Posts tagged with: economics

Over at National Review Online, Acton Research Director Samuel Gregg recaps President Obama’s State of the Union address:

There is always something surreal about a Chicago politician talking about “fairness” and “playing by the rules.” There is something even more bizarre about a president talking about the need to expand energy production after his administration has generally undermined significant progress in facilitating energy development for three years in the middle of a recession. And who would describe Detroit as “on the way back”? A stroll down the ghost town otherwise known as downtown Detroit — which is teetering on the edge of being put into administration — would suggest the opposite. It’s not often that I agree with very much said by the New York Times’s Maureen Dowd, but this State of the Union speech illustrated that the lady was dead right in describing the Obama presidency as a bubble within a bubble.

Read it all on NRO.

“Stupid is the new smart,” and “Pop culture is a wasteland” are just a few lines from Daniel J. Flynn’s introduction to Blue Collar Intellectuals: When the Enlightened and the Everyman Elevated America. Certainly, one does not need to read Flynn’s account to surmise that there are grave problems with our culture. But many would miss some great stories and a return to a people and time that crafted a great uplifting for mass audiences.

Flynn has profiled six intellectuals or thinkers who sprung out of the immigrant backgrounds and / or a working “blue collar” origins. They opened up and popularized the great works, theories, and conversations of Western Civilization for the everyman. It seems it is of little coincidence that in profiling Mortimer Adler, Eric Hoffer, Ray Bradbury, Will and Ariel Durant, and Milton Friedman, Flynn touches on diverse streams of thought such as history, literature, economics, philosophy, and popular story teller. Flynn laments that we do not see these type of public intellectuals today and we are surrounded by passive and meaningless entertainment that not only debases but detaches us from the great ideas and a common heritage.

Will and Ariel Durant popularized history with their widely popular 11-volume The Story of Civilization. Flynn lauds them as writers who “extracted history from the academic ghetto whither it had retreated, opening the conversation about the past to all comers.”

Mortimer Adler, who compiled The Great Books of the Western World set, once quipped, “The only education I got at Columbia was in one course.” That course studied the classic works of Western Civilization and Adler sought to package them for mass consumption. A brilliant mind, Adler received a Ph.D from Columbia without ever receiving a high school diploma, bachelor’s, or master’s degree. Adler held a disinterest and disdain for the academic bubble, and in turn academics turned their noses up at his work for packaging and popularizing the great works. “The Great Books Movement, for better or worse, offered education minus the middleman. It is no wonder the middleman objected so vociferously,” says Flynn.

The idea that somebody who took on entrepreneurial endeavors and worked a myriad of jobs in the economy might make a better or more notable economist makes sense. But it’s not always the case, when one looks at say the lifelong academic John Maynard Keynes. Flynn notes what many free marketers already know about Milton Friedman and that is he “waited tables, peddled socks door-to-door, and manned roadside fireworks stands. He attended the public schools and lived in rent controlled apartments.” Friedman harnessed his experiences, professorship, books, a “Newsweek” column, and a PBS series to popularize libertarian free-market economic principles. He transformed public policy and much of the economic lingo and ideas we borrow today directly comes from the free-market economist.

Eric Hoffer, the longshoremen philosopher, was the favorite author of President Dwight D. Eisenhower. His book The True Believer covers the psychology of mass movements. “Hoffer’s patriotism stemmed from the belief that America was the workingman’s country. That the everyman became president hardly proved America’s mediocrity; it proved the excellence of the American everyman,” says Flynn.

Ray Bradbury, still writing, and most noted for Fahrenheit 451, could not afford college. He has proudly said that he is an alumnus of the Los Angeles Public Library. Bradbury glamorized small town Midwestern life and the significance of books, while slamming the detached superficial culture that suffers from a lack of education and critical thinking.

Flynn has weaved together some wonderful stories to remind us that great culture and deeper ideas are accessible to the masses. I have often wondered how some history professors could turn a lively and passionate subject boring. History, and other academic subjects, have too often been turned into gender-bending, “evil colonialist” type studies, eschewing much of the established work of Western Civilization. They deliberately use their own inner language and codes. “The ivory tower has become a tower of babble,” Flynn says.

He makes the easy case that a vapid society is objectionable and bankrupt of purpose, meaning, and ideas. He also highlights the less known significance on society of six influential thinkers, who because of their background, were able to help uplift the masses to the great ideas and release those ideas from an academic ghetto. Outside of Friedman, I did not know much about these figures and the stories he tells are lively and I did not realize how some of these thinkers already had had an influence on me. Growing up, my family had the set of The Great Books of the Western World, so it was fascinating to hear the story behind it.

