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Archive for the ‘Statism’ Category

Why are there so few liberty-oriented societies compared to the number of places with statist governments?

And why does it seem like the size and scope of government keeps expanding around the world?

If I’m feeling optimistic, I’ll disagree with the tone of those questions. There are reasons to be cheerful, after all. the Soviet Empire collapsed and there’s solid data that global economic liberty has increased over the past few decades. And for those who care about evidence, there’s a slam-dunk argument that smaller government means more prosperity.

But if I’m feeling pessimistic, I’ll look at grim numbers suggesting that the burden of government automatically will expand because of demographic change. And I also worry about eroding societal capital, with more and more people thinking it’s okay to live off the government. And let’s not forget “public choice,” the theory that explains why politicians have an incentive to make government bigger.

I go back and forth on whether the glass is half full or half empty, and I’m not sure which side is winning. All I can say for sure is that Americans are getting increasingly polarized as we have big fights about the proper role of government.

Which is why I’ve always thought decentralization would be a good idea. No just for policy reasons, but also for domestic tranquility. All the leftists could move to places such as California, Illinois, and New Jersey and vote themselves Greek-style government. And all the advocates of limited government could move to more laissez-faire states such as New Hampshire, Texas, and South Dakota.

We don’t need a national divorce, not even the humorous version. We just need Swiss-style federalism.

But statists will never agree to that approach. And these two sentences from Reddit‘s Libertarian page succinctly explain the left’s opposition.

This guy nails it.

Libertarians have no objection to a bunch of statists creating some sort of socialist or communist mini-society, so long as it’s voluntary. Indeed, we’ve periodically had experimental societies in America based on Marxist principles. Starting with the Pilgrims (who learned from their mistake). And I still laugh every time I think about Bernie Sanders getting ejected from a hippie commune because he was too lazy to do his share of the common work.

But this tolerance isn’t a two-way street. Libertarians will let socialists create statist systems inside a free society, but the left won’t allow libertarian outposts in statist societies.

Heck, our statist friends don’t even like it when other nations have pro-market policy. That’s one of the reasons international bureaucracies always persecute so-called tax havens. Folks on the left may be misguided, but they’re usually not stupid. They know that statist systems will quickly fail if productive people have the ability to move themselves (or at least their money) across national borders.

The bottom line is that federalism is good because it means people can easily move when a government imposes bad policy. This is also a recipe for tolerance and tranquility, though only one side sees it that way.

P.S. The left is so hostile to tax havens that a bureaucrat from the U.S. Treasury accused me of “being disloyal” to America. A former Senator said my actions to defend low-tax jurisdictions were akin to “trading with the enemy.” And the bureaucrats at the OECD actually threatened to throw me in a Mexican jail for defending tax competition.

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The good news is that some honest leftists have thrown in the towel and now openly admit that capitalism generates more prosperity.

They still don’t want free markets, of course. For ideological reasons, they continue to push for a big welfare state. But at least they admit their redistributionist policies lead to weaker economic performance. Perversely, they are willing to reduce living standards for poor people so long as rich people suffer even bigger drops in their income (in other words, Thatcher was right).

Many statists, though, realize that this is not a compelling agenda.

So they try to claim – notwithstanding reams of evidence – that bigger government somehow enables more growth.

And they’re crafty. Most of them are clever enough that they don’t embrace full-scale socialism. Instead, they push for an ad hoc approach based on subsidies, bailouts, social engineering, price controls, and other forms of intervention.

If you want to get technical, they’re actually pushing a variant of fascism, with nominal private ownership but government direction and control.

But let’s avoid that loaded term and simply call it cronyism.

In a column for the Washington Post, Nicholas Borroz observes that this approach exists all over the world.

China’s consolidation of its state-owned enterprises (SOEs), Russia’s oligarch-led economy, the proliferation of sovereign wealth funds (SWFs) and growing government intervention in the West are clear indicators of state-led capitalism… Controlling market activity gives governments obvious advantages when it comes to advancing political agendas at home and foreign policy abroad. …SWFs are an important feature of today’s global economic landscape; governments also use them as agents of statecraft. …State-led capitalism is even finding support in the West. …President Trump has bragged that he personally influences firms’ decisions about where to place their factories. …we have entered an era when state-led capitalism is firmly entrenched.

