Archive for the ‘Capitalism & Libertarian Philospohy’ Category.
I could write a book on Progressive reform efforts which begin as sensible liberalization efforts and then overshoot into authoritarianism. Gay marriage is a great example. Liberalizing stage 1: Let's give gay folks equal access to the benefits of protections of legal marriage. Authoritarian state 2: Let's punish any small business who refuses to serve a gay wedding.
I ran into another example the other day. Hillary tweeted out, "Every survivor of sexual assault deserves to be heard, believed, and supported" which is a common refrain among women's groups (we will leave aside the irony of Hillary making this statement after she has crushed a number of women who have made sexual assault claims against her husband).
In what I believe to be the initial meaning of this phrase, it was quite reasonable. In the past (and presumably on occasion today) women have gone to police or some other authority and claimed to have been raped or assaulted, and have been essentially ignored. A pat on the head and the little lady is sent home. Women, reasonably, wanted their charges to be taken seriously and investigated seriously. This is my memory of where this phrase, then, originally came from. It meant that when women claim to have been assaulted, authorities need to take these charges seriously and investigate them seriously.
But, as with most other things, Progressive reform which began as liberalizing and empowering has transitioned to being Stalinist. The meaning today of this phrase when used by most women's groups is that any such claims by women should not immediately trigger an investigation but should trigger an immediate conviction. The accused male should be immediately treated as guilty and punished, and any exercise of due process represents an assault on women -- never mind that the same SJW's taking this stance would take exactly the opposite stance on due process if the accused were, say, a black male in Ferguson accused of theft.
I would rather have second-rate politicians who know they are duffers than ones who believe they are brilliant.
I am sympathetic with this statement but for a reason that Dillow does not mention. No one is smart enough to try to manage certain complex systems, like the economy. They don't have the information or the ability to set prices, fix (or even correctly identify) "market failures, assess the preferences of 300 million individuals, or any of the other things politicians try to do -- no matter how freaking brilliant they are. Really smart people in politics (or people who think they are really smart) also have a tendency to want to substitute, by force, their judgement and decision-making for my own.
From Ryan McMaken of the Mises Institute, is your state richer than Bernie Sander's dream country Sweden? The author has used state-level purchasing price parity adjustments, rather than a single US adjustment, due to large variations in state price levels discussed previously here (click to enlarge)
I find it telling the progressives have chosen the most vocal and one of the most eloquent opponents of cronyism and corporate welfare as their particular bogeyman.
The West Has A Continuous History of Becoming more Liberal Only Because We Have Changed the Definition of "Liberal"
Kevin Drum writes, "the entire Western world has been moving inexorably in a liberal direction for a couple of centuries."
If this is true, it is only because the definition of "liberal" has changed. After becoming increasingly less authoritarian and intrusive and controlling for hundreds of years, government is again becoming far more authoritarian and intrusive. Only with a change in the definition of "liberal" over time can one consider attempting to ban, for example, the eating of certain types of foods as "liberal"
Until a few years ago, I would have said that Drum was right that there is a continuity of liberalization in the social realm. I celebrate the increasing acceptance of differences, from race to sexuality. But even here people who call themselves "liberal" are demanding authoritarian limitations on speech and expression, try to enforce a dictatorship of hurt feelings.
The whole post of his is a really interesting insight into the Progressive mind. Apparently, the (purported) lack of compromise in government is the fault of just one of the two sides. I am not sure how that is possible, but that seems to be the Progressive position (you will find an equal number of folks on the Right who believe the same thing, though they blame the opposite group).
Essentially, you can see in this post the strong Progressive belief that the default mode of government is to constantly generate new prohibitions, rules, strictures, taxes, regulations, and penalties. And that anyone who stands in the way of this volume production of new legal entanglements must be overcome, even if one has to break the law to do it.
A few days ago Matt Yglesisas wrote a #Slatepitch piece arguing that Hillary Clinton "is clearly more comfortable than the average person with violating norms and operating in legal gray areas"—and that's a good thing. In a nutshell, Democrats can't get anything done through Congress, so they need someone willing to do whatever it takes to get things done some other way. And that's Hillary. "More than almost anyone else around, she knows where the levers of power lie, and she is comfortable pulling them, procedural niceties be damned."
Unsurprisingly, conservatives were shocked. Shocked! Liberals are fine with tyranny! Today Matt responded in one of his periodic newsletters:
A system of government based on the idea of compromises between two independently elected bodies will only work if the leaders of both bodies want to compromise. Congressional Republicans have rejected any form of compromise, so an effective Democratic president is going to try to govern through executive unilateralism. I don't think this is a positive development, but it's the only possible development.
