The new issue of Econ Journal Watch is out, which includes my article"Great Apprehensions, Prolonged Depression: Gauti Eggertsson on the 1930s." In addition, Larry White and I recorded a podcast on the article, which you can find here. (For those who don't know EJW, you can find a description here.) Here's the abstract of the paper:
Hopefully the advances that Borlaug's work made possible will not be lost in a rising tide of radical environmentalist criticisms. The Green Revolution wasn't perfect, but no other 20th century event did more for the betterment of humanity on balance. Think of it this way: Borlaug's legacy is the counter-balance to the state-led violence of the century. Add up the millions killed by Lenin, Stalin, Mao, Hitler, and Pol Pot. Add to that the millions killed in WW I and WW II and all the rest of the wars of the last century. Borlaug's work saved at least as many lives as all of those"leaders" and politicians slaughtered. If the term"social justice" has any meaning, Borlaug and the Green Revolution did more for it than any political activists by balancing the century's scales of life-and-death. If his more radical critics have their way, they will condemn millions to the poverty and starvation that his legacy saved them from.
In a just world, people like Borlaug would be the subject of hours of media commentary and coverage and special commemorative issues of Time or Newsweek while politicians got a cursory obit notice on the back page of the local rag.
That is not our world, sad to say, but as you sit down to your next meal, take a moment to pause and reflect on the life of a man who made it possible for a large hunk of humanity to go to bed tonight not worrying about where their next meal would come from. Contributions to humanity do not get any more praiseworthy than that.
Paying attention to that discussion is National Review's Jonah Goldberg, whose book Liberal Fascism caused quite a stir when it came out last year. Goldberg has a blog post exploring what he sees as sudden libertarian interest in this question even as many libertarians were lukewarm to dismissive of his book.
I reviewed the book for The Independent Review and was more favorable to it than many libertarians. The review is not online yet, but will be in a few months here. In a later post, Goldberg and I exchange thoughts on why libertarians might have been so lukewarm to his book, with me arguing that it was because the book didn't sufficiently recognize the fascist tendencies on the contemporary right. A number of libertarians have drifted farther from the right in the last decade (recall the number of libertarians who said they'd vote for Obama), and I would argue that it's because Big Government conservatism under Bush began to unfurl some fascist tendencies of its own.
Feel free to enter the conversation here or at the other blogs noted at the outset.
You’ve all seen them. Those ubiquitous TV ads where a simple little pill transforms a man suffering from erectile dysfunction, or ED, into a virile tiger who puts a smile on the face of his now beaming wife.
Well, Representative Jim Moran (D-VA) has seen them too, and you’d be hard pressed to see a smile on his face when he talks about the ads. “A number of people,” he says, “have come up, including colleagues, and said I’m fed up. I don’t want my three or four-year old grandkid asking me what erectile dysfunction is all about. And I don’t blame them.”
Enter H.R. 2175. That’s a bill that Rep. Moran introduced last month that would prohibit any ED ads from airing on broadcast radio and TV between 6AM and 10PM. The bill advises the Federal Communications Commission to treat these ads as “indecent” and instruct stations to restrict their broadcast to late night and overnight hours.
Yes, because parents, of course, cannot be put in to the situation of either monitoring what their kids watch or actually having to explain (or concoct a suitable white lie) what the commercial is about. Better the state should"tsk, tsk" the First Amendment in order to save the children from, gasp!, hearing about penises and sex.
Lots of Lovejoyism on display in the comments at the CNN story on his bill.
(For the Helen Lovejoy reference, go here or here.)
The close relationship between the rule of law and the enforceability of contracts, especially credit contracts, was well understood by the Framers of the U.S. Constitution. A primary reason they wanted it was the desire to escape the economic chaos spawned by debtor-friendly state laws during the period of the Articles of Confederation. Hence the Contracts Clause of Article V of the Constitution, which prohibited states from interfering with the obligation to pay debts. Hence also the Bankruptcy Clause of Article I, Section 8, which delegated to the federal government the sole authority to enact"uniform laws on the subject of bankruptcies."
The Obama administration's behavior in the Chrysler bankruptcy is a profound challenge to the rule of law. Secured creditors -- entitled to first priority payment under the"absolute priority rule" -- have been browbeaten by an American president into accepting only 30 cents on the dollar of their claims. Meanwhile, the United Auto Workers union, holding junior creditor claims, will get about 50 cents on the dollar.
The absolute priority rule is a linchpin of bankruptcy law. By preserving the substantive property and contract rights of creditors, it ensures that bankruptcy is used primarily as a procedural mechanism for the efficient resolution of financial distress. Chapter 11 promotes economic efficiency by reorganizing viable but financially distressed firms, i.e., firms that are worth more alive than dead.
