side. It entails equal reward for equal merit in a marketplace in which others, by freedom of contract, can also compete. As John Stuart Mill put it in On Liberty, ‘Society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering; and feels called on to interfere only when means of success have been employed which it is contrary to the general interest to permit – namely, fraud or treachery, or force.’ Yet in the real world, unhappily, if the poor are to be raised up, there is no magic alternative to such competition. An ill-advised and undercapitalized pet store, into which the owner pours his soul, goes under. In the same neighborhood a little independent office for immediate health care opens half a block from a branch of the largest hospital chain in Chicago, and seems doomed to fail the test of voluntary trade. Although the testing of business ideas in voluntary trade is obviously necessary for betterment of the economy (as it is too by non-monetary tests for betterment in art and sport and science and scholarship), such failures are deeply sad if you have the slightest sympathy for human projects, or for humans. But at least the pet store, the clinic, the Edsel, Woolworth’s, Polaroid, and Pan American Airlines face the same democratic test by trade: Do customers keep coming forward voluntarily? Does real income rise?

We could all by state compulsion backed by the monopoly of violence remain in the same jobs as our ancestors, perpetually “protected,” though at $3 a day. Or, with taxes taken by additional state compulsion, we could subsidize new activities without regard to a test by voluntary trade, “creating jobs” as the anti-economic rhetoric has it. Aside even from their immediate effect of making national income lower than it could have been, perpetually, such ever-popular plans – never mind the objectionable character of the violent compulsion they require – seldom work in the long run for the welfare of the poor, or the rest of us. In view of the way a government of imperfect people actually behaves in practice, job “protection” and job “creation” often fail to achieve their gentle, generous purposes. The protections and the creations get diverted to favorites. Laws requiring minority or female businesses to be hired, for example, tend to yield phony businesses run in fact by male whites. In a society run by male whites or inherited lords or clan members or Communist Party officials, or even by voters not restricted by inconvenient voting times and picture IDs, the unequal and involuntary rewards generated by sidestepping the test of trade are seized by the privileged. The privileged are good at that.

 

 

The Abolition of Man by C.S. Lewis – Modern Education and the Creation of “Men Without Chests”

I have written in previously in support of freedom of choice in our education models and in particular for support of the classical education model. I firmly believe that it is an inalienable right to be free to choose what manner or education is received, rather than the myopic and freedom of choice smothering one size fits all and centrally directed and dictated (and increasingly expensive with little return on investment) modern American education model we have blundered into. Recently, I found an ally of sorts in an unexpected corner – in the writings of C.S. Lewis. Many will recognize Lewis for \ his Chronicles of Narnia series or perhaps his more direct Christian books such as Mere Christianity and the Screwtape Letters, but oft neglected is his powerful and remarkably prescient book on primary education, The Abolition of Man.

In the Abolition of Man, Lewis takes aim at the then (1940s) education reformers and their zeal for removing the development of a foundation of objective values and replacing it with something in which the individual becomes much more critical and subjective. In a sense, this era witnessed the shift from attempts at educators to develop the moral and ethical character of a child to simply treating them as children to be loaded up with facts and to ostensibly create nothing more than rational and logical human beings who could conform to a certain desired standard way of thinking. With the hindsight of the year 2016, it is apparent to me that such reformers were successful in their aims with the modern education system as we know it. Of the reformers, Lewis has these rather harsh critiques:

They see the world around them swayed by emotional propaganda – they have learned from tradition that youth is sentimental – and they conclude that the best thing they can do is to fortify the young minds of young people against emotion. My own experience as a teacher tells an opposite tale. For every one pupil who needs to be guarded from a weak excess of sensibility there are three who need to be awakened from the slumber of cold vulgarity. The task of the modern educator is not to cut down jungles but to irrigate deserts. The right defence against false sentiments is to inculcate just sentiments. By starving the sensibility of our pupils we only make them easier prey to the propagandist when he comes. For famished nature will be avenged and a hard heart is no infallible protection against a soft head…. Their scepticism about values is on the surface: it is for use on other people’s values: about the values in their own set they are not nearly sceptical enough.