So Democrats are within their rights to lie, cheat and steal -- to do whatever it takes -- to break through the gridlock. I wonder: The worst gridlock this country has ever had was in the 1850's, when no compromise could be found on slavery. If Democrats are empowered today to lie, cheat, steal to break the gridlock, should they have been similarly empowered in 1850?
Of course, no one would want that. But it raises an important point. If you define the game as one with nietzsche-ist / Machiavellian rules, no one ever seems to consider that it is just as likely the other side will win as yours will. In fact, if you truly represent liberality, I am not sure this kind of anything-goes game is stacked in favor of the truly liberal players.
For folks who think that the end justifies the means here, and that we need to break the rule of law in order to save it, I would offer this paraphrase to an old saying: you can't sell your soul and have it too.
99% of the examples you will ever hear of resources being "raped" result from lack of property rights on those resources or insufficient legal protections for those rights. This video says it all (starting at 1:00 but the whole thing is funny). Money line: "There might be a few more polar bears left if people wanted one for breakfast"
I was thinking about the crazy populist nuttiness of Donald Trump and the misguided focus of Black Lives Matter and the musty socialism of Bernie Sanders. As I drive around Europe and see ruins of castles and palaces, it occurred to me that we had almost always been saddled with an aristocracy exercising power over us. Sometimes they won that position through violence and military action, and sometimes by birth.
But it struck me that we have a new sort of aristocracy today: the Aristocracy of Hucksterism. These new aristocrats are just as wealthy and powerful as the old sort, but they have found a new way to gain power -- By suckering millions of people to simply hand it to them. And when they inevitably fail, and make things worse for everyone, they additionally manage to convince people that they root cause of the failure is that they had not been given enough power.
Vox shares what is perhaps the greatest achievement in human history, the continuing disappearance of absolute poverty:
Readers of this blog will likely have seen this before (though it may well be new to Vox readers). Here is the amazing thing about the Vox article: It never once mentions capitalism, trade, economic freedom, or any synonym. Here is a sampling of the tone of the accompanying article:
There's still much work to be done: 14.4 percent of the world amounts to 1 billion people who still need to be lifted out of extreme poverty. And making sure everyone's making at least $1.25 a day isn't the end of the fight either. The world's median income is still only $3 to $4 a day. By comparison, the poverty line in the US for a family of four is $16.61 per person per day. Once under-$1.25-a-day poverty is eradicated, the world needs to set about eradicating under-$15-a-day poverty, which will be a substantially harder task.
Vox is treating this like it is the result of some top-down effort, using the same language one might use to describe the eradication of Yellow Fever in Panama. As if this resulted (and as if future progress depended on) some all-hands-on-deck technocratic government program.
No one "set about" eradicating poverty. It happened because governments, at least to some extent, got out of the way and didn't stop it. China is a great example. Mao "set about" trying to eliminate poverty using many of the approaches likely favored by the Vox staff, and killed a few tens of millions of people in the process.
Here is my theory of the world's accelerating wealth formation that I have written on a number of times before. This chart largely results from:
- There was a philosophical and intellectual change where questioning established beliefs and social patterns wentfrom being heresy and unthinkable to being acceptable, and even in vogue. In other words, men, at first just the elite but soon everyone, were urged to use their mind rather than just relying on established beliefs and appeals to authority.
- There were social and political changes that greatly increased the number of people capable of entrepreneurship. Before this time, the vast vast majority of people were locked into social positions that allowed them no flexibility to act on a good idea, even if they had one. By starting to create a large and free middle class, first in the Netherlands and England and then in the US, more people had the ability to use their mind to create new wealth. Whereas before, perhaps 1% or
less of any population really had the freedom to truly act on their ideas, after 1700 many more people began to have this freedom.
So today's wealth, and everything that goes with it (from shorter work hours to longer life spans) is the result of more people using their minds more freely.
I operate recreation areas in the US Forest Service and from time to time get criticized that my profit adds cost to the management of the facilities, and that the government would clearly be better off with a non-profit running the parks since they don't take a profit. What they miss is that non-profits historically do a terrible job at what I do. They begin in a burst of enthusiasm but then taper off into disorder. Think about any non-profit you have ever been a part of. Could they consistently run a 24/7/365 service operation to high standards?
Don Boudreaux has a great quote today that touches on this very issue
from page 114 of the 5th edition (2015) of Thomas Sowell’s Basic Economics:
While capitalism has a visible cost – profit – that does not exist under socialism, socialism has an invisible cost – inefficiency – that gets weeded out by losses and bankruptcy under capitalism. The fact that most goods are more widely affordable in a capitalist economy implies that profit is less costly than inefficiency. Put differently, profit is a price paid for efficiency.
It is also the "price" paid for innovation.
John Scalzi tries to explain privilege to non-SJW-types by saying that being a white male is like playing life on "easy" difficulty.
