Category: Free Markets

Milton Friedman Was a “Formative Intellectual Influence” to George Shultz

(p. A13) [George] Shultz, an unflamboyant personality once described by a college classmate as a “steady, plodding intellect,” reached the commanding heights of American government, holding four cabinet posts over his career from secretary of the Treasury to state. Shultz died in 2021 at the age of 100.

. . .

For a time Shultz was on track for a career in academia, working in the economics department at MIT and later the University of Chicago. “Chicago is what started me,” Shultz said. Milton Friedman, a formative intellectual influence and enduring friend, methodically deepened Shultz’s faith in free markets and his skepticism of government intervention in the economy. “Milton didn’t hit the tennis ball hard but it always came back,” Shultz once remarked, “which was reflective of the way he argued, too.”

. . .

. . . Shultz was hardly immune from being wrong. For example: Along with the rest of the State Department, he tried to talk Reagan out of using the line “Mr. Gorbachev, tear down this wall.” Shultz worried it was too provocative.

The cautionary tale is that many know Shultz from perhaps the biggest error in judgment he ever made, some 90 years into his life. That’s his association with Elizabeth Holmes, the Silicon Valley founder convicted of fraud in federal court. Shultz was one of Ms. Holmes’s first marks, and he helped her assemble a board for her blood-testing company from his Rolodex. Among the wreckage was Shultz’s relationship with his own grandson, Tyler, who early on discovered the company’s misrepresentations.

For the full review, see:

Kate Bachelder Odell. “BOOKSHELF; Subsume the Ego And Stay Loyal.” The Wall Street Journal (Tuesday, March 7, 2023): A13.

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

(Note: the online version of the review has the date March 6, 2023, and has the title “BOOKSHELF; ‘In the Nation’s Service’ Review: George Shultz’s Quiet Strength.”)

The book under review is:

Taubman, Philip. In the Nation’s Service: The Life and Times of George P. Shultz. Stanford, Cal.: Stanford University Press, 2023.

William F. Buckley, Sr. Spent $100,000 to Fund His Son’s Entrepreneurial Start-Up: National Review

In my Openness book, I give reasons why risky innovative start-ups at fragile early stages almost always need to be substantially self-funded. When close relatives invest, I include that as self-funding.

(p. A15) . . . “William F. Buckley Sr.: Witness to the Mexican Revolution, 1908-1922,” [is] a fascinating if uneven book by the independent historian John A. Adams Jr.

. . .

The business climate in Mexico was promising for foreigners like the Buckleys, thanks to the pro-development policies of its autocratic president, Porfirio Díaz, who would rule the country for more than three decades.

Buckley’s prominence among the American expatriate community made him a natural conduit between officials in the U.S. and Mexico once the latter country was plunged into chaos following the ouster of Díaz in 1911. Buckley was Zelig-like, cropping up repeatedly at key moments. He visited the U.S. Embassy in February 1913 during the Decena Tragíca (Ten Tragic Days), when Francisco Madero, Díaz’s successor, was overthrown in a coup led by Gen. Victoriano Huerta, instigating a spasm of violence that killed thousands in Mexico City.

. . .

Buckley favored Huerta, serving as the regime’s legal counsel in negotiations with the U.S. aimed at preventing hostilities between the two nations. He was thus dismayed by the ascendance of Venustiano Carranza and, later, Álvaro Obregón. Both leaders endorsed the Mexican Constitution of 1917, including Article 27, which asserted national ownership of natural resources while circumscribing the economic power of the church. These provisions horrified Buckley, who was a staunch believer in free-market capitalism as well as a devout Roman Catholic. In the bulletin of the American Association of Mexico, an advocacy group he founded in 1919, Buckley denounced the “dangerous Bolshevist movement” that had taken root in Mexico.

. . .

