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Archive for the ‘Statism’ Category

It’s time to make a very serious point, albeit with a bit of humor and sarcasm.

A couple of years ago, I shared an image of Libertarian Jesus to make the point that it’s absurd to equate compassion and virtue with government-coerced redistribution.

We all can agree – at least I hope – that it is admirable to help the less fortunate with our own time and/or money. Indeed, I’m proud that Americans are much more likely to be genuinely generous than people from other countries (and it’s also worth noting that people from conservative states are more generous than people from leftist states).

But some of our statist friends go awry when they think it’s also noble and selfless to support higher tax rates and bigger government. How is it compassionate, I ask them, to forcibly give away someone else’s money? Especially when those policies actually undermine progress in the fight against poverty!

With this in mind, here’s another great example of Libertarian Jesus (h/t: Reddit).

Amen (pun intended), I’m going to add this to my collection of libertarian humor.

But don’t overlook the serious part of the message. As Cal Thomas succinctly explained, it’s hardly a display of religious devotion when you use coercion to spend other people’s money.

This is why I’ve been critical of Pope Francis. His heart may be in the right place, but he’s misguided about the policies that actually help the less fortunate.

For what it’s worth, it would be helpful if he was guided by the moral wisdom of Walter Williams rather than the destructive statism of Juan Peron.

P.S. I’m rather amused that socialists, when looking for Christmas-themed heroes, could only identify people who practice non-coercive generosity.

P.P.S. On a separate topic, Al Gore blames climate change for Brexit.

Brexit was caused in part by climate change, former US Vice-President Al Gore has said, warning that extreme weather is creating political instability “the world will find extremely difficult to deal with”.

I’m beginning to lose track and get confused. Our statist friends have told us that climate change causes AIDS and terrorism, which are bad things. But now they’re telling us climate change caused Brexit, which is a good thing.

Maybe the real lesson is that Al Gore and his friends are crackpots.

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When trying to educate people about the superiority of free enterprise over statism, I generally show them long-run data comparing market-oriented jurisdictions with those that have state-driven economies. Here are some of my favorite examples.

It’s my hope that when readers look at these comparisons, they will recognize the value of economic freedom because it is very obvious that ordinary people become far more prosperous when government is small.

But there’s also another way of determining which approach is superior. Just look and see what happens when people are allowed to vote with their feet. Or, just as important, look at places where people are not allowed to vote with their feet.

The Berlin Wall and the Iron Curtain, for instance, existed to prevent people from escaping the horror of Soviet communism. Likewise, people in North Korea and Cuba don’t have the freedom to emigrate.

Totalitarian governments realize that their citizens would escape en masse if they had the chance.

In free countries, by contrast, there’s no need to imprison people.

And that’s why this Imgur image is not only funny, but also a good summary of population shifts around the world.

I’ll definitely have to add this to my collection of libertarian humor.

To be sure, not everybody who moves from a statist hellhole to a prosperous capitalist society is motivated by an appreciation for liberty. They may simply want a better life and have no idea that national prosperity is a function of economic liberty.

And they may not even want to earn a better life. They may simply want to get on the gravy train of government handouts (which is why I’m not a fan of America’s dependency-inducing refugee program).

But I’m digressing. The simple moral of today’s story is that decent societies don’t have to imprison their citizens. That only happens in place where government is not only big, but also evil.

P.S. Unlike some libertarians, I like borders.

P.P.S. People also vote with their feet inside nations, and the lesson to be learned is that smaller governments attract more people.

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Earlier this year, I borrowed from Dante’s Inferno and created the Five Circles of Statist Hell. At the time, I suggested that Venezuela was on the cusp of moving from the third circle (“widespread poverty and economic misery”) to the fourth circle (“systematic and grinding poverty and deprivation”).

Since we now know that children in the country are suffering from hunger and malnutrition, I think we can safely confirm that Venezuela has made that crossing, joining the dystopian hell of North Korea (though you can make a good argument that the savage regime based in Pyongyang actually belongs in the fifth circle).

