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The Shotgun Blog

Tuesday, November 23, 2010

VIDEO: "Britain's Trillion Pound Horror Story"

Stop whatever you're doing and watch this right now.

This charming documentary on the debt was created by Martin Durkin and aired on the UK's Channel 4 earlier this month. It is one big refutation of the Broken Window Fallacy, a crash course in the political economy of Frédéric Bastiat and Henry Hazlitt, and gives the lie to the popular notion that the Cameron-Clegg coalition are actually making reductions in state spending:

(h/t Trevor Loudon)

Posted by Kalim Kassam on November 23, 2010 in Economic freedom, Film, International Affairs, International Politics | Permalink | Comments (5)

Friday, October 08, 2010

CNBC's Larry Kudlow sounds alarm on coming US Dollar collapse

Many of us free market types (Austrian school adherents and otherwise) have been saying this for years, and now we see the mainstream cluing in. But is it too late?

The stupid Democrat in this video insists that the collapse of the US manufacturing industry is to be blamed on China's managed trade policies, and thus advocates for the US instituting it's own managed trade polices to protect American manufacturers. This is of course, weasel wording for punitive import tariffing.

We've heard this story before, and it totally ignores the fundamental structural issues in the US economy.

There is no debating that the lop-sided trading relationship between China and the US is creating an absolutely disastrous situation. But this is a symptom of the US's own economic policies. Not a situation created merely by China managing it's trade.

The US government has, for nearly a third of a century, through inflationary subsidy, fuelled the drive for home ownership and investment in the service-oriented economy, effectively pricing the manufacturing industry out of the equation.

Why do any hard work, when you can simply borrow your way to prosperity on a credit card, working in a non-exportable service job? The fact is, this has been a pie-in-the-sky American dream from the start, and it's relied on continuous monetary inflation to keep this consumer debt bubble afloat for thirty years.

The rest of the world is implicated, too. In that, it "bought in" to the American debt bubble, by lining up in droves to sell bonds to Americans to fund mortgages and consumer debt.

American consumers were more than happy to take those record low interest rates, run off to Best Buy and Wal-Mart and stock their homes with electronics and other consumer goods.

Foreign bond investors kept sending the money because they believed, falsely, that the sky was the limit for real estate prices.

Worse, the US has seemingly permanently fooled itself into believing that this cycle of consumer borrowing and buying is the lynchpin of the US economy. In fooling itself that this is the case, it has adopted economic policies that subsidize spending and consumption, and discourage the act of saving and capital investment. This is why there is no manufacturing base in the United States. Not because of China's trade policies.

America is as much of a managed economy as China is. No matter how much people convince themselves otherwise, there is nothing "free market" about a nation with state-managed asset prices in real estate and other asset classes, via monetary inflation, buying and holding of idle supply, and engaging in direct intervention into the equity markets in order that prices going up. All in the guise of raising investor and consumer "confidence" so that everyone keeps borrowing and spending.

Moreover, we've learned these lessons before. In the Great Depression -- with Hoover's disastrous trade policies which arguably turned what would have been a short and sharp recession into the a depression -- and in the 1970s.

What people have failed to realize, is that today's situation is far worse than either of those situations. In both of the previous cases, the US had the means of capital creation -- a manufacturing base -- to fall back on. When the shit hits the fan this time, consumers will be faced with mass shortages of basic consumer goods and will have no way to obtain them in any short-order, due to prohibitive import costs as a result of a severely weakened dollar.

Certainly, when this happens, investment in manufacturing will skyrocket -- out of necessity. But there will be no quick fix. America will experience a depression, followed by -- at the very least -- a decade of economic malaise, if not complete social and political breakdown.

Posted by Mike Brock on October 8, 2010 in Economic freedom | Permalink | Comments (22)

Sunday, September 26, 2010

Is the law too complex for lawmakers to understand?

At some point tomorrow, the Jaworski family will be heading to court to learn their fate.  They're in trouble because of one person's interpretation of some local bylaws.  Those out there who oppose them have been saying that it would be nothing for them to do their homework, navigate through those bylaws and go and get the proper permits.

But really, how easy is it for a business to stay within the letter of the law?  There's always something out there you're missing.  And it's not just businesses that have trouble navigating all of these laws, rules, regulations, bylaws - even parliamentarians can be tripped up by them.

As an example, let me point to Vancouver-Quadra MP, Joyce Murray.  Ms Murray is not the kind of person you would think would have trouble figuring out the rules.  For one, she's a former cabinet minister.

But visit her site, and you'll see a posting for an unpaid internship.  One open to: "Students, full or part-time, as well as recent graduates" (emphasis added).

And there is the problem.  Now I'm sure the majority of the readers of this blog would take no issue with an individual, in school or not, contracting to do an unpaid internship with a company.  Both sides benefit, the intern gets a chance to break into an industry in which they're interested, the company benefits from skilled and motivated people who are willing to try anything.

Unfortunately the government doesn't see it that way.  Here in BC, the Employment Standards Act (ESA) says of internships, that in order for them to be exempt from the ESA, and thus exempt from minimum wage rules, they must be - "“hands-on” training that is required by the curriculum, and will result in a certificate or diploma.".  To quote York University employment law professor, Dr David Doorey "So that’s easy: if the internship is part of a higher education co-op program, then the Act does not apply."

I exchanged emails with Dr. Doorey on this over the weekend.  He agreed that the issue is very complex, but added:

My sense is that there are a whole lot of employees in Canada being improperly labeled "interns" by their employers so that the employer can avoid employment law statutes.

Looking again at the definitions above*, a 'recent graduate' is not a student, and not a participant in a program of higher education.  In which case an unpaid internship for them would not be permitted.  According to the ESA's of both BC and Ontario, this potential intern would likely be considered an 'employee', and in that case would need to be paid at least minimum wage. 

Go back to Ms Murray's internship description and you'll see that the intern will receive a $300 honourarium at the end of their placement.  The placement is 12 weeks long, for a minimum of 8 hours per week, meaning that this potential 'employee' will expect to receive the equivalent of ... $3.12 per hour.  BC's minimum wage is low - it's not that low though.

Now is paying an employee $3.12 per hour exploitation?  A libertarian, naturally, would say 'no'.  If you can find someone who will work for that, then great for both of you.  But I would imagine a Liberal parliamentarian would see it differently.  After all, as we have recently seen, Liberals aren't keen on libertarianism - it's just for 'Peter Pans' after all.

The point of this isn't to hurl insults at Joyce Murray.  It is to point out how terribly complex the law is, how difficult it is to obey in full and how anyone, even a former cabinet minister / current Member of Parliament could get tripped up by it.

Update

FYI: Joyce Murray's office got back to me with this:

"It is certainly not my intention, or Ms. Murray’s, to violate BC’s Employment Standards.  Please see the modified link below:  http://joycemurray.liberal.ca/uncategorized/joyce-murray-mp%E2%80%99s-internship-program/"

The link shows a change to their program to bring it within the letter of the law.   If we have to have all of these obscure little rules, that's precisely how to deal with violations of them.  No drama, no $50,000 fines, just say sorry, fix it, and promise to follow the rules next time.  If it's good enough for parliamentarians ...

Posted by Robert Jago on September 26, 2010 in Canadian Politics, Economic freedom | Permalink | Comments (3)

Saturday, July 17, 2010

WS on the census: Paul McKeever "Optional long form census a blow to racism"


Canada's Conservative government has announced that completion of Canada's "long form" census will cease to be mandatory in 2011.  Shrieks of condemnation can now be heard from a wide range of interests.  None of them are justified.  To the contrary, this is one step the Harper government has announced in recent history that is actually praiseworthy.

Pursuant to the instruction of Industry Minister Tony Clement, on June 28, 2010, Statistics Canada announced, in part, that:

The 2011 Census will consist of the same eight questions that appeared on the 2006 Census short-form questionnaire. It will be conducted in May 2011.

The information previously collected by the long-form census questionnaire will be collected as part of the new voluntary National Household Survey (NHS). This questionnaire will cover most of the same topics as the 2006 Census, but will exclude the question asking for consent to release personal census information after 92 years as this is only required by the census. The NHS questions will be made available by the end of July.

The National Household Survey will be conducted within four weeks of the May 2011 Census and will include approximately 4.5 million households. (emphasis added)

The one somewhat unconvincing reason given by Clement for the government's decision to make the long form optional was explained in a July 13, 2010 media release by Clement which stated, in part:

The government does not believe it is appropriate to force Canadians to divulge detailed personal information under threat of prosecution.  For this reason, we have introduced changes for the 2011 Census.

The rationale for objecting to lifting the mandatory completion of the long form are numerous. According to the CBC, the long-form of the census includes questions about religious affiliation every 10 years (2011 being the next such year) and religious groups complain that they need the data to deliver programs and services and to track changes the "religious landscape". The Star reports that Canadian Medical Association journal needs long-form information for health care planning. In short, a good number of private associations like getting free data, and are quite happy to have the federal government threaten Canadians with fines and jail time in order to get it.

Others, not focusing upon the use to which census data is put, complain instead that taking a gun from the heads of those asked to fill out the long form will undermine the quality of the data.  For example, the Ottawa Citizen's Dan Gardner, and a host of statisticians about whom he writes, express concern that:

...the switch from a mandatory to a voluntary form will bias the data in many ways and increasing the number of households that get the long form won't correct the biases. It will just produce more numbers. That are biased. And not comparable with past census data.

Toronto Dominion Bank senior economist Drummond has complained that if the long form is optional, white middle-class individuals will submit a greater percentage of the long-forms, leaving minorities, aboriginals and the very wealthy under-represented in the data.  He says that, eventually, the data would be useless.

Implied in such complaints is an underlying belief that the data collected with the long form should be used by government.  So, what exactly is the nature of the data that so many are clamouring for, and to what purposes can a government put such data?

In 2006 - the year in which the most recent long-form census was sent out to Canadians - talk radio host Robert Metz described in great and illuminating detail the questions set out in the 2006 long form, which he refused to file.  Metz is the founder of the pro-free-market Freedom Party of Ontario and a long-time opponent of the census.  In his account (which is a must-read for anyone weighing in on the issue of continuing to force people to fill out the long form), he explains that the long form of the census divides Canadians into discrete collectives distinguished by race and wealth:

None of the census questions relate to any proper function of government or of its proper relationship to the citizen: the administration of justice, maintenance of an objective court system, or the function of the military. They're all about genetic make-up and wealth redistribution.

Many opponents of the plan to make the long form optional take the position that the long form does not take too long to fill out.  Others, like Liberal Party industry critique Marc Garneau argue that:

"...no one has gone to jail over the census, at least as far back as 1981. Only about 50-60 people are charged over each census, with about six having to pay fines".

Metz's account anticipates that argument, and responds as follows:

But again, fines and jail sentences are a secondary issue, particularly when rarely enforced. The real significance of Canada's Census lies not in the seemingly senseless questions being asked, nor in the threats of penalties directed against us, but in what we are being told about our collective future. Sadly, if the racists and other collectivists who design and administer the Canadian Census have their way, Canadians can expect a continued reversion from a productive society --- which survives by consensual trade in which wealth is earned by productivity --- towards an uncivilized jungle inhabited by warring tribes forced to segregate and divide themselves according to a genetic code.

Now, before the reader rebuts that Metz, an unflinching advocate for individual freedom and free markets, might be misrepresenting the purpose of the collection of such data, consider the statement issued last Tuesday by Armine Yalnizyan, an economist with the collectivist Canadian Centre for Policy Initiatives:

The long form is a critical tool that helps business, communities and governments decide where you need your money...

Without this information, we are all punching in the dark. Without this information, we cannot properly allocate our resources. The people who will pay most dearly are those who are already most vulnerable: the poor, aboriginal communities, recent immigrants and racial minorities.

Yalnizyan essentially agrees with Metz about the intended use of the data is to redistribute wealth to collectives distinguished by race.  To conclude that those not getting "our" resources (i.e., government subsidies) thereby "pay", it is necessary first to assume that the money taxed out of the pockets of those who earn it is, in fact, money that is owned by, and owed to, Canadians collectively.  Characterizing collectives of individuals defined almost exclusively by race as those who "pay", Yalnizyan confirms Metz's summation that the collectives in question are racial collectives; that the census is a tool to impose and facilitate tribalism (a state of affairs in which government governs not individuals, but collectives distinguished by race, sex, nationality, et cetera). 

Whether or not they realize it as explicitly as does Yalnizyan, the opponents of making the long-form optional are condemning not merely privacy and the freedom not to provide information, but also the individualism and free markets that the long form data is ultimately intended to undermine.  Whether the opponents want unpaid-for data or consistent statistical history, their objections are in the service of the most vile form of collectivism - racism - and of that well-known toxin to any economy, central planning.

It would give me great comfort were I to believe, as Liberal Party industry critic Marc Garneau somehow does, that the Harper Conservatives are motivated by a desire to put an end to central planning:

"By attacking the census, this government is throwing us in the dark on immigration-related issues. They're doing the same for aboriginals, visible minorities and the disabled, and for those arguing for the need for pay equity...That's what the Conservatives' endgame is here -to permanently hobble the government's ability to enforce legislation and deliver social programs aimed at our most vulnerable."

To be sure, the economic case against the practicality of central planning is as damning as the moral case against it (the immoral being the impractical, such will always be the case, in the long term, as knowledge grows).  But, alas, I do not share Garneau's belief that the Conservatives are using privacy concerns as a cover story for a secret agenda to end central planning.  The painful evidence is everywhere about us that the Harper Conservatives have no particular affinity for free markets, and no particular opposition to central planning.  Billions of dollars borrowed by the federal Conservatives to bail out or nationalize private companies (after having campaigned against such bail-outs and deficit spending); cuts to the rate of the inherently single-rate, less invasive GST instead of to the progressive rates of income taxes; soccer-mom hand-outs at taxpayer expense; quiet and countless transfers of billions across little community groups like Youth for Christ of Langley, BC: all stand as the best evidence that the Conservatives' only agenda is to do whatever it thinks it needs to do to stay in power. 

Moreover, such Conservative actions have been backed also by Stephen Harper's unequivocal condemnation of free markets; a condemnation not made in public to lefties and righties alike, but to a closed-door conservatives-only audience in 2009 at the Manning Centre for Building Democracy. In that speech, he condemned liberals for thinking government to have a role in all economic decisions, and condemned "libertarians" for thinking government to have no role in economic decisions.  Like so many on the left, his argument was founded upon the falsehood that the west's economies are free markets, and that it was the alleged free market - rather than fraud, credit inflation and government mandated loans to the uncreditworthy - that led to the current economic crisis.  Playing second fiddle to no fellow Keynesian, Harper made it clear he thinks individuals are all irresponsible children that need governmental parenting from cradle to grave:

Now, I know the libertarian – and I am sure there are a few in this room that define themselves that way – the libertarian says, and it's a perspective that I have a lot of sympathy for, let individuals exercise full freedom and take full responsibility for their actions.

