Ethanol, produced by corn, “biomass,” cane sugar or other plant matter, is considered by many to be a great alternative to fossil fuels. They consider the origin to be more renewable (plants grow rapidly), the fuel to produce less pollution, the production to release fear “carbon emissions,” and as a bonus, it costs more so people might drive less.
Ethanol is so beloved by some that legislation to subsidize farmers who grew crops for biofuels was pushed through in many countries including Germany and the United States. It would save us from dependence on foreign oil, it would reduce pollution, and cars can run on plants, won’t that be wonderful? Some even argue that it would reduce gas prices because we could shake that oil addiction from the middle east and produce it here cheaply and efficiently!
The truth is, ethanol has its advantages. When burned, it pollutes less than straight gasoline, and it actually has a higher octane rating, making it produce more horsepower per weight than gasoline. It also burns somewhat cooler than straight gasoline.
These days ethanol is less popular, and you don’t hear so much about how great it is. BP isn’t running bright green ads with happy cars driving around on corn any more. But the legislation is still in place, the farmers are still growing corn to turn into fuel, and any attempt to stop this or repeal the legislation is met with exactly the same environmental claims and protests.
So what about these fuels, are they really that great? Are people who oppose ethanol just oil company stooges?
Greg Giraldo is dead now, but he was a very brilliant, very funny comedian. He was one of those comedians that all other comedians loved and thought was so hilarious but for some reason never really caught on or broke big.
He had a bit on biofuels in which he pointed out that for every gallon of corn ethanol, it requires two gallons of gasoline to produce. He noted the only reason corn ethanol is even pushed is because corn farmers want that sweet subsidy money. Al Gore not long ago admitted it wasn’t about the environment, but about kickbacks to farmers for political gain:
First generation ethanol I think was a mistake. The energy conversion ratios are at best very small. […] One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.
Every so often a politician will be honest.
The truth is, ethanol is not just a failure in every single category it was supposed to succeed, but a disaster. From food shortages to riots, to slavery and beyond, ethanol in all its forms is a horrific failure. Let us count the ways.
Christopher Taylor, “COMMON KNOWLEDGE: Ethanol and Biofuels “, Word Around the Net, 2014-04-25.
March 2, 2015
March 1, 2015
Scott Lincicome would like to point out to the contending Republicans hoping to become the GOP’s presidential candidate that defence spending is not immune to the massive overspending problem common to big government:
Over the next 20 months, a clown-car-full of Republican politicians will vie for their party’s presidential nomination. As the candidates crisscross the nation, each will undoubtedly call for smarter, leaner, and (hopefully) smaller government. However, there is one government program that, despite being a paragon of government incompetence and mind-bending fiscal incontinence, will most likely be ignored by these champions of budgetary temperance: the F-35 Joint Strike Fighter. In so doing, these Republicans will abandon their principles and continue a long, bipartisan tradition of perpetuating the broader problems with U.S. defense spending that the troubled jet symbolizes.
During the Obama years, the Republican Party magically rediscovered its commitment — at least rhetorically — to limited government and fiscal sanity. Criticizing the graft, incompetence, and cost of boondoggles like the 2009 stimulus bill, green-energy subsidies, or Obamacare, GOP politicians not only highlighted these programs’ specific failings, but also often explained how such problems were the inevitable result of an unwieldy federal government that lacked discipline and accountability and was inherently susceptible to capture by well-funded interest groups like unions or insurance companies.
They railed against massive bureaucracies, like the Department of Energy, that paid off cronies with scant congressional oversight. And, in the case of well-publicized debacles like the botched, billion-dollar Healthcare.gov roll-out, many Republicans were quick to note that the root of the problem lay not in one glitchy website, but the entire federal procurement process, and even Big Government itself
One wonders, however, if these Republicans’ philosophical understanding of Big Government’s inherent weaknesses extends to national defense and, in particular, the F-35. According to the latest (2012) estimate from the Pentagon, the total cost to develop, buy and operate the F-35 will be $1.45 trillion — yes, trillion, with a “t” — over the next 50 years, up from a measly $1 trillion estimated in 2011. For those of you keeping score at home, this means that the F-35’s lifetime cost grew about $450 billion in one year. (Who says inflation is dead?)