I'll grant I benefited from a lot of things growing up others may not have had. I had parents that set high standards, taught me a work ethic, taught me the value of education, had money, and helped send me to Ivy League schools (though the performance there, I would argue, was all my own).
Well, for those of you concerned about living down a similar life of privilege, I have a solution for you: start a business. Doing so instantly converted me into a hated abused underclass. Every government agency I work with treats me with a presumption of guilt -- when I get called by the California Department of Labor, I am suddenly the young black man in St. Louis called out on the street by an angry and unaccountable cop**. Every movie and TV show and media outlet portrays me as a villain. Every failing in the economy is somehow my fault. When politicians make a proposal, it almost always depends on extracting something by force from me -- more wages for certain employees, more health care premiums, more hours of paperwork to comply with arcane laws, and always more taxes.
Postscript: I will add an alternative for younger readers -- there is also a way to play college on a higher difficulty: Try to be a vocal male libertarian there. Write editorials for the paper that never get published. Sit through hours of mindless sensitivity training explaining all the speech limitations you must live with on campus. Learn how you can be charged with rape if your sex partner regrets the sex months later. Wonder every time you honestly answer a question in class from a libertarian point of view if you are killing any chance of getting a good grade in that course. Live every moment in a stew of intellectual opinion meant mainly to strip you of your individual liberties, while the self-same authoritarians weep and cry that your observation that minimum wage laws hurt low-skilled workers somehow is an aggression against them.
** OK, this is an exaggeration. I won't likely get shot. I don't want to understate how badly abused a lot of blacks and Hispanics are by the justice system. I would much rather be in front of the DOL than be a Mexican ziptied by Sheriff Joe. But it does give one the same feeling of helplessness, of inherent unfairness, of the unreasoning presumption of guilt and built-in bias.
Karl Marx was wrong about many things but right about one thing: the revolutionary way capitalism attacks and destroys feudalism. As I explain in a new study, in India, the rise of capitalism since the economic reforms of 1991 has also attacked and eroded casteism, a social hierarchy that placed four castes on top with a fifth caste—dalits—like dirt beneath the feet of others. Dalits, once called untouchables, were traditionally denied any livelihood save virtual serfdom to landowners and the filthiest, most disease-ridden tasks, such as cleaning toilets and handling dead humans and animals. Remarkably, the opening up of the Indian economy has enabled dalits to break out of their traditional low occupations and start businesses. The Dalit Indian Chamber of Commerce and Industry (DICCI) now boasts over 3,000 millionaire members. This revolution is still in its early stages, but is now unstoppable.
I had an argument in a comment thread of one of Kevin Drum's minimum wage or some such posts (sorry, I can't even find which one now to link it). Anyway, my concluding remark was that the best thing that could ever happen to the unemployed, and particularly to low-skilled workers, would be if people were to discover ways to get rich from their labor. Of course, I was met with total scorn, as if I had suggested sacrificing virgins to improve the climate.
The reason I mention this is that this disconnect seems to be at the heart of the problem of Progressivism. I am convinced that they honestly want to help low-skilled workers and the poor do better economically, but they advocate for policies that are 180-degrees askew. Most of what they wish for -- higher minimum wages, larger mandated benefits packages, more paid leave, more ability to sue employers over trivial slights -- absolutely, with near mathematical precision, raise the cost of hiring low-skill workers, making it increasingly unlikely anyone will do so. Low-skill workers get hired for one and only one reason (which is the same reason any worker gets hired): someone thinks they can profit from that labor. It is the potential for profit that is the sole reason for hiring anyone, but it is exactly that profit potential that Progressives most fear and deride.
My contention is that what drives most progressives, at a very fundamental level, is a deep conservatism. Of course, most “progressives” would freak if they were called conservative, but what I mean by conservative in this context is not donate-to-Jesse-Helms capital-C Conservative but fearful of change and uncomfortable with uncertainty conservative.
Because capitalism is based so completely on individual decision-making, because its operation is inherently chaotic, and because its rewards can’t possibly be divided equally and still be “rewards”, progressives are hugely uncomfortable with it. Ironically, though progressives want to posture at being “dynamic”, it turns out that capitalism is in fact too dynamic for them. Industries rise and fall, jobs are won and lost, recessions give way to booms. Progressives want comfort and certainty. They want to lock things down the way they are. They want to know that such and such job will be there tomorrow and next decade, and will always pay at least X amount. Which is why, in the end, progressives are all statists, because only a government with totalitarian powers can bring the order and certainty and control of individual decision-making that they crave..
Progressive elements in this country have always tried to freeze commerce, to lock this country’s economy down in its then-current patterns. Progressives in the late 19th century were terrified the American economy was shifting from agriculture to industry. They wanted to stop this, to cement in place patterns where 80-90% of Americans worked on farms. I, for one, am glad they failed, since for all of the soft glow we have in this country around our notion of the family farmer, farming was and can still be a brutal, dawn to dusk endeavor that never really rewards the work people put into it....
