Expected Good News

One of the many great things about markets is that they encourage learning.  Isaac Orr at The Center of the American Experiment has an excellent article with a great title:

Capitalism is Saving the Planet Part Six: Minnesota Forests Are Flourishing

It is expected good news because capitalism and markets learns what generates profits and what the consumer wants.  You should, of course, read it all to get the details.  And you can savor the title again.  We will give you Isaac’s conclusion:

Using these technologies [see here] is not only good for the timber industry’s bottom line, they are good for the forests themselves. Rather than being an opponent of healthy forests, the capitalist timber industry is more invested in forest health than any other stakeholder, and therefore they have the most incentive to ensure Minnesota forests are healthy and vibrant.

Although Isaac uses environment as a category he doesn’t remind us that trees are natural carbon eaters.  The link tells us:

As a tree matures, it can consume 48 pounds of carbon dioxide per year (among other greenhouse gases like ozone), and releases enough oxygen for you to breathe for two years!

So the one billion additional trees in Minnesota will be eating 48 billion pounds of CO2 per year.  According to Wikipedia, Minnesota produces just under 90 million metric tons of CO2.  A metric ton is 2205 pounds so this is a big deal in term of arresting CO2 growth even if we are not entirely convinced of all the numbers.  We are working to find Isaac’s other five parts.


Venezuela Reminder

There is a strange presentation to a column in the WSJ.  The column title is The Americas which is written by of one of our favorite columnists, Mary Anastasia O’Grady, it has her picture on the link, and at the end of the column it has her email address but her name is not displayed.  Perhaps it is caused by something in our technology.  The column is Mary Anastasia at her best.  You should, as is often said, read it all.  She weaves together the religious and political traditions of Venezuela that have led us to the current sorry state of affairs.  Mary Anastasia tells us:

Climbing out of this hole will take more than removing dictator Nicolás Maduro. The country is devastated, but Venezuelans haven’t abandoned the collectivist cause. Many popular opposition politicians still call themselves socialists, unwilling to defend the creative class and its members’ right to the fruits of their labor.  [Emphasis added]

It is an amazing deep hole that Venezuela finds itself in.  Devastation, if anything, is not a strong enough word for what has happened to Venezuela.  Here is an estimate that inflation will be eight million percent in 2019.  Of course, many transactions are barter now that the currency is virtually worthless. Mary Anastasia is exactly right.  Venezuela elected Hugo (Obama’s mi amigo) and then Nicolas.  Not all of the elections were fair but those two had substantial support in Venezuela.  External actors like The Donald might be able to help a little but it is up to the locals to fix this.  Mary Anastasia hopes that the Catholic Church can help.  We hope so too.

Fighting Socialism, Part Two

In Part One we were supportive of Catherine Rampell’s thesis that using socialism as a scare word is lazy.  We need to fight socialism but we need to do it better.  Catherine gives us two reasons that we need to do a better job a fighting socialism.  First, folks don’t understand it:

The most common answer, volunteered by about a quarter of respondents, was that it had something to do with “equality” — “equal standing for everybody, all equal in rights, equal in distribution,” something to that effect. Smaller percentages mentioned communism, government control of utilities or even “talking to people, being social, social media, getting along with people.”

That quote is about as scary as information gets.  The related second reason, is because they don’t understand it they (and especially young people) think it is OK or even a good idea:

A majority of adults under age 30 already view the term “socialism” positively; about 40 percent of those ages 30 to 49 say the same.

By now you should be really worried.  We think that two of Catherine’s examples point that out.  One relates to Ronald Reagan and Medicare.  It ties nicely into how we work so hard at ignoring the entitlement and debt problem in the US:

Over the past 60 years — since Ronald Reagan warned that Medicare would doom the country to the s-word — the GOP has turned into the boy who cried socialism.

Socialism, as Catherine says, is about controlling the means of production.  We are not sure that reasonable people can disagree that Medicare has led to government control over the means of medical production.  In accounting we worry about control because we need to decide what companies should be consolidated as one unit for financial reporting purposes.  The old rule for consolidation were simple so we are going to stick with them: over 50 percent must consolidate, 20 to 50 percent it depends, and under 20 percent it is unlikely.  What it depends on for 20 to 50 percent is things like the next biggest stockholder.  If MWG owns 49 percent and the next biggest shareholder is 1 percent then it is likely that MWG controls that entity.

