Feeds:
Posts
Comments

Archive for the ‘Argentina’ Category

Argentina is a sobering example of how statist policies can turn a rich nation into a poor nation.

I’m not exaggerating. After World War II, Argentina was one of the world’s 10-richest nations.

But then Juan Peron took power and initiated Argentina’s slide toward big government, which eroded the nation’s competitiveness and hampered growth.

Even the Washington Post‘s Bureau Chief shares my assessment.

Perón’s rise marked the start of the country’s long, slow slide. …big-government populism squandered Argentine’s fortunes on nationalized railroads and ports. Perón’s pro-labor policies cultivated devout working-class followers but also laid the groundwork for the conversion of his party into an entity that would mirror a corrupt union. …The country battled bouts of damaging inflation in 1955, 1962, 1966 and 1974. …in the 1980s, Argentina saw a bonanza of public-sector hiring, bloated budgets… Cristina Fernández de Kirchner, the Perónist ex-president, took the helm a decade ago, ushering in a new era of fudged financial data and populism.

Thanks to endless bouts of bad policy, the nation suffers from perpetual crisis.

…a country stuck in what has now become its natural state: crisis. As if living a deja vu, I flipped on the TV to once again hear Argentine newscasters fretting about bailouts, the diving peso and fears of default. Beggars — even more than before — panhandled on the same corner by an imposing church on Santa Fe Avenue. As others had done years before, stores advertised going-out-of-business sales. …Argentina is doomed to a repeating history of financial emergencies. You can almost set your watch to it, and, worryingly, the intervals between implosions are growing ever shorter.

If we focus on policy this century, there was plenty of bad policy under the previous Peronist-oriented Presidents.

And since government amassed so much power over the economy, nobody should be surprised by this BBC report about rampant corruption.

More than a dozen people have been arrested in Argentina after copies of notebooks were found detailing what seem to be illicit political payments. They were kept by Oscar Centeno, who was employed as a driver by a public works official and describe delivering bags of cash. The notebooks cover from 2003 to 2015, when Cristina Fernández and her late husband Néstor Kirchner were president. …She has previously said she is being politically persecuted by the current government, who want to distract people from the country’s economic problems. …the payments total around US$56m (£43m), but Judge Claudio Bonadio says the corruption network could reached up to US$160m.

The Economist reports that the current president, Mauricio Macri, is imposing his share of bad policies, including price controls.

The measures are a change of course for a president who sought to undo the effects of more than a decade of populist government. The most important one is a…revival of a price-control mechanism in force under the two Peronist presidents who preceded him, Néstor Kirchner and his wife, Cristina Fernández de Kirchner. In Mr Macri’s version, which he, like the Kirchners, calls “precios cuidados” (“curated prices”), the price of 64 consumer items, from milk to jam, will be frozen for six months (ie, until the eve of the election). An “army” of inspectors, under the direction of the production ministry, will enforce supermarkets’ adherence to the freeze.

Price controls are spectacularly misguided.

Politicians cause inflation by having the central bank create too much money. They then act as if the result rise in prices is the fault of “greedy businesses” and impose controls.

All of which never ends well (see Venezuela, for instance).

But Macri is also adopting other bad policies.

The government has also opened new credit lines for pensioners and families with children and expanded a plan to build new homes with state financing.

He obviously hopes his short-sighted policies will enable him to prevail in the upcoming elections.

And maybe he will if his main opponent is similarly bad.

But at least one candidate supports pro-market reforms.

Argentine economist José Luis Espert once described President Mauricio Macri’s political movement as “kirchnerism with good manners,”… Now a presidential candidate himself, Espert wants to make government a lot less polite. “We need to lay off approximately 1.5 million public employees,” Espert, the head of the newly-formed Libertarian party, told AQ in an exclusive interview. “What I propose is a complete U-turn.” …The economist claims that he is the only candidate who can actually turn around what he describes as “Argentina’s century-long failure, marked by economic populism.” …“We need to abandon our model of import substitution and of running budget deficits, and revise our labor laws, which are similar to those during Italian fascism. We need to have free trade and a state that can pay for itself through reasonable taxes,” added Espert, who on Feb. 2 released a book called The Complicit Society, in which he describes “the economic myths that led Argentina to decadency.”

