President Names Monopolist to Competitiveness Board

"Anyone who has observed how aspiring monopolist regularly seek and frequently obtain the assistance of the power of the state to make their control effective can have little doubt that there is nothing inevitable about this development [of central economic planning].~~~F.A Hayek, The Road to Serfdom 

President Obama just named GE CEO Jeff Immelt to the "President's Council on Jobs and Competitiveness."  Competitiveness is italicized for a reason--it is ironic Immelt would be named to any advisory board with such a word in its title.   This is like naming Willie Nelson to chair a national advisory board on tax compliance.

Immelt displays little knowledge and even less affinity of competing openly in the market economy; to the contrary, he specializes in lobbying the federal government to legislate competitors out of his way and monopolizing the market by having government mandate the energy mechanisms and technologies that only his company, GE, can provide to consumers.

Not really competitive now, is it?

In his invaluable book, The Big Ripoff, Tim Carney documents Immelt's record of attempting to corner the energy market through the coercive regulatory power of the federal government, all the while building GE's public image up to one of a progressive, environmentally-conscious company.

Starting in 2005, GE launched its "ecomagination" public relations campaign wherein Immelt insisted GE was committed to providing cleaner, greener energy.  That's nice, but his method of doing so was anything but "competitive."  As Carney illustrates,

"Ecomagination involves investing in certain fuels and technologies, and then working with government to make those fuels or technologies mandatory."

And where did GE and Immelt decide to launch the bold new Ecomagination?  New York, the economic and financial center of the free world?  No.  Silicon Valley, that global symbol of technical innovation? Nope.  Ecomagination launched on Pennsylvania Avenue in Washington DC somewhere between Congress and the White House, the very belly of the regulatory, wealth-destroying Leviathan that has for decades stood in the way of competitive wealth creation.

Immelt, on that occasion:

"Industry cannot solve the problems of the world alone, we need to work in concert with government." [Emphasis added.]

Again, Immelt really does seem interested in "competitiveness" now, does he?

Then there is that little thing called Cap and Trade.  GE is an enthusiastic supporter of and lobbyist for the bill which would levy one of the largest tax hikes in history and completely cartelize the energy market with GE and the federal government in effect fixing all prices and controlling the entire market.

Yea, not too much "competitiveness" in Cap and Trade.

Perchance Immelt has since turned from his desire to collude with government and make competition illegal.  Let's see what he had to say as late as 2008 in a letter to shareholders?:

"The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner." [Emphasis added.]

Well that's not good but wait a tick.  To be fair that was almost three years ago.  What did he have to say just yesterday about competitiveness after being named to the president's new board?:

"The president and I are committed to a candid and full dialogue among business, labor and government to help ensure that the United States has the most competitive and innovative economy in the world." [Emphasis on monopolistic anti-competition verbiage added]

ObamaCare and Model T Fords: Give Free Exchange a Chance

Who made more money and became a household name around the modern world: Henry Ford or the guy who started the Rolls Royce company?  (See, I have no clue who the latter is.) 

Now that Obamacare has been back in the news it is a good time to consider why Ford became so rich and renowned.  What's the connection?  When it comes to health care we reflexively assume it is a political problem and not an economic one.  Being that it is a heart an economic issue, what would be the best way to delivery affordable health care to 300+ million Americans who, presumably, actually want affordable health care?

Ford found a way to provide millions of Americans with something they wanted.  He dropped the price of an automobile from $850 in 1909 to $290 in the 1920s.  By "dropped the price" I mean he saw that  economy of scale and selling more cars to more people would make him more money so he decreased the cost of production through greater efficiency.  This profit mongering made the horseless carriage available to more and more people at a cheaper price.  

Ford operated in a vastly freer and broadly less government controlled environment.  Providing affordable automobiles to millions of Americans was also not a politically-charged endeavor wherein politicians demagogued the car industry at every turn and people assumed they had a "right" to not have to pay for one. There were no government subsidies, Motorcare, or Motorcaid getting in between Ford and his goal of delivering affordable and reliable Ts to his customers.   

