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Free Markets Archive

Sunday

4

October 2009

0

COMMENTS

Pope Mouths Off Again

Written by , Posted in Free Markets

Not for the first time, Pope Benedict has proven, when it comes to economics, the old adage that it’s better to be thought a fool than to open your mouth and remove all doubt.

The Pope compared the world’s poorest continent, which he visited earlier this year, to a spiritual “lung” at risk of being attacked by what he called the viruses of materialism and religious fundamentalism, as he opened a synod of Roman Catholic bishops on Africa.

“There is absolutely no doubt that the so-called ‘First’ World has exported up to now and continues to export its spiritual toxic waste that contaminates the peoples of other continents, particularly those of Africa,” he said.

“In this sense colonialism, which is over at a political level, has never really entirely come to an end.”

Lamenting the exploitation of Africa’s vast resources, the Pope also spoke out against religious fundamentalism, which he said was mixed with political and economic interests.

The “virus of materialism” the Pope refers to is exactly what Africa lacks.  It has allowed the “First World” to experience a level of peace and prosperity unheard of in human history.  We know what works at lifting people out of poverty, but the Pope’s backward economic views would condemn Africa to continuing and unnecessary suffering.

Wednesday

30

September 2009

0

COMMENTS

The Power Of The Poor

Written by , Posted in Free Markets

Every day, people all across the world make countless transactions, exchanging one good or service for another. What allows us the necessary trust to engage in these interactions not only with our friends and neighbors, but with complete strangers?  Why are certain people in certain countries better able to grow their wealth through simple everyday trade? In America and other developed nations we are able to conduct these transactions without much thought because we have adopted the institutions necessary to promote peaceful cooperation.  Because many countries lack these institutions, it is difficult for much of the world to share in our success, and in some cases bad institutions actively prohibit trust and peaceful cooperation.

In order to ensure that we can cooperate – even with complete strangers – without undue fear, we need to know that there exists a uniform and predictable set of rules to prevent fraud or coercion, and to enforce contractual agreements.  There are particular institutional arrangements that history has proved most conducive to constructing and sustaining these rules.  A government in which powers are dispersed among several bodies, for instance, prevents the rule of law from devolving into the arbitrary rule of single tyrant.  Robust legislative, executive and judiciary branches are able to provide the law and enforcement necessary for open exchange, while each body also checks the others from becoming a threat to the liberty which they were instituted to foster.

In many countries, a lack of clear property rights prevents growth.  In order for individuals to prosper, they must not only feel secure in their dealings with others, but also in their belief that they will still possess tomorrow what they own today.  Governments that make it excessively difficult for the poor to claim legal ownership over their land and property condemn them to an uncertain and often bleak future.  Unable to participate in the legal market, they lose the benefit of trust that these institutions provide.

Even with these institutions, free exchange is often encumbered by bureaucracy and corruption.  When the people lose trust in their institutions, either because they are ineffective or hopelessly corrupt, they are unable to provide the necessary conditions for prosperous exchange.  But when we get it right, by creating institutions to protect the rights of citizens to be secure in their persons and possessions, the power of the poor can be unleashed to transform their future into one of peace and prosperity.

The Power of the Poor airs October 8, 10 PM ET (or check your local listings) on PBS

Tuesday

29

September 2009

0

COMMENTS

Monday

14

September 2009

1

COMMENTS

China Strikes Back, New York Times In Shock

Written by , Posted in Free Markets, Media Bias

Following President Obama’s launching of (trade) war against China, the world’s most populous nation and our second biggest trading partner, they have predictably struck back.  Predictably, that is, unless you work at the New York Times:

China unexpectedly increased pressure Sunday on the United States in a widening trade dispute, taking the first steps toward imposing tariffs on American exports of automotive products and chicken meat in retaliation for President Obama’s decision late Friday to levy tariffs on tires from China.

How utterly unexpected of them. I mean, who could have possibly predicted that slapping tariffs on Chinese tires simply because Americans wanted to purchase, and thus were sold, a high number of them would be just the first shot in a new trade war?

The article also provides the usual misinformed scaremongering about the so-called trade deficit:

Mr. Obama’s decision to impose a tariff of up to 35 percent on Chinese tires is a signal that he plans to deliver on his promise to labor unions that he would more strictly enforce trade laws, especially against China, which has become the world’s factory while the United States has lost millions of manufacturing jobs. The trade deficit with China was a record $268 billion in 2008.

The implications couldn’t be clearer, nor more wrong. There’s little evidence that China’s increases in manufacturer have come out the expense of American jobs. While the American manufacturing sector has indeed lost jobs, it has been doing so at the same, steady pace for over 50 years – well before China was a player. America manufactures more today then ever before, but thanks to gains in productivity it also requires less labor to do so.

