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Archive for the ‘Statism’ Category

Venezuela is falling apart. Decades of bad policy have produced economic stagnation and misery.

On the other side of South America, Chile has enjoyed comparatively strong growth since reforms began in the 1980s.

Can we learn lessons by comparing these two nations?

Yes. More than five years ago, I compared three decades of data to show that pro-market Chile grew somewhat faster than mixed-economy Argentina and much faster than statist Venezuela.

Now we have some new data.

My colleague at the Cato Institute, Marian Tupy, has an article in Reason that compares Chile and Venezuela.

He starts by noting that the two nations have moved in dramatically different directions when measuring economic freedom.

Chile’s success starts in the mid-1970s, when Chile’s military government abandoned socialism and started to implement economic reforms. In 2013, Chile was the world’s 10th freest economy. Venezuela, in the meantime, declined from being the world’s 10th freest economy in 1975 to being the world’s least free economy in 2013.

Here’s a sobering chart on the changes.

Some may believe that economic freedom as merely an abstraction.

What’s more important, they argue, is results. Is a nation enjoying good economic performance, or is it stagnating?

Well, it turns out that the abstraction of economic freedom is very important if you want good performance. Here’s another chart from Marian’s article. You can see that Venezuela has stagnated while Chile has boomed.

Chile is not a perfect role model, to be sure, because of an unsavory period of military rule.

But the good news, Marian points out, is that economic liberty has led to political liberty. Whereas the opposite has happened in Venezuela.

…as the people of Chile grew richer, they started demanding more say in the running of their country. Starting in the late 1980s, the military gradually and peacefully handed power over to democratically-elected representatives. In Venezuela, the opposite has happened. As failure of socialism became more apparent, the government had to resort to ever more repressive measures in order to keep itself in power.

Here’s a chart showing the remarkable progress in Chile..as well as the deterioration of rights in Venezuela (please note that “1” means strong political rights and “7” means low or nonexistent political rights).

All this data seemingly is slam-dunk evidence for the Chilean model over the Venezuelan model.

Yet there have been a number of leftists who actually praised the statist policies of Venezuela’s authoritarian rulers. Here are some excerpts from an exposê in the Daily Caller.

Socialist Venezuelan dictator Hugo Chavez was praised throughout his life by many figures in academia, journalism and Hollywood despite his brutal regime. This praise included Salon writer David Sirota’s piece after the leader’s death, titled “Hugo Chavez’s economic miracle.” In British publication The New Statesman, a headline as Chavez was nearing death in January 2013 was “Hugo Chavez: Man against the world,” and its sub-headline read “As illness ends Hugo Chavez’s rule in Venezuela, what will his legacy be? Richard Gott argues he brought hope to a continent.” This praise of Chavez by so many who enjoyed the benefits of living in a capitalist society while looking at the economic record of the late leader, as well as what his successor President Nicolas Maduro, has come undone.

And Joe Stiglitz gushed about Venezuela’s economic performance back in 2007.

Nobel Prize winning economist and former vice-president of the World Bank, Joseph Stiglitz, praised Venezuela’s economic growth and “positive policies in health and education” during a visit to Caracas on Wednesday. “Venezuela’s economic growth has been very impressive in the last few years,” Stiglitz said during his speech at a forum on Strategies for Emerging Markets sponsored by the Bank of Venezuela. …Venezuela has taken advantage of the boom in world oil prices to implement policies that benefit its citizens and promote economic development. “Venezuelan President Hugo Chavez appears to have had success in bringing health and education to the people in the poor neighborhoods of Caracas, to those who previously saw few benefits of the countries oil wealth,” he said. In his latest book “Making Globalization Work,” Stiglitz argues that left governments such as in Venezuela, “have frequently been castigated and called ‘populist’ because they promote the distribution of benefits of education and health to the poor.” “It is not only important to have sustainable growth,” Stiglitz continued during his speech, “but to ensure the best distribution of economic growth, for the benefit of all citizens.”

Wow, this is a remarkable case of ideological blindness. Stiglitz presumably allowed his statist views to drive his analysis.

But let’s focus on one part of that excerpt. Yes, it’s very desirable for all citizens to benefit from economic growth.

But if you look at the chart from Marian’s article comparing GDP per capita in Chile and Venezuela, it’s abundantly clear which nation is producing better outcomes from average citizens.

This is a fundamental flaw of statists. By fixating on redistribution and equality, this leads them to policies that re-slice a shrinking economic pie.

The evidence from all over the world is that this is not a recipe for convergence with rich nations.

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Having become interested in public policy because of Ronald Reagan’s message of limited government and individual liberty, I’m understandably depressed by the 2016 election.

But we can at least learn something from the process.

Robert Kagan of the Brookings Institution savages Donald Trump in a column for the Washington Post. Here’s a particularly brutal excerpt.

…what Trump offers his followers are not economic remedies — his proposals change daily. What he offers is an attitude, an aura of crude strength and machismo, a boasting disrespect for the niceties of the democratic culture that he claims, and his followers believe, has produced national weakness and incompetence. His incoherent and contradictory utterances have one thing in common: They provoke and play on feelings of resentment and disdain, intermingled with bits of fear, hatred and anger. His public discourse consists of attacking or ridiculing a wide range of “others” — Muslims, Hispanics, women, Chinese, Mexicans, Europeans, Arabs, immigrants, refugees — whom he depicts either as threats or as objects of derision.

