I am not sure that many politicians are good on this score, but Hillary Clinton and Donald Trump are likely as bad as it gets on crony capitalism. Forget their policy positions, which are steeped in government interventionism in the economy, but just look at their personal careers. Each have a long history of taking advantage of political power to enrich themselves and their business associates. I am not sure what Cruz meant when he said “New York values”, but both Trump and Clinton are steeped in the New York political economy, where one builds a fortune through political connections rather than entrepreneurial vigor. Want to build a new parking lot next to your casino or start up a new energy firm — you don’t bother with private investors or arms length transactions, you go to the government.
Warren Meyer, “2016 Presidential Election: Battle of the Crony Capitalists”, Coyote Blog, 2016-05-13.
May 24, 2016
May 12, 2016
In a comment on Facebook, Sean Gabb explains why even a government in a non-federal system sometimes seems to act inconsistently from moment to moment:
Sean Gabb In a country as large and rich as ours, The State is best regarded not as an entity with a single will, but as a collection of interest groups with agendas that sometimes overlap and sometimes conflict. The job of the people at the top is largely to try balancing these interests.
May 11, 2016
Off goes the head of the king, and tyranny gives way to freedom. The change seems abysmal. Then, bit by bit, the face of freedom hardens, and by and by it is the old face of tyranny. Then another cycle, and another. But under the play of all these opposites there is something fundamental and permanent — the basic delusion that men may be governed and yet be free.
H.L. Mencken, Preface to the first edition of The American Credo : A Contribution Toward the Interpretation of the National Mind, 1920.
May 5, 2016
J.C. Carlton explains why the US government’s latest regulatory intervention in the dishwasher market is pretty much guaranteed to make dishwashers more expensive and less capable:
… it’s amazing how much doesn’t work, or works poorly because of the rules that bureaucrats come up with. Yet time and again the bureaucrat’s solution is always more cowbell. For some reason they think that because something may have worked before, it will always work as long as you just do it more. The fact is that no matter what you do, that 24% energy “savings” and 38% less water use are going to have to come from somewhere. My guess is that it will come from making dishwashers that do a very lousy job of actually washing dishes or are terribly expensive.
There’s only so much you can do. 24% less electricity means that you will have to use a smaller motor, a smaller heating element, or both. You might have to use different heating elements or motors that work at different times during the cycle. More than likely you will have to use complicated electronics to run it all. Even when you are all done with meeting the mandate, you will end up with a machine that just doesn’t work very well. Which also costs more and has to be serviced more often to boot. How much savings to you get it the reliability is halved and the truck has to keep coming out for service calls. That’s the problem with those one-dimensional rules. They tend to cost more in compliance than they actually save.
Of course the endless quest for false efficiencies does have its costs. Somehow the bureaucrats never seem to have to pay those costs in their lives, or at least aren’t effected enough by the pain to notice. I have to wonder if whoever came up with the 1 gallon toilet ever flushes. Does the Energy Star guy never have to go shopping for appliances and when he gets home finds out that it barely works?
April 29, 2016
The American of today, in fact, probably enjoys less personal liberty than any other man of Christendom, and even his political liberty is fast succumbing to the new dogma that certain theories of government are virtuous and lawful, and others abhorrent and felonious. Laws limiting the radius of his free activity multiply year by year: It is now practically impossible for him to exhibit anything describable as genuine individuality, either in action or in thought, without running afoul of some harsh and unintelligible penalty. It would surprise no impartial observer if the motto “In God we trust” were one day expunged from the coins of the republic by the Junkers at Washington, and the far more appropriate word, “verboten,” substituted. Nor would it astound any save the most romantic if, at the same time, the goddess of liberty were taken off the silver dollars to make room for a bas-relief of a policeman in a spiked helmet. Moreover, this gradual (and, of late, rapidly progressive) decay of freedom goes almost without challenge; the American has grown so accustomed to the denial of his constitutional rights and to the minute regulation of his conduct by swarms of spies, letter-openers, informers and agents provocateurs that he no longer makes any serious protest.
H.L. Mencken, The American Credo: A Contribution toward the Interpretation of the National Mind, 1920.
