Capitalism – Page 18 – artdiamondblog.com

Cars Bring Convenience, Freedom, and Personal Security

(p. 16) Two generations ago in the United States,most families lacked a car; by our parents’ generation, most families had one car while the two-car lifestyle was a much-sought ideal; today a third of America’s families own three cars or more. The United States now contains just shy of one automobile per licensed driver, and is on track to having more cars than licensed drivers. Cars are a mixed blessing, as a future chapter will detail: But there is no doubt they represent convenience, freedom, and, for women, personal security, when compared to standing on street corners waiting for buses or lingering on dark subway platforms. Cars would not he so infuriatingly popular if the did not make our lives easier. Today all but the bottom-most fraction of the impoverished in the United States do most of their routine traveling by car: 100 auto trips in the United States for every one trip on a bus or the subway, according to the American Public Transit Association. The portion of routine trips made in private cars is rising toward overwhelming in the European Union, too. Two generations ago, people dreamed of possessing their own cars. Now almost everyone in the Western world who desires a car has one–and vehicles that are more comfortable, better-equipped, lower-polluting, and much safer than those available only a short time ago.

Source:
Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.

The Progress Paradox Documents How Life Is Better Here and Now

Source of book image: http://grigr.com/

Greg Easterbrook’s book has been out for several years, but I am a slow reader and have a long “to read” list. I enjoyed the first half or so of the book very much, and also enjoyed some parts of the second half. Roughly speaking, the first half is devoted to illustrating how much better life is now than before, and here (the West) than there (the less-developed countries). Roughly speaking, the second half of the book asks why we aren’t happier, and complains about areas of life where Easterbrook sees room for improvement.
Some of the part I like has now been updated, or written with better argument or more panache, by Matt Ridley in The Rational Optimist. But even so, Easterbrook often gives examples, or arguments, that complement Ridley’s case.
And even though Ridley is on average more eloquent than Easterbrook, the latter is eloquent plenty often enough to be worth reading. (And maybe my judgment about eloquence is colored by my agreeing with Ridley 90% of the time, and only agreeing with Easterbrook 75% of the time.)
On the less-satisfying second half of the book: worthwhile questions are often asked, but the answers are few and not very satisfying.
In the next few weeks, I’ll occasionally be quoting a few of the more illuminating or edifying passages in the Easterbrook book.

Easterbrook’s book:
Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.

The Ridley book that I mention:
Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.

Estonia Re-Elects “Government that Continued to Embrace Laissez-Faire Capitalism”

(p. A5) MOSCOW — Early results in Estonia’s parliamentary election on Sunday showed the ruling coalition headed for a victory, in a remarkable show of support for a government that has imposed harsh austerity measures to lift the country out of recession.
. . .
The vote reflects approval for a government that continued to embrace laissez-faire capitalism during the painful months after the global downturn. After Estonia’s economy shrank nearly 15 percent, the state reduced its budget by the equivalent of 9 percent of gross domestic product. Demand fell steeply, and unemployment crept up, early in 2010, to 19.8 percent.
But in contrast to their neighbors in Latvia, where economic troubles led to riots and the government’s collapse, Estonians stoically absorbed the suffering. These sacrifices allowed Estonia to join the euro zone in January, a move its leaders hailed as a sign that the country was on its way to achieving Western European standards of living. Meanwhile, the economy has been projected to grow by 4 percent this year, and unemployment has dropped to around 10 percent, according to the Estonian Unemployment Insurance Fund.

For the full story, see:
ELLEN BARRY. “After Cuts, Voters Back Ruling Bloc in Estonia.” The New York Times (Mon., March 7, 2011): A5.
(Note: ellipsis added.)
(Note: the online version of the article is dated March 6, 2011.)

Koch Does Not Run with the Antelope

If you were standing amongst a herd of antelope when a dangerous predator arrived, you would not see the antelope defending themselves against the predator. What you would see would be their white rear ends disappearing in the distance.
Last July in Wichita I heard some executives from Koch Industries talking about Market-Based Management. A couple of them mentioned Koch’s stands in defense of the free market. As a result of these efforts, Koch Industries has become the target of many agencies of the government and of groups opposed to the free market. Once or twice I heard an executive say something like: ‘it would have been a lot easier if we had just painted our butts white and run with the antelope.’
Schumpeter thought that those in business would not defend the fortress of capitalism (CSD, p. 142). And the evidence suggests that Schumpeter was mainly right. But we can hope that there are enough exceptions, in unpretentious places like Wichita, to keep the fortress standing.