That number — $1.45 trillion — might be difficult to grasp, especially in the context of U.S. defense spending, so let me try to put it in perspective: the entire Manhattan Project, which took around three years and led to the development of the atom bomb, cost a total of $26 billion (2015), most of which went to “building factories and producing the fissile materials, with less than 10% for development and production of the weapons.” By contrast, the F-35 will cost $29 billion. Per year.
For the next 50 years.
January 10, 2015
Megan McArdle explains why healthcare costs more than you think it should:
Milton Friedman famously divided spending into four kinds, which P.J. O’Rourke once summarized as follows:
- You spend your money on yourself. You’re motivated to get the thing you want most at the best price. This is the way middle-aged men haggle with Porsche dealers.
- You spend your money on other people. You still want a bargain, but you’re less interested in pleasing the recipient of your largesse. This is why children get underwear at Christmas.
- You spend other people’s money on yourself. You get what you want but price no longer matters. The second wives who ride around with the middle-aged men in the Porsches do this kind of spending at Neiman Marcus.
- You spend other people’s money on other people. And in this case, who gives a [damn]?
Most health-care spending in the U.S. falls into category three. In theory, the people who are funding our expenses — the proverbial middle-aged men in Porsches, except that they’re actually insurance executives and government bureaucrats — have every incentive to step in, cut up the charge cards, and substitute a gift-wrapped box of Hanes briefs with the comfort-soft waistband. In practice, legislators frequently intervene to stop them from exercising much cost-control. The managed care revolution of the 1990s died when patients complained to their representatives, and the representatives ran down to their offices to pass laws making it very hard to deny coverage for anything anyone wanted. Medicare cost-controls, such as the famed Sustainable Growth Rate, fell prey to similar maneuvers. The only system that exhibits sustained cost control is Medicaid, because poor people don’t vote, or exit the system for better insurance.
The result is a system where everyone complains that we spend much too much on health care — and the very same people get indignant if anyone suggests that they, personally, should maybe spend a little bit less. Everyone wants to go to heaven — but nobody wants to die.
Unfortunately, this is what cost-control actually looks like, which is to say, like people not being able to spend as much on health care. Oh, to be sure, we could achieve this end differently — instead of asking patients to pay a modest share of their own costs (the article suggests that this amount is less than 10 percent, in the case of Harvard professors) — we could simply set a schedule of covered treatment, and deny patients access to off-schedule treatments, or even better, not even tell them that those treatments exist. But people don’t like that solution either, which is why medical dramas are filled with rants about insurers who won’t cover procedures, and the law books are filled with regulations that sharply curtail the ability of insurers to ration care. And the third option, refusing to pay top-dollar for care, would be a bit tricky for Harvard to implement, given that they run exactly the sort of high-cost research facilities that help drive health-care costs skyward. Nor do I really think that the angry professors would be mollified by being given a cheap insurance package that wouldn’t let them go see the top-flight specialists their elite status now entitles them to access.
Instead, they persist in our mass delusion: that there is some magic pot of money in the health-care system, which can be painlessly tapped to provide universal coverage without dislocating any of the generous arrangements that insured people currently enjoy. Just as there are no leprechauns, there is no free money at the end of the rainbow; there are patients demanding services, and health-care workers making comfortable livings, who have built their financial lives around the expectation that those incomes will continue. Until we shed this delusion, you can expect a lot of ranting and raving about the hard truths of the real world.
January 3, 2015
It’s been a very long time since a federal judge
in Kentucky has struck down a “certificate of necessity” (CON) regulation:
Mighty oaks from little acorns grow, so last year’s most encouraging development in governance might have occurred in February in a U.S. district court in Frankfort, Ky. There, a judge did something no federal judge has done since 1932. By striking down a “certificate of necessity” (CON) regulation, he struck a blow for liberty and against crony capitalism.