Violating absolute priority undermines this commitment by introducing questions of redistribution into the process. It enables the rights of senior creditors to be plundered in order to benefit the rights of junior creditors.
My question is for those on the left who so rightly and eloquently argued against the Bush Administration's violations of the Rule of Law, and defended the Constitution in the process, with respect to the treatment of prisoners and other elements of the"war on terror":
Where are you now? The crickets are chirping once again from where I sit. If the Constitution and the Rule of Law really mean what you said they meant when Bush was president, why don't they mean the same thing now? If the imperial presidency was wrong then, why isn't it wrong now? Where are you, you passionate defenders of the Rule of Law? Has The One blinded you to your principles, or did you never really have them in the first place?
Absent the signals of the marketplace, czars, presidents, and members of Congress are thrashing around in the dark in their attempts to improve upon the outcomes generated in actual markets. Top-down directives forgo the opportunity to learn from the decentralized knowledge of those actually producing the goods and services in question.
Obama's reliance on experts and czars and top-down restructuring is particularly ironic in light of his promises of change and bringing the spirit of 21st century technology to government.
The clearest lesson of the networked world is that decentralized, bottom-up collaboration works much more effectively than top-down solutions. From Wikipedia, to open source software, to the Internet itself, the 21st century is quickly becoming the century of the"wisdom of crowds."
Suppose you had some high schoolers who were self-proclaimed Republicans. What would you give them to read to introduce them to libertarianism that would emphasize its differences from conservatism? (And no, Hayek's "Why I'm Not a Conservative," though wonderful, is not appropriate.)
Suggestions happily received in the comments or by email.
James Hansen, one of the world's leading climate scientists, will today call for the chief executives of large fossil fuel companies to be put on trial for high crimes against humanity and nature, accusing them of actively spreading doubt about global warming in the same way that tobacco companies blurred the links between smoking and cancer.
I'm sure that my good friend Gus is going to tell me that these folks aren't representative of the mainstream of environmentalist thought or that just because people say things like this, we shouldn't dismiss the environmentalists' concerns completely. I am in agreement with the latter, but I'm increasingly doubtful of the former. James Hansen"heads NASA's Goddard Institute for Space Studies in New York." and is often noted as"Al Gore's science advisor."Just how much more mainstream can you get?
More important: who will have the courage to name such demagoguery for what it is?(HT to Max)
I simply do not understand how those who are in favor of giving government all of these new powers because they sincerely believe that doing so will work out the way their blackboard designs intended can keep a straight face. What kind of cognitive dissonance must it take to believe that the people YOU are handing power over to are"not like" Ted Stevens or Rod Blagojevich? How deeply must one be in denial or engage in rationalization to believe that they are"different?" How blind must one be to think that trillions of dollars in bailout money won't go to the highest bidder (as the lobbyists line up on K Street...) in a process different only in its wink-and-a-nod courtesies than Blagojevich's auctioning off of a Senate seat?
For me, the key insight of public choice is the same insight that underlies Austrian economics: it is the institutional framework that is the key to understanding the choices people make and the unintended outcomes they produce. As I said to a class last week:"Governments can't act like businesses because businesses only act like businesses because they operate in the institutional environment of private property, monetary exchange, and competition." In the same way, getting politicians to stop selling off their power isn't a matter of ethics or psychology, rather it's about changing the rules of the game such that they do not have as much power to sell. Unfortunately, the current bailout mania is changing those rules in utterly the wrong direction.
Look at it this way: the bailouts are already becoming just a legal form of the essentially the same behavior for which the governor has been indicted.
Why should we ever accept"Oh, but he's different" as an answer to the claim that explicit bribery and selling off power are just a less subtle form of politics as usual?
Godwin's Law having been just invoked against me on another blog because I referred to the NRA as "fascist," despite the fact that I provided evidence and citations to back up my claim, I hereby announce Horwitz's Corollary to Godwin's Law:
"When people invoke Godwin's Law in the face of a serious, relevant argument about Hitler or Fascism made with evidence and citations, it reflects their own inability to respond rationally to the claim being made and thus they should be deemed to have lost the discussion."
Rauchway perceives me, rightly, as a New Deal critic and he is on a mission to combat what he sees as wrong-headed criticisms of the New Deal. So in addition to taking me to task for my use of"fascist" to describe the NRA (which only echoes FDR's and other's explicit statements that they borrowed from the Italians - one might also consult Luigi Villari's"The Economics of Fascism" for a description of the Italian system and see the similarities for oneself), he presents some additional context to the Schechters' story that he seems to think undermines my argument. The context comes from the historian Andrew Cohen's discussion of the Schechter case. You can read the whole thing there, but the gist seems to be this:
The Schechters were not a small immigrant business, but rather a very successful corporation. Moreover, they gained that success by out-competing (hence the points I raised in my original post) their unionized rivals by keeping prices lower due to lower labor costs. This infuriated the unions, who responded at first by targeting the Schechters with violence: "The tough guys who ran these organizations tried to bully the Schechters into submission, on one occasion putting emery powder in the crankcase of their trucks." Cohen then points out that when the NRA was created, it was the union leadership who was empowered to write the codes and they used that power to, presumably, get back at the non-union firms in the various industries, including the Schechters and poultry. Cohen then reads the Supreme Court's rejection of the NRA not as a matter of such regulation in general being unconstitutional, but rather that it was being driven by the wrong people: " It’s not just the power the state possessed, but who wielded it."
I'm not enough of a constitutional scholar to say for sure, but I'm pretty confident that the decision was not decided quite so ideologically, after all as Ilya Somin points out, all nine justices signed on, including the very liberal Brandeis, to the claim that Congress had execeeded its ability to delegate power under Article I. And nowhere in the actual Supreme Court decision are the issues Cohen raised ever mentioned. (But of course historians with their own axes to grind can always find their own ideological views about anti-labor hatred lurking in the background if they search hard enough.)
Bottom line, perhaps the Schechters weren't quite the small immigrant businessmen Shlaes and I portrayed them as. But that doesn't change the underlying points at all: they were targeted for specific reasons, including the fact that their observation of Kashrut and their skill as businessmen ran them, pun intended, afoul of the NRA, specifically the union organizers who helped write the codes. The fact that they survived attempted union violence and they became targets of those very same unions only enhances the main point of the story, and, in my eyes anyway, their heroism.
It also puts a new twist on the complaints of them competing too hard and paying wages less than NRA code: both of these were pissing off the union bosses in the rest of the industry. Giving those unions the power to help write the codes (in good fascist worker-corporation cooperative fashion, I might add) gave them an opportunity to even the score. Cohen and Rauchway perceive this as rough justice being served and thereby making the Schechters into the villians of the piece. That's a value/ideological judgment on their part and to suggest my history is sloppy and ideological because I see it the opposite way is more than a bit ironic.
Those who live in glass chicken coops....UPDATE: According to a commenter at the Volokh Conspiracy: "A member of the Schechter family has told me that shortly after the ruling Schechter Poultry went bankrupt. The family claims that the Jews of New York found out that the Schechters has run afoul of their beloved President Roosevelt and therefore stopped giving their business to the company." I have no idea if this is true, but if so, it only adds to the strange relationship between Jewish Americans and FDR.
Now this may be old hat to the historians here, but I'm going to retell it through my own eyes.
The Schechters ran two kosher butcher shops, poultry specifically, in Brooklyn. They were Jewish immigrants in the 1930s. Running a kosher butcher shop is a complicated affair, as the Laws of Kashrut are far more than a “dietary” code. Normally, keeping Kosher is thought of as just a set of rules about what food observant Jews cannot eat (e.g., pork, shellfish, scavengers, etc and no mixing milk with meat), but it is at least as much an ethical code. And that ethical code involves both how humans are to treat the animals they kill (humanely, as kosher butchers must follow specific rules about how animals are killed) as well as how they must treat their customers. For observant Jews such as the Schechters, the Laws of Kashrut were both a matter of religious observance and good business.
Enter FDR and the NRA. The National Recovery Administration was part of the early New Deal and was Roosevelt’s attempt to cartelize American industry to prevent it from suffering the consequences of too much competition. The thinking was that too much competition was keeping prices too low, which was undermining incomes and purchasing power, and dragging the economy down. Matched with Hoover’s and FDR’s attempts to keep wages up, the NRA’s similar attempt with prices made for a highly misguided combination that contributed to the length and depth of the Great Depresssion. As part of its legislation, the NRA had all kinds of detailed codes for individual industries, describing to the letter how firms must do their business. The Schechters fell under the “Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and About the City of New York” (and you thought Atlas Shrugged was fiction….). Among the things the code prohibited was “straight killing” which meant that customers could buy a whole or half coop of chickens, but did not have the right to make any selection of particular birds (such individual selecction was “straight killing”).
This last rule was in direct conflict with Kashrut laws, which also served as an informal health code in the Jewish community. As Shlaes points out, the phrase “glatt kosher” referred to the fact that the lungs of the animal were smooth (which is what “glatt” means) and therefore free of tuberculosis. Inspecting the lungs was part of the official process of conferring Kosher status on a butcher shop. Removing unhealthy animals from the stock was one of the core principles of keeping Kosher, and the rabbinical inspectors were fanatic about doing this. But so were customers. As Shlaes points out, individual customers, both retailers and their customers, had the right to refuse individual animals. This minimized the risk of an unhealthy animal getting through when both seller and buyer did such inspections. And it ensured that the kosher laws served as a health code, or perhaps something more like the Underwriters Laboratory or Good Housekeeping seal.
The Schechters, as you may have guessed, were targeted by the NRA enforcement crew. They were inspected repeatedlly during the summer of 1934, which forced them to violate their own Kashrut practices, telling customers that they could not reject individual birds as keeping Kosher allowed. Not surprisingly, their deeply religious customer base began to dwindle. The constant inspection turned up a variety of violations, including allegations that they had, in fact, sold sick chickens (not surprising, if true, given that part of their own internal inspection process was negated by the NRA code itself!). They were also accused of “competing too hard” and keeping prices “too low.” Shlaes recounts a couple of hilarious exchanges between the government lawyers and the Schechters where the knowledge of the actor is much greater than the knowledge of the expert.
Eventually, the lower courts found them guilty of 60 different violations and they all served a little bit of jail time. But more important, the Schecters’ lawyer continued to appeal and the case made it all the way to the Supreme Court, where the Roosevelt Administration saw it as the perfect test case of the constitutionality of the NRA, and perhaps the whole New Deal. Coverage of the case, Shlaes shows, was highly tinged with the standard anti-Semitism of the time, especially because the Schechters were right out of Jewish central casting, being immigrants with their Eastern Eurpoean cadences and traditional Jewish dress. It was the Jewish rubes of Brooklyn against the high powered WASP lawyers of the northeast corridor.
In the end, the Court ruled invalidated the NRA codes on a unanimous decision, including Justice McReynolds, one of the great defenders of liberty of contract and the Constitution in the early 20th century – he wrote the Meyer and Pierce decisions that now define the right to marry and parent – who was reported to be quite the anti-Semite. (He put his constitutional principles before his prejudices in this case though.) The four Jewish poultry butchers from Brooklyn had won over FDR and the fascist NRA codes. This was the first of several Court decisions that invalidated the first New Deal, and it was the Schechters’ willingness to fight this all the way to the top that was partially responsible. As Shlaes notes, the real insult of the accusations against the Schechters, in their eyes, was not that they had broken the NRA code, but that they were accused of violating, and forced to behave in ways that actually did violate, the Laws of Kashrut, which mattered more to them.
There are two fascinating elements to this story. First, there’s a terrific dissertation waiting to be written that explores the Laws of Kashrut as a set of informal institutions that serve as a non-governmental health code. It would be a project complementary to Lisa Bernstein’s work on the informal norms of the diamond industry. That story is only made better by the role the NRA played in overriding the, arguably superior, private sector arrangements within the Jewish community. The NRA’s attempt at cartelizing and planning all of these industries destroyed the indigenous institutions that functioned better.
The other fascinating element is what this says about the relationship between Roosevelt and the Jews. The other night I happened to catch for the second time the episode of PBS’s terrific series on “The Jewish Americans” that covers the Depression era and the Holocaust. It notes how much the Jews loved Roosevelt, but also notes the criticism he took for not acting more aggressively to save Eastern Eurpoean Jews (only his friend Morgenthau’s intervention finally pushed FDR to act by giving Morgenthau the authority to start rescuing people – about 20,000 altogther - which was better than nothing but still a drop in the bucket.) And it’s certainly true that FDR remains iconic among Jews, especially my parents’ and grandparents’ generation. But with the Schechters, we have a case where the Administration targeted Jewish merchants/middlemen for the dual sins of being good capitalists and observant Jews, both of which didn’t fit the NRA’s plans. And the way in which the prosecution was conducted and was covered by the newspapers put a whole bunch of anti-Semitic stereotypes into play. Why didn’t this sour more Jews on FDR? And why, when you take this case and FDR’s too little, too late approach to the Holocaust, is FDR still viewed so positively by so many Jews? I can offer a few answers to that question, many of them obvious I think, but it remains interesting that his sins were, and are, overlooked by many Jews.
Finally, I consider myself to be fairly familiar with the history of Jews in America, but nowhere in my Jewish education or in the aforementioned PBS series had I ever heard of the Schechter brothers. A quick email exchange with the lay-rabbi at my synagogue indicates he hadn’t either. The PBS series devotes, and rightly so, significant attention to the trial of Julius and Ethel Rosenberg, but not a word about the Schechters. Again, one can speculate as to why this is the case, but whatever the explanation, it’s a shame that an important part of Jewish history, including a victory for Jewish law over civil law (implicitly anyway), has been, as far as I can tell, ignored by modern day Jews. It’s also a story that, also as far as I know, hasn’t been told in any detail by classical liberals until Shlaes’ book. I’d happily be corrected on that.
In keeping with Shlaes’ theme of the “forgotten man,” the Schechters have indeed been forgotten by Jews and by classical liberals, both of whom have every reason to rescue them from the dustbin of history and recognize both their heroism and the fascinating questions of political economy their case raises.