I am sure, if asked, most progressives would profess to desire iPod’s and cures for cancer. But they want these without the incentives that drive men to invent them, and the disruption to current markets and competitors and employees that their introduction entails. They want to end poverty without wealth creation, they want jobs without employers, they want cars without unemployment for buggy whip makers.
In her first major economic policy address of the 2016 campaign, Democratic presidential frontrunner Hillary Clinton raised questions about the effect that companies like Uber and Airbnb are having on American workers. . . .
Later in the speech, Clinton vowed to “crack down on bosses who exploit employees by misclassifying them as contractors” — a possible reference to something like the recent California Labor Commission decision that threatens to undermine Uber’s business model.
To be sure, Clinton does not want to destroy the sharing economy. She acknowledged that “these trends are real” and “none is going away.” But she may believe that, with the right application of political muscle, the new economy can be forced to conform with the antiquated blue social model — that is, the midcentury vision of steady, regulated, unionized employment with generous benefits.
As we have argued again and again, this notion is unrealistic. Like it or not, this 1950s model of economic organization is breaking down, and has been for several decades, thanks to globalization, demographic changes, technological innovation, and other trends that simply cannot be reversed. Measures like the California decision are futile and counterproductive. We should treat the emergence of a more entrepreneurial, dynamic landscape as an opportunity to be engaged with productively, not a danger to be henpecked by regulations better suited to the last century.
The invaluable Carpe Diem blog has a compendium of 18 forecasts of doom that were made on or around the first Earth Day in 1970 -- all of which turned out wrong. Here is an example:
8. Peter Gunter, a North Texas State University professor, wrote in 1970, “Demographers agree almost unanimously on the following grim timetable: by 1975 widespread famines will begin in India; these will spread by 1990 to include all of India, Pakistan, China and the Near East, Africa. By the year 2000, or conceivably sooner, South and Central America will exist under famine conditions….By the year 2000, thirty years from now, the entire world, with the exception of Western Europe, North America, and Australia, will be in famine.”
9. In January 1970, Life reported, “Scientists have solid experimental and theoretical evidence to support…the following predictions: In a decade, urban dwellers will have to wear gas masks to survive air pollution…by 1985 air pollution will have reduced the amount of sunlight reaching earth by one half….”
Participants in the global warming debate today will surely recognize the formulation of these statements as representing a consensus scientific opinion.
For those of you too young to actively follow the news in the 1970s, Mark Perry is not cherry-picking cranks. These fearful quotations are representative of what was ubiquitous in the media of that time.
My school (Kinkaid in Houston) took speech and debate very seriously and had a robust debate program even in middle school. In 1975-1976 the national debate topic was this:
Resolved: That the development and allocation of scarce world resources should be controlled by an international organization
The short answer to this proposition should realistically have been: "you have got to be f*cking kidding me." But such were the times that this was considered a serious proposal worth debating for the entire year. In fact, in doing research, it was dead-easy to build up suitcases of quotations of doom to support the affirmative; it was far, far harder finding anyone who would argue that a) the world was not going to run out of everything in a few decades and b) that markets were an appropriate vehicle for managing resources. I could fill up an hour reading different sources predicting that oil would have run out by 1990 or 2000 at the latest.
Kevin Drum Claims "We" Haven't Learned Anything from Deepwater Horizon. What you mean, "we," Kemo Sabe?'
Kevin Drum claims that "we" haven't learned anything from the Deepwater Horizon disaster (the BP oil rig that exploded five years ago in the Gulf, killing a number of people and creating a large oil spill).
What is his evidence? Has he looked at oil company drilling practices and found them unchanged since the disaster? No, he does not mention any evidence based on observed drilling practices one way or another. His sole evidence that "we" have not learned anything is that the US Government has not shut down drilling in the Gulf and has not passed any new laws.
This is almost a caricature of progressive thinking -- nothing matters except what the government does. But presumably oil companies have been influenced by the cost of the disaster on BP. So far BP has paid out about $30 billion (billion with a B) in reparations and restoration expenses and may be facing another $20 or so billion in fines based on a 2014 court decision. All this ignores the loss of the platform itself, of access to the resource below the platform, and of BP's reputation.
One would presume that the prospect of losing $50+ billion would be enough to get the attention of private companies and cause them to make changes to their procedures. I suppose it is also possible that they completely ignored this, but Drum offers no evidence one way or another. To him, anything not done by the government is irrelevant.
Brandon Morse wrote about the My Little Pony critique of Marxism and social justice warriors. I couldn't really believe it, so I had to watch (or at least skim). Check out the 25 minute mark for a taste.
