Category: Capitalism

“Publicly Held Companies Will Play the Political Game”

(p. A11) Mr. Chitester was probably the only PBS or NPR station manager who didn’t believe public radio and television should receive subsidies from American taxpayers. But he had a skill in short supply among the pro-capitalist intellectual class: He knew how to popularize free-market ideas, which many thought couldn’t be done on television.

He confesses that he isn’t sure he’d even heard of Friedman when Wallis put the two in touch. But Mr. Chitester says he devoured Friedman’s 1962 book, “Capitalism and Freedom,” and went to meet Milton and his wife, fellow economist and collaborator, Rose, at their San Francisco apartment.

An hour into the conversation, Mr. Chitester brought up a section in the book where Friedman talks about the responsibility of business—also the theme of Friedman’s famous 1970 New York Times essay, “The Social Responsibility of Business Is to Increase Its Profits.” Mr. Chitester described his dilemma: “I said to Milton, based on your philosophy, I shouldn’t be asking companies for money, and if they take your advice, they’re not going to give me any.”

“Bob, don’t worry about it,” Friedman reassured him. “Businessmen don’t like me anyway.” The economist elaborated. “He said private owners—those who own their own companies—they will be sympathetic. But corporations and publicly held companies will play the political game.” In other word, they’d be shy about supporting such a project lest it hurt them when seeking government funding.

. . .

. . . [Chitester] offers two suggestions for those dreaming about doing what he did.

“First,” he says, “you have to be a storyteller. Think of the people that have had meteoric rises to celebrity. They’ve been excellent storytellers. Free-market preachers if you will.”

. . .

. . . [second] to hopefully get people to think at least initially that I’m a nice person,” he says. “Because if they don’t think I’m a nice person, there’s nothing on the face of the earth I can do that will likely persuade them to listen to what I have to say.”

For the full interview, see:

William McGurn, interviewer. “THE WEEKEND INTERVIEW; The Man Who Made Milton Friedman a Star.” The Wall Street Journal (Saturday, Oct 31, 2020): A11.

(Note: ellipses, and bracketed words, added.)

(Note: the online version of the interview has the date Oct. 30, 2020, and has the same title as the print version.)

The Friedman book mentioned in the passage quoted above is:

Friedman, Milton. Capitalism and Freedom. Chicago: The University of Chicago Press, 1962.

Chinese Communists Have Failed to Reform Toward Free Markets

(p. B6) China is the only major world economy reporting any economic growth today. It went first into Covid-19 and was first out, grinding out 3.2% growth in the most recent quarter while the U.S. shrank 9.5% and other advanced economies endured double-digit declines. High-tech monitoring, comprehensive testing and aggressive top-down containment measures enabled China to get the virus under control while others struggled. The Middle Kingdom may even deliver a modest year-over-year economic expansion in 2020.

This rebound is real, but behind the short-term numbers the economic restart is dubious. China’s growth spurt isn’t the beginning of a robust recovery but an uneven bounce fueled by infrastructure construction.

. . .

An honest look at the forces behind China’s growth this year shows a doubling down on state-managed solutions, not real reform. State-owned entities, or SOEs, drove China’s investment-led recovery.

. . .

For years, the world has watched and waited for China to become more like a free-market economy, thereby reducing American security concerns. At a time of profound stress world-wide, the multiple gauges of reform we have been monitoring through the China Dashboard point in the opposite direction. China’s economic norms are diverging from, rather than converging with, the West’s. Long-promised changes detailed at the beginning of the Xi era haven’t materialized.

Though Beijing talks about “market allocation” efficiency, it isn’t guided by what mainstream economists would call market principles. The Chinese economy is instead a system of state capitalism in which the arbiter is an uncontestable political authority. That may or may not work for China, but it isn’t what liberal democracies thought they would get when they invited China to take a leading role in the world economy.

For the full commentary, see:

Daniel Rosen, and Kevin Rudd. “China Backslides on Economic Reform.” The Wall Street Journal (Wednesday, September 23, 2020): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Sep. 22, 2020, and has the same title as the print version.)

Amazon’s Culture “Asks a Lot of Questions”

(p. B2) John Mackey helped popularize organic food when he co-founded Whole Foods Market four decades ago. Over the past several months, his chain of more than 500 stores has scrambled to adapt to another major shift in how Americans buy groceries.

. . .

The pandemic has accelerated an online-grocery movement that Whole Foods was already seeking to capitalize on as part of Amazon.com Inc. Mr. Mackey sold Whole Foods to the online-retail juggernaut for $13.4 billion in 2017, one of the decisions he recounts in his new book out this month, “Conscious Leadership: Elevating Humanity Through Business.”

. . .

WSJ: What merger challenges have you’ve learned from?