(p.A15) Years of tremendous overspending by federal, state and local governments have brought us face-to-face with an economic crisis. Federal spending will total at least $3.8 trillion this year–double what it was 10 years ago. And unlike in 2001, when there was a small federal surplus, this year’s projected budget deficit is more than $1.6 trillion.

Several trillions more in debt have been accumulated by state and local governments. States are looking at a combined total of more than $130 billion in budget shortfalls this year. Next year, they will be in even worse shape as most so-called stimulus payments end.
For many years, I, my family and our company have contributed to a variety of intellectual and political causes working to solve these problems. Because of our activism, we’ve been vilified by various groups. Despite this criticism, we’re determined to keep contributing and standing up for those politicians, like Wisconsin Gov. Scott Walker, who are taking these challenges seriously.

For the full commentary, see:
CHARLES G. KOCH. “Why Koch Industries Is Speaking Out; Crony capitalism and bloated government prevent entrepreneurs from producing the products and services that make people’s lives better.” The Wall Street Journal (Tues., MARCH 1, 2011): A15.

Koch’s book is:
Koch, Charles G. The Science of Success: How Market-Based Management Built the World’s Largest Private Company. Hoboken, NJ: Wiley & Sons, Inc., 2007.

Economic Importance of Inarticulate Knowledge Undermines Case for Central Planning

(p. 78) . . . the intelligence of humans, though immensely strengthened by articulation, nonetheless contains a large component of tacit understanding by individuals who know more than they can say. If this is also true with respect to the sorts of knowledge relevant to our economic activities, then no comprehensive planning agency could obtain the sort of knowledge necessary for economic planning, for it would lie buried deep in the minds of millions of persons.

Source:
Lavoie, Don. National Economic Planning: What Is Left? Washington, DC: Cato Institute, 1985.
(Note: ellipsis added.)

The Fragility of China’s Red Capitalism

Source of book image: http://media.wiley.com/product_data/coverImage300/63/04708258/0470825863.jpg

Red Capitalism is scheduled for release on February 15, 2011. I have not read it, but from early reports it would appear to be a credible account that updates and supports concerns about China’s economy expressed by David Smick (The World Is Curved) and others.

The reference is:
Walter, Carl E., and Fraser J. T. Howie. Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise. Hoboken, NJ: Wiley, 2011.

The Smick book mentioned, is:
Smick, David M. The World Is Curved: Hidden Dangers to the Global Economy. New York: Portfolio Hardcover, 2008.

Rockefeller Is Vilified Despite His Entrepreneurial Genius and His Philanthropic Generosity

Source of book image: http://ecx.images-amazon.com/images/I/512M5Z648JL.jpg

(p. C7) . . . as Suzanne Loebl rightly emphasizes in “America’s Medicis,” the Rockefellers’ patronage has been notable not only for its generosity but also for its deliberativeness. By founding such diverse institutions as MoMA, Colonial Williamsburg, the Cloisters, Riverside Church and the Asia Society–as well as by commissioning the distinguished artworks that enliven the office complex at Rockefeller Center–various members of the family have been guided by a perception that a moral responsibility comes with the possession of great wealth.

John D. Rockefeller, Sr. (1839-1937), the founder and chairman of Standard Oil, was routinely vilified in the press as a ruthless monopolist who crushed competition the way a giant might crush a bug. . . . . . . yet he was not the cold-hearted miser that some supposed. A devout Baptist, he donated substantial sums every year to one or more of the congregations he attended, as well as to associated causes, such as the American Baptist Education Society, which founded the University of Chicago with his support in 1890.
. . .
Unfortunately, not everyone behaved well in the face of Rockefeller munificence. The Mexican painter Diego Rivera, commissioned to create a sprawling mural for the lobby of Rockefeller Center, chose to deviate from his preparatory drawings and place an enormous portrait of Lenin at the center of the finished composition. Refusing to amend this egregious provocation, Rivera was paid in full for his work, which was then duly destroyed. A predictable uproar ensued, garnering the artist abundant publicity, which may have been his objective all along.
. . .
Ms. Loebl’s account is well grounded both in the existing literature and in original archival research. She has striven to be comprehensive and done a good job of incorporating lesser-known Rockefeller projects, for example the charming Wendell Gilley Museum of carved birds, in Maine, funded by Nelson’s son Steven. But several worthy undertakings, such as Junior’s restoration of the châteaux of Versailles and Fontainebleau, receive scant attention–as do Laurance Rockefeller’s extensive gifts for the purpose of creating and expanding our national parks.