Although Raleigh Bruner’s Wildcat Moving company in Lexington is named in celebration of the local religion — University of Kentucky basketball — this did not immunize him from the opposition of companies with which he wished to compete. In 2012, he formed the company, hoping to operate statewide. Kentucky, however, like some other states, requires movers to obtain a CON. Kentucky’s statute says such certificates shall be issued if the applicant is “fit, willing and able properly to perform” moving services — and if he can demonstrate that existing moving services are “inadequate,” and that the proposed service “is or will be required by the present or future public convenience and necessity.”
Applicants must notify their prospective competitors, who can and often do file protests. This frequently requires applicants to hire lawyers for the hearings. There they bear the burden of proving current inadequacies and future necessities. And they usually lose. From 2007 to 2012, 39 Kentucky applications for CONs drew 114 protests — none from the general public, all from moving companies. Only three of the 39 persevered through the hearing gantlet; all three were denied CONs.
Bruner sued, arguing three things: that the CON process violates the Constitution’s equal protection clause because it is a “competitors’ veto” that favors existing companies over prospective rivals; that the statute’s requirements (“inadequate,” “convenience,” “necessity”) are unconstitutionally vague; and that the process violates the 14th Amendment’s protections of Americans’ “privileges or immunities,” including the right to earn a living.
November 19, 2014
Net Neutrality is back in the news thanks to President Obama making a PR push to the regulators who may (or may not) be crafting regulations to bring the internet under government supervision:
Because this issue is still in the FCC’s hands, no one can know for sure what rules the agency will adopt. One important question, though, is: will neutrality apply to wireless services or only to cable-based ISPs, such as Comcast, Time Warner, and AT&T? In addition, will failure to preserve the status quo slow down the speed at which Internet connections and broadband capacity expand (because ISPs won’t be able to shift more of the expansion costs onto the “hogs”)? And what exactly is wrong with ISPs wanting to charge content providers higher prices for more bandwidth and faster, more reliable downloads?
More certain, however, is that regulations requiring “net neutrality” will end up benefiting the large, established ISPs. Incumbent firms have gained from “common carrier” regulation throughout U.S. history. As a matter of fact, the FCC predictably will be captured (if it has not already been) by the very companies President Obama wants to regulate “in the public interest.”
The president’s call to action sounds eerily similar to demands for federal railroad regulation that ultimately led to the creation of the Interstate Commerce Commission in 1887. Until it was put out of business in the early 1980s by President Jimmy Carter, the ICC allowed the railroads and, later, motor carriers and pipelines to charge prices exceeding competitive levels, thereby trying its best to protect the carriers’ profits at consumers’ expense.
William Shugart follows up on his original post:
The source of today’s online bottleneck can be traced back to local and regional government authorities, who quickly recognized the benefits (to them personally) of creating and granting exclusive franchises to one ISP that would, for the term of the contract, be a monopolist. (Government officials can extract more rents if they negotiate with only a handful of contestants.) Given that only one ISP would “win” the right to provide online content to local customers, the local monopolists also recognized a benefit of exclusive franchises: They would have the freedom to discriminate against some content suppliers by adding extra fees for privileged access.
So, a simple solution to the absence of net neutrality is readily available: Foster competition between ISPs.
Some people might raise the objection that, in this realm, robust competition for consumer dollars is unlikely because the suppliers of connections to the Internet are “natural monopolists”. In fact, ISPs are not “natural monopolists” as some commentators would have us believe. They are local government-granted monopolies. (Even Frederic Scherer, the author of the influential textbook Industrial Market Structure and Economic Performance, wrote that such claims of “natural monopoly” are “trumped up.”) Competition between ISPs nowadays is a contest for the favors of mayors and city councils who ultimately will determine who will win the exclusive franchise; it is not competition for the business of paying customers.
November 9, 2014
One of the reasons I’m a small-government fan is that the less the government tries to do, the less opportunity for rent-seekers and crony capitalists to batten on the inevitable opportunities that big government provides when it controls and regulates far beyond its competence:
A nice little point being made over in the New York Times, that for all of the public rhetoric about free markets and competition it’s not actually true that the Republicans are entirely pro-free market and pro-competition at all levels of governance. There’s an explanation for this too, an explanation that comes from the late economist Mancur Olsen. That explanation being about the level of the system that decides what will happen on a particular matter and thus where the special interests will try to capture governance.