And just in case you need another piece of evidence about Venezuela, consider these excerpts from a surreal BBC report.

Venezuelan authorities have arrested two toy company executives and seized almost four million toys, which they say they will distribute to the poor. Officials accused the company of hoarding toys and hiking prices in the run-up to Christmas. Last week, the government issued an order to retailers to reduce prices on a range of goods by 30%. …Venezuela…said…”Our children are sacred, we will not let them rob you of Christmas,” it said in a tweet, along with photos and video of thousands of boxes of toys. …The agency also posted photos of the two executives being marched from the premises by a squad of heavily armed soldiers.

Here’s some additional background on the economic situation in the country.

This is not the first time Venezuela has ordered price cuts on retailers, or mobilised armed units to enforce it. In late 2013, the country introduced laws allowing the government to fix prices and dictate profit margins. …The same measures have been used to fix the prices of basic products such as flour, meat and bread – but supply is limited in a country where many people go hungry.

Before continuing, I can’t help commenting that BBC journalists apparently can’t put 2 and 2 together. The reason supply is limited and people are suffering is because of the price controls and intervention.

Sigh.

Anyhow, here are some final passages from the article.

The Venezuelan government is becoming increasingly unpopular as the country’s economic crisis grows. …The International Monetary Fund estimates that inflation – the rate at which prices go up – will hit 2,000% next year.

Yup, Venezuela is a regular Shangri La. No wonder Bernie Sanders is so infatuated with the place.

But let’s focus today on the Venezuelan government’s attempt to play Santa Claus by seizing toys and selling them at below-market rates.

I don’t know if this move will be politically popular since that depends on whether ordinary people have some degree of economic sophistication.

But we can say with great confidence that it represents terrible economic policy. That’s because, as Thomas Sowell has wisely noted, it’s very difficult for a government to steal wealth more than one time.

The victims (both the ones who already have been looted and the ones who might be targeted in the future) quickly learn that it’s not a smart idea to accumulate assets that can be stolen by the state. In effect, the productive people of the country learn to behave like the Little Red Hen.

In the short run, though, the Venezuelan government gets to play Santa Claus. At least for 2016.

But it won’t have that option in 2017. And because the nation’s kleptocratic government is running out of victims, it’s just a matter of time before the system collapses, at which point the government either gives up power or launches a brutal crackdown.

Hopefully the former.

Though it would remain to be seen whether the leftist thugs who currently hold power are able to escape the country with all the loot they’ve stolen, or whether they get the Ceausescu treatment.

They deserve the latter.

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I’m very happy that we don’t have a one-world government, but my views have nothing to do with conspiratorial fears involving blue helmets and black helicopters.

Instead, I’m happy that there are lots of independent nations because that means lots of different approaches to public policy. And that means we have lots of real-life experiments about the relative merits of big government vs small government.

And this brings me joy because the evidence overwhelmingly shows that you get much better results when the size and scope of government is constrained.

Just compare France and Switzerland. Or look at the wreckage of communism. Or consider the prosperity of Hong Kong and Singapore.

Heck, I’ve put together all sorts of long-run comparisons to show that free markets produce much better results than statism.

This is also why I like federalism inside a nation. I think this decentralized approach leads to better policy, as we can see from Switzerland.

But it also means I have another set of real-life experiments about public policy.  And, once again, this brings a smile to my face because the data clearly show the negative consequences of big government.

It’s especially amusing to compare California and Texas. The Golden State is a playground for statist policies, including the highest income tax in the nation. The Lone Star State, by contrast, is famous for its laissez-faire approach and it doesn’t have any income tax.

And if you look at income data, we have very clear evidence that living standards are climbing much faster in Texas, particularly for the middle class.

I’m certainly not the only person to notice that there’s a clear link between good policy and good results.