Unfortunately, I think Mr. Borroz is correct.

Though “state-led capitalism” an oxymoronic phrase.

Borroz also notes that the shift to cronyism reverses some of the progress that occurred at the end of the 20th century.

This is a dramatic reversal of the trend from two decades ago. In the 1990s, there was a rush around the world to liberalize economies. Capitalism’s defeat of communism made it seem that unfettered market activity was the key to success.

If you look at the data from Economic Freedom of the World, the period of liberalization actually began in the 1980s, but I’m being a nit-picker.

So let’s shift to parts of his column where I have substantive disagreements.

First, my jaw hit the proverbial floor when I read the part about the International Monetary Fund supposedly being a beacon of free-market reform.

Developing countries signed up with the International Monetary Fund’s structural adjustment programs (SAPs), gaining access to loans in exchange for adopting neoliberal economic prescriptions.

Since I’ve referred to the IMF as the “dumpster fire” or “Dr. Kevorkian” of the global economy, I obviously have a different perspective.

Though, to be fair, the bureaucrats at the IMF generally do advocate for deregulation and free trade. But they are bad news on fiscal policy and oftentimes misguided on monetary policy as well.

But here’s the part of the column that is even more galling. Borroz defends cronyism because free markets allegedly failed.

…a number of factors led to skepticism about free markets. One was the underwhelming developmental effect of SAPs and liberalization. …A further blow to the neoliberal model was a series of financial disasters caused by unrestricted flows of capital, notably the 1997 Asian financial crisis and the 2008 global financial crisis. Perhaps the factor that has most undermined neoliberalism’s attractiveness, though, is…countries with state-led economies, such as China and Russia…remain relevant not despite state intervention but because of it.

This is remarkably wrong. Three big mistakes in a handful of sentences.

  1. When IMF structural adjustment programs fail, that’s an unsurprising consequence of big tax increases, not the fault of capitalism.
  2. Government monetary policy deserves the bulk of the blame for financial crises with Fannie and Freddie also playing a role in the case of America.
  3. China and Russia are relevant from a geopolitical perspective, but their economies could be far more prosperous if government played a smaller role.

Heck, per-capita output in both China and Russia is far below U.S. levels, so the notion that they are role models is amazingly oblivious to reality.

Now let’s review some evidence about the downside of “state-led” economic policy.

The Economist notes that cronyism does not have a very successful track record.

Some argue it makes no sense for a government to place VC bets, directly or otherwise. …Massimo Colombo, an academic who studies government VC in Europe at the Polytechnic University of Milan, …admits that, when results are measured by jobs created or productivity boosted, the private sector is far better at deploying capital. Studying 25,000 government VC investments in 28 countries, between 2000 and 2014, he and colleagues concluded that they worked only when they did not compete directly with the private sector.

And research from three economists at Italy’s central bank specifically measured the loss of economic efficiency when governments operate and control businesses.

In OECD countries public services, especially at local level, are often provided by public enterprises (Saussier and Klien, 2014). Therefore, the efficiency of LPEs is important for the overall efficiency of the economy and the sustainability of public finances. …we are able to build a very detailed dataset that allows us to compare firms that are observationally equivalent, apart from the ownership indicator, thus making possible the definition of the appropriate set of comparison firms. …Although we focus on Italy, which represents a particularly interesting case to analyze for several reasons, the approach we have followed in this paper may be easily adapted to other countries. We find that the performance of Italian LPEs, measured in terms of total factor productivity, is on average lower than that of private enterprises by about 8%… our results show that the ownership structure is more important than the market structure in explaining the performance of LPEs with respect to their private sector counterparts. …Our results imply that policy measures aimed at privatizing LPEs (totally or, at least, partially) can improve their performance, by reducing the level of public control and promoting cost-benefit analysis for investments.

In other words, the type of statism doesn’t really matter.

The inevitable result is less growth and prosperity.

Which is why I advocate “separation of business and state.”

Simply stated, I want to reverse the data in this chart because I understand the data in this video and this chart.