Republicans have hailed Uber, the smartphone-based car service, as a symbol of entrepreneurial innovation that could be strangled by misplaced government regulation. In August, the Republican National Committee urged supporters to sign a petition in support of the company, warning that “government officials are trying to block Uber from providing services simply because it’s cutting into the taxi unions’ profits.”
Josh Barro then goes on to point out that while the national Republican party might be saying such fine words when we get down to the people who actually regulate taxi rides then local Republicans can be just as pro-taxis and anti-Uber as any group of Democrats.
[…] More likely, to me at least, is that Mancur Olsen had it exactly right. His point being that over time democracy will end up being a competition between special interests for control of that democratic apparatus. The basic background insight is spread costs and concentrated benefits. One analogy is the pig and the chicken deciding what to have for breakfast. If they decide upon bacon and eggs then the chicken is interested but the pig is rather committed there. So it is with the regulation of producers and the competition that they might faced. US consumers of sugar might be paying $50 a year each to protect US sugar producers (that number’s not right but it’s not far off, it’s not $5 each nor $500) but rationally, when there’s so much else for us to think about, it’s sensible enough for us to not get very excited nor angry about this. But the sugar producers are making millions a year out of that same system of restrictions and subsidies. They’re very interested indeed in making sure that it continues.
We who take taxis or Uber are quite interested in Uber (and Lyft and all the others) being able to continue in business. But it’s not the end of our lifestyle if the regulatory apparatus is able to stifle them. But for the people who, for example, own taxi medallions in NYC then the replacement of the traditional taxi market by Uber will mean the potential loss of up to $1 million for each medallion. They’re very much more interested in crimping Uber’s style than we consumers are in expanding it.
Olsen went on to point out that the special interests are obviously more interested than we are in the details of regulation. And they’ll concentrate their efforts at whatever level of the regulatory and democratic system it is that affects their direct interests. Contributing to election campaigns, making their views known and so on, wheeling and dealing to promote their interests.
September 17, 2014
Gregg Easterbrook on the difference between ordinary jobs and government subsidized job creation:
Elon Musk Recharges His Bank Account: Tesla’s agreement with Nevada to build a battery factory is expected to create about 6,000 jobs in exchange for $1.25 billion in tax favors. That’s about $208,000 per job. More jobs are always good. But typical Nevada residents with a median household income of $54,000 per year will be taxed to create very expensive jobs for others. Volkswagen is expanding its manufacturing in Tennessee, which is good. But the state has agreed to about $300 million in subsidies for the expansion, which will create about 2,000 jobs — that’s $150,000 per new job, much of the money coming from Tennessee residents who can only dream of autoworkers’ wages. The median household income in Tennessee is $44,140, about a third of the tax subsidies per new Volkswagen job. The Tesla handout was approved by the Democratic state legislature of Nevada; Tennessee’s Republican-controlled state government approved the Volkswagen corporate welfare deal.
At least it’s a bargain compared to federally subsidized solar jobs. A Nevada solar project — state that is home to Senate Majority Leader Harry Reid, President Barack Obama’s closest ally on Capitol Hill — cost $10.8 million in subsidies per job created. Local public interest groups noticed the extreme subsidy while the national media did not.
This cheeky website monitors giveaways state by state.
August 27, 2014
If you’ve been reading the blog for a while, you’ll have picked up that I’m a fan of SpaceX and other non-governmental organizations in the space race. I wouldn’t go so far as to say Elon Musk is a hero, but I’ve generally been happy about his company’s successes in bringing more private enterprise into the launch business. However, as Lachlan Markay explains in some detail, Elon Musk is not above taking government funds to do things he’d be doing anyway, just like crony capitalists in the rest of the government-industrial complex:
Shortly before a private spaceflight company’s test rocket exploded over southern Texas last weekend, state lawmakers announced millions in subsidies to get the company to continue launching rockets in the Lone Star State.
Space Exploration Technologies, commonly known as SpaceX, will receive more than $15 million in public financing to build a launch pad in Cameron County, near the Mexican border.
The subsidies came after SpaceX’s founder, billionaire tech mogul and pop technologist Elon Musk, made campaign contributions to key state lawmakers and hired lobbyists with ties to Austin.
