Free Markets – Page 22 – artdiamondblog.com

Economic Freedom Correlated with “Every Indicator of Well-Being”

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

(p. A17) For 15 years, The Wall Street Journal and The Heritage Foundation have been measuring countries’ commitment to free-market capitalism in the “Index of Economic Freedom.” The 2009 Index, published this week, provides strong evidence that the countries that maintain the freest economies do the best job of promoting prosperity for all citizens.

The positive correlation between economic freedom and national income is confirmed yet again by this year’s data. The freest countries enjoy per capita incomes over 10 times higher than those in countries ranked as “repressed.” This year, for the first time, the Index also correlates economic freedom with important societal values like poverty reduction, human development, political freedom and environmental protection. The linkages are robust, with economically freer countries performing significantly better on every indicator of well-being.
. . .
In a special chapter in this year’s Index, the Journal’s Stephen Moore chronicles the critical role that tax cuts, particularly cuts in corporate taxes, have played in economic growth in Eastern European countries and others like Ireland. The citizens of those countries lived for decades with state-directed economic planning and regulation, which many now advocate for the U.S. and other advanced economies. They remember the clumsiness of socialism and the government missteps that fostered economic disaster. To switch dance partners now that they have adapted to the quick step of capitalism and are enjoying its many benefits would be a tragic mistake.
It would be ironic indeed if the world’s advanced economies, in seeking to address current woes, abandoned the system that has brought them and others around the world the amazing levels of prosperity experienced over the last half century. The “Index of Economic Freedom” provides a record of that progress. It charts the path to economic advancement and proves that the best way forward is to hang onto our partner and step to the music of the market.

For the full commentary, see:
TERRY MILLER. “Freedom Is Still the Winning Formula.” The Wall Street Journal (Tues., January 13, 2009): A17.
(Note: ellipsis added.)

Taxpayers Pay $91 Million for Surplus Milk Powder

“Millions of pounds of government-owned milk powder stored in a warehouse in Fowler, Calif.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) FOWLER, Calif. — The long economic boom, fueled by easy credit that allowed people to spend money they did not have, led to a huge oversupply of cars, houses and shopping malls, as recent months have made clear. Now, add one more item to the list: an oversupply of cows.
And it turns out that shutting down the milk supply is not as easy as closing an automobile assembly line.
As a breakneck expansion in the global dairy industry turns to bust, Roger Van Groningen must deal with the consequences. In a warehouse that his company runs here, 8 to 20 trucks pull up every day to unload milk powder. Bags of the stuff — surplus that nobody will buy, at least not at a price the dairy industry regards as acceptable — are unloaded and stacked into towering rows that nearly fill the warehouse.
Mr. Van Groningen’s company does not own the surplus milk powder, but merely stores it for the new owners: the taxpayers of the United States. To date, the government has agreed to buy about $91 million worth of milk powder.
. . .
(p. B5) Government price supports provide a price floor for agricultural products as a way of keeping farmers afloat during hard times and ensuring an adequate food supply.
The Agriculture Department has committed to buying 111.6 million pounds of milk powder at 80 cents a pound, for roughly $91 million, which includes some handling fees. . . .
. . .
. . . the agency has not decided what to do with the cache of milk powder in California.
Some critics of farm subsidies argue that price support programs are antiquated and allow farmers to continue producing even when the economics make no sense, as taxpayers will always buy up the excess production.
“They don’t want to downsize or respond to the market signal. They want to keep producing,” said Kenneth Cook, president of the Environmental Working Group, a Washington research organization that has long been critical of the government’s farm policy. “Once you get in a jam like this, it becomes our collective problem.”

For the full story, see:
ANDREW MARTIN. “Awash in Milk and Headaches; Cows Keep Producing Despite Drop in Demand.” The New York Times (Fri., January 1, 2009): B1 & B5.
(Note: ellipses added.)
(Note: the online version of the article is dated January 1, 2009, and is entitled “As Recession Deepens, So Does Milk Surplus.”)

“Arthur Machado, a dairy farmer in Fresno, Calif., has to keep feeding his herd of more than 300 cows. He plans to sell them and take up a more stable commodity.” Source of caption and photo: online version of the NYT article quoted and cited above.

Car Bailout Destroys Dynamism of Process of Creative Destruction

(p. A29) Not so long ago, corporate giants with names like PanAm, ITT and Montgomery Ward roamed the earth. They faded and were replaced by new companies with names like Microsoft, Southwest Airlines and Target. The U.S. became famous for this pattern of decay and new growth. Over time, American government built a bigger safety net so workers could survive the vicissitudes of this creative destruction — with unemployment insurance and soon, one hopes, health care security. But the government has generally not interfered in the dynamic process itself, which is the source of the country’s prosperity.

