Posts tagged with: free markets

Blog author: rnothstine
posted by on Tuesday, September 23, 2008

Shaped by the conservative movement since childhood, publisher Alfred S. Regnery offers an insider’s take on the influence of conservatives in Upstream: The Ascendance of American Conservatism (2008). Regnery’s father Henry started the company in 1947 and published conservative classics such as God and Man at Yale by William F. Buckley Jr., and The Conservative Mind by Russel Kirk.

Regnery covers just about everything including think tanks, publishers, candidates, religious conservatives, financial donors, the courts, the Constitution, and free markets. He does an excellent job at explaining the merger of traditionalists, anti-communists, and libertarians in to one political force due in large part to the writings of William F. Buckley, Jr. and other intellectuals,
grassroots activists, and the emergence of Barry Goldwater. Regnery also traces how conservative leaders were able to separate themselves from some of the more radical conspiracy minded leaders like Robert Welch of the John Birch Society. Russel Kirk responded to Welch’s charge that President Dwight D. Eisenhower was an agent of a world communist conspiracy by quipping “Ike isn’t a communist. He is a golfer.”

While Eisenhower was a disappointment for conservatives, Barry Goldwater’s presidential candidacy unified and excited the conservative movement on a national scale. Regnery notes:

Not only did people donate their time to Goldwater in record numbers, but they donated their money, too. Until the 1964 campaign presidential elections were financed exclusively by large contributions from wealthy contributors, corporations, lobbyists, and other special interest groups. In 1960, twenty-two thousand people had contributed $9.7 million to Kennedy’s campaign and forty-four thousand people had contributed a total of $10.1 million to Nixon’s. LBJ’s money largely came from labor unions and fat cats. But over one million middle-income people contributed to Goldwater’s campaign. When the campaign was over, Goldwater had the names, addresses, and history of over five thousand donors. He showed that candidates could actually raise more money in small amounts from large numbers of people, and thereby gain financial independence from the GOP establishment.

The Goldwater candidacy failed at electing a conservative to the highest office, but it allowed for its leaders and activists to learn valuable lessons for the future. The emergence of Ronald Reagan and “The Speech” was undoubtedly the greatest triumph of Goldwater’s unsuccessful presidential bid.

Regnery also incorporates succinct and effective arguments on why conservatives opposed Great Society programs, wage and price controls, and new government agencies. He also identifies Richard Nixon’s vast expansion of government power through regulation as another key building block for statist policies.

Another intriguing study by the author is an analysis of neoconservatives, the new right (religious conservatives), and Phyllis Schlafly and the rise of the grassroots.

Regnery demolishes the myth that the conservative movement was largely funded by Texas oil tycoons with briefcases of money or big corporations. In fact, he points out that many big businesses and corporations opposed conservatism because of corporate desire for regulation and less competition in the marketplace. “The right has never had the sort of money available to the left. During the early years of the movement, from 1945 into the mid-1970′s, no more than about a dozen foundations were willing to give money to conservative causes, and most of those were small, family charitable organizations,” says Regnery. The author discloses fascinating stories of notable donors who gave out of concern over the rising decay of free market principles. One example being William Volker, who purchased an academic chair for Frederick Hayek at the University of Chicago. (more…)

Blog author: rob.holmes
posted by on Wednesday, September 3, 2008

In the latest edition of an otherwise scholarly theological journal, a writer, who only ever writes about one subject, attacked the free market as usual. He wrote: “Neither can economics be satisfied with leaving human beings to the mercy of markets with their supposed ‘laws.’. . .” While there is certainly no space to take on his whole article, this part might just be the most serious error in it.

