Touching Capitalism

Several years ago, there was a computer commercial where a guy enters a supermarket and starts grabbing stuff from the shelf and suspiciously stuffs it in his jacket. As he leaves the building, he walks past what looks like a security scanner passing through a blue light. A guard grabs his attention. “Excuse me sir,” he says. “You forgot your receipt.”

Piggly Wiggly is taking an important step to that not-too-distant future technology as it announces the success of its “pay-by-touch” machines. Customers can pay for their groceries via fingerprint, which is electronically tied to their financial accounts. The system is incredibly safe—there’s even a heat sensor on the device too prevent fraud with photocopies of prints—and customers are singing its praises. The chain is currently expanding the realm of the service from just four stores to all of its outlets. This service, by the way, is free.

Just another example of how the free market generates what people want. The consumer is king.

Merging Trends

Let’s suppose you’re the president of a successful high-tech company. You’ve worked hard and brought the firm to a new level of success. You charge lower prices and offer better products than you competitors. You constantly push the boundaries of the technology to bring the best bargain for your customers. You led the company to the heights of its success and want to bring to the next level.

To pull it off, you need capital and you need it cheap. You need a new customer base, one to build on. You need employees familiar with the new equipment and customers. There’s one way to get all of this in one fell swoop and that’s a merger.

It’s no wonder why mergers garner so much attention in the business world. And two major mergers are making headlines, but the content rarely alludes to the great new potential about to be unleashed. It’s the legal issues.

SBC Communications is looking to buy AT&T and China’s Lenovo Group has plans to buy IBM’s personal computer division. In both cases, the Justice Department will probably allow the merger to go through, but that doesn’t mean there’s no political lunacy in the stories.

Back in 1997, then-FCC Chairman Reed Hundt shut down any chance of a merger between the two companies by simply calling it “unthinkable.”

Today, three Republicans are wrongfully concerned that IBM capital and technology will move overseas to China and want the review process extended so defend-orientated government agencies can lend their views.

Mergers are wonderful business tools. When one company mergers with another, management can take the best of both and serve the economy even better than if both were working independently. Politicizing this process never yields benefits. At best, it slows down economic progress through mountains of paperwork and political misinformation. At worst, it flat out prevents businesses from providing more for the economy. Paradoxically, there’s more distrust of big business than the much, much larger Big Government. If only the Justice Department would break up themselves.

Iowa Senators Geek With Laws

Months ago, I repeated the findings from a Quad City Times article that Iowa was number one in the country for meth incidents, mostly among teens. And like any “scary” statistic, this one grew horns, legs and big, bulging eyes and waddled over to the government.

Iowa’s two senators are pushing for a bill that would force pharmacies to keep decongestants behind the counter because these same medicines can be used to create meth—you know, Satan in a syringe.

Not only will the law make it harder to sell the products and piss off their customers, it won’t do a damn thing in the so-called “War on Drugs.” The same creative, entrepreneurial spirit that generated the television, modern aspirin and frozen food will fashion an alternative. It may be meth without decongestants or it could be a completely new substance altogether. That’s how crack and ecstasy got started.

Parents don’t like their teenagers and college kids taking drugs because they claim they’re too inexperienced, yet these are the same people who are concocting amazing new ways to make complicated substances. If the government would stop changing the recipe, these minds would have the time to work on other things: making plutonium from common household items.

State of Reality

Half a week ago Kenneth Green wrote this review of Michael Crichton’s newest book, State of Fear. It’s a good review and it’s a quality book—fast paced and informative. It was also an unexpected libertarian contribution from the man whose books often revolve around the arrogance accompanied with science (The Andromeda Strain), firms (Congo) or both (Jurassic Park, Timeline).

Easily his most political novel, Crichton attacks the theory of global warming, weaving scientific evidence with an all-too-real fictional story about eco-terrorists sabotaging the environment in order to push the global warming doctrine.

I loved this book and I torn through its 600 pages in a couple of days. It’s a fast, informative read (like so much of his other work) and encapsulates libertarian criticisms of politics.

The over-arching lesson of State of Fear is there’s a danger when we politicize science. When politicians become party to scientific theories, there’s a tendency to exaggerate, distort or manufacture the conclusions to perpetuate what the author calls, the state of fear. Reminiscent of Barry Glassner’s The Culture of Fear, Crichton talks of the “politico-legal-media complex” that’s replaced the military-industrial complex of yesteryear. Each of these factions has a genuine incentive to manufacture fear. “Politicians need fear to control the public. Lawyers need dangers to litigate, and make money. The media need scare stories to capture an audience. Together, these three estates are so compelling that they can go about their business even if the scare is totally groundless.” (p456) And of course powerful mechanisms of the political branch are interest groups.

Thus we get bullshit. Environmental interest groups scream global warming is a dangerous threat, DDT causes cancer and the West should regress its society to simpler times. In reality, there’s not a shred of scientific evidence that global warming exists, DDT’s safe enough to eat and “simpler times” is a euphemism for poverty. One of my favorite scenes in the book is when an island native took apart a Hollywood actor for singing the praises of the “old ways.”

