Blog author: kspence
posted by on Tuesday, October 4, 2011

Congress insults our intelligence when it tells us that Chinese currency games are to blame for our trade deficit with that country and unemployment in our own. Legislators might as well propose a fleet of men-o’-war to navigate the globe and collect all its gold: economics is not a zero-sum game.

An exchange on yesterday’s Laura Ingraham Show frames the debate nicely. The host asked Ted Cruz, the conservative Texan running for U.S. Senate, what he thought about the Chinese trade question. Said Cruz, “I think we need to be vigorous in dealing with China, but I think it’s a mistake to try to start a trade war with them.”

“The trade war is on, and we’re losing it,” Ingraham responded. “[China is] subverting the principles of free trade.”

We blockaded the ports of the Barbary pirates when they subverted the principles of free trade — is Ingraham looking for a similar response now? No, she wants weenier measures: just some punitive sanctions here and there to whip China back into shape (because those always work).

Conservatives who are looking through the Mercantilist spyglass have got to put it down, because it distorts economics in the same way Marxism does. Economic growth and expansion of the labor market don’t come by the redistribution of wealth; they come by allowing man to exercise his creative talents, to innovate, to produce.

Protectionists also tend to ignore the inverse relationship between the trade deficit and the inflow of capital to a country. We are a nation of entrepreneurs, and entrepreneurs require investment. All business requires investment. If it’s Chinese investment, then Chinese investors see long term value in the U.S. economy. Sorry I’m not sorry about that.

Our leaders do the country a disservice by proclaiming that unemployment is caused by a trade deficit, and that a build-up of retaliatory tariffs is the way to fix the trade deficit. And they do other countries a disservice also, because U.S. protectionism hurts our trade partners (or potential trade partners). Holding back U.S. economic progress by artificially retaining manufacturing jobs, for example, means that workers in China or Vietnam are denied employment opportunities. It’s mindless selfishness.

Blog author: kspence
posted by on Monday, October 3, 2011

The green tech firm Solyndra secured at $535 million federal loan guarantee in 2009 and was touted as an example of a promising green future. A month ago, the company went bankrupt. Here are the top five lessons we should learn from Solyndra’s collapse.

5. Both sides of the aisle are involved. Republican support of federal “investment” is routine — in fact, the DOE program that made Solyndra’s loan was approved by President Bush. It is true that Solyndra’s original application to the Bush era loan program was denied by the Office of Management and Budget (OMB), but then stimulus bill was passed, with Republican support in the Senate.

4. Stimulus tends to be wasted, and gigantic stimulus is wasted gigantically. The DOE guaranteed loan program’s budget was almost doubled by the stimulus bill, and it became more a money-shoveling operation than a subsidized bank. As Steven F. Hayward wrote in The Weekly Standard, “More than one DOE staffer told me at the time that they didn’t know how they were going to be able to spend all the stimulus money being thrown at the department.”

(Personally, I thought the stimulus bill was great — stimulus money disbursed by the NIH funded my part time job in a lab through college and a lot of the fancy equipment I got to use, but it’s unclear how that use of public money accomplished the Congress’s goal.)

3. Government money turns businesses into consumers, not producers. The Washington Post reported that Solyndra began spending money wildly once it received the DOE loan. “After we got the loan guarantee, they were just spending money left and right,” said a former engineer at the company. And as the Energy Department found itself disbursing money rather than “investing” it, businesses that wanted that money adjusted their efforts accordingly. Investing decisions are made based on a company’s product: can it sell enough to profit its investors? Free money is passed out with considerably less forethought.

Businesses that are serious about getting their share of government cheese (especially businesses like Solyndra for whom the government loan is four or five times the amount of a private investment) turn their focus away from producing something in a financially sustainable way, and become as dependent on government as the clients of the Roman Senate.

2. This story is applicable to the rest of green jobs. Solar trade groups have been defending federal support of the industry, saying for example “You can’t judge an industry by the bankruptcy of one company.” But though Solyndra had its personal demons — its chief competitive advantage evaporated, for instance, when the price of polysilicone fell 85 percent — there’s nothing to distinguish the main faults of this loan deal from any other the DOE might make. These types of disbursals, whichever bureau they come from and whomever they go to, encourage consumption instead of production.

