Free Markets – Page 10 – artdiamondblog.com

Lippmann Attacked FDR’s Socialist National Industrial Recovery Act

(p. A13) . . . Duke economic historian Craufurd D. Goodwin employs the writings of the once-famous newspaper columnist Walter Lippmann to describe the fervid U.S. debates that began with the 1929 stock-market crash.
. . .
Lippmann established his intellectual credentials in the 1920s, writing several well-received books. They included “Public Opinion,” which excoriated the press for sloppy coverage of government policies and actions. The book is often seen as a call for top-down rule by experts, but Mr. Goodwin argues that Lippmann had something else in mind–that he was eager for expert opinion and “reasoned study” to be widely disseminated so that self-government would be more fully informed and the citizenry less easily manipulated.
. . .
At first, Lippmann embraced the Keynesian argument that government could ameliorate downswings in business cycles through deficit spending, but he later had second thoughts about economic engineering and became more attuned to the free-market ideas of Friedrich Hayek, whom he knew and consulted. . . . Lippmann attacked as ill-conceived the most ambitious New Deal brainstorm, the 1933 National Industrial Recovery Act, which attempted to organize all business and industry into cartels to boost prices.

For the full review, see:
GEORGE MELLOAN. “BOOKSHELF; The Umpire of American Public Debate; Certain that a return of investment confidence would restore prosperity, Lippmann criticized those that blamed Wall Street for the malaise.” The Wall Street Journal (Tues., Oct. 14, 2014): A13.
(Note: ellipses added.)
(Note: the online version of the review has the date Oct. 13, 2014, and has the title “BOOKSHELF; Walter Lippmann: Umpire of American Public Debate; Certain that a return of investment confidence would restore prosperity, Lippmann criticized those that blamed Wall Street for the malaise.”)

The book under review, is:
Goodwin, Craufurd D. Walter Lippmann: Public Economist. Cambridge, MA: Harvard University Press, 2014.

Socialist Price Setting Causes Shortages of Corn Flour, Car Batteries and Toilet Paper

(p. B1) Venezuela’s prices on everything from butter to flat-screen TVs are set without warning by the government, which also caps corporate profits at 30%. Any profits evaporate quickly, however, because inflation is almost double that.
And expanded price controls imposed by Venezuelan President Nicolas Maduro, who succeeded late leftist firebrand Hugo Chávez in April 2013, have exacerbated shortages of basic items such as corn flour, car batteries and toilet paper, triggering violent street protests since early February.

For the full story, see:
MAXWELL MURPHY and KEJAL VYAS. “CFO JOURNAL; Currency Chaos in Venezuela Portends Write-Downs.” The Wall Street Journal (Tues., May 27, 2014): B1 & B6.
(Note: the online version of the story has the date May 26, 2014.)

Nader Enlists Mises, Hayek, Friedman and Stigler in Critique of Crony Capitalism

(p. A9) Mr. Nader, the consumer crusader who ran for president to the left of Al Gore, is perhaps the last person one would expect to admire a libertarian critique of the corporate state. But in “Unstoppable” he respectfully describes the views of Ludwig Von Mises, Friedrich von Hayek, Milton Friedman, George Stigler and other free-market economists. He praises their distrust of politicians, lobbyists and businessmen who seek to put government power in the service of corporate profit.
Not that the Republican Party is always guided by such thinkers. Mr. Nader neatly describes how corporatist RINOs (Republican In Name Only) co-opt the party’s anti-statist crusaders. “The corporatist Republicans,” he writes, “let the libertarians and conservatives have the paper platforms . . . and then move into office, where they are quick to throw out a welcome mat for Big Business lobbyists with their slush funds.” He cites Adam Smith’s suspicion of regulations that benefit special interests: “Such restraints favor the privileged interests that want to entrench their economic advantages through the force of law.”
These are profound observations and ones that I saw play out while editing the Americas column for this newspaper in the 1980s and ’90s. Mercantilist Latin American businessmen who claimed to cheer market forces often thrived only because of their contacts in government. They reached out to the Journal’s editorial page as allies but were more socialist in practice than some of their left-wing enemies. Little did I suspect that a similar form of mercantilism, or corporate statism, would take root in the U.S. It is a pleasure to see Mr. Nader doing battle against such cozy arrangements.