Fear mongering is a powerful, self-perpetuating force. Because there’s so much money and power behind the lie of global warming, few people feel safe denouncing it. So many scientists support the theory despite the lack of evidence because those who criticize it are in danger of losing their funding. Crichton points out that all opponents of the theory are retired, and are no longer seeking grants.

Before reading Crichton’s books, I was on the fence when it came to global warming. Everyone said it was happening, but no one seriously challenged it. While scientists screamed it was happening, their data seemed to rely on computer models predicting decades in advance (an astounding feat considering my weatherman can’t forecast the temperature two weeks from now). But I never heard of any contrary evidence until now. Once again, Crichton masterfully joins science fact with engaging storytelling.

Hunting For Freedom

A few days ago my mom told me a story about my uncle Lawrence and my cousin, Bevin. Earlier this month, Lawrence purchased a hunting license and lent it to Bevin. Now Bevin hurt his foot a few months ago and had it wrapped up in a thick cast. Given his temporary impairment, Bevin loaded up in some kind of vehicle (my mom didn’t know) instead of hunting on foot.

Bevin and a friend of his stalked a deer to the edge of their property (yes, Lawrence had to purchase a license to hunt on his own land) and shot it. The animal ran off, stumbled across the property line, and died. As the pair left to dress the deer (leaving their load guns in the car), the game warden came over the hill and pulled the two aside. It seems they just broke four laws.

The warden charged them with: hunting without a license, hunting on another’s property, hunting from a vehicle and letting a loaded gun be unattended. I don’t know how much the total fines were, but you can bet the sum was around four hundred or five hundred dollars.

My uncle Bruce lives in Florida and whenever he comes up to visit, he hunts. When he heard about this story, he thought it was crazy—he’s never encountered a game warden, not once. Why did he show up at this perfect time? It turns out Lawrence was chatting to a friend of his about lending Bevin his license. This friend happened to be the very same game warden that would later issue four fines.

You can’t trust the state. You can’t trust it to let people use their property as they see fit. You can’t it them to let people hunt as they wish. You can’t trust it not to baby-sit the general public, not to punish people for endangering themselves. You can’t trust it look beyond appearances and circumstances—maybe the deer was shot, as in hunted, before it crossed the property line—if it means they can make a little money. Hell, you can’t even trust it enough to tell it a story without being stabbed in the back the moment it becomes convenient. Don't give The Man and inch. Not one.

The Des Moines Consensus

The Des Moines Register’s Editorial Board (DMREB) ran this opinion piece in the Des Moines Register yesterday about the “Ownership Society.” Seems the President is trying to create a country where people, as individuals, possess society’s assets, instead of relying on the government. The theory isn’t new to libertarians—people who own their property manage it better than the government. Vouchers and private health coverage will bring better education and insurance, respectively. I’m hardly one to applaud the Bush administration, but this is certainly a step in the right direction (but he still has a long way to go).

The DMREB article disagrees and, not surprisingly, their arguments are riddled with economic errors and factual suspicions. They say: “Unfortunately, Bush's tax cuts have had the effect of concentrating wealth more, instead of spreading it around.” I don’t really know that they can say that. As I pointed out in “Why Lou Dobbs Is Wrong, Part II,” job growth in the highest income quartile is skyrocketing, exceeding all other quartiles, combined. This may or may not be because of the tax cuts—economics is complicated that way—but there’s no evidence that “concentrating wealth.”

We can double check with economics. The anti-tax cut theory tends to go like this: more money for the rich doesn’t help the economy because the rich spend it on yachts or stocks or whatever and not on things people need. The middle class do—which helps the economy. But as I point out in “The Magic Yacht,” that’s an absurd argument. People build, sell, maintain and design yachts. Some of the revenue from selling stock goes to buy things, which others have to provide. Money in the bank is loaned out to others (that’s how banks make profit) which they use to buy things, which people have to provide. All of these production roles are real jobs, ones based on genuine demand, and pay real incomes, not government hand outs. Money moves and people get richer.

Conversely, the article gives credit to the Democratic opinion, which says, “[t]he best way to build more wealth for more people is to raise wages, so people can afford to save…” As individuals, that’s true. If I want more wealth, the best way to accomplish that is to pay me more. But “more wealth for more people?” Hoover tried that during the Depression by encouraging industry to keep their wages up despite a plummeting demand. Economists call this the purchasing power fallacy: high wages are the key to economic expansion and they can be maintained even if productivity does not increase accordingly. Of course, wages are an expense like anything else and inflating them without reason bars companies from hiring more workers. Thus unemployment increases. High wages are a sign of economic expanse (they go up because productivity goes up) not a cause of it.

If the Hoover logic held, then a nine dollar-an-hour minimum wage would be good for the economy, thus a nine hundred dollar-an-hour minimum wage would be really good for the economy and a ninety thousand dollar-an-hour minimum would be amazing for the economy. Of course, the logic doesn’t hold and creating minimums creates more wealth for fewer people—exactly what the DMREB accuses the Bush administration of doing.