This particular writer, and those trained in his school, which he denies is the German Historical School, but it is, operate from a nominalistic approach. Nominalism, a school of thought begun in the Middle Ages by the Franciscan, William of Ockham, denies that there is any human nature. Therefore, human beings have no necessary consistency in them. In ethics, each person makes up his own code, and the codes can be very much at odds. To a nominalist, everything is will alone, not reason. This is why the writer in question asserts that people are at the “mercy of markets.” To those who think like this, everything is power. Even in moral theology, the reason one obeys the Ten Commandments is that it’s God’s will only, and there is no connection with those commandments and the nature of things. God could have commanded ten other things we were to avoid, and we would be required to obey them, because they are His will, even if they were the opposite of those actually listed. (I am sure many people would not have any trouble with the commandments were that the case) Thus, to those who think in this manner, markets are power, and that’s why there are no laws of economics. That’s why corporations are evil; because money gives them power, which they use to take advantage of others.

The truth of it is that human beings do participate in a common nature, created by God, and this common nature leads people to think and act alike generally speaking. The laws of economics come from this consistency of human nature. Markets do have laws because people make free choices as to what is best for them. The market exists for the sake of the consumer, which includes everybody. If I go to the store and want to buy bananas, and the bananas are rotten, why should I buy them; to support the farmer or the store? If we all did that, people would be encouraged to make junk and I would be encouraged to continue to buy it even if it did not fulfill my needs. Why would I do that?

Let’s take the example to a higher level. I know that there is a demand for office space in my city, so I want to build a tall office building. The office building has to be tall because land in a city is very scarce and therefore very expensive, so I have to build “up.” To do so I need strong steel. If company X has crummy steel, it will not hold up and the building will come crashing down at the first sign of stress. So I must go to company Y that sells steel that will be appropriate to the height of my proposed building. Should I buy the company X steel because I feel sorry for the workers who will not get my business? You tell me; rather you go tell that to the families of the victims of my collapsed building.

Will the steel from company X be cheaper? Perhaps. If I buy it and the building comes tumbling down, am I evil? Well, we cannot judge the soul of another, nor can we read his mind. One thing we do know is that this builder did ignore the laws of economics (and probably those of engineering as well).

Think about the decisions in your life, and see if there are no laws governing your decisions. If gasoline is $.10 per gallon cheaper in the next town, which is 45 minutes away, would you think it is worth it to drive there to get that particular gas, given not only the price but the time involved, and whether it is raining or snowing, and other things that you have to do? Well, you just did a cost-benefit analysis, which every sane human being does in their head many times a day whether they realize it or not. How can anyone say that there are no laws of economics.

Read more from Dr. Luckey at “Catholic Truths on Economics.”

The Summer issue of City Journal features a piece worth reading by Guy Sorman titled “Economics Does Not Lie.” The paper includes weighty arguments favoring a free market economic system and the author does a good job explaining the rationale of those who criticize a free economy. Sorman says:

If economics is finally a science, what, exactly, does it teach? With the help of Columbia University economist Pierre-André Chiappori, I have synthesized its findings into ten propositions. Almost all top economists—those who are recognized as such by their peers and who publish in the leading scientific journals—would endorse them (the exceptions are those like Joseph Stiglitz and Jeffrey Sachs, whose public pronouncements are more political than scientific). The more the public understands and embraces these propositions, the more prosperous the world will become.

These are the ten propositions put forward by Sorman:

1. The market economy is the most efficient of all economic systems.

2. Free trade helps economic development.

3. Good institutions help development. (governments & rule of law)

4. The best measure of a good economy is its growth.

5. Creative destruction is the engine of economic growth.

6. Monetary stability, too, is necessary for growth; inflation is always harmful.

7. Unemployment among unskilled workers is largely determined by how much labor costs.

8. While the welfare state is necessary in some form, it isn’t always effective.

9. The creation of complex financial markets has brought about economic progress.

10. Competition is usually desirable.

Sorman adds:

These ten propositions should guide all economic policymaking, and to an increasing degree they do, worldwide. Does this mean that we’ve reached an “end of history” in economics, to borrow a phrase made famous by Francis Fukuyama, by way of Hegel and Alexandre Kojève? In one sense, perhaps: economic science will never rediscover the virtues of hyperinflation or industrial nationalization. Some critics charge that economics is not a science in the way that, say, physics is—after all, economists can’t make precise predictions, as an exact science can. But this isn’t quite true: economists can predict that certain bad policies will lead necessarily to catastrophe. If economics, a human science, lacks the precision of physics, a natural one, it advances the same way—evolving from one theory to the next, each approximating a reality that eludes our complete grasp.