As somebody with a divinity degree, and as an observer of ministry and churches, I thought about this problem in our faith culture. Today, there is a serious issue with the need to see Church as a form of entertainment first. Too often churches reflect the very same problems that plague our culture. There is little use for serious deeper reflection in some churches, and little use for the study of doctrine and traditions. The consequences are that confusion abounds today about what Christianity teaches and its transformative power. A revival and renewal is not just needed in culture, but in many of our churches too. There is a great need for teachers and preachers to deliver that word in days such as these as well.

David Deavel’s review of Mitch Pearlstein’s From Family Collapse to America’s Decline: The Educational, Economic, and Social Costs of Family Fragmentation has been picked up by First Things and Mere Comments. Deavel’s review was published in the Fall 2011 issue of Religion & Liberty.

In his review, Deavel declared:

His [Pearlstein] new book, From Family Fragmentation to America’s Decline, laments this inability of many to climb their way up from the bottom rungs of society. But rather than fixating on the one percent, he focuses on the 33 percent. This is the percent of children living with one parent rather than two. These children, victims of what many call “family fragmentation,” start out with tremendous social and educational deficits that are hard to narrow, nevermind close. These are most often the children for whom upward mobility has stalled. Their economic well-being has led to decline in American competitiveness and also the deeper cleavages of inequality that have been so widely noted.

Dolphus Weary has a remarkable story to tell and certainly very few can add as much insight on the issue of poverty as he does. When you read the interview, now available online in the Fall 2011 R&L, or especially his book I Ain’t Comin’ Back, you realize leaving Mississippi was his one ambition, but God called him back in order to give his life and training for the “least of these.” One of the things Weary likes to ask is “Are you going into a mission field or are you running away from a mission field?” It’s a great question we should all ask ourselves.

Historian Mark Summers returns to offer another piece commemorating the 150th anniversary of the American Civil War. Last issue, Summers penned “The Great Harvest: Revival in the Confederate Army during the Civil War.” In this this issue he has written an article focusing on Northern Catholics and the Catholic Church during the conflict.

David Deavel has offered a very timely review of Mitch Pearlstein’s, From Family Collapse to America’s Decline: The Educational, Economic, and Social Costs of Family Fragmentation. Pearlstein focuses on the 33 percent rather than the one percent. Deavel observes:

This is the percent of children living with one parent rather than two. These children, victims of what many call ‘family fragmentation,’ start out with tremendous social and educational deficits that are hard to narrow, nevermind close. These are most often the children for whom upward mobility has stalled. Their economic well-being has led to decline in American competitiveness and also the deeper cleavages of inequality that have been so widely noted.

I reviewed the new biography of William F. Buckley, Jr. by Carl T. Bogus. This book, written by a self-described liberal, is critical of Buckley but works at achieving fairness. If you want to read a comparison of two very different biographies of Buckley, I also reviewed Lee Edwards sympathetic biography of Buckley in the Spring 2010 issue of Religion & Liberty.

The Russian philosopher and writer Vladimir Solovyov is the “In The Liberal Tradition” figure this issue. Dylan Pahman has already profiled this piece on the PowerBlog so check out his comments here.

There is more content in the issue and the next interview in R&L will be with Reformation scholar and Refo500 director Herman Selderhuis.

Finally, I just want to say learning from Dolphus Weary’s story was a spiritually enlightening experience. I read his book in one night in preparation for the interview and he is truly humble. While Weary offers a lot of insight, I believe his greatest strength is teaching and leading through example. It’s no wonder many ministries have tried to replicate what he has done and now does in Mississippi. There is something to be said for somebody who remains tied to their roots and is proud of where they come from, especially if where they come from may look hopeless by the world’s standards.

A practical man?

On the American Spectator, Acton Research Director Samuel Gregg examines the baleful influence exerted on economic thought and public policy for decades by John Maynard Keynes. Gregg observes that “despite his iconoclastic reputation, Keynes was a quintessentially establishment man.” This was in contrast to free-market critics of Keynes such as Friedrich Hayek and Wilhelm Röpke who generally speaking “exerted influence primarily from the ‘outside': not least through their writings capturing the imagination of decidedly non-establishment politicians such as Britain’s Margaret Thatcher and West Germany’s Ludwig Erhard.” Perhaps not so surprisingly, many of Keynes’ most prominent devotees are also “insider” types:

The story of Keynes’s rise as the scholar shaping economic policy from “within” is more, however, than just the tale of one man’s meteoric career. It also heralded the surge of an army of activist-intellectuals into the ranks of governments before, during, and after World War II. The revolution in economics pioneered by Keynes effectively accompanied and rationalized an upheaval in the composition and activities of governments.