Insourcing

Over the last few weeks, we’ve bounced about the idea of outsourcing, how we think it’s good, but that it has a rather bad reputation in the media. In fact, David even today made a brief allusion to it in his post The Capitalist Media. It occurred to be today that there is another way we outsource, but backwards: we insource. Specifically, I had in mind sports. Whether at the collegiate or professional level sports has it in mind to win and to be the best. But sports managers and coaches have often found the local talent pool lacking. And so we go shopping for talent: the Caribbean for baseball, Canada for hockey, Latin America or Europe for soccer, and so forth.

Myself, I’m not a sports fan. I don’t watch or play, and so I am not in a position to offer much commentary about the economy of sports. My observations are merely antidotal. That said, it seems pretty clear that the player pools in those geographic regions must be particularly adept at playing their respective sport. Maybe some of it is natural predisposition (such as height in basketball), but I suspect that most of it is just specialization. Unlike America, most countries have one or two major national sports. Consequently, the players of a given sport in those countries are likely to be especially skilled and practiced in it. And, because American sports offer them and their families an immensely better life, there is great incentive to perform successfully and break into an American league. By analogy, this does not seem to me much different from outsourcing tech jobs to India, or manufacturing jobs to East Asia. More and more ours is a specialist economy, which brings me to wonder: I wonder whether Lou Dobbs’ housekeeper or nanny has a greencard?

The Capitalist Media

A couple of days ago I picked up How Capitalism Saved America, by Thomas J. DiLorenzo. In the second chapter, DiLorenzo discusses the anticapitalists—particularly intellectuals as the responsible for “secondhand dealers” of neo-mercantilism. Of these secondhand dealers, DiLorenzo pays special attention to the media: they claim the trade deficit means something (it doesn’t), they imply tariffs are good for the economy (they aren’t), they suggest economics is a zero-sum game (it isn’t) and they even outright state that outsourcing is draining away our economy (while it actually enhances it).

DiLorenzo claims the media is “liberal.” Inspired by their Democratic professors, the media echoes their protectionist mantra for the common ear. The accusation of the “liberal media” isn’t new—conservatives have made the same claims for decades using arguments similar to DiLorenzo’s. But such twisted logic doesn’t hold water.

People change from college to career, probably because they enter the “real world” and face new challenges (like taxes). And DiLorenzo’s argument has inconsistencies. Liberal intellectuals also favor open immigration policies, international involvement and gay marriages. Yet the modern media shouts down immigration as poor economics (which it isn’t), often shrinks international coverage to a minute or less (unless some Americans died) and refuses to put gay marriage in a positive light—coverage of studies that praise gay marriage are crowded out by preachers and conservatives saying it’s evil. (The only time homosexuals are featured in the mass media is in sitcoms, where they function as comic relief.) If the media was truly “liberal,” then these examples would not exist.

So why does the mass media favor protectionism, if it isn’t because of their former professors’ influence? DiLorenzo should know—he wrote it on page 13 of his book, quoting Mises:

Neither the entrepreneurs not the farmers nor the capitalists determine what has to be produced. The consumers do that.

The consumer is king. That’s what all these distortions have in common: they all are what the people want. The trade arguments resonate with average viewer. The immigration jargon “seems right” to Joe Everyman. Downplaying international news leaves more time for cute stories about local people. Focusing on anti-gay marriage arguments is favored in a country where most of the population doesn’t like gay marriage. All of these distinctions about the media have pithy arguments—arguments than can easily be captured in a sound bite. The mass media panders to the masses, not to their former professors.

The Banning of Fascism

In light of Prince Harry’s run-in with a swastika, German officials are readying to widen the ban of the Nazi symbol to include all of Europe. Now like most people with a shred of morality, I don’t like Nazis, fascism or oppression. But I were a European, I’d be afraid of the ban, not the symbol.

Setting aside the fact that for all intents and purposes the Nazi party is in position to rise up again, banning the symbol, continent-wide or not, isn’t in the spirit of freedom and open communication. Wolfgang Bosbach, deputy president of the Christian Union Party, said the main justification for the main is to protect the feelings of Holocaust survivors. That’s a nice idea and if there weren’t any unintended consequences of it, I’d almost be on his side (almost because I don’t think people’s freedom of expression—no matter how tasteless—should be curtailed simply because it makes other people feel bad.

So what are some of the unintended consequences? Like so many popular symbols, the swastika is simple one—it can be drawn with just two lines. This simplicity makes it easily reproducible by the masses and easily identified. But that simplicity embodies widespread adaptation, even if it is unintended.

Under the ban, governments could have the power to control people if citizens happen to doodle a sketch, build a machine part, construct a floor plan, forge a sculpture or design a panel that, in whole or in part, happens to resemble a swastika. Is such a case likely to happen? I don’t know—I can’t predict the future. But I do know that banning any symbol isn’t beneficial for the public discourse, no matter how much it makes people feel good about themselves. Banning swastikas doesn’t stop Nazis but it does take a tiny step down the long road of control and oppression.

Double Speak, or “No” Speak

I tried to watch Meet the Press today. Every few weeks, I give it another shot, thinking that this is supposed to be America’s most respected Sunday morning weekly round-up. This is where the great newsmakers of our time are supposed to come before the American people and speak for themselves, rather than having their words filtered through journalists and newsrooms and editors and redactors. It’s supposed to be A time of candor and openness (to the degree possible with government officials), a chance to rid ourselves of quotes taken out of context. This is not what Meet the Press is.