On a somewhat related note about economic policy, here is a review I wrote about the book Good Capitalism, Bad Capitalism and the Economics of Growth and Prosperity. The review appeared in the Fall 2007 issue of Religion and Liberty.

Why yes, yes she did:

Link: sevenload.com

Via Hot Air.

Two weeks ago, French bank Société Générale announced that off-balance sheet speculation by a single “rogue trader” had cost the company 4.9 billion Euros ($7.2 billion). The scandal had enormous repercussions in international markets leading some commentators to decry the rotten nature of global “casino” capitalism and to call for the reversal of financial liberalization. However, the actual circumstances of the case do not justify more government intervention in financial markets but illustrate individual moral failings and poor internal governance on behalf of the bank.

A new report also suggests that a lack of internal controls and weak enforcement of existing rules may be the real source of the problem at one of the oldest banks in France.

On January 24th, Société Générale said that it had discovered a “massive fraud” through “a scheme of elaborate fictitious transactions.” The event caused a great stir not only for the magnitude of the bank’s losses but also because it is partly blamed for the worst European stock market collapse since September 11, 2001.

Jerome Kerviel, who worked as a junior trader in the arbitrage department at Société Générale, was responsible for betting on markets’ future performances. The bank claims that he had made unauthorized and concealed bets of around 50 billion Euros on European markets. According to the New York Times, Mr. Kerviel told prosecutors that his bets would have resulted in a profit of 1.4 billion Euros for the bank if they had been cashed out by the end of December. However, at the start of this year, stock markets experienced a sharp downturn turning the projected profits into losses.

The French bank discovered the bets in mid-January when auditors in the risk management office noticed a series of fictitious trades on its books. Société Générale then conducted a dramatic market sell-off operation in order to neutralize Kerviel’s deals. Traders estimate that the bank unwound contracts in the range of 20 billion to 70 billion Euros from January 21st to 22nd.

Many suspect that selling all these positions into an already volatile European market contributed to the shocking stock market performance in Europe around that time. This in turn, provoked an unexpected and controversial interest rate cut by the Federal Reserve of 0.75 per cent in order to protect the New York Stock Exchange which had been closed on the day when European markets dived. The curious series of events was summed up by a hedge fund manager who told Reuters that: “The real story here is basically, this guy, paid 100,000 Euros a year, sitting in some office at SocGen, forces the Fed to cut interest rates by 75 basis points, which is basically what happened”.

The huge and wide-ranging market repercussions have given ammunition to the critics of financial liberalization. An editorial of the French newspaper Libération sarcastically entitled “Casino” laments that no one controls the huge sums of money moving around in financial markets and demands tighter regulation of financial markets. It also claims that the scandal embarrasses President Sarkozy’s alleged embrace of laissez-faire capitalism. (more…)

Pat Sangimino wrote an article for the Wichita Business Journal titled, “Documentary seeks to dispel negative images of entrepreneurs ” (subscription required). A premiere of The Call of the Entrepreneur took place in Wichita, Kan., on November 14th. Sangimino noted in his piece:

Some consider Wichita to be the Midwest’s cradle of entrepreneurship. Evidence of that is the original Pizza Hut building, which was moved to the Wichita State University campus in 1984 to serve as a reminder of what can happen to those who dare to dream and are willing to take a chance.

The screening was sponsored locally by the Flint Hills Center for Public Policy. The Center is a think tank dedicated to the constitutional principles of limited government, open markets, and individual freedom and responsibility.