From this standpoint, it’s not hard to understand why New Dealers such as John Kenneth Galbraith were so giddy when they first read Keynes’s General Theory. Confident that Keynes and his followers had given them the conceptual tools to “run” the economy, scholars like Galbraith increasingly spent their careers shifting between tenured university posts, government advisory boards, international financial institutions, and political appointments — without, of course, spending any time whatsoever in the private sector.

In short, Keynes helped make possible the Jeffrey Sachs, Robert Reichs, Joseph Stiglitz’s, and Timothy Geithners of this world. Moreover, features of post-Keynesian economics — especially a penchant for econometrics and building abstract models that borders on physics-envy — fueled hopes that an expert-guided state could direct economic life without necessarily embracing socialism. A type of nexus consequently developed between postwar economists seeking influence (and jobs), and governments wanting studies that conferred scientific authority upon interventionist policies.

Read Samuel Gregg’s “The Madness of Lord Keynes” on the American Spectator.

Acton’s director of research Samuel Gregg is up at Public Discourse, with a piece titled “Monetary Possibilities for a Post-Euro Europe.” With his usual mix of sophisticated economic analysis and reference to deep principles, Gregg considers European countries’ options should the eurozone fail. If that happens, he says, “European governments will have a once-in-a-lifetime opportunity to rethink the type of monetary order they wish to embrace.”

One such scenario is a three-way monetary division within the EU that reflects the differing political commitments and economic priorities of different nations. Germany and the more fiscally responsible eurozone members such as Austria, Finland, and the Netherlands could, for instance, decide to reconcile themselves to being the only ones with the necessary fiscal and monetary discipline to maintain a common currency.

Alongside this bloc would be two other groups. One would consist of those EU countries such as Britain, Sweden, and Denmark that have maintained their own monetary systems because of reservations about the euro’s implications for national sovereignty. Another group would include EU nations such as Greece, Portugal, and Italy that are simply unable or unwilling to embrace the disciplined monetary and fiscal policies required by a common currency; these nations would consequently find themselves outside the eurozone and reverting to their national currencies.

A more radical monetary opportunity for a post-euro EU would be currency competition. This was once proposed by Britain’s Margaret Thatcher as an alternative to the present common currency. Contemporary proposals for currency competition, such as that advanced by Philip Booth and Alberto Mingardi, involve the monetary authorities of different countries authorizing the use of currencies alongside the euro in domestic settings other than their own. Consumer choice rather than state sovereignty would thus ultimately determine which currencies were used.

Yet another option would be the embrace of what might be called a European gold standard. In the 1950s and 1960s, the German economist Wilhelm Röpke argued that European monetary integration could occur via a nucleus of countries agreeing to adhere to a gold standard, much as had happened somewhat spontaneously in the nineteenth century through a process of unilateral decision-making by individual countries. Once this had occurred, adherents of such a gold standard would have to insist upon all members maintaining monetary discipline as well as freedom and stability in foreign exchange markets.

The stability of the European currency would be assured not by EU bureaucrats, but by the gold standard itself, and by allowance for the expulsion of countries that abuse their big-boy privileges.

Britain just rejected an EU treaty because the Conservative Party decided Brussels was trying to capitalize on the Mediterranean crisis by grabbing more power. The three proposed currency models, Gregg argues, would maintain countries’ freedom by yanking monetary power from central bureaucrats who exercise political power. He reflects further on the composition and history of the eurozone, on the countries’ political and economic freedom, and on what Röpke would have to say in the rest of the piece.

Blog author: jballor
Wednesday, November 23, 2011
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Over at the Economix blog, University of Chicago economist Casey B. Mullin takes another look at some of the recent poverty numbers. He notes the traditional interpretation, that “the safety net did a great job: For every seven people who would have fallen into poverty, the social safety net caught six.”

But another interpretation might have a bit more going for it, actually, and fits in line with my previous analogy between a safety net as a trampoline vs. a foam pit:

Another interpretation is that the safety net has taken away incentives and serves as a penalty for earning incomes above the poverty line. For every seven persons who let their market income fall below the poverty line, only one of them will have to bear the consequence of a poverty living standard. The other six will have a living standard above poverty.

