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.

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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.

Reviving An Old Slur

The “news” industry has rediscovered an old slur: Trickle-Down Economics (TDE).  Catherine Rampell is on the editorial page

Sidebar: We know we made fun of Kevin Williamson for stooping to take on Catherine but she is just part of this post.

She is saying things like this:

Of course, Republican lawmakers and administration officials promise that these corporate giveaways will really, truly, honest-to-goodness primarily benefit us regular humans, especially humans in the middle class.

That’s because, they claim, corporate tax cuts will unleash a wave of business investment and therefore economic growth, most of which will trickle down to the little people-people.

Well, heroes one thing Kevin Hassett, The Donald’s chair of the Council of Economic Advisors, said (from Larry Kudlow):

“Economists who have studied the effects of taxes over time have discovered a consensus,” he said. “Lower marginal tax rates and a broader base increase the rate of economic growth and well-being.”

Here is Kevin on CNBC:

The new report from Hassett, out Monday morning, projects that reducing the corporate tax rate to 20 percent will result in a windfall for U.S. workers. He predicted average U.S. household income would increase at least $4,000 a year but could rise as much as $9,000 annually.

It is an interesting question of the incidence of corporate taxes.  What percentage falls on owners and workers?  Catherine is suggesting that 100 percent falls on owners.  That seems unlikely.  It seems even more unlikely that the owners will decide to put all that money in their mattresses.

Taking up almost all of the above the fold back page of the 11/18 La Crosse Tribune  is an associated press (AP) story (yes it is an editorial pretending it is a news story) that we can’t find on the Internet.  The headline is: Giving Trickle-Down Another Try.  Here the AP is going for a triple slur.  They get Reagan, Trump, economics all in one headline.  It gives the Tax Policy Center the highly coveted “nonpartisan” designation.  [Perhaps they are just wrong and not partisan.] It blames the W’s 2001-3 tax cuts for the Great Recession and notes that W’s expansion was one of the weakest.  Hmmm, which President, we wonder, had the weakest?

If you would like a more detailed discussion of the slur check out Thomas Sowell from 2012.

Catherine and the AP seem desperate to make slurs and throw stuff against the wall and hope that something sticks.  To get the success of the Reagan tax cuts from The Donald’s tax cuts we need to couple it with deregulation and good central banking.  There seems to be good news on deregulation.  The Donald doesn’t fill us with confidence and we worry about trade but he is our best chance.

 

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.

A Reminder On Socialism

Yesterday is was Communism (no, we still don’t reference our stuff0.  Today it is socialism, the slightly less virulent method of restricting economic and personal freedom.   The WSJ Editorial Board tells us:

Venezuela is broke, which takes some doing. For much of the second half of the 20th century, a gusher of oil exports made dollars abundant in Venezuela and the country imported the finest of everything. There were rough patches in the 1980s and 1990s, but by 2001 Venezuela was the richest country in South America.

And now socialist Venezuela is broke.  Yes the country with the largest proven reserves in the world according to Wikipedia is broke.  The socialists are almost as unlucky as the Communists.  There are just too many “unexpected” events every time one of these methods is put in place.

A Reminder On Communism

It seems silly but we need to remind folks that Communism is evil.  Marc Thiessen at the Washington Post is up to the task.  If you think there is some question about the evil of Communism you should read the whole thing.  If not, here is some evidence from Marc on the misunderstanding of Communism:

Sadly, this twisted view of communism is being passed on to the next generation. A recent poll by the Victims of Communism Memorial Foundation found that just 36 percent of American millennials have a “very unfavorable” view of communism — the only American generation where this number is less than a majority. Worse still, 32 percent believe that more people were killed under George W. Bush than under Joseph Stalin. The ignorance is stunning. The first post-Cold War generation has been raised almost completely unaware of the evils of communism.

The Donald’s administration has much to be humble about.  Marc give us a data point that makes us happy he replaced his predecessor and won a year ago:

The Trump administration marked this week’s 100th anniversary of the Bolshevik Revolution by declaring a National Day for the Victims of Communism.

Yea!  There is always work to do.  If you want to recommend a book to somebody try The Draining Lake by Arnaldur Indridason.  It is a great work of fiction that helps explain why the Communist menace doesn’t go away.

A Sorry Excuse

Mike Kaplan, the CEO of Aspen Skiing has taken to the editorial page of the WSJ to make an extra special pleading for open borders.  Obviously, open borders advocates are received with open arms at the WSJ.  Mike, however, has an extra special pleading for open borders.  He doesn’t mention workers at Aspen.  All the ski areas we have been to recently have many international workers.  Mike says that the “xenophobia” emanating from the White House is causing legal Mexican tourists to stay away from Colorado.  He gives away the real story at the start of the last sentence which we have made bold:

Last year visitation to Aspen by Mexicans dropped 30% compared with the 2015-16 ski season. Bookings for 2017-18 aren’t looking much better. There are multiple reasons, but the xenophobia radiating from the Oval Office ranks at the top. As the head of the Mexico City public-relations firm that promotes Aspen in Mexico told us, “The dollar has been strong, which makes travel to the U.S. expensive, but Trump is the No. 1 reason.” [Emphasis added]

Sidebar: One question is: should we boycott places that say such things?  We say no.  Folks can do with their own money as that see fit.  We don’t want to rule out great places like Aspen and especially for us, Snowmass, just because the CEO makes silly excuses for an off year.  End Sidebar.

The dollar was strong last season when one would cost almost 22 pesos but today it cost less than 18 pesos.  It is time for Mike to get back to work and stop worrying about The Donald.  We hope Aspen has a great year.