And yes, I know Vonnegut intended Harrison Bergeron as a parody of the parodies of Marxist dystopias. But it reads just fine straight up. Or in particular, in the really well done short film version from several years ago called 2081. If interested, skip the songs in the My Little Pony episode above and watch 2081 instead, it is barely 20 minutes long.
I have always read Atlas Shrugged not as a character story (and thus I don't get bent out of shape by the stiff black and white characters) but as a story about the world itself changing and crashing under socialism and cronyism. As such, my favorite scene in the book is the hobo's tale of the socialist experiment on the 20th Century Motor Company.
Anyway, the final chapters of the book are full of more and more outrageous state interventions that build to a point that they are hard to believe anyone would actually ever try such things. Unbelievable, until one looks at Venezuela
Venezuelans soon may need to have their fingerprints scanned before they can buy bread and other staples. This unprecedented step was proposed after Maduro had the brilliant idea of proposing mandatory grocery fingerprinting system to combat food shortages. He said then that "the program will stop people from buying too much of a single item", but did not say when it would take effect.
Privacy concerns aside (clearly Venezuelans have bigger, well, smaller fish to fry) there was hope that this plunge into insanity would be delayed indefinitely, as the last thing Venezuela's strained economy would be able to handle is smuggling of the most basic of necessities: something such a dramatic rationing step would surely lead to.
Unfortunately for the struggling Venezuelan population, the time has arrived and as AP reported over the weekend, Venezuela "will begin installing 20,000 fingerprint scanners at supermarkets nationwide in a bid to stamp out hoarding and panic buying" as of this moment.The government has been selectively rolling out the rationing system for months at state-run supermarkets along the western border with Colombia where smuggling of price-controlled goods is a major problem.
On Saturday, President Nicolas Maduro said that seven large private retail chains had voluntarily agreed to install the scanners.
Last month the owners of several chains of supermarkets and drugstores were arrested for allegedly artificially creating long queues by not opening enough tills.
It gets better: Maduro also accused Colombian food smugglers of buying up price-controlled goods in state-run supermarkets along the border.
What a mess. An entirely predictable mess.
Noting that the United States is currently experiencing a drastic shortage of laws, America's media (example, but many others) have finally begun to chastise the recent Congress for being, as described by the Huffington Post, "pretty close" to "the least productive ever." Like fishes cast ashore flopping on the beach dying for lack of oxygen, Americans are desperately begging for more laws and for more things to be made a criminal offense, and Congress is shamefully ignoring them.
Said one man interviewed on the streets of New York, "there are barely 4000 criminal offenses outlined in the Federal code. No wonder we have so much anarchy. We need a lot more crimes and Congress is not cooperating."
A local business woman echoed these thoughts: "With only 80,000 pages in the Federal Register, I often don't know what I should be doing. Sometimes I go a quarter of an hour in my business making decisions for which there is absolutely no Federal guidance. It's criminal Congress is shirking its responsibility to tell me what to do."
Said everyone, "there ought to be a law..."
Remember the whole VA thing? It has mostly been forgotten, though we will all remember it again, or more accurately get to experience it ourselves, once the Democrats manage to get single payer passed.
People talk about government employees being motivated by "public service" but in fact very few government agencies have any tangible performance metrics linked to public service, and when they do (as in the case of the VA wait times) they just game them. At the end of the day, nothing enforces fidelity to the public good like competition and consumer choice, two things no government agency allows.
I will admit that government employees in agencies may have some interest in public welfare, but in the hierarchy of needs, the following three things dominate above any concerns for the public:
- Keeping the agency in existence
- Maintaining employment levels, and if that is achieved, increasing employment levels
- Getting more budget
But look at the VA response in this context:
- The agency remains in existence and most proposals to privatize certain parts were beaten back
- No one was fired and employment levels remain the same
- The agency was rewarded with a big bump in its budget
The VA won! Whereas a private company with that kind of negative publicity about how customers were treated would have as a minimum seen a huge revenue and market share loss, and might have faced bankruptcy, the VA was given more money.
On the free market, in short, the consumer is king, and any business firm that wants to make profits and avoid losses tries its best to serve the consumer as efficiently and at as low a cost as possible. In a government operation, in contrast, everything changes. Inherent in all government operation is a grave and fatal split between service and payment, between the providing of a service and the payment for receiving it. The government bureau does not get its income as does the private firm, from serving the consumer well or from consumer purchases of its products exceeding its costs of operation. No, the government bureau acquires its income from mulcting the long-suffering taxpayer. Its operations therefore become inefficient, and costs zoom, since government bureaus need not worry about losses or bankruptcy; they can make up their losses by additional extractions from the public till. Furthermore, the consumer, instead of being courted and wooed for his favor, becomes a mere annoyance to the government someone who is "wasting" the government's scarce resources. In government operations, the consumer is treated like an unwelcome intruder, an interference in the quiet enjoyment by the bureaucrat of his steady income.