SpaceX is one of a number of innovative and disruptive startups that, though lauded by some free marketeers for making government-run markets more competitive, are finding themselves drawn to political advocacy, whether out of shrewdness or necessity.
Of the more than $15 million in incentives for a SpaceX launch facility in Brownsville, Texas, announced this month, $13 million will come from the state’s Spaceport Trust Fund.
Initially created in 2002, the fund began to wind down together with the idea of commercial spaceflight. But with the ascendancy of SpaceX and similar companies, Texas looked to secure its place as a destination for commercial spaceflight operations.
Musk took notice. A prolific political donor, he began pouring money into the campaigns of key state lawmakers. On November 7, 2012, he donated $1,000 to state representative Rene Oliveira (D). Two weeks later, he gave state senator Eddie Lucio Jr. (D) $2,000.
The next month, the Associated Press reported that Lucio and Oliveira were working to secure state backing for a potential SpaceX launch pad in Brownsville.
As Drew M. says at Ace of Spades H.Q., it’s not like this is a new thing for businesses or for politicians, it’s just disappointing:
I’m not naive to think this sort of stuff hasn’t gone on forever and will go on forever, it’s simply human nature. That’s why making government at levels as small as possible is so important.
What does continue to surprise me when it shouldn’t is how cheap it is to buy politicians. Remember Team GOP’s hero, Mississippi Senator Thad Cochran’s longtime aide who accepted $20-30K in gifts from Jack Abrahmof in return to ensuring the felon’s clients received millions in government money?
When you think about it it’s really no surprise that politicians sell themselves so cheaply. Unlike honorable whores who sell their own bodies, politicians sell other people’s money. Plus, they make it up in volume.
This bi-partisan rush to hand out everyone’s money for their own gain is part of why I’m drifting away from conservatism and towards libertarianism. Screw them all.
July 26, 2014
The French press, media and intellectuals castigate ad nauseam what they call the ‘ultra-liberalism’ of the present-day western world: and their characterization, as intellectually lazy as it is inaccurate, now goes virtually by default. Very few are the commentators who see through its inaccuracy. That a country whose public sector accounts for more than half of economic activity, and which is as highly-administered as France (and, it must be said, often well-administered, for who would not rather go on the Paris Metro than the New York Subway?), cannot plausibly be described as ‘ultra-liberal,’ ought to be perfectly obvious even on the most casual reflection, but alas it is not. If France is ultra-anything it is ultra-corporatist, but even that would be an exaggeration. And so present discontents are laid at the door of ultra-liberalism, though in fact a considerable proportion of the resentments and discontents of the young who approve of M’Bala M’Bala are attributable to the rigidity of the French labor market, which is caused precisely by an illiberal nexus of protections and restrictions.
The problem, then, is not ultra-liberalism but insufficient liberalism. The difference between France and other western countries, incidentally, is one of degree and not of type, though even degree can be important: illiberalism in the French labor market has in a matter of a few years turned London into one of the largest French-speaking cities in the world.
Theodore Dalrymple, “Illusions of Control in the Omnicompetent French State”, Library of Law and Liberty, 2014-01-07
July 23, 2014
There’s capitalism and there’s crony capitalism: they share a name, but they’re very different creatures. Crony capitalism thrives when government controls a large share of the economy, because then the politicians and bureaucrats have more goodies to share with their “capitalist” cronies. The bigger the slice of the pie controlled by political leaders and unelected regulators, the better the situation for the favoured companies — and that usually means the biggest of the big corporations. In the US government, one of the best examples of institutionalized crony capitalism is the Export-Import Bank (Ex-Im): it exists to allow big corporations like Boeing to sell their products to foreign buyers at highly favourable interest rates, with the taxpayer picking up the risks and the American corporation creaming off the excess profits.