. . ., Mr. Adams consulted with several Buckley family members, including a descendant based in Mexico City, as well as Judge James L. Buckley, the sole survivor among the 10 children born to Will and his wife, Aloise. Judge Buckley, who recently celebrated his 100th birthday, contributed a foreword acknowledging the importance of Mexico to the family’s understanding of itself, writing that “it had somehow permeated our DNA.”

. . .

As another of his offspring once said, Buckley’s experience in Mexico “deepened his frontier suspicions of autocratic [leaders] (and big government in general), and this attitude dyes all his children strongly.” Surely that was true of Buckley’s favorite son, William F. Buckley Jr., who, after serving a short stint with the CIA in Mexico City (he, too, was fluent in Spanish), founded National Review in 1955, which remains one of the leading voices of the conservative movement. The elder Buckley helped fund his son’s upstart venture with a $100,000 contribution from a fortune that traced its origins to Mexico during the most tumultuous period of that nation’s history.

For the full review, see:

Andrew R. Graybill. “BOOKSHELF; Conservatism’s Mexican Roots.” The Wall Street Journal (Saturday, March 27, 2023): A15.

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

(Note: the online version of the review has the date March 26, 2023, and has the title “BOOKSHELF; ‘William F. Buckley Sr.’ Review: Conservatism’s Mexican Roots.”)

The book under review:

Adams, John A., Jr. William F. Buckley Sr.: Witness to the Mexican Revolution, 1908–1922. Norman, OK: University of Oklahoma Press, 2023.

Regulations, Trade Barriers, and “Restrictive Government Contracts” Caused Infant-Formula Crisis

(p. A15) The pandemic era has seen its share of supply-chain problems, but the infant-formula crisis—which began a year ago—stands out for its depth, duration and danger.

. . .

Politicians responded to the crisis with their standard pandemic playbook. They claimed decades of laissez-faire economics—free trade, deregulation, etc.—had left the U.S. formula market vulnerable to a major shock. Thus, the politicians argued, new government industrial policies and more regulatory enforcement were needed to resolve the current crisis and protect against future ones.

These refrains ignored the reality of the U.S. formula market and related federal policies, . . .

. . .

First, high and complicated “tariff rate quotas” dating back decades subjected most infant-formula imports to an effective tax of more than 25%; . . .

. . .

Two aspects of U.S. domestic policy added insult to this injury by effectively ensuring that a handful of large formula producers continue to dominate the market.

First, the U.S. regulates formula more strictly than any other food and more strictly than most other countries. Heavy regulatory burdens can discourage new market entrants, . . .

. . .

Second, the Special Supplemental Nutrition Assistance Program for Women, Infants, and Children, or WIC, which has grown to cover almost half of U.S. infant-formula sales each year, demands steep discounts from participating formula producers in exchange for sole access to a state’s WIC market and prime shelf space at participating retailers.

. . .

The combination of high trade barriers, onerous domestic regulations and restrictive government contracts has created a concentrated and sclerotic U.S. formula market that collapsed when a single factory shut down and still hasn’t fully recovered. Tellingly, the federal government’s emergency actions to alleviate the formula crisis targeted these very policies. Congress suspended baby-formula tariffs through the end of 2022. The FDA exercised its “enforcement discretion” to approve eight new foreign manufacturers to sell formula until 2025 without meeting all U.S. regulations. The Agriculture Department allowed WIC recipients to use their benefits to buy noncontract formula brands, including imports, until mid-2023. And President Biden’s Operation Fly Formula commissioned military aircraft to deliver formula from abroad.

In all cases, the federal government implicitly recognized how freer markets can boost economic resilience and how protectionism and excessive regulation undermine it. Yet Congress and the executive branch haven’t made these reforms permanent. Tariffs are now back in force, even as discrete shortages persist.

For the full commentary, see:

Scott Lincicome and Gabriella Beaumont-Smith. “The Infant-Formula Market Is Still Bottled Up.” The Wall Street Journal (Friday, Feb. 17, 2023): A15.

(Note: ellipses added.)

