Reviving Basket Cases

Mugabe is out in Zimbabwe.  It is not the worst economic and political basket case in the world but there is a great opportunity for its citizens and the world to improve.  Zimbabwe actually moved up in the last year or two as Heritage moved them up to a score of 44 (of 100) that lifts them into the repressive category.  Freedom House kindly puts them into the Partially Free category with a score of 32 of 100.  We have seen this description of the problems of newly found freedom for Zimbabwe in several places.  Here it comes from Neo-neocon:

“In the past we could never criticize the president,” said Felex Share, a political reporter, in the hours before Mugabe’s resignation. “Right now, we can touch anything.”

How will Zimbabwe deal with its opportunity?  What will the world do?  A better question is: What can the world do?  Answer: It can’t do much compared to Zimbabwe because only they can change the culture of corruption and so on that is causing the problem.

It is hard to change as the quote says and Douglas North described more generally.  Cambodia is in the news and we use it as an example.  It was hell on earth during the Khmer Rouge regime in the late 70s.  It is better now but it still only scores 59.5 from Heritage which is still just in the mostly unfree category while Freedom House scores them at 31 and categorizes them as unfree.  Much of Eastern Europe did much better after the fall of Communism but they were not in the Cambodia/Zimbabwe category before freedom returned and they had a capitalistic past to return to.  They also had freedom next door (or reunification for East and West Germany) and that helped too.

We hope that Zimbabwe propers.  We know that some critical elements like rule of law and the basic elements of capitalism are necessary for improvement but the citizens of Zimbabwe need to choose the path themselves because that is the only way to get them to follow it.  We hope you choose capitalism and hope the world makes it easy to do so.

We hope there will be opportunities to remediate additional basket cases like (but not limited to) Venezuela, Cuba, and North Korea in the near future.  Perhaps we can learn something in Zimbabwe that will help us and them.

Advertisements

Good Luck Zimbabwe

It appears that Zimbabwe has ousted the tyrant Robert Mugabe and his first lady Grace who has ruled and ruined the country over the last 37 years.  Right now Zimbabwe ranks 175 out of 180 countries on Heritage’s Index of Economic Freedom.  Here is a quote from Heritage:

Zimbabwe’s economy is characterized by instability and volatility, both of which are hallmarks of excessive government interference and mismanagement. Massive corruption and disastrous economic policies have plunged Zimbabwe into poverty. The government’s near bankruptcy has triggered large protests over unpaid civil service wages and a continuing economic crisis.

We wish Zimbabwe well.  We recognize how difficult it will be to make headway after 37 years of misrule. If they are reading we want to remind them that capitalism works and socialism doesn’t.  As evidence, three of the five countries below them are Venezuela, Cuba, and North Korea.  Good luck.

Picking Winners

It is hard to pick winners in a sporting event.  It is much harder to pick winners in the economy because you don’t know who is playing.  Arsenal hosts Tottenham tomorrow.  Get the odds from Ladbrokes for win, lose or draw.  You could bet on other events like which player gets the first goal.  Wisconsin hosts Michigan is even easier because it can’t end up in a tie.

Economic events are much harder because the set of alternatives is not known.  It would be like if Chelsea (or even better example, a team that does not yet exist) could win the Arsenal-Tottenham match.  Picking economic winners involves ignoring prices and markets to say X is the best.  Recent evidence shows the problems when the warmists and their allies try to pick winners.

Sidebar One: There are two main issues in global warming (whoops, climate change).  The first is the science side of it.  What determines global temperatures?  To date we have some evidence that carbon dioxide and temperatures are positively related.  The models have been unimpressive in forecasting temperatures but the ability to explain the past suggests we need to pay attention.  The bigger problem is what to do about the forecasts.  The warmists, with the exception of a few like Bjorn Lomborg, want to take action now.  That means picking winners.  End Sidebar One.

Two articles show the problems with trying to pick winners.  One is on Germany from the WSJ and the other is an academic study of ethanol from the University of Wisconsin reported in the Milwaukee Journal Sentinel.  Let’s start with the WSJ.

Mrs. Merkel’s failure [to reach carbon emission goals] comes despite astronomical costs. By one estimate, businesses and households paid an extra €125 billion in increased electricity bills between 2000 and 2015 to subsidize renewables, on top of billions more in other handouts. Germans join Danes in paying the highest household electricity rates in Europe, and German companies pay near the top among industrial users.

On the other hand, the AP reports on carbon emissions in the US:

In a surprising turnaround, the amount of carbon dioxide being released into the atmosphere in the U.S. has fallen dramatically to its lowest level in 20 years [Emphasis added].