April 16, 2016
I’m getting weary of the monarchical comparisons, which are a bit of an insult to real monarchs. The Obama model seems to owe more to Judge Dredd, the popular comic-book figure with the power to arrest, convict, sentence and execute as he does what’s necessary to bring hope and change to a dystopian megalopolis. Likewise, President Dredd: “He is the Law, and you’d better believe it!” A contempt for the people and for constitutional and legal restraints is what ties the President’s actions on Thursday night to Eric Holder’s corrupt justice department to Lois Lerner’s corrupt revenue agency to Jonathan Gruber’s corrupt health commissariat (merely to skim the surface of the most recent additions to the unending Obama-scandals document dump).
To express common-or-garden contempt for the will of the people, Obama could have simply repealed another handful of inconvenient paragraphs from Obamacare or made Lois Lerner Attorney-General, but the form of contempt he chose is especially exquisite: “legalizing” millions of foreign law-breakers and setting them on the path to US citizenship. The chief of state has heard the voice of the people and his message to them is: “Yeah, whatever, I can always get another people. Hey, here comes five million or so right now, plus another ten million in chain-migration relatives down the road…”
He is the Law, and you’d better believe it! And, even if you don’t, what are you gonna do about it? Obama has made a bet that in the end a Republican Congress will have no more get-up-and-go than a chronic invalid dependent on armies of undocumented bedpan-cleaners. It has been suggested that Boehner should tell America’s new ConLawProf-in-Chief to go give his State of the Union somewhere else. It would be a symbolic gesture, but symbols are important. In a contemporary North American context, it is not unknown for parliament to assert itself against the head of state: the chippy separatists of Quebec’s “National Assembly”, as part of their make-believe nation-building, have denied the Queen’s viceroy the customary right to give the Speech from the Throne (the Westminster equivalent to the State of the Union) for four decades now. Down the road in Ottawa, in a particularly petulant outburst, Jean Chrétien, the Canadian Prime Minister, denied the Queen herself the opportunity to give the 2002 Speech from the Throne in the federal parliament for no other reason than that he felt she hadn’t given him a good enough seat at her mother’s funeral earlier that year. In actual monarchies, the subjects flip the finger at the sovereign all the time. Yet in a supposed republic of citizen-legislators for the people’s house to assert its authority to the head of state by telling him to take a hike on the State of the Union would be an act of lèse-majesté too appalling even to consider. It would be entirely unreasonable to expect the legislature of the American republic to defend its lawful powers — and those of the people it represents — with the assertiveness of a provincial parliament in Canada.
Mark Steyn, “Elections Matter?”, SteynOnline.com, 2014-11-22.
April 1, 2016
The big pretend that costuming and repurposing mall food court workers as “security” will be anything approaching that has fooled the lazy American public that takes its civil liberties for granted.
They miss most of the items in DHL tests of their detection abilities, and really, it is clear that this is not security but a jobs program for unskilled earners, a cash program for former government employees like Michael Chertoff and the companies they are associated with, and obedience training for the American public — to be docile in the face of their rights being yanked from them.
March 30, 2016
In 15 years as governor of New York, Nelson A. Rockefeller, popularly known as “Rocky,” was as careful with the public’s money as he was with his own — which is to say, he spent lavishly, impulsively, and often indiscriminately. New Yorkers have been paying the bill ever since. As portrayed in Richard Norton Smith’s new biography, Rockefeller believed that there was no problem (least of all a lack of cash) too big to yield to a big-money solution. “As much as I loved Nelson,” Smith quotes the financier Frank Zarb, “his meter didn’t start until you reached a billion dollars.”
Rocky’s meter began to spin soon after he became governor of New York in 1959, and it accelerated as time went on. To be sure, every level of American government was expanding during the 1960s and 1970s. But Rockefeller made an outlier of the Empire State. He quadrupled the state budget and quintupled state debt, including off-the-books public-authority borrowing. He created the nation’s most lavish Medicaid program, designed to draw down maximum federal aid to the state while saddling New York City and county governments with half the non-federally reimbursed cost. He pushed through a collective bargaining law that would bequeath to New Yorkers the nation’s highest level of public-sector unionization. Though New York had been a cradle of open-handed liberalism, its state and local taxes, relative to personal income, were slightly below the national average when Rockefeller took office, according to Census data. By 1974, the combined burden had nearly doubled to a level well above the 50-state norm — where it has remained ever since.
