Category: Business and Society

French President Jacques Chirac has given in to the student protests in his country, protests that called for the removal of the First Employment Contract. This is a controversial new law giving employers greater freedom in whom they fire amongst under-26 employees. The law, as I am sure you’ve seen, sparked students protests for weeks.

Michael Miller in last Wednesday’s Acton News and Commentary addressed the deeper issue here: economic ignorance and moral apathy–I won’t repeat his analysis here. But here’s what I’d like to point out: what will fill in the vacuum.

The minister of employment, Jean-Louis Borloo, told Le Monde newspaper that the new plan will include increasing government subsidies to employers who hire people under 26 who face the biggest obstacles to finding jobs. He said the cost to the government in the second half of the year would be about $180 million.

From more economic freedom to subsidies. It is one thing to surrender to the protests and remove this law. It is quite something else to enact an (apparently) equal and (certainly) opposite policy. One wonders what will be the straw to break the Gallic camel’s economic back. Perhaps we should start a betting pool…

As student demonstrations in France mount, the government finds it increasingly difficult to dismantle restrictive labor laws that are directly tied to high unemployment rates. Michael Miller examines the political and cultural factors that are behind the French fear of economic risk taking.

Read the complete commentary here.

Following up on yesterday’s entry about Ronald Aronson’s call for a renewed socialism in American politics, I offer this paragraph from J. Budziszewski’s book, What We Can’t Not Know.

Discussing the principle of subsidiarity as first explicitly articulated by Pius XI in the encyclical Quadragesimo Anno, Budziszewski writes,

As Pius explained, what pushed the principle of subsidiarity to the forefront was the crisis in civil society brought about by the industrial revolution. For a time it seemed as though the middle rungs of the ladder might be crippled or destroyed, leaving nothing but the vaunting state at the top of the social scale and the solitary self at the bottom. Collectivists and individualists made strange alliance to cheer this holocaust of the little platoons. The principle of subsidiarity reaffirms the social design of the species, corrects both its individualist denial and its collectivist perversion, and champions the rights and dignity of all those in-between associations which, if only allowed, will take root and flourish, filling the valley between State and Self with fruit and color.

Blog author: jballor
posted by on Monday, April 3, 2006

Ronald Aronson argues that the political left in America needs to get back to its true socialist roots in order to become a coherent and clear alternative in this article from The Nation, “The Left Needs More Socialism.”

He points to contemporary political movements in other countries as models for success of the American left:

But Americans need only glance around the world to see that there are alternatives. The vibrant World Social Forums are an example, under way since 2001 and now envisioning several annual meetings of an immense variety of groups, organizations and networks. Another is the continuing leftward movement of South American governments, now adding Bolivia to Argentina, Uruguay, Venezuela, Chile and Brazil. A third is the continuing European efforts to defend social welfare programs, as evidenced in the German Social Democrats’ remarkable reversal of a slide into oblivion to tie the Christian Democratic Party in last September’s election, and the unflagging popular support for Britain’s National Health Service.

Aronson even goes so far to cite September 11 and Hurricane Katrina as instances that support the need for socialism. In his words, “September 11 and Hurricane Katrina showed the undying need for extensive and intensive structures of community. The socialist standards of fairness, democracy, equality and justice are as much a part of daily life as are capitalism’s values of privilege, unequal rewards and power.”

So here we see that socialism is committed to all things praiseworthy (fairness, democracy, equality, justice) while capitalism is committed to all things base (privilege, power, inequality). And Aronson dares to say that it is Marxism that is caricatured.

Aronson’s basic problem is that he has a fundamental bifurcation of the world into two groups: individuals and governments. So when he says that we need “extensive and intensive structures of community,” he really means we need more government (if it has any bearing on this discussion, Hurricane Katrina shows the basic ineffectiveness of statist solutions and is evidence in favor of a free, vigorous, and private civil society).

We can see that this is the case when Aronson writes, “Twenty-five years of attacking government has drained much of the basic civic spirit and social responsibility we must have to transact our collective business with integrity. If nothing is higher than the individual, the only thing that matters is whether I alone succeed.” Indeed the common good and society may be “higher than the individual,” but from this it does not follow that government is the only entity that fits that description.

Aronson’s caricature of capitalism does little to clarify the real disagreement. He makes the classic mistake of demonizing his opposition’s intentions and motives, rather than giving an honest and fair-minded analysis.