Since I don’t know what actually motivates Trump or his voters, I have no idea whether the above passage is fair, but it is true that Trump’s policy agenda oftentimes doesn’t make sense.

But here’s the part of the column that caught my attention.

…what he has tapped into is what the founders most feared when they established the democratic republic: the popular passions unleashed, the “mobocracy.” Conservatives have been warning for decades about government suffocating liberty. But here is the other threat to liberty that Alexis de Tocqueville and the ancient philosophers warned about: that the people in a democracy, excited, angry and unconstrained, might run roughshod over even the institutions created to preserve their freedoms.

I’m tempted to send Mr. Kagan a card that says “Welcome to the Club.” Libertarians and small-government conservatives for decades have been warning against the dangers of untrammeled majoritarianism.

We revere the Constitution because we believe that our freedoms and liberties should not be decided by 51 percent of the population. We cherish the fact that our Founding Fathers put limits on the power of the federal government.

But I don’t think Kagan deserves a card because his opposition to mobocracy is very selective. Has he ever criticized the Supreme Court for acquiescing to the New Deal and abandoning its obligation to limit Washington to the enumerated powers listed in the Constitution?

Did he condemn Chief Justice John Roberts and the Supreme Court for deciding that the “power to tax” somehow gave the federal government the authority to force citizens to buy government-approved health insurance plans?

I don’t recall seeing Kagan fret about these majoritarian steps that eroded constitutional liberties, so it’s hard to take seriously his complaints now.

I’m also unimpressed by his concerns about potential abuse of power by a Trump Administration.

Trump will…have ridden to power despite the party, catapulted into the White House by a mass following devoted only to him. …In addition to all that comes from being the leader of a mass following, he would also have the immense powers of the American presidency at his command: the Justice Department, the FBI, the intelligence services, the military. Who would dare to oppose him then? …is a man like Trump, with infinitely greater power in his hands, likely to become more humble, more judicious, more generous, less vengeful than he is today, than he has been his whole life? Does vast power un-corrupt?

He raises some very legitimate concerns. I don’t trust Trump with lots of power. That being said, the hypocrisy is staggering.

Did he write any columns about Obama’s sordid misuse of the IRS to target political opponents?

Has he complained about Operation Chokepoint? Fast and Furious? NSA spying? Efforts to undermine the 1st Amendment and restrict political speech?

Why is abuse of power okay for Obama but not for Trump?

Notwithstanding Kagan’s glaring hypocrisy, his conclusion may be correct.

This is how fascism comes to America, not with jackboots and salutes…but with a television huckster, a phony billionaire, a textbook egomaniac “tapping into” popular resentments and insecurities.

Except it needs to be expanded. Because fascism already has a foothold in America.

And it might expand not just because of a “television huckster,” but also because of a corrupt former presidential spouse or an envy-riddled Vermont crank, both of whom tap into resentments and insecurities.

Indeed, Kagan’s description of Trump sounds a lot like Clinton or Sanders if you replace “Muslim” and “Mexican” with “banker” or “top 1 percent.”

Charles Cooke of National Review wonders whether Trump will lead leftists to change their minds about government power. He starts by highlighting conservative opposition to an all-powerful presidency.

…progressives tend not to buy the argument that a government that can give you everything you want is also a government that can take it all away. For the past four or five years, conservatives have offered precisely this argument, our central contention being that it is a bad idea to invest too much power in one place because one never knows who might enjoy that power next. And, for the past four or five years, these warnings have fallen on deaf, derisive, overconfident ears. …we have argued that Congress ought to reclaim much of the legal authority that it has willingly ceded to the executive, lest that executive become unresponsive or worse; that, once abandoned, constitutional limits are difficult to resuscitate; that federalism leads not just to better government but to a diminished likelihood that bad actors will be able to inflict widespread damage.

So are statists about to get religion on the issue of big government, albeit belatedly?

Time and time again, Trump has been compared to Hitler, to Mussolini, to George Wallace, and to Bull Connor. Time and time again, self-described “liberals” have recoiled at the man’s praise for internment, at his disrespect for minorities and dissenters, and at his enthusiasm for torture and for war crimes. …If one were to take literally the chatter that one hears on MSNBC and the fear that one smells in the pages of the New York Times and of the Washington Post, one would have no choice but to conclude that the progressives have joined the conservatives in worrying aloud about the wholesale abuse of power. …Having watched the rise of Trumpism — and, now, having seen the beginning of violence in its name — who out there is having second thoughts as to the wisdom of imbuing our central state with massive power? …I would genuinely love to know how many “liberals” have begun to suspect that there are some pretty meaningful downsides to the consolidation of state authority. …When Peter Beinart warns that Donald Trump is a threat to “American liberal democracy” — specifically to “the idea that there are certain rights so fundamental that even democratic majorities cannot undo them” — he is channeling the conservative case for the Founders’ settlement, and taking square aim at the Jacobin mentality that would, if permitted, remove the remaining shackles that surround and enclose the state. Does he know this?

I suspect the answer to all these questions is “no.”

There is nothing genuinely liberal about most modern leftists. They will act hysterical about the prospect of Trump holding the reins of power, but I predict they will fall silent if Hillary is in the White House.

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I wrote last month about Secretary of State John Kerry being a giant hypocrite because he’s been a critic of so-called tax havens, yet he and his family benefits immensely from investments in various low-tax jurisdictions.