P.S. If my statist friends disagree, accept my challenge and please show me a cronyist nation that is outperforming a market-oriented nation.

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Yesterday’s column looked at the continued government-caused decay of Venezuelan society. To put it mildly, it’s a very sad story of how pervasive statism can destroy a country.

I also wondered whether leftists such as Bernie Sanders, Michael Moore, and Jeremy Corbyn will ever change their minds and (hopefully) apologize for giving aid and comfort to the evil Chavez-Maduro regime. (I’m not holding my breath.)

Today, let’s revisit the issue.

But instead of citing news reports, let’s look at four videos on the tragedy in Venezuela. We’ll start with Reason‘s excellent summary.

I like how the video concludes with a warning that America should avoid the same mistakes.

And that’s not just a throwaway line. Venezuela did not become a basket case overnight. There wasn’t an on-off switch that Chavez or Maduro used to turn the country from capitalism to statism.

Instead, it was the combined effect of decades of bad policy decisions.

In other words, gradual deterioration eventually turned into major disaster. Which may help explain why I’m so distressed about the creeping statism of the Bush and Obama (and perhaps Trump) years.

But I’m digressing. Let’s get back to the videos. Our next item is a report from the New York Times. It’s disappointing (but not overly surprising) that there’s no mention of the big-government policies that have reduced people to scouring for garbage, but you will learn about the horror of daily life for the poor.

Our next video, from Prager University, is a very straightforward description of how socialism has destroyed Venezuela.

I especially like how she concludes with a warning about how big government erodes societal capital, which then makes it very hard to restored liberty.

And the part about classifying involuntary weight loss as the “Maduro Diet” also was a highlight, at least if you like dark humor.

Our last video is an excerpt from a speech by a Venezuelan economist.

The part that grabbed my attention was the downward cycle of government-created inflation and government-imposed minimum-wage hikes. One bad policy leading to another bad policy, over and over again. Lather, rinse, repeat.

And while he doubtlessly exaggerated when he said that every single person in Venezuela would be happy to eat out of America’s trash cans, it’s still horrifying that a big chunk of the population would welcome such an opportunity.

So where will all this lead? At the start of the year, I expressed hope that the people of Venezuela would rise up and overthrow their tyrannical government. I don’t know if I should turn that hope into a prediction, but it certainly seems like it is only a matter of time before something dramatic happens.

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As far as I’m concerned, everything you need to know about capitalism vs. statism is captured in this chart comparing per-capita economic output in Chile and Venezuela.

Ask yourself which country offers more opportunity, especially for the poor? The obvious answer is Chile, where poverty has rapidly declined ever since the country shifted to free enterprise. In Venezuela, by contrast, poor children die of malnutrition thanks to pervasive interventionism.

Indeed, having shared several horrifying stories of human suffering and government venality from Venezuela (including 28 separate examples in April 2017 and 28 different separate examples in December 2017), I’ve reached the point where nothing shocks me.

So now I mostly wonder whether leftist apologists feel any shame when they see grim news from that statist hellhole.

For instance, what does Joe Stiglitz think about this report from the Miami Herald?

At 16, Liliana has become the mother figure for a gang of Venezuelan children and young adults called the Chacao, named after the neighborhood they’ve claimed as their territory. The 15 members, ranging in age from 10 to 23, work together to survive vicious fights for “quality” garbage in crumbling, shortage-plagued Venezuela. Their weapons are knives and sticks and machetes. The prize? Garbage that contains food good enough to eat. …A year ago, the gang was “stationed” around a supermarket at a mall called Centro Comercial Ciudad Tamanaco that generates tons of garbage. But a feared rival gang from the neighborhood Las Mercedes also wanted the garbage.

And what does Bernie Sanders think about this story from NPR?

The Pharmaceutical Federation of Venezuela estimates the country is suffering from an 85 percent shortage of medicine amid an economic crisis… The entire Venezuelan health care system is on the verge of collapse, says Francisco Valencia, head of the public health advocacy group Codevida. Some hospitals lack electricity, and more than 13,000 doctors have left Venezuela in the past four years in search of better opportunities. “They don’t give food to the patients in the hospital…” Government data shows infant mortality rose by 30 percent in 2016… The International Monetary Fund predicts inflation will soar to 13,000 percent this year and the economy will shrink by 15 percent. …The monthly minimum wage for many Venezuelans is now equal to $3, according to the AP. …Maduro blames the country’s growing crisis on…the U.S…leading an effort to wipe out socialism in Venezuela.