For the full review, see:
DAVID ASMAN. “BOOKSHELF; Let’s Make a Deal; Ralph Nader’s latest crusade is against the convergence of big business and government power. Let’s hope he succeeds.” The Wall Street Journal (Fri., July 18, 2014): A9.
(Note: ellipsis in original.)
(Note: the online version of the review has the date July 17, 2014, and has the title “BOOKSHELF; Book Review: ‘Unstoppable’ by Ralph Nader; Ralph Nader’s latest crusade is against the convergence of big business and government power. Let’s hope he succeeds.”)

Book under review:
Nader, Ralph. Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State. New York: Nation Books, 2014.

Lack of Innovation, Not Globalization, Killed U.S. Furniture Industry

The following is from a review by Marc Levinson, one of our leading experts on process innovation. I’m guessing that there is more wisdom in the review than in the book being reviewed:

(p. C6) . . . it was not by chance that the U.S. furniture industry provided easy pickings for foreign manufacturers.

In the 1990s, U.S. furniture making was a backward industry. Its productivity–the efficiency with which capital and labor are put to use–grew only one-third as fast as in manufacturing overall. While firms in other industries were investing in laser cutters and five-axis milling machines, furniture makers were devoting only 2.6% of their revenue to capital investment. Instead, they relied heavily on cheap labor, paying their average worker 29% less than the average in all manufacturing.
Nor was there much innovation. When Ikea’s flat-pack furniture, designed to minimize shipping costs and leave assembly to the purchaser, arrived in the United States in 1985, American manufacturers had nothing like it. Ms. Macy reports that Universal Furniture cut costs by designing for efficient production at high volume; U.S. manufacturers did not. Similarly, when JBIII countered the distant Chinese by guaranteeing that Vaughan-Bassett would deliver orders within a week, his own company’s credit and delivery departments couldn’t cope.
Globalization takes the blame for many ills these days. But the implosion that Ms. Macy chronicles owes less to import competition than to executives in a sheltered industry who failed to keep up with a changing world.

For the full, largely negative, review, see:
MARC LEVINSON. “Made in America; It’s not easy to copyright a furniture design–and somebody will always come along and make it for less.” The Wall Street Journal (Sat., July 19, 2014): C5-C6.
(Note: ellipsis added.)
(Note: the online version of the review has the date July 18, 2014, and has the title “Book Review: ‘Factory Man’ by Beth Macy; It’s not easy to copyright a furniture design–and somebody will always come along and make it for less.”)

The book being mainly panned is:
Macy, Beth. Factory Man: How One Furniture Maker Battled Offshoring, Stayed Local – and Helped Save an American Town. New York: Little, Brown and Company, 2014.

June 16th Is Liberalism Day

In the old days a “liberal” was someone who believed in freedom, including free markets and minimal government. Milton Friedman defended “liberal” in its original sense in his article “Liberalism, Old Style.”
At some point the left hijacked the word, at least in the United States. (I understand that in much of the rest of the world “liberal” still retains more of its original meaning.)
Maybe there’s some defensible justification for hijacking a word, but most of the time it seems like a dishonest and cowardly way to win an argument by muddying up the debate.
Dan Klein and Kevin Frei are trying to reclaim the word “liberal” from the pirates of the left. As part of their effort, they have proclaimed June 16th to be “Liberalism Day.”
I believe their cause is just, but I am not sure it is efficient. Time and effort are scarce, so we must pick our battles.
On the other hand, the meaning of “libertarian” has narrowed over recent decades. It used to be that most libertarians believed in minimal government; increasingly more libertarians endorse anarchism. It used to be that most libertarians believed in national defense; increasingly more libertarians endorse total isolationism.
I do believe in some minimal night-watchman state, and I do believe that sometimes there is evil in the world that must be fought. So maybe I should start calling myself a “liberal” in the original sense, what Friedman called a “classical liberal”?