But perhaps that’s something that Obama requires when selecting people for that position. It turns out that Kerry’s predecessor also utilized tax havens.

Earlier this year, the New York Post editorialized about Hillary Clinton’s attack against tax havens, which they found to be absurd since the Clinton family benefits significantly from places such as the Cayman Islands.

Hillary Clinton last week lunged into her most flagrant fit of hypocrisy yet. …she took new aim at the rich — including their use of tax dodges. She told MSNBC: “We can go after some of these schemes … the kind of…routing income through the Bahamas or the Cayman Islands or wherever.” Huh. …the Clintons’ family wealth has grown big-time thanks to firms with significant holdings in places like . . . the Caymans. As The Daily Caller notes, Bill Clinton spent years as a partner in his (now-ex-) buddy Ron Burkle’s investment fund Yucaipa Global — registered in the Cayman Islands. …It’s a family thing: Chelsea Clinton’s hubby, Marc Mezvinsky, is a partner in a hedge fund with multiple holdings incorporated in the Cayman Islands.

This isn’t to criticize Cayman, by the way. It’s one of the best jurisdictions in the world if you want high levels of honest governance and very sensible tax and regulatory policies.

But shouldn’t politicians practice what they preach? So why aren’t Kerry and Clinton instead investing in France or Greece to show their support for high tax burdens?

By the way, the editorial also cited the Clinton family’s house, which is owned by a trust to help dodge the death tax, something that I also called attention to back in 2014.

Let’s shift from taxes to the environment. Writing for Real Clear Politics, Ed Conard takes aim at the moral preening of Leonardo DiCaprio.

Time Magazine released its list of the top 100 Most Influential People and placed Leonardo DiCaprio on the cover of its magazine for the personal example he sets on climate change. How Ironic! …According to the leaked Sony documents for example, DiCaprio took six private roundtrip flights from Los Angeles to New York over a 6-week period and, a private jet to the 2014 World Economic Forum in Davos Switzerland. Pictures of him vacationing on big yachts… What hypocrisy! He enjoys the very luxuries that he admonishes others not to indulge.

Oh, wait, he buys carbon offsets, the modern version of purchasing an indulgence.

But Mr. Conard is not very impressed by that bit of moral preening.

So who really paid for DiCaprio’s grossly polluting ways? The rest of the world of course, not DiCaprio. …A person’s consumption is their true cost to the rest of society, not their income, nor their unspent wealth. Does the tax DiCaprio imposes on himself for polluting the world reduce his polluting consumption? Hardly! In fact, it encourages more of it. …DiCaprio, and others like him, buy carbon offsets to sooth their guilt—guilt they never needed to incur in the first place. …they sooth their guilt by voting to spend someone else’s income helping others. They think they have done a good deed when they have really done nothing at all.

I’m not sure I agree that carbon is pollution, and I also don’t like referring to consumption as a cost, but he’s right on the money about DiCaprio being a fraud or a phony (something that Michelle Fields exposed in a recent interview).

Let’s now shift back to taxes.

When I was in Montreal last year for a conference on tax competition, one of the highlights was hearing Governor Sam Brownback talk about his pro-growth tax policy. My least favorite part of the conference, by contrast, was hearing Margaret Hodge, a politician from the United Kingdom, pontificate about the evils of tax avoidance.

And the reason that was such an unpleasant experience is that she’s a glaring hypocrite. Here are some excerpts from a report published by the International Business Times.

Labour’s Margaret Hodge was, according to The Times, among the beneficiaries in 2011 of the winding-up of a Liechtenstein trust that held shares in the private steel-trading business set up by her father. The Times reports that just under 96,000 Stemcor shares handed to Hodge in 2011 came from the tiny principality, which is renowned for low tax rates. Three quarters of the shares in the family’s Liechtenstein trust had previously been held in Panama, which Ms Hodge described last month as “one of the most secretive jurisdictions” with “the least protection anywhere in the world against money laundering”.

Let’s close by identifying one more hypocritical “champagne socialist” from the United Kingdom, as reported by the U.K.-based Telegraph.

Dame Vivienne is now accused of hypocrisy over tax avoidance allegations that put her in direct conflict with one of the Green Party’s main policies. The most recent company accounts show Dame Vivienne’s main UK business is paying £2 million a year to an offshore company set up in Luxembourg for the right to use her name on her own fashion label. Tax experts have described the arrangement as “tax avoidance” that cheats the UK Treasury out of about £500,000 a year. The model is similar to one used by Starbucks, the coffee chain, which found itself at the centre of a protest over its use of Luxembourg to reduce its tax bill in the UK. …One City accountant, who studied the accounts of Vivienne Westwood Ltd, said: “This has to be tax avoidance. Why else would you make these payments to a company in Luxembourg? It makes the Green Party hypocrites for taking her money and Westwood a hypocrite for backing a party with policies she does not appear to endorse.”

So we can add Ms. Hodge and Ms. Vivienne to the list of American leftists who also utilize tax havens to minimize their tax burdens.

And all of the people above, as well as those above, will be charter members of the Statist Hall of Fame whenever I get around to setting up that page.

And there are a lot more that deserve to be mocked for their statist hypocrisy.

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I’m a proud advocate and defender of capitalism for the simple reason that it is a system that is consistent with human freedom while also producing mass prosperity that was unimaginable for much of human history.