The bit about the trade deficit is clearly tacked on as an ominous indication of the Chinese economic threat, and thus a justification for “more strictly enforc[ing] trade laws.” Later the article notes, “the United States buys $4.46 worth of Chinese goods for every $1 worth of American goods sold to China.” Good for us that we get $4.46 worth of goods for every $1 worth we give up! Don Boudreax at Cafe Hayek recently explained by example the idea that exports are the costs, while imports are the benefits.

He also made the point that retaliation is self-defeating. Unfortunately, the tire tariff is likely to spur pressure from other domestic special interests who don’t want to compete in a free market, and the Chinese retaliation gives them further political cover.  Let’s hope President Obama comes to his senses soon and stops this cycle or we’re in for a world of hurt.

Sunday

13

September 2009

2

COMMENTS

Obama Launches Trade War

Written by , Posted in Free Markets, Labor Unions

The first shots in a trade war – guaranteed to produce heavy economic casualties right here at home – have been fired by Barack Obama.  In order to secure a Pyrrhic victory for narrow union interests, President Obama has sent unarmed and ill-prepared consumers to the front lines.

Obama has slapped Chinese tire imports with a three-year tariff – at rates of 35 percent the first year, 30 percent the second and 25 percent the third. The justification for this action is a law passed in 2000, as part of the negotiations to Chinese admittance into WTO, that says the U.S. can impose tariffs if “a surge in Chinese imports damages a U.S. industry.”

A surge? Are Chinese tires storming the beaches of Florida?

Basically, some union official decided that China was selling too many tires and came whining about it to the U.S. government. All of a sudden it’s protectionism time.

Unfortunately, protectionism doesn’t actually do any protecting.  It doesn’t protect consumers who will have fewer choices at higher prices.  It doesn’t protect tire importers who will also pay higher prices which, when they necessarily pass them on to consumers, will cost them business.

It doesn’t even help the particular domestic industry ostensibly being protected.  Without competitive pressures, industry will grow in an inefficient and wasteful manner.  Numerous countries, particular in Latin America, have tried to develop economically by protecting domestic industries.  It has never worked.  You can no more protect an industry through tariffs than you can protect a child by locking him in a closet for twenty years.

Update: Daniel Ikenson at freetrade.org offer a much more detailed analysis.

Wednesday

19

August 2009

0

COMMENTS

The Dishonest Health Care Pitch

Written by , Posted in Free Markets, Health Care, Welfare & Entitlements

The White House mantra is all about “choice and competition.”  As I noted two months ago, the chosen strategy of the left on health care is to fraudulent adopt the language of freedom, while advancing a plan of control and restrictions.  Robert Gibbs says that the White House has the “goal of fostering choice and competition in a private health insurance market.” He even uttered the chosen words once every 8.7 seconds in a recent CNN interview.

No Choice

If you want choice, don’t expect any in this plan.  Want to purchase insurance that only includes coverage for care that you might actually need?  Too bad! Excessive government mandates won’t allow for plans tailored to your specific needs.  Want to forgo insurance and pay out of pocket? Too bad! An individual mandate prohibits that choice.  Want to get the same amount of money from your employer and purchase HSA accounts instead? Too bad! Government tax distortions make a dollar spent on your health care by your employer worth more than a dollar spent by yourself.

No Competition

If you want to see greater competition in health insurance, don’t expect to get it from this plan.  Want insurers to compete across state lines to offer the best plans possible? Too bad! State protectionism often makes this impossible.  Want a robust system where companies can offer different models? Too bad! Guaranteed issue and community rating rules in many states prevent companies from offering competing plans, or prices them right out of the market altogether.

Real competition and real choice is possible.  The way to get it is not through bigger government and more regulation, but by removing those barriers that government already has in place.  This plan does the opposite.  It is anti-choice and anti-competition.  Anyone who tells you otherwise thinks you are a sucker.

Tuesday

18

August 2009

0

COMMENTS

Saving Socialism By Ending It

Written by , Posted in Free Markets

An article on Cuba has the interesting headline, “Cuba’s leaders see private farmers as key to saving socialism.”

Had the author (or editor) thought this through a bit, he might have found the irony in declaring that capitalism was the key to saving socialism.  Certainly we agree that the best way to save socialism is to end it.

Some other gems from the article:

“There is too much control and bureaucracy that hinders everything,” Espinosa Chepe said. “It’s impregnated with a 50-year-old operating method that is built on taking orders and is not used to decentralization.

“There need to be more incentives,” he said.