In short, Ford did not have the government stopping him from providing Americans with what they want. 


For decades now the health care system has become increasingly entangled in cumbersome state and federal regulations and mandates.  Add to this efficiency-killer the insurance problem: for generations Americans have become accustomed to the third party model of paying for services.

Were Ford alive today and interested in turning his time, talents, energies, and capital towards providing Americans with more affordable health care he would have a much more difficult time delivering lower costs.  Actually given all the restrictions, regulations, government intervention, and insurance cartels provided by ObamaCare, he probably would not even give it a go.  Government is simply in the way.

The 2,700+ page health care law that will get piled onto all this mess (What could go wrong?!) will compound the very problems that have led to unnecessarily high prices in health care: increased bureaucratization, increased governmental command, and less consumer control.

So the Republicans have symbolically repealed Obamacare in the House.  That's nice, but how about publicly discussing that whole freedom in the market place thing that's worked somewhat well for us since the colonial days?  In every market that is unsubsidized and not controlled through the regulatory regimes in DC, Americans enjoy affordable and quality products and services. 

Milton Friedman makes the case:
   
Pro-freedom policies are a proactive, forward-looking approach to lowering the price of

health care.  Insisting on more central planning, corporatism, and government control of our lives is a turning back of the clock to the times that predate free markets and prosperity in modern society.   

We don't need to resurrect Henry Ford.  We need to resurrect the free market environment in which he made his millions by lowering the costs of a product Americans desired.  Now that's a progressive policy for health care. 