Wouldn’t it be a great ending to the story if Argentina become another Chile?

My fingers certainly will be crossed (as they are currently for Brazil).

Ironically, even though the International Monetary Fund has subsidized bad policy in Argentina with periodic bailouts, some of the economists who work at the IMF actually understand what’s plaguing the country.

Here are some excerpts from their study, starting with a description of how big government is stifling prosperity.

Argentina’s economic fortune has been on a declining path for a long time. Argentina’s per capita output relative to that of advanced economies nearly halved over the past 50 years. …yearly labor productivity growth has been close to zero on average since 1980… Argentina’s regulatory and administrative burden on businesses is one of the heaviest among EMs… Argentina has the worst overall PMR index among 42 OECD and non-OECD countries, owing to high barriers to entrepreneurship (including complex regulatory procedures which impede firm entry/expansion, and barriers in network sectors), …high trade and other external barriers, and a significant involvement of the state in the economy, both through state-owned enterprises and price controls. …Stringent labor market regulations, such as high firing costs and restrictions on temporary employment, hamper efficient allocation of resources in the economy, discourage investment, and lead to labor underutilization and informality… High tax burden, especially on labor, have similar adverse effects on investment, labor utilization (particularly formal employment), and overall competitiveness of the economy.

Here’s a chart showing how Argentina is de-converging, which is remarkably depressing since conventional theory tells us that poor nations should be catching up with rich nations.

Here are the main findings from the study.

The main objective of this paper is to…assess the role of the reforms in boosting long-term GDP growth through their impact on (i) capital accumulation, (ii) labor utilization, and (iii) total factor productivity or efficiency. …The paper finds that structural reforms can have significant impact on long-term GDP growth through all three supply-side channels. …An ambitious reform effort, which were to improve business regulatory environment (closing half the gap with Australia and New Zealand over two decades), would add 1–1½ percent to average annual growth of GDP. Reducing trade tariffs and payroll taxes (closing half the gap with Australia and New Zealand) could each boost average annual real GDP growth by about 0.1 percent.

Keep in mind, by the way, that even small increments of sustained growth make a huge difference to a nation’s long-run prosperity.

Here’s a table showing the IMF’s suggested reforms.

I actually agree with almost everything on the list.

The only mistake is calling for aggressive anti-trust laws. Yet history teaches us that such laws wind up being tools to protect incumbent companies.

Moreover, the best way to fight monopolies is to have completely open entry to the marketplace.

But I don’t want to quibble. By IMF standards, that list of proposed policies is excellent.

P.S. Pope Francis inexplicably wants to export the failed Argentine model to the rest of the world. Not surprisingly, I think Thomas Sowell and Walter Williams have a better approach.

Read Full Post »

Move over, Crazy Bernie, you’re no longer the left’s heartthrob. You’ve been replaced by Alexandria Ocasio-Cortez, an out-of-the-closet socialist from New York City who will enter Congress next January after beating a member of the Democratic leadership.

Referring to the boomlet she’s created, I’ve already written about why young people are deluded if they think bigger government is the answer, and I also pointed out that Norway is hardly a role model for “Democratic socialism.”

And in this brief snippet, I also pointed out she’s wrong to think that you can reduce corporate cronyism by giving government even more power over the economy.

But there’s a much bigger, more important, point to make.

Ms. Ocasio-Cortez wants a radical expansion in the size of the federal government. But, as noted in the Washington Examiner, she has no idea how to pay for it.

Consider…how she responded this week when she was asked on “The Daily Show” to explain how she intends to pay for her Democratic Socialism-friendly policies, including her Medicare for All agenda. “If people pay their fair share,” Ocasio-Cortez responded, “if corporations paid — if we reverse the tax bill, raised our corporate tax rate to 28 percent … if we do those two things and also close some of those loopholes, that’s $2 trillion right there. That’s $2 trillion in ten years.” She should probably confer with Democratic Socialist-in-arms Sen. Bernie Sanders, I-Vt., whose most optimistic projections ($1.38 trillion per year) place the cost of Medicare for All at roughly $14 trillion over a ten-year period. Two trillion in ten years obviously puts Ocasio-Cortez a long way away from realistically financing a Medicare for All program, which is why she also proposes carbon taxes. How much she expects to raise from this tax she didn’t say.