The consequence of such teaching is not benign in Lewis’ estimation, rather, it leads to the creation of an adult who is not really a human at all. Lewis has these dire observations about what the new education model would produce:

The old dealt with its pupils as grown birds deal with young birds when they teach them to fly: the new deals with them more as the poultry-keeper deals with young birds – making them thus or thus for purposes of which the bird knows nothing. In a word, the old was a kind of propagation – men transmitting manhood to men: the new is merely propaganda…

…We were told it all long ago by Plato. As the king governs by his executive, so Reason in man must rule the appetites by means of the ‘spirited element.’ The head rules the belly through the chest – the seat, as Alanus tells us, of Magnanimity, of emotions organized by trained habit into stable sentiments. The Chest – Magnanimity – Sentiment- these are indispensable liaison officers between cerebral man and visceral man…

…It is not excess of thought but defect of fertile and generous emotion that marks them out. Their heads are no bigger than the ordinary: it is the atrophy of the chest beneath that makes them seem so. And all the time – such is the tragi-comedy of our situation – we continue to clamor for those very qualities we are rendering impossible. You can hardly open a periodical without coming across the statement that what our civilization needs is more ‘drive,’ or dynamism or self-sacrifice or ‘creativity.’ In a sort of ghastly simplicity we remove the organ and demand the function. We make men without chests and expect of them virtue and enterprise. We laugh at honour and are shocked to find traitors in our midst. We castrate and bid the geldings by fruitful.

[As an side, since Lewis invoked the great word Magnanimty – I am linking to a previous article on the subject of that very word, that also connects back to the broader themes and points I am attempting to make in this one.]

To be clear, what Lewis has in mind when he speaks of the “old” is a return to fortifying the character of a child through teaching of objective values. One might call this conecpt ‘Natural Law’ – basic, fundamental, or even first principle universal virtues that we should all aspire to and should commonly agree should be inculcated in our children. Lest I set off any alarm bells for my secular friends, I should indicate that of all the Lewis books, this is one that is the least explicitly Christian. In fact, the virtues and values he builds up in the narrative he collectively labels The Tao, borrowing heavily from an ancient Chinese term that seems to translate roughly into “The Way.” While there are many Christian principles that are consistent with the Tao, Lewis endeavors to build a comprehensive list of virtues that reach back to ancient Egypt, Babylon, Confucius China, Indian Hinduism as well as building on ancient philosophers such as Plato and Aristotle. Indeed, it is a very Aristotelian list of virtues and ethics that Lewis builds into his Tao, echoing much of what Aristotle includes in his Nicomachean Ethics.  Specifically, Aristotle indicated that, “The aim of education is to make the pupil like and dislike what he ought.” Years prior, Aristotle’s mentor Plato said much the same about education when he stated that, “The little human animal will not at first have the right responses. It must be trained to feel pleasure, liking, disgust, and hatred.”  In Plato’s Republic, he elaborates that the well-nurtured youth is one, “who would see most clearly whatever was amiss in ill-made works of man or ill-grown works of nature, and with a just distaste would blame and hate the ugly even from his earliest years and would give delighted praise to beauty, receiving it into his soul and being nourished by it, so that he becomes a man of gentle heart.All this before he is an age of reason; so that when Reason at length comes to him, then, bred as he has been, he will hold out his hands in welcome and recognize her because of the affinity he bears to her.”

Lewis provides ample examples of what is included in the Tao – Natural Law elements such as honor, courage, good faith, justice, being free from cruelty and calumny, charity, and many others. The list of objective values that we could be teaching in schools could be distilled to seven virtues or as expansive as four-hundred. Our ample history and thousands of pages published on the subject from some of the world’s greatest philosphers and theologians provides us plenty of rich and viable options to choose from. I am personally partial to a recent innovation and list from Deirdre McCloskey’s book Bourgeois Equality in which she arrives at seven core values – a snapshot at which I have taken liberty of including in the (rather amateurish) picture below. Perhaps the broader point is that our public education systems aren’t teaching any of these. If there is any “value” being taught, it is the maniacal pursuit of of tolerance under a veneer of moral relativism. I believe this to be a travesty of the highest order, and I find it morally repugnant and offensive that we are under the shackles of being forced to pay tax dollars and forced to send our children to a school teaching such methods (and neglecting all others) by simple virtue of the arbitrarily drawn school districts we live in. We scramble to live in the right neighborhoods and pay dearly for housing  and property taxes to buy into certain school districts while ignoring that there truly is little difference in the education that is received out of them. There may be better “outcomes” due to clustering into wealthy neighborhoods, but ask yourselves, is there truly any differnece in what is learned? Does your chid truly develop any better character than the child forced into the “poor” school down the street? Isn’t it an injustice that the child born into poverty has no choice but to go to their locally zoned school? The connection back to my opening paragraph is that I believe school choice and reform is an idea ripe for harvest. I only hope to convince my fellow citizens of this fact one day, so that we can benefit our children, our families, communities, states, and nation.

