To add a library to a house is
to give that house a soul.
Cicero
Pro-Liberty Thought of the Day
Hall of Shame: Cops Terrorizing Kids
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| Don Joughin comforts his eleven-month-old son after the infant was doused in pepper spray by one of Portland’s “Finest.” via LewRockwell.com |
Pinketty and the War on the Wealthy
I probably won't fully comment on this until I've read the book Capital in the Twenty-First Century; I still remember being criticized by one philosophy professor for relying too much on secondary sources and another rebuked me for making "Donceel look like an idiot".
Nevertheless, I was intrigued by Krugman's rave review, the title of which references a second Gilded Age. At first, I was confused: was "Mr. (Trillion Dollar Coin) Enron" arguing we were headed for a prosperous age? Here's a relevant excerpt from Wikipedia:
During the 1870s and 1880s, the U.S. economy rose at the fastest rate in its history, with real wages, wealth, GDP, and capital formation all increasing rapidly. For example, between 1865 and 1898, the output of wheat increased by 256%, corn by 222%, coal by 800% and miles of railway track by 567%...This emerging industrial economy quickly expanded to meet the new market demands. From 1869 to 1879, the US economy grew at a rate of 6.8% for NNP (GDP minus capital depreciation) and 4.5% for NNP per capita. The economy repeated this period of growth in the 1880s, in which the wealth of the nation grew at an annual rate of 3.8%, while the GDP was also doubled... Real wages (adjusting for inflation) rose steadily. Economic historian Clarence D. Long estimates that (in terms of constant 1914 dollars), the average annual incomes of all American nonfarm employees rose from $375 in 1870 to $395 in 1880, $519 in 1890 and $573 in 1900, a gain of 53% in 30 years.You see, that's a major difference between Krugman and myself... He is/was far more concerned by what he saw as a concentration of wealth:
Wealthy industrialists and financiers such as John D. Rockefeller, Jay Gould, Henry Clay Frick, Andrew W. Mellon, Andrew Carnegie, Henry Flagler, Henry H. Rogers, J. P. Morgan, Leland Stanford, Charles Crocker, Cornelius Vanderbilt would sometimes be labeled "robber barons" by their critics, who argue their fortunes were made at the expense of the working class.However, Krugman and populist lefties like "Cherokee Lizzie" Warren, both multi-millionaires, are far wealthier than I am. I feel like taking a shower when they engage in their grotesque Politics of Envy rhetoric. The basic context is that Pinketty's work reviews wealth distribution historically and with an emphasis on unearned inherited wealth. The seminal problem I see as when Pinketty goes beyond historical data and starts speculating on redistributive public policies. "And then some magic happens..." The "magic" is the rub; wealth confiscation or even its mere threat only results in counterproductive economic uncertainty--have we learned nothing from Obama's failed economic policies.
Don Boudreaux of Cafe Hayek is currently writing a review of Pinketty's work for Barron's, which I eagerly await. He has telegraphed some of his comments in recent posts, including this sample from one of his signature letters:
But to make here one substantive point, let me ask you to look at the most recent (September 2013) Forbes list of the 400 wealthiest Americans.* From Bill Gates at the top to Nicholas Woodman at the bottom, all are billionaires. Yet 261 of these people are self-made...Also note that many of the superrich who aren’t self-made - many who began with lots of wealth - nevertheless continue, like Charles Koch, to work hard to further enhance their wealth through entrepreneurial creativity, effort, and risk-taking. This Forbes list supplies powerful evidence against Piketty’s notions that large fortunes in market economies overwhelmingly generate themselves automatically and that today’s superrich are mostly parasitic and idle rentiers.In an earlier post, Boudreaux makes the following compelling points:
While Piketty acknowledges elsewhere in the book that r need not, as a matter of logic, grow faster than g, he’s quite sure that something in the nature of capitalism practically assures that r will almost always grow faster than g. [r is the return to capital; g is economic growth] [My comment: Pinketty argues that at an accelerating r (say r >=6), the rich take from the non-rich/middle class in absolute, vs. relative terms... In essence, the only check on this growth is some wealth-destroying event, e.g., a world war.]
Yet capitalism has been around for more than 200 years and the living standards of the masses have skyrocketed – arguably by more than have the living standards of the rich. Salvation from starvation and moving into dwellings with hard floors and solid roofs (rather than sleeping on straw and dirt beneath rodent-infested and highly flammable thatched roofs) is a far greater improvement in absolute living standards than is traveling in a first-class seat on a 747 rather than in a first-class cabin on a sailing ship.