Economic Checks and Balances

Economic Checks and Balances
A prior post with some tweaks:
~~~~~~~~~~

One of the most overlooked and effective checks on government and guardian of individual freedom is the existence of private property and the mere existence of free market capitalism.

Ludwig von Mises, in his classic exposition, Liberalism: The Classical Tradition, remarks:

"There is an inherent tendency in all governmental power to recognize no restraints on it operation and to extend the sphere of its dominion as much as possible...If only private property did not stand in the way!  Private property creates for the individual a sphere in which he is free of the state.  It sets limits to the operation of the authoritarian will.  It allows other fores to arise side by side with and in opposition to political power...It is the soil in which the seeds of freedom are nurtured and in which the automony of the individual and ultimaely all intellectual and material progress are rooted." [Emphasis added.]

The recognition of and respect for private property sets a “No Trespassing” sign (or, for you Lord of The Rings geeks—like myself—a Gandolf-like You Shall Not Pass! declaration) between ourselves and our economy and the authoritarian proclivities of government.  Hence, the vital importance of insisting on economic freedom: If we are free to voluntarily exchange our property among ourselves, we create forces outside of and in opposition to the power of government.  We create and maintain one more check on the power of government.

Think of it as economic checks and balances.  We, the People create and maintain the free market economy through the voluntary exchange of our private property, making arbitrary government actions less likely.

In Capitalism and Freedom, Milton Friedman also stresses the importance of private property and its resulting free market as an economic counter force to the power of government: "History suggests only that capitalism is a necessary condition for political freedom." 

Why?  In a free market society economic power is widely dispersed among many millions of hands in which government has a limited role prescribed by law.

If government comes to direct and control the economy by laying claim to too much of our private property, it comes to control both political and economic power over our lives.  Economic power is then transferred from millions of hands working through voluntary exchange who hold no coercive power over each other to being concentrated into a few sets of hands in government regulatory agencies who already possess coercive political force.  

“By removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power.  It enables economic strength to be a check to political power rather than a reinforcement.” [Emphasis added.]

Thus the folly of believing we can remain free by being only persnickety about civil rights such as free speech and freedom of religion but neglecting to jealously guard our economic freedom and private property rights.  We cannot afford the confluence of political force and economic power in the same hands.

As the discussion of repealing or improving the recent health care law revs up, keep in mind the enormous control over both the economy and our personal lives government stands to a accumulate as the law gets phased in over the next few years.  Your body is certainly your property, and how we pay for our health is a matter for our cooperative, free market economy, not a matter of coercive political power.  Allowing government force to control the health care market would be wildly unhealthy, both literally and politically.

Ignorance is Bliss: Knowledge, Progress, and Freedom

"All political theories assume, of course, that most individuals are very ignorant.  Those who plead for liberty differ from the rest in that they include among the ignorant themselves as well as the wisest."  F.A. Hayek, The Constitution of Liberty

It seems counter-intuitive to suggest that the preservation and progress of civilization depends on a great amount of ignorance.

  Hayek points out in chapter two of Constitution, The Creative Powers of A Free Civilization, that societies should take seriously the Socratic admonition that ignorance is the beginning of wisdom.  Doing so leads to the practical conclusion that freedom in society is the genesis of the advances in civilization we've come to take for granted.  Freedom is also the best policy to ensure we preserve the progress already made and continue to progress and flourish.

For an individual to take the Socratic approach to wisdom, he or she recognizes they are ignorant about a great deal of life and do not presume to act upon knowledge they do not have. "I know what I do not know" is an excellent way to walk a path to greater understanding and avoid the trappings that await those less humbled by their ignorance. 

As a society, it would greatly behoove us to admit so much and recognize that civilization has not made advances through carefully planned strategies from   experts.  Believing so leads to the erroneous conclusion that there is a fixed amount of ignorance that can be conquered with the advance of science and that human activity can, and should, be efficiently arranged and ordered, and that society should be less free to go about in an uncoordinated (that is, free) way  pursing respective self-interests through competitive capitalism. 

"It is for this reason that those intoxicated by the advance of knowledge so often become the enemies of freedom." 

Even a cursory view of the brutal totalitarian regimes of the twentieth-century are chilling historical testaments to the lengths to which such intoxication can lead.

Individually we benefit a great deal from the workings and knowledge of countless other individuals in society.  I, for instance, am very much ignorant as to exactly how the bag of coffee beans I conveniently bought two miles from my home arrived there for me to purchase.  How were they harvested, roasted, packed, shipped, distributed, trucked, promoted, sold, bought, arranged, etc., etc., etc.?  And how does every business involved in this process operate, and how many other businesses and people are involved in how they respectively operate?