Here (there is other stuff too so read on) is a discussion of how much of the national health expenditure comes from the government.  Our point is that the government is such a large percentage compared to anyone and everyone else that they control medical delivery.  A small example of this is that MWG has to answer the Medicare questions on every visit to the clinic.

Ronald was right.  Medicare socialized medicine and now paying for Medicare is the biggest problem our republic faces. And Ronald gets part of the blame because in his remarkable presidency did many things including helping to reform Social Security (it still needs more reform but without it we would have even bigger problems) but did not reform Medicare when he clearly understood the problem.

The other problem is when Catherine says this:

The real debate Americans are having — including those on the far left trying to gain greater control of the Democratic Party — is about how regulated markets should be and how to make the rules fairer. No one in the 2020 race, not even relative outlier and self-proclaimed democratic socialist Sen. Bernie Sanders, I-Vt. [Act Naturally], is proposing that we recreate the Great Leap Forward.

We don’t know if Act Naturally is an outlier.  We know that he is one of the many candidates for the Democrat nomination for president that supports the Green New Deal (GND) although most support it by voting present.  We think know she knows about the NGD because she has written about it:

The resolution calls for net-zero carbon emissions by 2030 — though the International Panel on Climate Change proposes getting there by 2050, itself a herculean task. The resolution offers little guidance about how to achieve this — carbon tax? cap and trade? what of nuclear energy? — perhaps because the authors knew such choices would divide progressive constituencies.

The documents beyond the resolution answer most of her questions.  Here is part of the answer:

End destructive energy extraction and associated infrastructure: fracking, tar sands, offshore drilling, oil trains, mountaintop removal, natural gas pipelines, and uranium mines. Halt any investment in fossil fuel infrastructure, including natural gas, and phase out all fossil fuel power plants. Phase out nuclear power and end nuclear subsidies. End all subsidies for fossil fuels and impose a greenhouse gas fee/tax to charge polluters for the damage they have created.” [Emphasis added]

The answer to Catherine’s query on nuclear energy seems especially clear.  Let’s compare it to the Great Leap Forward:

The Great Leap Forward (Chinese大跃进pinyinDà Yuèjìn) of the People’s Republic of China (PRC) was an economic and social campaign by the Communist Party of China (CPC) from 1958 to 1962. The campaign was led by Chairman Mao Zedong and aimed to rapidly transform the country from an agrarian economy into a socialist society through rapid industrialization and collectivization. These policies proved to lead to an exponential social and economic disaster, but these failures were hidden by widespread exaggeration and deceitful reports.

Neither idea seems like a good one but we are hard pressed to say that the Great Leap Forward is a worse idea that GND.  In fact, they both look to transform an economy in a very short period of time.  One required coercion.  The other will require even more coercion if it comes to be.  It will be interesting when the government comes to confiscate cars, trucks, power boats, power mowers, ATVs, and so on.  The folks that own them also tend to own guns.

Sidebar: We brought up eminent domain in part one.  We do not have the legal expertise to have much of an opinion but we wonder if the government will have to pay for all of the stuff they propose taking.  We put this in a sidebar because neither outcome makes GND a good idea.  It is, as they say when belittling our profession, academic.  End Sidebar.

We agree with Catherine on the need to be more specific in combating socialism.  We seem to disagree on need to combat it.  We think we need to address the overall problems and the problems of specific proposals.  It is important to label the former as socialism but not the latter.

Fighting Socialism, Part One

Socialism is a really bad idea as shown currently by Cuba, Venezuela, North Korea, and many other examples through history.  Yet folks are often sloppy in the battle over socialism.  Catherine Rampell has a thoughtful article on the difficulties of fighting socialism.  We are not sure if she wants to fight socialism or not but we like her thoughtfulness in any case.

Catherine is talking about a specific problem of labels.  Some folks, and she specifically identifies The Donald, use socialism as a term to describe proposals they don’t like.  Catherine doesn’t make the connection but lots of folks use fascist to describe other folks they don’t like.