The problem with this notion is that conservatives know from experience that people who act irresponsibly in the name of freedom are almost never willing to take responsibility for their actions. I don't speak *just* of individuals who may have ruined their lives through drugs or crimes or whatever, but look at Wall Street, the great free-enterprise financial institutions who wanted so much freedom from government regulation. They were the first in line for government support when the recession hit. And now I read, I read yesterday, that now some of them are saying they don't like that this government money may limit their freedom.

These are not the words of a closet capitalist.  They are the anti-capitalistic (i.e., anti-free-market) words of a man who, first and foremost, likes the Prime Minister's chair. 

It is true, in my view, that the Conservatives do not at all care about the quality of the data collected in the long form of the Census.  And I would quite agree with any leftist who said that the Harper Conservatives, in fact, have no real need or desire for census data: I sincerely doubt they will use it to identify spending priorities, and I suspect that the only reason they did not announce scrapping it altogether was to ensure that the various people wanting free data (including Conservative-friendly religious organizations) could not argue that they have been deprived of it (they are left, instead, making sleep-inducing technical arguments about statistical accuracy, and other things that few voters care about).  

Though it pains me to say it, the decision to eliminate the mandatory completion of the long form is not founded upon a secret Conservative agenda to end central planning.  It is, in reality, nothing more than an effort to feed a bit of red meat to that slender, politically homeless demographic that nowadays finds itself so uncomfortable associating itself with a Conservative Party so bent upon managing the economy, pandering to the more radical religious elements, and setting itself up as a hand of god that will deliver us from such 'evils' as the decision to smoke a bit of cannabis.  For years, the Conservatives have dangled the carrot in front of that constituency, communicating by wink and smirk - but never by voice - a false promise to deliver a pro-free-market, pro-individualism revolution.  The mandatory long-form is a long-term gripe of that constituency and making it optional - without eliminating it - is only the latest half-hearted attempt to maintain whatever party loyalty there remains among those who seek individual freedom and capitalism.

I do not think the Conservatives will gain or maintain much loyalty from that constituency, but neither do I think they have much to lose by taking the step they have taken (unless they commit the cardinal sin of, again, reversing themselves only to fend off the Liberals and other collectivists).  Nonetheless, making the long form optional accomplishes something more important for Conservatives and non-Conservatives alike.  I anticipate relatively few people will volunteer to spend their time filling out an optional long-form census and, if that ends up being the case, the Conservatives will at least unintentionally have struck a blow against that most destructive and dehumanizing form of collectivism: racism.

Posted by Paul McKeever on July 17, 2010 in Canadian Politics, Census, Economic freedom, Libertarianism | Permalink | Comments (9)

Monday, July 12, 2010

Run from the Rahn Curve

Recently, Shotgun blogger PUBLIUS featured a video made by the Center for Freedom and Prosperity concerning a graph of the so-called "Rahn curve". The video serves as a good example of what is wrong with the idea of founding upon quantitative economic arguments ones advocacy of individual freedom. And, given the political orientation of those telling us about the Rahn curve, an explanation of why libertarians are prone to making the aforementioned error is warranted.

In the comments section of the
 blog post about the Rahn Curve, I essentially 'promised' a video response. The argument below may be a bit more precise, but I did in fact prepare a video in which I opine extemporaneously upon the same subject discussed in this post. For those who would rather watch and listen than read, I include that video response below:
 


 There should be little argument that the Center's video is being presented by an organization that wants the world to view it as advocating individual freedom. Were that not the case, I sincerely doubt that the "Center for Freedom and Prosperity" would bother mentioning freedom, and would instead call itself something like "The Centre for National Prosperity" (a name that would be more fitting). In the video, the Center's spokesperson is Dan Mitchell, a libertarian economist who is both a founder of the Center, and is a senior fellow with the
Cato Institute. The Cato Institute takes its name from Cato's Letters, which the Institute describes as "...a series of libertarian pamphlets that helped lay the philosophical foundation for the American Revolution." The Cato Institute states that its mission is: "...to increase the understanding of public policies based on the principles of limited government, free markets, individual liberty, and peace."  In short, the video is presented by entities that wish to be regarded as advocates of individual freedom. 

The purpose of the video is informed by the fact that those providing the video wish to be regarded, in doing so, as advocates of individual freedom. Accordingly, the arguments set out in the video purport to be arguments in defence of individual freedom (hence, of capitalism).  So let us turn to the content of the video for the purposes of determining whether the video's message strengthens or undermines the case for individual freedom.  



The video gets off to a bad start. The "Rahn Curve" graph does not disclose what, exactly, is being plotted.  The X axis is labeled ambiguously as "Economic Performance", and the Y axis is labeled just as ambiguously: "Size of Government". That ambiguous labeling, together with such narrative as "But you the viewer only need to understand one thing", suggests that the producers of the video are not very concerned with having viewers actually understand the curve, so long as viewers accept the curve as economic proof that government is currently too big. With not too much googling, one can find for oneself the units that the Center thought should be replaced with ambiguous terms. Values on the X axis (which the Center labels "Economic Performance") are actually: Percentages of Annual Growth in GDP. Values on the Y axis are (which the Center calls "Size of Government") are: Percentages of Annual GDP that is Spent by Government". 

Mitchell tells the viewer that "economic performance" is maximized when government spending (a.k.a., the "size of government") is somewhere in the range of 15% to 25% of GDP. He goes on to deliver the video's take-home message: because U.S. government spending is in the 35% to 40% range, the Rahn curve demonstrates "...that government is too big, and this is reducing prosperity".

As an aside, I should add that, given that that which is spent by government must first also be taxed by government, it should not be surprising that the Rahn Curve has the same shape as the Laffer Curve. Yet the Rahn Curve is presented to the viewer as though it is a second piece of evidence that there is a right size for government.

There are numerous problems with the Center's use of the Rahn Curve as a basis for advocating individual freedom. First, consider the implications of an alleged freedom advocate advocating the maximization of annual growth in GDP. GDP growth is not a measure of the increase of any particular individual's productivity, but of the increase of the productivity of a collective entity: the country, or nation. Because the Center is advocating the maximization of GDP growth as a desired goal, it is implicitly advocating for the interests of a collective (the country, the nation), whether or not such a goal is in the interest of a particular individual.  In other words, the Center is necessarily advocating in favour of what utilitarians and other collectivists are prone to calling "the greater good" ("greater", as in: "of greater importance than the good of any one individual"). 

One cannot seriously expect to found the advocacy of individual freedom upon maximization of something that designed to serve "the greater good"; the good of the collective. When one uses the economic benefit of the greater good as the basis for arguing that individual freedom is desirable, one instantly undermines the cause of individual freedom. Every instance of individual freedom that leads to an economic result in which the collective does less well than it otherwise would have done but for the individual freedom serves as an argument against individual freedom. Does the use of marijuana, or alcohol, or opiates decrease growth in the collective productivity of the country? If so, then the result of alleged individual freedom advocates holding up collective productivity growth as a desired goal implies that some of the revenue spent by government should be used to force individuals not to use such substances. The violation of liberty is thereby held up as somehow being consistent with, or even necessary for, the defence of individual freedom.

Second, the assertion that there is an ideal size of government, together with the assumption that the size of government is properly measured by spending as a percentage of GDP, implies that it is ideal for the government to grow – more precisely, that it is ideal for government spending to grow -- as GDP grows. The Center for Freedom and Prosperity having as one of its aims greater productivity, the Center is, ironically, advocating the continuous growth of government (assuming the economy continues to grow). So, if one starts with the libertarian notion that "the best government is the government that governs least" (i.e., that smaller government is necessarily more compatible with individual freedom than is bigger government), one is left with the self-defeating spectacle of libertarians implicitly arguing for ever-growing government; a growth allegedly serving "the greater good". 

Worse, the Center provides us with not even an attempt to explain why productivity growth leads to a situation in which government needs more money. If one individual's efforts increase the productivity of the country, it does not follow that that productivity increase causes a state of affairs in which defending life, liberty, and property becomes more expensive. The notion that government spending should increase as a percentage of GDP is a welfare statist conception, founded upon the notion that so long as the percentage of wealth stolen from the public does not change, there is no harm done: the amount of wealth transferred from the increasingly productive to the under-productive or non-productive can increase as the economy grows. Such wealth redistribution, being accomplished by a gun pointed by government at the head of every producer, is neither an incentive for production nor consistent with the role of government in a free society: defending every individual's life, liberty, and property. 

Third, government spending is, itself, an ambiguous concept. There is simply no way that “government spending”
per se, is necessarily good or necessarily bad for productivity growth. Law enforcement is not, per se, good or bad for productivity. For example, the supposedly ideal 20% recommended in the video could be spent on defending every individual’s life, liberty and property. Trade requires that a person’s property not be obtained without his consent so, clearly, if government pays officers to ensure that nobody obtains another person’s property by such means as theft or fraud, productivity will be higher than were government to allow thefts and frauds to occur. But productivity will be undermined if government uses exactly the same amount of money to pay officers to force stores or factories to close on Sundays or religious holidays, or to seize the property of milk farmers who sell milk directly to consumers instead of complying with a law requiring them to buy quotas and sell their milk only to a milk marketing board. 

As another example, the government can spend $1.8M Canadian tax dollars to pay a year’s salary to approximately 6 Canadian judges who will try and convict murderers, rapists, and thieves. Alternatively, the government can spend that $1.8M Canadian tax dollars to buy a painting comprised of three vertical stripes ("
Voice of Fire"). The arrest and conviction of criminals will facilitate productivity and trade, but the purchase -- by a non-productive entity such as government - of three lines on a canvas, will not increase productivity. To the contrary, the government's purchase of the painting may well reduce productivity by taking money out of the hands of producers (i.e., taxpayers) who would have used the money as capital with which to facilitate more valuable production.

Fourth, in a political context, individual freedom means: not having ones life, liberty, or property taken without ones consent. Individual freedom is not a reference to government using force (i.e., laws, backed by guns) in an attempt to maximize the increase of the collective productivity of the country's inhabitants. Individual freedom is not a reference to government using force to increase tax revenues and government spending when the country's productivity increases. Individual freedom does not refer to government using force to redistribute wealth from those who produce it to those who do not. All such uses of force in the economy are instances of the very coercion from which the government is supposed to be
protecting individuals. They are instances of the very crimes for which the government rightly arrests and imprisons people. They are evidence that the government now regards itself as being above the law.
 
The whole notion of “smaller government”, similarly, has nothing
per se to do with individual freedom.  Individual freedom depends upon the quality of government, not the quantity of it. Individual freedom is not a function of how big or small a government is, per se, but of how effective government is in defending every individual’s life, liberty or property; how effective it is in ensuring that no person is deprived of his life, liberty or property without his consent. A small government that does not defend life, liberty and property is less desirable than a big government that limits itself to doing so. Therefore it makes no sense to assert that there is a given percentage of GDP that the government should take and spend (i.e., it makes no sense to advocate that there is a right size for government based upon economic figures). A government's expenditures will properly depend upon such things as how much crime there is; how many thieves, rapists, and murderers there are, et cetera. A largely moral and peaceful society with a given GDP will be much less expensive to govern than a largely immoral and violent one with the same GDP.

Now, if neither the alleged size of government nor the quantitative arguments of economics has anything to do with individual freedom, why do many libertarians spend so much time calling for “less government”?  Why do libertarians base so many of their arguments upon the attainment of economic goals? The answer to both questions is rooted in the fact that economics deals not with the qualities of things, but with the quantities of things; it deals explicitly not with right and wrong, but with more and less. And, because economics deals with quantities instead of with qualities, an economic argument gives libertarians a rallying cry to attract individuals whose qualitative opinions about government differ greatly, or are even in opposition. 

For example, quantitative economic arguments in support of “small government” allow libertarians to attract religious anti-abortionists who want to take away government’s ability to fund abortions, while also attracting anti-religious pro-choicers who want government to stop funding (or to stop providing tax breaks for) religions that oppose a woman’s right to choose to have an abortion. The result is a libertarian group that claims to advocate individual freedom though its members cannot agree about whether doctors who provide abortion services should be protected from those who bomb abortion clinics, or whether such doctors ought to be given the death penalty. 

The libertarian's conscious or unconscious attraction to economics is founded upon the hope that if you give people common quantitative conclusions with which they can agree, they will voluntarily stick their heads in the sand, or keep their mouths shut, with respect to the qualitative commitments that make their fellow libertarians their political enemies. And so we have libertarians who rally behind the anti-abortion Ron Paul, a proponent of Austrian economics, joining with libertarians who rallied behind - and continue to praise - pro-choice libertarians like Murray Rothbard who, similarly, was a proponent of Austrian economics. 

In discussing libertarians, I do not imply that I restrict my criticism - concerning the use of economics to justify individual freedom, or to bring people together despite their substantive opposition - to libertarians or members of Libertarian parties. The same misguided attraction to economics imperils other political parties. For example, in a recent
interview of blogger Andrew Lawton by Libertas Post, Lawton took the libertarian position that health care should be entirely privatized. Lawton is anti-abortion and he considers himself a "social conservative". Yet he told Libertas Post that "at the end of the day, I think the most important issues that we have to work on as conservatives are the issues that we agree on, which are economic issues". Like the big L libertarians, the big C conservatives attempt to use economics as a no-conflict zone between warring factions who somehow think it desirable, for electoral ends, to work together though their desired governmental ends are mutually exclusive. 

However, unlike libertarians and Libertarians, conservatives and Conservatives do not seek to be seen as advocates for individual freedom, and generally do not hold themselves out to be such. Accordingly, trying to unite people with economics does little to undermine the case for individual freedom when it is conservatives who engage in such folly. If anything, it undermines conservatism.

In contrast, when libertarians - holding themselves out to be proponents of individual freedom -- use economic arguments to bring together individuals who oppose one another on qualitative matters (e.g., anti-abortion vs. pro-choice), each instance of disagreement on such fundamental qualitative matters -- among alleged advocates of individual freedom -- serves to convince the public that "individual freedom" itself is itself an ambiguous concept; individual freedom itself is undermined.