Seven Principle Virtues.jpg

 

 

What freedom entails: facing the good and the bad consequences of our decisions

For men and women to be free from paternalistic domination from others and free to make our own choices necessarily means that we are in turn subjected to the vicissitudes and the consequences, for better or for worse, of those decisions. It is a fundamental concept that for us to remain free, we must not in turn be “protected” by government from the downside risk of flawed choices or bad luck. It was in fact this form of “protection” that for centuries kept peasants under the feudal domination of their class superiors – the knights, earls, and dukes under which they served and whom they paid exorbitant rents to. Predictably, famine only ever struck the peasants when harvests failed, while nobles and priests always maintained a relatively bountiful diet. Ostensibly, this was the price to be paid for protection by the lords of the castle and his soldiers and mercenaries. The reality was that for most peasants throughout the ages, the only real danger to their lives was in fact the deprivations of the lords supposedly protecting them.

Alas, for centuries and the better part of human history, this system kept a stable class of hereditary beneficiaries in control of a never growing and largely agrarian-based economic pie. People lived consistently on the modern equivalent of $3 a day and under a Malthusian system in which population growth led to a decrease in individual agrarian and artisanal wages, wages which only rose again the next time a plague wiped out swaths of the population and the supply of labor.  On that note, this never growing economic pie also led to no real advancements in science and medicine, and those frequent plagues (thought for centuries to arise out of miasmas in the sky that needed to be avoided by clustering indoors and blood that needed to be let out of the body – an ignorantly fatal combination) killed noble and peasant alike. In the words of Thomas Hobbes, life for the vast majority of our ancestors’ histories was lived in “continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.” Shakespeare poetically wrote of death as, “the arbitrator of despairs, just death, kind umpire of men’s miseries…” Let me pause for a moment and express my extreme gratitude to have been born into the relative bounty and ease of modern-day American life. Whatever our problems, they pale in comparison to the way humanity lived for thousands of years; well into the 1800s most people lived in these Hobbesian conditions. Many millions of people on earth still reside in dark removes of similar medieval conditions in places such as Somalia and Afghanistan.

Deirdre McCloskey, in her remarkable book, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, makes the above points eloquently and with her unique ability to draw upon an impressive panoply of analogies, anecdotes, and historic intellectual luminaries’ thoughts and writings to buttress her points. I highly recommend the book and credit it with much of my facts (i.e. the $3 a day factoid, Malthus’ theories). In direct contrast to the idea that we as individuals need protection and on the topic of the reality and essential connection between freedom and potential loss, she observes:

“The ideas of equality led to other social and political movements not uniformly adorable. Hannah Arendt remarked in 1951 that ‘equality of condition…is among the greatest and most uncertain ventures of modern mankind.’ Alexis de Tocqueville had said much the same a century earlier. And Scottish equality has a harsh, even tragic side. It entails equal reward for equal merit in a marketplace in which others, by freedom of contract, can also compete. As John Stuart Mill put it in On Liberty, ‘Society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering; and feels called on to interfere only when means of success have been employed which it is contrary to the general interest to permit – namely, fraud or treachery, or force.’ Yet in the real world, unhappily, if the poor are to be raised up, there is no magic alternative to such competition. An ill-advised and undercapitalized pet store, into which the owner pours his soul, goes under. In the same neighborhood a little independent office for immediate health care opens half a block from a branch of the largest hospital chain in Chicago, and seems doomed to fail the test of voluntary trade. Although the testing of business ideas in voluntary trade is obviously necessary for betterment of the economy (as it is too by non-monetary tests for betterment in art and sport and science and scholarship), such failures are deeply sad if you have the slightest sympathy for human projects, or for humans. But at least the pet store, the clinic, the Edsel, Woolworth’s, Polaroid, and Pan American Airlines face the same democratic test by trade: Do customers keep coming forward voluntarily? Does real income rise?
We could all by state compulsion backed by the monopoly of violence remain in the same jobs as our ancestors, perpetually “protected,” though at $3 a day. Or, with taxes taken by additional state compulsion, we could subsidize new activities without regard to a test by voluntary trade, “creating jobs” as the anti-economic rhetoric has it. Aside even from their immediate effect of making national income lower than it could have been, perpetually, such ever-popular plans – never mind the objectionable character of the violent compulsion they require – seldom work in the long run for the welfare of the poor, or the rest of us. In view of the way a government of imperfect people actually behaves in practice, job “protection” and job “creation” often fail to achieve their gentle, generous purposes. The protections and the creations get diverted to favorites. Laws requiring minority or female businesses to be hired, for example, tend to yield phony businesses run in fact by male whites. In a society run by male whites or inherited lords or clan members or Communist Party officials, or even by voters not restricted by inconvenient voting times and picture IDs, the unequal and involuntary rewards generated by sidestepping the test of trade are seized by the privileged. The privileged are good at that.”