His alternative rate of return on capital of 4 percent would still allow the bottom 999th portion of the global population to enjoy an increasing absolute amount of wealth as time passes. The share of wealth of the 999th portion of the people would fall relative to the share of the top one-thousandth portion of the people – but not the absolute amount.
Piketty – both in his calling for a progressive tax on capital and in his reliance on the r > g formula – largely ignores any disincentives that such taxes inject into the market processes that generate economic growth.In particular, note Boudreaux's discussion of a rising standard of living and the distinction between absolute vs. relative wealth: take a bigger blueberry pie. Maybe the richer person gets a bigger portion of the pie, but even if my slice is proportionately smaller, it may still be more than I got from a bigger slice from a smaller pie. All I really care about is whether I'm better off, I get more pie, not the proportion of the pie I get. If the guy responsible for growth gets much more pie than I do, why should I care? Even if many innovations were first adopted by the wealthy, economies of scale make them more affordable for the rest of us.
As a brief final note, one of my favorite National Review columnists Kevin Williamson makes a related point:
But as Clive Crook notes in his review of the book, the question of whether income inequality widens in the future “won’t matter as much as whether and how quickly wages and living standards rise.” Which is to say, if the real standard of living for the poor and the middle classes continues to increase — as it has for virtually the entire history of modern capitalism — then it will not matter if the standards of living for the very wealthy increase even more quickly....The conservative hesitancy to put the issue of poverty at the center of our domestic economic agenda, rather than tax rates or middle-class jobs, is misguided — politically as well as substantively. Any analysis of the so-called War on Poverty, officially at the half-century mark this year, will find that the numbers are very strongly on the side of the conservative critique of the welfare state: We spend a great deal of money, achieve very little in the way of measurable positive good, and inflict a great deal of destruction on families and communities in the process. Addressing poverty in a meaningful and robust way calls for a response from every part of the conservative coalition, because we have a generation’s worth of social-science research documenting that poverty is only partially an economic phenomenon. Poverty is complexly intertwined with marriage and family, with childbearing habits, and with the prevailing norms in local communities.Exactly. We need to focus on the failure of centralized "progressive" policies, stop engaging in the polemical, dehumanizing philosophy of victimhood, and note the importance of the principle of Subsidiarity, reinforcement of traditional virtues, social norms and institutions (marriage, family, faith) in the private sector. When we engage in morally hazardous public policy, it basically creates uncertainty in voluntary private sector efforts to address those needs.
Facebook Corner
This is a follow-up on a Tom Woods thread (see yesterday's post), where I was critical of Pat Buchanan, a recent guest, on his protectionist policies. I didn't realize that 20 years later people are still touchy over NAFTA. This response is not from the standard leftist critiques or the right-wing protectionist but from other free market critics whom argue that NAFTA is an oxymoron, a version of managed trade that masks mercantilism which perverts the very concept of free trade; I am somewhat sympathetic to that point of view, but I view the glass as half full:
“The great historian Charles A. Beard used to talk about the vital gulf between "appearance" and "reality" that pervades our politics and our political system. Rarely has that gulf been as striking and as revealing as in the bitter and intense struggle over Nafta. On the surface, Nafta dealt with a few puny tariffs covering a small fraction of American trade. So why the fuss and feathers? Why did the Clinton administration pull out all the stops, throwing caution to the winds by openly and shamelessly buying Congressional votes? And why the coming together of the entire Establishment: Democrats, Republicans, Big Business, Big Finance, Big Media, ex-Presidents and Secretaries of State, including the ubiquitous Henry Kissinger, and the last but surely not least, Big Economists and Nobel Laureates? What was going on here?
Perhaps the most shocking performance was that of America's self-styled free-market economists, periodicals, and think-tanks. Surely it would have been legitimate for them to say, in response to those of us who denounced Nafta from a free-trade perspective: "Your concerns are legitimate, but taken all in all, we think that Nafta cuts more in favor of free trade than against." Surely that would be the behavior one would expect from one free-market economist to a colleague who differed on the issue. But with only one or two exceptions, this was not the response of the Nafta forces.
From the time when Lew Rockwell first laid out the free-market case against Nafta in the Los Angeles Times (10/19/92), the reaction has been hysteria. Consider what happened when the excellent analysts of the Competitive Enterprise Institute, Jim Sheehan and Matt Hoffman, proved in meticulous detail that Nafta was a statist mockery of free trade. Instead of being persuaded, or considering their views soberly, other and larger free-market think-tanks inside the Beltway played vicious hardball, suitable for a political brawl rather than for a discussion of ideas. They put tremendous pressure on CEI, not only to suppress the Sheehan-Hoffman Report, but also to fire its authors. Fortunately, Fred Smith, head of CEI, firmly resisted these pressures.