#LiberalismDay

Koch Industries Was Only Major Ethanol Producer to Oppose Ethanol Tax Credits

(p. A17) I have devoted most of my life to understanding the principles that enable people to improve their lives. It is those principles–the principles of a free society–that have shaped my life, my family, our company and America itself.
Unfortunately, the fundamental concepts of dignity, respect, equality before the law and personal freedom are under attack by the nation’s own government. That’s why, if we want to restore a free society and create greater well-being and opportunity for all Americans, we have no choice but to fight for those principles.
. . .
Far from trying to rig the system, I have spent decades opposing cronyism and all political favors, including mandates, subsidies and protective tariffs–even when we benefit from them. I believe that cronyism is nothing more than welfare for the rich and powerful, and should be abolished.
Koch Industries was the only major producer in the ethanol industry to argue for the demise of the ethanol tax credit in 2011. That government handout (which cost taxpayers billions) needlessly drove up food and fuel prices as well as other costs for consumers–many of whom were poor or otherwise disadvantaged. Now the mandate needs to go, so that consumers and the marketplace are the ones who decide the future of ethanol.

For the full commentary, see:
CHARLES G. KOCH. “OPINION; I’m Fighting to Restore a Free Society; Instead of welcoming free debate, collectivists engage in character assassination.” The Wall Street Journal (Thurs., April 3, 2014): A17.
(Note: ellipsis added.)
(Note: the online version of the commentary was updated April 2, 2014, and has the title “OPINION; Charles Koch: I’m Fighting to Restore a Free Society; Instead of welcoming free debate, collectivists engage in character assassination.” )

Koch’s philosophy of the free market is more fully elaborated in:
Koch, Charles G. The Science of Success: How Market-Based Management Built the World’s Largest Private Company. Hoboken, NJ: Wiley & Sons, Inc., 2007.

In the Gilded Age Moguls Cleaned Up Their Own Mess and the Economy Was Not Hurt

Source of book image: online version of the WSJ review quoted and cited below.

(p. A13) Takeover wars seem to have lost their sizzle. What happened to the battles of corporate goliaths? Where have they gone, those swaggering deal makers? “Harriman vs. Hill” is a corporate dust-up that takes us back to the beginning of the 20th century, when tycoons who traveled by private rail merrily raided each other’s empires while the world around them cringed.
. . .
Mr. Haeg conveys a vivid picture of the Gilded Age in splendor and in turmoil. Champagne still flowed in Peacock Alley in the Waldorf-Astoria, but fistfights erupted on the floor of the exchange, and a young trader named Bernard Baruch skirted disaster with the help of an inside tip, then perfectly legal. There were scant rules governing stock trading, the author reminds us–no taxes, either. “If you won in the market, you kept it all.”
In that era, moguls were left to clean up their own mess. . . .
. . .
Though hardly a cheerleader, Mr. Haeg is admiring of his cast, nostalgic for the laissez-faire world they inhabited. Observing that the economy wasn’t upset by the stock market’s mayhem, he concludes that, “in a perverse way, the market had worked.”

For the full review, see:
ROGER LOWENSTEIN. “BOOKSHELF; When Titans Tie the Knot; Businessmen of a century ago didn’t place ‘competition’ on a revered pedestal. Merger and monopoly were considered preferable.” The Wall Street Journal (Fri., Feb. 14, 2014): A13.
(Note: ellipses added.)
(Note: the online version of the review has the date Feb. 13, 2014, and has the title “BOOKSHELF; Book Review: ‘Harriman vs. Hill,’ by Larry Haeg; Businessmen of a century ago didn’t place ‘competition’ on a revered pedestal. Merger and monopoly were considered preferable.”)

The book under review is:
Haeg, Larry. Harriman Vs. Hill: Wall Street’s Great Railroad War. Minneapolis, MN: University of Minnesota Press, 2013.

As Venezuelan Economy Collapses, Socialists Urge Citizens to Hit the Beach and Party

“Antigovernment protesters blocking a street in San Cristóbal, in western Venezuela, decorated their barrier like a beach scene.” Source of caption and photo: online version of WILLIAM NEUMAN. “Slum Dwellers in Caracas Ask, What Protests?” The New York Times (Sat., March 1, 2014): A1 & A8.

(p. A6) CARACAS, Venezuela–President Nicolás Maduro declared an extended Carnival holiday season, betting that sun, sand and rum will help calm the worst civil unrest to sweep the oil-rich nation in more than a decade.