But this, apparently, is about to change. Democrats from Barack Obama to Nancy Pelosi want to grant immortality to General Motors, Chrysler and Ford. They have decided to follow an earlier $25 billion loan with a $50 billion bailout, which would inevitably be followed by more billions later, because if these companies are not permitted to go bankrupt now, they never will be.
This is a different sort of endeavor than the $750 billion bailout of Wall Street. That money was used to save the financial system itself. It was used to save the capital markets on which the process of creative destruction depends.
Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. . . .
. . .
But the larger principle is over the nature of America’s political system. Is this country going to slide into progressive corporatism, a merger of corporate and federal power that will inevitably stifle competition, empower corporate and federal bureaucrats and protect entrenched interests? Or is the U.S. going to stick with its historic model: Helping workers weather the storms of a dynamic economy, but preserving the dynamism that is the core of the country’s success.

For the full commentary, see:
DAVID BROOKS. “Bailout to Nowhere.” The New York Times (Fri., November 18, 2008): A29.
(Note: ellipses added.)

The Palace of Discovery: “They Came for Wonder and Hope”

The Palace of Discovery (aka Palais de la Decouverte) in Paris. Source of photo: http://www.flickr.com/photos/paris2e/2524827592/

Near the beginning of World War II, the 1937 Palace of Discovery in Paris, was a popular source of hope for the future:

(p. 206) An unexpectedly popular draw at the exposition was a relatively small hall hidden away behind the Grand Palais. The Palace of Discovery, as it was called, attracted more than 2 million visitors, five times the number that visited the modern art exhibit. They came for wonder and hope. The wonder was provided by exhibits including a huge electrostatic generator, like something from Dr. Frankenstein’s lab, two enormous metal spheres thirteen feet apart, across which a 5-million-volt current threw a hissing, crackling bolt of electricity. The hope came from the very nature of science itself. Designed by a group of liberal French researchers, the Palace of Discovery was intended to be more a “people’s university” than a stuffy museum, a place to hear inspiring lectures on the latest wonders of science, messages abut technological confidence and progress for the peoples of the world.

Source:
Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor’s Heroic Search for the World’s First Miracle Drug. New York: Three Rivers Press, 2007.

“Commerce in Goods Brought with it Commerce in Entertainment, Music, Ideas, Gods and Cults”

“This terra-cotta vessel, from the Hittite site in Turkey, looks strikingly modern.” Source of photo and caption: online version of the WSJ article quoted and cited below.

(p. D7) The show whisks us along on complementary interlocking narratives that take the visitor down a spaghetti junction of cultural confluences. We learn that in the 1950s a prominent Turkish archaeologist excavated a site known locally as Kultepe. It yielded a vast hoard of cuneiform tablets that record in detail the town’s trade in copper and numerous aspects of its domestic life, including letters home — many of which are on display. As a result, we know that Assyrian merchants in the copper trade moved en masse to Central Anatolia and founded the town, and many like it, to feed the burgeoning trade in what Ms. Aruz calls “the luxury goods of the time.” She adds that “potentates competed to possess artifacts like these — the more distant and exotic their origins, the more desirable because their possession denoted power and prestige.”

Visitors should, in particular, feast their eyes on the smoothly burnished terra-cotta spouted vessels from Kultepe and Hittite sites in Turkey. Outlandishly geometric and eerily modern, futuristic even, they alone are worth the price of admission.
In following the visual motif of bull-leaping acrobats from Crete to Anatolia to Egypt on everything from Minoan vases to cylinder seals and carved boxes, the show makes the point that commerce in goods brought with it commerce in entertainment, music, ideas, gods and cults. Suddenly images of Sphinxes and Gryphons pop up all over the 15th-century B.C. geosphere, as do toys and board games and educational institutions.

For the full story, see:
SARAH E. NEEDLEMAN. “Doing the Math to Find the Good Jobs; Mathematicians Land Top Spot in New Ranking of Best and Worst Occupations in the U.S.” The Wall Street Journal (Tues., Jan. 6, 2008): D2.

For the case for the complementarity between capitalism and culture, see:
Cowen, Tyler. Creative Destruction: How Globalization Is Changing the World’s Cultures. Princeton, NJ: Princeton University Press, 2002.

“The cuneiform inscription . . . is the earliest-known written appearance of the word “freedom” (amagi), or “liberty.” It is taken from a clay document written about 2300 B.C. in the Sumerian city-state of Lagash.” Source of the cuneiform and the caption: http://www.libertyfund.org/aboutlogo.htm
(Note: ellipsis added.)

