Socialist Destructionism

Ludwig von Mises, a founder of the Austrian School of Economics served as a professor of economics at New York University from 1945 through 1969. He was a towering intellect who was influenced by and associated with some of the great historical figures in academic economics. For instance, his dissertation adviser was Eugene Bohm Bawerk, and he was a student of Carl Menger. Von Mises students’ included  Oskar Morgenstern (NYU and Princeton) who along with mathematician John non Neuman, founded game theory. Another was Fritz Machlup (NYU and Princeton) who was one of the first economists to recognize and study knowledge as an economic resource, an idea that is taken for granted by economists today.

Ludwig von Mises

Way back in the 1920s von Mises was warning about the dangers of what he termed “Socialist Destruction”. Socialists, he argued, did not engage in reasoned debate over the merits of a proposition; instead they simply denounced their opponents while seeking their destruction. And not just their opponents, whom they considered (and consider) to be enemies.  They sought to destroy the institutions of civil society that protect the freedom and dignity of individuals, including religion, the rule of law, due process, free speech, freedom of assembly, limited government and the nuclear family. 

Mises was prescient. What he predicted is precisely what is going on today. Same wine, new bottle. It is at the heart of cancel culture and intersectionality that has gained so much power over intellectual and artistic life. First go the statues and symbols, then go the people. 

The video below is that of Professor Thomas J. DiLorenzo discussing Mises theory of Socialist Destruction in light of what is going on today. It is a story that can be told over and over, but some people never seem to learn. Until it’s too late.  

Prof Thomas J. DiLorenzo


JFB

Progressive Fascism

“Everything in the State, nothing outside the State, nothing against the State.” Benito Mussolini

“State intervention in economic production arises only when private initiative is lacking or insufficient, or when the political interests of the State are involved. This intervention may take the form of control, assistance or direct management. (pp. 135-136)

—Benito Mussolini, 1935, “Fascism: Doctrine and Institutions”, Rome: ‘Ardita’ Publishers.

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Nancy Pelosi couldn’t have said it better. 

It is more than a little ironic that as Progressives continue their utterly predictable march into the arms of fascism they continue to cry out about the dangers of — Fascism. The wonder is why. After all, Mussolini himself began his trip as a socialist before deciding he was a Fascist after all. 

It is (or should be) clear to anyone who has studied American history and politics that the classical liberalism of the American founding was thrown overboard by Woodrow Wilson and replaced by a Bismarckian flavored collectivism that, with intermittent and fleeting interruptions, has steadily gained ground at the expense of liberty. There are now few facets of American life that are not under the thumb, either directly or indirectly, of  the Administrative state, so painstakingly created by progressives. 

Consider how progressive politicians have been trampling on the Bill of Rights using the Covid-19 crisis as a pretext.  For example, Lousiville, KY Mayor Greg Fischer unilaterally banned drive-in Easter services even when they conformed to social distancing policies. When NJ Governor Phil Murphy was asked by Tucker Carlson where he got the authority to nullify the Bill of Rights in order to prevent people in New Jersey from going to church, Murphy responded “That’s above my pay grade.” Then he added “I wasn’t thinking of the Bill of Rights when we did this… The science says people have to stay away from each other”. 

Virginia’s Governor Northam issued an executive decree making it a crime (Class 1 misdemeanor) to attend a religious service with more than 10 people in attendance, even when keeping social distance. However, in Virginia, state liquor stores remain open as “essential”. Nobody has explained how customers are to maintain social distancing while handing a bottle of whiskey and cash to a sales clerk.  

Add to that clear violations of the right to assemble and petition the government by rules limiting the number of people who are permitted to assemble outside. 

Then there are the many attempts by progressives to shut down gun stores as “non-essential” businesses. Somehow or other though, state lottery sales count as essential. Obviously said governors do not consider the 2nd amendment to be essential. 

But what about businesses that some governor arbitrarily decides is non-essential? Closing down many small businesses dooms them to failure; they will never re-open, and the owner’s equity in the business, perhaps built over a lifetime, is reduced to nothing. 

Fortunately at least some of the more outrageous restrictions that violate the 1st amendment free exercise clause and the 2nd amendment right to bear arms have been batted down by judges. But let’s not forget that progressives have promised to pack the court should they gain the power to do so. People who regard this as an empty threat are just deluding themselves. 

It isn’t really necessary to search around looking for a hidden agenda. It is right out in the open. For example look at the $3 trillion wish list that Speaker Pelosi rammed through the Congress Friday with only 1 Republican vote—that vote belonging to the retiring Peter King of New York. And that would be on top of the $4 trillion that has already been approved. 

Consider some of the items contained in the bill, the so-called Heroes Act.