Writing for Investor’s Business Daily, Vance Ginn of the Texas Public Policy Foundation compares Texas and California. He starts by noting that the Lone Star State and the Golden State share some common characteristics.

Texas and California…contribute 25% of U.S. economic output, have similar abundances of natural resources, and are where 20% of Americans reside.

But that’s where the similarity ends. California almost surely wins the battle for which state has the best climate and scenery, but Texas is way ahead when you measure economic freedom.

Texas has low taxes, no personal income tax, and less regulation, versus California’s high taxes, highest marginal personal income tax rate nationwide, and burdensome regulations. The Economic Freedom of North America report…ranks Texas as the third most free state and California as second worst. The Tax Foundation ranks Texas as having the 14th best business tax climate while California ranks third worst.

Vance then addresses the left-wing stereotype that Texas is a poverty-stricken backwater.

He looks at various measures and finds that Texas always comes out on top. There’s more poverty in California.

What about poverty? Taking the average over the 2013 to 2015 period, the Census Bureau provides the official poverty rate of 16.1% in Texas and 15% in California, which suggests that the critics are right. However, that rate doesn’t account for regional differences in housing costs or noncash government assistance. The supplemental poverty rate includes these factors and instead finds a rate of 14.9% in Texas while California has the highest rate nationwide at 20.6%.

But there’s more income in Texas.

What about real income? Average nominal median household income from 2010 to 2014 (in 2014 dollars) in California ($61,489) is 17% higher and nationwide ($53,482) is 1.7% higher than in Texas ($52,576). But, the Bureau of Economic Analysis’ regional price parities data for 2014 show that the cost of living for California is 17% higher and the U.S. average is 3.5% higher than in Texas. Therefore, real income in Texas purchases as much as in California and even more when you consider that Texas doesn’t have a personal income tax.

Vance then points out that there is more income inequality in California, which I generally think is an irrelevant measure.

In this case, though, it probably does matter because bad policy is causing disproportionate harm for the poor and middle class in California.

The column also looks at the jobs data (which will cause special angst for Paul Krugman).

In the last decade, Texas has been the economic and job creation engine as the real private sector expanded 29% in Texas compared with only 14% in California. Moreover, total civilian employment increased 1.2 million in California but 1.7 million in Texas, with a labor force two-thirds the size of California’s. This increase in Texas’ employment accounts for nearly one-third of all jobs created nationwide.

So what’s the moral of the story?

Vance closes his column with some very appropriate advice for the incoming Trump Administration.

The more you tax and regulate something, the less you get of it. Clearly, less government contributes to higher standards of living in Texas. …As the new administration and policymakers nationwide reassess which direction to take, it’s important to remember that spending is the disease and taxes are a function of that disease. Restraining spending growth while following the Texas model of free market capitalism would be an excellent way to get the economy, and personal finances, back on track.

None of this means policy is perfect in Texas, needless to say. There are several ways that policy could be improved.

But if you’re looking for general lessons about the relative merits of big government vs. small government, both Texas and California are role models. They teach us lessons about job creation. About business climate. About government efficiency. And about labor mobility. And the lesson is always the same: You get better results when government is smaller and less intrusive.

Last but not least, there’s even a very amusing joke about California, Texas, and a coyote.

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It’s easy to define and/or understand most statist policies.

  • We know that a tax increase is when politicians take (or, given the Laffer Curve, try to take) more of your money based on your decisions to work, save, shop, or invest.
  • We know that protectionism is when politicians use taxes and other policies to restrict your freedom to buy goods and services produced in other nations.
  • We know that a minimum wage mandate is when politicians criminalize employment contracts between consenting adults, thus harming low-skilled workers.
  • We know that Keynesian “stimulus” is when politicians borrow from one part of the economy and spend in another part of the economy and pretend there’s more money.

The list is potentially endless, but there’s one statist policy – cronyism – that I haven’t added to the list because I haven’t thought of a simple definition.