Jurisdictions that embrace capitalism enjoy great progress while nations that veer in the other direction suffer economic decline, as vividly demonstrated by comparisons such as the relative performance of Hong Kong and Argentina.

And, for what it’s worth, the Princess of the Levant even says capitalism is “a sexy word.”

But not everybody agrees.

A column by Greg Sargent in the Washington Post has some very depressing poll numbers.

…the Harvard Institute of Politics has released a new poll of young voters… One key finding in the poll, which surveyed over 3,000 people from ages 18-29, is that these young people see a robust role for government in guaranteeing a right to a basic standard of living, and majorities of them see a large or moderate federal role in regulating the economy and access to health care and higher education. …A narrow majority of respondents in Harvard’s poll said they did not support capitalism.

Writing for Mic, Marie Solis looks at these recent poll numbers and wonders if the real issue is whether “capitalism” is simply an unpalatable word.

A new Harvard University survey found 51% of the participants between the ages 18 and 29 said they do not support capitalism. …The university’s results echo recent findings from Republican pollster Frank Luntz, who surveyed 1,000 Americans between the ages of 18 and 26 and found that 58% of respondents believed socialism to be the “more compassionate” political system when compared to capitalism. …the results may be more indicative of a shifting connotation for the word “capitalism” itself. “The word ‘capitalism’ doesn’t mean what it used to,” he said. “You don’t hear people on the right defending their economic policies using that word anymore.”

Not so fast. I still use “that word.”

But should I? James Pethokoukis of the American Enterprise Institute is sympathetic to the notion that there’s a perception problem. He speculates that the real problem is that capitalism now has a negative connotation.

America’s millennials are hardly some fifth column of communist sympathizers. Nor are they idiots. But they are at least a bit skeptical of “capitalism.” …Yet, oddly, many of those same capitalism skeptics also hold views similar to those of any Ayn Rand-loving free marketeer. For example: Less than a third believe government should play a large role in regulating the economy, reducing income inequality, or stimulating economic growth. Likewise, just a third said they supported socialism.

I fear Pethokoukis is being too optimistic in his reading of the polling data. When you review the questions in the poll and add together those who want a “large” role for government with those who favor a “moderate” role for government, they overwhelm the advocates of laissez-faire who say government should play “little to no role.”

Though maybe I’m just being a pessimist since the folks who want a “moderate” role may think the government today already is playing a “large” role and therefore would want to reduce the size and scope of Washington (though the fact that many people actually blame deregulation for the financial crisis, notwithstanding all the evidence to the contrary, makes me think that would be a Pollyannish interpretation of the polling data).

In any event, let’s return to the issue of whether capitalism is akin to a toxic brand.

Maybe one problem here is the word “capitalism” and what it evokes in the aftermath of the Great Recession and Wall Street bailout. Maybe “capitalism” really isn’t the right word for the free enterprise system, the deep magic that has made America the richest, most powerful nation on Earth. Indeed, wherever and whenever there’s been a bit of economic freedom, amazing things have happened — from Europe in the 1800s to China and India in the late 20th century. …Maybe millennials aren’t capitalists as much as they are “innovists” or “innovationists.” They believe the same dynamic economic system that created those amazing panes of internet-connected glass in their pockets will also create a better world.

It galls me that young people blame capitalism for the financial crisis. Have they ever heard of the Federal Reserve? Or Fannie Mae and Freddie Mac?

Blaming capitalism for the recent mess is like blaming the Red Cross for tornadoes. Sounds like millennials don’t know the difference between capitalism and cronyism.

But I’m digressing again. Time to get back to the central topic. Elizabeth Nolan Brown weighs in with a column for Reason.

…this new poll finds young people torn between “capitalism” and “socialism,” with perhaps little—or, to be more charitable, an ahistorical—understanding of what either means.

I definitely agree with her than millennials are confused about what these terms mean.

But grousing about their lack of knowledge doesn’t solve the problem. But maybe we can make progress if we learn why young people think the way they do.

…words—especially big, emotionally-laden words describing controversial or complicated concepts—connote different things to different people. When pollsters probe young people further about socialism and capitalism, they tend to find that respondents don’t have clear concepts of these economic philosophies. To many millennials, “socialism” doesn’t mean a government-managed economy but something like what we have now, only with more subsidized health care, student-loan forgiveness, and mandatory paid parental leave. …”Capitalism,” meanwhile, doesn’t simply mean private, for-profit enterprise. …Capitalism is Big Banks, Wall Street, “income inequality,” greed. It’s wealthy sociopaths screwing over the little guy, Bernie Madoff, and horrifying sweatshops in China. …However incomplete or caricatured, these are the narratives of capitalism that millennials have grown up with.

She basically comes to the same conclusion as Pethokoukis.

We certainly need to consider whether and how the word can be reclaimed, or if we’re better served talking about the “market economy,” “private enterprise,” “free trade,” or “entrepreneurship.” Millennials love the word entrepreneur… Unlike anti-capitalists of yore, young people today don’t seem to see a tension between turning a profit and living righteously. …As John Della Volpe, polling director at Harvard, puts it, millennials aren’t “rejecting the concept” of capitalism. “The way in which capitalism is practiced, in the minds of young people—that’s what they’re rejecting.”

