Posts tagged ‘Laissez Faire’

Laissez Faire and the Potato Famine

Via Cafe Hayek

As explained by historian Stephen Davies, after defeating James II in 1690, protestants subjected Irish Catholics to harsh restrictions on land ownership and leasing.  Most of Ireland’s people were thus forced to farm plots of land that were inefficiently small and on which they had no incentives to make long-term improvements.  As a consequence, Irish agricultural productivity stagnated, and, in turn, the high-yield, highly nutritious, and labor-intensive potato became the dominant crop.  In combination with interventions that obstructed Catholics from engaging in modern commercial activities – interventions that kept large numbers of Irish practicing subsistence agriculture well into the 19th century – this over-dependence on the potato spelled doom when in 1845 that crop became infected with the fungus Phytophthora infestans.

To make matters worse, Britain’s high-tariff “corn laws” discouraged the importation of grains that would have lessened the starvation.  Indeed, one of Britain’s most famous moves toward laissez faire – the 1846 repeal of the corn laws – was partly a response to the famine in Ireland.

Had laissez faire in fact reigned in Ireland in the mid-19th century, the potato famine almost certainly would never had happened.

Upside-Down World

The likely Republican presidential nominee is well to the left of the last Democratic president on economic issues.  And George McGovern sounds Laissez Faire:

Under the guise of protecting us from ourselves, the
right and the left are becoming ever more aggressive in regulating
behavior. Much paternalist scrutiny has recently centered on personal
economics...

Since leaving office I've written about public
policy from a new perspective: outside looking in. I've come to realize
that protecting freedom of choice in our everyday lives is essential to
maintaining a healthy civil society.

Why do we think we are
helping adult consumers by taking away their options? We don't take
away cars because we don't like some people speeding. We allow state
lotteries despite knowing some people are betting their grocery money.
Everyone is exposed to economic risks of some kind. But we don't
operate mindlessly in trying to smooth out every theoretical wrinkle in
life.

The nature of freedom of choice is that some people will
misuse their responsibility and hurt themselves in the process. We
should do our best to educate them, but without diminishing choice for
everyone else.

Really, its that George McGovern.

And David Mamet questions the power of government:

And I began to question my hatred for "the Corporations" - the
hatred of which, I found, was but the flip side of my hunger for those
goods and services they provide and without which we could not live.

And I began to question my distrust of the "Bad, Bad Military"
of my youth, which, I saw, was then and is now made up of those men and
women who actually risk their lives to protect the rest of us from a
very hostile world"¦

But if the government is not to intervene, how will we, mere human beings, work it all out?

I wondered and read, and it occurred to me that I knew the
answer, and here it is: We just seem to. How do I know? From
experience"¦

Strand unacquainted bus travelers in the middle of the night,
and what do you get? A lot of bad drama, and a shake-and-bake Mayflower
Compact. Each, instantly, adds what he or she can to the solution. Why?
Each wants, and in fact needs, to contribute - to throw into the pot
what gifts each has in order to achieve the overall goal, as well as
status in the new-formed community. And so they work it out.

And so I, like many of the liberal congregation, began, teeth
grinding, to attempt to do so. And in doing so, I recognized that I
held those two views of America (politics, government, corporations,
the military). One was of a state where everything was magically wrong
and must be immediately corrected at any cost; and the other - the
world in which I actually functioned day to day - was made up of
people, most of whom were reasonably trying to maximize their comfort
by getting along with each other (in the workplace, the marketplace,
the jury room, on the freeway, even at the school-board meeting).

And I realized that the time had come for me to avow my
participation in that America in which I chose to live, and that that
country was not a schoolroom teaching values, but a marketplace"¦

The Cost of Zoning

After years of getting grief, mostly from the left, for its eschewing of zoning and land-use ordinances that more "enlightened" places like San Francisco and Portland are so famous for, residents of Houston are reaping the benefits of their historical Laissez Faire approach:

Houston's gains are nothing like those seen in the past decade in
the Northeast and California, but that may be the secret to Houston's
success and the reason a bubble is unlikely to develop here. Land here
is abundant, and the city has some of the least-restrictive land-use
and construction rules in the nation. Those factors help supply to keep
pace with demand and keep prices within reach of a broad range of
potential buyers.

"We haven't had a bad year in the past decade," says Lorraine
Abercrombie, chairwoman of the local Realtors group and marketing
director for Greenwood King Properties.