The prospects for individual freedom would be undermined even more were libertarians -- having been drawn together by economic arguments -- somehow to win the reigns of governmental power. Returning to the abortion example, when conservatives disagree about abortion, and decide upon a "compromise" law in which women are free to have abortions in the first five months of pregnancy, but in which abortions conducted thereafter are punishable by imprisonment, the wisdom or insanity of the law is attributed to conservativism or to a Conservative party. 

In contrast, were a governing libertarian party -- a governing party that claims to be comprised of proponents of individual freedom -- to adopt the same 5-month law for abortions in order to accomplish the same comprise between its anti-abortionist and pro-choice membership, what would that tell the onlooking public? It would tell the public a range of falsehoods: that "individual freedom is not absolute"; that compromise is,
per se, a virtue, and is necessary; that "individual freedom is good in theory, but it doesn't work in practice"; that, ultimately, any argument in favour of individual freedom is flawed; that advocates of individual freedom are "naive" and should be ignored. In short, even were it possible to use economic arguments to unite de facto political opponents to win an election, the winning of the electoral battle would only serve to undermine the cause of individual freedom.

Nothing I have said about economics should be interpreted as a condemnation of economics itself. To the contrary, economics explains a great deal that should be known and that can help producers and consumers make wise choices. However, in a free society, economic choices are made by producers, who trade their respective values consensually. If the economic aim of a government is a free market, the government can ignore economic arguments altogether, and simply ensure that all trades a mutually consensual. Any other economic aim pursued by government (e.g., increasing government revenues and expenditures as the economy grows so as to maximize the productivity growth of the country), with or without economic knowledge, necessarily will involve using force to coerce individuals to part with their values non-consensually.

Accordingly, in a free society, economic arguments are of no use to government except for the identifying instances where an individual's life, liberty or property is being taken without his consent (e.g., arguments about the nature and effect of fractional reserve banking, monetary inflation, the use of gold as money, et cetera).  Any economic argument in favour of government having an economic aim other than a free market serves not to defend individual freedom, but to undermine it.

Posted by Paul McKeever on July 12, 2010 in Economic freedom, Libertarianism | Permalink | Comments (7)

Monday, November 30, 2009

Sunday Shopping in Manitoba

The issue of Sunday shopping often comes up around Christmas, when retailers expect a large spike in business for the holiday season. Being the evil capitalists that they are, they would like to "capitalize" on that shopping frenzy and be open to meet the customer demand.

There is a government prohibition on Sunday shopping in Manitoba, the government says when a business can or can't be open, and they provide monopolies to certain businesses by allowing them to stay open for extended hours (like convenience stores) while others cannot.

So, why Sunday? Why not Tuesday? Or Saturday? The answer is... Christianity. In a country that supposedly has separation of church and state, those people not of the Christian faith are forced to live by its tenant of keeping the Sabbath day "holy", by not doing business on that day.

But wait, you CAN do business on that day; if you are a gas station, convenience store, hospital, TV station, cable company, hydro worker, moving company, etc. It seems that those services are acceptable to the moralists, but oh no, want to go buy a TV on Sunday after 6PM? No way you heathen!

So as usual various business organizations beg the government for permission to do business on this holy day, in order to take advantage of the increased business this time of year.

Chamber seeks longer Sunday shopping hours

I would love to see business owners just open up the hours that they want and ignore the government regulations. What do bureaucrats know about running a box store? Why do they get to set the hours? The answer is because if you don't obey their dictates, the men with guns come and shut you down.

If you don't support Sunday shopping, then don't shop on Sunday, and don't force the rest of us to adhere to your standards.

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freedommanitoba.blogspot.com

twitter.com/freedommanitoba

I welcome feedback and I ask for civility in the exchange of comments. Vulgarity is discouraged. Please express yourself creatively with other language. We discuss ideas here, attacks on a person are discouraged.

Posted by Freedom Manitoba on November 30, 2009 in Economic freedom | Permalink | Comments (24)

Tuesday, November 17, 2009

Canadian Constitution Foundation to defend freedom to sell raw milk

Here's the press release form one of our favourite pro-liberty organizations, the Canadian Constitution Foundation:

At a press conference at Queen’s Park today, the Canadian Constitution Foundation (CCF) announced its support for a court case involving consumer choice, freedom of contract, and the right to earn an honest living free from government regulation that is arbitrary, unreasonable, unnecessary and unfair.

The case concerns Ontario dairy farmer Michael Schmidt, who has been providing unpasteurized milk to consumers for approximately 20 years without a single incident of illness attributable to milk borne germs.

Mr. Schmidt was charged in 2006 with numerous violations of the Milk Act and the Health Promotion and Protection Act, Ontario legislation that requires milk to be heated to at least 160 degrees Fahrenheit before it can be marketed.

Mr. Schmidt has contested both his guilt under the legislation, and the constitutional validity of the legislation itself. He argues that the ban on raw milk sales violates the guarantee of “life, liberty and security of the person” in the Canadian Charter of Rights and Freedoms. The ban also violates the Charter’s equality and non-discrimination rights.

His six-day trial ended in February, 2009. The court’s judgment is scheduled to be released on January 21, 2010.

Since Mr. Schmidt was charged in November, 2006, the size of the herd he manages has doubled. There is also a waiting list of consumers wishing to participate in Mr. Schmidt’s raw milk dairy.

The CCF has announced that it will represent Mr. Schmidt in ongoing litigation challenging the constitutionality of the raw milk ban.

“This is about the rights of Canadians to choose a product that is safely consumed by tens of thousands of people around the world. It’s also about the right to earn an honest living free from government regulations that are unnecessary, unreasonable and unfair,” said CCF Litigation Director Karen Selick.

“There have been huge technological improvements in refrigeration, transportation and pathogen testing, in addition to the entrenchment of individuals’ constitutional rights. Consumers who want freedom of choice expect their government to make the transition to the twenty-first century and to respect their rights,” added Selick.

The CCF will also represent consumer advocate James McLaren, who has sought for many years to persuade federal and provincial authorities to revise the regulatory regime so that inspected and tested raw milk can be sold to consumers. Mr. McLaren will argue on behalf of consumers that the legal prohibition on raw milk violates their constitutional right to “security of the person”.

Mr. McLaren has recently established an on-line petition for consumers who want the government to conduct a policy review for the purpose of establishing safe protocols for the production and distribution of raw milk.

The press release ends with some additional, and interesting, information:

A study published in 2006 in the medical journal Clinical and Experimental Allergy demonstrated that raw milk has a beneficial effect on children’s health. Scientists from prestigious American and European universities and children’s hospitals studied 14,893 children aged 5—13 years. The children who consumed raw milk had a significantly reduced incidence of asthma and allergies, compared with those who drank pasteurized milk.

Certified or government-authorized raw milk is sold in many European countries, including: the United Kingdom, France, Germany, Switzerland, Austria, the Netherlands and Denmark. Raw milk is also available legally in about half of the U.S. states.

Canadian authorities justify the mandatory pasteurization of milk on the grounds of food safety. However, the U.S. Center for Disease Control has documented at least a dozen outbreaks of food poisoning from pasteurized milk over the past 25 years. Some outbreaks affected hundreds of thousands of people, and some resulted in death.

You can sign a petition to legalize raw milk in Ontario, visit Michael Schmidt's website here, or James McLaren's Natural Milk website here.

Posted by P.M. Jaworski

Posted by westernstandard on November 17, 2009 in Economic freedom, Food and Drink | Permalink | Comments (25)

Sunday, October 18, 2009

What Happened to Arnold?

This is what happens when you go into politics, you get morally corrupted.

Hard to believe that this clip of Arnold Schwarzenegger in the early 1990's talking about free markets is the same man who recently pushed to ban plasma tv's in California that are over 40".

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freedommanitoba.blogspot.com

twitter.com/freedommanitoba

I welcome feedback and I ask for civility in the exchange of comments. Vulgarity is discouraged. Please express yourself creatively with other language. We discuss ideas here, attacks on a person are discouraged.

Posted by Freedom Manitoba on October 18, 2009 in Economic freedom, Free trade | Permalink | Comments (5)

Wednesday, September 30, 2009

Congressman Ron Paul on The Daily Show

Posted by Kalim Kassam on September 30, 2009 in Economic freedom, Libertarianism | Permalink | Comments (1)

Thursday, September 24, 2009

The existential drama of Canadian communists

This post could also have been called, "How Canadian communists must come to terms with history", or even, "Why I have to re-post more pursuant to Gerry Nicholls' post". According to an article in Epoch Times, plans to construct a monument in Ottawa to honor the victims of communism are being obstructed by due regard to the feelings of Canadian communists. 

The ever-industrious National Capital Commission (NCC) wants to change the name of the monument from  “Memorial to the Victims of Totalitarian Communism” to something that does not demean or tarnish the self-esteem of card-carrying communists in Canada. Initially, the monument was going to be called the "Memorial to the Victims of Communism", but NCC board members found it to be polarizing, hence the addition of the term "totalitarian". Now it seems no one is completely certain about the monument, the emotional states of Canadian communists, the value of historical memory, or whether communism really deserves the bad rap it seems to have earned over the past few decades.

There are exceptions to this Canadian confusion over communism. Tribute to Liberty, one of the groups trying to get this monument built, probably never anticipated so much controversy and stalling in the naming phase. After all, one would be hard-pressed to find honest individuals arguing against naming a monument to the victims of Nazism or fascism qualifying this description with the obvious, namely, "totalitarian". 

Of course governments ruled under the ideologies of Nazism, fascism, or communism are totalitarian-- in fact, "totalitarianism" (as opposed to freedom, rule of law, or human rights) might just be their original contribution to political history. Name one communist country in the history of the world which has not been totalitarian. In fact, adding the word "totalitarian" to qualify communism is not just ignorant--it is blatantly false and dangerous. The refusal of communists and their defenders to admit the nature of communism should not prevent the public square from being the place where a spade is called a spade and the victims of communism are duly honored.

Posted by Alina on September 24, 2009 in Canadian Conservative Politics, Canadian Politics, Current Affairs, Economic freedom, Freedom of expression | Permalink | Comments (35)

Tuesday, September 08, 2009

Prostitution likely to be banned in Rhode Island

I admit that the most surprising part of this Wall Street Journal article is that prostitution is legal in Rhode Island, but now it seems that legality is being threatened. A bill to ban prostitution has passed both levels of the legislature.

According the the WSJ, this new push to ban prostitution came from a high profile murder case involving a prostitute, a client, and Craigslist. I find this to be bizarre. Their response to this murder is to prosecute those in the same profession as the victim.

If a patient murdered their doctor would medical professionals be banned?

Posted by Hugh MacIntyre on September 8, 2009 in Economic freedom | Permalink | Comments (39)

Monday, August 17, 2009

Hog Farm Bail-Outs

The hog industry in Canada has seen some hard times lately, and after begging for $800 million government dollars now they are being offering a nice little financial incentive to get out of the hog business, $75 million tax payer dollars.

Speaking at a research farm in rural Manitoba Saturday, (federal Agriculture Minister Gerry Ritz) said some hog operations are not viable and those farmers need help.

"We have to face the reality that some producers will leave the industry and we need to reduce our current over-supply," he said.

It's just another bail-out. If an industry is failing, then let it fail! If people want to get out of a business, then let them get out of it. Artificially sustaining failing business is not economically sound. The industry can correct itself without forcing Canadian taxpayers to fork over the cash.

"Is it what we wanted? Of course, straight cash is always nicer without any strings attached, but the reality is that wasn't going to happen," said Jurgen Preugschas, president of the Canadian Pork Council.

Yes Jurgen, straight cash would be very nice, so go out and earn it instead of expecting the Canadian public to pay for your failing businesses!

If there is not enough demand to meet the supply, then reduce prices and perhaps you sell more. Reducing the supply is the responsibility of the business owners, not the customers and not the general public.

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I welcome feedback and I ask for civility in the exchange of comments. Vulgarity is discouraged. Please express yourself creatively with other language. We discuss ideas here, attacks on a person are discouraged.

FreedomManitoba.blogspot.com

Posted by Freedom Manitoba on August 17, 2009 in Economic freedom | Permalink | Comments (6)

Friday, July 31, 2009

Understanding protectionism

With every industrialized nation struggling to survive the Great Recession, government focus has shifted back to the idea of protecting their respective economies. Up until the recession, focus seemed to be global economic interdependence ended up creating a large portion of nations’ wealth. That being said, it was and still is of the best interest of nations to trade with others. This is due mostly to the idea of comparative advantage; for instance, let’s say Country ‘A’ is able to produce wheat at $5 per unit, while Country ‘B’ can produce the same unit of wheat for $7. On the other hand, Country ‘B’ is able to produce steel at $10 per unit, while Country ‘A’ can only produce it at $15 per unit. Assuming there are little to no trade barriers between the two countries, it benefits both equally to trade with each other: Country ‘A’ sells their wheat to Country ‘B’, and Country ‘B’ sells their steel to Country ‘A’ (let’s say $6 per unit of wheat and $12.50 per unit of steel). Both countries receive profit from one good and gets another good for a lower cost than if they were forced to produce it themselves.

It’s easy to see that this simple concept is a timeless idea, but it’s not so easy to understand why some governments, particularly now, create policies that go the opposite way and hinder comparative advantage. Besides the fact that currently it’s often a matter of economic survival, it’s important to understand the various arguments or reasons why protectionism still exists in an age of mass economic globalization.

The first and most common argument involves the labour force; labourers from foreign countries that produce the same goods are often paid less than those in high-income countries like the U.S. or Canada, where the cost of business is higher. Because of this, some governments are worried companies (in other words, jobs) will move overseas to reduce the cost of operation. As we all know, wages and benefits are huge expenses for Western companies. Although most governments these days are at least partially in support of free trade, there are occasions where countries are losing jobs at an alarming rate. Governments will understandably be skeptical of the advantages of free trade if the one disadvantage out-shadows all else.

The second argument worth mentioning focuses on emerging domestic industries. In particular, governments of developing nations sometime set up tariff policies in place to protect “infant” industries; developing industries that are not yet stable and productive in comparison with the industries of more industrialized nations. These advanced economies have stable, mature industries which would otherwise crush the common industries of developing countries in a free trade situation.

Developing nations often have the lingering worry that if they allow completely free trade in the cultural industries, then the most commercially successful companies will dominate. This has the possibility of the cultural values of the developing country to erode away, replaced by the dominant culture. It’s a no-brainer that many will chose to sell American films if they far outsell films from the their home country, and America happens to have the most viable entertainment industry in the world. Unfortunately one of the most disliked countries in the world also happens to be America.

