Posts Tagged ‘Statism’

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

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

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

That doesn’t mean Bernie and Hillary are identical.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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I like when leftists accidentally make the case for limited government.

  • The IMF, for instance, accidentally put together some solid evidence showing that a value-added tax is a money machine for bigger government.
  • A story in the New York Times, meanwhile, accidentally showed that politicians will hike taxes if they’re not constrained by tax competition.
  • And a statist in Illinois tried to argue that higher taxes don’t enable higher spending, but he accidentally showed that politicians raised taxes so they wouldn’t have to cut spending.
  • Another report in the New York Times accidentally acknowledged that genuine private savings is the best route to obtain a secure retirement.

You can look at more examples here, but you get the point.

And now we have another item for our collection.

Sean Davis of The Federalist must believe in taking candy from babies and in exploiting the weak and defenseless. I’m jumping to this uncharacteristic conclusion because he just body-slammed a very vulnerable target. To be more specific, he mocked Trevor Noah of the Daily Show for some amazingly vapid comments that inadvertently decimated the gun-free-zone argument of Barack Obama and Hillary Clinton.

You should read the whole thing, but here are some of the more relevant portions of Sean’s article.

Trevor Noah, the host of Comedy Central’s The Daily Show, accidentally destroyed the case for gun control during his show on Wednesday night. …The target of Noah’s ire was an ice cream shop owner in a small town southeast of St. Cloud, Minnesota — the site of a mass stabbing at a mall last weekend — who put up a sign outside of his restaurant that read, “Muslims Get Out.”

Sean then does something very unfair (at least in the mind of statists). He directly transcribes part of Noah’s diatribe so we can see his argument for ourselves (he also includes the video if you click through to see the full story from The Federalist). Here’s some of what Mr. Noah said.

…what’s also strange is this man genuinely thought people who go around blowing people up would be stopped by a sign? You realize you’re talking to terrorists, not vampires. They don’t need to be invited in, alright? Or maybe he’s onto something, because if you think about it, we’ve never tried that. We’ve never actually tried to repel terrorists with signs. Yeah, maybe that’s all the airports need is a sign that says “No Terrorists,” yes? Yeah, and then guys are going to be walking going, “Oh, I was going to blow up the airport, but the rules are rules and they said I can’t come in…”

If this was a play-by-play analysis, at this point I would say that Noah taped a sign to his own back that says “kick me.”

So Sean obliges with this understated observation.

Noah probably doesn’t know it, but he just accidentally made an airtight case against gun-free zones in particular and gun control in general. He is 100 percent correct: people hell-bent on murdering as many people as possible don’t really care about silly signs or laws that tell them not to murder people. A sign that says “No Guns” will no more keep a violent jihadi from gunning down a bunch of innocent people than will a sign that says “Muslims Get Out.”

Having exposed the giant flaw in Noah’s logic (if you could call it that), Sean then buries him under a pile of examples.

…how do we know that gun-free zones, nearly always marked with signs designating them as such, don’t deter murderous psychopaths? Because mass shootings, rather than happening at gun ranges or in gun stores, keep happening in gun-free zones. …The Sandy Hook massacre? Gun-free zone. Columbine? Gun-free zone. The Aurora movie theater shooting? Gun-free zone. The shooting last year at an Oregon community college? Gun-free zone. The shooting at a movie theater in Lafayette? Gun-free zone. The attack on a military recruiting center in Chattanooga? Gun-free zone. The Ft. Hood shooting? You guessed it: gun-free zone. The San Bernardino attack? Gun-free zone. And the massacre perpetrated by an ISIS enthusiast at an Orlando night club? Gun-free zone.

Being a generous soul, Sean concludes with some helpful advice.

A sign that says “Muslims Get Out” will do absolutely nothing to prevent radical Islamists from wreaking havoc. Trevor Noah understands this. If only he would learn to apply his logic to the argument from gun controllers that all we need to end violence are a few more signs telling terrorists not to use guns.

Reminds me of lesson contained in this Chuck Asay cartoon. Or in this amusing video.

Speaking of confused leftists, here’s a poster that is especially relevant given the racial unrest in Charlotte and elsewhere.

This young lady apparently is famous for appearing in Internet memes. She also showed up in this example of gun control satire.

Since we’re making fun of statists, let’s enjoy this story from the Boston Globe about a hack politician inadvertently boosting gun sales.

