Category: Free Markets

Nebraska’s Ban on Corporate Farming May be History (Three Cheers)

(1A) Initiative 300 generally bans corporations and certain other business entities from owning farmland or engaging in agricultural activity in Nebraska, although there are a number of exceptions geared toward family-based organizations.
It was added to the Nebraska Constitution through a petition drive and vote of the people.
Since receiving 57 percent of the vote in 1982, Initiative 300 has survived several state and federal court challenges, a petition drive to repeal it and attempts by state lawmakers to circumvent it.
The ban was promoted as a way to protect family farms in Nebraska from large corporations.
But Camp ruled that the effort to protect Nebraska farmers violated the U.S. Constitution’s commerce clause because it discriminated against out-of-state interests.
“There is considerable evidence to support the premise that Initiative 300 was conceived and born in a protectionist fervor,” the judge said.
Camp acknowledged that the ban might promote legitimate state interests, such as conservation of natural resources and rural economic development. But she said the state had not shown that the ban was the only (p. 2A) way to reach those goals.
In the lawsuit, Jones said the result of the ban has been a loss of income because he cannot contract with out-of-state corporations for raising and feeding livestock. The ban also reduces the value of his land and his stock in the family farm corporation by barring potential purchasers.
Other plaintiffs said the ban has prevented them from transferring their farm and ranchland as they wished and has interfered with their ability to compete in a national market.
In addition, the judge agreed with two of the plaintiffs who said the ban violated the Americans with Disabilities Act, because it says the person holding a majority of a farm must supply a majority of the day-to-day labor on the farm.
One was Shad Dahlgren of Lincoln, who was paralyzed as a teenager and uses a wheelchair. The other is Todd Ehler, an Elkhorn man who also is disabled.
Both said they are limited in their ability to own farms, since they cannot provide the day-to-day labor required under Initiative 300.

Governments do not know, and usually do not seek, the most efficient market structure. When they try to impose one, as in the Nebraska ban on corporate farming, their actions almost always end up reducing efficiency, and increasing prices for consumers.
For the full article, see:
Stoddard, Martha and Bill Hord. “Ruling Hits Corporate Fram Ban: Initiative 300 Unconstitutional, Judge Says.” Omaha World-Herald (Sunrise Edition, Friday, December 16, 2005): 1A & 2A.
(The online version is, I believe, the version printed in the evening edition of Thurs., Dec. 15, 2005, which I believe is the same, except for the headline.)

Ben Rogge on Bread, Capitalism and Free Choice


‘I believe that capitalism is the system that produces the wholesome bread, and socialism is the system that produces the moldy bread,’ Ben Rogge used to tell us. ‘But,’ he would continue, ‘even if I was wrong, and if it was the other way around, and it was capitalism that produced the moldy bread, and socialism that produced the wholesome bread, I would still choose capitalism. I would choose it because capitalism is the system of free choice.’
But most of us are not like Ben Rogge. Most of us are more like Deng Xiaoping, whose most famous saying is ‘It does not matter whether a cat is black, or white, as long as it catches mice.’ Contra Rogge, he cared only about which economic system produces the goods.
Personally, I believe Rogge was right. But I also believe that if capitalism is to survive, it will only be by continuing to convince the far more numerous Deng Xiaopings of the world.

Ethiopian Comparative Advantage Squandered through Graft and Corruption: More on Why Africa is Poor

   The source for the image of the book is: http://nasw.org/users/markp/grounds.html

 

One theory of how countries acquire a comparative advantage in a commodity ties the comparative advantage to some natural resource, climate or other "endowment" advantage the country has. This partially ‘explains’ some comparative advantages, but leaves many others unexplained (like why Japan has a comparative advantage in cars).

But even on the endowment theory’s own terms, it would seem that an initial comparative advantage can be squandered. Consider Ethiopia, which is the country in which coffee beans were first discovered, many centuries ago.

(p. 153) . . . Ethiopia, the birthplace of coffee, now exported a negligible amount of the bean, largely due to graft and corruption extending from King Menelik down to the country’s customs agents, . . .

(King Menelek II ruled Ethiopia from 1889 until his death in 1911.)

 

The quotation is from:

Pendergrast, Mark. Uncommon Grounds: The History of Coffee and How It Transformed Our World. New York: Basic Books, 2000.

 

Economic Growth Achieved by Entrepreneurs Taking Prudent Risks

(p. 489) Nor should anyone feel guilty about taking prudent risks.This is a fundamental truth that I learned from Joseph Schumpeter, who believed that without entrepreneurs willing to bring new products and ideas to the market and investors ready to finance them, it would be impossible to achieve real economic growth.The alternative, as we have learned to our sorrow in the twentieth century, is government control of the factors of production with results that can be seen in the devastated landscapes and abandoned factories of Russia and Eastern Europe, and the scarred lives of billions of human beings throughout Asia. South America, and Africa.

Rockefeller, David. Memoirs. New York: Random House, 2002.