To be fair, Bernie Sanders also didn’t have a good answer when asked how he would pay for all the handouts he advocated.

To help her out, some folks on the left have suggested alternative ways of answering the question about financing.

I used to play basketball with Chris Hayes of MSNBC. He’s a very good player (far better than me, though that’s a low bar to clear), but I don’t think he scores many points with this answer.

Indeed, Professor Glenn Reynolds of the University of Tennessee Law School required only seven words to point out the essential flaw in Hayes’ approach.

Simply stated, there’s no guarantee that a rich country will always stay rich.

I wrote earlier this month about the importance of long-run economic growth and pointed out that the United States would be almost as poor as Mexico today if growth was just one-percentage point less every year starting in 1895.

That was just a hypothetical exercise.

There are some very sobering real-world examples. For instance, Nima Sanandaji pointed out this his country of Sweden used to be the world’s 4th-richest nation. But it has slipped in the rankings ever since the welfare state was imposed.

Venezuela is another case study, as Glenn Reynolds noted.

Indeed, according to NationMaster, it was the world’s 4th-richest country, based on per-capita GDP, in 1950.

For what it’s worth, I’m not familiar with this source, so I’m not sure I trust the numbers. Or maybe Venezuela ranked artificially high because of oil production.

But even if one uses the Maddison database, Venezuela was ranked about #30 in 1950, which is still impressive.

Today, of course, Venezuela is ranked much lower. Decades of bad policy have led to decades of sub-par economic performance. And as Venezuela stagnated, other nations become richer.

So Glenn’s point hits the nail on the head. A relatively rich nation became a relatively poor nation. Why? Because it adopted the statist policies favored by Bernie Sanders and Alexandria Ocasio-Cortez.

I want to conclude, though, with an even better example.

More than seven years ago, I pointed out that Argentina used to be one of the world’s richest nations, ranking as high as #10 in the 1930s and 1940s (see chart to right).

Sadly, decades of Peronist policies exacted a heavy toll, which dropped Argentina to about #45 in 2008.

Well, I just checked the latest Maddison numbers and Argentina is now down to #62. I was too lazy to re-crunch all the numbers, so you’ll have to be satisfied with modifications to my 2011 chart.

The reverse is true as well. There are many nations that used to be poor, but now are rich thanks to the right kind of policies.

The bottom line is that no country is destined to be rich and no country is doomed to poverty. It’s simply a question of whether they follow the right recipe for growth and prosperity.

Read Full Post »

Way back in 2009, I narrated a video explaining that people worry too much about deficits and debt. Red ink isn’t desirable, to be sure, but I pointed out that the real problem is government spending.

And the bottom line is that most types of government spending are bad for an economy, regardless of whether they are financed by taxes or borrowing.

It is possible, of course, for a nation to have a debt crisis. But keep in mind that this simply means a government has accumulated so much debt that investors no longer trust that they will receive payments on government bonds.

That’s not a good outcome, but replacing debt-financed spending with tax-financed spending is like jumping out of the frying pan and into the fire. Or the fire into the frying pan, if you prefer. In either case, politicians are ignoring the real problem.

Greece is a cautionary example. Thanks to a period of overspending, Greek politicians drove the country into a debt crisis. But this dark cloud had a silver lining. The good news (at least relatively speaking) is that the government no longer could borrow from the private sector to finance more spending.

But the bad news is that Greek politicians subsequently hammered the economy with huge tax increases in hopes of propping up the country’s bloated welfare state. And the “troika” made a bad situation worse with bailout funds (mostly to protect big banks that unwisely lent money to Greek politicians, but that’s a separate story).

In other words, Greece got in trouble because of too much government spending and it remains in trouble because of too much government spending. As is the case for many other European nations.

And I fear the United States is slowly but surely heading in that direction. I elaborate about the problem of government spending – and the concomitant symptom of red ink – in this interview with the Mises Institute.

For all intents and purposes, I’m trying to convince people that deficits and debt are bad, but they’re bad mostly because they are a sign that government is too big. Sort of like a brain tumor being the real problem and headaches being a warning sign.

I feel like Goldilocks on this issue. Except instead of porridge that is too hot or too cold, I deal with people on both sides who think red ink is either wonderful or terrible.