Massachusetts gun dealers sold more than 2,000 military-style rifles Wednesday — nearly one-quarter of the total sold last year — after Attorney General Maura Healey moved to bar semiautomatic rifles that have been altered slightly to evade the state’s assault weapons ban. The 2,251 assault rifles snapped up in a gun-buying frenzy represented a remarkable uptick from the 132 sold Tuesday and the 51 sold Monday, before Healey announced her ban. …The run on assault rifles raised questions about whether a policy designed to keep the high-powered weapons off the streets had instead unleashed a flood of them. …said Greg Malany, owner of GFA Arms TEC in Natick, which stayed open until just before midnight Wednesday to accommodate the line of customers that snaked out the door and onto the street. “We had to turn customers away,” he said.

Wow, makes you wonder whether Healey is actually an investor in the firearms industry.

Ready to repel the French barbarians

Let’s close with some good news on gun from overseas. It seems that there’s been an effort in Switzerland to discourage members of the militia from keeping guns at home. The only problem is that Swiss men don’t seem to share the anti-gun sentiments of “trade unions, churches, pacifists and centre-left parties.” Here’s some background.

All able-bodied Swiss men must do military service and have the option of keeping their army rifle at home. …Anti-gun campaigners have tried – and failed – on several occasions to ban military weapons from Swiss households. In 2011, Swiss voters rejected a controversial initiative on restricting access to firearms.

But a policy was implemented allowing men to store their guns outside their homes.

…since the beginning of 2010, members of the Swiss army have the option of storing their rifles, pistols and other weapons free of charge at arsenals or military barracks when they are not doing their military service.

So how many Swiss households took advantage of this opportunity?

As of the end of June 2016, only 789 army guns out of a total of 170,000 in circulation (0.5%) had been handed in to special military arsenals.

In other words, 99.5 percent of the militia did the equivalent of “voting with their feet” and chose to keep their weapons at home.

Now you can see why I call Switzerland the world’s most sensible nation.

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When Economic Freedom of the World is released every September, it’s like an early Christmas present. This comprehensive yearly publication is a great summary of whether nations have policies that allow people economic liberty.

I eagerly peruse this annual survey every year (here’s what I wrote in 2015 and 2014 if you’re curious about a couple of recent examples). And this year is no different.

Let’s start with the table that gets the most attention. Here’s a look at the top nations, led (as is almost always the case) by Hong Kong and Singapore. Switzerland also deserves some recognition since it has always been in the top 5.

The United States used to be a regular member of the top-5 club, but we have fallen to 16th in the rankings.

Which is just barely ahead of the supposedly socialist countries of Finland and Denmark (which actually are very market-oriented nations in every area other than fiscal policy).

I don’t show the nations in the bottom half of the rankings, but I assume nobody will be surprised to learn that Venezuela is in last place (though, to be fair, the communist hellholes of North Korea and Cuba aren’t in the rankings because of inadequate data).

One of the other great features of Economic Freedom of the World is that you can look not just how nations rank today, but also how the have changed over time.

I selected some nations of interest from Exhibit 1.4 in Chapter 1. Keep in mind, as you review this data, that you’re seeing scores every fifth year from 1970-2005 and then the annual scores beginning in 2005.

A few observations on these numbers.

  • Chile’s improvement has been dramatic, even though the nation has slipped a bit since 2007.
  • Australia’s jump from 1975-today also is remarkable, as is China’s improvement since it entered the rankings in 1980.
  • Hong Kong has been consistently superb, though it’s troubling that its score has weakened slightly since 2008. Singapore also has a modest trend in the wrong direction.
  • I didn’t know Israel was so bad back in 1980, or that New Zealand scored so low back in 1975, so kudos to both nations for big reforms in the right direction.
  • I tend to give Estonia a lot of love, all of which is deserved, but it’s worth noting that its Baltic neighbors of Latvia and Lithuania also are big success stories.
  • Speaking of overlooked success stories, Peru’s upward climb deserves a lot of praise.
  • Switzerland isn’t overlooked (at least by me), but the praise it gets is very well deserved since it manages to be sensible while all its neighbors make mistakes.
  • Last but not least, scores for the United States and Venezuela have both been falling, though thankfully we started much higher and have fallen at a much slower rate.

Now let’s take a closer look at America. The good news is that we’re in the top 20 for economic freedom. The bad news is that we used to be in the top 5.

I’ve been grousing for years that the Bush-Obama policies have eroded America’s competitiveness and undermined economic liberty.

This year, EFW has a special chapter on the United States and it confirms my analysis. Here’s a chart from that chapter showing how America’s score has declined in recent years.

And if you want some additional details, America’s score is declining first and foremost because the rule of law is eroding and property rights are less secure.