European Commission Now Lets Consumers Buy Ugly Vegetables

(p. A6) BRUSSELS — Misshapen fruit and vegetables won a reprieve on Wednesday from the European Union as it scrapped rules banning overly curved, extra knobbly or oddly shaped produce from supermarket shelves.

Ending regulations on the size and shape of 26 types of fruit and vegetables, the European authorities killed off restrictions that had become synonymous with bureaucratic meddling.
The rising cost of commodities also persuaded the European Commission that there was no point in throwing away food just because it looked strange.
As of July, when the changes go into force, these standards for the 26 products, as varied as peas and plums, will disappear. European shoppers will then be able to choose their produce whatever its appearance.

For the full story, see:
STEPHEN CASTLE. “Europe Relaxes Rules on Sale of Ugly Fruits and Vegetables.” The New York Times (Thurs., November 13, 2008): A6.

Governments Still Give Sugar’s Fanjuls a Sweet Deal

“As Florida buys U.S. Sugar, company land could go on the block. The Fanjul family, with sugar operations like this one in Palm Beach County, is waiting.” Source of caption and photo: online version of the NYT article quoted and cited below.

Many years ago, CBS’s “Sixty Minutes” program ran a wonderful Steve Kroft piece (called, I think, “A Sweet Deal”) exposing how protectionist federal government sugar import quotas, benefit the extraordinarily wealthy and powerful Fanjul family, at the expense of ordinary consumers.
Nothing has changed:

(p. 1) IN June, Gov. Charlie Crist announced that Florida would buy one of the state’s two big sugar enterprises, the United States Sugar Corporation. He billed the purchase as a “jump-start” in the environmental restoration of the Everglades, which cane growers are accused of polluting with fertilizer runoff.

But in the end, the $1.7 billion buyout, scheduled to be completed in early 2009, may also prove to be a financial boon to the state’s remaining sugar superpower, Florida Crystals.
One of the country’s wealthiest families, the Fanjuls of Palm Beach, controls Florida Crystals and today touches virtually every aspect of the sugar trade in the United States.
. . .
“This is going to be a really good deal for the Fanjuls,” says Dexter Lehtinen, a former federal prosecutor whose 1988 lawsuit against the state led to a settlement instituting tough clean water standards. “The state embarked on a nonachievable goal, and now in desperation to wrap up some package, they’re going to have to give access to Florida Crystals on favorable terms.”
Others, like makers of candy and cereal, say the (p. 9) Fanjuls already control too much of the sugar trade. They want to buy sugar cheap and say the Fanjuls have long charmed Congress into legislating price supports that keep it expensive.
Free-trade advocates also complain, saying that a private business has used the shelter of the federal sugar program, created in the Depression to nurture struggling farmers, to increase its corporate hammerlock.
“These people have been absolutely extorting consumers for decades, and the only reason they’re existing in the first place is, they were able to get sweet deals from governments that were propping them up,” says Sallie James, a trade policy analyst with the libertarian Cato Institute, referring to Florida Crystals and U.S. Sugar.

For the full story, see:
MARY WILLIAMS WALSH. “Florida Deal for Everglades May Help Big Sugar.” The New York Times, SundayBusiness Section (Sun., September 14, 2008): 1 & 9.
(Note: ellipsis added.)

“Three leaders of the Fanjul family: Pepe Jr., left; J. Pepe, center; and Alfonso Jr., called Alfy. After Fidel Castro chased the family from Cuba, it rebuilt its sugar empire in the United States.” Source of caption and photo: online version of the NYT article quoted and cited above.

Source of graphic: online version of the NYT article quoted and cited above.

“The Authorities Were Shocked” at Private Airport Success

“Investors renovated a terminal at Domodedovo and oversaw construction of a train line to Moscow.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B9) MOSCOW — A heated battle for passengers between the Russian capital’s main airports offers an unlikely model of competition for the aviation industry.

