Category: Public Choice

Proletariat Loses Money Investing in Ponzi Scheme Supported by Chinese Communists

(p. B1) HONG KONG — At every turn in his improbably rapid rise, Ding Ning, 34, went to great efforts to convey the image of strong government backing for his Internet financing business.
There was his company’s lavish annual meeting and banquet last year in Beijing’s Great Hall of the People, where China’s legislature meets and where top government leaders host official functions. Adding a splash of celebrity to the event were Zhou Tao, a nationally famous actress and host on the government’s main television broadcaster, and several mid-ranking officials, bureaucrats and lawmakers.
There were the positive profiles in state-controlled media, as well as the company’s advertising on official TV. There was the section of his company’s website devoted to building Communist Party spirit.
But it all came crashing down in dramatic fashion for Mr. Ding this week, when the police alleged that his financing business, Ezubao, was a $7.6 billion Ponzi scheme and announced 21 arrests, including of Mr. Ding. The company was shut down.
, , ,
(p. B7) In interviews, former staff and investors described the signals of strong state support as one of the keys to Ezubao’s rapid rise.
“Many people joined Ezubao because they saw the support from the government and from some government officials,” said Feng Zhe, 36, a Beijing resident who worked as a salesman at the company from June of last year until December.
Mr. Feng said a number of his friends and family members invested in Ezubao’s products and suffered losses. “Many people bought their products because the government has lent the company credibility,” he added.

For the full story, see:
NEIL GOUGH. “Feeling Twice Victimized.” The New York Times (Sat., Feb. 6, 2016): B1 & B7.
(Note: ellipsis added.)
(Note: the online version of the article has the date Feb. 5, 2016, and has the title “Ponzi Scheme in China Gained Credibility From State Media.”)

Harry Reid Supported Huge Tax Loophole for Wall Street and Casinos

(p. A1) WASHINGTON — In the span of a mere 11 days this month, $1 billion in future federal tax payments vanished.
As congressional leaders were hastily braiding together a tax and spending bill of more than 2,000 pages, lobbyists swooped in to add 54 words that temporarily preserved a loophole sought by the hotel, restaurant and gambling industries, along with billionaire Wall Street investors, that allowed them to put real estate in trusts and avoid taxes.
They won support from the top Senate Democrat, Harry Reid of Nevada, who responded to appeals from executives of casino companies, politically powerful players and huge employers in his state. And the lobbyists even helped draft the crucial language.
The small changes, and the enormous windfall they generated, show the power of connected corporate lobbyists to alter a huge bill that is being put together with little time for lawmakers to consider. Throughout the legislation, there were thousands of other add-ons and hard to decipher tax changes.
Some executives at companies with the most at stake are also big campaign donors. For example, the family of David Bonderman, a co-founder of TPG Capital, has donated $1.2 million since 2014 to the Senate Majority PAC, a campaign fund with close ties to Mr. Reid and other Senate Democrats. TPG Capital has large holdings in Caesars Entertainment and helps run a Texas-based energy company, both of which stand to benefit from the (p. A17) last-minute change.

For the full story, see:
ERIC LIPTON and LIZ MOYER. “Lobbyists Shield a Tax Loophole Worth $1 Billion.” The New York Times (Mon., DEC. 20, 2015): A1 & A17.
(Note: the online version of the story has the date DEC. 20, 2015, and has the title “Hospitality and Gambling Interests Delay Closing of Billion-Dollar Tax Loophole.” )

Unusual Array of Groups Strongly Push Breast-Feeding

C-SPAN on Sat., Jan. 17, 2016 broadcast a thought-provoking presentation by Courtney Jung on her book Lactivism. Jung argues that an unusual array of groups strongly advocate breast-feeding for reasons that are independent of the fairly modest health benefits, for baby and mother, that result from breast-feeding.

Jung’s book, that she discussed on C-SPAN, is:
Jung, Courtney. Lactivism: How Feminists and Fundamentalists, Hippies and Yuppies, and Physicians and Politicians Made Breastfeeding Big Business and Bad Policy. New York: Basic Books, 2015.

“We’re from the Streets and We Want Change”

(p. A9) CARACAS, Venezuela — On a sunny afternoon, Jorge Millán, an opposition candidate for congress, walked through the narrow streets of a lower-middle-class neighborhood, pressing the flesh in what was once a no man’s land for people like him.