(Note: the online version of the commentary has the date February 16, 2023, and has the same title as the print version.)

Flourishing Is the End, Profit Can Be a Means

Glen Hubbard has long been a thoughtful defender of entrepreneurial capitalisms. The article quoted below from The New York Times suggests that he is moving away from that. Is that true, or is The New York Times misrepresenting the development of Hubbard’s thoughts? I suspect the latter, but I have not kept up with Hubbard’s recent articles or lectures. Profits are a key means to enable human flourishing. The two are not inconsistent. Flourishing is the end, profit can be a means.

(p. C1) One zigs, the other zags. One teases the passer-by with bands of translucent glass wrapping a core of clear windows; the other, with floors angled in and out — a gentle architectural mambo. The pair of buildings that comprise Columbia University’s new business school, on its growing Manhattanville campus, exude a nervous off-kilter energy.

. . .

(p. C4) Glenn Hubbard, the former business school dean who brought the project to fruition, saw the need to break free from fealty to the unregulated free market economy that over decades has led to extraordinary wealth concentration. The idea that business should focus only on making money, attributed to the economist Milton Friedman, “was a simple and direct idea that took over business, banking, even corporate law,” Hubbard explained. “We are trying to come up with a framework that can be more about flourishing, not just profit.”

“The vision now is to bring people together and debate issues going on in the world,” said Costis Maglaras, who was on the faculty as the project was being designed and who succeeded Hubbard.

For the full story, see:

James S. Russell. “A Temple of Capitalism Opens Itself Up.” The New York Times (Saturday, January 7, 2023): C1 & C4.

(Note: ellipsis added.)

(Note: the online version of the story was updated Jan. 9, 2023, and has the title “At Columbia’s $600 Million Business School, Time to Rethink Capitalism.”)

Deregulating Entrepreneurship Enables Upward Mobility

(p. A15) I saw the power of entrepreneurship firsthand after co-founding the Home Depot. My experiences led me to believe that preserving and expanding entrepreneurship is the key to advancing racial and economic equality.

. . .

With almost no money, I had the idea to open a hardware store, a lumberyard and a garden store all in one. What began as a single store in Georgia grew to more than 2,000 locations nationwide and made me a billionaire in the process. Only in America could a member of an ethnic minority from a poor immigrant family write that kind of success story.

. . .

You can see the entrepreneurs driving around town in their trucks full of tools and material. Many of them are minorities. They don’t consider themselves victims of racial wealth or income gaps; they are actively overcoming economic disparities through work.

That isn’t happening only in building and landscaping. In almost every part of the economy, you’ll find entrepreneurial minorities breaking through difficult circumstances to achieve and live the American Dream. Accelerating this process is the key to bridging the country’s economic divides.

Unfortunately, government is moving in the wrong direction, erecting hurdles to entrepreneurship. My company wouldn’t have succeeded if it had started in today’s climate of regulations and taxes that disproportionately burden small businesses. The Home Depot almost went bankrupt several times in its first decade, and today’s policy environment would have tipped us into insolvency—as it does to countless entrepreneurs each year.

The biggest victims of bad government policy aren’t the elite; they will always be able to get into good schools and get their foot in the door of corporate America. The people hurt most by big government are those who lack advantages in becoming economically independent, often minorities.

For the full commentary, see:

Bernie Marcus. “Entrepreneurship Will Lift Minorities Up.” The Wall Street Journal (Tuesday, Jan. 10, 2023): A15.

(Note: ellipses added.)

(Note: the online version of the commentary has the date January 9, 2023, and has the title “A History of Humanity in Cubits, Fathoms and Feet.”)

Marcus’s commentary is adapted from his foreword to this book:

Ortiz, Alfredo. The Real Race Revolutionaries: How Minority Entrepreneurship Can Overcome America’s Racial and Economic Divides. Conroe, TX: Defiance Press & Publishing, LLC, 2023.