It continues to amaze us how often the press is surprised when pricing mechanisms work.  The odds are to be surprised the other way.

Sidebar Two: We were not supportive of the mandate during the George W. Bush administration to require ethanol on a tactical basis.  We support price mechanisms.  We thought that there was a reason to do it on a strategic basis.  During W’s administration it seemed to us that the warmists had the momentum and there was a chance that the government would do something on an epic level of foolishness.  We made the judgment call that the ethanol mandate was the least foolish option available.  It seemed to sap the warming momentum.  End Sidebar Two.

A University of Wisconsin-Madison study has looked at the impact of the ethanol mandate on carbon emissions.  A word of academic caution.  No one study is definitive and this one has not yet been subject to a formal (everyone gets informal peer reviews as they create a paper) peer review.   The authors found that the trade off between more corn and less fossil fuel did not work as hoped:

The study underscores the unintended consequences of a federal policy meant to reduce America’s reliance on fossil fuels.

While adding ethanol means burning fewer fossil fuels, the study found that the benefits were lost as even greater amounts of carbon held in the soil were released into the atmosphere in newly cultivated farm fields.

It is not a surprise when you ignore market prices.  It would be wise to reduce the amount of ethanol in gas.  We need to eliminate wind subsidies.  We would take a reasonable carbon tax instead.  Eliminate the gas tax and make the carbon tax equivalent to the old gas tax is our idea.  It is revenue positive and makes the incentives right.  We are pretty sure that carbon is a bad thing but we don’t know how bad.  There is time for the market to fix it and there is really no other viable choice than to wait for the market.  Epic foolishness is not called for.

No And Yes

This appeared on our Facebook feed recently:

Everyone OK with using socialism to clean up after Harvey?  Or should we use the free market.  Just asking for a friend.

The obvious answers are no to the first question and yes to the second.  Here is the funny thing: The quote comes from the US Democratic Socialists page!  Does anyone really think that socialism is effective or could be effective with these kinds of problems?  The WSJ has a nice story on self-organized volunteers.  Does anyone think that capitalism or free markets will not be effective?  We are sure that Mark Perry has something on how folks will try to blunt the market’s ability to get the necessary items to Texas by fixing prices.  Ah, here is one.  If you want effective solutions you need markets.

Or is it that the socialists what Texas to suffer?

Free Trade

George Will is at his best on NRO touting the benefits of free trade.  And it gives him time for his favorite pastime of skewering The Donald.  We agree with George on this  one that The Donald is absolutely wrong on trade.  The MWG position is unilateral free trade.  The USA should eliminate all tariffs.  We would be willing to phase them out rather than require that they be eliminated immediately.

Do read it all but here are some juicy quotes.

Paul Samuelson, a leading 20th-century economist, cited this doctrine [free trade] when challenged to name a social-science proposition that is both true and not obvious.

We might argue that it is obvious that raising taxes is a bad idea but the behavior of individuals seems to argue for Paul’s position.

Foreigners, however, have their uses. After [The Donald] trumpeted that the Dow surpassing the 22,000 mark was evidence of America’s resurgent greatness, the Wall Street Journal rather impertinently noted this: Boeing, whose shares have gained 50 percent this year and which accounted for 563 of the more than 2,000 points the Dow had gained this year en route to 22,000, makes about 60 percent of its sales overseas. Boeing has a backlog of orders for 5,705 planes, 75 percent going outside North America. For Apple, the second-biggest contributor (283 points) to this year’s Dow gain at that point, foreign sales are two-thirds of its total sales. Foreign sales are also two-thirds of the sales of McDonald’s, the third-biggest contributor (239 points).

What serious folks should be thinking about is how do we cut tariffs and how do we facilitate the market so that the small percentage of folks that suffer can adjust to the changes.  The political problem is that the benefits are widespread while the costs are not.  One part of this solution might be to tax the large percentage of folks that benefit from trade.  Another part would be incentives to change.  A third part would be encouragement.  In addition to “Made In America” events at the White House there could be “Change In America” events.  The government should be part, perhaps only a small part, of the solution so we can capture the large benefits of free trade and absorb the small costs.

 

Too Slow And Too Good

We are too slow and Elliot Kaufman and Mike Rowe are too good.  Elliot discusses a NYT article while Mike shows that you can fight the mob and still maintain your independence.  Elliot quotes the NYT article gushes:

[A] surprising group of Americans is testing its moral voice more forcefully than ever: C.E.O.s.