1. Entrepreneurs drive economic growth. Government subsidies pervert the natural incentives of a free market, which is why they’re a bad way to create jobs. They also pervert the nature of work, and in that way violate the Christian vocation. As I explained in an Acton Commentary, the government commodifies workers when it buys jobs, because it strips them of the dignity of productive work and treats them like so many votes to be bought.

Acton’s director of research Samuel Gregg has a piece over at The American Spectator that may surprise big government liberals. (We know you read this blog.) In “Free Market Sweden, Social Democratic America,” he lays out the history of Sweden’s social democracy — its nature and its effects on the country’s economy — and then draws lessons for the United States. The Scandinavian country isn’t quite the pinko nanny state Americans like to look down upon, and we’ve missed their reforms of the last two decades.

Gregg explains that Sweden’s dramatic mid-century expansions of government were portrayed as rooted in the traditional values of the homeland, so Social Democrat governments escaped the soft-Marxism tag, and were able to do pretty much as they pleased. Social programs were also characterized as coverage of universal rights, to be imposed by general taxation. Then came

the decision of governments in the 1970s to hasten Sweden’s long march towards the Social Democratic nirvana. This included expanding welfare programs, nationalizing many industries, expanding and deepening regulation, and — of course — increasing taxation to punitive levels to pay for it all.

Over the next twenty years, the Swedish dream turned decidedly nightmarish. The Swedish parliamentarian Johnny Munkhammar points out that “In 1970, Sweden had the world’s fourth-highest GDP per capita. By 1990, it had fallen 13 positions. In those 20 years, real wages inSweden increased by only one percentage point.” So much for helping “the workers.”

Economic reality was painful, but Sweden responded, and began to unravel some of its “progress,” reducing the public sector and even allowing private retirement savings. Unemployment was still high though — about 20 percent — in large part because the country’s tax structure encouraged joblessness.

But with a non-Social Democrat coalition government’s election in 2006, Sweden’s reform agenda resumed. On the revenue side, property taxes were scaled back. Income-tax credits allowing larger numbers of middle and lower-income people to keep more of their incomes were introduced.

To be fair, the path to tax reform was paved here by the Social Democrats. In 2005, they simply abolished — yes, that’s right, abolished — inheritance taxes.

But liberalization wasn’t limited to taxation. Sweden’s new government accelerated privatizations of once-state owned businesses. It also permitted private providers to enter the healthcare market, thereby introducing competition into what had been one of the world’s most socialized medical systems. Industries such as taxis and trains were deregulated. State education and electricity monopolies were ended by the introduction of private competition. Even Swedish agricultural prices are now determined by the market. Finally, unemployment benefits were reformed so that the longer most people stayed on benefits, the less they received.

By 2010, Sweden’s public debt had fallen dramatically and its rate of economic growth was 5.5 percent. Compare that with America’s 2.7 percent growth in 2010, and just try to restrain your jealous impulses.

Gregg cautions that Sweden’s economy is still hampered the Social Democrats’ legacy. High minimum wages keep a full quarter of the country’s youth unemployed, and a carbon tithe to the religion of environmentalism retards growth, but

It’s surely paradoxical — and tragic — that a small Nordic country which remains a byword for its (at times obsessive) commitment to egalitarianism has proved far more willing than America to give economic liberty a chance.

Full article here.

Blog author: jcouretas
posted by on Wednesday, September 28, 2011

On The Freeman, PowerBlog contributor Bruce Edward Walker marks the 70th anniversary of the publication of Arthur Koestler’s Darkness at Noon and the essay “The Initiates” published a decade later in The God that Failed. As Walker notes, “it’s a convenient opportunity to revisit both works as a reminder of what awaits all democratic societies eager to abandon liberties for the sake of utopian ideologies.” Koestler’s Noon, he says, is where the author is at the height of his powers “capturing the mindset of the collectivist fantasy in order to completely dispel its flawed precepts.” Walker also reminds us that class struggle leads to a dead end:

What differentiates Koestler’s work from other highly lauded literary attacks on collectivism by George Orwell, Aldous Huxley, and Stanislaw Lem is perspective. Whereas the other writers projected the results of communism in novels depicting dystopian futures—Lem by necessity since he was living in Soviet-controlled Poland; Orwell and Huxley by choice—Koestler, recognizing the Soviet Central Committee’s initiatives to reconstruct all history as a class struggle between the bourgeoisie and proletariat, documented what had already occurred under Stalin’s reign of terror during a decade of famine, the Great Purge, and the Moscow show trials. While the famines and purges resulted in the deaths of tens of millions of Soviets, the show trials are characterized as an absurd travesty of Kafkaesque proportions in which Soviet apparatchiks obtained public confessions from old-guard Bolsheviks on trumped-up charges, resulting in the coerced “confessions” of counterrevolutionary activities and subsequent executions.