For an example of the former group, here’s some of what Stephanie Kelton wrote for the New York Times last October.

…bigger deficits wouldn’t wreck the nation’s finances. …Lawmakers are obsessed with avoiding an increase in the deficit. …It’s also holding us back. Politicians of both parties should stop using the deficit as a guide to public policy. Instead, they should be advancing legislation aimed at raising living standards and delivering…long-term prosperity.

Hard to disagree with the above excerpt.

But here’s the part I don’t like. She’s a believer in the perpetual motion machine of Keynesian economics. She thinks deficits are actually good for the economy and she wants to use debt to finance an ever-larger burden of government spending.

Government spending adds new money to the economy, and taxes take some of that money out again. …we should think of the government’s spending as self-financing since it pays its bills by sending new money into the economy. …the deficit itself could be deployed as a potent weapon in the fights against inequality, poverty and economic stagnation.

Ugh.

Now let’s check out the view of the so-called deficit hawks who think red ink is an abomination.

Here are some passages from a Hill report on the battle over last year’s tax plan.

A handful of GOP deficit hawks are worried that their party’s tax plan could add trillions to the deficit, deepening a debt crisis for future generations. …The tax plan could cost the government $1.5 trillion in revenue over the next decade… Sen. Bob Corker (R-Tenn.), who recently announced his retirement at the end of this Congress, has warned he’ll oppose the tax plan if it adds to the deficit. …In a separate interview, he told The New York Times that the debt is “the greatest threat to our nation,” more dangerous than the Islamic State in Iraq and Syria, or North Korea.

Ugh, again.

The threat isn’t the red ink. The real danger is an ever-increasing burden of government spending, driven by entitlements.

Besides, the GOP tax bill actually is a long-run tax increase!

Let’s close with a video on the topic from Marginal Revolution. It has too much Keynesianism in it for my tastes, but the discussion of Argentina’s default is useful for those who wonder about whether the United States is going to have a debt meltdown at some point.

P.S. I don’t agree with Keynesians and I don’t agree with the self-styled deficit hawks. But I can appreciate that both groups have a consistent approach to public finance. What really galls me are the statist hypocrites who are cheerleaders for debt when there are proposals to increase government spending, but then do a back flip and pretend that debt is terrible and must be reduced when tax increases are being discussed.

Read Full Post »

Since I called Trump a big-government Republican during the 2016 campaign and just condemned his capitulation to a spendaholic budget deal, it goes without saying that I’m not a huge fan of the President.

Heck, I also recently criticized his protectionism, warning that additional barriers to trade could offset the pro-growth effect of lower tax rates.

But I like to think I’m fair in my criticisms. I stay away from the personal stuff (other than for humor purposes) and and simply focus on whether liberty is increasing or decreasing.

Today, though, I want to quasi-defend Trump because a professor from the University of Richmond wrote a really strange column for the Washington Post with a very bizarre assertion about Juan Perón, the populist post-World War II president of Argentina.

It’s en vogue for enraged liberals to compare Trumpism to Argentine Peronism, wielding the analogy as a warning about the potential apocalypse that they fear is about to engulf us. …Like so many familiar historical cliches, however, this one is incomplete, if not downright wrong.

The professor who wrote the piece, Ernesto Semán, wants us to believe Perón is someone to admire, sort of the Argentine version of Bernie Sanders.

…the core of Peronism was a vision that is the exact opposite of Trumpism. Peronism led a process of expanding economic equality, collective organization and political enfranchisement. …Juan Perón presided over a process of massive wealth redistribution on behalf of the emerging working classes. …his government increased its intervention in the economy and provided…free public health care and education for everyone, as well as a wide array of union-managed social services. Peronism enacted strong regulations on private capital… Argentina’s social transformations resembled in some ways those that took place in the United States during the New Deal. Perón certainly thought so…in 1946 quoted entire paragraphs from President Franklin Roosevelt’s second inaugural address.

And he says that today’s Democrats should embrace Perón’s policies.

…comparison of Trumpism to Peronism…ignores how in fundamental ways the two are polar opposites… Instead of fearing Latin American populism, …Democrats should look to it as offering a potential path forward for a more equal and fair country.

Wow. This isn’t quite as bizarre as arguing that Venezuela should be a role model (looking at you, Bernie Sanders, Joe Stiglitz, and others), but it’s close.