Another noteworthy quote from the article:

The documentary’s three examples of business success could easily be compared with those of Dan and Frank Carney and Pizza Hut, Tom Devlin and Rent-A-Center or Jack DeBoer and his hotels, among others — tales that have become part of Wichita’s enterprise lore.

Erika Andersen reviewed the “The Call of the Entrepreneur” for Human Events in a piece titled, “Entrepreneurship Preserves Life as We Know It.” The Call premiered last week to DC audiences at the E Street Cinema, as part of the Renaissance Film Festival.

In her article Andersen noted the international interest in the film:

Though it initially seems like the tale of the American dream, “The Call of the Entrepreneur” is an international story and is now being translated into Spanish and other languages. In fact, the film experienced its largest premier audience in Nairobi, Kenya with over 450 attendees.

Andersen also easily recognizes the importance of calling, or vocation, in business and in free markets:

The stories restore faith in entrepreneurs’ ability to build lives, strengthen nations and economies as well as fulfill God-given destinies. The film denounces the myth that capitalists are self serving, arguing rather that they are almost wholly devoted to others.

Human Events is one of the oldest modern conservative publications, and the one that President Ronald Reagan called his “favorite newspaper.”

Blog author: rnothstine
posted by on Wednesday, September 19, 2007

In what is shaping up to appear like court imposed taxation, Microsoft lost its appeal in a major anti-trust case at Europe’s second highest court yesterday. The European Union’s Court of First Instance backed the European Commission’s 2004 decision to fine Microsoft and order the software giant to change its Windows operating system to make it more compatible with rival systems. The 2004 verdict imposed a record fine on Microsoft in the amount of $497 million.

The long feud appears, by some at least, to be a case of over regulation by the EU, and a propping up of their own sagging technological market at the expense of consumers. It is, at the very least, a classic example of not trusting the free market to correct any perceived problems or inefficiencies with Microsoft operating systems.

Are iTunes and Apple next?

Here’s a roundup to our running coverage of the Microsoft issue, including Alberto Mingardi’s commentary, titled, Letter from Turin: The EU’s Immoral Case Against Microsoft. In his piece Mingardi said, “What these companies don’t want is for Microsoft to ‘prevent’ them from succeeding in the European market. What competitors really fear is Microsoft’s ability to satisfy consumers better than they do, at a cheaper price.” .

Full Acton Commentary by Alberto Mingardi

Jordan Ballor also weighed in on the PowerBlog:

EU Conflicts of Interest

Open Source, Closed Markets

Also for a valuable look back at Microsoft’s anti-trust past battles in the United States:

Microsoft’s Innovation, Service, and Foresight Result in Consumer Trust and Government Antitrust Action, by Joseph Klesney

Free-Market Morals and the Microsoft Case
, by Jason Miller

Microsoft: A ‘Monopoly’ for the Consumer
, by Robert Crowner

“Is American higher education doing its duty to prepare the next generation to keep America free?” Apparently not, according to researchers at the University of Connecticut’s Department of Public Policy (UConnDPP), in a study commissioned by the Intercollegiate Studies Institute’s (ISI) National Civic Literacy Program.

In a survey of 14,000 freshman and seniors at 50 colleges and universities across the country, every school scored poorly. Also, college seniors, sadly, scored little better than freshman. The average senior score was a failing 53.2%; the average freshman score was 51.7%. In fact, no school scored higher than a D+. The top ten school are listed below:

1. Harvard University 69.56%
2. Grove City College (PA) 67.26
3. Washington & Lee University (VA) 66.98
4. Yale University 65.85
5. Brown University 65.64
6. University of Virginia 65.28
7. Wheaton College (IL) 64.98
8. University of Pennsylvania 63.49
9. Duke University 63.41
10. Bowdoin College (ME) 62.86

A link to the rankings of the fifty schools in the survey are found here. My alma mater, Ole Miss, scored 36th, and Calvin College in Grand Rapids, MI ranked 21st.