For the full review, see:
JONATHAN LOPEZ. “BOOKSHELF; The Splendid Spoils of Standard Oil; The Rockefeller family’s vast cultural legacy resulted from a sense of civic duty and a love of beautiful things.” The Wall Street Journal (Sat., NOVEMBER 20, 2010): C7.
(Note: ellipses added.)

The book being reviewed, is:
Loebl, Suzanne. America’s Medicis: The Rockefellers and Their Astonishing Cultural Legacy. New York: HarperCollins, 2010.

First Writing Grew from Commerce

“A Sumerian clay tablet from around 3200 B.C. is inscribed in wedgelike cuneiform with a list of professions.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. C5) CHICAGO — One of the stars of the Oriental Institute’s new show, “Visible Language: Inventions of Writing in the Ancient Middle East and Beyond,” is a clay tablet that dates from around 3200 B.C. On it, written in cuneiform, the script language of ancient Sumer in Mesopotamia, is a list of professions, described in small, repetitive impressed characters that look more like wedge-shape footprints than what we recognize as writing.
In fact “it is among the earliest examples of writings that we know of so far,” according to the institute’s director, Gil J. Stein, and it provides insights into the life of one of the world’s oldest cultures.
The new exhibition by the institute, part of the University of Chicago, is the first in the United States in 26 years to focus on comparative writing. It relies on advances in archaeologists’ knowledge to shed new light on the invention of scripted language and its subsequent evolution.
The show demonstrates that, contrary to the long-held belief that writing spread from east to west, Sumerian cuneiform and its derivatives and Egyptian hieroglyphics evolved separately from each another. And those writing systems were but two of the ancient forms of writing that evolved independently. Over a span of two millenniums, two other powerful civilizations — the Chinese and Mayans — also identified and met a need for written communication. Writing came to China as early as around 1200 B.C. and to the Maya in Mesoamerica long before A.D. 500.
. . .
The Oriental Institute, which opened in 1919, was heavily financed by John D. Rockefeller Jr., who had been greatly influenced by James Henry Breasted, a passionate archaeologist.
. . .
Experts are still struggling to understand just how writing evolved, but one theory, laid out at the Oriental Institute’s exhibition, places the final prewriting stage at 3400 B.C., when the Sumerians first began using small clay envelopes like the ones in the show. Some of the envelopes had tiny clay balls sealed within. Archaeologists theorize that they were sent along with goods being delivered; recipients would open them and ensure that the number of receivables matched the number of clay tokens. The tokens, examples of which are also are in the show , transmitted information, a key function of writing.

For the full story, see:
GERALDINE FABRIKANT. “Hunting for the Dawn of Writing, When Prehistory Became History.” The New York Times (Weds., October 20, 2010): C5.
(Note: ellipses added.)
(Note: the online version of the article is dated October 19, 2010.)

Capitalism’s Market Entrepreneurs Benefit the Common Man

“Rails to riches: An 1870 cartoon depicting James Fisk’s attempt to stop Cornelius Vanderbilt from gaining control of the Erie Railroad Company.” Source of caption and cartoon: online version of the WSJ article quoted and cited below.

I have read H.W. Brands’ Masters of Enterprise book and found that it contained some interesting anecdotes, but not very insightful interpretation. From Amity Shlaes’ useful review quoted below, I would expect the same from Brands’ most recent book.

(p. C7) Mr. Brands laments that capitalism’s triumph in the late 19th century created a disparity between the “wealthy class” and the common man that dwarfs any difference of income in our modern distribution tables. But this pitting of capitalism against democracy will not hold. When the word “class” crops up in economic discussions, watch out: it implies a perception of society held in thrall to a static economy of rigid social tiers. Capitalism might indeed preclude democracy if capitalism meant that rich people really were a permanent class, always able to keep the money they amass and collect an ever greater share. But Americans are an unruly bunch and do not stay in their classes. The lesson of the late 19th century is that genuine capitalism is a force of creative destruction, just as Joseph Schumpeter later recognized. Snapshots of rich versus poor cannot capture the more important dynamic, which occurs over time.