Here’s everything you need to know about Peronism, from a 2014 article in the Economist.

The country ranked among the ten richest in the world…its standing as one of the world’s most vibrant economies is a distant memory… Its income per head is now 43% of those same 16 rich economies… As the urban, working-class population swelled, so did the constituency susceptible to Perón’s promise to support industry and strengthen workers’ rights.

Takes a look at this chart from the article showing Argentina’s per-capita GDP relative to other nations. As you can see, the country used to be much richer than Brazil and considerably richer than Japan. And all through the first half of the 20th century, Argentina was not that far behind the United States and other wealthy nations. But then look at the lines starting after Perón came to power in the late 1940s.

In other words, Peronist policies reduced the comparative prosperity of the ordinary people.

Just like similar policies have reduced the comparative prosperity of ordinary people in Venezuela.

What makes these numbers especially powerful is that convergence theory assumes that the gap between rich nations and poor nations should shrink. Yet statist policies are causing the gap to widen.

I put together a chart back in 2011 showing the relative rankings of both Argentina and Hong Kong. As you can see, Argentina used to be one of the world’s richest nations. Indeed, it was the world’s 10th-richest country when Perón took over. And Hong Kong was relatively poor. But look at what’s happened over time. Perón’s statist policies produced a steady decline while Hong Kong’s laissez-faire approach has now made it one of the richest jurisdictions on the planet.

Yet Mr Semán says we should copy Perón. Go figure.

Let’s conclude by circling back to Trump. Semán is upset because some people are equating Trump (who he despises) with Perón (who he admires).

I’m vaguely sympathetic to part of his argument. He’s right that Trump’s version of populism is not the same as Perón’s left-wing version of populism (basically the Bernie Sanders agenda).

But since I care about the less fortunate, I have nothing for disdain for Semán’s assertion that Perón’s policies should be adopted in America.

P.S. Given his remarkable level of  economic illiteracy, you won’t be surprised to learn that Pope Francis was influenced by Peronism.

Read Full Post »

Some types of theft are legal in America.

But there’s a catch. You can only legally steal if you work for the government. It’s a process called “civil asset forfeiture” and it enables government officials to confiscate your property even if you have not been convicted of a crime. Or even charged with a crime.

I’m not joking. This isn’t a snarky reference to the tax system. Nor am I implying that bureaucrats can figuratively steal your property. We’re talking about literal theft by the state.

And it can happen if some government official decides – without any legal proceeding – that the property somehow may have been involved in criminal activity. Or maybe just because you have the wrong skin color.

A column in the Wall Street Journal explains this grotesque injustice.

…thousands of Americans have had their assets taken without ever being charged with a crime, let alone convicted. Russ Caswell almost lost his Massachusetts motel, which had been run by his family for more than 50 years, because of 15 “drug-related incidents” there from 1994-2008, a period through which he rented out nearly 200,000 rooms. Maryland dairy farmer Randy Sowers had his entire bank account—roughly $60,000—seized by the IRS, which accused him of running afoul of reporting requirements for cash deposits. …A manager of a Christian rock band had $53,000 in cash—profits from concerts and donations intended for an orphanage in Thailand—seized in Oklahoma after being stopped for a broken taillight. All of the property in these outrageous cases was eventually returned, but only after an arduous process.

These abuses happen in large part because cops are given bad incentives.

Any property they steal from citizens can be used to pad the budgets of police bureaucracies.

Today more than 40 states and the federal government permit law-enforcement agencies to retain anywhere from 45% to 100% of forfeiture proceeds. As a result, forfeiture has practically become an industry.

And real money is involved.

…data on asset forfeiture across 14 states, including California, Texas and New York. Between 2002 and 2013, the revenue from forfeiture more than doubled, from $107 million to $250 million. Federal confiscations have risen even faster. In 1986 the Justice Department’s Assets Forfeiture Fund collected $93.7 million. In 2014 the number was $4.5 billion.

In other words, there’s a huge incentive for cops to misbehave. It’s called “policing for profit.”

Fortunately, there is a move for reform at the state level.