Indeed, she shares some 2014 polling data that shows there is 2-1 support for free markets, which is significantly better than the level of support for capitalism.

This analysis is persuasive. If we can convince more people to support good policy by talking about “free markets” rather than “capitalism,” then I have no objection to using a more effective phrase or word.

For what it’s worth, opponents of economic liberty such as Karl Marx were among the first to use the term “capitalist” and they obviously meant it as a slur. Which is another reasons why advocates of economic liberty shouldn’t feel obliged to use that word.

That being said, I’m not sure whether using a different word or phrase will make a big difference. I remember when Social Security reform was a big issue between 1995-2005. Proponents were repeatedly told that “private” and “privatization” were words to avoid, so we all dutifully said we were for “personal retirement accounts.”

Which was fine, but it didn’t stop leftists from using “privatization.” Moreover, polling data showed considerable support for the idea, notwithstanding demagoguery from advocates of the status quo.

Now that we’ve discussed whether “capitalism” is a bad word, let’s shift gears and look at whether “liberal” should be a good word.

Professor Daniel Klein says the word has been hijacked by statists.

Here I make a plea, addressed to conservatives and libertarians, regarding the word liberal: please do not describe leftists, progressives, social democrats, or Democrats as “liberal.” …Words have deep-seated cognates and connotations; they have character and history. …The term liberal has always had an abundance of positive connotations: generous, open-minded, tolerant, big-hearted. …to oppose “liberals” almost seems tantamount to opposing modern, open civilization.

And “liberal” originally was linked to economic liberty and free markets.

The inception of liberal as a political term should be credited to the Scottish historian William Robertson, who published a book in 1769 that uses the term repeatedly to mean principles of liberty and commercial freedom. Adam Smith…used the term repeatedly in a signal way to refer to the sort of policy he advocated, a system that gives a strong presumption to individual liberty, and hence commercial and market freedom. …The principles of Adam Smith spread throughout Europe, as did the name he used for them, “liberal.” …so “liberal” political movements were born.

But then the statists began to call themselves liberals.

At the end of the nineteenth century, and thereafter, there came a dramatic shift. Collectivism or statism was on the rise. …Especially during the period 1880 to 1940, there came great changes in the meanings of words, changes in semantics. …people started using words in new ways, and often even announced and emphasized the newness of their usage and meaning. …the statists arrogated the term liberal to themselves… The literature of the so-called New Liberals declaimed openly against individual liberty and in favor of state collectivism and socialistic reform.

Interestingly, the bastardization of “liberal” has primarily occurred in the United States and Canada.

…when we step outside North America, we see that, by and large, liberal still means liberal…read and listen to European Parliament member Daniel Hannan, who often uses liberal proudly in its original sense, and who never calls leftists “liberal,” or to read the journal of the Institute of Economic Affairs (London)—Economic Affairs: A Journal of Liberal Political Economy. …In Prague, for example, the leading freedom-oriented organization is called the Liberal Institute. Where liberal still means liberal, such as in Europe and Latin America, leftists have no reluctance in calling their imaginary bogeyman “neoliberalism.”

I can vouch for that. I’m often accused of being a “liberal” or “neo-liberal” when speaking overseas. It took a while to get used to it, but now I smile and say “yup, that’s me.”

And I’ll sometimes use “classical liberal” and “libertarian” interchangeably when speaking in the United States. But given the way the meaning of the word has changed over time, I don’t think it would make sense to the average person if I referred to myself as “liberal.”

That being said, I fully agree with Professor Klein that we shouldn’t let leftists get away with using that term to describe themselves. I prefer to describe them as “statists.”

P.S. Tom Sowell has a more controversial, but technically accurate, term to describe modern leftists.

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Since Pope Francis is very critical of capitalism, I suppose it’s fitting that he had a special meeting with America’s crazy-Uncle-in-the-attic, Bernie Sanders.

With my sixth-grade sense of humor, I confess that my initial instinct (perhaps motivated by the famous line from Animal House about “a wimp and a blimp“) was to write about “the Pope and the dope,” but I’m going to be somewhat mature and instead share some excerpts from a very good column by Charles Lane, an editorial writer for the Washington Post.

Here’s some of what he wrote before Senator Sanders’ departure.

Democratic socialist presidential candidate Sen. Bernie Sanders (I-Vt.) will depart soon for the Vatican… In keeping with Pope Francis’s call for a “moral economy,” Sanders has said he’ll discuss “how we address the massive levels of wealth and income inequality that exist around the world, how we deal with unemployment, how we deal with poverty and how we create an economy that works for all people rather than the few.”

While inequality should be a non-issue (assuming income is earned honestly), it is very desirable to reduce poverty and boost wealth for the less fortunate. As such, Lane suggests that the Vermont Senator read some of the research from World Bank economist Branko Milanovic.

…real income went up between 70 percent and 80 percent for those around the world who were already earning at or near the global median, including some 200 million Chinese, 90 million Indians and 30 million people each in Indonesia, Egypt and Brazil. Those in the bottom third of the global income distribution registered real income gains between 40 percent and 70 percent, Milanovic reports. The share of the world’s population living on $1.25 or less per day — what the World Bank defines as “absolute poverty” — fell from 44 percent to 23 percent.

And here are the most important passages.

Was all this progress because of big government? Nope, people were lifted out of poverty because the power of government was reduced.