Here’s Orwell on Koestler:

The sin of nearly all left-wingers from 1933 onwards is that they have wanted to be anti-Fascist without being anti-totalitarian. In 1937 Koestler already knew this, but did not feel free to say so.

Read Bruce Edward Walker’s “Tyranny Afoot: Arthur Koestler’s Communist Chronicles” in The Freeman.

Billionaire Democrat Ted Leonsis wrote a posting titled “Class Warfare – Yuck!” on his blog yesterday, in which he implored the president, to whose campaign he donated the maximum amount: “Hit a reset button ASAP. Rethink how to talk to businesses and sell business leaders on your plan to make America great! Many of us want to be a part of the solution. We aren’t the problem.”

Today, Charles Schwab published an opinion piece in the Wall Street Journal, and again the title says it all: “Every Job Requires an Entrepreneur.” If there is to be an economic recovery, he says,

The leaders of both parties, Republicans and Democrats alike, must lend their voices to encourage and support private enterprise, both for what it can do to turn our economy around and for the spirit of opportunity it represents.

These two men are individually responsible for the creation of hundreds of thousands of jobs because of the innovations they brought to the internet (AOL) and to stock brokerage (Charles Schwab Corp.). And their businesses have done more than employ lots of people; they have lowered the cost of internet access and financial services for millions of Americans. These men have done immense good for “less fortunate Americans,” and Ted Leonsis feels insulted by corporate jet demagoguery,

I own 50 hours on NetJets for the rare occasion I do travel by private plane. Does Air Force One charter out? Stop making private planes an issue. This is a tiny issue for us to deal with for our country.

Trying to shackle investment and entrepreneurial activity does the unemployed no good (nor our national debt). And no rhetorical strategy could be more opposed to the Christian principle of solidarity than the vilifying of successful entrepreneurs — the effects of such a strategy on public morality should be immediately obvious.

The corporate jet talking point is meant to stir envy in the hearts of listeners — it’s a trifling proposal that packs maximum rhetorical punch — and government by envy will get you nowhere.

Religion & Liberty’s summer issue featuring an interview with Metropolitan Jonah (Orthodox Church in America) is now available online. Metropolitan Jonah talks asceticism and consumerism and says about secularism, “Faith cannot be dismissed as a compartmentalized influence on either our lives or on society.”

Mark Summers, a historian in Virginia, offers a superb analysis of religion during the American Civil War in his focus on the revival in the Confederate Army. 2011 marks the 150th anniversary of America’s bloodiest conflict. With all the added attention the conflict is receiving, a piece focusing on faith is especially poignant. “The Great Harvest” by Summers notes that the revival was “homespun,” meaning one that was organic in nature and spread among the common soldier.

I offer a review of Darren Dochuk’s new book From Bible Belt to Sunbelt. Dochuk tells the tale of the great migration from the American South to Southern California. This development ultimately transformed evangelicalism and national politics. It also helped in wedding many religious conservatives to economic conservatism.

“The Separation of Church and Art” is an excerpt from the forthcoming book, Wisdom & Wonder: Common Grace in Science & Art by Abraham Kuyper. Available for the first time in English, Christian’s Library Press will publish Kuyper’s work in November. The Acton Institute has played a tremendous role in the translation project. You can find out more about that role here.

The “In The Liberal Tradition” figure is American Founder Oliver Ellsworth. Ellsworth, a strong proponent of federalism was instrumental in the shaping of our Republic. American President John Adams called Ellsworth “the firmest pillar” of the federal government during its earliest years. In a new biography about Ellworth, author Michael C. Toth argues that Ellsworth’s Reformed faith not only shaped his personal life but the model of federalism he supported also had deeply religious roots within Connecticut.

There is more content in this issue. Past issues of Religion & Liberty are also available online.