In “1984” life is based upon “double speak.” You say one thing, but mean another. Nothing one says can be trusted or relied upon, and whatever the government says at that moment, regardless of what it may have said in the past, is now and has always been the truth and the only position it has ever taken. Naturally we regard this kind of thing with a great deal of trepidation, and so we are very critical of “flip floppers” in our society. And thankfully, we do not generally have double speak on Meet the Press either.

Instead, we have “no speak.” This is where the highest ranking and most politically powerful and influential people in the country sit for an hour and say, in many words, absolutely nothing. This has turned into quite an art.

Question (Russert): Does the president think that private savings accounts will save social security?

Answer (Bartlett): The president will work with Congress.

Answer (Bartlett): The president is willing to spend political capital.

Answer (Bartlett): We aren’t going to have this debate with ourselves, we’re going to work with Congress.

How many ways can you say absolutely nothing? Why bother going on the show at all? Why not stay at home in the Bush White House and get some work done, because you aren’t doing or saying much about anything on the show. It has become the policy of public officials of all kinds to say nothing about anything. Don’t comment about anything, don’t say anything, don’t reveal what you actually think about anything, don’t give an opinion, don’t contribute to the public debate (whatever that is), even if you have a position. Read only the authorized party-approved cue cards and pre-screened, pre-vetted, pre-focus-grouped sound bites. Keep your answers to under 15 seconds, and for God’s sake, don’t “say” anything.

And why not? You have jerk-off journalists like Tim Russert who don’t ask hard questions, or for that matter, do any journalism. And when he does ask a question that might seem to be masquerading as a tough question, it’s a “gotcha” question – the kind where you take a quote from 15 years ago out of context and say “you said this, do you think this.” Answer: I don’t remember making that specific comment, but I can tell you that we are working with Congress on it.”

In the face of all this, it may turn out that in another 20 years that the only reliable journalism will come from the paparazzi – at least they still dig.

Revisiting Wal-Mart, et al.

Riding along with my mother past Wheeling today, we noticed from the highway where they have broken ground for the construction of a new Lowe’s Home Improvement Warehouse. And she immediately began to complain about this monstrosity coming into the outskirts of the downtown, surely to drive out what little small business remains there. Now, what you should know is that there is another recently constructed Lowe’s not 10 minutes drive from this location. Knowing this, I suggested that instead they should have built a Super Wal-Mart since there are none of those for some distance around Wheeling. This threw my mother into what can only be called a “tizzy.”

She denounced Wal-Mart as a corporation that doesn’t pay its workers a living wage, does not provide benefits, etc. Now these are half-truths, but they are not entirely false, either. That said, I tried to explain to my mom the basic economics upon which Wal-Mart operates as a volume discounter, the lack of margin, and so on. I pointed out that the workers she is talking about are nothing by (not that I mean to make light of their livelihoods) cashiers and stock boys, and that this is perhaps not the level of employment that would justify such salary and benefit. And I attempted to explain how Wal-Mart’s clientele are largely working poor and lower-middle class folk who are most greatly benefited from the lower prices Wal-Mart offers – and that these folks typically include the Wal-Mart employees themselves. Mom actually agreed with all of that, more or less, if grudgingly.

But then she stumbled onto the real problem. You see, the City of Wheeling and the County of Ohio, are investing millions of tax dollars to develop this site so that we can beg Lowe’s (or anyone else) to come in and pay petty $6/hour jobs, and only on a 7-year contract at that. That’s not to mention the tax incentives they’re offering in the form of discounts and exemptions. You see, the worry is that Lowe’s will come in, drive out the competition, realize there isn’t enough business to justify two Lowe’s in 10 miles, and then close, leaving what’s left of the downtown industrial quarter absolutely destitute. And I think she’s on to something there.

You see Lowe’s likely wouldn’t build a second facility so close to another one if it had to foot the bill. But since the kindly citizens and businessmen of Wheeling are footing the development bill, and all Lowe’s has to do is plop down a giant cinderblock box, hey why not. And if it doesn’t make a go, the city is contractually obligated to buy it after the seven years. Lowe’s just moves the inventory, and that’s that. Wheeling, on the other hand, is even further behind than when they started, with all the levy debt, and no revenue either from Lowe’s or from their former employees.

Now, I’m all for corporate America. But this kind of collusion is bad for everyone. It encourages bad business practices by alleviating companies of the risks associated with doing business. It’s bad for the city, because that site will either have to be sold (a building that big, to whom?) or re-developed at even greater expense. And it’s bad for taxpayers for sooo many reasons.

It’s not just Lowe’s, by the way. Wal-Mart, Home Depot, Cabellas, and so on are all subject to the same criticism. For my mom’s sake, I think that we would do well to occasionally qualify our pro-business remarks so that people realize that we are speaking of business in purist terms; that in the real world, it doesn’t always go off like that, and that we are ready and willing to be critical of a business that uses the state to pervert the market.

A Tsunami of Disease

A couple of days ago, CBS issued this report about malaria in the tsunami disaster area. According to the report, malaria could easily double the death toll and possibly increase it by 150 percent—more than an addition 100,000 dead.