 The implicit conclusion is that while there are unfortunate consequences of freedom and a free market, the alternative is worse. The plea, as McCloskey states in her book’s foreword, is this:  “Perhaps you yourself still believe in nationalism or socialism or proliferating regulation. And perhaps you are in the grip of pessimism about growth or consumerism or the environment or inequality. Please, for the good of the wretched of the earth, reconsider.”

“The GOP’s Mexico Derangement”

Mexico

Bret Stephens has a biting critique of the GOP in his recent Wall Street Journal op-ed. Stephens, as ever, is able to criticize the party that he aligns with most often with eloquence and forcefulness that I admire. The GOP’s myopia and fixation, to say nothing of the lack of economic soundness and adherence to liberty, small government, and plain moral decency – was a primary source of frustration of mine with the party long before the rise of Trump. The combination of stances on immigration, free trade, and Trump are the main reasons I will be casting a Presidential Libertarian ballot this election season.

Some of the piquant highlights of the article, in which Stephens addresses common canards leveled against Mexico and Mexican immigration are as follows:

Mexico is a failed state. Mexico’s struggles with drug cartels—whose existence is almost entirely a function of America’s appetite for dope—are serious and well known. So are its deep-seated institutional weaknesses, especially the police forces that collude with the cartels and terrorize rural areas.

Then again, Mexico’s 2014 homicide rate of about 16 murders per 100,000 means that it is about as dangerous as Philadelphia (15.9) and considerably safer than Miami (19.2) or Atlanta (20.5). Are these “failed cities” that you don’t dare visit and that should be walled off from the rest of America?

Mexico steals U.S. jobs. Donald Trump recently resurrected this chestnut by inveighing against Nabisco and Ford for shifting production to Mexico from high-cost Illinois and Michigan. Never mind that one reason Ford made the move was to take advantage of Mexico’s free-trade agreements with the European Union and other countries, meaning that opposition to free trade is the very thing that drives business abroad. Then again, Mexico is the second-largest purchaser of U.S. products; the Wilson Center’s Christopher Wilson has estimated that “six million U.S. jobs depend on trade with Mexico.” That is especially true for border states. ‘Mexico is the top export destination for five states: California, Arizona, New Mexico, Texas and New Hampshire, and is the second most important market for another 17 states across the country.’

Illegal immigrants are a drain on the system. This whopper should be sold at Burger King, since illegal immigrants pay billions in state and local taxes, along with about $15 billion a year to Social Security—the benefits of which they are unlikely ever to get back. Entire U.S. industries, agriculture above all, depend on illegal migrants, without whom fruits and vegetables would simply rot in the field.

If there is a drain, it’s Mexicans going home—roughly one million returnees between 2009 and 2014, according to the Pew Research Center, outpacing the number of Mexicans moving north by about 140,000. That owes something to growth and stability in the Mexican economy, which is largely a function of the North American Free Trade Agreement.

This makes Mr. Trump’s opposition to Nafta all the more misjudged. Without it, Mexico could easily have become Venezuela, run by an Hugo Chávez-like strongman, that would have posed a real threat to U.S. security, as opposed to the one in Mr. Trump’s imagination.

 

Free Trade Lessons for the Economically Challenged

Yes, the would be trade war General Donald Trump is included in those that need these lessons. Whether he actually believes his own tirades against Mexico and China or whether he finds them politically astute given his blue collar base is beside the point, the lesson on the virtues of free trade are in constant need of defending – like a garden that is surrounded by malevolent spreading weeds that are aggressive but thoughtless.