Are bailouts cronyism? Yes, but it’s more than that. Are subsidies cronyism? Yes, but it’s more than that. Are favors in the tax code cronyism? Yes, but it’s more than that. Are trade barriers cronyism? Yes, but it’s more than that.

You’re probably noticing a pattern, which is why this new visual from the Mercatus Center is helpful. It illustrates that there are many policies that should be considered cronyism.

And Mercatus comes up with a definition that we can add to our list.

  • We know that cronyism is when politicians create “privileges that governments give to particular businesses and industries.”

Speaking of which, one of the most damaging features of cronyism is the way that it gives capitalism a bad name.

Many people equate free markets with “business.” So when people in the business sector get special favors, regular folks conclude that capitalism is a “rigged” system.

In theory, this false impression could be offset by an aggressive educational campaign by those who support free enterprise. Unfortunately, that task is rather difficult since many people assume Republicans are the pro-capitalism party. So when they see the GOP favoring corrupt handouts to business such as the Export-Import Bank and the sleazy ethanol program, they conclude – once again – that capitalism is rigged for the politically powerful.

And the battle to separate capitalism from cronyism is further hindered when major figures in the business world (such as Warren Buffett) get in bed with government.

Another example is Elon Musk, the head of Tesla, Solar City, and SpaceX. He is known as a visionary entrepreneur, which is good. But Andy Quinlan of the Center for Freedom and Prosperity explains that he also has put taxpayers on the hook to underwrite and prop up much of his business activities.

It was announced this week that one of Elon Musk’s companies, Tesla Motors, will buy one of his other companies, SolarCity, for an all-stock deal worth $2.6 billion. …With the amount of taxpayer support both companies have received, perhaps the rest of us should get a vote… The deal comes as SolarCity has floundered despite significant taxpayer support through a bevy of state and federal tax credits and subsidies. Nevertheless, the solar energy company’s stock has been in long term decline as the company struggles to develop a profitable market not reliant on generous helpings of taxpayer support. Tesla, too, has fed repeatedly at the government trough. The government provided federal loan guarantees and tax credits to help manufacture its electric vehicles. It also subsidized the purchase of those same vehicles to increase sales. Even still, the company makes more money selling “carbon credits” to other manufacturers than it does electric vehicles. …Musk’s other endeavor, SpaceX, also relies heavily on government. Obviously much of its business comes from government contracts, but more interesting is how those contracts are apparently obtained. …this year’s National Defense Authorization Act contains an amendment from Senator John McCain designed to eliminate from competition the Defense Department’s current supplier of rockets and pave the way for SpaceX to take over, despite the fact that its rockets aren’t yet powerful enough for the job.

Writing for Reason, Veronique de Rugy adds her insight

Elon Musk delivered a much-anticipated speech…where he laid out his vision for colonizing Mars…a testament to human innovation and determination. …it might be more impressive if Musk could provide a vision for how his companies can succeed here on Earth first, especially without heavy reliance on taxpayer support. …Musk is no stranger to cozy relations with federal and state governments. All three of his companies have benefited heavily from taxpayers. Yet despite generous green energy handouts, his SolarCity is heavily indebted. He now wants to merge it with his electric car company, Tesla Motors, which also benefited from almost $1.3 billion in subsidies. Solidifying his crony credentials, the epitome of crony capitalism itself, the Export-Import Bank of the United States, has subsidized the payloads for numerous SpaceX launches. The Ex-Im Bank’s chairman misrepresented this as support for “small business.” …There’s no doubt that Musk is an impressive salesman and innovator. …Now that he has set his sights on Mars, let’s hope—for the future of science and exploration—that he…has the courtesy to leave taxpayers out of it.

Amen.

It’s great when entrepreneurs are successful. And I don’t resent their wealth in the slightest.

But only if they earn their money honestly, in a genuinely free and competitive market.

Cronyism, by contrast, is a cancer that compromises and erodes genuine capitalism.