Obama, 2008: "I taught constitutional law for ten years. I take the Constitution very seriously. The biggest problems that we're facing right now have to do with George Bush trying to bring more and more power into the executive branch and not go through Congress at all, and that's what I intend to reverse when I'm president of the United States of America." (Townhall in Lancaster, Pennsylvania, March 31, 2008).
They all suck. Every one of them. This man was the great hope of more than half the nation and look what a loser he is. We should stop talking about whether we are going to hand power to the Coke or the Pepsi party and start talking about limiting the power of these jerks.
Paul Roberts has an editorial in the LA Times that sortof, kindof mirrors my post the other day that observed that corporate stock buybacks (and investments to reduce tax rates) were likely signs of a bad investment climate. Until he starts talking about solutions
Roberts begins in a similar manner
Here's a depressing statistic: Last year, U.S. companies spent a whopping $598 billion — not to develop new technologies, open new markets or to hire new workers but to buy up their own shares. By removing shares from circulation, companies made remaining shares pricier, thus creating the impression of a healthier business without the risks of actual business activity.
Share buybacks aren't illegal, and, to be fair, they make sense when companies truly don't have something better to reinvest their profits in. But U.S. companies do have something better: They could be reinvesting in the U.S. economy in ways that spur growth and generate jobs. The fact that they're not explains a lot about the weakness of the job market and the sliding prospects of the American middle class.
I suppose I would dispute him in his implication that there is something unseemly about buybacks. They are actually a great mechanism for economic efficiency. If companies do not have good investment prospects, we WANT them returning the cash to their shareholders, rather than doing things like the boneheaded diversification of the 1960's and 1970's (that made investment bankers so rich unwinding in the 1980's). That way, individuals can redeploy capital in more promising places. The lack of investment opportunities and return of capital to shareholders is a bad sign for investment prospects of large companies, but it is not at all a bad sign for the ethics of corporate management. I would argue this is the most ethical possible thing for corporations to do if they honestly do not feel they have a productive use for their cash.
The bigger story here is what might be called the Great Narrowing of the Corporate Mind: the growing willingness by business to pursue an agenda separate from, and even entirely at odds with, the broader goals of society. We saw this before the 2008 crash, when top U.S. banks used dodgy financial tools to score quick profits while shoving the risk onto taxpayers. We're seeing it again as U.S. companies reincorporate overseas to avoid paying U.S. taxes. This narrow mind-set is also evident in the way companies slash spending, not just on staffing but also on socially essential activities, such as long-term research or maintenance, to hit earnings targets and to keep share prices up....
It wasn't always like this. From the 1920s to the early 1970s, American business was far more in step with the larger social enterprise. Corporations were just as hungry for profits, but more of those profits were reinvested in new plants, new technologies and new, better-trained workers — "assets" whose returns benefited not only corporations but the broader society.
Yes, much of that corporate oblige was coerced: After the excesses of the Roaring '20s, regulators kept a rein on business, even as powerful unions exploited tight labor markets to win concessions. But companies also saw that investing in workers, communities and other stakeholders was key to sustainable profits. That such enlightened corporate self-interest corresponds with the long postwar period of broadly based prosperity is hardly a coincidence....
Without a more socially engaged corporate culture, the U.S. economy will continue to lose the capacity to generate long-term prosperity, compete globally or solve complicated economic challenges, such as climate change. We need to restore a broader sense of the corporation as a social citizen — no less focused on profit but far more cognizant of the fact that, in an interconnected economic world, there is no such thing as narrow self-interest.
There is so much crap here it is hard to know where to start. Since I work for a living rather than write editorials, I will just pound out some quick thoughts
- As is so typical with Leftist nostalgia for the 1950's, his view is entirely focused on large corporations. But the innovation model has changed in a lot of industries. Small companies and entrepreneurs are doing innovation, then get bought by large corporations with access to markets and capital needed to expanded (the drug industry increasingly works this way). Corporate buybacks return capital to the hands of individuals and potential entrepreneurs and funding angels.
- But the Left is working hard to kill innovation and entrepreneurship and solidify the position of large corporations. Large corporations increasingly have the scale to manage regulatory compliance that chokes smaller companies. And for areas that Mr. Roberts mentions, like climate and green energy, the government manages that whole sector as a crony enterprise, giving capital to political donors and people who can afford lobbyists and ignoring everyone else. "Socially engaged" investing is nearly always managed like this, as cronyism where the politician you held a fundraiser for is more important than your technology or business plan. *cough* Solyndra *cough*
- One enormous reason that companies are buying back their own stock is the Federal Reserve's quantitative easing program, which I would bet anything Mr. Roberts fully supports. This program concentrates capital in the hands of a few large banks and corporations, and encourages low-risk financial investments of capital over operational investments
- All those "Social engagement" folks on the Left seem to spend more time stopping investment rather than encouraging it. They fight tooth and nail the single most productive investment area in the US right now (fracking), they fight new construction in many places (e.g. most all places in California), they fight for workers in entrenched competitors against new business models like Lyft and Uber, they fight every urban Wal-Mart that attempts to get built. I would argue one large reason for the lack of operational investment is that the Left blocks and/or makes more expensive the investments corporations want to make, offering for alternatives only crap like green energy which doesn't work as an investment unless it is subsidized and you can't count on the subsidies unless you held an Obama fundraiser lately.