Houston's model is in stark contrast to cities such as Boston and
San Francisco, which have strict zoning, exacting building codes and
laws governing historical preservation. Some economists, including
Edward Glaeser of Harvard University, say excessive regulation in such
cities has slowed construction to the point where demand has
outstripped supply, fueling a run-up in home prices.

In the once-sizzling markets where home prices are falling, housing
costs are double, triple or even quadruple those of Houston. The
danger, says Dr. Glaeser, is such places have priced out today's highly
skilled "knowledge workers," forcing them to live in a more affordable
locale where their contribution to the economy might not be as great.
"These are places where only the elite can live," Dr. Glaeser says.

This issue is one of those great examples of the statist game to enlarge government.  Step 1:  Progressives argue for having government restrict land use and implement tight zoning.  Step 2:  Housing prices skyrocket, enriching the elite and making it tough for ordinary workers to own housing.  Step 3:  Progressives decry that lack of affordable housing represents a 'market failure' that must be addressed with more regulation.  For example, builders in the SF Bay Area are required to sell X number of below market rate 'affordable' homes for every Y homes they sell at market rates.  Step 4:  Builders costs go up from the new regulations, further reducing supply and increasing prices.  And the cycle just repeats, as bad outcomes from government regulation are blamed on free markets, and used to justify more regulation.

Here is a trick to try -- every time you see the word "sprawl" in an article, replace it with "affordable housing."  It makes for interesting reading.

Hat tip to Tom Kirkendall, who runs a great blog in Houston.

A Final Note on "Don't Know Much About History"

In an earlier post, I observed that my audio CD of the bestselling book "Don't Know Much About History" struck me as extremely odd, focusing on only the lowest points in American history.  I can report after finishing the CD that it stayed on this path to the end.  After the Cuban Missile Crisis we had conspiracy theories of JFKs death, then the Mai Lai massacre, then Watergate, then Iran Contra, then Monica Lewinsky.  Yes, the last 40 years were summed up in total as Mai Lai - Watergate - Iran Contra - Lewinsky and essentially nothing else.  Wow, what a view of history!  As a libertarian, I am happy to showcase the foibles of government, but this seems like a crazy loss of perspective even to me.

In addition, bits of the history were just terrible.  For example, he said that the Puritans who came to America were much like a cult today and treated as such.  That is a lame simplification of history.  Sure, one can argue that today's religions were yesterday's cults, but it is silly to say that the Puritans were treated poorly in England for the same reasons a cult might be today.  This completely ignores the whole reality of having a state religion in England at the time of the Puritans.  A state religion trying to purge itself of dissent is a really different dynamic than a modern cult getting shunned by mainstream society  (except perhaps when Janet Reno controls some tanks).  This distinction is also important because avoiding state religions is an important foundation block of our government, and its prohibition is buried in that arcane and little discussed thing called, uh, the First Amendment. 

It's clear the author is not a big fan of capitalism, and I would generally not even comment on such a thing because it is so common in academia.  I managed to mostly ignore numerous off-the-cuff quips he makes about evil corporations and greed and the assumption that any action by a rich person had to be out of a desire to repress the masses rather than from principle.  However, his bias creates some really bad history in at least one instance.  In discussing Hoover and the depression, he really lays into Hoover for how block-headed and absurd Hoover was for not initiating massive government welfare programs earlier in his administration.  I mean, he absolutely hammers Hoover for being a total cretin, and the author laughs at various Laissez-Faire speeches by HH. 

But this is a stunning loss of context for a historian.  While government handouts to people who are out of work may seem a no-brainer today, it was absolutely unprecedented at the time.  It had never been done.  And, nowhere in the Constitution, whose 10th Amendment specifically says that Congress only has the specific powers enumerated in the Constitution, does it say Congress has the power to tax one person and give the proceeds as a handout to another to relieve economic distress.  In fact, it was enough of a Constitutional question mark that the Supreme Court would later rule unconstitutional most of FDR's new deal, at least until FDR could repack the Court with his guys.  HH had good reason, beyond just his principles, to believe that he would be breaking the law and violating the Constitution to do as the author suggests.  But nothing of this context is mentioned.  The author only portrays Hoover as an idiot for not being interventionist enough. 

In fact, the author leaves out a point I would tend to make first -- that the Depression would have been much better off if Hoover had in fact been truly Laissez Faire.  Unfortunately, his tightening of money supply in the face of a depression and liquidity crisis via the relatively new Federal Reserve, his acquiescence to the Hawley Smoot tariffs, and his tax increases to close the budget deficit all contributed far more to sending the train off the rails than any intervention could have ameliorated.