Of course, most people work hard despite a generous safety net, and 140 million people are still working today. But in a labor force as big as ours, it takes only a small fraction of people who react to a generous safety net by working less to create millions of unemployed. I suspect that employment cannot return to pre-recession levels until safety-net generosity does, too.

The conclusion ought to be that policies that provide incentives for people to not seek out work as vigorously as they otherwise might, even if such incentives are unintended consequences, are morally suspect and economically questionable.

In the forthcoming Fall 2011 issue of Religion & Liberty, we interviewed Dolphus Weary. His life experience and ministry work offers a unique perspective on the issue of poverty and economic development. His story and witness is powerful. Some of the upcoming interview is previewed below.

Dolphus Weary grew up in segregated Mississippi and then moved to California to attend school in 1967. He is one of the first black graduates of Los Angeles Baptist College. He returned to Mississippi to lead Mendenhall Ministries, a Christ centered community outreach organization to at-risk individuals that takes a holistic approach to solving problems of poverty. Currently Dolphus Weary is president of R.E.A.L. Christian Foundation in Richland, Miss., which strives to empower and develop rural ministries to improve the lives of Mississippians. Among his numerous degrees, Dolphus Weary also received a Doctor of Ministry (D.Min) from Reformed Theological Seminary in Jackson, Miss. He is a nationally sought out speaker and writer and serves on numerous boards across the state and country. Weary recently spoke with managing editor Ray Nothstine.

– — – — – –

The title of your book is, I Ain’t Coming Back. What story does that title tell?

It tells a story of a young man who grew up in rural Mississippi. I grew up in a family of eight children. My father deserted the family when I was four years old and we lived in a three-room house, not three bedrooms, but a three-room house. All nine of us packed in there. We had holes throughout the house so I understand poverty.

As I grew up, I understood the difference between the white community and the black community. The school bus I rode, you could hear it coming down the road from miles away because it was so dilapidated. The new school bus passed my house. So, being poor and seeing racism and separation between the black community and the while community, I saw that the best thing I could do one day was to leave Mississippi.

I got a basketball scholarship to go to a Christian college in California, and when I got ready to leave Mississippi, I said, ‘Lord, I’m leaving Mississippi and I ain’t never coming back.’

I think that the other part of that is God put me in situations in California where I discovered that racism was not just unique to Mississippi or the South. Racism was found in other places as well, and I had to conclude that racism was not where you came from, but it’s an issue of the heart, and began to deal with that on an all white college campus in California. Then God began to point me back toward Mississippi, so I returned in the summers of 1968, ’69, and in 70. I traveled with a Christian basketball team and toured the Orient. We were playing basketball and sharing our faith at halftime, and there the coach challenged me about full time Christian service as a missionary in Taiwan or the Philippines.

That is when I began to think about am ‘I going into a mission field or am I running away from a mission field?’ And it became clear to me that I was running away from Mississippi as a mission field. After graduating from college and seminary, my wife and I moved back to Mendenhall, Mississippi and we started asking a question. The question we asked ‘is our Christian faith strong enough to impact the needs of a poor community, or is the best thing we can do is tell poor people to give your life to Jesus and one day you’re going to go to heaven and it’s going to be better?’

We began to internalize that to say that Jesus is concerned about you right now. We ended up developing a Christian health clinic and elementary school, a thrift store, a farm, a law office, a housing ministry, to try to take this precious gospel and make it into reality for poor people. Telling them that God loves you, he wants you to go to heaven, but God loves you right now and He wants you to live a decent life on this earth. What the Lord did was bring me back to be a part of the solution and not just to talk about the problem or simply walk away from it.

You also declare that meeting the social needs of people is the duty of the body of Christ. Many now feel that is a concept that is primarily the duty of government. Why is it important that the church lead on poverty issues?

For a long time the evangelical Church in America had this mission of just getting people saved. In Acts, we see the Church caring for people as well as feeding and clothing them. We have gotten away from that. We feel good about going to Africa and Asia. We feel good about flying 50 people across country, paying X number of dollars to fly 50 people to stay a week somewhere. Rather than taking that money and empowering the people in the local community, some want to just take a group and fly somewhere while ignoring their own backyard. We need to rethink mission. Over the last 30 years, we have been preaching a message that says let’s go to Jerusalem, Judea and Samaria, as we move to the remotest parts of the world. The Church, the body of Christ, needs to have a holistic view of reaching people, not just preparing them to go to heaven, but preparing people to deal with some of the social needs as well. I think that the Church has the greatest opportunity to hold individuals accountable and to move people along towards growth rather than along a line of dependency. We are really empowered to do that best in community at the local level.