This system works so well — for the businesses being subsidized and the politicians who control the process — that it’s difficult to see it being stopped any time soon. Ex-Im’s enabling legislation is due to be re-authorized later this summer, so this is one of those brief chances to stop it. The problem is that it isn’t just Republicans who support it (because “what’s good for
General Motors Boeing is good for America”), but also Democrats … sometimes the very same Democrats who make a lot of speeches about the evils of Wall Street. Jonah Goldberg explains why:
The Left’s anti-big-business populism is very different. It doesn’t want to cut the government’s incestuous relationship with big business; it simply wants to bring business to heel. Big business should do what Washington tells it to do, and when it does, it will get treats. When it doesn’t, it will get the newspaper to the nose. But big business will never be let off its leash, if the Left has its way.
“[Senator Elizabeth] Warren doesn’t have a problem with big banks or corporations,” the Federalist’s David Harsanyi writes. “She has a problem with banks and corporations that make profits in ways that she finds morally intolerable. She is an opponent of dynamism, not cronyism.”
This has always been the central idea behind progressive economics. Bureaucrats and other planners need — or at least want — ever more power to decide how economic resources are arranged and allocated. That doesn’t mean they’re socialists, it just means that corporations need to follow their lead. Indeed, good “corporate citizenship” means acquiescing to the priorities of progressive state planners and whatever their latest idea of “public–private partnerships” might be. The one constant in such partnerships is that business is always the junior partner.
This was the vision behind Woodrow Wilson’s “war socialism,” FDR’s New Deal, LBJ’s Great Society, Bill Clinton’s “Third Way,” and virtually all of Barack Obama’s economic policies. What is Obamacare but an attempt to turn the entire health-care industry into Washington’s well-fed lapdog?
What’s amazing is that people are still capable of shock when it turns out that a policy of treating businesses like dependent lapdogs yields businesses that try to have the government’s lap all to themselves.
July 17, 2014
Kevin Williamson isn’t a fan of the recent upsurge in usage of the term “economic patriotism”, both for practical and historical reasons:
“Economic patriotism” and its kissing cousin, economic nationalism, are ideas with a fairly stinky history, having been a mainstay of fascist rhetoric during the heyday of Franklin D. Roosevelt’s favorite “admirable Italian gentleman.” My colleague Jonah Goldberg has labored mightily in the task of illustrating the similarities between old-school fascist thinking and modern progressive thinking on matters political and social, but it is on economic questions that contemporary Democrats and vintage fascists are remarkably alike. In fact, their approaches are for all intents and purposes identical: As most economic historians agree, neither the Italian fascists nor the German national-socialists nor any similar movement of great significance had anything that could be described as a coherent economic philosophy. The Italian fascists put forward a number of different and incompatible economic theories during their reign, and the Third Reich, under the influence of Adolf Hitler’s heroic conception of history, mostly subordinated economic questions as such to purportedly grander concerns involving destiny and other abstractions.
Which is to say, what the economic nationalism of Benito Mussolini most has in common with the prattling and blockheaded talk of “economic patriotism” coming out of the mealy mouths of 21st-century Democrats is the habit of subordinating everything to immediate political concerns. In this context, “patriotism” doesn’t mean doing what’s best for your country — it means doing what is best for the Obama administration and its congressional allies. This is where my fellow conservatives who write off Barack Obama as a Marxist really get it wrong: He has no meaningful economic philosophy whatsoever. Marxism might be a moral step backward for Barack Obama, but it would be an intellectual step up in the sense that it at least represents a coherent worldview. (“At least it’s an ethos.”) In years of listening to Barack Obama’s speeches, I’ve never detected any evidence that he understands, or even has any interest in, economic questions as such. He is simply a keen political calculator. The conflation of the national interest — “patriotism” — with the interest of the party or the supreme leader is too familiar a demagogic technique to require much explication.
That’s the Washington way: Create stupid financial incentives, complain when people respond to them — and then declare that conformity with your political agenda is identical to patriotism. The production values may be Hollywood slick, but this is just another third-rate sequel: Banana Republic: The Tax Code Strikes Back.
Except the tax code is not striking back. Democrats complain about it, but they rarely if ever try to do anything about the industry handouts and sweetheart deals enshrined therein — given that they wrote so many of them, why would they?