Standardized Measurements Expedite Honest Exchange

(p. 20) Reading James Vincent’s quietly thrilling new book, “Beyond Measure: The Hidden History of Measurement From Cubits to Quantum Constants,” I began to think that one measure (so to speak) of the human experience might be the number of things we take for granted.

. . .

When people agree on a standard of measurement, they can coordinate their actions. You tell me that the sofa you’re selling is 72 inches wide, and from that bit of information I can see that it will fit in my living room.

. . .

Unlike, say, a simple act of thievery, which caused individual harm, metrological trickery could undermine the entire social order by sowing mistrust. “Measurement is a covenant that binds communities together,” Vincent writes. In addition to its obvious practical benefits — the ancient Egyptians couldn’t have built the Pyramids by eyeballing it — measurement has been embraced “for its ability to create a zone of shared expectations and rules.”

. . .

Metrology’s early history is marked by plurality — different units developing in different places, each one suited to a particular community’s needs. This variability allowed for flexibility, but it also allowed confusion and corruption to flourish. Vincent gives the example of France under the ancien régime, where the unit known as the pinte measured a measly 0.93 liters in Paris and a whopping 3.33 liters in Précy-sous-Thil. Elastic units were “exploited by the rich and powerful.” In exchanges with the peasantry, feudal lords used their authority over weights and measures to their own benefit.

Consequently, the metric system was a radical departure — the brainchild of the French Revolution’s savants, who promised to dispense with arbitrary units like the pied du Roi, or “the king’s foot,” in favor of weights and measures that were rational and impartial because they would be tethered to the Earth itself. A meter was standardized to one ten-millionth of the distance from the North Pole to the Equator. But even that definition turned out to be too “crass,” Vincent writes. Now the meter is defined in terms of something even more constant: the speed of light.

For the full review, see:

Jennifer Szalai. “Fathom That.” The New York Times Book Review (Sunday, December 4, 2022): 20.

(Note: ellipses added.)

(Note: the online version of the review was updated Nov. 21, 2022, and has the title “A History of Humanity in Cubits, Fathoms and Feet.”)

The book under review is:

Vincent, James. Beyond Measure: The Hidden History of Measurement from Cubits to Quantum Constants. New York: W. W. Norton & Company, 2022.

Firms Nimbly Shift Shipping Away from Unionized and Bottlenecked California Ports

(p. B1) Sharpie maker Newell Brands Inc. is opening distribution centers in Pennsylvania and North Carolina to lessen dependence on seaports in California. Abercrombie & Fitch Co. is moving more merchandise through New York and New Jersey to avoid West Coast bottlenecks. Air-conditioning manufacturer Trane Technologies PLC is sending most of its cargo this year through ports in the South, instead of the Los Angeles area.

The hierarchy of U.S. ports is getting shaken up. Companies across many industries are rethinking how and where they ship goods after years of relying heavily on the western U.S. as an entry point, betting that ports in the East and the South can save them time and money while reducing risk.

Their reasons range from fears of a dockworkers strike along the West Coast and a repeat of the bottlenecks that roiled supply chains early in the pandemic to a reduced dependence on Chinese production and the need to get products to all parts of the country faster.

In August [2022], Los Angeles lost its title as busiest port in the nation to the Port of (p. B6) New York and New Jersey as measured by the number of imported containers. It trailed its East Coast rival again in that measure during September and October, according to the Pacific Merchant Shipping Association and ports data.

The share of all U.S. containerized cargo handled by Los Angeles and a neighboring port in Long Beach fell through the first 10 months of the year to a combined 25% as measured by weight, according to census data analyzed by Jason Miller, interim chair of Michigan State University’s supply chain management department. That was their lowest level in nearly two decades, down from a height of 33%.

Other ports benefiting from this shift include Savannah, Ga., Houston and Charleston, S.C.

For the full story, see:

Paul Berger. “New Routes for Big Business.” The Wall Street Journal (Saturday, Dec. 10, 2022): B1 & B6.