What do you like most about Mississippi and why are you proud to call it home?

Mississippi is one of the best-kept secrets. The cost of living is still reasonable here. Mississippi is on its way up. It was just 40 years ago or so where Mississippi said we do not want industry, we do not want businesses. About 30 years ago, there was a major marketing push in business magazines saying, “Rethink Mississippi.”

In other words, Mississippi is a place for tremendous opportunity. I love the fact that we are changing. I love the fact that we are moving in a wonderful and fantastic direction. I have traveled all over the country, all around the world and I still believe that Mississippi is a good place. I am proud to call it home. Mississippi is still a place of courtesy. I believe with all my heart that there are many great people in this state.

Director of Research Samuel Gregg’s thoughts on the debate are up at The Corner. He sees a parallel between the Italian crisis unfolding across the ocean and the problems facing the United States — particularly in Michigan, where this debate was held. The collapse of Italy would certainly be a dramatic illustration of the shortcomings of crony capitalism, and Gregg thinks a candidate could find a majority of voters who don’t want that to happen.

With the Italian-flavored shadow of the European Union’s ongoing financial implosion overhanging the United States, it was expected that America’s own fragile economic state would be front-and-center at this debate.

This time, however, there was less argument among the GOP candidates. Instead, there were far more direct critiques of (1) President Obama and (2) the pattern of crony capitalism with which more and more Americans are visibly losing patience. The debate’s setting — the state of Michigan — is a living exemplar of all the fallacies of bailouts and business-union collusion, as well as a failure to promote the type of innovation that produces wealth but that also threatens businesses (like the Detroit car companies) that don’t like competition.

Also noticeable was the increased willingness of the candidates to advocate market solutions to any number of problems, the most prominent being America’s ongoing mortgage farce, the looming crisis of student debt, and the inexorable rise in health-care costs. That’s a welcome development. If this trend keeps up, maybe one of them will make the dismantling of crony capitalism a central plank of his platform. That won’t please the likes of General Electric and the City of Chicago, but there are surely votes there.

In a recent article in the Washington Post, Juan Forero and Michael Birnbaum recommend that in the face of the looming specter of Greek debt default, Europe may learn a few lessons from South America. In particular, they point to the good example of Uruguay and the bad example of Argentina.

According to the authors,

In a story that may provide a lesson for Europe, one country, Uruguay, that was on the edge of financial oblivion organized a fast, orderly and negotiated response that revived the economy and ended a run on banks. Another, Argentina, spiraled into a chaotic default and remains a pariah in world financial markets.

The article lists a variety of reasons, such as tax evasion, political stagnation, and civil unrest, with regards to why Greece is in danger of becoming the next Argentina. There is one aspect, in particular, though, that sheds some interesting light on current monetary practice. According to the article,

Greece is hamstrung by its ties to the euro, which it cannot devalue to make its exports cheaper, and leaving the currency zone might prove even more painful.

Though currency debasement has been possible since time immemorial, it has become easier ever since the “Nixon Shock” of 1971, when the United States ended its tie to the gold standard, affecting every other nation which had tied its own currency to the U.S. dollar for the sake of stability. However, from that point on, most countries have been operating with purely fiat-based currency; a government’s central bank can print as much or as little money as they desire, since its value has no stable grounding. (Grounding the dollar’s value to a specific amount of gold prevented the U.S. from printing more money than gold that it could be exchanged for.)

In a recent article in the Journal of Markets & Morality, James Alvey highlights the analysis of James Buchanan on the ethics of public debt and default. With regards to default, Buchanan identified two common means: open default or concealed default through inflation. By inflating its currency, a country can, in effect, cheat its bondholders out of the amount promised to them by repaying its debts with debased money. To do so is effectively concealed default. Notably, Alvey writes, “Buchanan says that the U.S. government did ‘default on a large scale through inflation’ during the 1970s,” the very decade in which we left the gold standard.

What is fascinating about the current crisis with Greece is that its central bank does not have sole control of the euro. Despite being a fiat currency, its decentralized nature gives it a certain stability.  Concealed default is not an option for Greece, forcing it to make the hard decisions necessary to avert defaulting on its debt or to do so openly.

For more on the history and moral implications of currency debasement, see Juan de Mariana, Treatise on the Alteration of Money, recently translated and published by Christian’s Library Press.