Finally, there is the case of countries deciding that another country’s trade policies unfairly discriminate against them. In retaliation, a common response is to impose similar barriers against the discriminating country. Although retaliatory tariffs and quotas can provide an incentive for negotiations (not a positive one at that), it can also lead to escalating trade wars, making both sides worse off than the original situation.

It’s now easy to see that these policies, though detrimental in the long-run, are tempting to nations desperate to survive the Great Recession. Whether they help, or whether they are morally and economically justifiable, will depend on who you ask. In the end it’s best to at least understand these anti-free trade practices, even if we don’t like them; especially if we don’t like them!

[Cross-posted at The Right Coast]

Posted by Dane Richard on July 31, 2009 in Economic freedom | Permalink | Comments (11)

Tuesday, July 07, 2009

Big government blues

Check out my latest column, which appears in today's Sun media chain.

It examines the government-spending mania that's taking place on both sides of the border.

Posted by Gerry Nicholls on July 7, 2009 in Economic freedom | Permalink | Comments (5)

Tuesday, June 30, 2009

Understanding the Great Recession

Unlike the Great Depression, which occurred over 75 years ago, the global recession is a mystery to most. It’s understandable, as the Great Recession is happening now, taking away the hindsight the Great Depression now provides us. Even still, many people falsely blame ideology for these financial crises, when it is many reasons that all tie into each other, none of which lay claim to any particular ideology.

Some reasons are “conservative” or even libertarian, while others are “liberal” and left-leaning. In the end however, one can only blame humanity and accept -– and learn -– from this event.

The first point we need to understand is the housing bubble and it’s inevitable burst. From that comes mortgage securitization and the complexity of large insurance firms that fooled the banks and subsequently the world. Finally, the lack of regulations surrounding foolish financial activity was the green light for the Great Recession. In a darkly hilarious manner, even the U.S. government, for better or for worse, helped speed up the Great Recession. Clearly it was for the worst.

Putting it all together, one will see how the term “bad” in macroeconomics is not very subjective, and that it’s that way for a reason. Macroeconomics is not about theory or ideological origin –- it’s about using history and our amazing capability of reason to our advantage to predict the future of the worldwide economy and to educate how it works. Why is this fact overlooked in most aspects of every day human life? In the end, it’s not about who to blame but how it really happened and why we must fix it. Never creating a severe recession would be a bonus, but humanity is far too short-sighted for that.

In the past, the main cause of housing crises has been reduced demand due to declining domestic investment in the housing market. This time, while that effect is still there, it’s a minor issue compared to the latest housing market collapse, which kick-started the Great Recession. Congressman Ron Paul (R-TX), among others, has been warning against and predicting this exact crisis for several years, perhaps even for more than a decade. Of course, the media payed little attention and so the public knew little of the matter. The short recession of 2001 in the U.S. was triggered by a sharp decline in domestic investment, mainly in telecommunications infrastructure. As a fall-out, the stock market assets of households declined, but housing assets held up, cushioning the normal decline in consumption that comes with recessions. This event isn’t that well known compared to what’s happening now, perhaps because it happened to be minor or that it worked itself out. Unfortunately, it’s not the case with the Great Recession.

A popular metaphor for crises of this nature is to call it the “bubble bursting”, and for good reason. In this case however, the balloon works much better. Consider the imaginary balloon represents the housing market, and sub-prime mortgages to be the air inflating the balloon. Sub-prime mortgages occur when banks lend to un-credit-worthy customers –- that is, handing out loans to people who want to buy a house that they can’t actually afford. This may seem obvious to us all now, but at the time people of all types -– bankers, potential home owners -– were disillusioned by the notion of housing prices continuing to go up.

The idea was that although it wouldn’t pay off now, since houses and property are long-term assets, when they are ready to turn the home over to new owners, the supposed increase in the value of the home would compensate for the lack of income in the household. As one can imagine, the idea was popular for both bakers and for eager to-be homeowners. Bankers lend more (which means more return for them in the long-run if the market goes well), and average folks get a better house than they could have otherwise -– a win-win situation, right? So the inflation of the balloon begins, filling up with lending amounts close to and exceeding equity (what one owes compared to what one owns), and eventually the rubber wears thin enough to burst.

So now you’re wondering “Where did the banks get all this capital that they’re lending out from?” The answer is one that’s overlooked but played a crucial role in the development of this recession. Simply put, many mortgages during this time of ballooning credit were packaged and sold as financial security instruments by banks to other institutions in exchange for additional capital the banks could then lend out (to those with bad credit, no doubt). The institutions that bought these packages benefited by being guaranteed a repayment. If they don’t receive the repayment, they have the legal right to take back their capital or assets worth an equivalent amount, hence the use of the word “security”. Since security is rarely seen as bad in any context, it seemed like yet another win-win situation. The fact that the American currency was the global common currency helped it make sense financially as well. As icing on the cake, the two institutions that were the lead buyers were Fannie Mae and Freddie Mac, created in 1938 and 1970 respectively, were government created.

These institutions weren’t the only thing the government created in the 1900s. In the early 1980s the government deliberately created a severe (relatively speaking) recession to control inflation using contractionary monetary policy. In other words, the money supply was reduced and interest rates were increased in order to reduce aggregate demand in the economy. A decline in demand means a decline in prices. At a time when inflation was on the run, the result was prices staying more or less the same while the nation’s output and income dropped. It’s bad, but the fear of hyper-inflation, which was a legitimate fear, would have been worse.

An economy that as a whole is generally strong, for example the U.S. economy, is able to recover from the recession along with slowly lowering interest rates speeding the recovery up. Although not necessary, increased government spending and tax cuts (expansionary fiscal policy) could have also sped it up –- which it probably did considering in 1986 the deficit rose to be well over five per cent of national GDP. Believe it or not, that was considered a huge deficit at the time. Currently, the U.S. deficit created to end the Great Recession is about 12 per cent of national GDP. and don’t think for a moment that it’s going to stop growing any time soon. Either way, the “severe” recession of the 1980s focused on expansionary monetary policy.

This time, strong expansionary fiscal policy is being used worldwide as it is much faster and more effective than the monetary policy used in the 80s. It leads to staggering deficits which are never good, but it does lead to an a strong enough increase in aggregate demand to ride of the recession without the world coming to a screeching halt. Milton Friedman is probably turning in his grave, especially with the mass amounts of bailouts to major insurance companies and banks –- many of which created this mess in the first place.

The bailouts were accepted by policy makers much easier than in the Great Depression of the 1930s. They let the banks fail and the money supply contract. At a time when 100 per cent free markets was extremely popular amongst major economists, it’s understandable why the government let them fail. In an ideal world, the free market should have corrected it all itself, but in a world full of foolish people, it just didn’t happen.

This is not a defense of government bailouts, especially to the culprits of the Great Recession, but simply an explanation of why they were done. It’s interesting when people pay attention to certain aspects of history and ignore others –- selective attention anyone It must also be said that the wrong monetary policy was used during the Great Depression. Unlike in the 1980s where contractionary monetary policy worked, in the 1930s it was a total failure by the Federal Reserve. Milton Friedman named this decline in income, prices, and employment the “Great Contraction”, as much of this was caused in the tight contraction of the money supply. Like the 1980s recession however, the government at least partially created this recession as well. At the very least the government ensured that the recession turned into a depression. Interesting enough, current Federal Reserve chairman Ben Bernanke has been quoted as saying:

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton [Friedman] and Anna Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.

Back to the present, one might now be wondering “Well, why didn’t the banks know of the huge risks of securitization”. Great question! Complexity is the culprit; whether intentional or simply the result of mass bureaucracy, it’s often been at the root of many people’s problems skimming over the fine-print. Those pesky security instruments were further packaged in complex ways as derivative security instruments and sold again to other financial institutions, including back to the banks themselves. In simpler terms, these are bought for lower levels of risks such as interest rates or to help determine whether underlying prices will increase or decrease. This occurred because of foreigners trying to exchange cash for American securities (negotiable items that represent financial value), allowing banks and other buyers to increase returns. That was what was thought any way, but some large insurance companies such as AIG insured the packages without capital backing them up, calling them “credit default swaps”. As expected, the packages ended up being worthless. When this creates a ripple throughout the entire world in terms of mass amounts of assets going bad, we know this isn’t a normal old recession that’s expected to occur every once and a while. Although weak regulation in general was not the cause, the lack of regulation surrounding banks’ mortgage lending, banks’ capital requirements, and insurance “swaps” secured the collapse of the financial system, and can now be looked back upon when creating new policies regarding lending and capital requirements so that a crisis such as this cannot happen again.

Of course, not all of this happened spontaneously. Recall that foreigners bought up a lot of those security instruments because the U.S. dollar was so stable and strong. When the mortgages went bad, the security instruments that were held globally also went bad. The huge amount of bad assets in the bank’s financial books ceased the credit market, resulting in an unusually large recession that was and still is felt worldwide. From here, it can be said that asset prices normally decline in a recession as a result of the wealth effect (less household income, less consumption, and vice versa). This fact certainly doesn’t help fix the problem – if anything, it makes it worse. The real reasons -– sub-prime mortgages, securitization, complexity, and the lack of regulation –- pulled the world down into a sever recession. The government policies used to curb recessions (and those that help create them) differ from the past, mostly because of the sheer severity of this problem. Hopefully the world will learn from its many mistakes and get past this human flaw of over doing things; hopefully we understand more, look at the long-term more, and listen more. As Edmund Burke wrote over two centuries ago, “[e]very thing human and divine sacrificed to the idol of public credit, and national bankruptcy the consequence”.

[Cross-posted at the The Right Coast and the Campus Free Press]

Posted by Dane Richard on June 30, 2009 in Economic freedom | Permalink | Comments (5)

Saturday, June 27, 2009

Will the economy recover and what will it look like if it does?

The American Thinker has an interesting article that questions whether or not the U.S. economy will ever recover from the current recession:

Haven't they heard? The America that always recovers is not in anymore. Any assumption of a recovery fails to consider the idea that we now have a government run by people who ignore American history and who are hell bent on changing America's future.

Obama has done more than apologize for America's greatness and generosity while abroad. He is wreaking havoc on the economy that paid for that greatness and generosity at home. Don't you remember? He is "the one" we've been waiting for to finally do something right around here.

Thus the conviction that Americans always bounce back and bring their economy with them is not necessarily relevant anymore. The rules for business have changed and continue to do so daily. Incentive has been devastated. The reliable motivations of the past do not matter, because most of those dynamics have been targeted as what is wrong with this country and they are systematically being removed at a stunning pace.

In reaction, Atlas is shrugging. And who can blame him (and her).

We cannot be on the verge of any meaningful recovery because we are in a downward swirl of liberal policy consequences -- and we have a government determined to correct this by getting more and more liberal.

Likewise, a recent report from Sprott Asset Management looks at the question of who is going to buy the massive amount of new debt the American government is creating and comes up with some troubling conclusions:

As we hope the breakdown above has revealed, the future solvency of the United States as a nation state is currently in jeopardy. It is in far deeper trouble than the mainstream press cares to admit. There are simply not enough new buyers of debt on this planet to support the spending programs of the United States government - and it appears that current holders of debt are beginning to sell. Because it is impossible to balance the budget from outside sources of capital, the only source of funds left for the US, in all reality, is continued money printing.

The Federal Reserve's policy of Quantitative Easing is failing. The US budget is ludicrous, spending is out of control, spending promises are out of control, the world knows it - and we know it. For all the pundits who see the economy improving over the next year, we invite you to explain to us how this debt crisis will resolve itself without significant turmoil. We've tabulated the numbers above - and they do not lie. As we wrote this past January, welcome to 2009.

While these are troubling signs, I think there's little doubt the American economy will bounce back eventually. As just about any economist will tell you, the business cycle is cyclical, rising and falling every ten years or so. This is one reason why I was surprised by all the fear mongering talk of "the next great depression" when the recession first hit. The bigger question is what the economy will look like when this is all said and done.

I think that a lot of the fear, uncertainty, and doubt (FUD) about the economy was largely created by the media. The tangible effect of this fear was a global recession and a willingness on the part of world governments—including Canada's Conservative government—to implement Keynesian economic policies. Despite the fact that Keynes claimed he was trying to save capitalism, I would argue he's actually a socialist, as is anyone who is now trying to blame the recession on a failure of the capitalist system. The argument might hold some weight if we had a capitalist system to begin with.

The legacy of this worldwide shift to the left will likely be an economic system that bears little resemblance to capitalism. Capitalism is the most efficient economic system known to man. Granted, it is not always fair, but life in general is not fair either. The role of government should be to help people deal with economic shifts, rather than try to ensure they don't happen in the first place. Capitalism achieves its efficiency by weeding out inefficient companies and industries and shifting resources to more efficient sectors. In this respect, recessions are not only expected, they are necessary.

Capitalism operates in the same manner as evolution, the dodo birds go extinct, while humans thrive and conquer the Earth. By trying to bailout inefficient industries through government intervention, we are managing the economy as though it were communist. This, history has shown, does not work. Now that Bush and Obama have spent trillions bailing out the banks, is there any reason to expect they won't make the same stupid mistakes again? None whatsoever. This is like giving a dog a bone every time it pees on the carpet. How can you expect it not to repeat the same bad behaviour, when it actually has a disincentive to do so?

Likewise, when North American governments bailed out the auto sector, they ensured that land, labour, and capital would continue to be tied up in an inefficient and uncompetitive industry, rather than being shifted to industries that could help the North American economy thrive in the long-run. So what will the economy look like in the future? I worry that our children will by left to deal with the effects of an inefficient socialist economy and a massive debt load, all because our politicians made the politically expedient moves, rather than the economically sound ones.

Posted by Jesse Kline on June 27, 2009 in Economic freedom | Permalink | Comments (15)

Friday, June 26, 2009

Toronto Strike Solution

Garbage5 Earlier this week 24,000 Toronto municipal civil service employees walked off of the job. Some of the services that have been interrupted are garbage pickup, city-run daycares, swimming pools, summer camps, museums, some libraries and others.

This has caused a lot of turmoil for Toronto residents; garbage is piling up in the streets, closed day cares are forcing people to stay home from work, etc. Regardless of the reasons that the civil service employees are striking, the core problem here is one of economics; supply and demand.

Since the city are the ones that pick-up garbage, when they go on strike there is no-one left to provide that service. Whether it is city employees themselves on strike or a private company with a city provided monopoly, there is no one ready else to step in cases where there is an interruption of service.