- If corporations make bad investments and tick off their workers and do all the things he suggests, they get run out of business. And incredibly, he even acknowledges this: "And here is the paradox. Companies are so obsessed with short-term performance that they are undermining their long-term self-interest. Employees have been demoralized by constant cutbacks. Investment in equipment upgrades, worker training and research — all essential to long-term profitability and competitiveness — is falling." So fine, the problem corrects itself over time.
- He even acknowledges that corporations that are following his preferred investment strategy exist and are prospering -- he points to Google. Google is a great example of exactly what he is missing. Search engines and Internet functionality that Google thrives on were not developed in corporate R&D departments. I don't get how he can write so fondly about Google and simultaneously write that he wishes, say, US Steel, were investing more in R&D. I would think having dinosaur corporations eschew trying to invest in these new areas, and having them return the money to their shareholders, and then having those individuals invest the money in startups like Google would be a good thing. But like many Leftists he just can't get around the 1950's model. At the end of the day, entrepreneurship is too chaotic -- the Left wants large corporations that it can easily see and control.
Michael Munger has one of the most useful articles I have read in a very long time. As illustrated by the Venn diagram I posted a while back showing the heavy overlap between the Tea Party and Occupy Wall Street, we have much more concurrence in the diagnosis of problems than in the prescriptions for solutions. Munger gets at the heart of why many people go wrong in these prescriptions
When I am discussing the state with my colleagues at Duke, it's not long before I realize that, for them, almost without exception, the State is a unicorn. I come from the Public Choice tradition, which tends to emphasize consequentialist arguments more than natural rights, and so the distinction is particularly important for me. My friends generally dislike politicians, find democracy messy and distasteful, and object to the brutality and coercive excesses of foreign wars, the war on drugs, and the spying of the NSA.
But their solution is, without exception, to expand the power of "the State." That seems literally insane to me—a non sequitur of such monstrous proportions that I had trouble taking it seriously.
Then I realized that they want a kind of unicorn, a State that has the properties, motivations, knowledge, and abilities that they can imagine for it. When I finally realized that we were talking past each other, I felt kind of dumb. Because essentially this very realization—that people who favor expansion of government imagine a State different from the one possible in the physical world—has been a core part of the argument made by classical liberals for at least three hundred years....
He follows with this useful test
But they may not immediately see why "the State" that they can imagine is a unicorn. So, to help them, I propose what I (immodestly) call "the Munger test."
- Go ahead, make your argument for what you want the State to do, and what you want the State to be in charge of.
- Then, go back and look at your statement. Everywhere you said "the State" delete that phrase and replace it with "politicians I actually know, running in electoral systems with voters and interest groups that actually exist."
- If you still believe your statement, then we have something to talk about.
This leads to loads of fun, believe me. When someone says, "The State should be in charge of hundreds of thousands of heavily armed troops, with the authority to use that coercive power," ask them to take out the unicorn ("The State") and replace it with George W. Bush. How do you like it now?
If someone says, "The State should be able to choose subsidies and taxes to change the incentives people face in deciding what energy sources to use," ask them to remove "The State" and replace it with "senators from states that rely on coal, oil, or corn ethanol for income." Still sound like a good idea?
How about, "The State should make rules for regulating sales of high performance electric cars." Now, the switch: "Representatives from Michigan and other states that produce parts for internal combustion engines should be in charge of regulating Tesla Motors." Gosh, maybe not …
I spent most of the Bush years asking Conservatives a similar question -- you may be fine when "your guy" has this power, but would you be happy if Al Gore or Nancy Pelosi had it. And of course I have spent most of the Obama years asking Liberals whether they would be comfortable if George Bush or Rick Perry had similar powers to what Obama has claimed for himself. Because they will.
I said something similar here, though less elegantly. I concluded in part:
Technocratic idealists ALWAYS lose control of the game. It may feel good at first when the trains start running on time, but the technocrats are soon swept away by the thugs, and the patina of idealism is swept away, and only fascism is left. Interestingly, the technocrats always cry "our only mistake was letting those other guys take control". No, the mistake was accepting the right to use force on another man. Everything after that was inevitable.