A pledge of $1 trillion in virtually unrestricted funds to state and local governments. Keep in mind that the major ongoing financial problem faced by (some) state and local governments is funding state pension programs, which has absolutely nothing at all to do with the coronavirus. Needless to say, public sector unions applauded mightily when the bill passed. 

The bill hands out $25 billion in aid to the U.S. Postal Service. 

The bill requires federal banking regulators to regularly report on “the availability of access to financial services for minority-owned and women-owned cannabis-related legitimate businesses.”

The bill extends an additional $600 per week in unemployment relief until January of 2021, thus ensuring that unemployment will last longer than it otherwise would,

It provides $850 million for states to provide child and family care for those deemed “essential workers”. Keep in mind that selling lottery tickets is typically deemed essential. 

It provides an additional $100 billion to low income renters and $50 million to farmers. 

It lifts the SALT Cap for two years.

The passage of this monstrosity does serve a purpose though. It should serve to eliminate the fiction that there are moderates in the Democratic caucus who matter. There were all of 13 “moderates” who voted against the bill, compared to 206 Democratic Members who voted “Aye”. 

Like Obamacare it is going to take a while to see what else is in the bill; unlike Obamacare it is not going to get through the Senate. 

But this bill together with other proposed legislation makes clear what the priorities of the Democrats are and what they will attempt to do if they retain the House and recapture the Senate. They will attempt (once again) to amend the Bill of Rights; enact a regime of economic command-and-control; intimidate the judiciary; eliminate the filibuster and the electoral college. Which is to say, centralize economic and political power in Washington, DC. 

If the Progressives get their way, the State will reign supreme in all matters, big and small. Not to worry they say; they will just be pragmatists and do what works. Kind of like the way Mussolini got the trains to run on time. 

JFB

Are They or Aren’t They?

Donald Trump insists that the Democrats are embracing socialism. Senior Democrats running for the Party’s presidential nomination call themselves socialists. We would seem to have a rare moment of bipartisan agreement.  But…Chris Edelson, an assistant professor of Government at American University writes in Market Watch that Trump’s references to the Democrats embrace of socialism is a “smear”. 

How So?

The term socialism, says Edelson can have many meanings and interpretations. If so, one is led to wonder how using the term socialist as a descriptor constitutes a smear. In this respect Professor Edelson helpfully notes that Stalin was a communist, not a socialist. (Note that the Professor seems to have forgotten Bernie Sanders’ love affair with the USSR, whose initials stood for the Union of Soviet Socialist Republics, which we are supposed to believe was not socialist.) 

What Professor Edelson is apparently trying to do is to separate “good socialism” from “bad socialism”. It is a hopeless task; there is no such thing as good socialism. Its adoption (or imposition) inevitably leads to one of two outcomes. The first is that the people throw off the shackles in time to revert to a market economy with property rights and the rule of law. The second is more typical and follows the path of Venezuela or Greece. 

There are those who cite Norway, Sweden and Denmark as countries with socialist economies that “work”. They have not been paying attention. Perhaps they should consult the World Population Review of Walnut, CA, which publishes a rank-ordered list of capitalist countries. Hong Kong is at the top of the list. The U.S. is #18. Denmark is #12, Sweden is #15 and Norway is #23, two steps ahead of Germany at #25. 

Freedom House publishes a similar rank-ordered list of economic freedom. Once again, Hong Kong is at the top. Singapore is #2 and New Zealand is #3. The United States is #12, behind Canada which is #8. Denmark is #14, Sweden is #19, Finland is #20, Norway is #26, just behind Germany at #24. Russia clocks in at #98, China at #100 and Greece at #106. Venezuela at #179 falls just behind Cuba at #178, and edges out North Korea which comes in dead last at #180.   

Perhaps sensing the danger of labeling themselves as socialists, Democratic politicians and their cheerleaders are starting to backpedal a bit. But not too much because the energy in the Party’s base is decidedly with lefty radicals who actually mean what they say. So we will have to wait and see if any of them pivot toward sanity after the primaries and before the general election. The smart money isn’t on it, though. 

Socialism, along with its cousins communism and fascism, is the greatest killer the world has ever known. It has an unbroken record of failure and has produced famine, war and human suffering on an unimaginable scale. Liberalism, which encompasses individual freedom, property rights, the rule of law, liberal institutions of governance and subsidiarity, has created conditions in which human beings can flourish. And they have done so, using their talents to create unparalleled prosperity and well-being.  

There is a reason why the path taken by immigrants leads toward, and not away from, Liberal democracies. Maybe socialist apologists ought to think about that for a minute. 

JFB

The EU Again

In a remarkably destructive bit of policy making, the EU announced that it will not sign any agreements with countries that are not party to the Paris Climate Accords. That includes free trade agreements. And of course, the country in the EU’s gunsights is none other than the United States. Which means that the EU has told the U.S. in no uncertain terms that in order to trade with Europe, America must surrender its sovereignty to the central planners that populate the EU bureaucracy.

