For a succinct article on governmental processes versus private processes, see this nice little report by Bill Steigerwald. It focues on responses to Hurricane Katrina by private companies and by the city, state, and federal governments. Stories like these need to be circulated more widely.
Any predictions on how this will turn out? All eyes should be watching Japan, whose legislature just approved the privatization of their postal service. (It is important to note that the Japanese postal service is markedly different from ours here in the States.)
It is also a state-owned savings bank with more than $3 trillion (.7 trillion) in assets, making it by some measures the largest financial institution in the world, and the largest provider of life insurance in the country.
Of course, the States have private agencies to compete with the US Postal Service: FedEx and UPS are the two largest (nearly 80% of the express delivery market is held by these two alone–I hesitate to list DHL as a private company; the majority-owner of their parent company, Deutsche Post, is the German government).
Will America ever retire its government post? I think whatever happens in Japan will be an important element in that conversation. But nonetheless, the Japanese move is an important event for all who believe in individual initiative, for more than one reason. But if it does nothing else, the news illustrates why classical liberals ought to be persistent: (now) Prime Minister Koizumi has been calling for this privatization since 1979.
So for all you out there calling for privatization of social security, or education, or __________, buck up; all things come to those who wait–even government-delivered mail.
Acton President Rev. Robert A. Sirico appeared yesterday on Your World with Neil Cavuto on the Fox News Channel and discussed the president’s nomination of Harriet Miers to replace Sandra Day O’Connor as an Associate Justice of the United States Supreme Court.
If you didn’t have a chance to catch the interview live, you can watch it by clicking here (5.2 mb Windows Media file).
A man’s home is his castle, unless of course government officials need his property for a new strip mall or a hotel. Since June, when the U.S. Supreme Court dramatically expanded government’s eminent domain powers, some three dozen states have formulated measures to protect property owners from the Kelo v. New London ruling. Sam Gregg looks at the potential Kelo has to “violate basic norms of justice concerning property.”
Rosa Parks Cicle is a small park in the middle of downtown Grand Rapids. It is often used as a public music venue in the summertime, and an ice skating rink in the winter. Unfortunately, this year it was scheduled to remain closed (like so many parks facilities and pools in the area) due to a citywide budget crunch. Here is where businesses and private individuals step up and take the baton where the local government fails. Two businesses (LaSalle Bank and Centennial Wireless) have written checks to the city, providing the needed funds to run the rink, on a limited basis. The Grand Rapids Griffins Youth Foundation, a tax-exempt organization affiliated with the city’s American Hockey League franchise, will also be providing free skate rentals to those who need them.
While I don’t ice skate very often, every time I do head downtown in the evening to the Rosa Parks Circle. The ice rink is packed with people of all ages skating around and having a great time. From all of us who use the facility, a big thank you to LaSalle Bank, Centennial Wireless, and the Grand Rapids Griffins Youth Foundation for your contributions and for keeping skating downtown available to all.
In between dire warnings from the World Alliance of Reformed Churches (WARC) about the evil neo-liberal economic order and calls for more money from its member denominations, this gem arrived today via Ecumenical News International:
Church bank says its loans are at forefront of anti-poverty fight
Utrecht (ENI). Thirty years after its launch, a church-backed international development bank says it has become a world leader in providing resources for small loans for poor people to set up in business. The Netherlands-based Oikocredit agency announced it had approved record funding in the first nine months of the year for what is called the microfinance sector, which among other things offers small microcredit loans to cash-strapped borrowers.
According to its website, “Oikocredit believes that poor people can build themselves a better life, if only given the chance, if only given credit.” Beyond the cliches and PC buzzwords, there’s some clear economic thinking going on here.
“Throughout our years of operations, Oikocredit has proven that small poor entrepreneurs, cooperatives and others in developing countries are credit-worthy partners indeed. In fact, the demand for loans offered by Oikocredit steadily increases as the effectiveness of this credit for development is broadly recognised. Thus our loans are directed at groups: cooperatives of small-scale coffee farmers, for instance, who need their own coffee mill for increased income. Or microfinance institutions that split up our loans into thousands of small loans to very poor people.”
It’s not perfect, but its a far sight better than many other half-brained church schemes to “end poverty now.”
This interview with Charles Sandmel, a veteran of the municipal bond market, gives us some insights into current trends in the ethical investing movement. Some key points:
- The leading market sectors over the last few years are in areas that “most of them [ethical investors] avoid, such as energy.”
- Ethical investors don’t buy “Big Oil because of the pollution problems.”
- Examples of ethical investments: wind turbine farms and facilities.
- Examples of unethical investments: government bonds for nations with standing armies.