Which is a point I made last year, but EFW‘s chart is much better than my homemade version.

You can also see that protectionism has increased since 2000. And one shudders to think what will happen in this area over the next few years given the protectionist utterances of Donald Trump and Hillary Clinton (though I hope Hillary is lying and trade is an issue where she’s actually on the right side).

Heck, I’m worried about the next four years for reasons that go well beyond trade. I hope I’m wrong, but it seems that America faces a choice of a statist Tweedledee or a statist Tweedledum.

It’s almost as if the two major-party candidates have read the recipe for growth and prosperity and have decided to use it as a road map of what not to do. Sigh.

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When Donald Trump and Hillary Clinton agree on things, it’s always bad news for taxpayers.

Now they both agree that it’s somehow the federal government’s job to subsidize child care, though they’ve each concocted different ways of implementing this new form of redistribution.

The Wall Street Journal opines on this fiscally incontinent bidding war.

…both candidates [are] offering multiple subsidies for raising kids. This will end up raising prices and it won’t address the real reason parents feel squeezed: a decade of slow or no economic growth. Donald Trump on Tuesday proposed a tax deduction that would let families write off the average cost of child care for up to four children, among other ideas. Hillary Clinton has already promised to limit care expenses to 10% of income; raises for caretakers; universal pre-K; an increase in the $1,000 per child tax credit; a new program for student parents, and more.

Looking at the details, Trumps plan would exacerbate the EITC problem.

Here’s the dirty detail: Mr. Trump proposed an up to $1,200 child-care tax rebate for low-income families that would be delivered by expanding the earned-income tax credit. But the credit would inevitably phase out as income increases and disappears at $31,200. The result would be a higher inframarginal tax cliff—when people are discouraged from earning more income because they lose more in benefits than they can gain in wages. This disincentive to advancement is already steep.

He’s also proposing a new subsidy for savings accounts.

Mr. Trump also proposes savings accounts for child care to add to the tax-free destinations for retirement, health care, college and more. This new benefit, worth up to $2,000 a year, would make tax reform more difficult. The government would also match parental contributions at 50% up to $1,000 a year for low-income families. That’s a wonky way of unveiling a new $500 transfer payment.

And Trump even wants to engage in a no-win bidding war with Hillary Clinton to create a new European-style entitlement for paid maternity leave (even though, as a columnist for the New York Times even admitted, this type of scheme will backfire against women by making them less attractive to employers).

Then there’s six weeks of paid maternity leave that Mr. Trump says he would guarantee through unemployment insurance. He claims he’ll pay for this by cleaning out fraudulent payments, though this is his funding mechanism for every proposal. Mr. Trump will nonetheless lose the family bidding war with Mrs. Clinton, who wants 12 weeks of paid leave for new mothers and fathers.

The Clinton plan, meanwhile, is a predictably statist prescription for more intervention and subsidies.

And the WSJ‘s editorial correctly points out that is a recipe for ever-higher costs.

Mrs. Clinton raises the Trump offer in every regard, from more Head Start funding to salary support for day-care workers. And if you think care is expensive now, wait until Mrs. Clinton wades in. She likes to say that child care can be more expensive than college tuition, which is false. The irony is that her day-care blowout would recreate what has made college notoriously expensive—large subsidies for the provider and buyer. Day-care centers and pre-Ks could raise prices, confident that government will cover the increase.

The fact that Hillary Clinton wants bigger government is not the most shocking revelation in the world.

Her voting record as a Senator was almost identical to Bernie Sanders’.

And every single proposal in her big economic speech last month required a larger burden of government.

But it’s rather odd to find the Republican nominee being the statist Tweedledee to match the statist Tweedledum.

In an article for Commentary, Noah Rothman looks at Trump’s overall approach to fiscal policy.

Donald Trump…is a self-described Republican who has cast aside the austere facade of fiscal conservatism in favor of any and every spending proposal that crosses his transom. Promising the electorate the world in the campaign with every intention of working out the details after the election is hardly a new phenomenon, but it used to be one that Republicans rejected. Today, under Trump’s corrupting umbra, the GOP has become the party of wild assurances and cascading spending proposals with no intention of ever making good on them.

Actually, I fear the spending promises would be fulfilled if Trump got to the White House. Though I agree that Trump personally doesn’t care if they are either adopted or forgotten.

Here are just a few of the spending promises Trump has made.