So what was the frenzy all about, from Clinton and Kissinger down to Beltway think-tanks? It was indeed not about trade, certainly not about "free" trade. As the Clinton administration and their Republican auxiliaries stressed as the vote went down to the wire, the fight was about foreign policy, about the globalist policy that the United States has been pursuing since Woodrow Wilson, and certainly since World War II. It was about the Establishment-Keynesian dream of a New World Order. Nafta was a vital step down the road to that order.”
~ Murray N. Rothbard
http://mises.org/econsense/ch88.asp
Foreign Trade Follies
Llewellyn H. Rockwell, Jr.
http://mises.org/freemarket_detail.aspx?control=249...
“The worst aspects of Nafta are the Clintonian side agreements, which have converted an unfortunate Bush [I] treaty into a horror of international statism. We have the side agreements to thank for the supra-national Commissions and their coming “upward harmonization.” The side agreements also push the foreign aid aspect of the establishment’s “free trade hoax.”’296
THE NOVEMBER REVOLUTION AND ITS BETRAYAL
~ Murray N. Rothbard, Edited by Llewellyn H. Rockwell, Jr.
January 1995
http://www.lewrockwell.com/rothbard/ir/Ch17.html
Birth of the WTO
James M. Sheehan
http://mises.org/freemarket_detail.aspx?control=287
This is crackpot hubris. First of all, you've added zero to the conversation. Why did you not understand what I wrote: "In principle, I am deeply suspicious of convoluted managed trade pacts. All government needs to do is get the hell out of the way of cross-border transactions. But even a measured step forward is better than "beggar thy neighbor" madness."
Second, even Rothbard made my general point against the likes of Pat Buchanan: "The renegade free marketers and free traders who endorse Nafta have two contrasting rebuttals to our argument, rebuttals...(2) that we are associating with the absurd arguments and the sinister interests of Left Liberals, the AFL-CIO, and/or such conservative protectionists as Pat Buchanan."
Third, most of the squabble among economists is how much we can attribute increased trade among Canada, the US, and Mexico to NAFTA vs., say, existing organic growth. For example, Canada already had a trade pact with the US.
Let me be clear: unlike Woods and apparently you, I'm not of the Austrian School, although I've been been intrigued or influenced by them on some ideas; I'm more of an independent, pragmatic free marketer. A lot of the Austrian disagreements dealt with the side agreements, e.g., ideological crap, like environmental impact, labor law, and consumer protection. I could cite several pieces here (Heritage still has a 1993 piece on the side agreements online), but suffice it to say these were marketing gimmicks that Clinton needed to sell a trade pact given niche constituencies in the Democratic coalition. You don't have to take my word for it: go to any left-wing website like HuffPo, and they'll bitch about the "weak" side agreements. You have the same nonsense going on with TPP. Do I oppose these economically clueless side agreements? Of course!
But here are some relevant notes from CFR: "Some studies overlook the effect of the development of supply chains, which has been credited to NAFTA. Companies in the three countries, especially U.S. auto manufacturers but also North American makers of electronics, machinery, and appliances, have benefitted from spreading production lines across each country to reduce costs and become more globally competitive, a tactic that would be more difficult without the tariff reductions of NAFTA. Economists estimate that 40 percent of the content of U.S. imports from Mexico and 25 percent of the content of U.S. imports from Canada are of U.S. origin U.S. Imports from China, by comparison, only contain 4 percent U.S. content." "Manufacturing in the United States was under stress decades before the treaty, and job losses in that sector are viewed as part of a structural shift in the U.S. economy toward light manufacturing and high-end services." " Intraregional trade flows have increased significantly over the treaty's first two decades, from roughly $290 billion in 1993 to more than $1.1 trillion in 2012. Cross-border investment and travel have also surged. The United States trades more in goods and services with Mexico and Canada than it does with Japan, South Korea, Brazil, Russia, India, and China combined." "For instance, the deal has led to a dramatic reduction in Mexican prices for clothes, televisions, and food, which helps offset slow income growth. GEA, a Mexico City-based economic consulting firm, estimates that the cost of basic household goods in Mexico has halved since NAFTA's implementation."
(IPI). According to a recent Pew Research Center/USA TODAY survey, more Americans disapprove of the Affordable Care Act now than when the law was enacted. #ObamaCare's disapproval rating has jumped eleven points to 55% from 44%.
Remember when the Wicked Witch of the West Coast said, "But we have to pass the [health care] bill so that you can find out what’s in it....” Well, it seems now that people have seen their bills, they don't like it even more...