I don't know. 

But I ignorantly bought and enjoyed the beans anyway, all because many, many people in society are individually pursing their own self interests and utilizing the knowledge they have and I do not.  Multiply that one bag of coffee beans and the many people it required to deliver it to a shelf two miles from my house by the countless goods and services and countless more people and respective knowledge it requires to provide the current high standard of living for 300+ million Americans enjoy.

That is a lot of individual, respective knowledge spread out over a lot of people, and that equals a lot of collective ignorance as to how society has generated the advances we have come to take for granted.

What central board of experts could possibly command so much information?  What person could possibly control just coffee beans?

Hence embracing ignorance and allowing for a maximum amount of liberty in society is the only way to preserve and ensure progress:

"Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen."

As we face a future where our health care and personal property are headed for increased control by the federal government, it would be best to remind ourselves and Capital Hill there is a lot they do not know about our own health, lives, retirements, etc.  Greater restrictions on our freedom to maintain the health of our bodies and the fruits of our labors would be societal regress, not progress consistent with the preservation of civilization.

If government is limited according to how much it does not know, and we are free order the welfare of our lives we can confidently proclaim that ignorance, in this context, is a good thing.

You might even say it is bliss.

The Disasterous and Instructive Presidency of Hoover

All the Hoover-was-doggedly-laissez-faire lore is terribly incorrect.  One probably reacts: "He was a Republican so he must have been against government intervention, right?"  That assumption is a bit like thinking Jeffrey Dahmer was a vegetarian if he did not eat animals.  That's a disgusting analogy but so is myopic interventionism!

Revisiting the historical record sheds truth on the matter and gives us deeper insight into what did actually cause that particular depression to be so great.

Hoover does indeed deserve blame for the depression but not because he did too little.  As a self-described progressive he intervened too much and set the table for the hyper interventionalism and meddling of the New Deal.  Good one, Herbie!

To that point in history (1929-1932) Hoover set all the records in relation to government intervention in the economy and spending, only to be eclipsed by the dizzying manipulation of society by his successor, FDR.

Here are some examples, from an excellent book on economic history, How Capitalism Saved America, by Thomas J. DiLorenzo.

• As Commerce Secretary under President Coolidge, Hoover disliked open competition in the market and favored government-coordinated competition, calling it "cooperative competition." This laid the groundwork for FDR's National Industrial Recovery Act and the National Recovery Association, a noxious system whereby businesses were forbidden from competing below government-dictated price levels. Policies were set by business cartels supervised by government, and enforcement was provided by the government.

• As president he pushed for and signed the Smoot-Hartley tariff act. This high tariff cut off trade with consumers around the world, set off retaliatory tariffs from other countries, and greatly depressed domestic production of agricultural and manufacturing goods as the tariff killed global demand for American products.

• Hoover was an enthusiastic proponent of public works. As DiLorenzo points out, by 1931 (FDR was not president until 1933) total government expenditures on public works was as high as any other year in the decade! This is astounding when we consider the millions FDR put on the public payroll with his myriad of works programs. Hoover also encouraged state governments to increase spending on public works.

• By 1931 Hoover's spending created a $2 billion deficit.

• He pushed through the largest tax increase in history, to that point in time. Income, corporate, surcharges, estate, and gift taxes all went up.

• Hoover created the Agricultural Marketing Act, creating a government-created cartel of large corporate interests in the form of the Federal Farm Board. This board colluded production interests, reduced production, and drove up prices of agricultural goods. This was the predecessor of FDR's Agricultural Adjustment Act.

• He created the Reconstruction Finance Corporation (RFC). This board used tax payer funds to prop up uncreditworthy entities with credit, leading to the watering down of free market pressures and forces in lending and finance. This effectively steered capital investment away from productive ventures and job-creating businesses, skewing the market and depressing wealth creation and, therefore, job creation.

Decidedly not laissez-faire, all.  Just as important, decidedly unconstitutional, all.

And all these gross interferences in the market occurred during the onset of a depression, paving the way for the only Great Depression in American history:

• When the market needed more freedom, not less, to create wealth and jobs, Hoover intervened.

• When people needed to save more of their own property in the form of savings, Hoover increased taxes.

• When entrepreneurs and businesses needed more certainty in the market in order to invest and plan for the future, Hoover rocked the boat with interventionalism.

• When the country could least afford deficit spending, Hoover piled it on.

