Saturday, July 22, 2006

King of the socialist moonbats, part III

He's the new king...of the socialist moonbats
King of the socialist moonbats, part II
What hath the free market wrought?
In Chavez's footsteps
"For wide is the gate, and broad is the way, that leadeth to destruction"

First of all, guess who said the following:
These improvements [in Third World countries] have not taken place because well-meaning people in the West have done anything to help--foreign aid, never large, has lately shrunk to virtually nothing. Nor is it the result of the benign policies of national governments, which are as callous and corrupt as ever. It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor. It is not an edifying spectacle; but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful but nonetheless significantly better.
I'll give the answer at the end. The main story is that Venezuela's proto-dictator, Hugo Chavez, is at it again. This time, flanked by his Marxist godfather Fidel Castro, he blamed Latin America's economic troubles on the free market. Apparently their brother-in-collectivism, Bolivian President Evo Morales, wasn't there. We've heard their spiels before, like from Paul Krugman, who blamed Argentina's problems on laissez-faire. Neither could be further from the truth.

There are no economic problems from Mexico to Tierra del Fuego that couldn't be solved by the free market, which, contrary to intellectually bankrupt leftists, does require the rule of law. The free market simply cannot operate without principles like private property rights and the freedom from government coercion. So let's look at private property rights in Cuba...ok, bad example. On second thought, how about property rights in Venezuela? Heavy progressive taxation deprives people of their own earnings, and the oil industry, the country's main source of wealth, is nationalized. What nationalization really does is allow the government to distribute wealth to its leaders and cronies. The masses will get very little, but just enough of a taste so they think el presidente is a hero. And courtesy of the government's education monopoly, they're indoctrinated well enough that few ever consider that they'd be better off with private ownership: maybe you don't own the McDonald's, but working behind the counter is a better alternative to waiting for scraps at the back.

Remember that "nationalized" is just a euphemism for socialized: what's yours isn't officially everyone's, but it could be. Hopefully you don't own something or are involved in an enterprise that is too valuable, otherwise the military will come to seize it. Evo Morales demonstrated that back in June, when he sent in the military to take over the natural gas fields. That, of course, begets the question: if the government can take your wealth at its own discretion, why would anyone bother to do anything that creates prosperity?

How about a comparison of prosperity? The news article says that with Venezuela, "Mercosur [has] a combined market of 250 million people and a combined output of $1 trillion in goods and services annually." Big deal. The article adds, "NAFTA, combining the markets of the United States, Canada and Mexico, has 450 million consumers and a combined gross product of about $14 trillion." Now consider that the 300 million people in the United States accounts for $13 trillion of that. It's not like the United States has that much more natural wealth, nor does it use its military to force other nations into trade. So other than the U.S. accounting for the massive difference between NAFTA and Mercosur, what accounts for the difference between NAFTA and is the difference?

Well, the United States prospers because it is based on the free market. Our various levels of governments may not always act like it, but freedom was always the basis of this country. That includes the freedom of buyers and sellers to engage in commerce on their own terms, ideally without government telling them how to do things (sadly not the case, with all our regulations), and most certainly without the threat that government can just seize people's property (even more sadly not the case, as shown in the Kelo decision that sanctioned eminent domain at a tyrannical level. Things ought to be better, but until we can reclaim real liberty in this country, thankfully we're free enough that we still prosper as a country. If local, state or federal governments could simply seize a Wal-Mart store's inventory to distribute to a town, or "nationalize" financial firms that are at the heart of our wealth, what would that do to our economy? No one would bother to start up companies of any significance, and even if they wanted to, what investors, domestic or foreign, would want to risk their money? So we would all be left that much poorer.

Also, the United States, again for the most part, believes in freer trade with other nations. It's not true free trade, but it is at least liberalized. We will even trade with China, despite it being an ideological enemy that frequently does us no favors, because the benefits outweigh the costs. Both sides have more to gain than enacting trade restrictions, let alone going to war, and like all situations of liberalized trade, both sides are equally dependent. In fact, China has more competitors in producing than the U.S. has competitors in consuming, and its banking system would collapse if it couldn't buy all those U.S. Treasury bonds to use as collateral, so China is actually more dependent on Sino-U.S. trade than we are.

If Latin America wants to prosper, they will trade freely, not selectively. There's no such thing as "excess free trade," contrary to what some anti-globalists say. Why should I buy less food from my local grocer, so that I can purchase my own? The reason I don't is the same reason that part of my rent pays for people to mow the front lawn, or why people of low incomes still don't try to make their own clothes: it's far more profitable to work in what you specialize in, then buy what you want from others. Real economics knows no distinctions between individuals, families and borders, so ultimately there's no difference between buying from your neighbor and buying from someone halfway around the globe.

Did you make a guess as to who said what I quoted at the top? Was it Greg Mankiw, who was unfairly pilloried in mainstream media for pointing out the benefits of outsourcing? Perhaps Milton Friedman? Larry Kudlow, Don Luskin, or another supply-sider? If you guessed any of those names, you were wrong. It was Paul Krugman in a March 1997 article for Slate.

Yes, even Paul Krugman has ardently spoken for free trade to the extent that he defended sweatshops: "Bad jobs at bad wages are better than no jobs at all." I didn't realize until this afternoon that he even conceded their benefits. But there's a big difference between 1997 and now: a Democrat was in the White House then. Instead of pointing out today that large corporations, motivated by greed, have been guided by the Invisible Hand to improving the lives of low-end workers, Krugman has changed channels. Substitute "Wal-Mart" for "multi-national corporations," and Krugman suddenly sounds like those he criticized nine years ago:
There's no reason Wal-Mart couldn't have reasonably high wages...But they choose not to.
But as I pointed out a few nights ago, sweatshops can't pay workers more, because that necessitates increasing the products' prices, and therefore consumers won't buy as many. "Bad jobs at bad wages are better than no jobs at all." It's not a terribly profound or pithy thing to say, but pre-2000 Krugman was correct to say it.

Another difference between Krugman then and now, which I also didn't realize until today:

"But time has not been kind to [John Kenneth Galbraith's] theory [of giant corporations ruling society]. We have not become an economy of GM-sized corporations; in fact, large corporations play a considerably smaller role in the economy now than they did when he wrote his book, and for that matter GM itself is a lot less immune from market pressures than it used to be. Rather than evolving away from a market economy and the constraints it imposes, we are now more firmly ruled by the Invisible Hand than ever before." - Paul Krugman, September 1996

"Krugman noted that General Motors Corp. was the largest American company during the 1960s and paid good wages and benefits to its workers. Today, he said, the country's largest corporation is Wal-Mart Stores Inc., which pays its workers $17,000 a year." - Paul Krugman, June 2, 2006

What a difference a decade makes, doesn't it? Ten years ago, no big deal with GM: it's subject to free market forces like everyone else (though it always was and shall be), and big business isn't dominant anyway. Today, Krugman points to Wal-Mart, now the largest American corporation, as the benchmark for labor. It's no wonder Krugman would have gotten a top economics position had Kerry won the election: they're two flip-floppers made for each other.

To be fair, I've changed positions on various issues, but there's a difference here. I admit it, for one. I don't deny that I was once a protectionist, or that I was pretty Marxist for a short while in my teenage years. Also, I don't emphasize or ignore issues because of my loyalty to one party. Krugman rarely misses a chance to criticize Bush and the GOP, but I'm an equal-opportunity political basher who goes after both parties.

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