Four things I would do to help African Americans
- Legalize drugs. This would reduce the rents that attract the poor into dealing, would keep people out of jail, and reduce a lot of violent crime associated with narcotics traffic that kills investment and business creation in black neighborhoods. No its not a good thing to have people addicted to strong narcotics but it is worse to be putting them in jail and having them shooting at each other.
- Bring real accountability to police forces. When I see stories of folks absurdly abused by police forces, I can almost always guess the race of the victim in advance
- Eliminate the minimum wage (compromise: eliminate the minimum wage before 25). Originally passed for racist reasons, it still (if unintentionally) keeps young blacks from entering the work force. Dropping out of high school does not hurt employment because kids learn job skills in high school (they don't); it hurts because finishing high school is a marker of responsibility and other desirable job traits. Kids who drop out can overcome this, but only if they get a job where they can demonstrate these traits. No one is going to take that chance at $10 or $15 an hour**
- Voucherize education. It's not the middle class that is primarily the victim of awful public schools, it is poor blacks. Middle and upper class parents have the political pull to get accountability. It is no coincidence the best public schools are generally in middle and upper class neighborhoods. Programs such as the one in DC that used to allow urban poor to escape failing schools need to be promoted.
** This might not be enough. One of the main reasons we do not hire inexperienced youth, regardless of wage rates, is that the legal system has put the entire liability for any boneheaded thing an employee does on the employer. Even if the employee is wildly breaking clear rules and is terminated immediately for his or her actions, the employer can be liable. The cost of a bad hire is skyrocketing (at the same time various groups are trying to reign in employers' ability to do due diligence on prospective employees). I am not positive that in today's legal environment I would take free labor from an untried high school dropout, but I certainly am not going to do it at $10 an hour when there are thousands of experienced people who will work for that. Some sort of legal safe harbor for the actions of untried workers might be necessary.
What Happens When You Abandon Prices As A Supply-Demand Matching Tool? California Tries Totalitarianism
Mostly, we use prices to match supply and demand. When supplies of some item are short, rising prices provide incentives for conservation and substitution, as well as the creation of creative new sources of supply.
When we abandon prices, often out of some sort of political opportunism, chaos usually results.
California, for example, has never had the political will to allow water prices to rise when water is short. They cite all kinds of awful things that would happen to people if water prices were higher, but then proceed instead with all sorts of authoritarian rationing initiatives that strike me as far worse than any downsides of higher prices.
In this particular drought, California has taken a page from Nazi Germany block watches to try to ration water
So, faced with apparent indifference to stern warnings from state leaders and media alarms, cities across California have encouraged residents to tattle on their neighbors for wasting water — and the residents have responded in droves. Sacramento, for instance, has received more than 6,000 reports of water waste this year, up twentyfold from last year...
Some drought-conscious Californians have turned not only to tattling, but also to an age-old strategy to persuade friends and neighbors to cut back: shaming. On Twitter, radio shows and elsewhere, Californians are indulging in such sports as shower-shaming (trying to embarrass a neighbor or relative who takes a leisurely wash), car-wash-shaming and lawn-shaming.
“Is washing the sidewalk with water a good idea in a drought @sfgov?” Sahand Mirzahossein, a 32-year-old management consultant, posted on Twitter, along with a picture of a San Francisco city employee cleaning the sidewalk with a hose. (He said he hoped a city official would respond to his post, but he never heard back.)
Drought-shaming may sound like a petty, vindictive strategy, and officials at water agencies all denied wanting to shame anyone, preferring to call it “education” or “competition.” But there are signs that pitting residents against one another can pay dividends.
All this to get, in the best case, a 10% savings. How much would water prices have to rise to cut demand 10% and avoid all this creepy Orwellian crap?
One of the features of Nazi and communist block watch systems was that certain people would instrumentalize the system to use it to pay back old grudges. The same thing is apparently happening in California
In Santa Cruz, dozens of complaints have come from just a few residents, who seem to be trying to use the city’s tight water restrictions to indulge old grudges.
“You get people who hate their neighbors and chronically report them in hopes they’ll be thrown in prison for wasting water,” said Eileen Cross, Santa Cruz’s water conservation manager. People claim water-waste innocence, she said, and ask: “Was that my neighbor? She’s been after me ever since I got that dog.”
Ms. Franzi said that in her Sacramento neighborhood, people were now looking askance at one another, wondering who reported them for wasting water.
“There’s a lot of suspiciousness,” Ms. Franzi said. “It’s a little uncomfortable at this point.” She pointed out that she and her husband have proudly replaced their green lawn with drought-resistant plants, and even cut back showers to once every few days.
Update: Seriously, for those that are unclear -- this is the alternative to capitalism. This is the Progressive alternative to markets. Sure, bad things happen in a free society with free markets, but how can anyone believe that this is a better alternative?