The disagreement isn’t whether or not all people have value, whether community is a good thing, or whether individuals have responsibilities beyond themselves. It seems to me that the real disagreement is about means. Aronson’s statism finds government to be the primary, if not sole, agent in meeting these responsibilities.

Blog author: jballor
posted by on Wednesday, March 29, 2006

It has been a bit of a mystery over the last few months, as an anonymous group of developers had been purchasing up a series of properties near downtown Grand Rapids. The investigative work of the local TV news turned up the plans for the group to end up with a 41-acre area that runs along the Grand River through the heart of downtown.

Currently, the area is mostly made up of unused manufacturing facilities, abandoned buildings, and generally unproductive land. Over the last week, WOODTV 8 has learned the identify of one of the primary developers and their plans for the property. The project is called the RiverGrand, and Duane Faust of a developing company with offices in Atlanta and Los Angeles has been identified as a key player.

In an interview with Faust, 24 Hour News 8’s Suzanne Geha got Faust to describe the project: “We plan to build a large scale, mixed-use infrastructure development project that will serve as the standard bearer for not only Grand Rapids but the entire state of Michigan, making the transition from an industrial, manufacturing-based economy to a technology-economic-health care-entertainment as well as financial economy that everyone else is doing in the country,” he said.

There are currently no blueprints, but Faust says the project would take the best elements from other well-known developments, including Baltimore’s Inner Harbor, Atlanta’s “Atlantic Station,” and London, England’s Canary Wharf.

Like Baltimore’s Inner Harbor, the RiverGrand would have a marina for use by boaters. Similar to Atlanta’s “Atlantic Station,” the RiverGrand would be “a city within a city,” made up of mixed-use land that serves as the core of downtown economic, residential, and social activity. And akin to London’s Canary Wharf, the land would be the home for several high-rise buildings, which would “significantly” change the skyline of Grand Rapids.

Since the RiverGrand project is much smaller than these other developments, the similarities would be appropriated to the scale of the plan, of course. Even so, Faust predicts that RiverGrand will employ 10,000 people.

This is good news for an area that has been hit hard by recent manufacturing losses. Electrolux, which at one point employed 2,700 people in Greenville, Michigan, closed its doors earlier this year. The key for the Faust plan is that Michigan is to move beyond a primarily industrial economy, and the attractiveness of the RiverGrand project is the diversity of economic opportunity it embraces, from tourism, music and entertainment, to commercial and finance industries.

This is in marked contrast to the plan from the politicians in the state’s capital. On the heels of the Electrolux move, Gov. Granholm trumpeted the news of a new plant being opened in Greenville, which would employ 500 people. The facility is owned by United Solar Ovonic, which is a developer of alternative fuel techonlogies, including the production of solar cells.

It’s clear that the Lansing politicians see the future of Michigan’s economy to be a continuation of the industrialized past, as two consecutive administrations (Engler and Granholm) have used tobacco settlement funds to set up technology and biotechnology funds for new endeavors in Michigan.

The problem with such efforts is that the liberty of entrepreneurial enterprises should not be pitted against the determinism of lawmakers. As we have seen, the transition from an industrial economy can be difficult for many in the short-term. And while it is tempting for politicians to try to find for themselves the next big thing, they must resist that temptation and simply place Michigan in a position where it has a clear and fair tax structure that is competitive with other states and nations.

Technological innovation will always be an important part of a robust economy. But a diversification that deals with the realities of a global economy will be the real answer to long-term growth. For that reason, the future hope for Michigan lies more with entrepreneurial endeavors like the RiverGrand project as with the decisions of Lansing lawmakers in determining the future industries of Michigan.

Projects like the RiverGrand will do more to make Grand Rapids a “cool city” than state programs ever could.

Blog author: jballor
posted by on Tuesday, March 28, 2006

“Immigration creates wealth,” says Larry Kudlow:

Part of the immigration problem is simply Mexico’s inadequate growth and lack of economic opportunity. The country is growing at about 3 percent a year, but it ought to be growing at six to ten percent. Our southern neighbor ought to be the “Mexican Tiger,” but continues to be the “Mexican Chihuahua.”

He also cites and explicates a column by Linda Chavez in The Washington Times, “illustrating what great entrepreneurs and small-business owners Hispanics are.”

Blog author: kschmiesing
posted by on Monday, March 27, 2006

It was a major topic of discussion during the era of corporate scandals a couple years ago, but the issue of executive compensation still pops up in the news from time to time, and it remains a problem with which serious thinkers continue to grapple.