June 30, 2014
Our political bureaucracies are grasping and vicious, and some of the larger of them are dominated by people who are, if we’re being frank, not especially bright. No society can long thrive by making its creators and innovators subservient to its pimps and thieves. But agencies with the power to tax or the power to pay themselves out of taxes have the power to command, and, human nature being what it is, it is not surprising that their executives use that power to extort for themselves extraordinary levels of compensation (occasionally through criminal means, as in the Bell case), even as they bore us all to death talking about the sacrifices they have endured on behalf of their careers in “public service.” […]
It is baffling that my progressive friends lament the influence of so-called big money on government while at the same time proposing to expand the very scope and scale of that government that makes influencing it such a good investment. Where government means constables, soldiers, judges, and precious little else, it is not much worth capturing. Where government means somebody whose permission must be sought before you can even begin to earn a living, when it determines the prices of products, the terms of competition, and the interest rates on your competitors’ financing, then it is worth capturing. That much is obvious. Progressives refuse to see the inherent corruption in the new ruling class — and, make no mistake, we now have a ruling class — because it is largely made up of them, their colleagues, and people who are socially and culturally like them and their colleagues. Getting a couple hundred grand a year to teach one class doesn’t look so crazy if you think you might be the guy who gets the check next time around. You can be an anti-elite crusader on behalf of the poor and disenfranchised from your million-dollar mansion, even if you never find yourself so much as downwind from a poor person, without fearing charges of hypocrisy: Ask Senator Warren. Of course Chelsea Clinton does not have the sense or the good taste to be embarrassed when talking about her blasé attitude toward money: Money is invisible to her for the same reason that water is invisible to a fish — she’d notice it if it weren’t there, and flap like a desperate landed mackerel until she’d secured her next big payday.
Kevin D. Williamson, “Politics Pays”, National Review, 2014-06-29.
June 28, 2014
Thirty-one percent of Americans are probably right:
Many Americans remain unconvinced that the United States has a system of free market capitalism and continue to be wary of government involvement in the economy.
A new Rasmussen Reports national telephone survey finds that 32% of American Adults believe the United States has a system of free market capitalism, while just as many (31%) say it is a system of crony capitalism. Slightly more (37%) are not sure what kind of capitalist system America has.
That’s from a survey conducted at the beginning of April. I suspect the same survey done now would produce a plurality for the crony capitalist side.
H/T to Jesse Walker for the link.
June 25, 2014
I don’t read the various financial magazines’ regular fanboi coverage of multi-billionaires, so I wasn’t all that aware of the fabulous wealth of Mexico’s Carlos Slim. Slim is one of the richest men in the world, but he doesn’t owe his success to technical innovation or outstanding business skills … he owns the Mexican telephone market thanks to a sweetheart “privatization” deal he got from his good friend in the Presidential palace back in 1990. In other words, his fortune largely derives from his ability to skim off vast profits from a captive customer base. Steve Sailer rounds up some interesting snippets about Slim, including a bit from French economist and current media darling Thomas Piketty:
Andres Oppenheimer wrote for PBS:
Mexico in the early nineties was similar to American capitalism in the late 1870s. Azcarraga, Slim, and Hernandez were not much different from railroad and steel magnate Andrew Carnegie or oil trader John D. Rockefeller. Like the American “Robber Barons” of their time, the Mexico Twelve were making a fortune from their close partnership with the government. And to their immense relief, Mexico was not contemplating anything like the 1890 Sherman Anti-Trust Act, which had broken up U.S. monopolies through forced sell-offs.
In return, Salinas demanded at a private dinner party on February 23, 1993 that Slim and Mexico’s other 29 oligarchs donate $25 million each to the ruling party’s campaign war chest, a total of $750 million. Oppenheimer notes:
Telecommunications magnate Slim … supported the motion, adding only that he wished the funds had been collected privately, rather than at a dinner, because publicity over the banquet could “turn into a political scandal.”
Now, you might think that there is something unseemly about a regular contender for the title of World’s Richest Man making his fortune off the relatively small Mexican economy. We’re constantly told that Mexicans have to be allowed to flock to America to escape starvation in their own land. Yet one well-connected monopolist is permitted to pile up an enormous trove by charging exorbitant fees for the lifeblood of any economy, communications.