…

“The more independent you are, the more you push yourself,” he said. “Why work harder if you don’t get any benefit?”

…

“If the worker is not content in his job and you don’t pay him for his results, you don’t achieve anything,” cooperative president Lázaro Hernández told the paper, saying he paid his 20 employees 780 pesos a month ($32.50), more than twice the average national wage. Their wages, and share of produce, increase if they exceed production targets.

“If the salary is fixed, the worker will just show up and do his day’s work, but he won’t be interested in getting the most out of it. If he has a percentage, it all changes,” he said.

Incentives? Motivation in ownership? By George, I think they’ve got it!

Hat-tip: John Stossel’s Take

Monday

17

August 2009

0

COMMENTS

Current Approach To Health Care Is Still Fundamentally Flawed

Written by , Posted in Free Markets, Government Meddling, Health Care, Welfare & Entitlements

The argument for a public option never really made sense.  If there’s an insurance model that could perform better than current models, there’s no reason it can’t be adopted in the private sector, perhaps financed by liberal billionaires like George Soros and Steve Bing, without government legislation.  If it’s really a better choice for consumers, and thus profitable, someone would step forward to do it. On the other hand, there are many obvious disadvantages to administering government insurance (the same disadvantages that plague all government activities), while the only real advantage is the availability of taxpayer money.

If the government is to use taxpayer dollars to run an insurance model at a loss, which is basically a redistribution from taxpayers to insurance consumers (two overlapping but not identical groups), then the same thing could be more easily accomplished without undermining existing insurance providers (food stamps, for instance, don’t undermine grocery stores).  In other words, the public option was always completely unnecessary no matter which side you looked at it from, and the White House may or may not be ceding ground on this issue, depending on who you listen to.   But while dropping the public option from the discussion would be a welcome development, the nature of the health care argument advanced by the White House is still fundamentally flawed. (more…)

Saturday

15

August 2009

0

COMMENTS

Opposition To ObamaCare Ought Not Be A Defense Of Insurance Companies

Written by , Posted in Free Markets, Health Care, Welfare & Entitlements, Liberty & Limited Government

Free market advocates shouldn’t get too excited defending insurance companies. Yes, the statist tactic of scapegoating private actors in order to justify an expansion of government power is deplorable.  Defenders of free markets have a right to object to those efforts.

But we must also be careful not to forget that these very same private actors are not principled believers of free markets, but rather self-interested entities more than willing to advocate for government meddling when it suits their own agenda.  I made this very argument regarding Wal-Mart’s embrace of government health care mandates, and Tim Carney makes it now regarding the insurance companies themselves:

Dear conservatives: Health insurance companies are not your friends. Keep opposing a new government-run insurer, a single-payer plan, and new regulations on the HMOs. But grant that Speaker of the House Nancy Pelosi is correct on this: Insurance companies are villains.

Insurance companies lobby for big-government regulations, subsidies, mandates, and tax-code distortions that funnel them money, keep out competition, and stultify innovation. These policies preserve the employer-based health-care system that mocks the idea of free-market competition. Then they cry “unfair competition” when government threatens to encroach on their government-protected monopolies.

But they’re not just lobbying against a government option. Today, health insurers are lobbying to force you and me to buy their product or face a tax hike (the individual mandate).

…

Big government advanced on behalf of special interests is just as deplorable as that advanced by power hungry liberals.

Update: John Stossel also tackled this issue.

Wednesday

12

August 2009

0

COMMENTS

Government Meddling Decimates Canadian Sperm Donation

Written by , Posted in Free Markets, Government Meddling, Health Care, Welfare & Entitlements

Moralistic, do-gooder economic policy has consequences:

Why is it that Canada, a country of 12 million adult men, has only 33 sperm donors to supply its thousands of infertile couples? That’s the question being asked by some fertility doctors as many couples look elsewhere for help growing their families.

Canada once had about two dozen sperm banks. But in 2004, the federal government passed the Assisted Human Reproduction Act, which outlawed payment to sperm or egg donors. The only money that has been allowed to change hands is for expenses incurred in the donation process, such as the costs of traveling to the clinic.

Five years later, there are very few Canadian sperm donors willing to donate for free, says Dr. Tom Hannam of the Hannam Fertility Centre in Toronto. That’s left many couples, especially those among visible minorities, without many choices.

Applying the same lesson to other types of medical donations the question becomes: how many more people would we be able to save if compensation was allowed for organs?

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About Me

profileI serve as Vice President of the Center for Freedom and Prosperity, a non-profit think tank dedicated to preserving tax competition and free markets. This site features my personal views, which are not reflective of CF&P.

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