Fighting this bout of malaria, however, is proving to be the hardest in recorded history. The sheer size of the rising epidemic isn’t helped by the limited options.

According to the report, “The classic malaria prevention approach of distributing pesticide-impregnated bed nets to communities will not be part of the effort to protect the local population because there is a world shortage of nets, they are bulky to transport if they are available and, in an emergency situation, it's difficult to teach the people how to use them properly, [Richard] Allan, [director of the Mentor Institute,] said.”

Though fumigators will spray homes with pesticide, there’s little chance DDT—the most efficient killer of mosquitoes—will be used, thanks to the near global ban on the chemical (which is based on unfounded claims). If this is truly the rising epidemic the experts are saying it is, then why isn’t the best weapon for this war being flown in? Perhaps people should read more.

The Origin of R&D

Today I started Evan I. Schwartz’s page-turning historical account of the invention of the television: The Last Lone Inventor: A Tale of Genius, Deceit, and the Birth of Television. I can tell you that it’s a solid read as I’m over 160 pages into it and I’m a slow reader. But between this work and Diamond’s Guns Germs and Steel, the economics of invention have been weighing heavily on my mind. Their words are driving me to conclude a take on innovation that they would surely describe as heartless, while I call it hopeful.

Diamond and Schwartz have similar views of technology. In GGS, Diamond points out that most inventions were created by tinkers—people who were merely curious about the world around them. Technological advancement isn’t generated by necessity, as the saying goes; it’s generated by inquisitive people in a free society.

The invention of television offers a powerful example: Philo Farnsworth was a curious genius, determined to make this new wonder. As Diamond would surely point out, Farnsworth was driven by intellectual obsession, not a lust for profit. Schwartz uses Farnsworth as a romantic symbol to drive home a point: in the 20s and 30s, heartless, greedy companies crowded out “lone inventors” and forced them to extinction. “Corporations now saw scientists, engineers, and inventors as property whose minds could be systematically milked for their ideas.” (p167)

Schwartz implies the culture of creativity was taken from the people and transplanted (and sterilized) to the corporation. The overall tone of the work embodies a definite hatred of large companies. Diamond seems to think along the same lines: the heartless pursuit of profit isn’t needed for invention; impassioned individuals can do a fine job.

Now there’s a lot of merit to what each these authors are saying. Freedom is the cornerstone to innovation for it allows new and radical ideas to be tested and tried. I wouldn’t be surprised if more major inventions were created by the passionate than the profit-seeking. I wouldn’t be taken aback if I discovered firms made inventing seem less wondrous because a scientist was now concerned about deadlines, company brass and corporate culture. But I would argue that this is a good and inevitable thing.

Schwartz describes Farnsworth as “the last lone inventor.” There’re two was that can be wrong, depending on how you define as “lone.” If we take “lone” to mean the main source of intellect behind an invention, than Farnsworth wasn’t the last one. From Mr. Popeil to the hundreds of independent computer enthusiasts of the 60s and 70s all invented things on their own. If we add just one more person (technically not “lone” but still a cultural and physical departure from some kind of corporate technology factory), we would have to include the Steves who created the first personal computer in their garage.

The other way to take “lone” reveals an interesting way to think about technology. Let’s define a “lone inventor” as an independent individual who created a new device solely with the tools available to society at large. If I go to Radio Shack and build a new robot from parts I got at the store, I’m a lone inventor. If I need my friend Ben to make a special part, I’m not a lone inventor because I needed someone else to help. Again, Farnsworth was not a “lone inventor.” He enlisted a local geologist to help discover the right coating for screen interior. His brother-in-law, Cliff, blew the special glass tubes. Cliff had to learn the art from a local glass blower. The “lone inventor” had half a dozen lab assistants. Farnsworth was not alone.

Increasingly, this is the story of modern inventions. Because modern inventions are really new combinations of existing technology, melding these components often requires unique parts (invention is rarely a matter of putting together a big jigsaw puzzle). Creating these parts require specialized knowledge and because a single person can only know so much, getting all this knowledge requires more people. As technology becomes more advanced, more knowledge (and thus more people) is needed. This is why the invention of the wheel would’ve required just one person, but inventing the television and modern car required several.

The more people that are needed, the less likely a single “tinker” can get the job done. Sure, she may be able to pull together the needed knowledge from family and friends but as technology advances, finding those people and getting them to set aside the time to make that special thing becomes harder and harder. The increasing difficulty to invent makes it less likely an inventor/hobbyist will create in his spare time, “just for fun.”

But the corporation acts as a coordination mechanism by offering incentives (salaries) for specialists to gather and collaborate. And because inventing is paired with a steady paycheck, creators have the time to go through the difficult process of creating, instead of doing it in their spare time. But to generate the revenue for paychecks, companies and inventors must seek the most promising avenue of profit. Necessity becomes the mother of invention once more.