Freedom in Pulsating, Vibrant Hong Kong


Source of book image: http://www.holtzbrinckpublishers.com/stmartins/Search/SearchBookDisplayLarge.asp?BookKey=3008997
Here is an excerpt from a review of a posthumously published memoir, by a well-known British author, recounting three years of childhood in the Hong Kong of the early 1950s:

(p. B12) He has written an extraordinarily happy book, filled with hilarious set-pieces and pulsating with Hong Kong’s vibrant street life. Unlike monochrome Britain, with its dull diet and pinched economy, Hong Kong offered color, variety and adventure.
. . .
Most of Mr. Booth’s encounters were curious rather than dramatic, like the incident of the plink-plonk man, a street musician with a monkey outfitted like a mandarin from the Ming dynasty. One day, as Martin watched, the monkey managed to bite through his leather leash. In a flash, he was up a tree, where, ignoring his master’s pleading and cursing, he carefully disrobed and flung his costume to the street below. Then, in one magnificent act of repudiation, he sent a perfectly aimed stream of urine down on the man’s upturned face, to the delight of the crowd that had gathered. Where in England could you see that?

WILLIAM GRIMES. “Books of The Times: Hong Kong Is Fantasy Land for a Young Adventurer.” The New York Times (Weds., December 21, 2005): B12.
(Note: ellipsis added.)

Information on the book reviewed:
Martin Booth. Golden Boy: Memories of a Hong Kong Childhood. St. Martin’s Press, 2005. (342 pages. $25.95.)

Free to Choose in Education

Here is the text of my brief letter-to-the-editor that was published several months ago. “OPS” stands for Omaha Public Schools.

Competing school districts within the Omaha area permit parents some freedom of choice in the education of their children.
If OPS succeeds in ending that freedom, the Legislature should restore freedom of choice by adopting Milton Friedman’s proposal to issue vouchers to parents, to be spent at the public or private school of their choice.

Art Diamond. “Try Vouchers.” Omaha World-Herald (Thurs., June 16, 2005): 6B.

Memories of Hope after a Landslide Loss

My sixth grade daughter’s teacher asked that the students have their parents write a paragraph about some memorable event that occurred during the year the parent was a sixth-grader. Here is what I wrote:
I was in sixth grade during the fall of 1964 and the spring of 1965. My main memory of that year was the election for president in 1964. My family strongly supported Barry Goldwater. We thought he spoke honestly and believed in freedom. My family became very discouraged as the polls showed that Goldwater was losing very badly. In the end, he lost 49 states and only won his home state of Arizona. I remember us all sitting in front of the TV a few days before the election, watching a short speech by a former actor, who said that freedom was worth fighting for, and that we should not give up hope. His name was Ronald Reagan.

Nebraska Congressman Opposed Government Supporting Agricultural Prices

 

(p. 85) ". . . in March 1911 Nebraskan Representative George W. Norris sponsored a congressional resolution asking the Attorney General to investigate "a monopoly in the coffee industry."  Wickersham replied that he indeed was conducting an ongoing investigation.

(p. 86) In April, Norris lambasted the coffee trust from the floor of the House, summarizing the valorization loan process.  He concluded that "this gigantic combination [has been able] to control the supply and the sale of coffee throughout the civilized world.  [They] sold only in such quantities as would not break the market."  Frustrated by Brazil’s involvement, he observed that when a conspiracy to monopolize a product involved a domestic corporation, it was termed a trust and could be broken.  "But if the combination has behind it the power and influence of a great nation, it is dignified with the new term ‘valorization.’  Reduced to common language, it is simply a hold-up of the people by a combination."

 

Source:

Mark Pendergrast. Uncommon Grounds: The History of Coffee and How It Transformed Our World. Basic Books, 2000. (ISBN: 0465054676)

 

The Innovator’s Dilemma at the Movies?

Sounds like a possible example of Clayton Christensen’s where the incumbent (movie theaters) move up-market in response to the threat from the disruptive technology (increasingly high quality home entertainment systems):

It was Saturday night at the Palace 20, a huge megaplex here designed in an ornate, Mediterranean style and suggesting the ambience of a Las Vegas hotel. Moviegoers by the hundreds were keeping the valet parkers busy, pulling into the porte-cochere beneath the enormous chandelier-style lamps. Entering the capacious lobby, some of them dropped off their small children in a supervised playroom and proceeded to a vast concession stand for a quick meal of pizza or popcorn shrimp before the show.
Others, who had arrived early for their screening of, say, ”Wedding Crashers” or ”The Dukes of Hazzard” — their reserved-seat tickets, ordered online and printed out at home, in hand — entered through a separate door. They paid $18 — twice the regular ticket price (though it included free popcorn and valet service) — and took an escalator upstairs to the bar and restaurant, where the monkfish was excellent and no one under 21 was allowed.
Those who didn’t want a whole dinner, or arrived too late for a sit-down meal, lined up at the special concession stand, where the menu included shrimp cocktail and sushi and half bottles of white zinfandel and pinot noir. As it got close to curtain time, they took their food and drink into one of the adjoining six theater balconies, all with plush wide seats and small tables with sunken cup holders. During the film, the most irritating sound was the clink of ice in real glasses.
Not your image of moviegoing? Pretty soon it might be. At a time when movie attendance is flagging, when home entertainment is offering increasing competition and when the largest theater chains — Regal Entertainment, AMC Entertainment (which has recently announced a merger with Loews Cineplex) and Cinemark — are focused on shifting from film to digital projection, a handful of smaller companies with names like Muvico Theaters, Rave Motion Pictures and National Amusements are busy rethinking what it means to go to the movie theater. (B1)

BRUCE WEBER. “Liked the Movie, Loved the Megaplex; Smaller Theater Chains Lure Adults With Bars, Dinner and Luxury.” The New York Times (Wednesday, August 17, 2005): B1 & B7.

