Liberty & Power: Group Blog
David T. Beito
According to Stewart's wife Sarah, when they arrived at the hospital “it was full to bursting. I walked to the front with the letter and told them what the GP had said but I was just told to go to the back of the queue." Representatives of the the National Health Service stated that they were"saddened" by the news but explained that they had particularly long lines this time of year.
Perhaps Mark Brady has an answer. Under the British system does Mr. Fleming's family have any right to sue for malpractice?
"From January 1, the iconic sailor falls into the public domain in Britain under an EU law that restricts the rights of authors to 70 years after their death. Elzie Segar, the Illinois artist who created Popeye, his love interest Olive Oyl and nemesis Bluto, died in 1938."
"While the copyright is about to expire inside the EU, the character is protected in the US until 2024. US law protects a work for 95 years after its initial copyright.
"The Popeye trademark, a separate entity to Segar's authorial copyright, is owned by King Features, a subsidiary of the Hearst Corporation — the US entertainment giant — which is expected to protect its brand aggressively."
David T. Beito
One of the great myths in health care is that the uninsured are responsible for driving up private premiums by shifting costs. Uncompensated care certainly shifts some costs to private payers. Yet these costs are actually quite manageable in the aggregate, akin to what retailers lose due to shoplifting. The major cost shift is from government programs -- Medicare and Medicaid -- to private plans. The government pays doctors to treat Medicare and Medicaid patients. But the rates it pays, on average, are less than the cost for providing care to these patients. This is why Medicaid patients, and increasingly Medicare patients, struggle to find doctors. Putting more people on these programs will destabilize the remaining private system and create a coalition for price and wage controls.
Lucas finds the Fed’s actions in adding more than $600 billion to bank reserves in the past few months to be “the boldest exercise of the Fed’s lender-of-last-resort function” in its history. He believes, as I do, that in recent months financial decision-makers have engaged in a “flight to quality”—I call it a flight from risk—and that by injecting reserves into the banks, the Fed has effectively exchanged risky assets (the banks’ collateral securities) for a riskless asset (deposits at the Fed), thereby satisfying their demand to hold additional high-quality assets when the market itself was not supplying more such assets.
Viewing the Fed’s action as an effective way to stimulate spending, Lucas also applauds it as superior to the alternative policies to achieve this objective. “It entails no new government enterprises, no government equity positions in private enterprises, no price fixing or other controls on the operation of individual businesses, and no government role in the allocation of capital across different activities.”
I agree that these alternative policies are probably worse than direct Fed lending to the banks, but, unlike Lucas, I do not view the Fed’s abrupt, massive lending with equanimity. Indeed, as I indicated three days ago, I view the banks’ current, gigantic holdings of excess reserves as a veritable Sword of Damocles with the potential to cause a near-collapse of the dollar’s purchasing power.
I also differ with Lucas—and with Bernanke and nearly all of the mainstream commentators on the financial scene during the past several months—in that whereas he views the present situation as a liquidity crisis, I view it as fundamentally an insolvency problem for many banks and other financial institutions, inter alia. By treating this situation as if it were a liquidity crisis, like the banking situation from 1929 to 1933, one may moderate the recession for a short while or even reverse it, but only at the expense of preserving a plethora of malinvestments that ought to be liquidated by balance-sheet adjustments and, in many cases, bankruptcies, so that the valuable assets can be reallocated to their most valuable uses, rather than being kept impounded in zombie enterprises, including zombie banks. Because Lucas, in good mainstream-economics style, views the current situation in terms of aggregates, he is not looking inside the capital stock and therefore he is failing to see that the easy credit and reckless lending from 2002 to 2007 gave rise to a great many rotten investments that are not viable except by some species of Fed or Treasury bailout.
If the economy is to experience healthy sustainable growth, this garbage needs to be thrown out—and the incompetent managers and investors who created it need to be removed from positions of control over assets they have demonstrated they cannot manage responsibly and successfully. Free enterprise is a system of profit AND loss. If the government rides to the rescue of every large-scale, politically connected loser, the system will grow ever more rotten from the top down.