Trump promised to augment the Pentagon’s budget by repealing the portions of the Budget Control Act of 2011 (aka, “Sequester”) that imposed limits on defense spending. …Trump has called for “more funding” for the Department of Veterans Affairs to augment job training, research on traumatic stress, brain injury, and suicide prevention, and to hire more service providers at VA hospitals. The Republican nominee promised a massive $500 billion public works program that you dare not call a “stimulus,” which he proudly boasted would spend more than double what Hillary Clinton has pledged to refurbish America’s infrastructure. …He has attacked as cold-hearted the idea that America’s entitlement state must be curtailed and reformed—a massive expenditure that already consumes nearly two-thirds of the nation’s annual outlays.

In other words, Trump is a big-government, Nixon-style Republican.

Which means advocates of limited government are not exactly thrilled about November.

P.S. Other Republican presidential candidates have boosted the burden of government when they took office (President George H.W. Bush and President George W. Bush are two dismal examples of this phenomenon). But they at least pretended to be vaguely in favor of smaller government during their respective campaigns. The fact that Trump doesn’t even fake it during the campaign suggests that economic policy would be very bad if he ever got to the White House.

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Communism should be remembered first and foremost for the death, brutality, and repression that occurred whenever that evil system was imposed upon a nation.

Dictators like Stalin, Mao, Pol Pot, the North Korean Kim dynasty either killed more than Hitler, or butchered higher proportions of their populations.

But let’s not forget that communism also has an awful economic legacy. The economic breakdown of the Soviet Empire. The horrid deprivation in North Korea. The giant gap that existed between West Germany and East Germany. The mass poverty in China before partial liberalization.

Today, let’s focus on how communism has severely crippled the Cuban economy.

In a column for Reason a few years ago, Steven Chapman accurately summarized the problems in that long-suffering nation.

There may yet be admirers of Cuban communism in certain precincts of Berkeley or Cambridge, but it’s hard to find them in Havana. …the average Cuban makes only about $20 a month—which is a bit spartan even if you add in free housing, food, and medical care. For that matter, the free stuff is not so easy to come by: Food shortages are frequent, the stock of adequate housing has shrunk, and hospital patients often have to bring their own sheets, food, and even medical supplies. …Roger Noriega, a researcher at the conservative American Enterprise Institute in Washington, notes that before communism arrived, Cuba “was one of the most prosperous and egalitarian societies of the Americas.” His colleague Nicholas Eberstadt has documented that pre-Castro Cuba had a high rate of literacy and a life expectancy surpassing that in Spain, Greece, and Portugal. Instead of accelerating development, Castro has hindered it. In 1980, living standards in Chile were double those in Cuba. Thanks to bold free-market reforms implemented in Chile but not Cuba, the average Chilean’s income now appears to be four times higher than the average Cuban’s. …In its latest annual report, Human Rights Watch says, “Cuba remains the one country in Latin America that represses virtually all forms of political dissent.”

The comparison between Chile and Cuba is especially apt since the pro-market reforms in the South American nation came after a coup against a Marxist government that severely weakened the Chilean economy.

Chapman points out that the standard leftist excuse for Cuban misery – the U.S. trade embargo – isn’t very legitimate.

The regime prefers to blame any problems on the Yankee imperialists, who have enforced an economic embargo for decades. In fact, its effect on the Cuban economy is modest, since Cuba trades freely with the rest of the world.

Since the U.S. accounts for nearly one-fourth of world economic output, I’m open to the hypothesis that the negative impact on Cuba is more than “modest.”

But it still would be just a partial explanation. Just remember that communist societies have always been economic basket cases even if they have unfettered ability to trade with all other nations.

Writing for the Huffington Post (hardly a pro-capitalism outfit), Terry Savage also explains that Cuba is an economic disaster.

…the economic consequences of a 50-year, totalitarian, socialistic experiment in government are obvious today. Cuba is a beautiful country filled with many friendly people, who have lived in poverty and deprivation for decades. Socialism in its purest form simply didn’t work there. I was immediately reminded of that old saying: “Capitalism is the unequal distribution of wealth – but socialism is the equal distribution of poverty.” Once-magnificent buildings are literally crumbling, plaster falling and walls and stairways falling apart, as there are no ownership incentives to maintain them – or profit potential to incent their preservation. …Every Cuban gets a ration book and an assigned “bodega” in which to purchase the low-cost, subsidized food. The one I visited looked like an empty warehouse, with little on the shelves. If the rice, beans, eggs, and cooking oil are not in stock, the shopper must return the following week. Allowed five eggs per month, the basics barely cover a starvation existence. …the economic results of their 50-year rule have been abysmal. Cuba became a protectorate of the old Soviet Union (remember the Cuban missile crisis) -and that worked until the early 1990s, when the USSR fell apart. No longer receiving aid from its protector, Cuba entered a long period now remembered as “the special times” – when Cubans were literally starving, when there was electricity only two hours per day, and people turned any patch of dirt into a garden to survive. Cubans bear the scars of that terrible time, and for many the current situation is still not that much better.