(Note: bracketed year added.)

(Note: the online version of the story was updated Dec. 14, 2022, and has the title “California Long Ruled Shipping in U.S. Importers Look to East.”)

During December 2022, Kindle Version of McCloskey’s Bourgeois Equality Is Only $2.99

The long, but wonderful, third volume of Deirdre’ McClokey’s Bourgeois trilogy, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, is on offer from Amazon during the month of December 2022 in eText Kindle version for only $2.99.

Chinese Communist Party Archives Reveal Contradictions, Confusion, and Corruption in “Reform” Policies

(p. C3) Up until the Covid pandemic, I spent years traversing the country to explore the Chinese Communist Party archives from the reform period. Access was at times surprisingly easy, and my findings were eye-opening.

. . .

The archives suggest that officials were aware of reform’s contradictions from its earliest days. Remnants of the command economy combined with what one economist called “selected, pasteurized, partial, truncated, restricted and disjointed pieces of market and private property policy.” The outcome, said Liu Guoguang, a professor of economics and alternate member of the party’s Central Committee, was “a confused economic system.”

Private ownership of intellectual property had no place in this system, and its theft was actively encouraged throughout the party hierarchy. Two government ministries jointly circulated a directive on counterfeiting in 1983, noting that due to the country’s legal obligations, it was necessary with such goods to “change the name of the product.” As one report noted, “We need a unified approach towards copying” so that “the quality of the copied equipment can be guaranteed.”

The counterfeiting of computer technology assumed particular importance after Zhao Ziyang, the country’s premier from 1980 to 1987, read “The Third Wave,” by the American futurist Alvin Toffler. The book predicted that, in the wake of the agricultural and industrial revolutions, a third revolution would be based on the computer. In October 1983, Zhao proposed skipping the second wave altogether: “Time and tide wait for no one, opportunity knocks but once,” he pronounced. To leap into the digital era, China would need to imitate and reverse engineer foreign products.

But the copying wasn’t limited to computer technology. By 2001, China was awash in fake pharmaceutical products and pirated Hollywood movies on DVD. China’s accession to the WTO that year led to a bonanza of copying, for which few consumers paid more than ordinary Chinese: Electric kettles blew up, brake pads failed. Spices contained paraffin wax, noodles used a red dye that caused cancer, and rice wine was made with cheap industrial-grade alcohol. In 2007, the government estimated that one-fifth of the food and consumer goods it checked were substandard or tainted.

China’s financial system rested on similarly shaky foundations. By the summer of 1988, the pace of growth led to double-digit inflation, and state banks were unable to pay villagers for their contractual deliveries of grain, cotton and other essential products. Protests in 1989, in Tiananmen Square and elsewhere across the country, were as much about economic as political discontent. About a fifth of the files in the party archives deal with debt—lending to solve the debt, further debt due to the lending, more lending to solve an even larger debt.

. . .

The image that emerges from the archives is very different from the impression that many have of today’s China. From a distance, the country’s gleaming cities may resemble an impressively shipshape tanker, with the captain and his lieutenants standing proudly on the bridge, but below deck, sailors are desperately pumping water and plugging holes to keep the vessel afloat.

For the full essay, see:

Frank Dikötter. “China’s Economic Miracle That Wasn’t.” The Wall Street Journal (Saturday, November 19, 2022): C3.

(Note: ellipses added.)

(Note: the online version of the review has the date November 17, 2022, and has the same title as the print version.)

The essay quoted above is adapted from Dikötter’s book:

Dikötter, Frank. China after Mao: The Rise of a Superpower. New York: Bloomsbury Press, 2022.

Toyota Pressured to “Dial Back” Its Defense of Hybrids as a Practical Bridge to EVs

(p. B2) Mr. Toyoda, Toyota’s chief, has been one of the industry’s most prominent voices of caution about EVs. He has questioned whether the vehicles are as environmentally friendly as advertised and expressed doubt that consumers want them.