Imagine that there was no government garbage collection service, what would people do? They would do what they do with other services they want, hire a company to provide that service. Just as there is competition with cable providers, in a free market there would be competition with garbage services. You could pick and choose between a variety of providers, especially in a large market like Toronto where there would be several companies competing for your dollar. If one company goes on strike, you can hire another to take over.

Strikes would be resolved much quicker, since company owners know that everyday that goes buy while their employees are off the job, they loose customers; they would have an incentive to resolve these strikes quickly. In the current situation, there is no one else that can step in and take over because it is a government enforced monopoly.

By moving these services into the free market situations such as this would be less likely to arise.

Posted by Freedom Manitoba on June 26, 2009 in Economic freedom | Permalink | Comments (45)

Tuesday, June 16, 2009

Somebody has to pay...

Nothing demanded by the government comes to the public without a cost.

This is a fact that I can prove anew, based on something that happened at work today.

I clerk for a temp service when not blogging. This afternoon, three of my company's temps returned from working at a warehouse.

I sometimes ask the workers what they did, and in this case, they worked a full 8 hour day doing labelling work. The warehouse had received an big shipment of canned fish from Europe.

"We spent all day putting Canadian labels on the cans." Not French/English labels, but the labels stating the percentage of vitamins in the product, how many calories each "serving" has, and such. Consumers, one assumes, can guess for themselves that each fish serving will have less calories than pure lard and more calories than a serving of celery. But, the government makes sure that we know precisely how much thanks to the labels that my company's workers had to put on.

I can't reveal trade secrets, but I can say that our temps do have a cost. And I can make an educated guess that the added cost is passed on to the consumer in the form of a few cents added to the cost of the canned fish.

I'm not complaining, as my workers value the work, and my company is thankful for the business. But European fish fanciers might, if they think about what costs might be added by the government that may be unnecessary.

Posted by Rick Hiebert on June 16, 2009 in Economic freedom | Permalink | Comments (6)

Friday, June 05, 2009

Tax Freedom Day

Today is the day that the Fraser Institute calculates as when Canadians have made enough money this year to pay their taxes. That's right five months into the year and you are finally working for yourself and not the government. To celebrate the Fraser Institute has released this video:

Posted by Hugh MacIntyre on June 5, 2009 in Economic freedom | Permalink | Comments (9)

Friday, May 15, 2009

We're all statists now

As J.J. Jackson pointed out in an essay in Enter Stage Right this week, Americans (and Canadians, of course) talk a good game about smaller government but in reality most of them are as addicted to the government teat as the targets of their ire.

The reason why I bring this up is a new poll conducted by Fox News suggests that a huge majority of Americans want less government in their lives and think spending is out of control.

That's nice, but I imagine once you get down to a granular level, where we start addressing individual government programs that many Americans "benefit" from, I imagine the numbers demanding a shrinkage in government would rapidly diminish. No different from Canadians, of course, who complain about welfare queens but vociferously support things like socialized health care, the Canada Wheat Board and middle class entitlements.

Posted by Steve Martinovich on May 15, 2009 in Economic freedom, U.S. politics | Permalink | Comments (2) | TrackBack

Friday, May 08, 2009

Canadian banking is better

For those who claim an under-regulated lending market in the U.S. caused the housing bubble, I submit a few facts about Canadian banking from Nick Rowe via Tyler Cowen:

1. We never had restrictions on interstate banking, so Canadian banks spread their assets and liabilities across Canada. (So it doesn’t matter if a local housing market goes bust).

2. We don’t have Glass-Steagal. The investment banks joined the retail banks some years ago.

3. We don’t have mortgage interest deductibility from taxes. So paying down your mortgage is a tax-free investment. So most people want to pay down their mortgages.

4. (Except in Alberta), mortgages are fully recourse. You can’t just walk away from a negative equity home and hand the keys to the bank; the bank will come after you for the difference.

Those are some pretty good reasons the housing bubble didn't do to Canada what it did to the U.S.  Also notice every one of these differences in Canada's favor represent fewer regulations than in the U.S.  No restrictions, no Glass-Steagal, no manipulated tax code to artificially incentivise "the American Dream" of home ownership.  Number four may seem like a stricter regulation, but I would argue even that is not a regulation, but simply a better protection of property rights (I didn't even know Canada had those!).

I'm sure you Canucks could tell me more about the problems of Canadian banking, but as Yankee I am envious of the short list above.

Posted by Isaac Morehouse on May 8, 2009 in Economic freedom | Permalink | Comments (12)

Monday, April 27, 2009

Lies my school teacher taught me

Not that I believed them at the time:

The results speak for themselves. During the heartless "liquidationist" era before Hoover, depressions (or "panics") were typically over within two years. Yes, it was surely no fun for workers to see their paychecks shrink quite rapidly, but it ensured a quick recovery, and, in any event, the blow was cushioned because prices in general would fall too.

So what was the fate of the worker during the allegedly compassionate Hoover era, when "enlightened" business leaders maintained wage rates amidst falling prices and profits? Well, Econ 101 tells us that higher prices lead to a smaller amount purchased. Because workers' "real wages" (i.e., nominal pay adjusted for price deflation) rose more quickly in the early 1930s than they had even during the Roaring Twenties, businesses couldn't afford to hire as many workers. That's why unemployment rates shot up to an inconceivable 28 percent by March 1933.

One of the killer arguments my old economics professors used to bring out, supposedly devastating proof that markets don't really work all that well, is the Great Depression. Prices remained "sticky" during the crisis, wages even more so. Long and often convoluted explanations were provided for this problem of "stickiness." Workers were resistant to wage cuts. The inherent irrationality of markets in a crisis. Not once was it mentioned in any classroom by any professors the policies of the Hoover administration. I discovered the actual policies of the Great Engineer while reading obscure and yellowed texts written by Austrians and libertarians in the 1930s and 1940s.

Posted by Richard Anderson on April 27, 2009 in Economic freedom | Permalink | Comments (2)

Tuesday, April 14, 2009

Is there uni-tea in the protests?

Last week, I posted about the possible pitfalls of tea parties. Sure, there are distractions and side-shows, but in general these are genuinely frustrated everyday people who want the political class to slow down, shrink down, and become accountable to them.

The party in power and the media have largely mocked the protests -- they have some legitimate points, especially the fact that the protests were not occurring during the big spending Bush years. (Which also raises the question, where are all the war protesters from the Bush years?)

Though I wish the tea party attendees were hosting similar protests during the GOP spending era, there are a few notable differences. For one, the spending has continued to accelerate. The final months of Bush and the first months of Obama swept by like a whirlwind of massive intervention and spending. Each act was more brazen and more expensive than the one before. The anger that had been mounting, even during the Bush years, has now come to a head.

Another reason is that the average American is "rationally ignorant" of government activity. During the Bush years, no matter how much GW spent, media reports largely focused on how much more he could've spent and how "free-market" he was. Bush himself talked a limited government game. The message picked up on by the casual observer was essentially, "government isn't big enough because Bush is a conservative free-market type". I'm sure many doubted this, but without the time to look into it the average citizen wasn't really aware just how massive the government was becoming.

Contrast that with today's administration that rarely attempts to give free markets and limited government lip-service. Media outlets seem to gleefully report the massive spending. The message to the somewhat attuned citizen is clear, "government is growing huge and fast". It was during the Bush era too, but it wasn't clear to most people so they didn't have a visceral reaction.

That's no excuse for this to become a stupid partisan yelling match. The greedy, inbred, self-serving, deceitful and corrupt political class spans both major parties (as it would minority parties if they ever achieved any measure of power in the U.S.). It's government that we should be protesting, not the figure head associated with it.

Once again, Jack McHugh offers some wisdom on the topic. McHugh outlines the basic meaning and message of the tea parties:

"The Tea Party protest has become a broad-based “big tent”  because it is focused on a few simple things:

 

The complaint is chronic fiscal irresponsibility, now become acute fiscal extremism.

 

The target is an inbred, self-serving, self-perpetuating and bipartisan political class that no longer represents the will of the people.

 

The goal is to send that political class packing and restore genuine representative government, with whatever policy implications that entails.

 

What are those policy implications? A balanced budget amendment and honest government accounting are two strong possibilities. The effects of just those would ripple through the welfare state with surprising and healthy results.

 

It’s true that some Tea Party protesters are also passionate about other issues -- immigration, abortion, school choice, etc. It’s also likely that there are Tea Party protesters on both sides of those issues.

 

What unites them is the complaint, the target, and the goal described above.

 

“What do we want?”

“Representative government!”

“When do we want it?”

“Now!”

 

Not the most catchy chant, but its substance is just right."

Posted by Isaac Morehouse on April 14, 2009 in Economic freedom | Permalink | Comments (4)

Monday, April 13, 2009

Minister Day introduces Canadian capitalists to Chinese communists; new contracts signed

I’ve always been sceptical of government trade missions. I love trade, but the idea of government officials supervising introductions among business leaders -- like parents at a debutante ball -- collides with my uncorrupted vision of laissez faire capitalism and my idealization of ruggedly independent entrepreneurs going it alone.

Wouldn’t it be better if the political class left the business of trade to the capitalists and keep itself busy...umm...doing...ummm...busy doing...well wouldn’t it just be better if the government left the business of trade to the capitalists?

But when you’re trying to do business in a place like China, you’d likely not get very far without a little political help. And seven Canadian construction companies got that help recently from Stockwell Day, Minister of International Trade and Minister for the Asia-Pacific Gateway.

Day announced that seven construction contracts between Canadian and Chinese companies were signed today in Beijing:

“Canada and China enjoy a growing commercial relationship, and construction is one sector where we see particularly strong opportunities,” said Minister Day. “Canadian expertise in construction-sector goods and services is recognized around the world. Our companies have a stellar record of constructing high-quality buildings with minimal environmental impact, and this trade mission will help create even more opportunities for Canadian business. I was pleased to be a part of these ceremonies to celebrate our successes.”

The reason freedom-loving people should celebrate this growing trade with China, besides the profits to be enjoyed by private Canadian companies, is because trade is a liberalizing force in society, a case I’ve made often (you can find an example here) to a somewhat sceptical Western Standard readership.

Here are the companies heroicly serving their own private interests while bringing trade and liberalism to China:

•         GenesisTP, a division of Genesis Worldwide Inc. of Mississauga, Ontario, will provide its green building products and technologies to China Perfect Machinery Industry Corp., Ltd. for all its six-storey-or-less building projects.
•         China National Materials Industry Import and Export Corp. will become the Hebei province distributor for the soft foam insulation and air barrier system manufactured by Icynene Inc. of Mississauga.
•         Y+S International Design Ltd., of Markham, Ontario, will provide its ecological, integrated design services to Beijing Haigang Real Estate Development Co., Ltd.
•         Soprema, of Drummondville, Quebec, will supply its waterproof membrane building material to Beijing Engrand Technology and Development Co. Ltd.
•         MHKW Architects Inc., of Toronto, Ontario, will design a mixed hospitality and residential development in Tianjin for the Tianjin Supply and Marketing Co.
•         MHKW Architects will also design the Guangzhou Tian Ze Sheng Royal Hotel.
•         ACICC Trading International Co., of Surrey, British Columbia, will supply western red cedar, hemlock and SPF (spruce-pine-fir) lumber to the Longfor Group; Canada Mortgage and Housing Corporation helped facilitate the contract.

“I am pleased that this trade mission is leading to concrete results that will inject millions of dollars into our economies and help create new jobs in Canada and China,” said Minister Day.

Day is in China as part of an April 8 to 17 visit to China and Japan to open doors for Canadian businesses and strengthen trade and investment ties.

Posted by Matthew Johnston

Posted by westernstandard on April 13, 2009 in Economic freedom | Permalink | Comments (2)

Monday, April 06, 2009

AUPE members “negotiate” while French workers take hostages. Is there really a difference in tactics?

The right to strike comes from the basic libertarian idea of self-ownership. Since you own your body and your mind, you also own your labour and the products of that labour. And since you own your labour, you can strike if you don’t like the terms of your employment, notwithstanding any existing contract to which you might be subject.

The right to join a union also comes from the basic libertarian idea of freedom of association. If you feel your position within a company might be enhanced by the collective bargaining process, you should be free to join a union.

But employers should have the same basic right to self-ownership and freedom of association. An entrepreneur should have the same right to his labour, and to control the products of his labour, as the people he chooses to employ. If he doesn’t like the terms of his relationship with his employees, he should be able to break that relationship, provided there are no existing contracts.

Freedom of association, to have any coherent meaning at all, must include the freedom not to associate -- and an employer may decide that striking workers are not the sort of employees he wants. In fact, he may decide that unionized workers, in general, are not the sort of people with whom he wishes to associate. Similarly, workers may choose not to associate with employers who forbid unions.

In a free society, wages would be freely negotiated. Labour unions would work hard to drive wages and benefits up using collective bargaining and the threat of strikes; employers would work hard to drive wages and benefits down in order to maximize profits. And from this perpetual struggle would come a market clearing price for labour.

But we don’t live in a free society.

In a press release today, Alberta Union of Provincial Employees (AUPE) announced that a private sector long-term care employer has ratified a collective agreement with its AUPE members that matches the wage and benefit improvements achieved in province-wide health sector bargaining last year.

The agreement was ratified by a “huge majority” of members at an April 2nd vote at the privately-owned and operated Forest Grove Care Centre in Calgary, said AUPE Staff Negotiator, Ken Cutrell. Approximately 160 members of AUPE Local 048/017 are employed at Forest Grove.

“This confirms that the wages and benefits set in province-wide bargaining with the health regions last year are fair and affordable for all employers, including private health care employers,” said AUPE President Doug Knight.

What’s “fair” is what is freely negotiated, and what’s “affordable” will no doubt depend on the business circumstances of each and every organization. This agreement proves nothing except the power of unions to force agreements where no real agreement exists.

While a collective agreement was ratified by AUPE members at the Forest Grove Care Centre, 60 AUPE members employed by AgeCare at the Valleyview Care Centre in Medicine Hat have been on strike since March 13, seeking a contract similar to that “negotiated” with the Forest Grove care facility employees.

“We encourage AgeCare’s owners -- Drs. Kabir Jivraj and Hasmukh Patel -- to recognize the value of their staff, and meet the standards set by the majority of health care employers in this province,” said Knight.

But what if the owners of AgeCare disagree with AUPE brass on the value of their employees, and what if they don’t think their unique and constantly changing business circumstances make it possible for them to meet the standards to which other health care employers are complying, including the Alberta government, which is free from market forces?

That’s the question I asked Mark Wells, Communications Officer with AUPE. He kindly responded:

Hi Matthew,

You asked: "What is the law concerning firing workers on strike and replacing them with non-unionized workers?"