I’d be curious to know what Michael Moore thinks about this news from CNN?

Venezuela’s devastating food crisis means wheat flour has become a rare commodity in the country. Some churches have run out of the ingredient needed to make the sacramental bread that is central to celebrating the Holy Eucharist… So, members of the Catholic diocese of Cúcuta, Colombia, braved heavy rain this week to deliver the wafers over a bridge that connects the two countries… Venezuela’s economic crisis, fueled by a decline in oil production, shows no signs of improvement.People are starving because of routine food shortages. They are dying in hospitals because basic medicine and equipment aren’t available.

And what does Jeremy Corbyn think about this Bloomberg report?

Ruiz’s weekly salary of 110,000 bolivares — about 50 cents at the black-market exchange rate — buys him less than a kilo of corn meal or rice. His only protein comes from 170 grams of canned tuna included in a food box the government provides to low-income families. It shows up every 45 days or so. “I haven’t eaten meat for two months,” he said. …Hunger is hastening the ruin of Venezuelan’s oil industry as workers grow too weak and hungry for heavy labor. With children dying of malnutrition and adults sifting garbage for table scraps, food has become more important than employment, and thousands are walking off the job. …Venezuela, a socialist autocracy that once was South America’s most prosperous nation, is suffering a collapse almost without precedent.

Or how about getting Sean Penn‘s reaction to this story from the New York Times?

For the past three weeks, Wilya Hernández, her husband and their daughter, 2, have been sleeping on the garbage-strewn streets of Cúcuta, a sprawling and chaotic city on Colombia’s side of the border with Venezuela. Though Antonela, the toddler, often misses meals, Ms. Hernández has no desire to return home to Venezuela. …“I sold my hair to feed my girl,” Ms. Hernández said, pulling back her locks to reveal a shaved head underneath, adding that wigmakers now walk the plazas of Cúcuta where many Venezuelans congregate, wearing signs advertising that they give cash for hair. …“If I can’t afford to go the bathroom, I’ll go on the street,” Ms. Hernández added. “That’s when guys walking by say creepy things.”

I wonder if Noam Chomsky has any comments about this Washington Post story?

A friend recently sent me a photograph…, just a blurry cellphone shot of trash… And yet I can’t stop thinking about it, because strewn about in the trash are at least a dozen 20-bolivar bills, small-denomination currency now so worthless even looters didn’t think it was worth their time to stop and pick them up. …according to the “official” exchange rate, …each of those bills is worth $2. In fact, as Venezuela sinks deeper…into…hyperinflation…, bolivar banknotes have come to be worth basically nothing: Each bill is worth about $0.0001 at the current exchange rate… It’s easy to see why the thieves left them behind.

Last but not least, I wonder what Jesse Jackson thinks about this news from the U.K.-based Guardian?

More than half of young Venezuelans want to move abroad permanently, after food shortages, violence and a political crisis escalated to new extremes in 2017, according to a new survey. Once Latin America’s richest country, Venezuela’s economy is now collapsing… One of the most painful effects of the current crisis has been widespread hunger. In 2015, when inflation and food shortages were well below current levels, nearly 45% of Venezuelans said there were times when they were unable to afford food; in the latest study, that figure had risen to 79% – one of the highest rates in the world. …Norma Gutiérrez, a radiologist in eastern Caracas, is one of those…would-be migrants. Acute shortages in the hospital where she works depress her, and she says the idea of emigrating crosses her mind at least once a week.

By the way, in an example of unintended humor, the Socialist Party of Great Britain has a ready-made answer to all those questions. The misery is the fault of capitalism. I’m not kidding.

And folks on the establishment left occasionally try to imply that it’s all the result of falling oil prices.

Two years ago, I concocted a visual showing the “Five Circles of Statist Hell” and speculated that Venezuela was getting close to the fourth level. Though I still don’t think it’s nearly as bad as North Korea.