Yes, this way of proceeding entails short-run pain, but the alternative only pushes the pain into the future while ensuring that when it strikes, it will be even more severe.
"The new law, which comes into effect today, gives the chance of Spanish nationality to descendants of those who fled the country during the civil war between 1936 and 1939. It also gives a right of application to those whose grandparents fled the dictatorship of General Franco, which lasted from 1939 until 1975."
It is ironic that a self-styled socialist government is doing more to bring freedom to Cubans than successive U.S. administrations with their self-defeating sanctions.
David T. Beito
In a letter to W.E.B. Du Bois, Charles Clinton Spaulding argued that the Depression would cultivate a generation of superior business managers by forcing them to operate businesses more efficiently. His company, North Carolina Mutual Life Insurance Company, had suffered a series of economic setbacks during the 1930s, and he adjusted by trimming expenses--to name one example. I wonder what Spaulding might say about today’s economic bailouts.
To learn more about this African American entrepreneur, click here.
"The invasion of Iraq was a bandit act, an act of blatant state terrorism, demonstrating absolute contempt for the concept of international law."
"How many people do you have to kill before you qualify to be described as a mass murderer and a war criminal? One hundred thousand?"
There is a hoary myth in American labor history of “privatism”—that, unlike the European labor parties, American unions have only asked to be left alone by the state, and to exercise their economic power to improve labor standards. They have eschewed partisan activity and instead focused on “bread-and-butter” issues—-wages, hours, and working conditions (later, pensions and health care). They often quote American Federation of Labor official Adolph Strasser’s quip that the American Federation of Labor “has no ultimate aims.” (Less often do we hear A.F.L. President Samuel Gompers, who said that trade unions shared “certain ultimate ends, including the abolition of the wage system.”) The left has long lamented this, that American labor has such a narrow, “business unionism” outlook, and has not sought to transform American society.
This myth had some basis in the history of A.F.L. craft unionism, when it broke away from older, broad-based movements like the Knights of Labor, but even here the federation was far from apolitical. They supported protective tariffs because they believed they would raise the wages of American workers. Though ambivalent about European immigration restriction (so many being themselves immigrants), they did vigorously support “Oriental” exclusion. Renowned labor historian Selig Perlman called the Chinese Exclusion Act of 1882 “doubtless the most important single factor in the history of American labor, for without it the entire country might have been overrun by Mongolian labor, and the labor movement might have become a conflict of races instead of one of classes.”
Above all, unions sought special exemptions from prosecution as conspiracies in restraint of trade under the antitrust laws and from injunctions during strikes, so that they could be free to picket—-though, as law professor Sylvester Petro has shown, every labor injunction but one in American history followed some kind of union violence or intimidation.
Over time, the A.F.L. became more and more statist, moving toward the Democratic party in 1908. As United Mine Workers President John Mitchell put it, “The trade union movement in this country can make progress only by identifying itself with the state.” They began to win their first legislative victories (antitrust and injunction exemptions, as well as railroad union power) under Woodrow Wilson. The government pressured employers to recognize and bargain with unions during World War One, and union ranks swelled. When government promotion ebbed after the war, so did union ranks.
The breakthrough and most obvious illustration that the success of union organization depended on government promotion came in the New Deal. It had begun even under Herbert Hoover, who signed the Norris-La Guardia Act, which restored the antitrust and injunction exemptions that had eroded in the 1920s, and declared that “the individual unorganized worker is commonly helpless to exercise actual liberty of contract and to protect his freedom of labor, and thereby to obtain acceptable terms and conditions of employment.” Before the Supreme Court declared it unconstitutional, the National Industrial Recovery Act (a 1933-style “bailout”) required industries that received government benefits to engage in collective bargaining, albeit not explicitly enough for unions.
The dam finally broke with the National Labor Relations (Wagner) Act of 1935, which established the principles of compulsory unionism (employers must bargain with organizations chosen by a majority of their workers) and majority unionism (that union represents all workers, even those who did not vote for it). This was true even if the union was racially exclusive, which led National Urban League President Lester Granger to call the Wagner Act “the worst piece of legislation ever passed by the Congress.” The organization of industrial unions—the unskilled workers of the auto, steel, rubber and other industries—into the Congress of Industrial Organizations could not have succeeded without it. Wartime government pressure again swelled union ranks during the second world war.