Blog author: jballor
posted by on Wednesday, September 28, 2011

In the latest issue of Religion & Liberty, Acton Institute executive direct Kris Mauren answers the question, “Why does the Acton Institute publish the Journal of Markets & Morality?”

For more, check out my interview with Micheal Hickerson of the Emerging Scholars Network.

You can support the work of the journal by getting a subscription for yourself or recommending a subscription to your library of choice.

Blog author: kspence
posted by on Tuesday, September 27, 2011

Roger Scruton has written an excellent piece on the moral basis of free markets; it’s up at MercatorNet. He begins with the Islamic proscriptions of interest charged, insurance, and other trade in unreal things:

Of course, an economy without interest, insurance, limited liability or the trade in debts would be a very different thing from the world economy today. It would be slow-moving, restricted, and comparatively impoverished. But that’s not the point: the economy proposed by the Prophet was not justified on economic grounds, but on moral grounds, as an economy of righteous conduct.

Our long-term economic malaise may mystify world leaders, but Scruton sees its causes clearly: ways intended to speed economic development have become ways to acquire luxuries without payment; we have confused trade in debts with others’ assumption of our debts. This moral confusion is as much to be found in governments as it is in private markets, because the incentives are exactly the same — anyone who denies it is lying.

If you borrow money you are obliged to repay it. And you should repay it by earning the sum required, and not by borrowing again, and then again, and then again. For some reason, when it comes to the state and its clients, those elementary moral truths are forgotten.

Scruton concludes that morality is inescapable — though we may delay it, judgment will come.

The moral sense emerged in human beings precisely because it has proved to be, in the long run, for their advantage. It is the thing that puts a brake on reckless behaviour, which returns the cost of mistakes to the one who makes them, and which expels cheating from the fold. It hurts to be punished, and states that act wrongly naturally try to avoid the punishment. And since they can pass on their hurt so easily to the rest of us, we turn a blind eye to their behaviour. But I cannot help thinking that the result is at best only a short term economic advantage, and that the long term costs will be all the greater. For what we are seeing, in both Europe andAmerica, is a demoralisation of the economic life. Debts are no longer regarded as obligations to be met, but as assets to be traded. And the cost of them is being passed to future generations, in other words to our children, to whom we owe protection and who will rightly despise us for stealing what is theirs.

Read the full text here.

Acton Research Fellow Dr. Anthony Bradley spoke about his book Black and Tired: Essays on Race, Politics, Culture, and International Development at The Heritage Foundation earlier this month, and the video is now online.

Dr. Bradley explained just why he called his book “Black and Tired:”

The hopes and dreams, aspirations, virtues, institutions, values, principles that created the conditions that put me here today, are being sabotaged and eroded by those who have good intentions, but often do not think through the consequences of public policy decisions, because they have different views on the human person, and human dignity, then those who actually structured our government in the first place. And while the effects of this anthropology are not immediately seen, the long-term effects have been uniquely and harshly experience among a black underclass, and this makes me tired.

Dr. Bradley blames a “poisonous cocktail” of converging trends that has allowed a class of political elites to sabotage and erode the American spirit. He blames the decline of American religious life, the erosion of an understanding of human dignity, and concern with equality of results rather than equality of process. These trends are symptomatic of a pervasive narcissism, says Dr. Bradley, that sets them off and is then fed by them.

The black community needs an ethical rebirth — as Dr. Bradley says, “moral problems require moral solutions” — in order to escape the fatal “patriarchy of good intentions.” His book provides lessons for a recovery of black culture and a return to moral responsibility. He reminds the audience,

The Civil Rights Movement at its core was about … liberating African Americans from the control of others who sought to make their decisions for them, as if they were children. So during the civil rights movement you saw men carrying placards that read “I AM A MAN” — I’m not a boy.

For how to turn things around, to turn out men instead of boys, read Dr. Bradley’s book. Here’s the full video:

Blog author: rnothstine
posted by on Tuesday, September 27, 2011

For some, in our still largely affluent society, there is a deep seated need to be a member of the victim class. The background of your socioeconomic privilege is no obstacle, as they must create a narrative that points to being a victim. While some might aspire to sainthood, others aspire to victimhood. This video and report courtesy of The Blaze sums it up well. It would be unfortunate if charades like this drown out the real instances of injustice and those that are truly marginalized.