Smith demonstrates that Rockefeller’s profligacy was at least as much a matter of personal disposition as political preference. There’s no small irony in this: Rocky’s grandfather, John D. Rockefeller, Sr., built his Standard Oil mega-fortune on penny-pinching attention to detail. As one story goes, even as a wealthy man, “Senior” was delighted to discover he could eke out a slightly larger profit by encouraging his employees to use one less drop of solder on each tin can of Standard Oil kerosene.
E.J. McMahon, “Hiya, Big Spender! For good or ill, Nelson Rockefeller’s legacy lives on”, City Journal, 2014-12-04.
March 25, 2016
[David Cay] Johnston’s piece is titled America should be more like Disneyland but instead of thinking seriously about what this means he fumbles on the 20 yard line and concludes that what makes Disneyland different is… happy thoughts. If only we were more like W.D., he says, “we could make America into a happy place.”
No, what makes Disney invest in infrastructure is not happy thoughts. Johnston is in fact clear about this:
The Walt Disney Co. invests in infrastructure because it makes the company money.
The problem with America is that our public infrastructure has been turned over to a fickle political process that is not governed by a rational calculation of cost and benefit, market test and experimentation but by a pursuit of power, glory and advantage that only rarely coincides with the public interest.
America should be more like Disneyland and to do that we need to develop institutions that allow more infrastructure to built by the private sector. Most ambitiously we need more cities as hotels, more proprietary cities. As Rajagopolan and I wrote in our study of India (in Cities and Private Planning):
The lesson of Gurgaon, Walt Disney World, and Jamshedpur is that a system of proprietary, competitive cities can combine the initiative and drive of private development with the planning and foresight characteristic of the best urban planning. A proprietary city will build infrastructure to attract residents and revenues. A handful of proprietary cities built within a single region will create a competitive system of proprietary cities that build, compete, innovate, and experiment.
Alex Tabarrok “How to make America more like Disneyland”, Marginal Revolution, 2014-12-17.
March 20, 2016
It’s only a rumour rather than a definite stand, but it is a hopeful one for civil liberties:
The spirit of anarchy and anti-establishment still runs strong at Apple. Rather than comply with the government’s requests to develop a so-called “GovtOS” to unlock the iPhone 5c of San Bernardino shooter Syed Rizwan Farook, The New York Times‘ half-dozen sources say that some software engineers may quit instead. “It’s an independent culture and a rebellious one,” former Apple engineering manager Jean-Louis Gassée tells NYT. “If the government tries to compel testimony or action from these engineers, good luck with that.”
Former senior product manager for Apple’s security and privacy division Window Snyder agrees. “If someone attempts to force them to work on something that’s outside their personal values, they can expect to find a position that’s a better fit somewhere else.”
In another instance of Apple’s company culture clashing with what the federal government demands, the development teams are apparently relatively siloed off from one another. It isn’t until a product gets closer to release that disparate teams like hardware and software engineers come together for finalizing a given gizmo. NYT notes that the team of six to 10 engineers needed to develop the back door doesn’t currently exist and that forcing any sort of collaboration would be incredibly difficult, again, due to how Apple works internally.
March 16, 2016
How bad was the Great Depression? Over the four years from 1929 to 1933, production at the nation’s factories, mines, and utilities fell by more than half. People’s real disposable incomes dropped 28 percent. Stock prices collapsed to one-tenth of their pre-crash height. The number of unemployed Americans rose from 1.6 million in 1929 to 12.8 million in 1933. One of every four workers was out of a job at the Depression’s nadir, and ugly rumors of revolt simmered for the first time since the Civil War.
Old myths never die; they just keep showing up in college economics and political science textbooks. Students today are frequently taught that unfettered free enterprise collapsed of its own weight in 1929, paving the way for a decade-long economic depression full of hardship and misery. President Herbert Hoover is presented as an advocate of “hands-off,” or laissez-faire, economic policy, while his successor, Franklin Roosevelt, is the economic savior whose policies brought us recovery. This popular account of the Depression belongs in a book of fairy tales and not in a serious discussion of economic history, as a review of the facts demonstrates.