In most cities, airports are monopolies. Even in cities that have more than one, including New York, Paris and Tokyo, airports are usually owned by the same operator. That means airlines can rarely make the kind of choices passengers take for granted, such as choosing an airport for its efficiency, shopping or lounges.
Not so in Moscow, where two international airports, Domodedovo and Sheremetyevo, owned by rival organizations, battle for business. The result is lower fees, better service and fast-improving facilities all around.
Domodedovo Airport, for example, recently convinced several top airlines to make it their Russian base, thanks to a major modernization that added more than 20 new restaurants, jewelry boutiques and a shop where passengers can rent DVDs to watch in booths.
Sheremetyevo Airport responded by building a fast rail link to Moscow, complete with a Starbucks at the airport station.
Moscow’s airport rivalry highlights a paradox of the global aviation industry: Airlines compete fiercely with each other for customers, but they face many monopolist suppliers, such as air-traffic control systems, fuel distributors and airports. Resulting costs and poor services get passed on to travelers.
. . .
During Russia’s privatization drive of the 1990s, local investors bought Domodedovo, which was previously Moscow’s airport serving Soviet Central Asia. The investors, grouped into an upstart charter-airline operator, East Line Group, renovated a terminal at Domodedovo and oversaw construction of a train line to Moscow.
East Line charged airlines landing and operating fees that undercut Sheremetyevo by around 30%. For passengers, Domodedovo’s rail link guaranteed a 40-minute trip to downtown Moscow. Private Russian carriers, largely frozen out of Aeroflot’s base at Sheremetyevo, expanded quickly at the spacious Domodedovo.
East Line’s big break came in 2003, when British Airways announced it would switch from Sheremetyevo to Domodedovo.
“The authorities were shocked that a major airline would leave the government airport,” recalls Daniel Burkard, BA’s former country manager for Russia.

For the full story, see:
DANIEL MICHAELS. “Moscow Points the Way With Airport Competition; While Most Nations Sport Monopolies, Rivalry Between Two Russian Gateways Ushers in Improvements for Carriers, Travelers.” The Wall Street Journal (Mon., DECEMBER 1, 2008): B9.
(Note: ellipsis added.)

Source of graph: online version of the WSJ article quoted and cited above.

In Amsterdam: Expecting the Spanish Inquisition

A cartoon of the cartoonist who calls himself Gregorius Nekschot. Source of the photo: online version of the WSJ article quoted and cited below.

(p. W1) Amsterdam
On a sunny May morning, six plainclothes police officers, two uniformed policemen and a trio of functionaries from the state prosecutor’s office closed in on a small apartment in Amsterdam. Their quarry: a skinny Dutch cartoonist with a rude sense of humor. Informed that he was suspected of sketching offensive drawings of Muslims and other minorities, the Dutchman surrendered without a struggle.
“I never expected the Spanish Inquisition,” recalls the cartoonist, who goes by the nom de plume Gregorius Nekschot, quoting the British comedy team Monty Python. A fan of ribald gags, he’s a caustic foe of religion, particularly Islam. The Quran, crucifixion, sexual organs and goats are among his favorite motifs.
Mr. Nekschot, whose cartoons had appeared mainly on his own Web site, spent the night in a jail cell. Police grabbed his computer, a hard drive and sketch pads. He’s been summoned for further questioning later this month by prosecutors. He hasn’t been charged with a crime, but the prosecutor’s office says he’s been under investigation for three years on suspicion that he violated a Dutch law that forbids discrimination on the basis of race, religion or sexual orientation.
The cartoon affair has come as a shock to a country that sees itself as a bastion of tolerance, a tradition forged by grim memories of bloody conflict between Catholics and Protestants. The Netherlands sheltered Jews and other refugees from the Spanish Inquisition, and Calvinists fleeing persecution in France. Its thinkers helped nurture the 18th-century Enlightenment. Prostitutes, marijuana and pornography have been legal for decades.
“This is serious. It is about freedom of speech,” says Mark Rutte, the leader of a center-right opposition party. Some of Mr. Nekschot’s oeuvre is “really disgusting,” he says, “but that is free speech.”
. . .
Mr. Nekschot, who calls the investigation “surreal,” says, “Not even Monty Python could have come up with this.” (His pen name, Gregorius Nekschot, is a mocking tribute to Gregory IX, a 13th-century pope who set up a Vatican department to hunt down and execute heretics. Nekschot means “shot in the neck” in Dutch.) Some Muslim groups have voiced dismay at his arrest as well. The head of an organization of Moroccan preachers in Holland said authorities seemed “more afraid” of offending Islam than Muslims.
. . .
The cartoonist blames his woes on what he calls Holland’s “political correctness industry,” a network of often state-funded organizations set up to protect Muslims and other minority groups. One of these, an Internet monitoring group known as MDI, says it received dozens of complaints about the cartoonist’s mockery of Islam and first reported him to the prosecutor’s office in 2005.
“We’re not sure what he does is illegal, but there is a possibility that it is not legal,” says the group’s head, Niels van Tamelen. Many of the complaints, he says, came from followers of a controversial Muslim convert called Abdul-Jabbar van de Ven.
Mr. Van de Ven caused an uproar after the 2004 murder of Mr. Van Gogh, when he seemed to welcome the killing on national TV. He said Mr. Wilders, the anti-immigrant legislator, also deserved to die, preferably from cancer. Mr. Nekschot, appalled by the outburst, caricatured the convert as a fatwa-spewing fanatic.