This Neighborhood Tale from Cafe Hayek is one Orwellian dystopian view of the topic that asks the obvious question – why should government backed by freedom-hating voters decide what I get to consume and where I get my products from? Drawing the arbitrary consumption boundary to the United States is really no different philosophically and morally than drawing a consumption boundary around my neighborhood. When one paints it in this light, then the restrictions on individual liberty and punitive tariffs becomes quite the sophistry.

Another highly insightful and thought provoking entry on the topic comes from the American Enterprise Institute constructed video debate between Trump and Milton Friedman on the topic. Of course, Friedman having passed away some years ago we don’t get the pleasure of Friedman actually destroying Trump’s immature trade arguments in real time, but the artful creation of AEI does the job well enough.

A key phrase from Friedman in the video montage that I particularly enjoy (at the 2:00 minute mark) summarizes the topic of free trade quite well, “When I look at the legislation it always seems to me that the legislation is enacted to benefit a small group at the expense of the large group. Free trade is a way of benefiting a large group at the expense of the small group. But, politically, a small group always speaks with a bigger voice.”

Another common bogeyman of the protectionist is the trade deficit. To the protectionist, this is a pernicious sign of unfair trade practices. The problem with this simplistic view is an assumption that those dollars will exist in a permanent vacuum of no escape. Eventually, those dollars will have to be spent on something, which is most often re-invested back into the United States. Friedman also observes that trade surplus countries are often driven by the lack of savings opportunities in their own countries, driving them to invest in countries such as America where investment opportunities are better.

“When I look at the legislation it always seems to me that the legislation is enacted to benefit a small group at the expense of the large group. Free trade is a way of benefiting a large group at the expense of the small group. But, politically, a small group always speaks with a bigger voice.” – Milton Friedman

Another brilliant quote that I want to call out is when Friedman uses a quote (7:35 minute mark) from the classical American economist Henry George (circa 1890) that, “It’s a very interesting thing that in times of war, we blockade our enemies in order to prevent them from getting goods from us. In time of peace we do to ourselves by tariffs what we do to our enemy in time of war.”

AEI provides a fuller version of Henry George’s arguments on the inanity of protectionist policies in their text, which I have copied below. I find the similarities between Trump’s proposed 45% tariff and the 47% tariff of George’s day that President Grover Cleveland was attempting to lower an amazing coincidence.

Trade is not invasion. It does not involve aggression on one side and resistance on the other, but mutual consent and gratification. There cannot be a trade unless the parties to it agree, any more than there can be a quarrel unless the parties to it differ. England, we say, forced trade with the outside world upon China, and the United States upon Japan. But, in both cases, what was done was not to force the people to trade, but to force their governments to let them. If the people had not wanted to trade, the opening of the ports would have been useless.

Civilized nations, however, do not use their armies and fleets to open one another’s ports to trade. What they use their armies and fleets for, is, when they quarrel, to close one another’s ports. And their effort then is to prevent the carrying in of things even more than the bringing out of things—importing rather than exporting. For a people can be more quickly injured by preventing them from getting things than by preventing them from sending things away. Trade does not require force. Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade.The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.

Can there be any greater misuse of language than to apply to commerce terms suggesting strife, and to talk of one nation invading, deluging, overwhelming or inundating another with goods? Goods! what are they but good things—things we are all glad to get? Is it not preposterous to talk of one nation forcing its good things upon another nation? Who individually would wish to be preserved from such invasion? Who would object to being inundated with all the dress goods his wife and daughters could want; deluged with a horse and buggy; overwhelmed with clothing, with groceries, with good cigars, fine pictures, or anything else that has value? And who would take it kindly if any one should assume to protect him by driving off those who wanted to bring him such things?

 

 

Quote of the week – Friedman on Freedom

“So long as freedom is maintained, it prevents positions of privilege from becoming institutionalized. Freedom means diversity, but also mobility. It preserves the opportunity for today’s disadvantaged to become tomorrow’s privileged and, in the process enables almost everyone, from top to bottom, to enjoy a fuller and richer life.” – Milton Friedman.

A socialist society advocated by Sanders becomes an ossified one. The free market is not perfect and not advertised to be, but is still the only way known to man to provide equality of opportunity and the most effective way to ensure that people can escape poverty.