With Flat Tax, Estonia Has 11% Growth


“Prime Minister Andrus Ansip of Estonia in the cabinet room, which is equipped with a computer for each minister.” Source of caption and photo: online version of NYT article quoted and cited below.

(p. A4) TALLINN, Estonia – Estonia, one realizes after a few days in the abiding twilight of a Baltic winter, is not like other European countries.
The first tip-off is the government’s cabinet room, outfitted less like a ceremonial chamber than a control center. Each minister has a flat-screen computer to transmit votes during debates. Then there is Estonia’s idea of an intellectual hero: Steve Forbes, the American publishing scion, two-time candidate for the Republican presidential nomination and tireless evangelist for the flat tax.
Fired with a free-market fervor and hurtling into the high-tech future, Estonia feels more like a Baltic outpost of Silicon Valley than of Europe. Nineteen months after it achieved its cherished goal of joining the European Union, one might even characterize Estonia as the un-Europe.
“I must say Steve Forbes was a genius,” Prime Minister Andrus Ansip declared during an interview in his hilltop office. “I’m sure he still is,” he added hastily.
The subject was the flat tax, which Mr. Forbes never succeeded in selling in the United States. Here in the polar reaches of Europe it is an article of faith. Estonia became the first country to adopt it in 1994, as part of a broader strategy to transform itself from an obscure Soviet republic into a plugged-in member of the global information economy.
By all accounts, the plan is working. Estonia’s economic growth was nearly 11 percent in the last quarter – the second fastest in Europe, after Latvia, and an increase more reminiscent of China or India than Germany or France.
People call this place E-stonia, and the cyber-intoxication is palpable in Tallinn’s cafes and bars, which are universally equipped with wireless connections, and in local success stories like Skype, designed by Estonian developers and now offering free calls over the Internet to millions.
. . .
Germans showed how allergic they were to the idea when Angela Merkel chose a flat tax advocate as her economic adviser. Antipathy toward him was so intense that political analysts say it probably cost Chancellor Merkel’s party a clear majority in the German Parliament.
Yet the concept has caught on in this part of Europe. Latvia, Lithuania and Slovakia all have a flat tax, while the Czech Republic and Slovenia have considered one. Tax policy, not support for the American-led war in Iraq, is the bright line that separates the so-called old Europe from the new.

For the full article, see:
MARK LANDLER. “Letter From Estonia: A Land of Northern Lights, Cybercafes and the Flat Tax.” The New York Times (Weds., December 21, 2005): A4.
(Note: ellipsis added.)

Disruptive Innovation Threatens Boeing and Lockheed?

SpaceXHeavyLifters.gif Source of table: online version of WSJ article cited below.

EL SEGUNDO, Calif. — Maverick entrepreneur Elon Musk, who says he is prepared to spend nearly $200 million of his personal fortune creating a family of low-cost, reusable rockets, recently landed an unexpected customer: the U.S. intelligence community.
Mr. Musk and his fledgling company, closely held Space Exploration Technologies Corp., for years worked on advanced technologies and less-expensive manufacturing concepts to build small rockets capable of launching commercial or government satellites weighing around 1,000 pounds.
But the new contract for a single, classified launch — shrouded in such secrecy that neither the spy agency nor specific type of satellite was identified — envisions construction of a massive rocket by Mr. Musk’s company, known as SpaceX. The launch vehicle is slated to be comparable to the largest, most powerful models built by Boeing Co. and Lockheed Martin Corp., but costing a fraction of the prices charged by the rocket-industry leaders
. . .
Mr. Musk doesn’t minimize the challenge of trying to win more government business while criticizing government procurement practices. “I think it’s extremely risky,” he says of his overall strategy, “but we’ve got to fight for our right to win customers.” If development of simpler, less-costly rocket alternatives is left to major defense contractors, he argues, “I can assure you it will never, never happen.”
. . .
In spite of skepticism and criticism of SpaceX, industry leaders are keeping a wary eye on Mr. Musk, with some vowing stepped-up competition against the industry newcomer.
Tom Marsh, a senior Lockheed Martin space official, told a space conference last month that his company “absolutely intends to pursue, and to pursue vigorously” the market for smaller rockets initially targeted by SpaceX.

ANDY PASZTOR. “For Rocket Start-Up, Sky’s the Limit; Surprise Contract Boosts SpaceX as It Competes With Boeing, Lockheed.” THE WALL STREET JOURNAL (Thurs., September 15, 2005): B6.