To be fair, the Media Darling (MD) and Act Naturally describe themselves as socialists. Although they may add a modifier (countries often add more than one) to socialism they are subject to the criticisms of the failure of socialism.  They should be asked to explain why they support socialism despite its numerous and continuing failures.

Catherine makes the point that capitalism and socialism are not a useful binary to describe countries.  She says “all modern economies” are mixed:

That includes the United States. We have public schools, public roads, subsidized health care for the elderly and other forms of social insurance. Yet we also have private property, and the government does not control the means of production [except as above]— which is, you know, actually how socialism is defined.

Developed economies, to use a different term, are fairly similar overall although there are big differences in the details.  The Heritage Foundation Index of economic freedom will tell you that the US and Denmark have almost the exact same degree of economic freedom, 76.8 versus 76.7 in 2019.  It will also tell you that there are 22 “repressed” economies with Cuba, Venezuela, and North Korea ending the list.  We are not sure where Catherine is drawing the line.

Sidebar: Catherine’s “all modern economies” is a great term.  We wish we had of thought of it.  Catherine is able to exclude some where from three to a quarter to a half of the world’s countries with one ambiguous phrase.  End Sidebar.

So socialism fails but we often accept a reduction of economic freedom in return for something else.  Eminent Domain would be an example that most people would support but debate the extent of (see Kelo).

Although socialism is a bad idea, Catherine is right that calling something socialism is lazy and not a real criticism.  It is, as we said earlier, like calling somebody a fascist.  It is saying I don’t like you or your idea but I can’t articulate exactly why.

We are with Catherine on her main point of articulating the issues.  Calling an idea socialistic is lazy.  You need to explain why it is a bad idea.  On the other hand, folks that call themselves socialists are subject to the deserved criticisms of socialism.  In the next post we will continue with some specifics from Catherine’s article.

Airbus, Boeing, And Socialism

Socialism is in the news these days because of, but not limited to, the announced candidates for the Democrat presidential nomination, the media darling (MD), the Green New Deal, and health care.  Holman W. Jenkins, Jr. has a Lesson For Young Socialists at WSJ.  You should, of course, read the whole thing.  We generally support Holman’s article but we have three things to add or clarify.

First we start with the most trivial, the title.  Holman gives a lesson not just to the young but all socialists.  The lesson applies to The Bernie and MD.

Second, Holman is close to misleading about the market.  There is a market for airplane rides but not a market for new passenger jets.  There are millions of buyers and many seller of airplane rides.  There are quite a few buyers of large new passenger jets but very few sellers of them.  There is also a market for Boeing’s stock.  It is true that Boeing, a company with less government support, made the right decisions and Airbus, a company with more government support made the wrong decisions.  As Holman puts it:

Boeing’s management was vilified at the time for declining to compete with Airbus to replace its own fabulously successful 747 jumbo jet. But Boeing treated its business like a business. Its forecasts showed the market was likely to evolve in ways unfavorable to another very large passenger plane.

Because Boeing had more at risk it was more likely to be right but it wasn’t a market solution from the selling side because there were so few producers.  There was nothing to assure us that Boeing’s forecasts were right.  Capitalistic companies make mistakes all the time.  The difference is that they suffer the consequences while socialistic companies do not.

Lastly, Holman ends with this:

Today the socialist miscalculations of our infallible leaders are measured mainly in dollars. This represents a great leap forward over the socialist failures that characterized the last century.

Umm, we know Holman knows about North Korea, Venezuela, and Zimbabwe to name a few socialist countries that have seen violence this century.  More than currency has been lost in each of those hell-holes.

We think that Holman oversold the Boeing versus Airbus comparison but he is right that there is a big difference.  Boeing was at risk because it would be punished by another market, the stock market.  Airbus was, like the California rail project Holman includes, only spending money from taxpayers.


Venezuela Spring?

We love Mary Anastasia O’Grady and not just for her name.  She factual and insightful about the world and especially Latin America in a way few people are.  Her latest piece is Venezuela Spring in the WSJ and although we support much of it we need to respectfully disagree about part of it.  Mary says:

Not since the fall of the Soviet empire has a nation risen with such fury and determination to throw off the yoke of socialism. And not since then has Marxist misery been so clear for all the world to see. Venezuelans are experiencing what millions of Russians, Chinese, Cubans and countless others have suffered. Destitute and angry, they want it to end.