Fat chance.

Issue linkage is a tool commonly used by diplomats to get to agreements that might not otherwise be reached. The log rolling inherent in this sort of thing allows each side of a negotiation to come out claiming victory, thus greasing the skids. This however is something entirely different. It is an ultimatum. As such, it sets up a test of wills that structurally resembles a game of chicken in which each side has an incentive to escalate rather than resolve the conflict.

In this, the EU is rather obviously overplaying its hand, and the consequences could very well be catastrophic. Consider the fact that various forms of nationalism are sweeping the globe, so that very few politicians have an incentive to be seen as neo-liberals to begin with. Britain has already had its Brexit vote; Macron has conceded that if France had a referendum on the EU, French citizens would vote to withdraw; Scotland is once again making noise about exiting the UK, and Spain only managed to keep the Basque region from seceding by the use of police truncheons.

Also consider what the U.S. response to all this may be. Donald Trump for one has already made clear that he has little use for either free trade or NATO. Suppose his response is to escalate further and say that the U.S. is just fine without a trade agreement with the EU, and by the way, the U.S. is going to begin withdrawing troops from Germany in preparation for leaving NATO. Without benefit of the U.S. nuclear umbrella, Europe can feel free to devise its own foreign policy for dealing with the Russian Bear, a prospect that Vladimir Putin would surely relish. That this would be a geopolitical catastrophe is an understatement.

The irony of all this is that it probably has little to do with the purported issue of climate change. Over the last several years the U.S. has become the largest energy exporter in the world, largely due to fracking. The U.S. is now largely “energy independent” in that it exports more than it imports. And because of fracking U.S. manufacturing has developed significant energy cost advantages over European firms. The EU’s latest gambit probably represents old fashioned protectionism gussied up as concern over the never quite defined issue of climate change.

Regardless of motive, the EU’s announcement was reckless in the extreme and could very well have far reaching consequences whose deleterious effects are likely to fall most heavily on the Europeans themselves, and stay with us for a long time. That, after all, is the story of European colonialism, and World Wars I and II. Perhaps they should give up playing empire and mind their own back yard which is in serious need of repair.

Now What?

In response to Bashar Al-Assad’s use of nerve gas to attack his civilian population, President Donald Trump ordered an attack on the Syrian airport Assad’s Air Force used to launch the attack. Now what?

It isn’t so clear what exactly Trump hoped to accomplish by lobbing a reported 50 + Tomahawk missiles at the airport from two Navy warships stationed in the eastern Mediterranean. One prominent theory making the rounds is that Trump used this as a way of “sending a message” to North Korea’s Kim Jong-un. Buttressing this argument is the Pentagon’s announcement that a U.S. Navy aircraft carrier-led strike group is headed toward the Korean Peninsula. It is apparently meant to be a show of force.

U.S> Navy Battleship

In the short run, Trump’s response to the Syrian use of a gas attack on civilians provided him with the opportunity to reap lots of political benefits without taking any appreciable risk. For one thing, it pretty much demolishes the argument, fashionable in the Resistance, that Trump is a tool of the Russians. After all, it was the Russians who negotiated a deal with then Secretary of State John Kerry to take control of and destroy Syria’s WMD, including poison gas. It is now abundantly clear (to the surprise of no one except perhaps John Kerry and Barack Obama) that Syria and Russia had no intention of doing any such thing. The only question now is whether Russia was actively complicit in the actual gas attack.

The larger geo-strategic question is whether the Trump Administration is about to toss the populist nationalism overboard and begin to reassert U.S. leadership in world politics after 8 years of atrophy under the Obama Administration. That is certainly plausible, especially given the fact that political advisor Steve Bannon has been cut down to size, particularly with respect to foreign policy. But it runs directly counter to the forces that got Trump elected in the first place.

At the heart of the Trump Presidency there is an insoluble political / economic dilemma. His (for the moment) politically popular protectionist economic policies are on a collision course with his need to increase economic growth. Supply chains and finance are global. The leg bone is connected to the thighbone so to speak. Serious disruptions in global financial markets and supply chains would be economically and politically catastrophic.

While Trump professes to be a non-interventionist in foreign affairs, he jumped into the Syrian civil war at the first opportunity. It is not clear why. A pinprick will not dissuade Assad from his determination to retain power at any price. Moreover, a pinprick without any follow-up would leave Assad in a more powerful position, something that would not escape notice in Pyongyang.

So the question remains. Does President Trump intend to begin reasserting U.S. leadership in the world? If so it is going to require working with allies, keeping the U.S. economy open, increasing funding for the military, and getting the U.S. government’s fiscal position on a path to solvency. Which is to say, pretty much the opposite of what he has been promising from the beginning, with the possible exception of increased military spending.