. . .
With the economy sinking under the weight of triple-digit inflation, a deep recession, shortages of basic goods and long lines at stores despite the nation’s vast oil reserves, the opposition has its best chance in years to win a legislative majority.
. . .
“I was a Chavista, but Chávez isn’t here anymore,” said Mr. Omaña, referring to the followers of the former president.
“It’s this guy,” he said, referring to Mr. Maduro. “It’s not the same.”
Mr. Omaña complained about having to stand in long lines to buy food and about the fast-rising prices, saying that for the first time since Mr. Chávez was elected in 1998 he would vote for an opposition candidate.
“Enough is enough,” he said. “We need something good for Venezuela.”
Venezuelan politics was dominated after 1998 by Mr. Chávez and the movement he started, which he called the Bolivarian revolution, after the country’s independence hero, Simón Bolívar. Mr. Chávez died in 2013, and his disciple, Mr. Maduro, was elected to succeed him, vowing to continue Mr. Chávez’s socialist-inspired policies.
. . .
Opposition candidates said one of the biggest surprises of the campaign has been the warm reception they have received in what were once hostile pro-government strongholds.
Carlos Mendoza, 53, a motorcycle taxi driver and former convict who works in the district where Mr. Millán is running, said that he belongs to a group, known as a colectivo, that in the past was paid by the government to help out during campaigns, attend rallies and drive voters to the polls. Such groups were also often used to intimidate opposition supporters.
“They called us again this time,” Mr. Mendoza said. “I told them, ‘No way, you’re not using me again.’ ”
“We’re from the streets,” he said, “and we want change.”

For the full story, see:
WILLIAM NEUMAN. “Venezuela’s Economic Pain Gives Opposition Lift Before Vote.” The New York Times (Sat., DEC. 5, 2015): A9.
(Note: ellipses added.)
(Note: the online version of the story has the date DEC. 4, 2015, and has the title “Venezuela’s Economic Woes Buoy Opposition Before Election.”)

How Democratic Operatives Fight Innovation-Crushing Regulations

(p. B1) SAN FRANCISCO — Over the last few years, so-called sharing companies like Airbnb and Uber — online platforms that allow strangers to pay one another for a room or a ride — have established footholds in thousands of communities well before local regulators have figured out how to deal with them.

. . .
Chris Lehane, a Washington political operative who now serves as Airbnb’s head of global policy and public affairs, framed Proposition F (p. B10) as a hotel-industry-led attack on the middle class.
In this city of about 840,000 people, roughly $8 million was raised by groups opposed to Proposition F — about eight times the amount raised by the proposition’s backers, according to records filed with the San Francisco Ethics Commission.
Much of that money was spent mobilizing Airbnb hosts and users, Mr. Lehane said. Still, he repeatedly homed in on one of the company’s most important talking points: Airbnb’s victory was a win for the middle class.
“Cities recognize where the world is going, right, they understand that you’re either going to go forward or you’re going to go backward,” he said. “They understand that in a time of economic inequality, this is a question of whose side are you on: Do you want to be on the side of the middle class, or do you want to be opposed to the middle class?”
. . .
Companies like Airbnb and Uber have become multibillion-dollar companies by employing a kind of guerrilla growth strategy in which they set up a modest team of workers in a city and immediately start providing their services to the public, whether local laws allow them to or not.
. . .
Mr. Lehane, a former political operative in the Clinton administration, was nicknamed the Master of Disaster for his no-holds-barred approach to winning political fights. David Plouffe, a former adviser to President Obama, is now a senior adviser to Uber and a member of its board.
Mr. Lehane and Mr. Plouffe have both tried to frame their companies as middle-class saviors in a moment of economic anxiety and income inequality — themes that are playing out in the presidential election as well. Jeb Bush and other Republicans have bragged about their Uber rides on the campaign trail, praising these companies as the future of self-sufficient employment.

For the full story, see:
CONOR DOUGHERTY and MIKE ISAAC. “Airbnb and Uber Mobilize Vast User Base to Sway Policy.” The New York Times (Thurs., NOV. 5, 2015): B1 & B10.
(Note: ellipses added.)
(Note: the online version of the story has the date NOV. 4, 2015.)

Climate Change Likely to Be Slower and Less Harmful than Feared

(p. A11) . . . , we are often told by journalists that the science is “settled” and there is no debate. But scientists disagree: They say there is great uncertainty, and they reflected this uncertainty in their fifth and latest assessment for the United Nations Intergovernmental Panel on Climate Change (IPCC). It projects that temperatures are likely to be anything from 1.5 to 4.5 degrees Celsius (2.7 to 8.1 degrees Fahrenheit) warmer by the latter part of the century–that is, anything from mildly beneficial to significantly harmful.
As for the impact of that future warming, a new study by a leading climate economist, Richard Tol of the University of Sussex, concludes that warming may well bring gains, because carbon dioxide causes crops and wild ecosystems to grow greener and more drought-resistant. In the long run, the negatives may outweigh these benefits, says Mr. Tol, but “the impact of climate change does not significantly deviate from zero until 3.5°C warming.”
Mr. Tol’s study summarizes the effect we are to expect during this century: “The welfare change caused by climate change is equivalent to the welfare change caused by an income change of a few percent. That is, a century of climate change is about as good/bad for welfare as a year of economic growth. Statements that climate change is the biggest problem of humankind are unfounded: We can readily think of bigger problems.” No justification for prioritizing climate change over terrorism there.
. . .
To put it bluntly, climate change and its likely impact are proving slower and less harmful than we feared, while decarbonization of the economy is proving more painful and costly than we hoped. The mood in Paris will be one of furious pessimism among the well-funded NGOs that will attend the summit in large numbers: Decarbonization, on which they have set their hearts, is not happening, and they dare not mention the reassuring news from science lest it threaten their budgets.
Casting around for somebody to blame, they have fastened on foot-dragging fossil-fuel companies and those who make skeptical observations, however well-founded, about the likelihood of dangerous climate change. Scientific skeptics are now routinely censored, or threatened with prosecution. One recent survey by Rasmussen Reports shows that 27% of Democrats in the U.S. are in favor of prosecuting climate skeptics. This is the mentality of religious fanaticism, not scientific debate.

For the full commentary, see:
MATT RIDLEY And BENNY PEISER. “Your Complete Guide to the Climate Debate; At the Paris conference, expect an agreement that is sufficiently vague and noncommittal for all countries to claim victory.” The Wall Street Journal (Sat., Nov. 28, 2015): A11.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Nov. 27, 2015.)

The Tol working paper mentioned above, is:
Tol, Richard S. J. “Economic Impacts of Climate Change.” University of Sussex Economics Working Paper No. 75-2015.

Audits Worth Less When the Audited Directly Pay for Them

(p. B1) Environmental regulators in Gujarat, one of India’s fastest-growing industrial states, found themselves in an implausible situation a few years ago: Every single city breached national air quality standards. And yet environmental audits kept finding that factories met pollution limits.
So the Gujaratis hired some researchers from Harvard and the Massachusetts Institute of Technology to carry out an experiment, changing the way the audits were made. Instead of hiring their own auditors, companies had auditors assigned to them randomly. Instead of being paid by the companies they audited, auditors drew a fixed fee from a pool that all companies paid into.
Measured compliance rates abruptly plummeted. But once the new system was in place, the real emissions from polluting factories finally started to decline. The Gujaratis kept the new approach.
“When fact-checking is not done in an independent way, there is a long history of things turning out the way the entity being fact checked wants them to turn out,” said Michael Greenstone of the University of Chicago, a former chief economist for President Obama’s Council of Economic Advisers who was one of the researchers involved in the study. “Until you change the incentives, this will not change.”
The problem may seem remote, but it turns out that the same incentives apply in the United States, even in programs that, at first glance, appear to provide an unmitigated benefit.
Last month, the Energy Department released an extensive report assessing the impact of the federal weatherization program, which was begun in 1976 to shield the homes of low-income Americans from the elements, save them money on heating bills and improve energy efficiency.
It concluded that weatheriza-(p. B10)tion — insulating homes, changing boilers, plugging leaky windows and the like — was a stellar investment. Not only were the energy savings substantially larger than the cost of weatherizing homes, the report found, but the gains soared even more once the broader impacts on health were taken into account.
“The results demonstrate that weatherization provides cost-effective energy savings and health and safety benefits to American families,” the Energy Department announced.
But do they? When Professor Greenstone and two other independent economists looked under the hood — not a trivial challenge, given the report’s 4,500 pages — they found a collection of idiosyncratic choices and unorthodox assumptions that severely undermined the credibility of the enterprise.
In the end, they concluded, the government research effort, which was led by the Energy Department’s own Oak Ridge National Laboratory, cannot tell us whether weatherization is a fabulous program or a waste of taxpayer dollars.

For the full commentary, see:
Eduardo Porter. “ECONOMIC SCENE; For Government That Works, Call In the Auditors.” The New York Times (Weds., OCT. 7, 2015): B1 & B10.
(Note: the online version of the commentary has the date OCT. 6, 2015, and the title “ECONOMIC SCENE; For Government That Works, Call In the Auditors.”)

Federal Agency Director Collects $750,000 for Lobbying

(p. A1) WASHINGTON — In this city with a grand tradition of government officials who pass through the revolving door into a world of big paychecks, Jeffrey Farrow stands apart.
While earning more than $100,000 a year as executive director of a tiny federal agency called the Commission for the Preservation of America’s Heritage Abroad, which has only one full-time federal employee, Mr. Farrow has simultaneously helped collect as much as $750,000 a year in lobbying fees. His clients have included the governments of Puerto Rico and the Republic of Palau, a tiny island nation in the western Pacific.
Mr. Farrow was at once a federal government bureaucrat and lobbyist. The revolving door did not even have to spin.
He managed this feat while running one of dozens of agencies that can get lost in the vast United States government — this one responsible for identifying and helping preserve cemeteries and historic buildings in Eastern and Central Europe that are important to American Jews and others, including Orthodox Christians from Kosovo.
. . .
(p. A16) “A bizarre tale,” said Senator Ron Johnson, Republican of Wisconsin and chairman of the Senate Homeland Security and Governmental Affairs Committee, in a letter he sent last month to Lesley Weiss, the chairwoman of the 30-year-old commission, asking her to explain Mr. Farrow’s dual roles. “This lobbyist used federal personnel and resources to run a profitable personal business advancing the interest of foreign agents.”.
. . .
Mr. Johnson, the Wisconsin senator, in a statement released by his office Friday, said the commission, despite its worthwhile mission, was an example of what is wrong with government.
“This relatively tiny agency is a classic example of the dysfunction and waste that typify far too much of the federal government,” he said. “Established with the best of intentions to memorialize the horrors of 20th-century genocides, the Commission for the Preservation of America’s Heritage Abroad did little to accomplish that goal but was instead used to enrich a lobbyist.”

For the full story, see:
ERIC LIPTON. “The Lobbyist With a Six-Figure Government Job.”The New York Times (Fri., SEPT. 15, 2015): A1 & A16.
(Note: ellipses added.)
(Note: the online version of the story has the date SEPT. 14, 2015.)

Lax College Accreditors May Be “Doing More Harm than Good”

(p. A19) Most colleges can’t keep their doors open without an accreditor’s seal of approval, which is needed to get students access to federal loans and grants. But accreditors hardly ever kick out the worst-performing colleges and lack uniform standards for assessing graduation rates and loan defaults.
Those problems are blamed by critics for deepening the student-debt crisis as college costs soared during the past decade. Last year alone, the U.S. government sent $16 billion in aid to students at four-year colleges that graduated less than one-third of their students within six years, according to an analysis by The Wall Street Journal of the latest available federal data.
. . .
(p. A12) Accreditors say their job is to help colleges get better rather than to weed out laggards. Colleges pay for the inspections, which can cost more than $1 million at large institutions.
“You’re not there to remove an institution,” says Judith Eaton, president of the Council for Higher Education Accreditation, a trade group. “You’re there to enhance the operation.”
The government has relied on accreditors as watchdogs since the 1950s. Colleges are evaluated by teams of volunteers from similar institutions, who follow standards set by the accreditation group. For example, colleges sometimes are required to collect student-retention data but given the freedom to set their own goals for those numbers.
. . .
Stephen Roderick, former provost at Fort Lewis College in Colorado, says he now has misgivings about his 2013 review of Glenville State College in West Virginia for the Higher Learning Commission. The review team wrote that the college had a “responsible program” to minimize default rates and “demonstrates a commitment” to evaluating graduation data.
Glenville’s graduation rate is 30%, while about 22% of students defaulted on loans from 2011 to 2013. Both percentages rank near the bottom 10% of accredited four-year colleges. David Millard, assistant to Glenville’s president, says the figures reflect the opportunity offered by the college to students in one of the poorest parts of the U.S.
Mr. Roderick says accreditors are inclined to see the best in colleges like Glenville, but that might not be the best for students. “Sometimes I feel that we’re doing more harm than good,” he says.

For the full story, see:
ANDREA FULLER and DOUGLAS BELKIN. “Education Watchdogs Rarely Bite; Accreditors keep hundreds of schools with low graduation rates or high loan defaults alive.” The Wall Street Journal (Thurs., June 18, 2015): A1 & A12.
(Note: ellipses added.)
(Note: the online version of the article was dated June 17, 2015, and had the title “The Watchdogs of College Education Rarely Bite; Accreditors keep hundreds of schools with low graduation rates or high loan defaults alive.”)

“Words Can Obscure Rather than Illuminate”

(p. C6) In his essay “Politics and the English Language,” George Orwell shows how language is a tool of political control, how words can obscure rather than illuminate. Mr. Swaim explains how that applies to Mr. Sanford’s office. At one point, constituents start writing in to ask whether the governor plans to run for president. While Mr. Swaim is expected to answer the letters, he is also expected to deploy a whole lot of “platitudinous observations” and “superfluous phrases” to say, basically, nothing.
“The trick was to use the maximum number of words with the maximum number of legitimate interpretations,” he writes. “Words are useful, but often their meanings are not. Sometimes what you want is feeling rather than meaning, warmth rather than content. And that takes verbiage.”

For the full review, see:
SARAH LYALL. “Pumpting Up Hot Air to the Governor’s Level.” The New York Times (Thurs., JULY 30, 2015): C1 & C6.
(Note: the online version of the review has the date JULY 29, 2015, and has the title “Review: In ‘The Speechwriter,’ Barton Swaim Shares Tales of Working for Mark Sanford.”)

The book under review, is:
Swaim, Barton. The Speechwriter: A Brief Education in Politics. New York: Simon & Schuster, 2015.

“A Collective Thumbing of the Nose at” Burma’s Dictatorship

(p. A9) For a young man born in a premodern dictatorship, Nway appeared to have it all. The son of a physician, he grew up in the town of Twantay, Burma, with the comforts typically reserved for the country’s military elite. He dreamed of becoming a doctor and raising a family of his own.
That all changed one night after the abortive elections of 1990, when Nway’s father, a supporter of the democracy movement, was arrested on unnamed charges and sentenced to 20 years in prison. There, he was kept in solitary confinement and endured routine beatings, interrogations and mock suffocations until he died of “complications of the liver” in October 1996.
Nway’s father was gone but not forgotten: His awza, or influence, lives on. Inspired by his father’s legacy, Nway dropped out of medical school and devoted his life to bringing liberal democracy to Burma.
. . .
At one point in the book, Nway is pursued by the “dogs” of Burma’s security forces and happens upon some old acquaintances at a beer den. The friends swallow their fear and summon passersby to help protect him. They sit down, building “a fort around Nway” in “a collective thumbing of the nose at the Special Branch police” until he is able to slip away on a motorbike.
For Ms. Schrank, this anecdote embodies the philosophy that ultimately makes the dissidents’ appeal to the people of Burma successful. In her final chapter she notes that it has now become “cool” to tie across your forehead a strip of cloth with the sign of the NLD and support the party “that only months before had belonged to the underground students and come most often with a one-way ticket to prison.”

For the full review, see:
NICHOLAS DESATNICK. “BOOKSHELF; Freedom Fighters; To understand how Burma’s military junta began coming apart at the seams, you need to meet this band of ‘oddballs and dreamers.'” The Wall Street Journal (Fri., July 31, 2015): A9.
(Note: ellipsis added, italics in original.)
(Note: the online version of the review has the date July 30, 2015.)

The book under review, is:
Schrank, Delphine. The Rebel of Rangoon: A Tale of Defiance and Deliverance in Burma. New York: Nation Books, 2015.