What is a sweatshop? Should they not exist?

MI Touring Nike's Factories
**FILE**Workers at a Nike factory on the outskirts of Ho Chi Minh City, Vietnam, assemble shoes in this Oct. 10, 2000, file photo. Michigan State, among many schools with sponsorship agreements with Nike and the school will have senior associate athletic director Mark Hollis joining Nike officials for an upcoming tour of manufacturing facilities in Vietnam and China. (AP Photo/Richard Vogel)

The fundamental question on the existence and morality of sweatshops through this podcast, as presented by Economist Ben Powell, who is located in my hometown of Lubbock, Texas at the Free Market Institute of Texas Tech University and happens to be a friend of a friend, provides a thought provoking view of sweatshops and whether we should focus our philanthropic energies on shutting them down, demanding higher wages and better workplace conditions, and/or boycotting the goods produced out of sweatshops. One would expect an economist to point out the unintended consequences of utopian decisions we would like to impose. Powell does a remarkable job of distilling economic frameworks such as price theory and immigration to their reducible and translatable components so that even the layman can enjoy and learn from them, hence my pitch to my friends and followers to give it a listen since one can rarely find economics topics presented with such clarity for the non-economist.

One of the chief insights in the podcast is that we must not fail to keep philosophy (in this case, perhaps we should call it humanism) from a connection to economics when evaluating policy and what we advocate for and support. While those of us in the West might get tremendously squeamish about sweatshop conditions and profess a knee-jerk reaction that of course they should be shut down (our humanism instincts), we must consider the unintended consequences of what would happen if we could in fact enact our plans. Economics + Philosophy must guide our knowledge, thoughts, and responses to such issues.  This ultimately forces us to consider what the next best alternative of the sweatshop worker is and to more critically examine why the individual chooses employment there. It must be stated that nobody should support slave labor, so let’s put that red herring to rest since in the vast majority of cases individuals choose to work in these factories that we in the West would admittedly deem abhorrent conditions. Thus, there is in fact an element of localized choice in these cases that we must consider. The great challenge and the deeper level to focus on is the fact that the overall range of employment options for these individuals is remarkably poor and sweatshops likely offer the best alternative on hand for them to be able to feed themselves and their families. In essence, the choice can often be working in a sweatshop or working in subsistence farming, which often offers far less money and far more grueling conditions, nor does farming provide a step onto the industrial skills ladder that sweatshop work often provides. While we may reflexively want to attack a symptom, the broader disease is nations with venal and corrupt government that have little institutional foundations that support an open and growing society that would facilitate the individual escaping their condition. The essential foundations for such a dynamic society can be summarized as limited and competent and non-corrupt government, individual property rights, the rule of law and freedom from arbitrary prosecution and perspection, freedom of contract, and a strong and impartial judicial system.

As it relates to individual choice, one might easily be led to believe that sweatshop workers should be given better working conditions such as more time off, more vacation, and safer and more elegant working conditions. Such a simplistic analysis would miss the point of economic tradeoffs. One might ask anyone in this world whether they would like more pay and better working conditions and all except for the world’s few true masochists would provide an invariable “yes” as an answer to that trite question. When pressed as to whether workers would trade off lower wages in order to receive those benefits, the vast majority of people working in sweatshops would invariably say “no” given their high dependence and relative value of cash in hand. Furthermore, to explore and get to the heart of how a worker in Bangladesh could get paid substantially far less pay than a textile worker in North Carolina, it is also absurdly simplistic to compare hourly wages. A true analysis must look at wage rate/productivity ratios for the differences between these two types of workers. Intuitively, the highly paid North Carolina worker is going to produce a tremendous amount more than their Bangladeshi counterpart through a combination of higher skills and better use of capital, dictating a higher relative wage. If a Bangladeshi is not paid significantly less, then their alternative choice to the sweatshop becomes unemployment.

Another interesting insight from the podcast is the alcohol prohibition analogy of Baptists and Bootleggers in grouping the cast of characters in the sweatshop debate. Baptists are the NGOs and philanthropists who are actually committed to the cause of reform, at least making them morally principled. They just often have wrongheaded and misinformed notions of policy prescriptions that should be pursued as a result of their convictions and their effectiveness. Bootleggers are the Unions and others who have a tremendous vested interest in pushing sweatshop wages to a higher point such that they are rendered uncompetitive, thus boosting their own wages. Bootleggers will thus remain unrepentant hurdles to reform while cynically acting as if they have the sweatshop worker’s interests at heart. The intent of the podcast is implicitly to convince the “Baptists” that they will do more harm than good with their approach and to direct their energies elsewhere.