Did this historic progress, with its overwhelmingly beneficial consequences for millions of the world’s humblest inhabitants, occur because everyone finally adopted “democratic socialism”? …To the contrary: The big story after 1988 is the collapse of communism and the spread of market institutions, albeit imperfect ones, to India, China and Latin America. This was a process mightily abetted by freer flows of international trade and private capital… The extension of capitalism fueled economic growth, which Milanovic correctly calls “the most powerful tool for reducing global poverty and inequality.” And he’s no supply-sider, but instead a left-leaning critic of modern economic orthodoxy — as his new book, “Global Inequality,” makes clear.

The final sentence is worth highlighting. Mr. Milanovic is not a libertarian firebrand. And since Charles Lane is an editorial writer at the Washington Post, it’s safe to assume that he isn’t an advocate of small government either.

For what it’s worth, they’re probably both supporters of something akin to the Nordic Model, which allows for a large welfare state and high tax rates, but otherwise is very sympathetic to free markets (i.e., open trade, light regulation, stable money, strong property rights, etc).

In other words, if we created a scale or a spectrum, there would be a big difference between the crazy left and the rational left. And the socialists and totalitarians would be in their own category.

The flags of the Nordic nations represent the rational left. I’ve put the Greek flag next to Bernie Sanders to represent the crazy left.

I actually had a hard time coming up with an example of a genuine socialist (i.e., government ownership of the means of production) who wasn’t also a totalitarian, but eventually settled on Clement Attlee, the United Kingdom’s misguided post-WWII Prime Minister who nationalized industries.

And Hitler and Stalin obviously are representatives of the totalitarian left.

I’ve placed Obama and Clinton on the spectrum based on what I think they actually believe, not what they say. So even though Hillary and Bernie are singing from the same nutty song sheet, I suspect she’s exaggerating her leftism and he’s downplaying his.

P.S. Returning to our original focus about which policies actually help the poor, Bono also understands that there’s no substitute for free markets.

P.P.S. My goal, of course, is to help rational leftists understand that free markets are just one ingredient in the recipe for prosperity. We also should have small government.

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The debate over socialism shouldn’t even exist. Everywhere big government has been tried, it has failed.

And we have reams of evidence that free-market economies dramatically out-perform statist economies.

Yet the siren song of socialism still appeals to a subsection of the population, either because of naiveté or an unseemly lust to exercise power over others.

So let’s once again wade into this debate that shouldn’t be happening.

Writing for the Dallas Morning News, former Texas A&M economics professor Svetozar Pejovich explains that adding “democratic” to “socialism” doesn’t change anything. What really matters is that Sanders and his supporters want bigger government. And that never ends well.

Sanders’ policies…are…incompatible with the American tradition of self-responsibility, self-determination and limited government under a rule of law. …putting those premises into practice requires the acceptance of two institutions: the redistribution of income initiated and monitored by federal government, and the attenuation of private property rights.

And these policies don’t lead to good results, something that Professor Pejovich understands very well given that he was born in the former Yugoslavia.

Of course, the lunch is not free. The short-run consequence of redistributive policies is erosion of the link between performance and reward, which, in turn, reduces economic efficiency and the pie available for redistribution. The long-run cost is the transformation of the American culture of self-responsibility and self-determination into the culture of dependence on the state. …Sanders’ democratic socialism bribes people to voluntarily accept the erosion of private property rights…via laws and regulations. Those law and regulations (such as reducing the right of employers to fire workers at will, giving tenants rights at the expense of apartment owners, granting special privileges to some rent seeking groups, etc.) transfer some decision-making rights from owners to public decision makers, or non-owners. …In the end, the attenuation of private property rights impedes the flow of resources to higher-valued uses and reduces economic efficiency of the economy.

Allow me to augment Professor Pejovich’s analysis by elaborating on how these policies hurt the economy. The redistributionism doesn’t lead to immediate disaster, but it inevitably lures a larger share of the population into dependency over time and the higher taxes required to finance the growing welfare burden gradually erode incentives for work, saving, investment, and entrepreneurship. The combination of those factors slowly but surely dampens the economy’s growth. And as I’ve repeatedly explained, even small difference in growth have enormous long-run implications for a nation’s prosperity.

And there comes a point, particularly given modern demographics, that the system breaks down.

The erosion of property rights has a similar effect, largely by causing a reduction in both the level of investment and the quality of investment. And since every economic theory agrees that capital formation is a key to long-run growth, the net effect of “democratic socialism” it to further weaken potential growth.

What’s especially frustrating is that leftists then point to reduced growth rates as an argument for even bigger government.

I’m not joking. Robert Kuttner of the American Prospect argues that young people are attracted to Sanders because their economic outlook is so grim.

Bernie Sanders has…broad and enthusiastic support, especially among the young…voters who say they are attracted rather than repelled by Sanders’s embrace of socialism. …this is the stunted generation—young adults venturing into a world of work, loaded with student debt, unable to find stable jobs or decent careers.

I basically agree that the economic situation for young people is tepid, but I’m baffled that this is an argument for bigger government since the statist policies of both Bush and Obama deserve much of the blame for today’s sub-par economy.

In other words, we’re seeing Mitchell’s Law in action. Politicians have adopted bad policies that have led to stagnation and now they’re using the resulting economic malaise as an argument for even bigger government. And young people, who are among the biggest victims, are getting seduced.