The answer: It's illegal.

Illegal? It’s not much of a “negotiation,” is it, if only the unionized employees can exercise their basic right to self-ownership and freedom of association? If an employer cannot replace striking workers, he has little choice but to "negotiate" at the barrel of a gun, metaphorically speaking.

In France, however, workers have dispensed with this “barrel of a gun” metaphor in favour of the real thing. Last week, the media reported that:

French workers burned tires, marched on the presidential palace and held a manager of U.S. manufacturer 3M hostage Wednesday as anger mounted over job cuts and executive bonuses.

The French workers, like the AUPE members, are “negotiating” for better wages and benefits. The French have just dispensed with the legal niceties that attempt to hide the exploitation of entrepreneurs and business owners, and have opted instead for a more honest form of coercion: naked violence.

It’s unlikely that the rights of business owners in either jurisdiction will be protected by law in accordance with natural justice.

Posted by Matthew Johnston

Posted by westernstandard on April 6, 2009 in Economic freedom | Permalink | Comments (17)

Friday, March 06, 2009

Economic Freedom vs The Recession

Here's a debate piece for you.  Each year the Wall Street Journal publishes a ranking of countries by degree of 'Economic Freedom'. They define the term in these words:

"The highest form of economic freedom provides an absolute right of property ownership, fully realized freedoms of movement for labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself."

Here is a list of Eurozone countries ordered according to the Wall Street Journal's rankings . Their GDP growth or decline in the 4th quarter of 2008 is shown in brackets next to their name (NB - some Eurozone countries were left off the list because I couldn't find 4th quarter numbers.)

12 - Netherlands (-0.9%*)
17 - Finland (-2.4%*)
20 - Belgium (-1.3%*)
23 - Austria (-0.2%*)
24 - Cyprus (+0.6%*)
25 - Germany (-2.1%*)
29 - Spain (-1.0%*)
36 - Slovakia (+2.1%*)
53 - Portugal (-2.0%*)
64 - France (-1.2%*)
76 - Italy (-1.8%*)
81 - Greece (+0.3%*)

Anyone have an idea what these numbers mean for Economic Freedom?  Any explanations for the growth of oppressive Greece, and the recession in the free-wheeling Netherlands?

Posted by Robert Jago on March 6, 2009 in Economic freedom | Permalink | Comments (13)

Sunday, February 08, 2009

Milton Friedman on greed

Greed gets a bad rep

(I found this video at Surly Beaver)

Posted by Hugh MacIntyre on February 8, 2009 in Economic freedom | Permalink | Comments (3)

Friday, January 30, 2009

Okay, so the budget's not conservative -- but will it stimulate the economy?

Whether or not we can agree that the disaster that is the 2009 Canadian budget is necessary politically is up for discussion. More to the point is whether or not the budget will be anywhere near successful in achieving its stated goal of cushioning Canadians in the face of recession and coaxing the economy into recovery.

Tasha Kheirridin, with whom I've disagreed often over the past few years, has a great article over at the National Post's Full Comment.

One line in particular, which appears at the top of the article, is important to understanding what a disaster this budget will be for Canada:

The government cannot put money into the economy without taking it out of the economy first. Thus activity does not increase overall - it is simply redirected.

I can never get over the fact that people don't seem to get this. The government does not create wealth. It can take wealth from Canadians and direct it towards goals that Canadians wouldn't have pursued otherwise (though doesn't that seem odd?) or it can borrow against the taxes of future Canadians (thanks, kids!) to do the same thing.

Essentially, what any "bailout"-themed budget or bill is going to do is take money from the parts of the Canadian economy that have been productive and will continue to grow, or at least recover quickly, in the face of this recession and move that money to parts of the Canadian economy that have been failing or will not recover quickly. Further, intelligent, persuasive, and productive people will become lobbyists as the pot of government handouts becomes larger and work at redirecting wealth and economic activity rather than creating it -- deepening the effects of this redistribution.

How will increasing the proportion of the economy that isn't self-sustaining help us recover from a recession quickly? You've got me. But at least some conservatives and libertarian Conservatives are shaken enough by the budget to start bringing these questions to Canadians' attention.

Posted by Janet Neilson on January 30, 2009 in Economic freedom | Permalink | Comments (12)

Tuesday, January 13, 2009

NDP to push spending increases and trade restrictions in meeting with Flaherty

During a January 6th pre-budget consultation meeting, the Canadian Taxpayers Federation (CTF) urged Finance Minister Jim Flaherty to balance the 2009-10 budget and provide tax relief stimulus.

Today, Flaherty is likely to hear very different advice as he extends his consultations to the opposition parties in parliament. New Democrat MPs Thomas Mulcair and Judy Wasylycia-Leis will meet with Flaherty this afternoon to advance their party’s socialist economic agenda.

The NDP is recommending affordable housing projects, restrictions on outsourcing, reforms to employment insurance, job training programs, auto bailouts and other spending increases to stimulate the economy.

Tax cuts or government spending, which is the better stimulus strategy?

In Economics in One Lesson, first published in 1946, Henry Hazlitt wrote:

There is no more persistent and influential faith in the world today than the faith in government spending. Everywhere government spending is presented as a panacea for all our economic ills. Is private industry partially stagnant? We can fix it all by government spending. Is there unemployment? That is obviously due to “insufficient private purchasing power.” The remedy is just as obvious. All that is necessary is for the government to spend enough to make up the “deficiency”.

...

Having put aside for later consideration the network of fallacies which rest on chronic government borrowing and inflation, we shall take it for granted throughout the present chapter that either immediately or ultimately every dollar of government spending must be raised through a dollar of taxation. Once we look at the matter in this way, the supposed miracles of government spending will appear in another light.

...

I have not spoken of the hundreds of boondoggling projects that are invariably embarked upon the moment the main object is to “give jobs” and “to put people to work.” For then the usefulness of the project itself, as we have seen, inevitably becomes a subordinate consideration. Moreover, the more wasteful the work, the more costly in manpower, the better it becomes for the purpose of providing more employment. Under such circumstances it is highly improbable that the projects thought up by the bureaucrats will provide the same net addition to wealth and welfare, per dollar expended, as would have been provided by the taxpayers themselves, if they had been individually permitted to buy or have made what they themselves wanted, instead of being forced to surrender part of their earnings to the state.

Cutting taxes and allowing investors to finance productive ventures in a gently regulated market would create wealth and jobs, and re-built Canadian industry for long-term sustainable economic growth. Government spending, by contrast, misallocates and destroys wealth, ultimately demands higher taxes and crowds out private sector activity.

Posted by Matthew Johnston

Posted by westernstandard on January 13, 2009 in Economic freedom | Permalink | Comments (13)

Monday, January 12, 2009

Excerpt from Ric Dolphin's latest posting...

Back home with our scotches, waiting for the last year of the decade to dawn, my brothers-in-law and I considered how the Zeroes or the Oughts - or whatever this decade will be called - will be remembered. What will define it in people's memories? Probably terrorism and its offshoots: 9/11 and the aftermath, the War on Terror, Homeland Security, the war in Iraq, the war in Afghanistan ... the Great Satan squaring off against the Lions of Islam.

It will doubtlessly be a more definable decade than the 1990s. None of us could figure out the defining characteristic of those final ten years of the 20th century. Most other decades seemed to have had vivid identities - the roaring Twenties, the Dirty Thirties, the wartime Forties, the prosperous, grey-flannel Fifties, the hippy-dippy Sixties, the Me-generation 1970s, the Greedy 1980s. But what were the 1990s? Grant suggested The Internet Decade, but then dismissed the idea because the Internet really didn't become commonplace until the current decade. Ditto cellphones. So although true that the digital communications revolution started in the 1990s, I don't think you can say it defined them. The final decade of the millennium should have something to define it. Maybe its lack of identity defines it. The Lost Decade? I welcome your thoughts.

As for the prospects going into 2009, your guess is as good as mine. The economic predictions are so dire it could happen that the recession helps define the decade, along with the terror stuff. Decade of  Woe?  Regarding the financial meltdown, there is a perverse part of me that says, Bring it on. Let's see what a real Depression is like. Give us the kind of privations with which to bore our grandkids that our grandparents bored us with. Hey, Ma, we cain't afford meat this month. Let's fry up the dawg...

To read more of Dolphin's blog, click here

Posted by Ric Dolphin on January 12, 2009 in Aboriginal Issues, American History, Canadian Politics, Current Affairs, Economic freedom, Humour, Media, Television, U.S. politics | Permalink | Comments (2)

Friday, January 09, 2009

This is Stephen Moore speaking: Atlas Shrugged, fiction to fact

Rand_typewriter As the US government swoops in with massive new powers intended to stabilize the economy, Moin Yahya isn't the only person seeing parallels between the world today and the world of industrialists and moochers envisioned by Ayn Rand in her 1957 novel Atlas Shrugged. This is supply-side economist Stephen Moore on the editorial page of the Wall Street Journal:

For the uninitiated, the moral of [Atlas Shrugged] is simply this: Politicians invariably respond to crises -- that in most cases they themselves created -- by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

In the book, these relentless wealth redistributionists and their programs are disparaged as "the looters and their laws." Every new act of government futility and stupidity carries with it a benevolent-sounding title. These include the "Anti-Greed Act" to redistribute income (sounds like Charlie Rangel's promises soak-the-rich tax bill) and the "Equalization of Opportunity Act" to prevent people from starting more than one business (to give other people a chance). My personal favorite, the "Anti Dog-Eat-Dog Act," aims to restrict cut-throat competition between firms and thus slow the wave of business bankruptcies. Why didn't Hank Paulson think of that?

These acts and edicts sound farcical, yes, but no more so than the actual events in Washington, circa 2008. We already have been served up the $700 billion "Emergency Economic Stabilization Act" and the "Auto Industry Financing and Restructuring Act." Now that Barack Obama is in town, he will soon sign into law with great urgency the "American Recovery and Reinvestment Plan." This latest Hail Mary pass will increase the federal budget (which has already expanded by $1.5 trillion in eight years under George Bush) by an additional $1 trillion -- in roughly his first 100 days in office.

The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the more handouts the politicians will bestow on you. That's the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies -- while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to "calm the markets," another trillion of national wealth is subsequently lost. Yet, as "Atlas" grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate "windfalls."

Read the rest here.

Don't miss Moore's radical though common-sense Galtian policy proposal towards the end: abolish the income tax. Entirely. That's the road to recovery.

Posted by Kalim Kassam on January 9, 2009 in Economic freedom | Permalink | Comments (4)

Mortgage Cramdowns coming soon?

The bailouts show the toxic and corrupting impact of private business accepting public funds. A bank that would never support the idea of mortgage cramdowns suddenly does an about face and supports the proposed legislation, which suggests that this was a condition of accepting the public dollars.

Mortgage cramdowns, if passed, would allow bankruptcy judges to reduce the outstanding value of a mortgage owing down to the value of the mortgage house or property. The problem with such legislation is that while it does offer relief for existing mortgage holders, it penalizes future potential homeowners who will have to pay higher mortgage rates to account for the possibility of the mortgage being "crammed down." Hence, the result will be less home ownership, and the vicious cycle will continue.

Needless to say, the American Bankers Association opposes such proposed legislation. So why did the big bank do an about face and support a bill that clearly is detrimental to the banks and also to borrowers? Because the state is dangling the carrot of cash and at that point, everyone forgets their principles even if it sacrifices their long term interest.

I feel like I am living in Atlas Shrugged.

Posted by Moin A Yahya on January 9, 2009 in Economic freedom | Permalink | Comments (6)

Thursday, January 08, 2009

The trouble with riches

Some snippets from my article on generational wealth posted today on Mises.org:

"It is a great irony that prosperity affords posterity the luxury of forgetting its origins. Though not a hard-and-fast rule of societal evolution, generations who grow up wealthy often lack respect for or understanding of the values and ideas that generated the very wealth from which they benefit.

There is an honesty, realism, and practical virtue often accompanying generations that have to endure difficult labor that is sometimes lost on later generations that inherit a comfortable material life. This is not a new phenomenon but is present throughout history. Compare, for example, the life and work of the ancient Greek poet Hesiod with that of the great philosopher Aristotle some 300 years later." [...]

"Aristotle provided one of the best defenses for private property, and his work in logic and metaphysics remains unrivaled today. However, Aristotle’s political and economic thought leaves something to be desired by those who value free-market capitalism, the role of the entrepreneur, and the positive power of self-interest and individuality." [...]

"The main difference between these two men was their wealth and status. Hesiod, perhaps due to necessity, was a practical thinker. Extolling the virtues of hard work was not mere speculation; I doubt Hesiod could afford to look down his nose at labor. Aristotle, on the other hand, could afford to disparage trade and labor. The wealth of Greece provided opportunity for full-time teachers and thinkers to ponder anything they chose. Indeed, the power of wealth to fund such speculative philosophy is one of its greatest advantages, and as one who spends hours studying, I would not wish to return to a poor agrarian society. Still, such generational wealth carries with it a certain danger.

Anticapitalist theories share in common an inability to take human nature as it is. Rather than analyzing man as a complex creature who will always act to achieve what he perceives as good, anticapitalist theories tend to focus on what the theorist wishes man to be and often overlook the necessity of market exchange for human improvement. From the vantage of a moneyed aristocracy, it is easy to be “above” the hustle and bustle of the marketplace, and to pursue higher ideals than material prosperity — forgetting that such prosperity is what supports the hours of speculation.

I do not believe one must be poor to understand and appreciate capitalism, nor am I opposed to generational wealth or inheritances. It does seem, however, that there is a certain danger in living a life completely detached from market processes and the pursuit of wealth through production and trade." [...]

"In our age of plenty where “higher learning” is ubiquitous, it is imperative that we remain realistic in our assessment of human nature and not forget that the basic principles that produced our prosperity still govern human action. Teaching future generations the theories of individual liberty and capitalist production is important; perhaps letting them experience the theories in practice is as well"

Read the whole thing here.

Posted by Isaac Morehouse on January 8, 2009 in Economic freedom | Permalink | Comments (0)

Tuesday, December 30, 2008

A shameful display from Detroit

And no, I'm not even talking about the Lions. Their 0-16 season looks heroic compared to the pan-handling, rent-seeking, name-calling, self-pitying and grovelling coming from Detroit pundits, auto execs, union bosses and politicians. Some of the most ludicrous things are flying about day after day in defense of a massive money grab (aka: redistribution, theft) by the big three. Rather than realizing their tough situation, rolling up their sleeves and setting about the difficult task of righting their respective ships, they've chosen to blame others who are more successful, to whine, to grovel, and to plead before no-nothing pompous politicians. Have some dignity Detroit! At least Rod Marinelli didn't beg for money from Washington.