The abuses of government-delegated power became acute in the postwar years, leading unionists to label even the liberal President Harry S Truman a union-buster. It led Congress to clip the wings of unions in the Taft-Hartley Act, which remains the basic template for American labor relations law. Even so, ten years later Roscoe Pound, the Harvard Law School dean who had been a famous progressive champion of labor rights, observed that unions were free to commits torts against persons and property, interfere with the use of transportation, break contracts, deprive people of the means of livelihood, and misuse trust funds, “things no one else can do with impunity. The labor leader and labor union now stand where the king and government . . . stood at common law.” He feared that unions posed “a despotic centralized control.”
In the ensuing decades, the costs of American labor law and global competition began to erode the union base. During the last severe recession, of 1979-82, the ranks of many powerful unions were halved, and one of every seven American manufacturing jobs were lost. The Change to Win leaders—-Andy Stern and the Service Employees especially--seek government power to reverse this trend. They broke away from the A.F.L.-C.I.O. because the old federation was not politically effective enough. The C.T.W. leaders recognize that the only way to recruit new members—-and Democratic party loyalists-—is via legislative privileges.
Public employees have long recognized this. The teachers union worked hard to elect Jimmy Carter, and were rewarded with the creation of the Department of Education, which zealously promotes the interests of the N.E.A. When it was created, N.E.A. leaders offered a toast to “the only union that owns its own cabinet department.” The nexus here between politics and union power could not be clearer, and the C.T.W. coalition is simply following this successful strategy.
The abolition of secret ballots in union elections and, still more, the compulsory arbitration that the card-check law would impose will certainly not help American workers or the American economy. Unionization simply shifts wages from one group of workers to another. Economists Richard Vedder and Lowell Gallaway have estimated that unions cost the American economy $3.5 trillion from 1947 to 2000, or about forty percent of the 2002 GNP. This means that even unionism makes even union members worse off economically.
The union argument is that “everything is political” and that unions are an appropriate countervailing force to the power of big business, which itself benefited from government support, and to redress growing income inequality. If that’s the case, the proper response is to reduce rather than extend government favors. And, if our goal is to “spread the wealth around,” there are easier and more efficient ways to do it than union promotion.
How fortunate that Honest Harry chose Mr. Fleming to help his daughter.
No mention by Fleming of how Truman in heading the Senate investigation into war-profiteering in WWII sanitized it to the benefit of his Party. (See Bruce Catton, The Warlords of Washington.
That certainly went a long way to his replacing Wallace as VP in 1944.
No mention of Truman's decision to drop the A-Bombs when Japan was already defeated.
No mention of his decision to reverse FDR's policy on Indo-China and help place the French back in power there.
Not to worry, David McCullough's over 1,000 page Pulitzer Prize winning biography doesn't mention Harry's role in early Vietnam policy either.
Finally, Truman set another precedent in getting the US into a UN"police action," in Korea with no Declaration of War, thus greatly increasing Executive Power. Well, Harry WAS an"honest" proto-Caesar in promoting the Empire!
So far, this explosive increase of reserves has had only a small effect on the growth of the money stock as measured by the conventional monetary aggregates, such as M2, although the rate of growth of the monetary aggregates is beginning to increase substantially, as shown in this graph.
Because the public’s demand for cash balances has also risen, the recent increases in the money stock have not given rise to increased prices in general. In fact, the major price indexes have fallen slightly in recent months, although the bulk of this decline has occurred because of the decline in the price of oil and related products since July. Price indexes for goods other than energy have declined very little - certainly not enough to justify the many expressions of fear of impending deflation (setting aside whether an actual deflation ought to be feared or not).
At matters now stand, by far the greater threat is rapid inflation, notwithstanding the ongoing recession. When the banks begin to feel more comfortable with expanding the volume of their conventional loans and investments, they will have more than $550 billion on hand to employ for that purpose. The multiplied effect of such a vast amount of lending, as newly created deposits make their way through the fractional-reserve banking system, portends a gargantuan increase in the money stock and hence a correspondingly enormous jump in the general price level. As the public responds to the acceleration of inflation by reducing its demand for cash balances, the increased velocity of monetary circulation will contribute to even more rapid price inflation.
So much potential new money is now impounded in the commercial banks’ holdings of excess reserves that it is difficult to see how the Fed will be able to stem the flood once the banks begin to transform those excess reserves into normal loans and investments. If the Fed attempts to sell enough government securities to soak up the growing money stock, it will drive down the prices of Treasury bonds and hence drive up their yield, increasing the government’s cost of borrowing to finance the huge budget deficits the government will be running because of its various bailout commitments and so-called stimulus programs. This scenario holds the potential for a complete monetary crackup.
I have never been inclined toward touting doomsday financial scenarios. I raise the possibility now only because, as I consider the situation portrayed in the graph of excess reserves linked above, I am unable to foresee how the Fed and the Treasury can navigate through these treacherous waters - waters that their own previous actions have whipped to a foam - without creating terrible financial and economic harm. If the dollar survives the ministrations of Bernanke, Paulson, Bush, and the Obama gang, its survival will be something of a miracle.
David T. Beito
Eartha Kitt not only had talent (see, for example, her scene-stealing performance in St. Louis Blues) but fearlessly spoke truth to power.
In 1968, while at a public White House lunch, she properly embarassed Lady Bird Johnson by declaring "You send the best of this country off to be shot and maimed....They rebel in the street. They don't want to go to school because they're going to be snatched off from their mothers to be shot in Vietnam."
Many, it appears, have simply panicked. Starting late last summer, the financial markets began to exhibit tremendous volatility, officials at the Fed and the Treasury began to act as if imminent disaster loomed, and media commentators and reporters completely lost their composure. Even people who should have known better began to talk and to act as if the economy stood on the brink of complete collapse unless the government took unprecedented actions immediately. When one extraordinary action failed to calm the waters at once, another extraordinary action was taken, then another, and another.
We now look back on four months littered with ad hoc bailouts, new regulations, institutional takeovers, a gigantic bail-out statute, massive lending, asset exchanges, and loan guarantees never before made by the Fed and the Treasury – all on a scale that no one foresaw six months ago. We might understand that the big bankers and other financial masters of the universe who had got themselves and their mega-institutions into such deep trouble would have worked hard to create a sense of crisis and to exploit it as a pretext for cushioning their slide from the financial pinnacles — peaks so high that the air is thin and the brain does not function effectively, so that even such workaday necessities as due diligence are overlooked. Blessed with friends in high places, these financial titans snatched loot by the hundreds of billions while the snatching was good.
But why have free-market economists and other commentators expressed approval of this blatant piracy? It now appears, I am saddened to report, that these free-market experts were not so expert after all. Indeed, many of them seem to have failed to understand how markets work and how government actions can hobble or kill those workings. Many have talked as if they actually believe in vulgar Keynesianism or other crackpot ideas — about “systemic risk” where none exists or about “missing markets” for poor-quality assets that only a fool would try to sell privately when the alternative of a munificent government buyout shimmers on the horizon.
Despite the evidence of how counterproductive all of these frantic government actions have been, of how they have served above all to produce “regime uncertainty”about what the rules will be tomorrow or the next day, and thereby to paralyze private arrangements, the market’s fair weather friends are now clamoring for various species of government “stimulus” as soon as the Obama regime takes power. Of course, the Obamistas’ motives are purely political, as befits a pack of office holders and their lackeys, so it is pointless to indict them — a rattlesnake is not to be blamed if it strikes, because its nature impels it to do so. But why are well-known free-market economists going along with this nonsense?
Back in my days as a professor, I always endeavored early in the course to teach my students the fundamental importance not only of the first laws of demand and supply, but also of the second laws of demand and supply. Thus, the first law of supply states that the greater the price, the greater is the quantity supplied per unit of time, other things being equal. And the second law of supply states that the own-price elasticity of supply is greater, the greater is the time allowed for response to a change in price. The first and second laws of demand are expressed similarly, mutatis mutandis. Thus, although we can expect markets to respond to price changes, we must recognize that the responses take time; and the greater the time, the greater are the responses. Anyone who expects markets to restore a disturbed equilibrium instantaneously will be disappointed. People cannot discover the relevant changes, confirm and assess them, consider alternative arrangements of their affairs, and carry out those changes in an instant. The competent economist appreciates the necessity of patience in evaluating the market’s operation. Simply because the market does not appear to have reconfigured itself fully soon after a shock, we have no warrant to conclude that “the market doesn’t work anymore” or that “the market doesn’t work the way it used to.” Such statements manifest an economic crackpot, and economists who talk this way discredit their professional competence.
A clever riposte, of course, is the one that Keynes himself famously made in response to criticism of inconstancy in his views: “When the facts change, I change my mind. What do you do, sir?” Glibness, however, is a poor substitute for good sense, and Keynes’s critics were right to call him to account for his frequent shifts with the winds of events and intellectual fads. Nothing that has happened recently invalidates in the slightest the solid corpus of sound economic understanding. Indeed, such understanding allows us to comprehend how a variety of government policies created the incentives that, by various paths, led to the current difficulties; and such understanding informs us that piling new, equally foolish polices on top of the ones that got us into these straits is a recipe for short-term salvation at best, and for long-term troubles galore, even if the short-term “stimulus” should appear to have the desired effects.
Decent analysts know these things; I am not breaking new ground here. So, we can only shake our heads in wonder when we see well-known free-market economists and other formerly sound analysts and commentators embracing unsound and ill-considered positions. Among other things, we must appreciate that the sky is not falling, even if the news media and the politicians talk and act as if it is.
Yes, house prices have fallen substantially, but what did people expect – that the bubbled-up values achieved between 2001 and 2007 would be sustained forever or rise even more preposterously? We are witnessing a correction. If real estate prices have been driven up absurdly by easy credit, reckless lending, and silly expectations, then real estate prices must come down substantially. To act as if prevention of this correction represents the sine qua non of recovery is to begin one’s journey on the wrong foot. And to suppose that throwing taxpayer money mindlessly at real-estate-based securities or at people who cannot afford to make regular mortgage payments only portends a new and greater collapse of house prices later on.
Of course, the new New Deal idea of the Obama regime’s “creating jobs” by bankrolling infrastructure “investments” might as well come with a written guarantee attached that it will generate nothing but resource waste and the pork-barrel distribution of vast amounts of taxpayer money to satisfy the appetites of congressmen, local politicians, construction unions, and real-estate interests. Even if a road, a bridge, or a sewer system ultimately comes forth as a visible result, the unseen alternatives forgone are almost certain to have greater value for those from whom the grasping hand of the federal state has stripped the wherewithal to pay for the projects. Free-market analysts ought to understand such matters, which are scarcely arcane, and anyone who has watched the government’s responses to previous recessions, from 1929 to the present, ought to understand the present situation without remedial instruction from me.
Yes, unemployment has risen, as it always does during a recession. But the rate of unemployment last month was only 6.7 percent. During the Great Depression, the unemployment rate often exceeded 20 percent, and many workers who had jobs in those days had only part-time employment even when they wanted to work full-time. So, despite the numerous Chicken Littles running about excitedly, the present situation does not bear comparison with the mass unemployment of the 1930s; nor does the ample safety net that now stretches beneath the unemployed — a refuge that did not exist in anything like its present setup during that difficult decade. I do not belittle the problems that involuntary unemployment may pose for people even now, but it makes no sense for policy makers to burn the house down because they have discovered that a few rats have taken up residence in it.
Above all, policy makers, economists, other analysts, and news media commentators need to cultivate an understanding of and appreciation for the wisdom of the aphorism, “don’t just stand there, undo something.” The greatest mistake made in previous occasions of this sort has been to add new government burdens to the ones that helped to bring on the troubles in the first place; hence the ratchet effect in the growth of government. If only we had the wisdom to recognize a crisis as the most compelling occasion for getting rid of accumulated government burdens and idiocies, then we could throw the ratchet effect into reverse, with highly beneficial long-run consequences, including greater economic liberty and faster economic growth.
Unfortunately, many people are now urging exactly the opposite policy, joining their voices with those of the usual suspects who, like Obama's lieutenant Rahm Emmanuel, seek to exploit the prevailing sense of emergency to lock new government controls and burdens onto the economy in order to gain their political ends and solidify their state powers, at the expense of our purses and our liberties. I beseech these former friends of the market: please pause and reflect; do not allow yourself to be stampeded into support for measures that probably will not work as advertised even in the short run and will certainly prove counterproductive and oppressive in the long run. The sky is not falling; do not act as if it is or lend your support to those who recognize hard times as the perfect opportunity to realize their grandiose dreams of social engineering, wealth redistribution, and central economic planning.
Jane S. Shaw
My first thought: clever maybe, but a cheap shot that minimizes the $50 billion fraud. And, by the way, Madoff didn’t do it alone—he had help when the SEC turned a blind eye. Investors were lulled and gulled.
Upon reflection, however, there is something to Keith’s posting.
Our economic system is based on confidence that we are going to be properly treated. This confidence comes about because of past experience, the reputation of the people we deal with, private and public methods of validation, and the knowledge that we have recourse (courts and arbitration systems) to correct a problem when it occurs.
A bad experience like Madoff's trickery will teach some painful lessons, warning many investors to be more careful the next time.
But what lessons will be learned from the crisis and bailout? If any, probably the wrong ones. First of all, the bailouts create a moral hazard in which any organization will push to be “rescued.”
More fundamentally, the lessons of what happened to our economy, and why, may never be learned. At dining tables across the country this holiday season people are discussing what caused the crisis of 2008. Was it the Fed’s laxness? Barney Frank and his friends at Fannie Mae and Freddie Mac? The periodic madness of crowds? And if it was all of these and more, in which proportions?
Nearly 80 years after the Great Depression began, a similar conversation goes on about the cause of that crisis. There is no consensus. Then and now, the country is too large, the forces too many, and people’s political and ideological predilections too strong for widespread agreement to develop. Thus the Madoff scandal, however painful and shocking, will fade into history, but the economic crisis of 2008 may never be understood.
Jane S. Shaw
First, the Pope Center for Higher Education Policy (which I head) came up with a wish list for Santa. We tend to be naughty (criticizing the establishment) so we may not get what we want, but we're giving Santa all next year to bring us our four stockings full of reform.
And, second, Rich Vedder reminds us how good a teacher Jesus was, even though untenured, and how the institution he founded keeps its focus, unlike modern institutions of higher learning, where anything goes.
David T. Beito
Roderick T. Long
[cross-posted at Austro-Athenian Empire]
Heres the final roster for the Molinari Societys upcoming fifth annual Symposium being held in conjunction with the Eastern Division of the American Philosophical Association in Philadelphia, December 27-30, 2008:
GIX-3. Monday, 29 December 2008, 1:30-4:30 p.m.
Molinari Society symposium: Authors Meet Critics:
Crispin Sartwells Against the State: An Introduction to Anarchist Political Theory and
Roderick T. Long and Tibor R. Machan, eds., Anarchism/Minarchism: Is a Government Part of a Free Country?
Philadelphia Marriott Downtown, 1201 Market Street, Room TBA
Chair: Carrie-Ann Biondi (Marymount Manhattan College)
John Hasnas (Georgetown University)
Charles Johnson (Molinari Institute)
Roderick T. Long (Auburn University)
Jan Narveson (University of Waterloo-Canada)
Crispin Sartwell (Dickinson College)
William Thomas (Atlas Society)
The APA, ever vigilant against the menace of free riders (and, I suspect, grossly overestimating the inelasticity of demand for APA sessions) isnt revealing the location of the session until we pick up our final programs at registration. But Ill try to post the info as soon as I learn it.