P.S. Let’s close on a more upbeat and entertaining topic, which is the bipartisan mockery of politicians.

I shared a very funny post about American leftists escaping to Canada after the Tea Party election of 2010.

Here’s some related humor about Canada closing the border for the next eight years.

One unfortunate aspect of being a libertarian is that you’re almost always unhappy about whoever becomes President. Indeed, I’ve only been pleased with one President who has served in my lifetime.

So I’m not overflowing with sympathy for Republicans who were unhappy after the 2012 election. And I’m similarly immune to feelings of empathy for Democrats who are unhappy about this election.

Especially the leftists who are engaging is hysterical hyperbolic histrionics (how’s that for alliteration!) about Trump. Here’s some great satire about the millennials protesting against Trump’s victory.

As anti-Trump rallies nationwide turned hostile overnight with widespread reports of violence, looting, vandalism, and death threats against the president-elect and his supporters, police in numerous major cities were able to instill calm and regain control by handing out participation trophies to all millennial protesters who were enraged about losing the election, sources confirmed. …“It’s a foreign notion to them. Even in sports—win or lose, everyone won, and everyone got a trophy no matter what. This is the millennial way,” he said. “So I had the idea—hey, why not start handing out participation trophies to the protesters, and telling them ‘Hey, you know what? You may have lost the election, but look—everyone gets a trophy. Everyone’s a winner.’” Seeing how the trophies had an instantaneous calming effect on the millennials and filled them with a sense of fulfillment and achievement, word spread quickly among police departments nationwide, and emergency trophies were procured by the thousands for use at the rallies.

Speaking of which, here’s an amusing image that has a serious message. I agree with leftists who fear that Trump may abuse the vast powers of the federal government. But they supported Obama’s dubious expansion of executive power, so they don’t have much credibility on the issue.

Reminds me of this clever poster that the Libertarian Party created to mock the Occupy crazies.

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A couple of days ago, I wrote about Clemens Schneider’s hypothesis, presented at the European Students for Liberty regional conference in Maastricht, that 1356 was a very important year in European history because of two events that promoted decentralization and federalism.

I also participated in the event and was asked to speak about “Ensuring Sustainable Prosperity in Europe.”

But I spent 90 percent of my speech saying there was very little hope of that happening. I highlighted three points.

  1. Europe is suffering from anemic growth and is falling further behind the United States.
  2. Demographic changes in Europe will likely cause even further economic stagnation.
  3. An ever-rising burden of government spending will further cripple economic performance.

To tie all these points together, I pointed out that worsening fiscal policy doesn’t necessarily mean economic decline. If nations make sufficient improvements in other policy areas (regulation, monetary policy, trade, rule of law and property right), then it is still possible to have more overall freedom and a stronger economy. Indeed, that’s basically what happened in developed nations after World War II.

But that hasn’t been happening in the 21st Century. Here’s a chart I prepared for the students showing changes in overall economic freedom in the major nations of Western Europe from 2000-present.

As you can see, other than Austria’s tiny increase and Greece’s unchanged (but still lowest on the list) score, economic freedom in Europe has been eroding. Indeed, the average decline is about .2 on a 0-10 scale, which isn’t trivial.

I also included the United States, which unfortunately has experienced the biggest decrease of all nations (thanks Bush and Obama!). And I’m disappointed that Switzerland (one of my favorite nations) also has moved in the wrong direction.

To conclude, there was a reprehensible American journalist named Lincoln Steffens who made a trip to the Soviet Union in 1919 and then told American audiences that, “I have seen the future, and it works.” Some might argue we shouldn’t judge him too harshly since it took time for the barbarity of communism to become apparent, but any ideology that puts the state over the individual is a priori evil in my humble opinion.

But I’m digressing. I cite Steffens’ infamous quote because I, too, have seen the future. It’s Europe. And it doesn’t work.

P.S. I did point out that the outlook for European is not theoretically hopeless. Even Greece could climb out of its statist malaise with sustained spending restraint and other market reforms.