A 2006 article in the New York Times pointed out:
The Organization for Economic Cooperation and Development, an association of wealthy countries based in Paris, reports that Mexicans pay some of the highest phone rates in the world, with calls costing 50 percent more than the group’s average. Forbes reported that the average monthly phone bill for a small business in Mexico is $132, compared with $60 in the United States.
Slim epitomizes the toll taken on the Mexican economy by monopolists:
As a result, said Mr. Ortiz of the Bank of Mexico, economic growth is one percentage point less than it could be with real competition. There are not enough jobs to keep workers from migrating to the United States …
Piketty, however, is offended by how Slim
… is often described in the Western press as one who owes his great wealth to monopoly rents obtained through (implicitly corrupt) government favors…
(Slim, himself, has been proactive about improving his press coverage: in 2008 he financially bailed out the New York Times and is now the newspaper of record’s second-biggest owner. Not surprisingly, Slim, who profits lavishly off long distance calls between illegal immigrants in America and their loved ones in Mexico, doesn’t get mentioned much in the Times’ vociferous denunciations of immigration skeptics.)
Piketty, in his inimitable prose style, explains that criticizing Slim is a mistake, if not downright racist:
Rather than indulge in constructing a moral hierarchy of wealth, which in practice often amounts to an exercise in Western ethnocentrism, I think it is more useful to try to understand the general laws that govern the dynamics of wealth—leaving individuals aside and thinking instead about modes of regulation, and in particular taxation, that apply equally to everyone, regardless of nationality.
In other words, rather than the citizens of Mexico using the rule of law to break up Slim’s monopoly, as Americans did with Rockefeller’s, the important thing is for readers of Capital to take global control.
What could possibly go wrong in Piketty’s planetary empire?
June 24, 2014
The urge to provide a national (or even a global) solution to a given problem is almost always mistaken. Kevin Williamson explains why:
“How should we do x?” The main problem is not the answer, but the question itself, and the assumptions behind that question, the belief that an answer exists.
Some policies must, by their nature, be implemented at the national level. If you’re going to have a sovereign nation-state, you need a national defense apparatus (which is not to say you need our national-defense apparatus; there are alternatives), and you probably need a national immigration policy, etc. The basic architecture of the current American constitutional order, which is a remarkably wise and intelligent piece of work, contemplates national policies in those areas in which the several states interact with foreign powers and in those cases in which the states cannot coordinate efforts or resolve disputes among themselves on their own. That, along with some 18th-century anachronisms (post roads, etc.) and some awful economic superstitions (political management of trade, a political monopoly on the issuance of currency), constitutes most of what the federal government is in theory there to do. That and fighting pirates and others committing “felonies on the high seas,” of course, which is awesome, and we can all feel patriotic about fighting pirates.
But … if we look at federal programs by budget share, almost nothing that Washington does requires a national policy. There’s national defense, of course, at around 20 percent of spending; you may believe, as I do, that that number is probably too high, but national defense is a legitimate national endeavor. But most federal spending is on various entitlement programs — Social Security, Medicare, Medicaid, and various other welfare benefits. There is not much reason for any of these programs to exist at all — government is a criminally inept pension planner and a thoroughly incompetent insurance company — and there is very little reason for any of them to exist as uniform, one-size-fits-all national programs. Start digging into that non-defense discretionary spending and you end up with very little more than a catalog of crony payoffs and political favoritism.
There is no more reason to believe that a single government-run pension scheme is in each individual’s best interest than to believe that a single city or single model of car is right for everybody. And the people who design and plan these programs know that. The point of Social Security — like the point of insisting that health insurance is “a right” rather than a consumer good — is to redefine the relationship between citizen and state. That is the real rationale for a national pension scheme or a national insurance policy. For several generations now, we’ve been changing the very idea of what it means to be an American citizen. It used to mean being entitled to enjoy liberty and republican self-governance under the Constitution. Eventually, it came to mean being eligible for Social Security, functionally if not formally. Now it means being eligible for Obamacare. The name of the project may change every generation, and its totems may evolve from Bismarck to Marx to “the experts” — that legion of pointy-headed Caesars who are to be the final authority in all matters in dispute — but the dream remains the same: society as one big factory under the management of enlightened men with extraordinary powers of compulsion.