(Drudge Report). OBAMA WARNS OF 'DYSFUNCTION'
The dysfunction has been from not having a real leader in the White House in over 5 years, an inability to engage in compromise, even rejecting his own bipartisan debt reduction committee findings, and his administration's increasing lawlessness.
The dysfunction stems from 53% of the voting population's idiocy in voting for him in the first place. Twice....not to mention the other (x)% of voters being stupid enough to put McCain and Romney against him...
Let's face it: the GOP needed to distance itself away from the Bush Administration both in 2008 and 2012 and failed to do so. The Bush Administration nearly doubled the national debt through Clinton, they expanded Medicare, which already had massive unfunded liabilities, without paying for it, they got involved in two ill-fated rounds of nation building in countries with known tribal or sectarian conflicts.
Both McCain and Romney were not principled conservatives. McCain pulled two of the most bone-headed moves I've ever seen: he inexplicably chose a first-term governor as a running mate which largely nullified his experience argument against a first-term senator, and he suspended his campaign during the TARP legislation to SUPPORT it. The Democrats' worst nightmare was that, as in control of Congress, they held primary responsibility to carry it. On the other hand, their whole campaign was largely based on tying McCain to a President with a 30% approval rating. In one swoop, McCain could have distanced himself definitively from Bush. Instead, he decided to try to add another bipartisan notch and found Harry Reid thanking him for his support by telling the country they didn't need McCain.
Romney had his own problems. As a wealthy individual, he was the perfect foil for Obama's class-warfare politics. Romney also had a hard time distancing himself from ObamaCare, in part because his signature accomplishment during his term as governor was the passage of RomneyCare. In my opinion, he had a unique opportunity to strike a blow against decades of failed "progressive" policies, 12 years of irresponsible deficits and meddling foreign policy of Bush/Obama, sort of a resurrection of the Old Right.
We'll see if the GOP learned its lessons in 2016. There's at least one candidate (Rand Paul) whom can rise to the challenge I expected in 2012.,,
And in the ongoing nature of dealing with trolls, this one is off an Independent Institute thread:
Yep, you're right. There are no lobbyists and special interests at all. It's just a "conspiracy" to think so. lol Oh, or maybe it's just 'Progressives' that are on the take. Hmmm...military contracts, educational contracts, health insurance contracts, inside deals...Oh yeah, that's right; it's all just a "conspiracy." Talk about being in a "state of denial." You make me laugh so hard!
Are you really so gullible as to believe this crap? If you put $10,000 in the open, watch the crowd in a feeding frenzy; it doesn't mean they are corrupt; it's that you are stupid to put the money out there in the first place. If you didn't have "progressive" morons spending their grandchildren's money trying to bribe people and companies, how could they plan the economy? But none of the parties that collect the money have one vote to spend the people's tax money or allocate it. THE ONLY WAY TO ELIMINATE CORRUPTION IS TO LIMIT GOVERNMENT'S RESOURCES AND AUTHORITY. Period. Not idiotic attempts to regulate political speech. Stop blaming the whore, when the john offers the money....
(Reason). So how many federal employees got shitcanned because of reduced funds in 2013? A hundred thousand? A million? More? According to a new GAO report, a grand total of one (1), in the Department of Justice's Parole Commission.
The whole thing was a charade. Both parties knew full well nothing was really going to happen. No cuts were really going to occur. It was showboating. Both parties are now the SAME party. Once you realize this fact you start voting for Libertarian candidates like I do these days because I've had enough of the Republicans and Democrats and their insipid and pathetic ways
Oh, COME ON! The One was willing to shut down the whole government vs. negotiate a modest uniform budget cut. Which party has the public blamed more for budgetary disputes: the free-spending Democrats or the GOP? The problem is that the Dems have vested a lot of special interests to profligate spending. If you want to talk audacity, look at how the Dems ran on "saving" Medicare and showing ads of Rep. Ryan tossing granny over the cliff after they enacted Medicare cuts, not to shore up the program but to fund ObamaCare....
off a Cato Institute thread (someone labeled RomneyCare socialist)
You do not take weekends? Do not collect overtime? Did not attend public schools?
The troll is attempting to suggest that "progressive" legislators are responsible for this. This has been disproven several times; Ford, for instance, implemented improved compensation policies decades before its first union contract or any government policy. My first private-sector full-time job was with an insurance company offering a 4-day workweek. The free market works; you have to compete for good employees.
Separate comment: Learn some economics: the allocation of scarce resources and diminishing rates of return. You forget that there are opportunity costs to State theft from the private sector to grow its corrupt empire.
Inspiration
Political Cartoon
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| Courtesy of the original artist via Drudge Report |
Krista Branch, "I Am America"