So Cuba was a basket case that was subsidized by the Soviet Union. When the Evil Empire collapsed and the subsidies ended, the basket case became a hellhole.

The good news, if we’re grading on a curve, is that Cuba has now improved to again being a basket case.

But that improvement still leaves Cuba with a lot of room for improvement. It may not be at the level of North Korea, but it’s worse than Venezuela, and that’s saying something.

My friend Michel Kelly-Gagnon of the Montreal Economic Institute echoes the horrid news about Cuba’s economy.

As anyone who has spent any amount of time in Cuba outside the tourist compounds can tell you, socialism, particularly the unsubsidized version that we have seen since the fall of the Soviet empire, has been a disaster. …The hospitals which supposedly offer free care only do so quickly and effectively to the politically connected, friends and family of staff members, and to those who pay the largest bribes… That “free” university education that many Cubans get in technical fields is rarely worth much more than what students pay for it. There are few books in the country’s schools, and those that can be found are years, if not decades old. The country’s libraries are empty… The guaranteed jobs that all Cubans have are fine, until you realize that the average salary is in the range of $20 a month. Worse, the food and other staple allotments that Cubans have long felt entitled to, have shrunk over the years. Tourists often marvel at how thin and healthy Cubans look. Sadly many of them are outright hungry.

Though Michel includes a bit of optimism in his column, pointing out that there’s been a modest bit of economic liberalization (a point that I’ve also made, even to the point of joking about whether we should trade Obama for Castro).

Communist Cuba, beset with an oppressive bureaucracy, an anachronistic cradle-to-grave welfare state, a hopelessly subpar economy, and widespread poverty, is gradually shifting to private sector solutions. Starting when Raul Castro “temporarily” took over power from his brother Fidel six years ago and culminating with the Communist party’s approval of a major package of reforms…, Cuba has taken a series of increasingly bold steps to implement free market reforms. These range from providing entrepreneurs with increased flexibility to run small businesses, and use of state agricultural lands by individual farmers, to the elimination of a variety of burdensome rules and regulations. Ironically, there is a lot that Canadians…can learn from that shift.

And there’s a lot the United States can learn, particularly our President, who is so deluded that he said there are (presumably positive) things America can learn from Cuba.

One common talking point from Cuban sympathizers is that the country has done a good job of reducing infant mortality. But, as Johan Norberg explains, that claim largely evaporates upon closer examination.

The bottom line is that communism is a system that is grossly inconsistent with both human freedom and economic liberty.

And because it squashes economic liberty (thanks to central planning, price controls, and the various other features of total statism), that ensures mass poverty.

Amazingly, there are still some leftists who want us to believe that communism would work if “good people” were in charge. I guess they don’t understand that good people, by definition, don’t want to control the lives of others.

P.S. No analysis of Cuba would be complete without noting the bizarre fetish of some leftists to wear t-shirts celebrating the homicidal racist Che Guevara. What’s next, baseball caps featuring Kim Jong-un. Computer screen savers featuring Hermann Göring? Pol Pot bobble head dolls?

There are some sick weirdos in this world to defend any form of coercive statism.

P.S. Here’s my only communist-themed joke (other than the video of Reagan’s jokes about communism).

P.P.S. At the advice of a reader, let me add one more point. Probably the most amazing indictment of communism is that living standards in Cuba when Castro took power were about even with living standards in Hong Kong. Today, the gap between the two is enormous.

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Maybe it’s just because I’m a wonk, but it seems that comparing long-run growth rates in various nation sets up a slam-dunk argument for the superiority of free markets and small government.

Whether it’s North Korea vs. South Korea, Cuba vs. Chile, or Ukraine vs. Poland, nations with bigger governments and more intervention inevitably decline compared to market-oriented alternatives.

That’s very compelling evidence, in my humble opinion, but I wonder whether it’s not overly persuasive because it’s too dry and analytical.

Maybe I should focus more on the human cost of statism. And not just by sharing data about low levels of per-capita GDP. Perhaps it would help to explain what that means for the lives of ordinary people.

Venezuela certainly would be a perfect (in a bad way) example.

The Associated Press explains that big government and statism aren’t working very well, particularly for the most vulnerable members of Venezuelan society.