So history tells us the Progressive-Light, damn-the-Constitution RINO phenomena is not a new one in the Republican Party.  This history also teaches as long as the government is too big, its authority too far reaching, and our freedoms insecure, we need to place no faith in political parties and the politicians that bear their banners.

If only there were some written document into which we could place our trust, to which these politicians had to swear to uphold and defend, something that limited the power of the offices of the government they occupy, something that was the first in history to prioritize individual rights over the privileges of the power of the state...

Progressive or Regressive?

"The myth of socialism is far stronger than the reality of capitalism. That is because capitalism is not really an 'ism' at all. It is what people do if you leave them alone."~~Arnold Beichman

From a prior post with some revisions...This has been on my mind a lot lately:

Progress is the act of moving forward toward good things. Regress is the act of sliding backwards away from good things already enjoyed.

Historically, societies progressed away from hand-to-mouth existences by embracing free and cooperative exchange.  Real material progress began wherever there were free markets, free trade, and government policies that allowed for the unplanned progress of society. Regress, poverty, and stagnation have occurred every time governments suppress freedom and seek to turn the clock back to the mercantile-style government planning of economies, attempting to shape societies into the image of their choosing.

It is interesting and befuddling, then, that the economic and social policies of self-described “progressives” (or, generically, “liberals”) point us backward to the kinds of mercantilistic, central planning authority in governments that both predates any real progress in the world and has been the source of social and economic regression.

Prior to the expansion of free market capitalism in19th century Europe economic activity was dictated by the mercantile policies of a handful of people in governments. In Liberalism, The Classical Tradition, Ludwig von Mises reminds us that western Europeans in the period between the end of the Napoleonic Wars (1815) and the beginning of the first World War (1914) experienced an unprecedented improvement in the standard of living alongside a quickly rising population.

How did that happen? Mises explains that because of free market capitalism, millions of erstwhile serfs became the consumers that entrepreneurs sought to please. Because serfs wanted a higher standard of living and because other people were free to provide so much for them, society progressed out of centuries-old patterns of inter-generational poverty. This “democracy of the market” unleashed the creative and productive power of societies: "By the time of the start of the Great War, the average industrial worker in England and the U.S. lived better and more graciously than the nobleman of not too long before.”

In Basic Economics, Thomas Sowell highlights the rapid progress countries experienced when they loosened government restrictions on trade and price controls. India, New Zealand, Sri Lanka, South Korea, and China all experienced progress by permitting more freedom, not less, in their markets. In 1978 “less than 10 percent of China’s agricultural output was sold in open markets, but, by 1990, 80 percent was.” From 1978 to 1995 China experienced an annual economic growth rate of 9 percent.

As for aversion to freedom and regressive policies think of the living conditions in Cuba, North Korea, the Soviet Union, eastern European communist countries, and third world countries ruled by authoritarian governments. The contrast could not be sharper. These examples mark a regression to precapitalistic times before freedom in the market place was embraced.

Returning to the progressive/liberal identification in contemporary political culture, here is Milton Friedman bemoaning what the term “liberal” has come to represent:

“In the name of welfare and equality, the twentieth-century liberal has come to favor a revival of the very policies of state intervention and paternalism against which classical liberalism fought. In the very act of turning the clock back to seventeenth-century mercantilism, he is fond of castigating true liberals as reactionary!”

Liberal has come to mean illiberal; progressive has come to mean regressive.

The more Americans understand that real human freedom is not an abstract concept but is at the heart of the only real progress in world history, the closer we’ll come to approximating a reinvigorated belief in freedom into real policy.  Proponents of freedom should heartily take on the "progressive" label and remind others just what makes them progressive.

A belief in freedom is a belief grounded in history and realistic optimism about the resourceful, creative, and productive powers of Americans and other capitalist societies in the world.  Insisting on a policy of freedom is our best way of progressing forward, slowly but most assuredly out of this debt-riddled recession into which we've allowed our neo-mercantilists to bog us down.

Otherwise, we have no where to go but backward.

Gridlock, Political Parties, and The Constitution.

"In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.  A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions." James Madison ("Publius") Federalist 51

On the eve of a newly-divided Congress anxiety is stirring up over the prospect of a--gasp!--gridlocked government.   With no more one-party rule,  how will anything get done?

The premise of this anxiety rests on two assumptions that need reconsidered:

1. Only good things transpire when all branches of the government act in one accord without obstruction or party bickering, and, conversely,
2. When government is gridlocked nothing good happens