Since 2014 nearly 20 states and the District of Columbia have enacted laws limiting asset forfeiture or increasing transparency. Nearly 20 other states are considering similar legislation. …lawmakers in Alaska, Connecticut, North Dakota and Texas have sponsored legislation that would send confiscated proceeds directly to the general fund of the state or county. Similar measures in Arizona and Hawaii would restrict forfeiture proceeds to being used to compensate crime victims and their families. …Last fall California Gov. Jerry Brown signed a bill that, in most cases, requires a criminal conviction before any California agency can receive equitable-sharing proceeds. In January Ohio Gov. John Kasich approved legislation to ban his state’s police and prosecutors from transferring seized property to federal agencies unless its value is more than $100,000. Similar reforms have been introduced in Colorado, New Hampshire and a handful of other states.

Legislative reforms are good, though judicial action would be even better.

And, sooner or later, that may happen.

America’s best (but not quite perfect) Supreme Court Justice is justly outraged by these examples of legalized theft. First, some background.

…the U.S. Supreme Court declined to hear a case filed by a Texas woman who says that her due process rights were violated when the police seized over $200,000 in cash from her family despite the fact that no one has been convicted of any underlying crime associated with the money. Unfortunately, thanks to the state’s sweeping civil asset forfeiture laws, the authorities were permitted to take the money of this innocent woman. The Supreme Court offered no explanation today for its refusal to hear the case.

But Justice Thomas is not happy that government officials are allowed to randomly steal property.

Justice Clarence Thomas made it clear that he believes the current state of civil asset forfeiture law is fundamentally unconstitutional. “This system—where police can seize property with limited judicial oversight and retain it for their own use—has led to egregious and well-chronicled abuses,” Thomas declared. Furthermore, he wrote, the Supreme Court’s previous rulings on the matter are starkly at odds with the Constitution, which “presumably would require the Court to align its distinct doctrine governing civil forfeiture with its doctrines governing other forms of punitive state action and property deprivation.” Those other doctrines, Thomas noted, impose significant checks on the government, such as heightened standards of proof, various procedural protections, and the right to a trial by jury. Civil asset forfeiture proceedings, by contrast, offer no such constitutional safeguards for the rights of person or property.

The article continues to explain that Thomas could be signalling that the Supreme Court will address these issues in the future, even though it didn’t choose to address the case filed by the Texas woman.

Let’s hope so. It’s heartening that there’s been a bit of good news at the state level (I even wrote that reform of asset forfeiture was one of the best developments of 2015), but it would be nice if the Supreme Court ultimately decided to prohibit civil asset forfeiture altogether.

But that might be years in the future, so let’s close with a very fresh example of a good state-based reform.

The Wall Street Journal favorably opined yesterday about reforms that have been enacted in Mississippi.

…it’s worth highlighting a civil forfeiture reform backed by the ACLU that Mississippi GOP Governor Phil Bryant signed last week with bipartisan legislative support.

The editorial reminds us why asset forfeiture is wrong.

…civil forfeiture laws…allow law enforcement agencies to seize property they suspect to be related to a crime without actually having to obtain a conviction or even submit charges. Police and prosecutors can auction off the property and keep the proceeds to pad their budgets. …Perverse incentives…create a huge potential for abuse.

Here’s what Mississippi did.

Mississippi’s reforms, which were pushed by the Institute for Justice and had nearly unanimous support in the legislature, would curb the most egregious abuses. Law enforcers would have to obtain a seizure warrant within 72 hours and prosecute within 30 days, so they couldn’t take property while trying to formulate a case. Agencies would also be required to publish a description of the seized property along with its value and petitions contesting the forfeiture to an online public database. …the public will finally be able to police misconduct by law enforcement in criminal raids. That’s something even liberals can cheer.

It’s nice that there’s been reform at the state level, and the Mississippi example is quite encouraging. That’s the good news.

But the bad news is that there may not be much reason to expect progress from the White House since both President Trump and his Attorney General support these arbitrary and unfair confiscations of property.

Which is a shame since they both took oaths to protect Americans from the kind of horrible abuse that the Dehko family experienced. Or the mistreatment of Carole Hinders. Or the ransacking of Joseph Rivers. Or the brutalization of Thomas Williams.

However, if the first two directors of the Justice Department’s asset forfeiture office can change their minds and urge repeal of these unfair laws, maybe there’s hope for Trump and Sessions.