As some opposition leaders called to cancel the celebrations to mourn those who died in recent weeks during protests, Mr. Maduro’s ministers publicly encouraged Venezuelans to hit the beach for the pre-Lent festivities.
. . .
Among those officials most visible to the public these days has been Tourism Minister Andres Izarra, who has been hitting tourist hot spots with a campaign called “Carnival 2014–The Coolest Holiday.”
He said that officials were opening 180 tourist information centers for the long holiday weekend and increasing maintenance and trash pickup at beaches that are often covered with empty alcohol containers. Meanwhile, the transportation minister, Haiman El Troudi, said new bus routes would be added to get Venezuelans to the beach.

For the full story, see:
KEJAL VYAS and JUAN FORERO. “Venezuela Leader Fights Unrest With Fiesta; President Maduro Extends Carnival Celebration After Opposition Call For Mourning, More Protests.” The Wall Street Journal (Fri., FEB. 28, 2014): A6.
(Note: ellipsis added.)
(Note: the online version of the story has the date Feb. 27, 2014.)

“PARTY LINE: Venezuela President Nicolás Maduro, reeling from weeks of protests, called for Carnival season to begin early, and his ministers urged Venezuelans to hit the beach. But the crumbling economy and food shortages created scenes such as the lines at a supermarket.” Source of caption and photo: online version of the WSJ article quoted and cited above.

“Opposition demonstrators wearing Carnival masks take part in a women’s rally against Nicolás Maduro’s government in Caracas on Wednesday.” Source of caption and photo: online version of the WSJ article quoted and cited above.

United States Drops Out of Top 10 in Economic Freedom

Source of table: online version of the WSJ article quoted and cited below.

(p. A13) World economic freedom has reached record levels, according to the 2014 Index of Economic Freedom, released Tuesday [Jan. 14, 2014] by the Heritage Foundation and The Wall Street Journal. But after seven straight years of decline, the U.S. has dropped out of the top 10 most economically free countries.

For 20 years, the index has measured a nation’s commitment to free enterprise on a scale of 0 to 100 by evaluating 10 categories, including fiscal soundness, government size and property rights. These commitments have powerful effects: Countries achieving higher levels of economic freedom consistently and measurably outperform others in economic growth, long-term prosperity and social progress.

For the full commentary, see:
TERRY MILLER. “America’s Dwindling Economic Freedom; Regulation, taxes and debt knock the U.S. out of the world’s top 10.” The Wall Street Journal (Tues., Jan. 14, 2014): A13.
(Note: bracketed date added.)
(Note: the online version of the commentary has the date Jan. 13, 2014.)

For more on the 2014 Index of Economic Freedom, visit:
http://www.heritage.org/index/

Carnegie’s Not-Fully-Grown-Infant-Industry Argument for Steel Tariffs

(p. 375) The steel industry was doubly dependent on state and national governments for the generous loans and subsidies that fueled railway expansion and rail purchases and the protective tariffs that enabled the manufacturers to keep their prices–and profits–higher than would have been possible had they been compelled to compete with European steelmakers. If, in the beginning, as Carnegie had argued, the tariff had been needed to nurture an infant steel industry, by the mid-1880s that infant had become a strapping, abrasive youth, who kept on growing. Why then, one might inconveniently ask, was there need for a protective tariff? Because, as Carnegie argued in the North American Review in July 1890, the steel industry was not yet fully grown and would have to be protected until it was.
On the issue of the tariff–as on few others–Pittsburgh’s workingmen were in agreement with Carnegie. They voted Republican in large numbers because the Republicans were the guardians of the protective tariff, and the tariff, they believed, protected their wage rates.
The argument linking the tariff and wages in the manufacturing sector was a compelling one in the industrial states, but nowhere else. As the Democrats took great delight in pointing out, high tariffs led to high prices for all consumers.

Source:
Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.
(Note: italics in original.)
(Note: the pagination of the hardback and paperback editions of Nasaw’s book are the same.)

Jay Gould Said Railroad Rates Should Be Set by “the Laws of Supply and Demand”

(p. 344) Jay Gould, asked in 1885 by a Senate investigating committee if he believed a “general national law” was needed to regulate railroad rates, responded that they were already regulated by “the laws of supply and demand, production, and consumption.”

Source:
Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.
(Note: the pagination of the hardback and paperback editions of Nasaw’s book are the same.)