How ironic that some American politicians, like Vermont Sen. Bernie Sanders and newly elected New York Democratic Rep. Alexandria Ocasio-Cortez want socialism for the U.S. The tide of history is going the other way.

We are completely on board with the first paragraph. To be explicit we support connecting socialism and Marxism.  The differences are trivial.   But it also points out that many of the folks suffering under socialism don’t want to or can’t find a way out.  We are completely on board with the first sentence in the second paragraph.  We hope Mary is right about the last sentence of the second paragraph but we are not convinced.  We are not convinced that Venezuela will end well despite the suffering of almost everyone and the bravery of so many.  We applaud what The Donald is doing but the US can only do so much.

Sidebar: The silliness of The Donald as a Russian supporter shows up again.  The most important single thing to Russia is the price of oil.  Higher is better for them.  The Donald is the sworn enemy of supporting the Russians by raising the price of oil as his actions in Venezuela, with LNG, and fracking show again and again.  His opponent in the recent election was the supporter for actions to raise the price of oil.  End Sidebar.

We hope that the tide of economic and political freedom is rising but Mary’s first sentence in the second paragraph reminds us that we need to fight socialism everywhere and every time.  Once socialism wins it takes decades to ruin a country and then a ruined country is hard to rehabilitate.  We hope that Mary is right and capitalism runs rampant in the twenty-first century but we wouldn’t bet on it.

Choosing Freedom

Kevin Williamson writing at NRO has a great article on the fruits of economic freedom.  You should read it all twice.  He starts with some of the economic and technological wonders of the modern world and then the other side:

Perhaps you’ve had the experience of clicking a link to a video or a news story and taking a second to realize that what you’re seeing is real life — life as we knew it in 2018: horrifying hunger in Yemen and South Sudan; police-state repression in Venezuela and North Korea; migrants in Libya captured like animals and sold as slaves; monarchies that still take themselves seriously.

The world has made great strides in reducing poverty through economic freedom in the past few decades but when we look at the Heritage map of economic freedom there is much to be done.  Only six countries are classified as free and all are small in population so less than 60 million souls out of seven plus billion are free.  When we look at the list of countries with the largest populations, only one (US) of the top ten makes it on the Heritage list of mostly free.

How come?  Here is where we are not entirely in agreement with Kevin.  He notes that lots of rich folks from other countries come to the US and other places because the risk of staying at home is considerable.  He also pokes W’s statement about everybody wishing to be free.  Then he generalizes:

How proud is Pakistan, really? I guess they showed those Hindus a thing or two, maybe, but nobody gets up in the morning thinking: “I wish my country were more like Pakistan!” Not Pakistanis, surely. [Emphasis added]

We disagree.  We think the Pakistanis (not everyone but as a group) are satisfied with their country.  We admit that the limited political freedom there makes alternative hypotheses possible but we are convinced they are satisfied.

Sidebar: the negative net migrants for China, India, etc compared to the positive net for the US support Kevin’s point that some are voting with they feet but these are small percentages.  And why does mostly unfree Russia (#107 on the Heritage list) have positive net migrants?  End Sidebar.

It is not that Pakistanis wouldn’t like to be free and have the fruits of freedom but their priorities are elsewhere and Pakistan meets those other priorities.  We think W was in part right when he said that everyone yearns to be free but sometimes their first priority is to take away another’s freedom.  So we agree with Kevin’s critique of America (and everywhere else):

And it’s not like we don’t know what made us rich and blessed us with relative domestic tranquility. But we happy Americans are not immune from the darker desires. We have not been liberated from hatred, envy, or resentment, and we are just dumb enough to act on those impulses, politically, every now and then.

It is easy for envy and the rest to become a greater priority than freedom because freedom means everybody is free.  MWG and Kevin come to the same conclusion: It is always a time for choosing and we should choose freedom.  We should choose economic and political freedom.  That’s a good resolution for 2019.