For the full story, see:
ANDREW HIGGINS. “Why Islam Is Unfunny for a Cartoonist; The arrest of a controversial Dutch cartoonist has set off a wave of protests. The case is raising questions for a changing Europe about free speech, religion and art.” The Wall Street Journal (Sat., JULY 12, 2008): W1 & W6.
(Note: ellipses added.)

75th Anniversary of End of Prohibition

(p. W8) “Prohibition went into effect on January 16, 1920, and blew up at last on December 5, 1933 — an elapsed time of twelve years, ten months and nineteen days,” H.L. Mencken wrote shortly after ratification of the 21st Amendment to the Constitution eliminated the 18th Amendment. “It seemed almost a geologic epoch while it was going on, and the human suffering that it entailed must have been a fair match for that of the Black Death or the Thirty Years War.”

The demise of Prohibition, 75 years ago . . . , is something of a cause for celebration, and it will be treated as such with Repeal Day parties in Washington, Chicago, New Orleans, San Francisco, New York and elsewhere. . . .
. . .
Temperance advocates had argued Prohibition would usher in an era of sober moral rectitude. When it didn’t quite work out that way, public opinion began to turn against the drys. They joined those who opposed Prohibition because it had handed new and oppressive powers to the federal government. Charles Lindbergh’s father-in-law, Dwight Whitney Morrow, won a Senate seat from New Jersey in 1930 running as a Republican against Prohibition. He argued that it had caused Americans to “conceive of the Federal Government as an alien and even a hostile Power.”
And yet, it was finance that finally did Prohibition in. As the nation sank into the Depression, tax revenues dwindled. The prospect of capturing all the liquor excise taxes that had for a decade been missing (and, in effect, had gone into the pockets of bootlegging mobs) was alluring to Democrats and Republicans alike. Pierre du Pont lobbied his fellow plutocrats to support repeal in the vain hope that liquor taxes would replace income taxes. But the New Dealers saw repeal as creating a vast pile of money with which to fund expansive new government programs. Not only did Prohibition and its enforcement increase the size and scope of the federal government, but so did Prohibition’s repeal.

For the full story, see:
ERIC FELTEN. “HOW’S YOUR DRINK; Celebrating Cinco de Drinko.” The Wall Street Journal (Fri., NOVEMBER 28, 2008): W8.
(Note: ellipses added.)

Oil Companies Often Drill Deep With No Payoff

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

(p. B1) McMoRan Exploration Co. is leading a renewed effort to find natural gas in a site known as one of the world’s deepest dry holes.
Exxon Mobil Corp. walked away from the legendary Blackbeard prospect in the Gulf of Mexico in 2006 after drilling to more than 30,000 feet without a payoff. But high energy prices have emboldened the industry, stirring wildcatter passions and prompting companies to look anew at previously abandoned projects.
. . .
(p. B2) If industry reports, unconfirmed by Exxon, are correct, the company spent more than $200 million on the well, making it one of the most expensive dry holes ever drilled.
The industry is littered with expensive failures, but Blackbeard proved too tempting to let go, especially in today’s record-price environment, where any reasonably promising prospect is worth a try. Indeed, there are more drilling rigs at work in the U.S. today than at any point since 1985, according to Baker Hughes Inc.
Mr. Moffett, the 69-year-old founder of McMoRan Exploration, is a geologist and inveterate risk taker. He discovered the giant Grasberg copper and gold mine in Indonesia, parlaying it into global mining giant Freeport-McMoRan Copper & Gold Inc. The oil-and-gas exploration company was spun off from the mining assets in 1994.
Last August, McMoRan paid $1.1 billion for a package of shallow Gulf of Mexico assets, including Blackbeard, from Newfield Exploration Co., Exxon’s former partner on the well. Studying the geology, Mr. Moffett found it similar to successful wells drilled by other companies in the deeper parts of the Gulf.
He now says that if McMoRan decides to keep drilling to 35,000 feet, it will cost about $75 million.

For the full story, see:
RUSSELL GOLD “A Famed Dry Hole Gets a Second Shot.” The Wall Street Journal (Mon., July 21, 2008): B1-B2.
(Note: ellipsis added.)

Photo on left is “GorillaIV, the rig drilling Blackbeard.” Image on right is the Co-Chairman of McMoRan. Source of photo, image, and caption on left photo: online version of the WSJ article quoted and cited above.