P.P.S. My indictment of Europe, I explained, should not be interpreted as an endorsement of the United States. I explained that our long-run outlook was similarly grim (and will probably accelerate in the wrong direction because of the election).

P.P.P.S. Which is why I told the students in my conclusion that they should apply for Australian visas.

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I’m in Sweden today, where I just spoke before Timbro (a prominent classical liberal think tank) about the US elections and the implications for public policy.

My main message was pessimism since neither Donald Trump nor Hillary Clinton support genuine entitlement reform.

But I’ve addressed that topic many times before. Today, motivated by my trip, I want to augment my analysis about Sweden from 10 days ago.

In that column, I highlighted some research from Professor Olle Kranz showing that Sweden became a rich nation during a free-market era when government was relatively small. And as you can see from his chart (I added the parts in red), this is also when per-capita economic output in Sweden caught up with – and eventually surpassed – per-capita GDP in other advanced countries.

Then Sweden began to lose ground. Some of this was understandable and inevitable. Sweden didn’t participate in World War II, so its comparative prosperity during the war and immediately afterwards was a one-time blip.

But the main focus of my column from last week was to show that Swedish prosperity began a sustained drop during the 1960s, and I argued that the nation lost ground precisely because statist policies were adopted.

In other words, Sweden enjoyed above-average growth when it relied on policies I like and then suffered below-average growth when it imposed the policies (high tax rates, massive redistribution, etc) that get Bernie Sanders excited.

Today, let’s build upon Professor Kranz’s analysis by extending his calculations. He did his research in the early part of last decade, and we now have many years of additional data that can be added to the chart.

But before doing that, it’s worth noting that the years of additional data basically coincide with a period of market-oriented reforms in Sweden. A study from the Reform Institute in Stockholm explains some of what happened, starting with the stagnation caused by the era of big government.

The seventies and eighties saw Sweden’s tax burden rise from an average European level to the world’s highest. The public sector expanded vastly. All facets of the welfare system were made more generous in international comparison. Meanwhile, labour market regulation increased… Throughout these years, Swedes’ individual after-tax real income stagnated, private sector job creation ceased, and public debt spiralled higher. This culminated in a severe economic crisis in the early 1990s. By then, Sweden had fallen to 14th place in the GDP per capita rankings of OECD countries.

That’s the bad news.

The good news is that this economic misery led to market-oriented reforms.

When the onset of the financial crisis coincided with election of a market-oriented centre-right government in 1991, the reform process began in earnest. Most emphasis at the time was placed on reforms that opened significant sectors in the economy to greater competition. Moreover, an important feature of these regulatory reforms was that the crisis spurred local authorities to implement less burdensome regulation. …significant changes were introduced to the tax system, macroeconomic policy framework, and social insurance system. …every aspect of the Swedish economy has changed due to implementation of reforms. …public sector employment has declined.

To be sure, none of the means Sweden became Hong Kong. It is currently ranked only #38 by Economic Freedom of the World, and its score only improved from 6.92 in 1990 to 7.46 today, hardly a huge jump.

But we nonetheless can now check whether this period of modest reform yielded any dividends. And, looking at an updated and extended version of Professor Kranz’s chart, there certainly seems to be a clear relationship between pro-market policy and Swedish prosperity.

Call me crazy, but it seems like there’s a lesson here about the right recipe for growth.

P.S. The 16 countries in the comparison are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Japan, Sweden, Switzerland, the United Kingdom, and the United States.

P.P.S. If you’re so disposed, you can watch my speech in Stockholm on Timbro’s Facebook page. If you prefer YouTube, the folks at CEPOS in Denmark saw the same speech (I only oppose wasteful forms of recycling) and they posted it yesterday.

P.P.P.S. If you’re interested in more information about market-oriented reforms in Sweden, check out Lotta Moberg’s video and Johan Norberg’s video.

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