P.S. Since I mentioned unintentional humor, you’ll be amused to know a “Happy Planet Index” created by radical environmentalists places Venezuela above the United States.

P.P.S. And here’s some intentional dark humor about hunger in Venezuela.

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I’m not a fan of conspiracy theories. When people ask me whether there is some sinister, behind-the-scenes cabal running Washington, I tell them that petty corruption, self interest, and “public choiceare much better explanations for the nonsensical policies being imposed on the country.

So you won’t be surprised that rhetoric about the “deep state” rubs me the wrong way. If the term simply was used to describe D.C.’s bloated, self-interested, and left-leaning bureaucracies, that would be okay. But is seems that the phase also implies some sort of secret master plan on the part of shadowy insiders.

To be blunt, the people in Washington don’t have the competence to design, implement, and enforce any type of master plan. Yes, we have a Leviathan state, but it’s much more accurate to think of Uncle Sam as a covetous, obese, and blundering oaf (as illustrated by my collection of cartoons).

That being said, that oaf is not a friend of liberty, as explained in an article published by the Federalist.

…to make a government job more like the ones the rest of us have will require the president and Congress to undo more than a century of misguided, anti-democratic, and unconstitutional laws governing the civil service. …the bulk of the civil service—2.8 million bureaucrats—has become a permanent class of powerbrokers, totally unaccountable to the winds of democratic change. …incompetence and corruption are the least of the problems with the modern civil service. With 95-99 percent of political donations from government employees going to Hillary Clinton in the last election, it looks less like a system of apolitical administrators and more like an arm of the Democratic Party. …Civil service protections…have created a system that grows government and advances left-wing causes regardless of who the people elect.

Moreover, there is a structural feature of the Washington bureaucracy that gives it dangerous powers.

John Tierney’s column in the Wall Street Journal explains the problem of the “administrative state.”

What’s the greatest threat to liberty in America? …the enormous rogue beast known as the administrative state. Sometimes called the regulatory state or the deep state, it is a government within the government… Unelected bureaucrats not only write their own laws, they also interpret these laws and enforce them in their own courts with their own judges. All this is in blatant violation of the Constitution… Mr. Hamburger, 60, a constitutional scholar…says, sitting in his office at Columbia Law School… “The government can choose to…use an administrative proceeding where you don’t have the right to be heard by a real judge or a jury and you don’t have the full due process of law…” In volume and complexity, the edicts from federal agencies exceed the laws passed by Congress by orders of magnitude. “The administrative state has become the government’s predominant mode of contact with citizens,” Mr. Hamburger says. …“The framers of the Constitution were very clear about this,” Mr. Hamburger says…”Congress cannot delegate the legislative powers to an agency, just as judges cannot delegate their power to an agency.”

George Will elaborates, noting that “administrative law” is an affront to the Constitution’s principle of “rival branches.”

…the administrative state distorts the United States’ constitutional architecture…Clarence Thomas…is urging the judicial branch to limit the legislative branch’s practice of delegating its power to the executive branch. …This subject is central to today’s argument between constitutionalists and progressives. …Today, if Congress provides “a minimal degree of specificity” in the instructions it gives to the executive, the court, Thomas says, abandons “all pretense of enforcing a qualitative distinction between legislative and executive power.” …the principles Thomas has articulated “attack the very existence of the modern administrative state.” This state, so inimical to conservatism’s aspiration for government limited by a constitutional structure of rival branches… Woodrow Wilson…became the first president to criticize America’s founding, regretted the separation of powers because he thought modern government required a clerisy of unfettered administrators. …Today we are governed by Wilson’s clerisy, but it does not deliver what is supposed to justify the overthrow of James Madison’s constitutional system — efficient, admirable government.

Peter Wallison of the American Enterprise Institute adds some cogent analysis.