Read Full Post »

I live-tweeted last night’s debate between the Governor Mike Pence and Senator Tim Kaine.

As the debate closed, I summed up my reaction with two tweets, one of which sadly observed that Donald Trump does not share Ronald Reagan’s belief in smaller government and more freedom.

And because I’m fair and balanced, I also reminded people that Hillary Clinton is no Bill Clinton. Indeed, I pointed out that her vote rating in the Senate was almost identical to Bernie Sanders’.

That doesn’t mean Bernie and Hillary are identical.

I’ve remarked many times that he wants America to become Greece at 90 miles per hour while she seems content for the country to become Greece at 55 miles per hour.

But, in practice, they were almost always on the same side when it came time to cast votes on the floor of the Senate.

In any case, my tweet obviously touched a nerve since there were a bunch of (mostly incoherent) responses. And I also got this reaction from a law professor at the University of Baltimore.

I assume he thinks I was being juvenile to say that Senator Sanders is crazy. Since I actually am juvenile in many ways (particularly my sense of humor), I might be tempted to plead guilty.

But let’s actually contemplate how the Vermont Senator should be labeled.

Sanders is a virulent and dogmatic supporter of coercive statism. Even columnists for the Washington Post have criticized him for being too far to the left.

But he’s not a real socialist (which technically means government ownership of the means of production). And even though his policies are based on coercion, I certainly don’t think he is a totalitarian.

Yet he’s not a rational leftist like you find in the Nordic nations (where they at least compensate for large welfare states by being very market-oriented about trade, regulation, etc).

All this explains why, when categorizing different types of leftists, I put him in the “crazies” group along with the Syriza Party of Greece.

And while “crazies” might be a pejorative bit of shorthand, I do think folks like Bernie Sanders are largely detached from reality.

But I don’t want people to be upset with me, so I’m going to reconsider how Sanders should be categorized.

To help with this chore, let’s consider a few additional bits of information, starting with an item from his Senate office that contains this remarkable passage.

These days, the American dream is more apt to be realized in South America, in places such as Ecuador, Venezuela and Argentina, where incomes are actually more equal today than they are in the land of Horatio Alger. Who’s the banana republic now?

By the way, it’s not clear if this is a column written by Sanders or whether he just endorses the sentiments expressed therein.

Though it doesn’t really matter since – at the very least – he obviously agrees with the message.

So let’s think about what it means that Sanders views Argentina and Venezuela as role models.

Argentina used to be one of the richest nations in the world, ranked in the top 10 at the end of World War II. But then decades of statism, starting with Peron and continuing through Kirchner, wreaked havoc with the nation’s economy and Argentina has plummeted in the rankings.

And I’ve written many times about the basket case of Venezuela, so there’s already ample information to discredit anyone who thinks that nation should be emulated.

But let’s add one more straw to the camel’s back. Here are some excerpts from a very depressing story about the human misery being caused by big government in that country.

Klaireth Díaz is a 1st-grade teacher at Elías Toro School… Last year, she says, attendance was painfully low. Every day, of a class of 30 children at least 10 would be absent. “The reason was always lack of food,” she told Fox News Latino. She said she had a student who skipped class every single Thursday and when she asked his mother about it, she explained that Thursday was the day of the week assigned to her family to buy food at government-regulated prices – which involves standing in line starting sometimes as early as 3 a.m.

Food lines?!? That’s what Bernie Sanders thinks is a success story?

Though I guess if everyone has to wait in lines for food, at least they’re all equally poor (though even that’s not true since the ruling-class leftists in Venezuela have plundered the nation’s treasury).

In other words, maybe this image isn’t a joke or satire after all.

But it gets worse. The food lines apparently don’t provide enough food.

Across the country, teachers have said they have seen children faint or fall asleep because they haven’t had enough to eat. …As the school year progressed last year, Diaz said, she noticed more and more kids had stopped bringing lunch. …According to a poll conducted last month by More Consulting among 2,000 respondents in Caracas, in 48 percent of the times children do not attend school, the cause is related to the food. Either they are feeling too weak for lack of nutrition, or their parents rather use the transport money to buy food, or they are in the food lines with their parents. The poll revealed that 36.5 percent of children eat only twice a day and 10.2 percent just once.