Harvard’s Lucian Bebchuk and Berkeley’s Jesse Fried started one important strand of the discussion when they published Pay Without Performance in 2004. (Robert Kennedy reviewed it for Markets & Morality [available to subscribers]). In brief, Bebchuk and Fried proposed measures to enable and encourage more active shareholders as a check on exorbitant executive pay.

The discussion continues at Harvard’s Program on Corporate Governance, which features further commentary from Bebchuk as well as papers that criticize his proposals for reform. One paper not linked at that page is Stephen Bainbridge’s, which argues that boards of directors are better suited to make corporate governance decisions than are shareholders.

An snippet from Ecumenical News International:

Presbyterians invest $1 million in church ‘bank’ that helps poor

New York (ENI). The Presbyterian Church (USA) has invested US$1 million in Oikocredit, an organization established by the World Council of Churches that assists people in poor countries start small businesses. The investment is the largest in Oikocredit over more than a decade, the church announced earlier this week, making the 2.4-million-member US denomination the second-largest investor in the institution set up in 1975. The largest is the Church of Sweden.

I’ve looked a bit at the Oikocredit organization, and in generally this does not fit my normal expectations for an initiative by the left-leaning WCC. To be sure, Oikocredit does employ the rather vague criteria of “socially responsible investing” when deciding which groups to fund.

But in general, the microlending approach is much more economically viable and informed than many ecumenical attitudes towards global poverty. Started over thirty years ago, Oikocredit has a track record, and “was created for groups that need credit to develop their productive enterprises, but have difficulties receiving credit through conventional financial institutions, because they simply lack collateral.” For a personal story of how microloans can be a part of the solution (along with property rights, the rule of law, and so on), see this commentary by Rev. Jerry Zandstra.

Despite its shortcomings, Oikocredit on the whole is probably a good thing. And again, when compared to what you typically see from ecumenical groups, it’s positively refreshing.

Hunter Baker at The Reform Club passes along a column by Maggie Gallagher that has him “rethinking” his position concerning illegal immigration. Gallagher notes, “Economic studies suggest that overall, immigration is a net wash, or a slight plus, for the American economy. But the pluses and minuses are not evenly distributed over the whole population: Lesser-skilled Americans who compete for jobs that don’t require Ivy League credentials take the hit, while people like me enjoy a lot of the benefits.”

Andrew Yuengert, a professor of economics at Pepperdine University, in his Acton monograph on immigration, makes the same observation. In his shorter white paper based on the monograph, Yuengert writes regarding the impact of immigrants on the cost of social programs, “the real problem is not the fiscal burden of immigrants but the concentration of the fiscal burden in a few localities.”

Baker identifies with the problems posed for low-wage natives in the US who are faced with increasing competition from immigrant workers (both legal and illegal). It is true that certain areas of the country are going to be negatively impacted in terms of the costs of government programs, as well as that certain sectors of the population in these areas will face increased competition for low-wage jobs.

Neither of these two facts can obscure the reality that liberal and legal immigration results in a net economic gain for the US. What these realities can do, however, is temper and specialize government policy.

Perhaps even more importantly, they can give incentive and direction for private social endeavors to help alleviate the job displacement and negative economic effects. Charities could target immigrant communities and take the burden off the state to provide education and health care. Other programs could focus on training and education for immigrants and natives to move on from low-wage jobs.

Immigration should be seen as an opportunity and incentive for natives in low-wage earning jobs to get better training, experience, and education and improve to higher paying positions. A benefit of increased competition for jobs is that workers are given the incentive not to remain indefinitely in positions that don’t give them the standard of living they desire.

For Yuengert’s views especially as regards illegal immigration, listen to this radio interview (mp3) from The Jerry Bowyer Show.

Blog author: jballor
posted by on Friday, March 17, 2006

A recent NBER working paper, “The Effects of Tort Reform on Medical Malpractice Insurers’ Ultimate Losses,” argues that “The long run effects of reforms are greater than insurers’ expected effects, as five year developed losses and ten year developed losses are below the initially reported incurred losses for those years following reform measures.”

A number of the specific changes in the history of tort law are discussed in Ronald Rychlak’s Trial by Fury: Restoring the Common Good in Tort Litigation, part of Acton’s Christian Social Thought Series.

Rychlak argues that in addition to the tangible and significant economic impact of current tort law, the system also “encourages litigation at the expense of forgiveness and understanding. It ignores the role that family members, friends, religious leaders, and others can play in bringing about reconciliation.”