The Conservatives who cheered Trump along ought to be getting pretty nervous thinking about this. Trump has given no indication of anything remotely resembling a coherent view of world politics, much less a governing philosophy. That’s probably because he doesn’t have one. He has instead shown himself to be a remarkably ignorant man, who lacks intellectual curiosity, and who prefers to think of himself as a practical businessman. All of which means that there is no telling what he will do, or why he will do it. That is hardly a conservative approach. In fact, his approach thus far seems more Wilsonian than anything else, but it is still early in the game.

Conservatives and libertarians should not be comfortable with Trump taking action after announcing that his thinking had changed because of pictures he saw on television. If he is to gain the support of policy intellectuals on the conservative / libertarian side, he is going to have to enunciate a coherent doctrine that describes the world the way it actually is, what U.S. goals are, and the means to achieve them.

Reasserting U.S. leadership in an increasingly fractious world after 8 years of Obama’s neglect is also going to require the assent of the citizenry, which means leadership at home. Leadership is not a quality Trump has demonstrated to date, unless you call rants in stadiums before worshipful followers leadership. The foreign policy catastrophe produced by Obama demonstrates the need for U.S. leadership in world politics. It is not clear if Trump is up to the job.

JFB

To Trade or Not to Trade…

Economic Nationalism and the Trump Trade Agenda

According to Steve Bannon, the second prong of the Trump Administration’s policy focus is “Economic Nationalism”. The obvious first question is: what, exactly, does Bannon have in mind when he refers to Economic Nationalism? An important subsidiary question is whether the Trump Administration considers Economic Nationalism to be a distinct area of policy focus, or does the Administration consider it to be an integral part of an integrated policy agenda.
Steve Bannon

The term Economic Nationalism is certain to provoke well-deserved eye rolling among the vast majority of professional economists. The term sounds like one of those focus group inventions that sounds good to the untutored, but is actually bereft of substantive economic meaning. Proof of the pudding is Obama’s use of similar rhetoric, as when he referred to “Economic Patriotism” and attacked what he called corporate “deserters”.

 

Barrack Obama

That said, this type of thing has to be taken seriously for a few reasons. First, terms like Economic Nationalism have a distinctly unpleasant historical odor, one might say stench, about them, as the terms are associated with the likes of Juan Peron and Hugo Chavez, not to mention Adolf Hitler. (Fans of this bunch need to read no further, they are all pretty much beyond saving). Secondly, leaving aside its linguistic associations, Economic Nationalism is often (correctly) seen as a form a mercantilism, which though noxious, doesn’t reach the depravity of fascism or totalitarianism. But mercantilism is no day at the beach either. It (incorrectly) sees trade as a zero-sum game and can easily lead to resource wars and empire building, as it did in the past.

 

Third, to the extent that Economic Nationalism represents some kind of resurgent mercantilism, protectionism or isolationism, it is bad economic policy whose imposition would almost certainly harm economic growth in the United States and abroad leading to economic misery. Ironically enough, the bulk of the economic harms would fall mostly on the people who seem to be most enthusiastic about it.

 

Finally, Trump seems to mean what he says, and he and strategist Bannon seem to be on the same page.
Donald Trump

No matter how you slice it, it is hard to see how Bannon / Trumpian Economic Nationalism is different from old-fashioned protectionism.

 

 

Trade and Protectionism

 

It is important to understand what free trade is and what free trade agreements like NAFTA actually do. In a nutshell, free trade refers to the free exchange of goods and services across national borders. Free trade agreements make this possible by removing trade barriers between people and companies residing in different countries. The trade barriers that are removed or reduced are typically tariffs and regulatory schemes designed to give the importing country’s home producers an advantage over foreign rivals. Consumers pay for all this through higher prices.

 

Discussions about free trade and trade agreements are often phrased in language that obscures more than it reveals. For example, when speaking of trade, it is typical to hear someone say something like this. “The U.S. bought $10 billion worth of goods from Mexico, but only sold Mexico $6 billion worth of goods in return. Therefore the U.S. has a trade deficit of $4 billion with Mexico. Moreover, that’s $4 billion worth of goods that American workers could have made. Therefore trading with Mexico cost Americans to lose jobs.”

 

Let’s take this one piece at a time. It is true but misleading to say that America bought $10 billion worth of Mexican goods, as if America is an undifferentiated whole. It is more accurate to say that millions of individual Americans in the aggregate bought $10 billion worth of stuff that came from Mexico and that millions of Mexicans bought $6 billion worth of stuff made in the U.S. The reason that Americans bought the $10 billion worth of stuff (and vice versa) is that they got a better deal buying the Mexican goods, whether in quality, price or both. In short, American consumers are better off because they can buy better quality and / or lower priced goods made in Mexico and shipped to the U.S.