Although the Constitution places the federal legislative power in Congress, it is now increasingly — and alarmingly — flowing to administrative agencies that, unlike Congress, are not directly accountable to the public affected by their decisions. Unless we can find a solution to this problem—a way to curb and cabin the discretionary power of administrative agencies —decentralization and individual self-determination will eventually be brought to an end. …The framers believed that the tripartite structure of the federal government would be enough to prevent any one of the three branches from consolidating the power of government and becoming a danger to liberty. But with the growth of the administrative state, we may now be seeing exactly the consolidation of powers that Madison feared. …the judicial branch is supposed to be the final interpreter of the Constitution and thus the objective protector of the framework the Constitution ordains. But unfortunately, modern courts have generally failed to perform this role… America is an exceptional country in part because its constitutional framework has, until relatively recently, limited the government’s ability to centralize its control and restrain the nation’s diversity. If we are to avoid a dramatic over-centralization of power, the growth of the administrative state must be restrained.

In an article for National Review, Stanley Kurtz delves into the topic.

the gist of the growing conservative critique of the administrative state…focuses on a runaway bureaucracy’s threat to constitutional government. Congress has improperly delegated much of its law-making power to bureaucrats, who in turn have abusively expanded this authority. The courts, for their part, have turned a blind eye to the administrative power-grab. Meanwhile, agencies staffed by unelected bureaucrats now operate de facto courts. In effect, these agencies negate the separation of powers by simultaneously exercising legislative, executive, and judicial functions, the very definition of authoritarian rule. …governors and state legislators can be unaware of policy end-runs imposed by federal agreements with a state’s own bureaucrats. At both the state and federal levels, then, bureaucracy has broken loose and effectively turned into a national fourth branch of government. …The Founders designed our federalist system to secure liberty by dividing and disbursing power, and by ensuring that local and state governments would remain more accountable to citizens than a distant federal government ever could. In fundamental ways, however, the modern practice of conditioning federal grants on state acceptance of federal dictates undermines the Founders’ intent. …

Robert Gebelhoff of the Washington Post points out that this fight has major implications.

One of the legal issues that’s less often discussed is the role that the next Supreme Court justice will play in conservatives’ long-running legal fight to limit the size of the federal government. For decades, conservatives on the bench have been losing that war, giving way to a system of administrative law that is written, for the most part, by bureaucratic agencies. …it’s a really big deal. Over the past half century, agencies have exploded in size and power, so this debate really is about how much power the federal government should have. …Conservatives, fearful that bureaucracies are becoming an unchecked “fourth branch of government,” have decried agency deference. Just last month, Justice Clarence Thomas argued that the doctrine “has metastasized,” as if it were a cancer. And back in 2013, Chief Justice John Roberts warned of the “danger posed by the growing power of the administrative state…” Both Roberts and Thomas frame the issue as a threat to the separation of powers: We’re letting agencies in the executive branch dip into the powers reserved for the judicial and legislative branches. …And by allowing bureaucrats the ability to define the scope of their own jurisdiction, we let them answer questions meant to be left up to the courts. This, they argue, is at odds with the Constitution. …Conservatives fearing a powerful bureaucratic state have few legal weapons to fight it. The future of a small-government Supreme Court is bleak, and the march toward greater agency control of the law will probably continue forward.

I’ll close with some recent polling data about the “deep state” from Monmouth University.

Here’s a question asking whether there’s a conspiratorial version of the “deep state.”

I’m not sure what to think of the answers.

I like people to be suspicious of the federal government. But I’d much prefer them to be concerned because they’re reading my daily columns, not because they think there’s a sinister plot.

I prefer the answers to this next question. Most people presumably have never heard of “administrative law” or the “administrative state,” but they do have a healthy skepticism of bureaucratic rule.

Most of the authors cited today correctly want federal judges to fix the problem by limiting the power of bureaucrats to make and enforce law.

That would be desirable, but I’d go much further. We should eliminate almost all of the agencies, programs, and departments that clutter Washington. Then the problem of the administrative state automatically disappears.

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Not all leftists are alike.

I speculated a couple of years ago that there were four types of statists and put them on a spectrum. I put “rational leftists” at one end. If you wanted to pick a nation that represents this mindset, think Sweden. Nice, civilized, market-oriented, but plenty of redistribution.

On the other end of the spectrum were three less-palatable types.

  1. The “totalitarians,” which means a dictatorial state-run economy, as represented by the Soviet Union and China.
  2. The “socialists,” a democratically elected form of a state-run economy, as represented by post-WWII United Kingdom.
  3. The “crazies,” which I confess is a catch-all category to capture visceral, unthinking, and punitive intervention.