Tens of thousands of Venezuelans poured into neighboring Colombia to buy food and medicine on Saturday after authorities briefly opened the border that has been closed for almost a year. A similar measure last week led to dramatic scenes of the elderly and mothers storming Colombian supermarkets and highlighted how daily life has deteriorated for millions in Venezuela, where the economy has been in a freefall.

That certainly sounds grim, but that story doesn’t fully capture how bad life has become for ordinary people.

Here are some excerpts from a BBC report on the government-created misery in Venezuela.

Travelling through the country this month I saw endless queues of people trying to buy food – any food – at supermarkets and other government-run shops. I was stopped at a roadblock in the middle of the countryside by people who said they had eaten nothing but mangoes for three days. I saw the hopeless expression of a mother, who had been eating so little that she was no longer able to breastfeed her baby.

What a miserable tragedy.

The reporter shares information on his own family and other people he met.

…it was my family who really brought it home to me. My brother told me all his trousers were now too big. My father – never one to grumble – let slip that things were “really tough”. My mother, meanwhile, confessed that sometimes she only eats once a day. They all live in different parts of Venezuela, but none of them is getting enough to eat. It’s a nationwide problem. …a young mother, Liliana, …admitted to going to bed in tears on days when she had been unable to give her two children any dinner. In western Venezuela, in the oil-rich province of Zulia, I visited several small towns where people didn’t know what they would eat the following day.

What a horrifying life.

Imagine if you were a parent in Venezuela and you couldn’t find food for your children? That shouldn’t be happening in the 21st century.

Unsurprisingly, deprivation and economic chaos are now the norm.

A study by three of the country’s main universities indicates…that “extreme poverty” has jumped by 53% since 2014. …The country’s official inflation rate was 180% in December, the last time a figure was made public, but the IMF estimates it will be above 700% by the end of the year.

Considering that Venezuela is in last place for Economic Freedom of the World, none of this should be surprising.

But remember that we want to focus today on the human cost of statism, not just broad measures of economic mismanagement.

And this chart from the BBC on food riots certainly is a persuasive piece of evidence.

Here’s the part that shows the mess was created by bad government policies, with price controls being a major culprit.

…the government years ago fixed the price of many basic goods, such as flour, chicken, or bread. But Venezuelans can only buy the goods at these fixed prices once a week, depending on the final digit of the number on their national identity card. …Because there is a risk of the goods running out, people often arrive at supermarkets in the early hours of the morning, or even earlier. At 6am one morning in Caracas, I met a man who had already been in the queue for three hours. …”I’m hoping to get rice, but sometimes I’ve queued and then been unable to buy anything because the rice runs out before I get in,” he said.

In a sad example of Mitchell’s Law as the failure of one bad policy leads to the imposition of another bad policy.

President Nicolas Maduro[‘s]…latest step has been to create Local Committees of Supplies and Production, better known by the Spanish acronym, CLAP. The CLAPs essentially mean that the government will stop sending imported food to supermarkets and start handing it over to local community councils. …The ultimate aim of the CLAPs is to create self-sustaining communities, where people grow their own food. …a member of a colectivo – a group of hardcore government supporters, often armed, …agreed in the end to show me what the CLAP was aiming to achieve. I was taken to see a barren field – “which we aim to have ready for crops in eight months” – and several chili plants waiting to be planted. It was, to say the least, disheartening.

In other words, Venezuela apparently is creating a sure-to-fail mixture of autarky and collective agriculture.

Even Ayn Rand didn’t think to include something that crazy in her dystopian novel, Atlas Shrugged.

Let’s wrap up with a CNN story about a new “jobs” program from the thugs in Caracas.

In a vaguely-worded decree, Venezuelan officials indicated that public and private sector employees could be forced to work in the country’s fields for at least 60-day periods, which may be extended “if circumstances merit.” …President Nicolas Maduro is using his executive powers to declare a state of economic emergency. …According to the decree from July 22, workers would still be paid their normal salary by the government and they can’t be fired from their actual job. …Venezuela…is grappling with the lack of basic food items like milk, eggs and bread. People wait hours in lines outsides supermarkets to buy groceries and often only see empty shelves. …Venezuela is the world’s worst economy, according to the IMF. It’s expected to shrink 10% this year and inflation is projected to rise over 700%. Beyond food shortages, hospitals are low on supplies, causing many patients to go untreated and some to die.

Wow, I’m not even sure where to start. The fact that people are dying because of horribly sub-standard care? The fact that the government is engaging in a form of quasi-slavery by forcing people to work on farms? Or the fact that bad government policy is the reason for the disaster?