To properly understand the events of the time, it is appropriate to view the Great Depression as not one, but four consecutive depressions rolled into one. The late economist Hans F. Sennholz labeled these four “phases” as follows: the business cycle; the disintegration of the world economy; the New Deal; and the Wagner Act. The first phase explains why the crash of 1929 happened in the first place; the other three show how government intervention kept the economy in a stupor for over a decade.
The Great Depression was not the country’s first depression, though it proved to be the longest. The common thread woven through the several earlier debacles was disastrous manipulation of the money supply by government. For various reasons, government policies were adopted that ballooned the quantity of money and credit. A boom resulted, followed later by a painful day of reckoning. None of America’s depressions prior to 1929, however, lasted more than four years and most of them were over in two. The Great Depression lasted for a dozen years because the government compounded its monetary errors with a series of harmful interventions.
Lawrence W. Reed, “The Great Depression was a Calamity of Unfettered Capitalism”, The Freeman, 2014-11-28.
March 3, 2016
When a candidate for public office faces the voters he does not face men of sense; he faces a mob of men whose chief distinguishing mark is the fact that they are quite incapable of weighing ideas, or even of comprehending any save the most elemental — men whose whole thinking is done in terms of emotion, and whose dominant emotion is dread of what they cannot understand. So confronted, the candidate must either bark with the pack or be lost… All the odds are on the man who is, intrinsically, the most devious and mediocre — the man who can most adeptly disperse the notion that his mind is a virtual vacuum. The Presidency tends, year by year, to go to such men. As democracy is perfected, the office represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day the plain folks of the land will reach their heart’s desire at last, and the White House will be adorned by a downright moron.
H.L. Mencken, Baltimore Sun, 1920-07-26.
February 23, 2016
Over on his campaign website Bernie Sanders has a page telling us all how his delightful bribes to the voters will get paid for. The usual populist politician’s trick of just shouting that it will be someone else, not you, no absolutely not you the special little voting snowflake, who will pay for all that you, that special little voting snowflake, are being promised. In Bernie’s case it will be “the rich” who pay for everything. And that’s what means that his taxation plans don’t add up. Simply because there’s not all that many rich people and collectively they don’t have all that much money.
Sure, it’s possible to get a bit more money from them. But at some point in the face of ever rising marginal tax rates, peoples’ behavior will change. There really is some tax rate at which point higher rates don’t produce more revenue, they produce less. And sadly Bernie’s sums don’t take account of this fact. Thus under the current taxation plans all these goodies will not be paid for at all. And this brings us to the essential truth that the European states have all worked out. If you want to bring Big Government to the middle classes then you’ve got to tax the middle classes to pay for Big Government. There just is no other way of raising that sort of amount of revenue.
Tim Worstall, “How Bernie Sanders Won’t Pay For His Proposals”, Forbes, 2016-02-12.
February 18, 2016
Franklin Delano Roosevelt won the 1932 presidential election in a landslide, collecting 472 electoral votes to just 59 for the incumbent Herbert Hoover. The platform of the Democratic Party whose ticket Roosevelt headed declared, “We believe that a party platform is a covenant with the people to be faithfully kept by the party entrusted with power.” It called for a 25 percent reduction in federal spending, a balanced federal budget, a sound gold currency “to be preserved at all hazards,” the removal of government from areas that belonged more appropriately to private enterprise, and an end to the “extravagance” of Hoover’s farm programs. This is what candidate Roosevelt promised, but it bears no resemblance to what President Roosevelt actually delivered.
In the first year of the New Deal, Roosevelt proposed spending $10 billion while revenues were only $3 billion. Between 1933 and 1936, government expenditures rose by more than 83 percent. Federal debt skyrocketed by 73 percent.