Of course, not all inventions require this institutional framework. Independent inventors will always exist. But it will be harder and harder to invent as it requires more knowledge and time to pull it off. The possibility that our society will see another Edison—another that creates hundreds of revolutionary inventions—is highly unlikely. Surely that person would have to command a breadth and depth of science they would rival the collective knowledge of our greatest universities. More likely, the future holds a communal pursuit of knowledge, one built on liberty and competition, where the brightest minds are attracted from all over the world. Racial, gender, ethnic and religious barriers are torn away so that the best minds can work together for a better tomorrow. And, oh yes, for lots and lots of money.

Heard from the Rain Forests lately?

For the last several days, I’ve had the flu bug that’s been going around. During one of my fever-induced delirioums, I kept imagining the rain forest – God only knows why. Anyway, upon waking and reflecting upon the possible theological implication of my dream (turns out there was none) I got to thinking about how I hadn’t actually heard anything about the rain forests in some time.

As we children of the late ‘80s and early ’90s no doubt remember, rain forest depletion was all the rage among enviro-liberators of all sorts. I am a big fan of Nature and other PBS animal documentaries, you know the ones where you sit there for an hour watching a tiger mull a wildebeast whilst the British narrator says something akin to, “Observe the firely predator as he rips the leathery flesh from his still-thrashing prey.” I remember that at the end of every single one of those kinds of shows, there would be a 5 minute infomercial documenting the devastation of natural environment of, well, everywhere. The rain forests were merely the poster child. I haven’t seen much about that of late. The new rage is sustainable development, so the enviro-folk are more concerned with housing developments (or the lack thereof) and the building of roads (or not) than with trees. But it isn’t all just the changing hem line of environmental fads.

My aunt worked for nearly 20 years in the paper industry, companies like Wisconsin Paper and Xpedex. These are companies that own vast tracts of forestlands all around the world. It was she who first explained to me how, in order to best manage their investment, Xpedex would only harvest certain acres at certain times, much like a farmer does a crop rotation. Moreover in the interests of local wildlife, they left what she called “connected islands,” which are many-acres-large stands of original growth connected to other similiarly situated islands by strips of likewise undeveloped land. And hence, the interest of both paper and wildlife are served. Moreover, the local economy is bolstered by the hiring of local laborers at reasonable wages, meaning jobs for rural-dwelling men who would otherwise likely remain unemployed; and who, if it weren’t for the income from their timber jobs would probably have to subsist selling drugs and coffee like the rest of his rural counterparts.

In other words, the reason we don’t hear about the depletion of the rain forests anymore is because it became pretty evident that they were not in fact being depleted, at least not in the terms presented. Rather, by and large the paper and wood industries have development policies and practices that safeguard their investment in the land. Those abuses that do continue tend to be at the hands of either local marauders or nationalized forests where governments own the trees – both of which are cases of a lack of, and respect for, private property rights. That is a problem, I am sorry to report, that no amount of enviro-activism can fix.

Exporting Poverty

Lately I’ve been reading Paul Driessen’s book, Eco-Imperialism, which exposes how some environmental groups cause death and poverty in developing countries. Using governments and UN agencies, these organizations build barriers to economic development under the guise of the precautionary principle, sustainable development and corporate social responsibility.

Driessen’s title is profoundly accurate. Just as governments once kept other countries in poverty to make the homeland richer, Eco-Imperialists ensure destitution to make the homeland feel better about themselves. They don’t directly force the people to accept poverty but their justifications seem so reasonable governments and NGOs are pressured by first-world citizens to do their dirty work. Eco-Imperialists project their standards on the rest of the world, even if it makes things worse.

For example, environmentalists attack DDT which directly led to its virtual lack of use in the third world. Their accusations against DDT are unfounded and no other tactic is better at combating malaria for developing countries because DDT is both effective and affordable. The absence of DDT is directly responsible for sharp increases of malaria cases in the developing world. Each year, about two million people die from malaria. The disease also stretches the limited health care resources and hamstrings their fledgling economies, impoverishing the developing world further.

As a nod to Lou Dobbs—who we’ve been focusing on this past week—I’m starting my own list. Instead of cataloging which companies are “exporting America” (better known as outsourcing), I’m recording which organizations are Eco-Imperialists. I call it Exporting Poverty. This is a growing list and readers of LL&L are encouraged to add to it.

Greenpeace
World Wildlife Fund
Earth Liberation Front
Friends of the Earth
National Resource Defense Council
Rainforest Action Network
PressurePoint
European Wind Energy Association
The Body Shop
World Business Council for Sustainable Development
Coalition for Environmentally Responsible Economies
Union of Concerned Scientists

The Evility of Lou Dobbs

I have seen the Devil, and his name is Lou Dobbs. I must admire David’s tenacity on the protectionist issue, but I’m starting to pity the poor man. After all, what does one expect from CNN? You wouldn’t surely hear him spouting this stuff if Rupert Murdoch paid his salary.

What David’s articles do on another level is remind us how entrenched this dogma – and it is dogma – is. And we are reminded also that this mindset is nothing new. Plato penned the protectionist republic nearly 3,000 years ago. It was not new then, and that peculiar brand of religion has stuck with us. One of the most important contributions that Ayn Rand makes in her books is the notion that “ideas have consequences.” And I cannot for the life of me figure out how it is that well-educated, intelligent people, such as Lou Dobbs, can continually fail to see the inter-connection between economics and politics (remember I’m a political philosopher, not an economist in my educational training). Depending on which side of the street you stand on, economic principles are either the extension of, or underpinning for, a political regime or worldview. This being true, we should ask ourselves whether Lou Dobbs has a political worldview that necessitates these economics, or whether he is merely ignorant of the connection that socialist economics has had with political, social, and cultural decline throughout history.