 

It is not in any meaningful sense true that Mexico “stole” American jobs through trade. The first reason is that apart from a small number of political jobs that require U.S. citizenship, there is no such thing as an American job. There are jobs that Americans do, just as there are jobs that Frenchman do. But there is no particular reason to think of any job as American, or French or Mexican.

 

Second, it is without doubt the case that some jobs that were formerly performed in America are now performed in other countries resulting in the temporary displacement of some American workers. But American consumers are better off because more goods and services are available at lower cost and better quality than were available previously.

 

When it comes to Americans who lose jobs as a result of foreign competition, it really doesn’t matter that the competition comes from abroad or the next town over. It could come from anywhere. Eastman Kodak, for example, did not ultimately fail because of foreign competition. It failed because it resisted innovation and the advent of digital photography and was competed out of business. The lesson here is that to survive and thrive, workers and businesses need to remain dynamic and competitive.

 

By encouraging—or at least not impeding—the free flow of labor and capital across national boundaries, free trade facilitates the spread of knowledge, innovation and economic dynamism. It correctly treats trade as a plus sum game of shared gains. In so doing free trade allows resources to be matched to their highest and best uses, thereby promoting economic efficiency and wealth creation.

 

Opposition to free trade is often rhetorically disguised. One of the more popular dodges is to be for “fair trade” as opposed to free trade. Politicians routinely claim they are in favor of trade, but that it has to be “fair”. But what could be fairer than two counterparties exchanging goods and services for a freely negotiated price? And what could be less unfair than a transaction in which the police power of the State (in the form of tariffs and regulations) is used to tip the scales to favor one side?

 

We often hear that trade is unfair because a foreign producer’s government subsidizes them, or that their currency is being manipulated to lower prices below the market level. And in some cases this is undoubtedly correct.

 

So what?

 

If a government wants to subsidize a domestic producer directly or through currency manipulation, that government is taxing its own citizens to benefit the citizens of the importing country. Let them do it all day long. It is simply self-defeating. To see this, let’s do a thought experiment.

 

Suppose Korea, in an effort to guaranty large exports of Korean cars, decided to subsidize the manufacture of Hyundai and Kia cars such that the companies could sell their cars in the U.S. for a mere $1 dollar apiece. We would soon see lots of Hyundai and Kia cars on the road. And sales of other brands would dive. But American consumers would be richer and Korean taxpayers poorer because Korea would be effectively shipping products over to the U.S. and getting almost nothing in return.

 

Obviously, that wouldn’t last long because it would be so costly to Korean taxpayers that they would revolt. They would revolt because the favoritism (and corruption) of the arrangement is so transparent. But in principle there isn’t any real difference between the example given in this thought experiment and real world subsides and trade barriers. The only difference is that the thought experiment is clear and real world arrangements are opaque.

 

The Trump Trade Agenda

 

The Trump Trade agenda gives every indication of being old-fashioned protectionism implemented through tariffs and regulation, and gussied up as “Economic Nationalism”. The Trump argument is that it will increase employment and wages in America. Except that it won’t.

 

To the extent that people in protected industries keep jobs they do so at the price of higher costs and lower quality for consumers. It necessarily means that inefficiency is being subsidized, which in turn means that the dollars being shoveled into inefficient enterprises are being denied to innovative and efficient businesses that represent the growth of the future.

 

The path to increased economic growth and with it, higher wages, is one that recognizes the importance of achieving productivity gains through innovation and Schumpeterian creative destruction. It does not come through subsidizing failure; nor does it come by taxing consumers to privilege the industries with the best lobbying efforts.

 

Trumpian protectionism does not just fail to make the case in its own right; it is also undermines his stated intention to roll back the Regulatory, or Administrative State. Any serious effort to impose trade protectionism would entail massive increase in the power of the Administrative State. How are we to distinguish what is and is not an “American” product. How far back do we have to follow the supply chain to see whether a car manufactured in South Carolina counts as American or foreign. Are BMWs made in South Carolina foreign or American? How about Volvos? And who makes that determination and how?

 

Should we consider iPhones to be American products? There are about 750 or so parts suppliers, of which 69 are in the U.S. About 85% of the “rare earth” elements in the iPhone come from China. But the intellectual property of the iPhone has its home in Steve Jobs from California. And, by the way, Jobs’s biological father was a Syrian immigrant to the United States.

 

The Politics of Trade

 

Unfortunately, the current political environment does not favor trade. Trump has bought into the illiberal if not bizarre idea that Americans need to be protected from the freedom to trade. Bernie Sanders, Sherrod Brown and Elizabeth Warren have been there all along. Free traders dominate the Republican Congressional leadership, so perhaps they can limit the damage that Trump seems intent on inflicting in concert with Democratic Progressives. Trump has already moderated on some things; perhaps Paul Ryan will talk some sense into him and provide a fig leaf for a decorous retreat.

 

Paul Ryan
One can only hope.