I’m tempted to simply say young people are too stupid to be allowed to vote, but instead let’s take a serious look at why so many of them are misguided.

Christine Emba of the Washington Post has a column pointing out young people openly embrace socialism.

…it seems that socialism is cool. …socialism does seem to have become the political orientation du jour among voters of a certain (read: young) age. …A January YouGov poll asked respondents whether they had a “favorable or unfavorable” view of socialism and capitalism. While capitalism rated significantly higher overall, those younger than 30 gave socialism higher marks: Forty-three percent viewed it very or somewhat favorably, compared with only 32 percent for capitalism.

The problem is that both Ms. Emba and a lot of young people apparently believe the nonsense spouted by people like Robert Kuttner. They actually blame capitalism for the economic weakness caused by government intervention.

…simple economics have pushed a younger generation of voters to embrace what used to be a dirty word. The past 10 years – for many millennials, the formative years of adulthood – have eroded the credibility of economic [classical] liberalism. The financial crisis and recession weakened youths’ faith in markets… Yet they were also told that the solution to the these problems was more [classical] liberal capitalism. But those solutions haven’t delivered… Underemployment, excessive debt, out-of-reach health care and delayed life goals are young peoples’ defining concerns, and the traditional assumption – that free markets and limited state intervention lead to good outcomes – just doesn’t ring true to them.

Wow, it’s bad enough that people blame free markets for a government-caused financial crisis, but Ms. Emba (and perhaps others) think that we’ve tried capitalist “solutions” after the crisis.

What planet is she on? Can she identify one thing that Obama has done that would count as a free-market response to the financial crisis? The fake stimulus? Obamacare? Dodd-Frank?

By the way, she points out that young people presumably have no idea what socialism actually entails. They just want traditional welfare-state redistributionism.

…for many millennials, “socialism” is simply shorthand for “vaguely Scandinavian in the best way” – free health care, free education and subsidized child care, a state that supports its citizens rather than leaving them at the mercy of impersonal corporations bent on profit. …the socialism that most millennials want is simply a return to a more muscular form of traditional liberalism, one that would have felt right at home in the administration of FDR.

Given that President Roosevelt was either malicious or ignorant, and given that his policies lengthened and deepened the Great Depression, I’m not exactly encouraged that millennials merely want traditional liberal (as opposed to classical liberal) policies.

Though it’s worth noting (in a very depressing sense) that a lot of young people are embracing more totalitarian versions of socialism. Here are some brief excerpts from a longer article in Vox.

Jacobin has in the past five years become the leading intellectual voice of the American left, the most vibrant and relevant socialist publication in a very long time. …That’s an opportunity that Jacobin is seizing to great effect, even if Sanders isn’t far enough left for their taste. The Sanders campaign “could begin to legitimate the word ‘socialist,’ and spark a conversation around it, even if Sanders’s welfare-state socialism doesn’t go far enough,” Sunkara wrote earlier this year. …Jacobin…now boasts a print circulation of about 20,000 and has gained about 400 more subscribers a week since Bernie started his ascent in November. …even if Bernie fades, there’s still a constituency for socialist ideas — a fact that could turn out to be much more important than the Sanders campaign itself.

And they really, really mean socialism. With all its warts.

“It is unapologetic about its interests in political economy and Marxism…,” Brooklyn College professor Corey Robin, a longtime leftist writer who signed on early and is now a contributing editor at Jacobin, says. …any Jacobin editor would be the first to tell you, Sanders is a normal labor liberal, or at most a social democrat. He doesn’t go far enough. …What we really need, Sunkara insists, is democratic worker control of the means of production. …A number of Jacobin’s contributors are members of the International Socialist Organization (ISO), the largest Trotskyist group in North America. …Sunkara’s allegiances…lie with Democratic Socialists of America (DSA). …Frase recalls working with the Freedom Road Socialist Organization, a post-Maoist group, while in high school.

I’m not sure to be more amazed that some people really believe this evil nonsense or more worried that Jacobin may actually represent the future of the left in America.

Time for some good news.

My Cato colleague Emily Ekins writes that young people are not hopeless idiots, at least not all of them. Though she phrases her argument in a much nicer fashion in a column she wrote for the Washington Post.

She starts with grim polling data.

A national Reason-Rupe survey found that 53 percent of Americans under 30 have a favorable view of socialism compared with less than a third of those over 30. Moreover, Gallup has found that an astounding 69 percent of millennials say they’d be willing to vote for a “socialist” candidate for president — among their parents’ generation, only a third would do so.

But she notes that for the most part they don’t actually believe in real socialism.

…millennials tend to reject the actual definition of socialism — government ownership of the means of production, or government running businesses. Only 32 percent of millennials favor “an economy managed by the government,” while, similar to older generations, 64 percent prefer a free-market economy. …what does socialism actually mean to millennials? Scandinavia. …In contrast with the 1960s and ’70s, college students today are not debating whether we should adopt the Soviet or Maoist command-and-control regimes that devastated economies and killed millions.

In other words, the nutjobs at Jacobin are still a minority on the left.

Best of all, young people are capable of learning lessons from the real world.