Roosevelt secured passage of the Agricultural Adjustment Act (AAA), which levied a new tax on agricultural processors and used the revenue to supervise the wholesale destruction of valuable crops and cattle. Federal agents oversaw the ugly spectacle of perfectly good fields of cotton, wheat, and corn being plowed under. Healthy cattle, sheep, and pigs by the millions were slaughtered and buried in mass graves.
Even if the AAA had helped farmers by curtailing supplies and raising prices, it could have done so only by hurting millions of others who had to pay those prices or make do with less to eat.
Perhaps the most radical aspect of the New Deal was the National Industrial Recovery Act (NIRA), passed in June 1933, which set up the National Recovery Administration (NRA). Under the NIRA, most manufacturing industries were suddenly forced into government-mandated cartels. Codes that regulated prices and terms of sale briefly transformed much of the American economy into a fascist-style arrangement, while the NRA was financed by new taxes on the very industries it controlled. Some economists have estimated that the NRA boosted the cost of doing business by an average of 40 percent — not something a depressed economy needed for recovery.
Like Hoover before him, Roosevelt signed into law steep income tax rate increases for the high brackets and introduced a 5 percent withholding tax on corporate dividends. In fact, tax hikes became a favorite policy of the president’s for the next ten years, culminating in a top income tax rate of 94 percent during the last year of World War II.
Lawrence W. Reed, “The Great Depression was a Calamity of Unfettered Capitalism”, The Freeman, 2014-11-28.
February 14, 2016
Until March 1933, these were the years of President Herbert Hoover — the man that anti-capitalists depict as a champion of non-interventionist, laissez-faire economics.
Did Hoover really subscribe to a “hands off the economy,” free-market philosophy? His opponent in the 1932 election, Franklin Roosevelt, didn’t think so. During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate, John Nance Garner, charged that Hoover was “leading the country down the path of socialism.” Contrary to the modern myth about Hoover, Roosevelt and Garner were absolutely right.
The crowning folly of the Hoover administration was the Smoot-Hawley Tariff, passed in June 1930. It came on top of the Fordney-McCumber Tariff of 1922, which had already put American agriculture in a tailspin during the preceding decade. The most protectionist legislation in U.S. history, Smoot-Hawley virtually closed the borders to foreign goods and ignited a vicious international trade war.
Officials in the administration and in Congress believed that raising trade barriers would force Americans to buy more goods made at home, which would solve the nagging unemployment problem. They ignored an important principle of international commerce: trade is ultimately a two-way street; if foreigners cannot sell their goods here, then they cannot earn the dollars they need to buy here.
Foreign companies and their workers were flattened by Smoot-Hawley’s steep tariff rates, and foreign governments soon retaliated with trade barriers of their own. With their ability to sell in the American market severely hampered, they curtailed their purchases of American goods. American agriculture was particularly hard hit. With a stroke of the presidential pen, farmers in this country lost nearly a third of their markets. Farm prices plummeted and tens of thousands of farmers went bankrupt. With the collapse of agriculture, rural banks failed in record numbers, dragging down hundreds of thousands of their customers.
Hoover dramatically increased government spending for subsidy and relief schemes. In the space of one year alone, from 1930 to 1931, the federal government’s share of GNP increased by about one-third.
Hoover’s agricultural bureaucracy doled out hundreds of millions of dollars to wheat and cotton farmers even as the new tariffs wiped out their markets. His Reconstruction Finance Corporation ladled out billions more in business subsidies. Commenting decades later on Hoover’s administration, Rexford Guy Tugwell, one of the architects of Franklin Roosevelt’s policies of the 1930s, explained, “We didn’t admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.”
To compound the folly of high tariffs and huge subsidies, Congress then passed and Hoover signed the Revenue Act of 1932. It doubled the income tax for most Americans; the top bracket more than doubled, going from 24 percent to 63 percent. Exemptions were lowered; the earned income credit was abolished; corporate and estate taxes were raised; new gift, gasoline, and auto taxes were imposed; and postal rates were sharply hiked.
Can any serious scholar observe the Hoover administration’s massive economic intervention and, with a straight face, pronounce the inevitably deleterious effects as the fault of free markets?
Lawrence W. Reed, “The Great Depression was a Calamity of Unfettered Capitalism”, The Freeman, 2014-11-28.