Some shocking or not so shocking analysis is quoted below, directly taken from the American Civic Literacy Website. You can also examine the entire website for a treasure trove of facts, findings, and analysis.

Students were asked 60 multiple-choice questions to measure their knowledge in four subject areas: America’s history, government, international relations, and market economy. The disappointing results were published in the fall of 2006 in The Coming Crisis in Citizenship: Higher Education’s Failure to Teach America’s History and Institutions.

The website declares, “This report is not designed to tear down American higher education, but to hold it accountable.” After taking the quiz myself, I scored a 93.33 %, which is 56 out of 60. You can take the quiz here, and see how you measure up against American college students.

In an appropriate quote also taken from the Intercollegiate Studies Institute website, John Quincy Adams, then a state senator, praised the pilgrims of Plymouth Rock:

Among the sentiments of most powerful operation upon the human heart, and most highly honorable to the human character, are those of veneration for our forefathers and of love for our posterity. They form the connecting links between the selfish and the social passions,” he said. “Respect for his ancestors excites in the breast of man, interest in their history, attachment to their characters, concern for their errors, involuntary pride in their virtues. Love for his posterity spurs him to exertion for their support, stimulates him to virtue for their example and fills him with the tenderest solicitude for their welfare.

Do you ever walk into a business and see a license on the wall and wonder if that specific industry really needs to be licensed by the state? I know I have thought that, if just a few times. John Fund of the Wall Street Journal looks at how licensing laws hinders low prices and competition in the marketplace. In a piece titled, License to Kill Jobs, Fund also explains how over regulation has stymied job growth and the ability of new entrepreneurs to become more self reliant.

Fund also notes in his column:

In the 1950s, only about 4.5% of jobs required a license to work. Today, that proportion is more than 20%. Many of the jobs that require a government stamp of approval don’t involve health or safety. Depending on the state, you need a license to be a hair braider, florist, auctioneer, interior designer or even fortune-teller.

The cost of the education for the license also hurts those who may have the necessary skills but can’t afford to meet all the requirements. Furthermore, sometimes the licensing requirements have little to do with the relevancy of the actual work performed. Another aspect Fund looks at is the arbitrary nature and requirements from state licensing, compiled by a major study by the Reason Foundation. California requires 177 specific business types to be licensed, while Missouri requires only 41. The “Live Free or Die” state of New Hampshire, requires a walloping 130 licenses for specific businesses types.

Another interesting point Fund makes is the licensing requirements hurt the very consumers it’s meant to protect. Fund notes just a few of the facts from the Reason Foundation study:

The higher prices such licensing bodies impose for services can also hurt consumers by creating incentives to do dangerous jobs themselves. “Electrocution rates are higher in states with strict electrical licensing requirements, as more consumers risk performing their own electrical work,” the study notes. “Similarly, states with stricter dental licensing laws also have the highest incidence of poor dental hygiene.”

In the Wall Street Journal piece, the author also declares how in some instances the courts have stepped in and found some of the licensing requirements completely unnecessary, and additionally acts as a regulatory infringement on the right to earn a living. Fund also declares, “Some courts are even citing the 14th Amendment’s due process and equal protection clauses in striking down protectionist government regulations.”

Which makes one wonder all the more: Are the over-zealous requirements and so called need for licensing helping the consumer or just perpetuating higher prices, and lack of competition, which can result in inferior products and service? Obviously licensing in some classes of business are needed. But does everybody, in say an interior design or the florist industry need to be licensed? There are large and powerful lobbying groups able to protect and strengthen certain businesses from more competition, but in some cases little help for newcomers trying to break into the market. In addition, we often overlook just how much the market can regulate itself.

It all reminds me a little bit about the stories you see in the news print and media about young children getting their lemonade stands shut down by bureaucratic governmental standards . Concerning the crackdown on lemonade stands, where are the “It’s For The Children” speeches when they are actually needed?