 

JFB

 

 

Obama Tosses Israel Under the Bus

“Israel, we got your back” Obama famously claimed in August 2012. So the question must be asked, how  would U.S. foreign policy look any different if Obama’s goal were to put Israel on the road to extinction?

 

 

 

How for instance, Israelis are entitled to wonder, does it help for the United States to toss aside 50 years of policy in the waning days of an administration to delegitimize defensible borders for an Israel that is surrounded by hostile powers? How exactly does it help Israel for the United States to negotiate a nuclear deal with Iran despite Israel’s strong objections? How does it help to put Iran on the path to a nuclear weapon? How does it help to send tens of billions of dollars in unmarked cash to an Iran committed to the destruction of Israel, and which the U.S. State department still considers to be the world’s leading State sponsor of terrorism.

 

It is probably true as John Kerry says, that the demographics of the Middle East require that Israel accept a two-state solution if it is to survive as both Jewish and a democracy. It depends on how democracy is defined. But it doesn’t mean that any two-state solution will do. A two state solution must recognize Israel’s right to exist as a sovereign state within defensible borders.

 

That poses a problem because Palestinian rejectionists refuse to concede Israel’s right to exist.

 

And why should they? They mean to win the war to eliminate Israel in the capitals of the West by isolating Israel and making it a pariah. They intend to do this by claiming the mantle of victimhood. They are, they claim, victims of Western colonial powers who seized their ancestral land in wars of aggression that date back at least as far as the Crusades. Their failures are the fault of the Western oppressors.

 

Except that there was that Muslim invasion of Spain that began in 711, not to mention Italy and France that came fast on its heels (historically speaking). Eventually Spain and Portugal fell under Islamic rule that lasted until 1492. Then there is that small matter of the Ottoman Empire’s entry into World War 1 on the side of Germany with an unprovoked attack on Russia, which was then allied with England and France.

 

But never mind. That was then.

 

Today progressives in Western capitals get to feel virtuous by simultaneously pulling the rug out from under Israel while insisting that Israel “take risks for peace”. This is the same crowd, by the way, that is busy creating safe spaces for undergraduates who live in terror that they might be forced to confront the horror of a gender specific pronoun.

 

There is a path to peace, but the path is not through Israeli settlements. Nor is it by surrender. Peace will come when the Arab and Persian governments of the Mideast stop using Israel as an excuse for their failures, liberalize their regimes and stop financing Hamas and their ilk.

 

JFB

 

 

 

For Kevin Lara Lugo Born 2000, Died 2016.

The story is always the same; it is only the names that change. This time the name is Kevin Lara Lugo. He died on his 16th birthday. The New York Times reports that he had spent the previous day foraging for food in an empty lot because there was none at home. The family had gone without for three days, and they were getting weak, so he went out to find something, anything, to eat. What he did find turned out to be poisonous. Because the hospital lacked the simplest supplies needed to save him, the boy died on a gurney while his mother stood by helplessly.

 

His aunt told Nicholas Casey, the Times reporter, that “the boy [died] for no reason at all.” But that is not correct. The boy died because he was killed by Socialism, the most ruthless man-made killer the world has ever known.

 

In Venezuela, as a direct result of the Socialist revolution brought about by Hugo Chavez, there are widespread shortages of food and medicine. Doctors lack water to clean operating tables, and there are food riots. But Venezuela is just the latest to go down this path. People starve to death in North Korea every day. The most conservative estimates of North Korean starvation deaths in the late 1990s are in the neighborhood of 250,000 with some estimates greater by an order of magnitude.

 

During 1932-33 Joseph Stalin deliberately starved to death between 3 and 7 million Ukrainians in what Ukrainians call the Holodomor. This took place within a larger collapse of Soviet agriculture that accompanied–was caused by– the collectivization of the farms. Kazakhstan was particularly hard hit, losing about 2 million to starvation. From 1919 through 1933 Kazakhstan lost more than half its population as a result of the Soviet imposition of collective farming.

 

At the moment Cuba, which imports 80% of its food, is going through one of its periodic food shortages, and is looking north to U.S. farmers for help. And if you look at a list of 40 countries where people are going hungry you will find names like Zimbabwe, Chad, Liberia, Mali, Republic of Congo, Haiti, India, Nicaragua, Ethiopia, Kenya, Mozambique, Sudan, Afghanistan, Myanmar, Uganda and Nepal. And that list leaves out places like Syria.

 

Not a capitalist one in the bunch. Not one. Every single one of them represents some stripe of collectivism. Call it socialism, communism, fascism, planned economy or whatever you want. The result is always the same. Bureaucrats and politicians, not business people and entrepreneurs make key economic decisions. As a result, the poor and vulnerable, those without political connections, are left to deal with predictable shortages of food and medicines. Make no mistake: these shortages are brought about by the politicians and bureaucrats who substitute central planning, bureaucratic control and regulation for free markets.