This begs the question of where the concerned over the plight of sweatshop workers should direct their focus. As Powell indicates, the most effective policy reforms would be to support more open forms of immigration. This simple act of changing one’s domicile from a nation lacking the foundations I listed above to one that does (i.e. from Bangladesh to America) increases their wage earning potential 1000% overnight, according to Powell. In the long run, policies that support institutional and government reform will greatly aid in lifting millions from their plights within their native lands. What is clear is that demanding higher wages could very well result in no job and is therefore the opposite of what we should be advocating. Similarly, demanding safer workplace conditions will result in lower wages, which will harm those most in need of straight up cash.

As an aside, I can’t help but notice that Libertarianism.org uses some of the same visuals that I do for this blog – Washington’s crossing of the Delaware and Plato’s Academy. I am not sure whether I should feel validated or concerned that people will assume that I am a copycat, but I assure you that the usage is purely coincidental. I began the blog back in October and just recently picked up the podcast. Great minds think alike…

The drift towards socialism

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Given all of the momentum behind Bernie Sanders, fueled by what I heard one pundit call, “the children’s brigade of people supporting Sanders that have never had to watch thousands of dollars go out of their paychecks for taxes,” I created this post, in which I essentially copy and paste from one of my hidden away comments from within the About Me section.

My guiding principles on the appropriate order of society is that man should be free to do as much as they possibly can on their own without coercion of their fellow man. Freedom from coercion will inherently mean a small and limited government, which is the antithesis of what an avowed socialist such as Sanders advocates. It is not that I don’t like the idealism of a utopian state of all of us cooperating to build a just society, it is that I believe that empirical evidence of countries that have tried socialism have failed to deliver the utopia and have instead descended into quite the dystopia. The problem is that to have such a system, the ruling elites of a society change from one in which the invisible hand of the pricing system and the free market determine who is elite based upon individual skills and effort to one in which favors and status are doled out arbitrarily by a government elite. We can’t pretend that those entrenched with government power will suddenly become benevolent and all-wise benefactors. As William McGurn indicated in an op-ed in the Wall Street Journal, the unfortunate reality is that the end result of a socialist society is not idealistic cooperation, it is in fact collusion of a small governing elite and their attachments and hangers on. It is no accident that the richest woman in Venezuela is Hugo Chavez’s daughter. It is no accident that Brazil is dealing with corruption charges at all levels of government due to government officials abusing their power to milk bribes and embezzle money from the state-owned oil and gas company Petrobas.

It seems unquestionable at this point that in the last 8 years, the Democratic party has made a tremendous shift to the left, which is pulling Hillary Clinton leftward as well. Granted, much of Bernie’s recent success is in converse relation to Clinton’s inherent weaknesses in campaigning, trustworthiness, and likability, but it is still clear that voters are driving the party in a leftward lurch. This is perhaps a natural outcome of 8 years of anemic economic growth and a drumbeat of income inequality. I would submit that the income inequality seems to have been greatly aided and driven by conscious decisions by the federal reserve (by extension, government) to fuel asset prices through quantitative easing that props up asset prices owned mostly by the ultra wealthy and pins down meager saving rates largely owned by the middle class on down. We have thus ignored and swept away the hard fiscal and government reform that would actually unshackle the economy and tried to take the easy but much less effective path of monetary policy manipulation that also is much more prone to fueling asset price increases to the benefit of the rich and inflates the probabilities of a bust cycle requiring more bailouts that benefit the wealthy in the future. The clarion call warning is that if you haven’t been able to trust the angels that run government before to structure your life and make it all better before, why would you hand them the keys to even more power and control over your lives? Take some time to view the outcomes of socialist governments in the past and whether they delivered the utopia that is being proclaimed today. You will find that 100% of the time, they failed to live up to their ideals and instead descended into a different and less accountable elite-controlled society with sclerotic growth and a much more income stratified society that becomes much less fluid and changeable.

Downton Abbey’s Dowager versus Big Government

Watching the last episode of Downton Abbey, I found myself applauding the soliloquy of a fictitious character, Violet Crawley, the Dowager Countess of Grantham, who made a full-throated defense of limiting the encroachments of big government. I would have posted an original post on the matter, but I have to give credit to Joe Carter from Acton Institute for beating me to the punch in one of his blog posts that I receive daily via email.