Karen De Coster writes about some of the crazier things coming out of Detroit of late:

"The Union is squaring off against the South again. This time it's Detroit's union — the UAW — partnering with the auto manufacturers, politicians, and media supporters of the domestic auto industry to wage warfare against the entire South.

"The problem here centers on certain southern states — Mississippi, Louisiana, Georgia and, in particular, Alabama — where certain bone-headed senators seem to have forgotten that the Civil War ended, with the appropriate outcome, almost 150 years ago.

What's more, these Alabama representatives argued that they and other southern states had plenty of automotive manufacturing capacity to take up the slack and keep the country's economy going if Detroit was to go belly up. Specifically, Alabama's Republican senator Richard Shelby called Detroit a 'dinosaur' and said bankruptcy was a better solution to the problems facing U.S. carmakers. The state's other senator, Jeff Sessions, also a Republican, said Detroit's collapse would "not be the end of the world. We have a very large and vibrant automobile sector in Alabama."

That's Detroit News columnist John McCormick, who labeled Southern politicians opposing the bailout "good old southern boys."

Detroiters continue to embarrass themselves by placing the auto industry collapse into an us-versus-them framework. In the midst of all the whining and begging for a bailout, the South has been declared the new enemy, along with the foreign-car manufacturers who are producing cars — in Southern plants — that consumers want to buy. The army of politicians and opinion columnists in Michigan who lay the groundwork for resuscitating this fading industry don't bother to acknowledge that it is in the best interests of any public company to maximize quality for its customers and efficiency of production and profits for its shareholders."

And...

"Getting back to John McCormick's limp line of reasoning, he ends his column by implying that Michiganders should boycott Alabama — especially the retirees and warm-weather family vacationers. As always, the little guys are told to give up their way of life to preserve the high-paying jobs of corporate and union executives — along with the jobs of people who make cars no one wants to buy. But what's in it for them? National pride?"

I can't handle this shameful display of prideless whimpering and excuse-making for ineptitude any longer, I'm gonna go watch the Lions game on my DVR as a reprieve.

(Cross-posted on the SFEblog)

Posted by Isaac Morehouse on December 30, 2008 in Economic freedom | Permalink | Comments (7)

Tuesday, December 23, 2008

Most Canadians think an auto bailout is unwise: poll

Struggling North American automakers are looking for bailouts, and the U.S. and Canadian federal governments have committed $14 billion and $4 billion respectively so far.

But a new Ipsos Reid poll shows that a majority of Canadians (58%) think it's unwise for the federal government to provide this assistance because it would set a precedent for other protectionist measures and industry bailouts, and there is no guarantee the auto companies will survive even with this support.

Canadians are right to be skeptical, according to a recent report by the Fraser Institute:

“While corporate begging has become even more blatant this year, the fundamental truth has not changed. Business subsidies, bailouts, or loans are all forms of corporate welfare that transfer tax dollars and employment from healthy businesses to risky businesses,” said Mark Milke, author of the report, Corporate Welfare: Now a $182 Billion Addiction. “Government intervention only delays the day of reckoning and often at the expense of other businesses and a healthy industry and economy.”

Posted by Matthew Johnston

Posted by westernstandard on December 23, 2008 in Economic freedom | Permalink | Comments (8)

Sunday, December 21, 2008

Prime Minister Harper and Ontario Premier McGuinty announce $4 billion in financial support for the auto industry

Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty announced Saturday that Canadian automakers will $4 billion in loans.

The money will go to General Motors and Chrysler through Export Development Canada (EDC).

“This is a regrettable but necessary step to protect the Canadian economy,” said Prime Minister Harper. “Canadian taxpayers now expect their money will be used to restructure and renew the automotive industry in this country and ensure that Canada maintains our current production share of the North American market.”

“Here in Ontario, we’ve got thousands of people, and their families, who rely on the auto industry to be on firm ground, so they can put food on the table and keep a roof over their heads. What the Prime Minister and I are saying is that those people and their jobs are worth fighting for," said Premier McGuinty.

The automotive industry in Canada directly represents 14 percent of the country’s manufacturing output, 23 percent of manufactured exports, and directly employs over 150,000 Canadians. It is the country’s largest industry within the manufacturing sector.

Posted by Matthew Johnston

Posted by westernstandard on December 21, 2008 in Economic freedom | Permalink | Comments (21)

Canadian tab for corporate welfare exceeds $180 billion, not including $4 billion for automakers announced Saturday

While John Maynard Keynes – the ghost of economics past – haunts central planners and central bankers caught in the grip of stimulus mania, a new Fraser Institute report reveals that Canadian taxpayers have already spent $182 billion on corporate welfare between 1994 and 2006 – and they’re not getting much for their money.

$185 billion works out to $13,639 per taxpayer over that twelve-year period or $1,291 per taxpayer in 2006 alone.

“While corporate begging has become even more blatant this year, the fundamental truth has not changed. Business subsidies, bailouts, or loans are all forms of corporate welfare that transfer tax dollars and employment from healthy businesses to risky businesses,” said Mark Milke, author of the report, Corporate Welfare: Now a $182 Billion Addiction. “Government intervention only delays the day of reckoning and often at the expense of other businesses and a healthy industry and economy.”

With $4 billion in government loans committed on Saturday by Prime Minister Stephen Harper and Ontario premier Dalton McGuinty to the auto industry, Milke points out that since 2004 the federal and Ontario governments together gave $752 million to the automotive industry, including $200 million for Ford, $200 million for GM, and $125 million for Toyota. Will additional billions in corporate welfare really make a difference this time?

"Even though research does not support claims that corporate welfare contributes to widespread economic growth, governments continue to pursue these policies because they want to be seen to be doing something,” Milke said. “By subsidizing or bailing out failing businesses, politicians can tell voters they are saving jobs, or they can appeal to voters with interests in specific industries.”

Here are some highlights from Corporate Welfare: Now a $182 Billion Addiction:

• Between 1994 and 2006, the last year for which statistics are available, Canada’s federal, provincial, and local governments spent $182.4 billion on subsidies to business.

• In 2006 alone, Canada’s federal, provincial, and local governments spent $19.3 billion on corporate welfare, almost double the 1995 figure of $10.3 billion.

• The total corporate welfare bill (federal, provincial, and municipal) has ranged from a low of $9.9 billion in 1996 to a high of almost $20 billion in 2005. In 2006, it amounted to $19.3 billion.

• The cost to each taxpayer who paid income tax in 2006 was $1,291, which was 38% higher than the 1995 figure of $934.

• Over 12 years, the total cost per tax filer who paid tax amounted to $13,639 per person (all figures adjusted for inflation to 2008 dollars).

• Between 1994 and 2006, provincial governments spent $98.5 billion on corporate welfare, while the federal government spent $61.4 billion and municipal governments spent $22.5 billion.

• Among provincial governments, the province which disburses the most amount of public money to corporations is Quebec, with over $5.4 billion in corporate welfare in 2006. Quebec was followed by Ontario at $2.4 billion and Alberta at almost $1.5 billion, with British Columbia fourth at just under $950 million.

“With multiple companies lining up around the world for government-financed grants, loans and loan guarantees, bailouts for one company in trouble will merely make it more difficult for other healthy competitors in a tough economic environment,” Milke said.

Posted by Matthew Johnston

Posted by westernstandard on December 21, 2008 in Economic freedom | Permalink | Comments (3)

Friday, December 19, 2008

Why banks shouldn't be given government help

You may have heard about banks calling in lines of credit. Essentially saying to customers "hey, you know that money we loaned you? Well, we want it all back. Now." In many cases, this scenario is playing out with customers who have current accounts, have paid according to terms, but due to the banks perceived changes in credit worthiness of the customer, irrespective of their payment behaviour, they have decided to pull their contract. To be fair, most business lines of credit, and unsecured consumer lines of credit (ie. they don't have an asset backing) contain a clause allowing the bank to terminate the agreement at will.  In this sense, the bank has said upfront to the client: "we may ask for our money back, in full, at any time". It's a contract. You signed it. It's fair.

Having experienced this, due to "changes in my credit worthiness" recently, I have been faced with trying to understand why the bank would back me into a corner. Particularly because, the downgrade in my credit worthiness, is purely because of my credit exposure. Not because of my payment history. I have never missed a payment. When you pull up a TransUnion credit report on me, all you see is a sea of green "OK" boxes going back as far as the credit report keeps a score.

The issue is that I have absorbed quite a bit of debt due to unfortunate circumstances. But the debt I hold is not beyond my reasonable ability to pay it, given my quite decent income level. In fact, I took on most of this debt over a year ago, and I have substantially paid it down over the course of the past twelve months.

A large Canadian bank, which I will not name, has made notice that they would like the balance of my line of credit paid in full (about $8,300) within the next 30 days due to new "considerations" about my credit worthiness. 

While I intend to try and appeal to the bank to reconsider, and failing that, attempt to arrange payment as I am contractually obligated to do, I am wondering why the bank thinks this is "minimizing their risk". If anything, it's placing me into a situation where I am more likely to default. Not just on this particular account, but on others. 

I am not worried in my own case because I have the income level to manage my way through this burden.  But what do banks really think the macro-economic effects of this kind of scorched Earth tactic really accomplishes? 

Unfortunately, and much to my chagrin, I am likely to be forced to do business with said bank, if only indirectly, through my taxes. The government will likely render assistance to this bank as it already has by taking all it's "high risk liabilities" of it's books and handing out cheap loans on the taxpayers dime. 

So despite my absolute desire to cease doing business with this bank, I'll be forced to by an immoral taxation regime that expropriates my wealth to the benefit of said bank.

The bank is transferring risk to the government, and dumping  risk back onto it's customers at the same time. If my money wasn't being expropriated from me and being used to help keep this bank profitable and free of risk, I wouldn't have a right to complain. But we don't live in such a world, do we? So I complain. 

Add this reason #103,930 to why government bailouts do not work.

Posted by Mike Brock on December 19, 2008 in Economic freedom | Permalink | Comments (9)

Wednesday, December 17, 2008

House of Horrors: Getting government out of housing

Concentrating social problems in derelict government housing projects comes with predictable results, none of which improve the circumstances of the poor. Manitoba now faces a $50 million cost to bring its public housing up to modern standards. Should the province sell its housing portfolio instead?

Daniel Klymchuk says “yes.”

In "House of Horrors: Getting government out of housing," Klymchuk writes:

Public housing in Canada began as an idealistic tenet of Fabian socialism that much of society could honestly embrace. After all, how could one doubt the caring, gentle hand of government as the entity to build, manage and otherwise care for needy families?

[I assume that’s a rhetorical question, Daniel.]

...

The Manitoba Housing Authority (MHA) was created in 1992 to manage the province’s public housing portfolio of 13,100 units. While Manitoba has only 3.5% of the Canadian population, the province constructed 7% of all public housing.

...

The MHA commissioned an outside study that unfortunately supports the above assessment. Serious neglect of the physical asset has left the department staring at $30-million to $50-million hole in their capital budget to bring public housing up to modern standards. Considering the challenging condition of both the department and the rental units the obvious question arises: why not sell the real estate portfolio?

Good question. For the answer, read "House of Horrors: Getting government out of housing."

Posted by Matthew Johnston

Posted by westernstandard on December 17, 2008 in Economic freedom | Permalink | Comments (2) | TrackBack

Madoff and Ponzi Schemes

Larry Ribstein (Uof Illinois free marketer Law Prof.) has some good posts on the Madoff scandal. Appropos of Kalim's comment on my earlier post, he has one titled "Jenkins on Madoff: let him run Social Security," and many more.

Posted by Moin A Yahya on December 17, 2008 in Economic freedom | Permalink | Comments (1) | TrackBack

Canada West Foundation provides political leaders with a Keynsian-lite economic stimulus strategy

The Calgary-based Canada West Foundation released a report today outlining its ideas for stimulating the economy. 

The report contains the consolidated thinking of 25 leading western Canadian economic analysts who were asked what the Government of Canada should do to address the current economic slowdown.  The resulting report, Taking Action on the Economy, is designed to ensure that western interests and perspectives are part of any national strategy to address Canada’s slowing economy.

While the views of the 25 economic analysts “varied considerably,” some consensus themes emerged:

• Monetary policy needs to be the first line of attack, and contributors support interest rate cuts and efforts to improve liquidity that have already been taken.  This is in line with the general observation that the current slowdown is driven by factors outside Canada, over which domestic policy has no influence.

• An effective stimulus package should act quickly by working through automatic stabilizers (e.g. employment insurance) to strengthen the existing safety net and put money in the hands consumers.  In the interests of speed, the package should rely primarily on enhancements to existing programs (e.g. tax cuts) rather than on the creation of new programs.

• Infrastructure spending should be directed first to ‘shovel ready’ projects identified by municipal governments, and then to projects designed to improve Canada’s long-term economic competitiveness and social well being.

• The stimulus package should be national in design rather than being designed for particular regions, sectors or firms; although participants reluctantly agree that the auto sector may require specific attention.

• To the extent possible, the stimulus package should be aligned with long-term policy objectives to enhance Canada¹s competitiveness, productivity and trade. In this sense, the current crisis is an opportunity to get things right for the long haul.

“Participants in the report were passionate in their opinions,” says Dr. Roger Gibbins, President and CEO of the Canada West Foundation and editor of the report.

Gibbins added that deficits should be tolerated as a necessary part of any economic stimulus strategy: “We accept the need for quick action on a national stimulus package, but stress that any short-term deficit should only be accepted so long as we don’t drive the economy over the cliff in the long run.  We need to avoid structural deficits at all costs.”

Monetary stimulus, infrastructure spending, industry bailouts, economic diversification schemes – there is really nothing new here, or anything that will work, unless tax cuts, which were mentioned, are plucked out of this policy grab bag while the rest of the New Deal schemes are ignored.

The burden of big government and high taxes will eventually destroy even the most robust economy – and it is monetary meddling that has created the false wealth that is now evaporating.

Why does anyone believe more of the same will work?

Posted by Matthew Johnston

Posted by westernstandard on December 17, 2008 in Economic freedom | Permalink | Comments (1) | TrackBack

Can "Funky Lady" prove Keynes was right?

(Originally posted on the Prometheus blog):

Today we're going to do an economic experiment with music.