As I contemplated these questions, it got me thinking about the varying degrees of statism and the harmful impact on ordinary people.

So, with apologies to fans of Dante’s Inferno, I put together the Five Circles of Statist Hell. The first layer is relatively benign, featuring nations such as France that sap an economy’s vitality with lots of feel-good programs. Then you get countries that belong in the second layer, which is characterized by economies that are actually declining rather than merely stagnating.

And the next layer is where Venezuela is today, with systemic misery and poverty. In other words, the nations in this layer already have declined and have lots of suffering.

But it’s always possible to decline even further. If Venezuela doesn’t reverse some of the awful policies that are causing chaos today, it’s just a matter of time before the country joins North Korea is a state of pervasive deprivation and even starvation.

And the only thing worse than that is the final layer of statist hell, which features countries that actually butcher their own citizens.

By the way, let’s not forget the “useful idiots” who have justified and/or praised Venezuela’s brutal government. I’ve previously cited the misguided words of Joseph Stiglitz.

Well, Joe Kennedy also deserves our scorn and disdain. The former politician actually mourned the death of the evil slug who is most responsible for the mess in Venezuela.

Former congressman Joe Kennedy (D-Mass.) is mourning the death of Venezuelan President Hugo Chavez today, praising Chavez as someone who made a difference for poor people. …Kennedy also said that “some of the wealthiest people on our planet have more money than they can ever reasonably expect to spend.” Kennedy joins Rep. Jose Serrano (D-N.Y.) among the few American politicians to praise Chavez after his death Tuesday.

How disgusting and unseemly. Makes the Che sycophants seems like moral giants.

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I’m in Shenyang, China, as part of the faculty for Northeastern University’s International Economics and Management program.

My primary role is to talk about the economics of fiscal policy, explaining the impact of both taxes and spending.

But regular readers already know my views on those issues, so let’s look instead at the vaunted Chinese Miracle.

And I don’t use “vaunted” in a sarcastic sense. Ever since China began to liberalize its economy in the late 1970s, economic growth has been very impressive. I don’t necessarily believe the statistics coming from the Chinese government, but it’s unquestionably true that there’s been spectacular progress.

The great mystery, though, is whether China will continue to enjoy rapid growth. In other words, will it actually converge with the United States (right now per-capita economic output in America is more than five times higher than it is in China)? Or will China, like many other developing/transition economies, hit a ceiling and then begin to stagnate.

I don’t pretend to know the future, but I can say with great confidence that the answer depends on the actions of the Chinese government.

The good news is that economic freedom jumped dramatically starting in 1980 according to Economic Freedom of the World. Thanks to good reforms, China’s score rose by more than 50 percent, climbing from 4.0 in 1980 to more than 6.0 in just a bit over two decades.

That’s a huge improvement, and it largely explains why prosperity has expanded and there’s been a record reduction in the grinding poverty and material deprivation that characterized the country.

But the bad news is that there hasn’t been much reform in the past 15 years. China’s economic freedom score has oscillated between 6.0 and 6.4 during that period.

Indeed, there have been financial bailouts and Keynesian-style “stimulus” schemes, so it’s possible that China is now going in the wrong direction.

Before digging into the details, let’s consider the economics of growth. I’ve written before that labor and capital are the two factors of production and that economic growth is a function of more labor, more capital, or learning to use existing labor and/or capital more productively.

One way to visualize this is with a production possibility curve. This is a tool in economics that often is used to illustrate tradeoffs and opportunity costs. If Robinson Crusoe is on a deserted island, what the best way for him to allocate his time to maximize the amount of fish he can catch and the number of coconuts he can collect? Or, for an entire society, what’s the “guns-vs-butter” tradeoff?

Here’s a chart I found online that illustrates the role of capital and labor and producing output. It’s a three-dimensional chart, which is helpful since it not only shows that there’s no output in the absence of capital and labor, but it also shows that an economy with just labor or just capital also won’t have much if any output. You produce a lot, by contrast, with labor and capital are mixed together.

But that’s just the beginning.

The above chart shows the amount of output that theoretically can be produced with given amounts of labor and capital. But what if there’s bad policy in a nation? Consider the difference, for example, between China’s plateaued economic freedom score and decent economic performance compared to Hong Kong’s great economic freedom score and great economic performance.

With that in mind, contemplate this two-dimensional image. With bad policy, either the economy only produces A when it can produce B (i.e., by using existing labor and capital more productively) or it produces B when it can produce C (i.e., by expanding the amount of labor and capital).