I do not find conspiracy theories to be typically very helpful at explaining the world, so it is not my belief that Lou Dobbs is a clandestine member of a worldwide communist cabal plotting to secretly take over the world with the unwitting aid of the media. But frankly, considering the economic obviousness of David’s criticisms, I think as a man that I would have more respect for an evil Lou Dobbs than a merely brainless one.

Why Lou Dobbs Is Wrong, Part III

In my last article, I explained some flaws in Lou Dobbs’ anti-outsourcing book, Exporting America. These flaws were typical for protectionists (Lou Dobbs doesn’t claim to be a protectionist but as we will see, he is). Before that, I explained why outsourcing is good for the economy, providing evidence along the way. In Part III of Why Lou Dobbs Is Wrong, we will learn how wrong he is as Lou Dobbs throws out basic economic principle and pretty much makes an fool of himself.

According to Lou Dobbs, “insourcing”—when foreign companies employ American workers—is a myth. “The hiring of American workers in plants owned by foreign companies is not analogous in any way to IBM’s shipping 10,000 jobs to India solely for the purpose of paying lower wages.” (p111) [Emphasis added.] Mr. Dobbs justifies this erroneous claim because companies build and sell in the US, not just build.

There are three things wrong with this. First, it’s rather silly to claim that not one of these cars will ever be sold abroad. I simply don’t see how he can make that claim. Second, Mr. Dobbs calls this transfer foreign direct investment (which is partly true: only the construction of the factory is FDI) but he acts like that’s immaterial. In reality, it does matter. FDI is why the trade deficit doesn’t matter because net imports equal capital inflow. Capital inflow causes construction workers, machinists, plumbers and other economic agents to have work. Third, insourcing is the hiring of the workers, not FDI, and it creates real jobs for real people. It doesn’t matter where the goods are being shipped and it doesn’t matter why companies are hiring (whether it’s lower wages or better productivity). Insourcing is the reciprocal of outsourcing. Foreign companies hire American domestic labor just as American companies hire foreign labor. And it really does exist.

Lou Dobbs lists “myths” of outsourcing and free trade. Number seven claims that free traders say outsourcing benefits “everyone.” No economist in their right mind would say it’s good for every single person. People really do loose their jobs because of outsourcing—that’s the nature of competition. The key is that the economy as a whole benefits when jobs are sent abroad. Saying free traders assert that outsourcing helps absolutely everyone is the same as claiming protectionists believe the best thing for the economy is to withdraw from the international stage altogether. Both are equally deceptive.

Lou Dobbs claims companies defend outsourcing on the grounds of improving efficiency and productivity but they really do it to cut their expenses. To clarify, productivity is the measure of how many goods or services are produced per unit of input (usually labor). Efficiency is the ratio of output produced to input needed to produce it. If a person can create a thousand pencils a minute, he is very productive. But if he charges a million dollars an hour for his services, hiring him would not be efficient. Thus, corporations really do outsource to improve their efficiency. By saving money, they get the same for less. Thus they become more productive because they use the saved money on other things. They end up producing more with the same level of input. Cutting costs while maintaining the quality of a good is efficient, leading to greater productivity. In fact, Mr. Dobbs listed outsourcing (under myth number 2) as one of the reasons the economy witnessed increased in productivity over the years.

Lou Dobbs writes over and over again that there’s no empirical evidence whatsoever that outsourcing is good for the economy. I’ve provided such evidence over and over again. Mr. Dobbs vehement claims that such evidence—which is very easy to find—doesn’t in fact exist is comical.

Lastly, Lou Dobbs claims he’s not a protectionist yet he casually suggests that the government bar outsourcing until its benefits or perils can be unquestionably ascertained. This is his answer to the “myth” that companies have to outsource to remain competitive. He implicitly determines that if we outlaw outsourcing, companies could still compete. Of course this isn’t true—labor is a cost of doing business just like any other input. Inflating that cost for American companies in a world where firms compete on an international stage will cause problems for American companies. Many will severely downsize or go out of business completely. In a free market, this isn’t a problem because the failed company would leave because it couldn’t cut the mustard when someone else could. But creating such a protectionist barrier—even one that’s temporary and “merely” for gathering information—will push the economy downward and might cause a recession. If Mr. Dobbs isn’t a protectionist, why does he support trade barriers?

If I didn’t know Lou Dobbs is so wrong, I’d think I was taking crazy pills.

Why Lou Dobbs Is Wrong, Part II

Several days ago I began an article about the advantages of outsourcing, describing how sending our jobs overseas helps, not hinders, out economy. The counter-argument to the benefits of outsourcing stems from economic commentator, Lou Dobbs, of CNN’s Lou Dobb’s Tonight.