You may have heard of Keynesian economics. To summarize, it's a bunch of economic ideas espoused by the British economist John Maynard Keynes that offer more government and consumer spending as the solution to economic slow-downs.  Keynes saw saving as a "leakage", particularly during slumps, and thought government needed to borrow, tax, inflate and do anything it could to spend, spend, spend.  It should also do anything in its power to "stimulate" consumer spending.

Anyone really interested in studying it from a theoretical standpoint will find ample evidence both from neoclassical economists like Milton Friedman and other Chicago School types, as well as from Austrian School economists like Ludwig von Mises and F.A. Hayek that Keynes' ideas don't hold up.

As for the ideas in practice, I'm not content with the massive record of history that Keynesian policies are a terrible mess.  Bush's "stimulus" check and the bailouts as recent examples (and Obama's FDR style public works projects as future examples) aren't enough to put the nail in the coffin.  They're too far removed from me.  That's why I'm launching, with your help, an experiment to test Keynes' theories.

We all need to go to iTunes and buy the new single from the liberty-loving and funky-fresh band Major Maker. "Funky Lady" is not only a great single (why do they call it a single when it has two songs?), but it will help us test Keynesianism.  If we all go out and buy the single (only $1.98!) for ourselves and as gifts for as many people as possible, we can bring the economy back; that is, if Keynes was right.  The only way to know is to try.

The good news for you is that even if Keynes turns out to have been wrong and your purchase of "Funky Lady" doesn't make the stock market leap and your home value soar, you still have a great MP3 in your collection. Unlike government attempts to test Keynsianism, you walk away with a valuable asset in the end, even if the experiment fails.

In fact, by the time we see the results and judge whether or not our Keynesian consumption test was a success your new Major Maker MP3 asset may be worth MORE than the $1.98 you spent, due to inflation.  Then you could trade or sell "Funky Lady" for a nominal profit.  You may want to buy lots of "Funky Lady" singles, just like people buy lots of gold and commodities when inflation is expected; Major Maker songs may become a default currency if the dollar becomes too unstable.

So, everyone  go to iTunes, buy Major Makers new single "Funky Lady" and know that you're not only supporting an awesome liberty-loving band, getting some sweet and super hip tunes, but also engaging in a massive empirical test of Keynesian economic theory AND investing in a stable commodity to hedge against monetary inflation.

Who new rocking sweet songs could be so freaking educational.

Posted by Isaac Morehouse on December 17, 2008 in Economic freedom | Permalink | Comments (6) | TrackBack

Sunday, December 14, 2008

Jim Rogers calls most big U.S. banks "bankrupt," opposes banking sector bailouts

One man’s monetary stimulus is another man’s industry bailout.

Yesterday, I reported that former EnCana CEO Gwyn Morgan opposes industry bailouts, like those being proposed for the North American auto sector, and instead supports a strategy of monetary stimulus and efforts to enhance banking sector liquidity.

Legendary investor Jim Rogers thinks pumping money into failing banks is just another bailout that “rewards weaker lenders with new capital.” Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, Rogers said most the largest US banks are “totally bankrupt" and should be allowed to fail.

As was reported by Western Standard blogger Omar Abu Hatem, Rogers thinks America’s central bankers are working to destroy the US dollar in a doomed effort to improve competitiveness and stimulate the economy.

Stephen Johnston with is Agcapita thinks “the US is clearly committed to inflation as the only way out of its current mess.” The plan: destroy the dollar and monetize the debt.

While I’ve been critical of the Harper Conservatives, they seem to be the lone voice for relative economic sanity in the world. Prime Minister Stephen Harper and Finance Minister Jim Flaherty believe now is the time for spending restraint and a return to fiscal conservatism, while the rest of the world is eagerly following the failed path of Keynesian economics with stimulus mania.

Posted by Matthew Johnston

Posted by westernstandard on December 14, 2008 in Economic freedom | Permalink | Comments (3) | TrackBack

Tuesday, December 09, 2008

Taxation is bad for the market, who'd have thunk it?

The Globe & Mail is reporting on a CD Howe report that says that part of the reason for the real estate collapse in Toronto is due to Mayor Miller's new taxation system. The extra tax on purchasing houses, surprise surprise, has meant that fewer people want to buy houses.

David Miller's crony Shelley Carroll defended this tax by implying that it only hurts wealthy people who are buying homes. Except it also hurts the construction workers that build new houses and condos. It hurts people who invested in construction companies (which would include seniors) and it hurts painters and renovators that are often hired to change newly purchased houses.

It always marvels me, the universe that some people live in. There are people out there that simply cannot see how everyone is connected to each other. How sectors in the economy do not operate in a vacuum from each other. You can't just consider the immediate effect of a new tax, you have to investigate the spin off harm to the economy.

Posted by Hugh MacIntyre on December 9, 2008 in Economic freedom | Permalink | Comments (4) | TrackBack

Thursday, December 04, 2008

Liberty and Private Charity

Interesting Friday and Saturday ahead for me: I'm one of a dozen or so invited participants from the U.S. and Canada taking part in a colloquium here in Vancouver on Liberty and Private Charity, co-sponsored by the Fraser Institute and Liberty Fund, Inc.

I've quite enjoyed the pre-conference readings, which included full books by Bernard Mandeville, Adam Smith, and Marvin Olasky, plus chapters from a dozen or so other books. Frankly, the conference could end the moment after it began, and, because of the quality of the readings, I would feel that I'd already earned post-grad credit in subjects such as the nature of compassion and the rise of the welfare state.

I'm looking forward to getting to know a fascinating group of fellow participants, including Fr. Raymond de Souza of the Post and David Quist of the Institute of Marriage and Family.

One final thought: I'm pretty sure they won't be trying to turn we so-cons into hardcore libertarians, but I'll report back at the end of the weekend to let you know how we held up!

Posted by Terry O'Neill on December 4, 2008 in Economic freedom | Permalink | Comments (3) | TrackBack

Wednesday, December 03, 2008

Stephen Harper remembers Canadian business leader Ted Rogers, and why it's important

In popular culture, when politicians become celebrities and business leaders become villains, tyranny can’t be far off.

So while the world looks to President-elect Barack Obama for salvation, and coverage of sordid political schemes spill onto the business pages of newspapers and crowd out stories of innovation, entrepreneurship and industry, it pleases me when time is taken to recognize greatness in commerce.

In this spirit, it is worth reading Prime Minister Stephen Harper's statement on the passing of Ted Rogers:

“On behalf of the Government of Canada, I wish to express our deepest condolences to Ted Roger’s family and friends. Our thoughts and prayers are with you.

Mr. Rogers was one of Canada’s greatest telecommunications entrepreneurs. His visionary business acumen was evident as early as 1960 when, as a law student in his mid-20s, he bought all the shares in Canada’s only FM radio station CHFI when only 5% of Toronto households had FM receivers. This prescient investment in FM radio led him to invest in cable television, wireless telecommunications, broadcasting and publishing. He paved the way for enhanced consumer service in areas such as the Internet and voice over Internet.

He touched the lives of countless Canadians outside of his business ventures through his generosity in professional sport, health care and education. He and his wife Loretta have made substantial contributions, including to Ryerson University and Toronto-area hospitals.

Mr. Rogers was appointed to the Order of Canada in 1990, our country’s highest civilian honour.

We will never forget one of our greatest Canadians.”

Posted by Matthew Johnston on December 3, 2008 in Economic freedom | Permalink | Comments (0) | TrackBack

Can Wal-Mart save U.S. healthcare?

Smile A great article by Chris Brown for the Mises Institute on the U.S. healthcare system.  Brown correctly points out that in America we DO NOT have a free market in the health care industry.  In fact, one of the most startling facts in the article is mentioned in this paragraph:

"...the US government accounted for over 45% of all US healthcare expenditures in 2006; it spends almost 20% of GDP on healthcare; indeed, it spends more per capita than any other OECD country, including those with socialist, government-funded healthcare. In short, this is not a free market."

Did you hear that Canada?  The U.S. government spends more per person on health care than you!  You'll have to increase your spending, lest ye be outdone by the coldhearted "free market" U.S.!  (Notice thick sarcasm)

The truth is our health care industry in America is a mess of regulations, subsidies, taxes, and bureaucracy.  It is a managed cartel.  Industry players have lobbied hard to get into monopoly positions and exclude competition.  Fortunately for consumers, you just can't keep those pesky entrepreneurs down.  Brown describes how Wal-Mart is leading the way in offering cheap, quick, quality health care to more and more consumers, despite all the government obstacles and industry insiders seeking to limit the provision of care to themselves.

"Wal-Mart now offers walk-in, inexpensive healthcare services by leasing store space to private health clinics. This service, combined with an in-store pharmacy that offers $4 prescriptions, will offer these services to millions of people, and there is no requirement to have health insurance. Consider this: Wal-Mart's $4 prescription program has saved customers over $1 billion dollars since its inception. Prices are a flat fee of around $45 per visit, and are well advertised, i.e., there is no guess work, and price transparency exists. Contrast this with a typical doctor's visit where you might not know what you are paying until three months later."

See where serving the customer gets you with the big government loving cartels and monopolies:

"...some physicians are (correctly) worried since they will have to struggle to compete with Wal-Mart's healthcare. Most physicians earn their revenue from "quick" visits — the "simpler" the illness, the quicker the visit — which means more customers, and more revenue. Wal-Mart will now be treating those patients and receiving revenue from customers, which formerly would have gone to physicians.

Similarly, the AMA cartel could receive a "prescription" from Wal-Mart on learning how to foster innovation, as opposed to stagnation, to maintain relevance. Other organizations, such as the American Academy of Pediatrics, instead of attempting to compete, intransigently and stubbornly cling to their antediluvian practices by merely writing position papers opposing retail clinics such as Wal-Mart.Download PDF"

None of this is because Wal-Mart is benevolent and the cartels are greedy.  Both parties are self interested (ALL parties are self interested...that means you too).  But as Adam Smith so deftly explained in The Wealth of Nations some 232 years ago, competition is the only way to keep our economic self-interest in check, and indeed, in a free-market each person's self interest is led, "As if by an invisible hand" to the benefit of everyone.

Wal-Mart is helping more and more people (particularly those with low incomes) get health care because they want to be more profitable and be better than their competition.  Freedom leads them to offer what their customers want.  Customers are the only ones with the dollars they seek, and to get those dollars they must please the customers - customers are their master.

The cartels and government sanctioned monopolies on the other hand will seek to beat their competition not by pleasing consumers of their services, but by pleasing their masters - government.

If you want better health care (or better anything), don't let government become the master of the industry.  It's a lot better for you when you're the master.

In February, Western Standard general manager Kalim Kassam argued that Wal-Mart founder Sam Walton deserves the Nobel Peace Prize.

Posted by Isaac Morehouse on December 3, 2008 in Economic freedom | Permalink | Comments (7) | TrackBack

Joe the Plumber's intelligent Christmas book picks: "Ludwig von Mises important reading for these troubled times"

The Christmas issue of the The American Spectator magazine has recommended holiday reading lists from a variety of conservative figures.

The Economist's Democracy in America blog has the recommendations of Joe "the Plumber" Wurzelbacher; three books about plumbing and a grand opus on monetary theory by the great classical liberal and Austrian School economist Ludwig von Mises, normally encountered by economics students in second level courses on money and banking, alongside JM Keynes' Pure Theory of Money:

Temples of Convenience—and Chambers of Delight (Lucinda Lambton): "It shed a great deal of light on the development of the lavatory, or as we say over home, 'the hutch.'" Most of the privies in the book are "the product of non-union labor." A plus!

Flushed with Pride: The Story of Thomas Crapper (Wallace Reyburn): "Just when you think you know everything about plumbing, this book comes along."

Plumber's Handbook (Howard C. Massey): Particularly useful "on the topics of greasy waste systems, outside waste interceptors, and what for me has been a longtime conundrum, local gas codes." It's also water-resistant.

The Theory of Money and Credit (Ludwig von Mises): "It brought monetary theory into the mainstream of economic analysis. It is important reading for these troubled times."

In September, I attended the Mises Circle in Vancouver event where philosopher David Gordon gave a speech titled "The Ten Best Books on Money."

Mises' Theory of Money and Credit, which Gordon called "undoubtedly the greatest of all books on monetary theory" was number two on the list.

During the US presidential campaign, Western Standard editor Peter Jaworski gave three reasons to vote for Joe Wurzelbacher -- I'd like to add a fourth.

(h/t Andrew Sullivan and thanks for a heads up from Lew Rockwell)

Posted by Kalim Kassam on December 3, 2008 in Economic freedom | Permalink | Comments (7) | TrackBack

Tuesday, December 02, 2008

Not all politicians support bailouts

Two Governors of American States wrote an op-ed in the Wall Street Journal. Governor Rick Perry of Texas and Governor Mark Sanford of South Carolina both oppose bailouts.

An excerpt:

In a free-market system, competition and one's own personal stake motivate people to do their best. In this process, the winners create wealth, jobs and new investment, while others go back to the drawing board better prepared to try again.

To an unprecedented degree, government is currently picking winners and losers in the private marketplace, and throwing good money after bad. A prudent investor takes money from low-yield investments and puts them in those that yield better returns. Recent government intervention is doing the opposite -- taking capital generated from productive activities and throwing it at enterprises that in many cases need to reorganize their business model.

Posted by Hugh MacIntyre on December 2, 2008 in Economic freedom | Permalink | Comments (0) | TrackBack

Denying the inflationist dogma: Bernanke and the futility of monetary policy

Charles Anthony of The Politic writes:

When the price of the US dollar is approaching zero, the Federal Reserve Chairman, Ben Bernanke reveals a bitter truth about the futility of monetary policy

The U.S. economy “will probably remain weak for a time,” even if the credit crisis eases, Bernanke said yesterday in his speech. While the Fed can’t push interest rates below zero, “the second arrow in the Federal Reserve’s quiver — the provision of liquidity — remains effective,” he said.

Maybe eventually — after the Fed prolongs the recession and fuels malinvestments — more Americans will wake up to the fact that inflating the money supply is not about stimulating the economy nor about helping the public. It is all about giving new money to the banks first. In Canada, such monetary inflation goes unnoticed or without debate.

Anthony is absolutely right on his final point. There is so little debate on many of the most important economic issues in Canada because there is no diversity of opinion; all major parties in Canada agree with the Keynesian policies of "spend, baby, spend," easy credit from the Bank of Canada, more "investment" in infrastructure, and a government backstop for mortgages and lending institutions.

With the winds of 'change' seemingly blowing North to Canada, I fear we are entering a terrible era of economic interventionism in North America.

Posted by Kalim Kassam on December 2, 2008 in Economic freedom | Permalink | Comments (2) | TrackBack