Next Elliot tells us about the young adult site:

Vox upped the ante, explaining: “After Charlottesville, CEOs have become our public conscience.”

Of course, this is just appeasement.  The CEOs are hoping that the leftist crocodile eats them last.  Elliot explains:

The New York Times was right, in a sense. “The C.E.O.s had found their voice,” concluded their fawning article. But top-flight executives are not pre-teen girls who have finally mustered up the confidence to speak; they are savvy representatives of their shareholders’ interests. ESPN, like all the Fortune 500 companies that leapt to boycott or threaten Indiana and North Carolina over their religious-liberty and transgender-bathroom laws, knew that the safest thing they could do was to get out ahead of a left-wing mob.

Do read all of it.

It is the opposite of courage to give into the mob.  Business folk, particularly CEOs, are working for their shareholders.  It is a reasonable business judgment that it is in their shareholders’ interest to submit to the mob and is a moral judgment in the sense of serving their shareholders but VOX is exactly wrong to call the CEOs public conscience.   This is a private and perhaps profitable choice like paying protection to a different mob.

Sidebar: It is an interesting aspect of politics that the left supports CEOs when they do exactly the opposite of what the left wants.  The left wants CEOs, somehow, to work for the public rather than profits of their company.  In this case the CEOs are working to increase their profits but the left is happy.  The left is not the only side to confuse short-term gains with principles.  End Sidebar.

Mike, on the other hand, wants to combat the mob without taking political sides.  We agree.  We would describe it as the fight against violent socialism.  It doesn’t matter if it is the national socialists (Nazis) or world socialists, often, without intentional irony, called Antifa.  The important word is violent.  Here is how Mike takes issue with a commenter that calls him anti-intellectual and tries to associate him with the Nazis.  He does this without (entirely) taking a political side:

mikeroweWORKS is a PR campaign for the skilled trades. For the last nine years, we’ve partnered with numerous trade schools, raised millions of dollars for work-ethic scholarships, and called attention to millions of jobs that don’t require a four-year degree. But that doesn’t mean we’re “anti-intellectual.” We’re not even “anti-college.” We simply reject the popular notion that a four-year degree is the best path for the most people. And we’re hardly alone.

Millions of reasonable people – Republicans and Democrats alike – are worried that our universities are doing a poor job of preparing students for the real world. They’re worried about activist professors [R], safe spaces [R], the rising cost of tuition [R&D], a growing contempt for history [R], and a simmering disregard of the first amendment [R]. These people are concerned that our universities – once beacons of free speech – now pander to a relatively small percentage of students who can’t tolerate any political opinion that challenges their own. And they’re concerned – deeply concerned – that millions of good jobs are currently vacant that don’t require a four-year degree, or any of the catastrophic debt that comes with it. [R & D added]

We’ve put R for Republican and D for Democrat on Mike’s list of what reasonable people think.  Of course, Mike’s response is being lapped up by conservative sites like TheBlaze, The Daily Caller, and Fox News because conservatives like the list above, are generally pro-capitalism, and and are anti-violence.  As Mike shows, the CEOs could have done better.

Venezuela Clarity

Rich Lowery is on point in discussing Venezuela at NRO.  He has a great way of summarizing how bad things are there:

The result is a sharp, years-long recession, runaway inflation, and unsustainable debt. The suffering of ordinary people is staggering, while the thieves and killers who are Chávezista officials have made off with hundreds of billions of dollars. At this rate — The Economist calls the country’s economic decline “the steepest in modern Latin American history” — there will be nothing left to steal.

The situation leaves The Donald with limited options as Rich discusses.  Read his whole analysis.  What he doesn’t remind us of is the policy of The Donald’s predecessor.  To him Chavez was mi amigo.  As Patrick Cooper at USA Today had a quote from AP back in 2009:

“President Barack Obama has gone abroad and gored an ox — the deeply held belief that the United States does not make mistakes in dealings with either friends or foes. And in the process, he’s taking a huge gamble both at home and abroad, for a payoff that could be a long time coming, if ever.”

Read all of Patrick’s column to remind yourself how controversial the predecessors actions toward Venezuela were.  The Donald’s predecessor always seemed willing to gamble with our future.  If we were at the track we would say he wasn’t an astute improver of the breed.

Recently we cited David Horowitz at PowerLine on why the Middle East is a disaster.  The Middle East is not the only disaster left for The Donald to work out.  We wish him greater insight than his predecessor.  The problem is he has less degrees of freedom because of the actions that were taken.