Add to these premises an important fact we too often forget: Even with one-party rule of the House, Senate, and White House, the federal government is still divided and designed to internally conflict with itself and hence limit the power of government in our lives.

Consider some historical examples of what happens when one party controls the Senate, the House, and the White House.

2009-2010:  Democrats in control.  What "got done"?

• A trillion dollar special-interest payout piece of..."legislation," (Whew. Almost broke a New Years resolution there.) was piled on top of our staggering debt.  It was euphemistically called a "stimulus package" but all it stimulated was the debt and a downturn in the economy during a recession (and the burgeoning Tea Party movement).
• A thinly-veiled bailout of the Auto Workers union transpired which led to the government take-over of GM.  Mussolini could not have drawn up a better "co-operative" between industry and government planners.  How's the whole Chevy Volt masterpiece of corporatism going these days, by the way?
• A staggering 2,700 page health care bill creating vast new powers over the lives of every American was passed over massive public disapproval and bi-partisan opposition in the House.  Oh, and that purchase-or-punishment provision was tucked in there that authorizes the federal government to force you, an individual, to purchase a product from a private company.  Buy insurance or be fined or jailed.    
• College loans get nationalized.  Reflecting on the track record of prices after government subsidies in health care, housing, and college loans up to this point,  what could go wrong? 
• Fannie Mae and Freddie Mac get nationalized and continue on with an endless line of instant credit to the Treasury Department, that is, the backs of the US taxpayers.  

But wait!  Order now and you'll get two versions of one-party government running the country deeper into debt and further away from a constitutionally-limited government!  (Separate shipping and handling fees apply but may be subsidized...)

2003-2007: The Republicans controlled the Senate, House and White House.  What did they "get done"?

• An unconstitutional, unwarranted, unnecessary war is initiated in Iraq.  With it came unknown civilian deaths, still occurring, ostensibly in a global strategy that began in reaction the murder of our own non-combatant innocent civilians on 9-11.  Now there's some irony chew on.  Several thousand US troops have died and many more marred for life, all for what, again?  Then there's the obligatory endless occupation and troop presence (how is the exit strategy in Germany, Japan, and Korea going, anyway?).  That's not going to reduce the debt.
• Federal spending and the size of the government exploded during the reign of the party that says it's devoted to smaller government and fiscal responsibility.  
• A new federal entitlement drug benefit program was initiated by the party of limited government and personal responsibility, getting the debt really rolling early in W's first term.  The Dems used that as rhetorical precedent for their 2010 initiation of nationalizing health care.  Good one, Dubbya!
• Steel tariffs.  Like all protective tariffs, this is guaranteed to screw the consumer and taxpayer.
• Nationalizing education standards and letting Ted Kennedy write an "education" bill.  Look out, Korean, Japanese, and Indian grade schoolers: Our federal bureaucracy is more involved in local education now.

Back a bit further: 1933-41.  FDR and the progressive Democrats have fiat power to do whatever they wish.  What "got done"?

• Unemployment never went below 14%, averaging 17% from 1934-40.  FDR made it a crime to own gold, tripled taxes, intentionally made everything more expensive for everyone, destroyed food (6 million hogs, for instance) when people were literally starving, and created a double depression (1938).  (How about a book instead of a link?: FDR's Folly)
• Government-orchestrated monopolies in agriculture (via the Agricultural Adjustment Act) colluded to raise commodity prices at a time when people had fewer dollars to buy the bare necessities to avoid dying.
• Government planners sent agents into nearly every small business (via the National Recovery Act) and threw people in jail if they lowered their prices for customers who had less money, setting prices below government edicts.  (See the Supreme Court case Schecter v. U.S.)
• The only certainty was uncertainty, due to the inability to put a roadblock in the way of government (that is, limit its scope and power), so there was virtually no investment or capital accumulation, what's most needed for recovery
• A deep recession descended into the worst depression in US history.  Hence, America's only great depression

By contrast, shortly after the "government shutdown" of 1995 a "divided government" accomplished balanced budget legislation.  Is that even conceivable in 2011?

During all the above occurrences the federal government was actually divided by branches and Congress divided by chambers.  One department, irrespective of which party controlled it, could have at any one time exercised its constitutional rights and duty and interfered with the operations of the other departments and forestalled or prevented any of the above travesties.

Parties are extra-constitutional entities that should compliment and assist the separation of powers, as we'll most likely see with a new House coming in this month.  Party spirit should never work against the spirit of separation of powers and grease the tracks toward limitless government the Constitution is designed to obstruct.

We already place too much hope and faith in the parties.  Back to Madison: "Experience has taught mankind the necessity of auxiliary precautions," and we have such precautions in the Constitution.  Politicians have given us a lot "experience" to show our dire need to keep them gridlocked in the limits of the Constitution and its separation of powers.  

A lot of experience.