 

 

Which begs the question. Why is it that the activists who seem to be constantly staging marches for social justice are nowhere to be found protesting the plight of Venezuelans? Where are Bernie Sanders and the professional left? After all, Bernie Sanders has spent his entire political career advocating for the policies that have produced the predictable (and predicted) disaster in Venezuela. Shouldn’t he have some explaining to do? Believe it or not Sanders actually described food lines as a good thing. He said, “You know, it’s funny. Sometimes American journalists talk about how bad a country is when people are lining up for food. That’s a good thing. In other countries, people don’t line up for food. The rich get the food and the poor starve to death.”

 

Please see the John Stossel  You Tube segment below.

 

 

So the question needs to be asked. Why does the mainstream press give Sanders (and his ilk) a pass? Why are his campus followers, decked out in their Che branded T-shirts, treated as idealists rather than as dupes? Let’s be clear. The collectivist ideology they so enthusiastically and foolishly embrace is what ultimately killed Kevin Lara Lugo on his 16th birthday.

 

Kevin Lara Lugo, born 2000, died 2016. RIP.

 

JFB

 

 

 

 

 

 

 

 

His Royal Highness, Donald the First of 5th Avenue

Donald the First of 5th Avenue let it be known that His Majesty was royally displeased that the Carrier Corporation planned to move some production facilities from Indiana to Mexico thereby eliminating 1,000 or so “American jobs”. In order to prevent the tragedy, His Majesty decided to tax the remaining serfs of his Kingdom to compensate the Carrier Corporation for saving some of those jobs.

 

One of the Knights of the Kingdom, a Mr. Chuck Jones who is President of the Steel Workers Union, objected that his Lordship the King only saved 730 jobs, not the entire 1,000. This in turn prompted a Presidential (elect) Tweet Storm from Donald the First.

 

Trump Tweet

 

Which brings us to the case of Walmart.

 

Take That, Your Majesty

According to the most recent data, over the last 4 quarters Walmart generated about $484 billion in revenue on which it earned $15 billion net of income taxes. Income taxes amounted to about $6.3 billion, or 29% of pre-tax profits. The firm employs 2.3 million people worldwide, of which 1.5 million are in the United States. The entire U.S. civilian labor force is 159 million. Of that total, 145 million are currently employed as non-farm workers. Which means that Walmart employs a staggering 1% of all people in America who have a job and are not working on the proverbial farm.

 

Walmart announced Wednesday that it is going to invest $1.3 billion in Mexico in logistics, including new distribution centers. While a spokesman hastened to add that Walmart wouldn’t be moving any jobs to Mexico from the U.S., the firm did note that the investments would create about 10,000 new permanent jobs. Walmart, which already has about $4 billion invested in Mexico has singled out Mexico as a top priority for growth and is looking to double sales in Mexico by 2024.

 

So what does King Donald the First have to say about that? Does he think Walmart needs to get a White House permission slip before making an investment? Walmart has clearly served notice that it will run its business as it sees fit without the advice and consent of an ignorant loudmouth. Good for them.

 
Paul Ryan, please take note.
 

The Family Business

 
In the meantime The New York Times reports that His Majesty is considering turning over operational responsibility for his business to his two adult sons, but that he also intends to keep a stake in the business.

 

Perhaps His Majesty will seek subsidies for his own business so he can persuade himself to cease procuring products abroad that he intends to brand with the Royal name.

 

Life Imitates the Onion

In a story headlined “Trump Inherits Obama Boom” Ben White, Chief Economist for Politico says that the U.S. economy is the envy of the world. Well, yes it is. But it has been for a very long time and it has nothing to do with Obama. Real GDP growth during Obama’s tenure will have clocked in at 1.5% when all the numbers are finally counted. That’s about the slowest recovery on record.

 

Keep in mind that the painfully slow recovery has also been accompanied by the first drop in U.S. life expectancy in about 20 years according to the National Center for Health Statistics.

 

Apologists argue that the slow recovery is due to the depth of the 2008 – 2009 slump. It’s actually the other way around. Deep slumps are usually followed by rapid recoveries. And while the unemployment rate has fallen to 4.6%, much of that is due to the collapse of the labor force participation rate, now at 62.8%, the lowest is has been since 1978. It has been falling steadily since its March 2000 peak when it clocked in at 67.3%. Please see the graph below.

 

 

Not to worry though. His Majesty Donald the First and Princess Ivanka recently met with that economic sage Leonardo DiCaprio and his team, who reportedly discussed “how jobs centered on preserving the environment can boost the economy.” Reminiscent of Barbra Streisand sending policy memos to Dick Gephardt, DiCaprio Foundation CEO Terry Tamminen and Leonardo DiCaprio said they “…presented the President-elect and his advisors with a framework—developed in consultation with leading voices in the fields of economics and environmentalism—that details how to unleash a major economic revival across the United States that is centered on investments in sustainable infrastructure.”