- Sandmel likes bond funds for ethical investors because “going to the companies that are borrowing gives you a much greater chance to engage them on your social issues than simply buying their stock.”
Mark Cuban, billionaire owner of the Dallas Mavericks, opines on his blog about the difference between “investing” and “speculating.” He says, “The difference between the two is very simple. If you spend the money and the only way you can earn a return on that money is by selling whatever it is you have purchased. You are speculating.”
With respect to buying bonds, Cuban writes:
If you give your money to a mutual fund or hedge fund that puts money into public stocks and bonds, that’s super speculation.
Why Super Speculation? Because there is a 99 pct certainty that you are 3rd in line to get paid with whatever earnings the fund generates with your money.
First the fund itself has to get paid. They take money off the top.
Then the person who makes the investment decision has to be concerned about keeping their job. You see if the fund doesn’t outperform its peers or comp indexes, then the person who is responsible for the fund is out of a job.
Do you think that person cares more about putting a roof over his family’s head or you? Which means when push comes to shove, unless there are strict limitations, that fund manager is going to take the chances necessary to outperform his comps. And I can tell you that its par for the course to “go down swinging” than it is to take a called 3rd strike. Meaning, they risk your capital in hopes of keeping their jobs if that’s the only way to keep their jobs.
For Cuban, the “the problem is when the balance between the two shifts from heavy in investing to heavy in speculation.” This is because an emphasis on the former, “when money goes to create commerce, that’s capitalism at its best. Money going to smart people to do smart things. If it has good results, everyone makes money. The economy grows. Expectations are based on the prosperity of the company, typically over a longer term. New ideas create new wealth. It’s not a zero sum game. It can be an everyone wins game.”
But when there’s an emphasis on the latter, and while “speculation isn’t a bad thing. It can serve many purposes,” even so “it primarily just results in redistribution of wealth. If I speculate better than you, even if you are investing in apples and me in oranges, then its just a contest to see who does a better job. The winner gets the cash. Across all the different levels of speculation, the trillions of dollars, its a zero sum game.”
Eric Schansberg ponders the lessons that we can learn from the aftermatch of Hurricane Katrina. One of Schansberg’s biggest questions in light of the government’s failure to effectively manage the disaster is this: if the government, both local and federal, failed at all levels to deal with Katrina before, during, and after it made landfall, shouldn’t we be looking for other options rather than trying to depend more on a system that obviously failed? Schansberg suggests that while the government does play a role in the welfare of the nation, private organizations, charities, and local community groups are much more capable of dealing with the emotional and physical care of those displaced in the aftermath of the hurricane.
Private charitable activity is always better. Charity is always preferred ethically because people are engaged in voluntary, mutually beneficial exchange with others. Charity is always preferred biblically because it fills the biblical mandate to love others, especially those who are the most vulnerable. Charity, if done well, is preferred practically, because it is more effective, more efficient, and can focus on the spiritual as well as the material concerns of the needy. Again, if government is ineffective, shouldn’t our response be less dependence on government and more encouragement of private activity?
Also from last week’s McLaughlin Group, Mort Zuckerman from U.S. News & World Report makes the important point that rising costs of gasoline greatly impact the poorest and most vulnerable populations.
MR. ZUCKERMAN: …It is very difficult in America to really cut back on gasoline consumption, because people go to work and go shopping in their cars. We do not have public transportation in the way that Europe does.
MR. MCLAUGHLIN: Well, we need that for the macroeconomy and the microeconomy.
MR. ZUCKERMAN: Yes, we do need — absolutely, because it is the sole means of transportation both to jobs, to schools and to entertainment. So it is –
MR. MCLAUGHLIN: Forget the means. I’m talking about consumption, consumption, consumption.
MR. ZUCKERMAN: I’m talking consumption, yes. But the other part of it is when gasoline prices go up, if they go up by 50 cents a gallon, people use 20 gallons a week. Okay, that’s $10 a week or $500 a year. And for a couple, that’s $1,000 a year. For the poor people or the people earning relatively…It really hurts a lot. So it really disproportionately hits the poor.
So while prices go up and the market adjusts and people will make decisions based on that, some of us don’t have all options to choose from that a large amount of disposable income allows. If you struggled before when gas was $1.50 a gallon to afford what it takes to commute to your job, imagine when that cost is doubled. Certainly there are still general possibilities for off-setting some of this burden (such as carpooling or relying on what public transportation there is), but especially the short-term effects when the costs of a commodity like gasoline rise as they have, as Zuckerman says, it “disproportionately hits the poor.”
So while on the broader economic level it is best to let the market work, at the same time churches, charities, and community groups should be acutely aware of this, and attempt to address these individual situations as best they can.