I suspect that China’s problem is mostly that bad policy interferes with the efficient allocation of labor and capital. In other words, there’s already a lot of labor and capital being deployed, but a significant amount is misallocated because of cronyism and other forms of intervention.

Now let’s move from theory to empirical details.

Here’s a close look at China’s reforms from Professor Li Yang, Vice President of the Chinese Academy of Social Sciences.

Over the past 35 years, China has achieved extraordinary economic performance thanks to the market-oriented reforms and opening-up….The GDP per capita also reached to $6075 in 2012, up from $205 in 1980… China’s economy experiences impressive changes in favor of marketization. In fact, as far back as 1996, 81% of the production materials, and 93% of retail sales, had already been traded according to the market pricing mechanism.

And here’s a chart showing the gradual expansion of market forces in China, presumably based on whether prices are determined by markets or by central planning.

We also have two charts showing the decline in genuine socialism (i.e., government ownership of the means of production).

The first chart shows that state-owned companies are becoming an ever-smaller share of the economy.

Even more impressive, there’s been a huge decline in the share of the population employed by state-owned firms.

This is good news, and it helps to explain why China is much richer today than it was 30 years ago.

But the great unknown is whether China will experience similar strong growth for the next 30 years.

Here’s more of Professor Yang’s optimistic analysis.

Another indispensable factor explaining China’s growth miracle is constant opening-up, which is equally guided by the principle of gradualism. Regarding the space structure, the markets successively opened up from the special economic zones, economic and technological development zones, coastal economic development zones, riparian regions, inland regions, and finally the whole China; regarding the industrial structure, from the advantaged manufacturing industry, to the less advantaged agriculture and service industries. In 2001, China’s entry into the WTO can be regarded as a milestone: China’s opening up transformed from selective policy measures to widespread and deep institutional arrangements.

The liberalization of trade is particularly impressive, as shown by the following chart from the study.

Makes me wonder what Donald Trump would adjust his protectionist China-bashing if he saw (and understood) this chart.

Anyhow, here are some passages from Professor Yang’s conclusion.

…market-oriented reforms constitute the most crucial factor to support China’s growth in the future. The key here is to properly deal with the relationship between government and markets. The latter will be expected to play the fundamental role in the allocation of economic resources. …China should make more effort to improve the efficiency of investment. …the government needs to reduce its intervention in the micro-level economic activities, promote deregulation and administrative decentralization, break up monopolies, and improve the efficiency of functioning.

I agree, particularly the part about boosting the efficiency of investment.

And that can only happen if China ends cronyism by letting capital be allocated by market forces rather than political connections.

Let’s close with two items.

First, one of the other faculty with me at the University in Shenyang is Ken Schoolland. In his presentation, he noted that there’s some real federalism in China. Provinces have considerable flexibility to engage in reform.

And it shouldn’t come as any surprise that the rapid growth in China has been concentrated in the areas that have moved the fastest and farthest in the direction of free markets.

Second, some experienced observers are a bit pessimistic about future Chinese economic developments. Derek Scissors of the American Enterprise Institute explains what needs to happen to boost future prosperity.

…the economy is in the process of stagnating. The only solution is a return to market-driven, politically difficult reform. Such reform must be focused primarily on rolling back the state sector. …Expanded individual or household land ownership in rural areas would be…helpful. …More individual land rights shrink the rural state. The critical step in revitalizing the economy is to shrink the urban state, and by a considerable amount. Such changes will of course be phased in over time but the sooner they start, the sooner economic performance improves. Shrinking the urban state sector would (i) finally address excess capacity; (ii) enable capital to be much more efficiently allocated; (iii) thereby slow or halt unproductive debt accumulation; and (iv)encourage innovation by enabling more competition. …In terms of capital allocation, formal interest rate liberalization was said to be a vital step. But it cannot be while the state controls most financial assets – the incentives for collusion among sister state financials are overwhelming.

Here’s Derek’s bottom line.

Want to know when China is going to thrive again – just check if the state sector is actually shrinking.


What he’s basically describing are the policies that would dramatically improve China’s score from Economic Freedom of the World. And if China can ever climb as high as Hong Kong, then the sky’s the limit for growth and prosperity.

P.S. There are some signs that China’s leadership recognizes that a Reagan-style agenda is needed.

P.P.S. On the other hand, if China’s government takes the IMF’s advice, then prepare for economic decline and stagnation.

P.P.P.S. The most amusing economic news in recent years was when a senior Chinese official basically explained that the welfare state in Europe makes people lazy.

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