I went to the store today to check out Mr. Dobbs’ new book, Exporting America, to see if I could better grasp his claims against outsourcing. They didn’t surprise me, at least not in any good way. His basic theme was typical: economics is a zero sum game, thus America needs to shield its domestic jobs from outsourcing. Their gain is out loss. By sending jobs overseas, Americans experience a net decline in the economy.

I only looked at three chapters from Mr. Dobb’s book and I saw lots of problems. Some of them are typical mistakes that protectionists (and yes I do call him a protectionist, not to be confused with an isolationist) often make. Other errors were down-right absurd. (Those will be in Part III, because it will be so long.)

Typical problems were addressed in Part I, where I explained the economics behind outsourcing and its benefits to the economy. To sum up, economics is not about winning and losing; it’s a positive sum game. We know this because it’s based on trade and parties only trade if both involved benefit. They may not benefit equally—in fact they rarely do—but they are always made better off. Because there are always opportunity costs, their gain is the economy’s gain—they will use their saved money for something else. At the end of the day, outsourcing expands the available resources to the people at large.

Lou Dobbs seems to think that people engage in trade (in the form of outsourcing) when they don’t benefit from it. “[Adam] Smith and [David] Ricardo didn’t envision a trade relationship in which there wasn’t a mutuality of benefit, that is, a balance.” (p106) That is true, but outsourcing isn’t such a relationship. Mr. Dobbs pushes his zero-sum attitude further, quoting Bureau of Labor Statistics data that projects the top ten growing jobs over the next ten years, seven of which will be low paying.

Now I could point out that any projections over ten years are inherently flawed—the BLS can’t possibly know the state of the world in 2012. But I decided to meet Mr. Dobbs on his own terms. After all, those projections probably aren’t completely useless. After much web searching, I think I found Mr. Dobbs’ list—it matches the date of February 2004 as well as the topic—but not quite as he presented it in the book. First, five, not three, of these jobs are well paying (in the upper two quartiles) and only one is in the lowest quartile. The pattern is the same for the next ten jobs. For the next and final ten, the numbers shoot up in favor of high paying jobs—all but one is in the top two quartiles and more than half are in the top-most quartile. Here’s the total growth (in thousands) for each quartile over the next ten years, starting with the highest earnings.

Highest -1,636
High - 229
Low - 671
Lowest - 678

Holy shit! According to the data, the exact opposite is happening—Americans are getting richer. Let’s look at that again.

Highest -1,636
High - 229
Low - 671
Lowest - 678

HOLY SHIT! Combined, all other quartiles are still dwarfed by the largest wage earners. These numbers that determine the quartiles are based solely on salary and do not include benefits and bonuses. This is the level of minimum progress.

Lou Dobbs’ second bit of evidence stems from NAFTA. He said the Clinton Administration claimed NAFTA would create a net of 170,000 jobs each year but Mr. Dobbs exclaims that 750,000 jobs were lost as a “direct result of NAFTA.” (p73). Again, I could point out that linking job loss “directly” with a policy ten years old and counting in an economy as dynamic and large as ours must require supernatural skills. And again, I’ll stand on Mr. Dobbs terms—these can be rough estimates based on the economic trends of domestic industries. Even if we walk on that branch, Mr. Dobbs still has some explaining to do. Notice that he focuses on “jobs lost”—not “net jobs lost,” a common tactic. And why should he write “net jobs lost”? The lie works so much better, especially when you consider the Bush Administration credits millions new jobs to NAFTA.

Yes, NAFTA probably created a net job loss in the first years of its existence—this is typical of any large-scale change because it takes time for the market to adjust. This simple fact is something protectionists often ignore: they claim short run indicators are indicative of long run realities. Admittedly once in a blue moon things work out that way. For example, when NAFTA was first introduced protectionists screamed it would harm the US economy. In the long run, they’re still wrong.

The Market Works

CNN canceled Crossfire. Enough said.

The Guests Are Gone!

For the past three days, a good friend of mine (along with his wife and baby, who I might add has a terribly irritating and grating whine, and has suspiciously fat lips for a Caucasian child) has been visiting us here at my home. Our home is pretty small, little more of an apartment at less than 1000 feet of living space, and so having two families with toddlers becomes very cramped, very quickly. To make matters worse, our neck of the woods was been experiencing flooding (again), and so we were pretty much stranded inside since many of the main roads were closed. Somewhere between the game of Parcheesi and watching 50 First Dates (I admit it – I would consider leaving my wife for Drew Barrymore) it stuck me how very real and significant dead weight it. Let me elaborate.

Hospitality, like charity, is wholly consumptive. Your guests, unless they are exceedingly gracious, do not tip you for services rendered. You do not provide them with a check at the end of the meal. Now, I wouldn’t not have my friends over, nor am I a grudging host. But I can see where the coffers would become quite empty in short order if they were to stay on for any length of time without chipping into the proverbial pot. The next time we libertarians want to convince others of the significant drain on an economy that welfare, social security, and the rest of it represents; and the enormous burden it puts upon our individual billfolds, perhaps we should just remind them of the last time their in-laws visited, and say, “Yeh, it’s just like that.” I quite think there could be spawned form such a realization an overnight libertarian revolution. Then again, with Uncle Sam is related to the in-laws, this could make for a nasty Christmas Day dinner.