For those of you that missed it or don’t watch Downton, this particular plotline is over whether to cede control of the local hospital to a larger government trust under the promise of better efficiencies and more modern equipment. The Dowager stands essentially alone in her defense of local control. No need for me to prattle on. Watch the video and see for yourself the rousing performance.

 

Speaking of PBS, for those looking for another phenomenal drama, look no further than the show Mercy Street that comes on after Downton. The show is two episodes in, so now is a great opportunity to catch up on past shows and get prepared for upcoming shows. Mercy Street provides a welcome diversion away from British dominance on PBS, who benefits vicariously from the masterful production efforts of the BBC. As much as I enjoy the British shows, it is great to see a show set to one of America’s seminal historical moments, The Civil War,  and all of the juxtapositions it offers between loyalty to one’s notion of state and country, family, and traditions, the great harms created by war, and the evils and compromises of the “peculiar institution” of slavery.

I personally am still holding out hope for a Russian themed PBS drama, perhaps set to The Brothers Karamazov or the Fall of the Romanovs and the ushering in of the Bolsheviks, but the American drama is certainly a great addition.

 

 

“Texas Doctors Organize Against Innovation”

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Courtesy of http://www.amdtelemedicine.com

Imagine that it is 2 am and your 3 year old child is crying and complaining of an ear ache. You want to be able to quickly figure out whether it is something serious or not, and one of your options at such a late hour is to open up your laptop and quickly find a qualified caregiver from anywhere in the United States to give you some basic guidance and recommendations on demand. The caregiver indicates to you that based upon the evidence, it is a basic ear infection and prescribes the proper medication and routes it to the 24 hour pharmacy closest to you. This could potentially save you a tremendously burdensome and costly trip to the Emergency Room. Expand this concept of virtual clinicians on demand beyond my simple example above, and you can see the powerful implications as it relates to timely access and costs associated with care across hundreds of situations where our current impulse is to go to the ER or call 911. Even within the hospital and outpatient clinic settings,  the best specialists in their field could be brought in virtually to consult on complex cases – thus a Critical Access Hospital in Tulia, Texas could bring in a Cardiologist from the Cleveland Clinic for a consult in the unencumbered by regulations hospital.

Alas, this type of seemingly no-brainer innovation is but one of thousands of examples of regulatory-based supply restrictions that pervades healthcare. In this particular example of what is broadly called “telemedicine”, restrictions come in various forms but can largely be bucketized into reimbursement restrictions (doctors or facilities don’t get reimbursed for virtual visits even though they could perform the exact same functions as a face to face visit), geographic restrictions (a consumer can only leverage a caregiver in a certain state), or licensing restrictions (a consumer can only see a certain type of caregiver or can only see them upon certain conditions.

A recent Cato Institute podcast interview with John Davidson of the Texas Public Policy Foundation highlights such inane regulations, in this instance in the form of dictates pushed down from an unaccountable medical governing board comprised largely of licensed physicians, who will inevitably have a conflict of interest allowing more care supply. The specifics of the case are that the medical board published a ruling earlier in 2015 (with a company that provides access to on demand telemedicine services, Teladoc firmly in their crosshairs) that indicated that to use telemedicine services a licensed professional had to first have a face to face meeting with the patient or be present in the room while the virtual visit occurred. This of course defeats the whole purpose of telehealth and renders my example above of the ear infection as impossible to actually pull off. The case has since gone to court, and hopefully the judicial review finds the patently obvious conflict of interest ruling (physicians restricting supply will increase their own reimbursement) as anti-competitive.

At a higher level, this calls into question the sprawling and pernicious market impacts that such governing and licensing boards create, especially when legislative bodies fail to create controls or boundaries on such agencies. When such boundaries do not exist, we wind up with agencies that can create arbitrary rulings that favor the connected and entrenched interests and can have a sizable impact on economic forces and ultimately hurt the consumer, particularly the poor. The agencies can essentially act with unchecked powers – a quasi executive, legislative, and judicial branch all rolled into one. In this instance, I am pointing to the services required mostly of a Primary Care Physician, but the examples abound in Healthcare, Energy, Environmental, and many thousands of subsets of our economy beyond.