One capitalist idea (the railroad, say) brutally supplants another (the shipping canal). Within a few generations–and in thoroughly democratic fashion–this supplanting knocks some families out of the top tier and elevates others to it. Some poor families vault to the middle class, others drop out. If Mr. Brands were right, and the “triumph of capitalism” had deadened democracy and created a permanent overclass, Forbes’s 2010 list of billionaires would today be populated by Rockefellers, Morgans and Carnegies. The main legacy of titans, former or current, is that the innovations they support will produce social benefits, from the steel-making to the Internet.
The second failing of “Colossus” is its perpetuation of the robber-baron myth. Years ago, historian Burton Folsom noted the difference between what he labeled political entrepreneurs and market entrepreneurs. The political entrepreneur tends to compete over finite assets–or even to steal them–and therefore deserves the “robber baron” moniker. An example that Mr. Folsom provided: the ferry magnate Robert Fulton, who operated successfully on the Hudson thanks to a 30-year exclusive concession from the New York state legislature. Russia’s petrocrats nowadays enjoy similar protections. Neither Fulton nor the petrocrats qualify as true capitalists.
Market entrepreneurs, by contrast, vanquish the competition by overtaking it. On some days Cornelius Vanderbilt was a political entrepreneur–perhaps when he ruined those traitorous partners, for instance. But most days Vanderbilt typified the market entrepreneur, ruining Fulton’s monopoly in the 1820s with lower fares, the innovative and cost-saving tubular boiler and a splendid advertising logo: “New Jersey Must Be Free.” With market entrepreneurship, a third party also wins: the consumer. Market entrepreneurs are not true robbers, for their ruining serves the common good.

For the full review, see:
AMITY SHLAES. “An Age of Creative Destruction.” The Wall Street Journal (Sat., October 16, 2010): C7.
(Note: the online version of the article is dated October 29 (sic), 2010.)

The book under critical review by Shlaes:
Brands, H.W. American Colossus: The Triumph of Capitalism, 1865-1900. New York: Doubleday, 2010.

The Folsom book rightly praised in passing by Shlaes is:
Folsom, Burton W. The Myth of the Robber Barons. 4th ed: Young America’s Foundation, 2003.

If You Think Life Was Better in the Past, “Say One Single Word: Dentistry”

(p. 2) In general, life is better than it ever has been, and if you think that, in the past, there was some golden age of pleasure and plenty to which you would, if you were able, transport yourself, let me say one single word: “dentistry.”

Source:
O’Rourke, P. J. All the Trouble in the World: The Lighter Side of Overpopulation, Famine, Ecological Disaster, Ethnic Hatred, Plague, and Poverty. paperback ed. New York: Atlantic Monthly Press, 1994.

William Rosen’s “The Most Powerful Idea in the World”

Source of book image: http://ffbsccn.files.wordpress.com/2010/07/the-most-powerful-idea-in-the-world.jpg

The range of William Rosen’s fascinating and useful book is very broad indeed. He is interested in THE question: why did the singular improvement in living standards known as the industrial revolution happen where and when it did?
The question is not just of historical interest—if we can figure out what caused the improvement then and there, we have a better shot at continuing to improve in the here and now.
I especially enjoyed and learned from William Rosen’s discussion, examples and quotations on the difficult issue of whether patents are on balance a good or bad institution.
Deirdre McCloskey taught me that the most important part of a sentence is the last word, and the most important part of a paragraph is the last sentence, and the most important part of a chapter is the last paragraph.
Here are the last couple of sentences of Rosen’s book:

(p. 324) Incised in the stone over the Herbert C. Hoover Building’s north entrance is the legend that, with Lincoln’s characteristic brevity, sums up the single most important idea in the world:

THE PATENT SYSTEM ADDED

THE FUEL OF INTEREST

TO THE FIRE OF GENIUS

In the next few weeks I will occasionally quote a few of the more illuminating passages from Rosen’s well-written account.

Book discussed:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.