Mr. Mackey: Amazon has a culture that asks a lot of questions. We took a little longer to get used to that, but that’s no big deal. That’s how you learn things. They’re trying to understand our business. They want to know everything. And I think that’s healthy.

WSJ: What’s the biggest leadership lesson you’ve adopted from Jeff Bezos?

Mr. Mackey: Amazon wants you to write up a document explaining your ideas, defending them, and then you can have discussions. That’s a practice Whole Foods has adopted. Amazon’s also very data-driven. As opposed to acting from the gut, Amazon says, “Show us the data.” That’s been a good discipline for us. We do it ourselves, even when we’re not talking to Amazon.

For the full interview, see:

Jaewon Kang, interviewer. “BOSS TALK; Rugged Individualism in the Grocery Aisle.” The Wall Street Journal (Saturday, September 12, 2020): B2.

(Note: ellipses added. In both the print and online versions, “WSJ” and “Mr. Mackey” are bolded, as are the questions asked by Jaewon Kang. The bolding is not visible in the theme used for this blog.)

(Note: the online version of the interview has the date Sep. 11, 2020, and has the title “BOSS TALK; Whole Foods CEO John Mackey Says Many People Are Done With Grocery Stores.”)

The book co-authored by Mackey and mentioned above is:

Mackey, John, Steve Mcintosh, and Carter Phipps. Conscious Capitalism: Elevating Humanity Through Business. New York: Portfolio, 2020.

Despite Global Trading Routes, in Year 1000 Most Ordinary People Rejected the Unfamiliar

(p. C8) Valerie Hansen’s “The Year 1000: When Explorers Connected the World—and Globalization Began” is a gripping account of exploration and ingenuity, sweeping across the economic alliances and great networks of trade that connected disparate regions around the globe. By touching down in different parts of the world at that precise moment, Ms. Hansen reveals the social and economic changes that linked individuals and societies in astonishing ways.

. . .

People navigated along the trading routes from China to the Persian Gulf and East Africa, and from Scandinavia to North America and the Caspian Sea, long before da Gama, Magellan and Columbus. But for most ordinary people life was still circumscribed. Globalization in 1000 may have opened the world to rulers—and busy ports and cities like Quanzhou and Bukhara may have hosted culturally and religiously diverse populations—but there was little sense of a wider, cosmopolitan embrace of a common humanity. “The most important lesson we can learn from our forebears is how best to react to the unfamiliar,” Ms. Hansen writes. “Those who remained open to the unfamiliar did much better than those who rejected anything new.”

For the full review, see:

Karin Altenberg. “Setting The Globe Spinning.” The Wall Street Journal (Saturday, May 23, 2020): C8.

(Note: ellipsis added.)

(Note: the online version of the review has the date May 22, 2020, and has the title “The Year 1000’ Review: Setting the Globe Spinning.”)

The book under review is:

Hansen, Valerie. The Year 1000: When Explorers Connected the World—and Globalization Began. New York: Scribner, 2020.

When Khrushchev Voted With His Feet for Freedom

(p. A23) Sergei N. Khrushchev, a former Soviet rocket scientist and the son of Nikita S. Khrushchev, the Soviet leader during the Cold War of the 1950s and ’60s, died on June 18 [2020] at his home in Cranston, R.I.

. . .

“I’m not a defector,” Sergei Khrushchev told The Providence Journal in 2001. “I’m not a traitor. I did not commit any treason. I work here and I like this country.”

Still, he said, he felt that becoming an American citizen had given him a new lease on life. “I’m feeling like a newborn,” he told The A.P. “It’s the beginning of a new life.”

. . .

Americans had a close-up look at the Soviet leader and his family in 1959, when he visited the United States at the invitation of President Dwight D. Eisenhower.

. . .

Sergei Khrushchev said years later, in the interview with The Providence Journal, that during that trip his family felt as if they had landed on Mars, seeing things they had never imagined. “It was palms, cars, highways, everything,” he said. He took home movies of it all, including Times Square.

They were especially baffled by the concept of Disneyland, then four years old but already a top attraction in Southern California. When told that his family would not be allowed to visit the park out of concerns for their safety, the premier exploded in anger: “What is it? Is there an epidemic of cholera there or something? Or have gangsters taken hold of the place?”

For the full obituary, see:

Katharine Q. Seelye. “Sergei N. Khrushchev, 84, Rocket Scientist and the Son of a Former Soviet Premier.” The New York Times (Thursday, June 25, 2020): A23.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the obituary has the date June 24, 2020, and the title “Sergei Khrushchev, Son of Former Soviet Premier, Dies at 84.”)

“The Spontaneous, Uncoordinated Effort of Businesses, Entrepreneurs and Innovators”

(p. A1) True Value Co. heard from its more than 4,500 affiliated hardware stores last month that hand sanitizer was flying off the shelves, leaving store staff with none for themselves.

At the company’s factory in Cary, Ill., which makes cleaning products and paint, John Vanderpool, the company’s divisional vice president of paint, recalled asking, “What can we do to help here?” After a tip from his wife, a pharmacist, he consulted with the Food and Drug Administration, then huddled with his maintenance team and engineers over two weekends to retool two paint-filling lines to produce jugs of FDA-approved hand sanitizer.

Starting this week they are being shipped free to stores for their own use. The product will go on sale to the public eventually.

The changeover at True Value’s factory from paint to hand sanitizer is one of countless private-sector initiatives that represent an underappreciated asset in Americans’ fight against the coronavirus. It is a 21st-century version of the “Arsenal of Democracy,” the mobilization of industrial might that helped win World War II, only this time to make personal protective equipment, ventilators, tests and vaccines instead of uniforms, ammunition, tanks and bombers.

And where that arsenal was orchestrated by the federal government, this one has been largely the spontaneous, uncoordinated effort of businesses, entrepreneurs and innovators driven as much by the urge to contribute as by future profit.

. . .

(p. A9) Joel Mokyr, an economic historian at Northwestern University, said national crises such as wars and pandemics historically generate a hive of entrepreneurial innovation, from the late 18th-century search in England for a treatment for smallpox to a German drive in the run-up to World War I to use atmospheric nitrogen for explosives.

“We have this huge reservoir of creative energy spread around the economy. When you have an event like this all of a sudden, everyone says, ‘Oh wow let’s look at this problem—let’s see what I can do to solve it.’ ”

This time, innovators are exploiting tools and methods that didn’t exist in previous crises. In mid-March, Lennon Rodgers, director of the Grainger Engineering Design Innovation Lab at the University of Wisconsin in Madison, fielded a plea from the university’s hospital to make 1,000 face shields.

He often gets requests from around the campus to manufacture random items and “initially, I didn’t take it too seriously,” he recalled. But after his wife, an anesthesiologist, told him the shields were indispensable for dealing with highly infectious patients, he scoured hardware and craft stores for parts.

He teamed up with Delve, a local design firm, and Midwest Prototyping, a contract manufacturer, to design their own “Badger Shield,” named after the University of Wisconsin mascot. They expected to use 3-D printers, then concluded that wouldn’t achieve the necessary scale. They uploaded the design to their website along with the necessary parts for anyone to download. A few days later Ford Motor Co. did, and, with tweaks of its own, began turning out face shields for Detroit-area hospitals.

For the full story, see:

Greg Ip. “Health Crisis Awakens Spirit Of Private-Sector Innovation.” The Wall Street Journal (Friday, April 17, 2020): A1 & A9.

(Note: ellipsis added.)

(Note: the online version of the story was updated April 16, 2020, and has the title “Shoes to Masks: Corporate Innovation Flourishes in Coronavirus Fight.”)

Each Week, Chinese Children Read “Socialism Is Good. Capitalism Is Bad.”

(p. A11) Many Chinese children of my generation read a newspaper column for students called “Socialism Is Good. Capitalism Is Bad.” Each week, it described the wonders of China alongside the hardships of capitalist societies. The lesson: Socialist China takes care of its people, while people in the United States go hungry and the elderly die alone.

For the full commentary, see:

Li Yuan. “THE NEW NEW WORLD; China Builds Culture of Hate With Selective Coverage of the Pandemic.” The New York Times (Thursday, April 23, 2020): A11.

(Note: the online version of the commentary has the date April 22, 2020, and has the title “THE NEW NEW WORLD; With Selective Coronavirus Coverage, China Builds a Culture of Hate.”)

87% of American Liberals Support Some Merit-Based Income Differences

In my Openness to Creative Destruction, I claim that most people do not care as much about inequality per se, as they do about unfair inequality. What they care about is the differences in income be roughly related to differences in contribution. I illustrate this by recounting a famous experiment that Frans de Waal conducted with capuchin monkeys. The evidence in the study quoted below, supports my claim.

(p. B3) In 2018, four economists at the Center for Experimental Research on Fairness, Inequality and Rationality at the Norwegian School of Economics conducted a huge experiment — mostly via face-to-face interviews — using the Gallup World Poll. The Norwegian team — Bertil Tungodden, Alexander Cappelen, Ingvild Almas and Erik O. Sorensen — worked with Gallup to survey 65,000 people across 60 countries about their beliefs related to the gaps between the rich and the poor.

Part of the survey was an experiment. Respondents were randomly assigned to different conditions and presented a real-life scenario: Two people were recently hired to independently complete a short assignment; they were both paid, but one was given an additional $6.

In the first group, survey takers were told that the additional $6 was given out randomly. In the second group, they were told the $6 went to the worker who was more productive in completing the assignment. In both cases, respondents were asked how they would divide the additional earnings: whether they would transfer none of it, some of it or all of it to the other worker.

. . .

American conservatives might assume liberals are averse to merit-based compensation. The experiment proves that’s not so. When told the bonus payment was made only to the most productive worker, only 13 percent of the liberals transferred all of the money equally to the less productive worker, which is within the margin of error of the American conservative response (10 percent).

Americans both liberal and conservative were more likely than most people worldwide to accept merit-based income differences. As one of the study’s investigators, Mr. Tungodden, mentioned in his public presentation on the study, people in richer countries were more likely than people in poorer countries to allow merit-based differences. In the rich and more egalitarian country of Norway, 88 percent of respondents transferred the bonus payment equally when told it was allocated by chance, but only 33 percent did so when allocated by merit.

For the full commentary, see:

Jonathan Rothwell. “THE UPSHOT; Think Only Liberals Will Share the Wealth? A Survey May Surprise You.” The New York Times (Friday, February 14, 2020): B3.

(Note: ellipsis added.)

(Note: the online version of the commentary was last updated February 14, 2020, and has the title “THE UPSHOT; Experiment Shows Conservatives More Willing to Share Wealth Than They Say.”)

The soon-to-be-published version of the research discussed above, is:

Almås, Ingvild, Alexander W. Cappelen, and Bertil Tungodden. “Cutthroat Capitalism Versus Cuddly Socialism: Are Americans More Meritocratic and Efficiency-Seeking Than Scandinavians?” Journal of Political Economy (forthcoming 2020).

My book, mentioned above, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

For Venturesome Amazon Toilet Paper Shoppers, “Like Sandpaper” Is “Better than Nothing”

(p. B5) Where name-brand products sell out, off-brand products sold by third-party sellers have filled the void. Many of the top search results for toilet paper with regular Prime delivery were novelty rolls with zombies or the faces of politicians like Hillary Clinton.

In early April, Arielle Ogletree and her mother, who live near Tampa, Fla., were almost out of toilet paper when they turned to Amazon. They found a 16-pack of the large commercial toilet paper rolls found in public restrooms for $42. A few days later, it was at their door.

“It was the only one they had, and we figured it would last a while,” Ms. Ogletree said.

The roll, too big for a regular holder, sits awkwardly on their bathroom counter. Though the single ply feels “like sandpaper,” Ms. Ogletree said, it was better than nothing.

For the full story, see:

Karen Weise. “Confusion And Chaos At Amazon.” The New York Times (Saturday, April 18, 2020): B1 & B5.

(Note: the online version of the story has the date April 17, 2020, and has the title “When Even Amazon Is Sold Out of Exploding Kittens.”)

To Survive, Venezuelan Socialists Retreat from Socialism

(p. 14) CARACAS, Venezuela — After decades of dominating its oil industry, the Venezuelan government is quietly surrendering control to foreign companies in a desperate bid to keep the economy afloat and hold on to power.

The opening is a startling reversal for Venezuela, breaking decades of state command over its crude reserves, the world’s biggest.

The government’s power and legitimacy have always rested on its ability to control its oil fields — the backbone of the country’s economy — and use their profits for the benefit of its people.

But the nation’s authoritarian leader, Nicolás Maduro, in his struggle to retain his grip over a country in its seventh year of a crippling economic crisis, is giving up policies that once were central to its socialist-inspired revolution.

For the full story, see:

Anatoly Kurmanaev and Clifford Krauss. “Economy Mired in Crisis, Venezuela Quietly Surrenders Control of Its Oil.” The New York Times, First Section (Sunday, February 9, 2020): 14.

(Note: the online version of the story was updated Feb. 18, 2020, and has the title “To Survive, Venezuela’s Leader Gives Up Decades of Control Over Oil.” The online version says that the article was on p. A8 of the print version. But it was on p. 14 of my National Edition print version.)

Millennials Blame Capitalism for “the Crushing Burden of College Debt”?

(p. A22) “Millennials don’t remember the Cold War,” said Maurice Isserman, a history professor at Hamilton College who has studied democratic socialism. “They don’t react in the same way to the word ‘socialist’ and associate it with totalitarian communism.”

Instead, young voters have experienced a structural shift in the economy, including the 2008 financial crisis and the crushing burden of college debt, that has given them a more critical view of capitalism, he said.

For the full story, see:

Patricia Mazzei and Sydney Ember. “Sanders’s Views on Cuba Split Young and Old Voters.” The New York Times (Saturday, February 29, 2020): A22.

(Note: the online version of the story has the date Feb. 28, 2020, and has the title “Sanders Is Stirring Cold War Angst. Young Voters Say, So What?.”)