 

The Bernie and Elizabeth Show

 

Just when you think it can’t get any more ridiculous Bernie Sanders and Elizabeth Warren show up. Their complaint? His Majesty announced he was going to nominate Steve Mnuchin as Treasury Secretary. The problem is that Mnuchin, a Democrat, once worked as a banker; even worse he worked at Goldman Sachs, the epitome of evil in the eyes of progressives. According to Sanders and Warren after Mnuchin left Goldman “[He] moved on to make a fortune running another bank that aggressively foreclosed on families still reeling from the crisis.”

 

Imagine that. A Treasury Secretary who expects borrowers to either repay their loans or face foreclosure. We can’t have that now, can we? Now, about the trillion dollars or so in student debt that’s out there…

 

JFB

 

Donald Trump: Central Planner in Chief

Donald J. Trump, accompanied by some Republican politicians formerly known as free traders, has taken take a brashly promised leap into the land of economic idiocy. That is the land where we “save American jobs” by shoveling taxpayer money to firms to bribe them into keeping relatively inefficient production facilities in the United States. Instead of draining the swamp, which in fact does need draining, Trump just fortified it by opening wide the spigots of corporate welfare.

 

Trump and Pence

Trump’s very public bribery of the Carrier Corporation will affect economic decision-making virtually instantaneously. And it won’t be pretty. For instance, keep in mind that Carrier Corporation is a subsidiary of United Technologies, a very prominent military contractor, so it is especially vulnerable to political pressure. They got paid off anyway. Other manufacturers, especially those not related to military contracting, are almost certain to threaten to move their facilities to make sure they get on the gravy train.

 

The Administration is going to have to decide who gets subsidized and who doesn’t, and how much and why. Which means that all of a sudden we have a national industrial policy that liberals used to cheer and conservatives used to scorn. And rightly so. Why would anyone this side of sanity believe that the government is even remotely competent to make these sorts of decisions?

Hayek

 

Over 50 years ago Frederick Hayek demonstrated the utter impossibility of successful central planning. No one is capable of collecting and analyzing all the data needed to set prices correctly; no one can tell how tastes will change; no one can successfully predict the next disruptive innovation; no central planner knows how to best deploy capital to achieve maximum returns. And that assumes good intentions, and decision-making free of politics. That’s why a successful economy depends on the information provided by market prices so that individuals and firms can intelligently assume risks in search of returns.

 

Donald J. Trump is in the process of corrupting that information and increasing the risks of doing business in the United States. Consider the impact on foreign firms. They will be more hesitant to invest in plant and equipment in the U.S. because they will now have to include heightened political risk into their calculations. That’s the kind of calculation firms usually make before investing in third world countries.

 

There is also the illusion that there is such a thing as an American product. But it’s only an illusion. For example, many low-end, low-tech components of “American” products are made overseas before they reach the United States for final assembly. Are we now to have a Czar of Component Parts to decide what may and may not be imported into the United States for final assembly? Or does the Czar demand that U.S. firms make all the component parts here until otherwise instructed?

 

Let us not forget that the United States has a trade deficit and a corresponding capital account surplus. The capital account surplus, the flip side of the trade deficit, represents foreign capital invested in the U.S. By discouraging foreign investment in the U.S., which is precisely what Trump is doing, he is raising the cost of capital in the U.S. The result will be an increase in interest rates for the Treasury, corporate borrowers and consumers. It will also put downward pressure on the dollar in foreign exchange markets. Which means higher prices for consumers and slower economic growth.

 

None of this is exactly new. Crony capitalism is and always has been harmful, a point so obvious it shouldn’t have to be made. Republicans used to at least pretend to be ashamed of this sort of thing. Now they appear poised to enthusiastically embrace economic stupidity–and that’s precisely what this is–with the gusto of Bernie Sanders.

 

At a press conference in Indiana, V.P. elect Mike Pence, defended the Carrier deal. According to Reason.com Pence claimed that “the free market has been sorting it out and America’s been losing.” After which, according to The New York Times, President-elect Donald Trump cut in to agree, saying, “Every time, every time.”

 

 

While Trump’s embrace of economic nonsense is long standing, there was a hope that Mike Pence, a conventional Republican, would be a lifeline to sanity. In the wake of the 2008 financial crisis Pence opposed TARP, the Troubled Asset Relief Program, saying, “Economic freedom means the freedom to succeed and the freedom to fail”. That was then.

 

The Republican Party used to have some reasonably solid defenders of free markets. Maybe, against the odds, they will rise to the occasion and put a stop to this before it gets worse. Otherwise it looks like it’s going to be a long 4 years for economic literates.

 

 

JFB