So maybe Bernie Sanders isn’t crazy. If he views Venezuela as a role model, maybe he’s morally blind. Or genuinely evil.

But I’m a nice guy, so I’m sticking with crazy since I would hate to think that even a crank like Sanders willfully embraces the monstrous outcomes found in Venezuela.

P.S. I haven’t written about Ecuador, but if forced to choose among Bernie’s various success stories, I guess that would be my pick since it is 142 out of 159 in the rankings from Economic Freedom of the World, which surely is better than being Argentina (156) or Venezuela (dead last at 159).

To be fair to Sanders, at least he didn’t list Cuba, which is such an economic hell-hole that (if reliable numbers were available) it would presumably rank below even Venezuela.

Read Full Post »

Two days ago, I contrasted the views of Pope Francis and Walter Williams about capitalism and morality.

I explained that Walter had the upper hand because free markets are a positive-sum game based on voluntary exchange while redistribution (at best) is a zero-sum game based on coercion.

That’s the theoretical argument. Now let’s look at the empirical data, specifically focusing on which approach is best for the less fortunate.

Thomas Sowell, the great economist at Stanford University’s Hoover Institution, is not impressed by the Pope’s analysis. Here some of what Prof. Sowell wrote for Investor’s Business Daily.

Pope Francis has created political controversy…by blaming capitalism for many of the problems of the poor. …putting aside religious or philosophical questions, we have more than two centuries of historical evidence… Any serious look at the history of human beings over the millennia shows that the species began in poverty. It is not poverty, but prosperity, that needs explaining. …which has a better track record of helping the less fortunate — fighting for a bigger slice of the economic pie, or producing a bigger pie? …the official poverty level in the U.S. is the upper middle class in Mexico. The much criticized market economy of the U.S. has done far more for the poor than the ideology of the left. Pope Francis’ own native Argentina was once among the leading economies of the world, before it was ruined by the kind of ideological notions he is now promoting around the world.

I briefly discussed the failure of the Peronist Argentinian model last month, but let’s take a closer look at Professor Sowell’s assertions about the U.S. and Argentina.

My colleague at the Cato Institute, Marian Tupy, has put together a great fact-filled website called Human Progress, and it allows users to access all sorts of databases to produce their own charts and tables.

And here’s what the data shows about per-capita economic output in Argentina and the United States.

Not exactly a ringing endorsement of the supposedly more compassionate system in Argentina.

As you can see from this table, Argentina actually was slightly richer than the U.S. back in 1896. But that nation’s shift to statism, particularly after World War II, hindered Argentina’s growth rates.

And seemingly modest differences in growth, compounded over decades, have a huge impact on living standards for ordinary people (i.e., inflation-adjusted GDP per person climbing nearly $27,000 in the U.S. vs an increase of less than $6,700 in Argentina).

By the way, this is not an endorsement of America’s economic policy. We have far too much statism in the United States.

But compared to Argentina, which generally has ranked in the bottom quartile for economic freedom, the United States has a more market-friendly track record.

To help make the bigger point about the importance of economic liberty, let’s now compare the United States with a jurisdiction that consistently has been ranked as the world’s freest economy.

Look at changes in economic output in America and Hong Kong from 1950 to the present. As you can see, Hong Kong started the period as a very poor jurisdiction, with per-capita output only about one-fourth of American levels.

But thanks to better policy, which led to faster growth compounding over several decades, Hong Kong has now caught up to the United States.

What’s most remarkable, if you look at the table, is that per-capita output over the past 65 years has soared by more than 1,275 percent in Hong Kong.

Needless to say, if the U.S. is out-performing Argentina and Hong Kong is out-performing the U.S., then a comparison of Hong Kong and Argentina would yield ever starker results.

I actually did something like that back in 2011 and the results further underscore that there’s a very powerful relationship between economic policy and economic performance.

Which brings us back to the fundamental issue of what system is best for the less fortunate in society?

I suppose that’s a judgement call, but poor people obviously have higher incomes and more opportunity when there’s strong economic growth.

But as Margaret Thatcher famously explained, some people are so consumed by disdain for success that they’re willing to accept more suffering for poor people if they can simultaneously lower the incomes of rich people.

Read Full Post »

Older Posts »

%d bloggers like this: