artdiamondblog.com – Page 526 – Art Diamond's web log

Small Business Sceptical of Big Government Health Plan

“No, I mean it,” said Ms. Brigugulio, “I expect you to keep your word on this.” Source of the photo and caption: http://boss.blogs.nytimes.com/2009/07/30/mr-prez-meets-ms-biz-the-story-behind-the-photo/

(p. A11) Patty Briguglio thinks President Obama may have a public relations problem selling his health care plan to small-business owners.
And Ms. Briguglio, who was photographed exchanging a wagging finger with the president at his health care forum Wednesday in Raleigh, N.C., should know: she runs her own small business, MMI Associates, a public relations firm in Raleigh.
Ms. Briguglio pays much of the cost of health insurance for her firm’s 19 employees, though she does not offer a group plan. Because the members of her staff are so young, it is cheaper simply to provide an allowance for them to buy individual policies.
When Mr. Obama called on Ms. Briguglio at Wednesday’s forum, she asked, ”What current long-term social program created and run by the government should we look to as a model of success and one that we as taxpayers should be confident that a new government-run health care system would be better than the current system in place?”
The president suggested Veterans Affairs hospitals and Medicare, both of which, he said, ”have very high satisfaction rates.”
And, he added, ”Medicare costs have gone up more slowly than private-sector health care costs.”
Ms. Briguglio was not completely satisfied. ”I’ve never associated any government program with ‘cost effective’ or ‘efficient,’ ” she said in a telephone interview on Thursday. ”I don’t believe that the government will be a better steward of the money that I set aside for health care for my employees than I will be.”

For the full story, see:

ROBB MANDELBAUM. “To Challenges For Obama, Add Another.” The New York Times (Fri., July 31, 2009): A11.
(Note: the online version of the article does not have the photo of Briguglio wagging her finger, that was published in my print version of the paper. The photo above is from later in the exchange, and appeared on the NYT blog.)

In Early Days Entrepreneur Honda “Pawned His Wife’s Jewelry for Funds”

(p. 217) At the root and origin of all great empires of industry can usually be found a perspiring entrepreneur, often frustrated and fatigued, struggling over a machine that won’t quite work.

Honda, for example, was to become the world’s single most brilliant and successful entrepreneur of mechanical engineering since Henry Ford. But only the perspiration of genius was in sight during that period before the war when he embarked on a siege of day-and-night study and experiment in the techniques of casting, in his attempt to make a piston ring. He lived at the factory, turning from a gay blade into a hirsute and harried hermit, stinking of grease and sweat, while his savings ran out, his friends fretted, his parents reminded him of promising opportunities in auto repair, and he pawned his wife’s jewelry for funds.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

“How Do We Get on the Special Interests, Special Treatment Bandwagon?”

Uncreative destruction. “Jose Luis Garcia pours sodium silicate into a junkyard car engine to render it inoperable at a lot in Sun Valley, Calif., on Tuesday. The process destroys the car’s engine in a matter of minutes.” Source of photo and part of caption: online version of the WSJ article quoted and cited below.

(p. A4) WASHINGTON — Who doesn’t like the government’s “cash for clunkers” program? Your mechanic, for one.

Owners of automotive repair shops say the program to help invigorate sales of new cars is succeeding at their expense.
Bill Wiygul, whose family owns four repair shops in Virginia, said he has already had five or six customers decide against repairs. A man who sits on the board of Mr. Wiygul’s bank traded in his car rather than repair it. “He’d been a customer at our Reston store since it opened,” Mr. Wiygul said.
The clunkers program, formally known as the Car Allowance Rebate System, offers subsidies of as much as $4,500 to consumers who trade in older vehicles and buy new, more fuel-efficient models. The program was initially given $1 billion. That money was spent in one week.
The Senate reached a deal to extend the clunkers program Wednesday night, agreeing to vote on a measure Thursday that would add $2 billion to the program, the Associated Press reported.
The House approve a $2 billion extension last week.
For Mr. Wiygul and other mechanics, until now the recession has brought them more customers as people fixed cars rather than go into debt for new ones. He has hired five people and is expanding one of the shops.
Auto dealers who offer the rebates on new cars in exchange for clunkers must agree to “kill” the old models by disabling the engines and shipping the dead vehicle to a junkyard.
The loss of such potential work — as many as 250,000 vehicles will be destroyed in the program’s first round — prompted Mr. Wiygul to question the federal program’s focus on dealers and big business at the expense of the little guy.
“How do we get on the special interests, special treatment bandwagon? How much is it going to cost me and to whom shall I send the check?” he said. “Who picks the winners in this game ’cause obviously the game is fixed.”

For the full commentary, see:
GARY FIELDS. “Clunkers Plan Deflates Mechanics.” The Wall Street Journal (Thurs., AUGUST 6, 2009): A4.

Wikipedia Continues to Gain Respect

(p. B5) Recognizing that the online encyclopedia Wikipedia is increasingly used by the public as a news source, Google News began this month to include Wikipedia among the stable of publications it trawls to create the site.

A visit to the Google News home page on Wednesday evening, for example, found that four of the 30 or so articles summarized there had prominent links to Wikipedia articles, including ones covering the global swine flu outbreak and the Iranian election protests.
. . .
The move by Google News was news to Wikipedia itself. Jay Walsh, a spokesman for the Wikimedia Foundation, said he learned about it by reading an online item on the subject by the Nieman Journalism Lab.
“Google is recognizing that Wikipedia is becoming a source for very up-to-date information,” he said, although “it is an encyclopedia at the end of the day.”

For the full story, see:

NOAM COHEN. “Google Starts Including Wikipedia on Its News Site.” The New York Times Company (Weds., June 22, 2009): B5.
(Note: ellipsis added.)

Huge Increase in Money Supply Increases Odds of Inflation

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

(p. A15) . . . , starting in early September 2008, the Bernanke Fed did an abrupt about-face and radically increased the monetary base — which is comprised of currency in circulation, member bank reserves held at the Fed, and vault cash — by a little less than $1 trillion. The Fed controls the monetary base 100% and does so by purchasing and selling assets in the open market. By such a radical move, the Fed signaled a 180-degree shift in its focus from an anti-inflation position to an anti-deflation position.

The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10 (see chart nearby). It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless. The currency-in-circulation component of the monetary base — which prior to the expansion had comprised 95% of the monetary base — has risen by a little less than 10%, while bank reserves have increased almost 20-fold. Now the currency-in-circulation component of the monetary base is a smidgen less than 50% of the monetary base. Yikes!
. . .

With an increased trust in the overall banking system, the panic demand for money has begun to and should continue to recede. The dramatic drop in output and employment in the U.S. economy will also reduce the demand for money. Reduced demand for money combined with rapid growth in money is a surefire recipe for inflation and higher interest rates. The higher interest rates themselves will also further reduce the demand for money, thereby exacerbating inflationary pressures. It’s a catch-22.
It’s difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed’s actions because, frankly, we haven’t ever seen anything like this in the U.S. To date what’s happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn’t a pretty picture.

For the full commentary, see:
ARTHUR B. LAFFER. “Get Ready for Inflation and Higher Interest Rates; The unprecedented expansion of the money supply could make the ’70s look benign.” The Wall Street Journal (Weds., June 10, 2009): A15.
(Note: ellipses added.)

Wealth Consists Mainly in Ideas

(p. 67) Through all the centuries of man, there has recurred this same morbid misunderstanding of the nature of wealth and the wealth of nations. Always wealth is seen as something solid and calculable: to be seized and held, clutched and hoarded, measured and inventoried, amassed and monopolized. In the age of imperialism, it was imagined to consist in land and the armies that could acquire it; in the mercantilist era, it was recognized as bullion, gained through a favorable balance of trade; in every period, men have fawned over gems and glitter; in the modern age, fossil fuels and strategic minerals have seemed to be the open sesame, but seekers of wealth still fumble for gold and baubles, and real estate as well.

All bespeak the materialistic fallacy, a fixation of leftists, but a shibboleth also for much of the intelligentsia of capitalism: the idea that wealth is material and collectible, finite and definable, subject to measurement and inventory, to entropy and exhaustion. The way to get rich is to find some precious substance and (p. 68) hold It. Its price will inevitably rise in time as its quantity declines with use. This is the fantasy through which Pierre Trudeau was bankrupting Canada in the early 1980s and the Arab leaders were impoverishing the world and destroying their own future.
Wealth consists not chiefly in things but in thought: in the ideas and applications that confer value to what seems useless to the uninformed. The Arab leaders should learn that they can best enhance the value of oil–and the wealth of oil-producing nations–by lowering its price and enlarging its uses. This is the central rule of riches, understood by every major titan of wealth, from John D. Rockefeller and Henry Ford to the entrepreneurs of modern computers and the industrialists of contemporary Japan. Each gained his fortune not by increasing the price of his product but by drastically dropping it, bringing it within the reach of the creative uses and ideas of millions, and thus vastly enlarging its total value and market.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

“The Evidence of His Eyes Overturned 2,000 Years of Accepted Wisdom”

“. . ., the Italian astronomer shows the satellites of Jupiter to Venetian senators in this 1882 illustration.” Source of illustration and caption: online version of the WSJ article quoted and cited below.

(p. A9) A mathematician and experimental physicist, Galileo, however, immediately recognized that what he could see of Venus, Jupiter and the moon through his telescope offered crucial evidence that the sun, not Earth, was the center of our solar system. The evidence of his eyes overturned 2,000 years of accepted wisdom about cosmology in which philosophers had conceived the night sky as a system of crystalline spheres.

Moreover, Galileo quickly shared his observations with scientists throughout Europe by openly publishing his data.
“He wrought a change so fundamental for science and for humanity,” says Munich astronomer Pedro Russo, who is global coordinator of the International Year of Astronomy. “For the first time, we realized we were not the center of the universe.”
But his insistence on contradicting traditional cosmology led to his arrest and trial by the Roman Catholic Church. He was forced to recant his views and imprisoned for life. The Vatican did not formally admit that Galileo was correct until 1992. Now Vatican authorities are planning a statue in his honor.
During his life, Galileo is known to have built at least 100 telescopes, mostly as ornate presentation gifts for his patrons — the powerful Medici family of Florence. Only one is known to survive with its optics intact — the humble device now on show at the Franklin Institute.
“We assume it was personally used by Galileo,” says Paolo Galluzzi, director of the science museum in Florence, which loaned the telescope for the exhibit. “Only this one was found among his property at his death. We believe that this is one of the major tools of his work.”
. . .
“Science is fundamentally about establishing truth for yourself,” says Dr. Pompea in Arizona. “People can make observations, take data and establish for themselves the nature of the universe. They don’t have to take it from someone else or read it in a book.”
Like Galileo, “they can see it.”

For the full story, see:
ROBERT LEE HOTZ. “Galileo’s Discoveries, 400 Years Later, Still Open Eyes
Astronomer’s Telescope, on View Outside Italy for the First Time, Helped Expand Perceptions of the Universe.” The Wall Street Journal (Fri., APRIL 10, 2009): A9.
(Note: ellipsis added.)

“Galileo Galilei.” Source of image and caption: online version of the WSJ article quoted and cited above.

“The Voluntary Slaves of a ‘Compassionate’ Government”

Thomas Szaz has been defending liberty for many decades. It is good to see him still eloquently at it:

(p. A13) If we persevere in our quixotic quest for a fetishized medical equality we will sacrifice personal freedom as its price. We will become the voluntary slaves of a “compassionate” government that will provide the same low quality health care to everyone.

For the full commentary, see:
THOMAS SZASZ. “Universal Health Care Isn’t Worth Our Freedom.” Wall Street Journal (Weds., JULY 15, 2009): A13.

Penn Government Protects Us from “Little Old Ladies Baking Pies”

“After a state crackdown forbidding the sale of homemade pies, members of St. Cecilia Catholic Church in Rochester, Pa., proceeded with their annual Lenten fish fries anyway. The pie flap helped draw healthy crowds.” Source of photos and caption: online version of the WSJ article quoted and cited below.

(p. A1) ROCHESTER, Pa. — On the first Friday of Lent, an elderly female parishioner of St. Cecilia Catholic Church began unwrapping pies at the church. That’s when the trouble started.

A state inspector, there for an annual checkup on the church’s kitchen, spied the desserts. After it was determined that the pies were home-baked, the inspector decreed they couldn’t be sold.
“Everyone was devastated,” says Josie Reed, a 69-year-old former teacher known for her pumpkin and berry pies.
. . .

The disappearance of Mary Pratte’s coconut-cream pie, Louise Humbert’s raisin pie and (p. A10) Marge Murtha’s “farm apple” pie from the fish-fry fund-raisers sparked an uproar that spread far beyond the small parish.
. . .

(p. A10) The ruckus at St. Cecilia’s could lead to changes in Pennsylvania state law. State Sen. Elder Vogel Jr. has drafted legislation aimed at allowing nonprofits, including churches, to serve food prepared at home. That would cover fish fries held during Lent. “Once again, you’ve got the heavy hand of government coming in,” he says. “These ladies bake pies, out of the goodness of their hearts.”
Sen. Vogel, who sits on the state legislature’s agriculture committee, says state officials seem willing to change the law. “They have more work on their hands than going after little old ladies baking pies.”
The inspector’s warning to St. Cecilia’s carried no fine. But the inspector has raised some hackles by telling the women that the state would allow them to bake pies for sale in their own kitchens, if they paid $35 to have them inspected as well.
“Well, that’s just ridiculous,” says Ms. Humbert, 73, one of the parish bakers. She has been bringing raisin pies to the church for more than a decade and says she thought the women’s kitchens “are probably a lot cleaner than some restaurants,” but might not meet “nitpicky” requirements.
Ms. Pratte, 88, has been attending St. Cecilia’s since she was a girl. She missed a step and spent two and a half weeks in the hospital earlier this year. She said it would be “kind of hard” to get to the church to do any baking. “I’d rather just make them at home,” she says of her coconut-cream pies. Others say it’s difficult to bake good pies in a strange oven.
Thanks to the publicity caused by the crackdown, the St. Cecilia’s fish fries attracted more visitors than ever before.

For the full story, see:
KRIS MAHER. “Pennsylvania Pie Fight: State Cracks Down on Baked Goods; Inspector Nabs Homemade Desserts At St. Cecilia Church’s Lenten Fish Fry.” The Wall Street Journal (Fri., APRIL 10, 2009): A1 & A10.
(Note: ellipses added.)

“Established Experts Flee in Horror to All Available Caves and Cages”

(p. 96) While science and enterprise open vast new panoramas of opportunity, our established experts flee in horror to all available caves and cages, like so many primitives, terrified by freedom and change.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

Wattenberg’s Corporate Graveyard Illustrates Creative Destruction

The clip is the famous corporate graveyard scene from Ben Wattenberg’s 1977 “In Search of the Real America: A Challenge to the Chorus of Failure and Guilt.” The scene appears in the first of 13 episodes, the episode called “There’s No Business Like Big Business” which received the Tuck Award for the Advancement of Economic Understanding. The episode was produced and written by Austin Hoyt.
The corporate graveyard scene illustrates that under entrepreneurial capitalism, companies prosper that innovate in better serving the consumer.

URL address for graveyard scene video clip:
http://www.youtube.com/watch?v=DDMNYLiBexo

Wattenberg discussed the “In Search of the Real America” program, and the graveyard scene, in his recent book Fighting Words:

(p. 307) The central point of the program was that if big American corporations didn’t compete effectively, they suffer, and many would go out of business.

The producers had the wonderful idea of a visual of a graveyard on a foggy night, with headstones made from papier-mâché and a smoke machine providing the fog. I walked through the mock cemetery in a raincoat and read off the names of corporate tombstones, which included Central Leather (the seventeenth largest company in 1917), International Mercantile Marine (the eleventh largest in 1917), as well as failures like Baldwin Locomotive Works, American Woolen, Packard Motor Car, International Match, Pierce Petroleum, Curtiss-Wright, United Verde Mining, and Consolidation Coal.2 When we showed the Central Leather tombstone, a sound effect mooed; behind International Mercantile Marine’s, a steamship horn bellowed (I love shtick).
. . .
2 The program was based on an article by James Michaels, editor of Forbes. For many years, people would come up to me in airports, recalling that one scene and complementing me on the program.

Source:

Wattenberg, Ben J. Fighting Words: A Tale of How Liberals Created Neo-Conservatism. New York: Thomas Dunne Books, 2008.
(Note: ellipsis added.)
(Note: I have corrected a few obvious errors involving the omission and placement of commas in the list of companies in the text of Wattenberg’s Fighting book.)