And for that final category, I listed Bernie Sanders and Greece as representatives.

And if you want to know why I listed Sanders, here’s some of Jeffrey Tucker’s FEE column from 2015.

Bernie Sanders, that sweet old socialist who we would have to invent if he didn’t exist in real life, elicited guffaws all over the Internet with his now famous comment about deodorant choice. “You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers,” he said, “when children are hungry in this country.” …The underlying theory here is that the proliferation of deodorant and tennis shoes come at the expense of food for the poor. There is only a certain amount of wealth in the world, this thinking goes.

In practical terms, Sanders must think the world is zero-sum. I can’t be rich unless you are poor, and vice-versa.

Tucker explains that this isn’t true. Or, to be more accurate, it’s not true when markets are allowed to function.

That’s what was so captivating about the Industrial Revolution. All kinds of people were suddenly getting richer, and not by grabbing other people’s stuff. Wealth seemed to be actually expanding. ..Adam Smith…patiently observed how expansion of the division of labor, innovation, and trade — all based on secure ownership titles and free association — were working together to make everyone better off. This was not a zero-sum world. We escaped that fate long ago. …This was the single most marvelous discovery that economics made.

But because of his visceral disdain for markets, Sanders doesn’t trust free people to make decisions.

People who talk like Sanders imagine themselves in the position of dictators, deciding what social priorities ought to be. …What if they got their way? They would have to override billions of decentralized decisions. They would have to reject the judgements of millions of balance sheets. They would have to use massive force to prevent people from inventing, making bargains, striking deals, and buying and selling. It really does mean the end of freedom… It is for this reason that socialist central planning has brought reduced standards of living, poverty, and economic stagnation and chaos everywhere it has been tried.

And Sanders isn’t the only crazy.

Jeremy Corbyn’s economic views are also astoundingly bad, as explained by Andrew McKie for CapX.

…no matter how clueless and unrealistic the Labour leader is when it comes to Europe, that’s nothing compared with his failure to come to grips with the real world. Corbyn said: “I do not agree with or accept the idea there has to be competition in mail delivery. After all, we all have one letterbox, and it is much more efficient to have one postal delivery person coming down the street rather than three or four from different or competing companies.” …Corbyn isn’t just saying that Labour plans to renationalise the Royal Mail. …wave goodbye to Amazon Prime and next-day delivery from Asos, and say so long to FedEx, DHL or UPS and their guarantees. As for innovations that have just arrived or are in the works, such as universal same-day delivery and the use of drones, forget it.

McKie delves into the many reasons why Corbyn is so misguided.

The extraordinary point is that Corbyn really seems to think that, if there’s one of something, it’s neither realistic nor desirable that there should be any alternative on offer. Heaven forbid that you might think that you could make a choice, or that anyone else might provide a better, a cheaper or – in any way at all – a different service. …Corbyn’s “one-size fits all” approach ought to seem ridiculous, even if no one would laugh if they had to live in a country that operated that way. But he’s not joking; he really seems to think that all the reforms, the improvements in living standards, the economic growth and consumer choice of the last 40 years were a mistake, and that the state-run companies of Britain (then known as ‘the sick man of Europe”) were better. He doesn’t seem to realise that it is exactly the market – the existence of choice and competition – which led to those improvements, which drove innovation, drove up living standards, and drove down prices.

Everything Tucker and McKie says is spot on.

My two cents on this issue is that Sanders and Corbyn are guilty of two huge mistakes.

  • First, they think the economy is a fixed pie, which is laughably false. Just watch these videos by Don Boudreaux and Deirdre McCloskey. The simple lesson is that everyone can become richer at the same time. At least if they have decent policy.
  • Second, they have no idea of the valuable role of “creative destruction” in encouraging ever-more efficient and less costly ways of generating ever-more valuable goods and services. Watch this video and this video for more details.

You don’t need to be an economist to understand why Sanders and Corbyn are wrong. Normal people can look at how fast various nations grow (or don’t grow) and draw the appropriate conclusions.

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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.

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