Toyota has said it believes hybrids can reduce carbon emissions while the battery supply chains and charging networks necessary to support big fleets of EVs are built globally over the coming decades. Hybrid cars—which made up nearly 30% of Toyota and Lexus global shipments for the most recent quarter—are helping the auto maker meet tightening emissions rules in markets like Europe.

Demand for hybrids also helped Toyota reach a record operating profit of ¥3 trillion, equivalent to $21 billion, for the fiscal year ended in March. Its stock price on the Tokyo Stock Exchange has held up reasonably well, down 9% this year, while other auto makers have suffered steeper declines.

Mr. Toyoda has been trying to understand why some investors and environmental groups remain unconvinced about the company’s electrification strategy.

. . .

People at Toyota said company executives have been advised by public-relations specialists and others in the company to dial back negative comments about EVs and instead highlight their benefits as well as Toyota’s extensive investments in the technology.

Sage Advisory Services, an investment management firm in Austin, Texas, that holds Toyota bonds, said it has sensed a shift in rhetoric.

Sage Advisory had approached the car maker last year with concerns about its EV stance, to which Toyota responded with its usual arguments, including about hybrid cars, said Sage Vice President Emma Harper. She said the points made sense to her but were hard for the general public to grasp.

More recently, she said, Toyota has “flipped over and they’ve felt the change in the tide and how consumers and politicians and other stakeholders are feeling about the transition away from fossil-fuel cars.”

For the full story, see:

River Davis. “Toyota Aims to Face Critics of Its EV Policies.” The Wall Street Journal (Monday, Sept. 26, 2022): B1-B2.

(Note: ellipsis added.)

(Note: the online version of the story has the date September 25, 2022, and has the title “Toyota Softens Toward Critics of Its EV Push.” Where the versions differ, the quotes above follow the more detailed online version.)

Deregulation of Hearing Aids Will Lower Costs and Increase Innovation

(p. A1) The Food and Drug Administration decided on Tuesday to allow hearing aids to be sold over the counter without a prescription to adults, a long-sought wish of consumers frustrated by expensive exams and devices.

The high cost of hearing aids, which are not covered by basic Medicare, has discouraged millions of Americans from buying the devices. Health experts say that untreated hearing loss can contribute to cognitive decline and depression in older people.

Under the F.D.A.’s new rule, people with mild to moderate hearing loss should be able to buy hearing aids online and in retail stores as soon as October, without being required to see a doctor for an exam to get a prescription.

. . .

“This could fundamentally change technology,” said Nicholas Reed, an audiologist at the Department of Epidemiology at Johns Hopkins Bloomberg School of Public Health. “We don’t know what these companies might come up with. We may literally see new ways hearing aids work, how they look.”

. . .

The change has been percolating for years. In 2016, a proposal for the F.D.A. to approve over-the-counter hearing aids for adults with mild to moderate hearing was released in a report by the National Academies of Science, Engineering and Medicine. The following year, Senators Chuck Grassley, a Republican of Iowa, and Elizabeth Warren, a Democrat of Massachusetts, introduced a bill enabling the agency to make the change. Congress approved the legislation and President Trump signed it into law.

Finalizing regulations has moved slowly since then, with some conflict over details, like how the federal rule would interact with state laws on hearing aid returns or warranty policies and how much the devices should amplify sound.

Mr. Biden issued an executive order last July calling for greater competition in the economy, which urged the F.D.A. to take action “to promote the wide availability of low-cost hearing aids.”

For the full story, see:

Christina Jewett. “F.D.A. Decides to Allow Over-the-Counter Sales of Hearing Aids.” The New York Times (Wednesday, August 17, 2022): A1 & A23.

(Note: ellipses added.)

(Note: the online version of the story was updated Aug. 23, 2022, and has the title “F.D.A. Clears Path for Hearing Aids to Be Sold Over the Counter.”)