…as millennials age and begin to earn more, their socialistic ideals seem to slip away. …millennials become averse to social welfare spending if they foot the bill. As they reach the threshold of earning $40,000 to $60,000 a year, the majority of millennials come to oppose income redistribution, including raising taxes to increase financial assistance to the poor. …When tax rates are not explicit, millennials say they’d prefer larger government offering more services (54 percent) to smaller government offering fewer services (43 percent). However when larger government offering more services is described as requiring high taxes, support flips and 57 percent of millennials opt for smaller government with fewer services and low taxes, while 41 percent prefer large government.

And she explains that previous generations also have shifted away from big government.

In the 1980s, the same share (52 percent) of baby boomers also supported bigger government, and so did Generation Xers (53 percent) in the 1990s. Yet, both baby boomers and Gen Xers grew more skeptical of government over time and by about the same magnitude. Today, only 25 percent of boomers and 37 percent of Gen Xers continue to favor larger government.

My two cents, for what it’s worth, is that the infatuation with socialism (however defined) among the young underscores why it is so important to “win the narrative” about the causes of the financial crisis and the resulting weak economy.

To the extent that voters actually think capitalism caused the mess in 2008, they will be susceptible to statist ideologies.

In some sense, this is history repeating itself. The Great Depression largely was caused by misguided policies from Hoover and Roosevelt. Yet the left very cleverly peddled the story that capitalism had failed. As a result, generations of voters were more sympathetic to big government.

Thank goodness there are places such as the Cato Institute that are working to correct the narrative, not only about the Great Depression, but also with regards to the financial crisis.

Let’s close with a clever description of the difference between various strains of statism.

I put forth a similar analysis back in 2014, but I confess it wasn’t as clever as the above image. Or as clever as the sign I recently shared.

And let’s not forget the famous two-cow explanation of various ideologies.

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I wrote yesterday that many European nations are doomed to demographics and fiscal chaos, but a lot of people don’t care that much about the future.

Bernie Sanders, for instance, looks at nations such as Denmark and Sweden today and says that America should copy their expansive welfare states.

Is he right?

Well, it depends on the parameters. If, for some reason, somebody was holding a gun to my head and demanding that we copy the policies of a nation from the European Union, the Nordic countries would be among my top choices. Yes, their welfare states are too large, but they somewhat compensate for that mistake by having very pro-free market policies in other areas.

That being said, Ireland and the United Kingdom have the most economic freedom among EU nations, and Switzerland would be at the top if the choice was broadened to non-EU nations in Europe.

But I’m digressing. Let’s get back to whether people in places such as Denmark (or anywhere else in Europe) enjoy more prosperity than their American counterparts.

Mark Perry of the American Enterprise Institute has put together some apples-to-apples data suggesting the answer is no. At least if the goal is more economic output and higher living standards.

…most European countries (including Germany, Sweden, Denmark and Belgium) if they joined the US, would rank among the poorest one-third of US states on a per-capita GDP basis, and the UK, France, Japan and New Zealand would all rank among America’s very poorest states, below No. 47 West Virginia, and not too far above No. 50 Mississippi. Countries like Italy, S. Korea, Spain, Portugal and Greece would each rank below Mississippi as the poorest states in the country.

And here’s the table Mark prepared.

As a quick caveat, it’s worth noting that there’s not a one-to-one link between gross domestic product and actual living standards.

Some of the economic activity in energy-rich states such as North Dakota, for instance, translates into income for shareholders living elsewhere in America.

But if you look at the U.S. average ($54,629), it obviously is higher than economic output in European nations.

And if you prefer direct measures of living standards, then data on consumption from the OECD also shows that America is considerably more prosperous.

None of this suggests that policy in America is ideal (it isn’t), or that European nations are failures (they still rank among the wealthiest places on the planet).

I’m simply making the modest – yet important – argument that Europeans would be more prosperous if the fiscal burden of government wasn’t so onerous.

And I’m debunking the argument that we should copy nations such as Denmark by allowing a larger government in the United States (though I do want to copy Danish policies in other areas, which generally are more pro-economic liberty than what we have in America).

Shifting to a different topic, Mark Perry also takes a shot at Donald Trump, who seems to think that other nations are “winning” over America because of trade.

…maybe we should remind him that Mexico and China, as US states, would both be far below our poorest state — Mississippi — by 51% and 62% respectively for GDP per capita; and Japan would be barely above our poorest state — Mississippi. Using GDP per capita as a measure of both economic output per person and of a country’s standard of living, America is winning quite handsomely.

Excellent point. It’s a sign of American prosperity that we can afford to buy more from other nations than they can afford to buy from us.

It’s also a sign of prosperity that, when they do earn American dollars, foreigners often choose to invest those funds in the American economy (remember, the necessary flip side of a “trade deficit” is a “capital surplus”).

P.S. Speaking of European prosperity, here’s a fascinating map I saw on Twitter. The reporter from the Wall Street Journal who shared it remarked that “Purple areas are rich as US states. Yellow areas poorer than Mexico.” In other words, The few dark areas (a handful in Germany and one each in a few other nations) are the only parts of Europe that are economically equal to the U.S.

P.P.S. Here’s another map, concentrating just on Northern Europe.

I don’t have a policy lesson. Simply an observation that the United Kingdom has one really rich region (Greater London) and quite few relatively poor regions.

P.P.P.S One final comment. Long-run growth matters. Hong Kong and Singapore, for instance, used to be a poor jurisdictions. But free markets and small government have produced decades of strong growth. And now these places are among the richest places on the planet. Richer not only than Europe, but even more prosperous than the United States.

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