What is Corporatism?

Robert Locke writes one of the most thorough and well thought-out articles on political economics I have read in a very long time. The words “socialism” and “fascism” have been abused by misuse for so long they have essentially lost their meaning. I prefer the word “statism”, as a blanket word to cover many kinds of political control (but I realize this is too broad to be effective.)

Locke uses the word “corporatism”, which has a very specific meaning and is far more accurate then any other word commonly used in the public. To Locke, corporatism is particularly dangerous because all nearly all-major political ideologies support it in one way or another. The slow drift towards corporatism has been steady sense the turn of the 19^th century.

His article is a good read, be sure to check it out.  

Keynesian Myths

Harry Binswanger talks very eloquently about the current stimulus and the economical philosophy that underlines it. Besides the first few opining paragraphs (which I think detracted from the main theme of the article) it is quite good:

Read it here.

Binswanger sums up recent silliness well by the end of the article:

"It is amazing that in this crisis, which is a crisis of over- consumption, over-borrowing, too little liquidity, the government's idea of a "stimulus" is to encourage more consumption, more borrowing, and less liquidity. It is especially amazing when all these points were known and well explicated by the classical economists, from Adam Smith on."

Michael Crichton, Complexity, and the Environment

I was saddened by the death of Michael Crichton. Not only did the world lose an incredibly interesting storyteller, but an incredibly intelligent and objective man.

Here he writes about complex systems, and how they apply to the environment; He even throws little economics and sociology in there. Anybody interested in “saving” the environment should read this. In fact, any body the least bit interested in science, complexity theory, economics, should read this; as it is not only incredibly interesting but incredibly informative.

….who believes that the complex system of our atmosphere behaves in such a simple and predictable way that if we reduce one component, carbon dioxide, we will therefore reliably reduce temperature? CO2 is not like an accelerator on a car. It’s not linear (and by the way, neither is a car accelerator.) And furthermore, who believes that the climate can be stabilized when it has never been stable throughout the earth’s history? We can only entertain such an idea if we don’t really understand what a complex system is.

There are also lots of pictures. So please, read it. It really is very good. A great tribute to a mind that is no longer with us.

The Real Thanksgiving

Benjamin Powell lays out the real story behind the famous Thanksgiving feast. Turns out a good deal of economics was involved.

RUSSELL ROBERTS: THE PRICE OF EVERYTHING: A PARABLE OF POSSIBILITY AND PROSPERITY

What Needs to be Known About Hoover

I wince whenever I hear that Hoover was a supporter of free-markets or laissez-faire Capitilism. It is so easily proven wrong. And it is not wrong in some abstract sense, it is not a matter of argumentation, it is factually wrong. It is like saying “President George Washington is a woman”; it simply has no merit.

And yet, in most history books, in most lectures, and in most people eyes: Hoover was a stanch supporter of ‘free-markets’, which eventually led to the Great Depression (and thank God to FDR for saving the day!)

Well, here is Hoover, in his own words, talking about the various achievements of his administration right before the 1932 election. Judge for yourself how “laissez-faire” they are.

‘Is Obama a Socialist?’

Donald J. Boudreaux talks with his usually clarity and insight on weather or not Obama is a “Socialist.” His answer:

No. At least not in the classic sense of the term. "Socialism" originally meant government ownership of the major means of production and finance, such as land, coal mines, steel mills, automobile factories, and banks.

Be sure to read the rest of his explanation.

A little Mises

Of all the major free-market advocates, Mises is in my top five. Despite some rather blatant philosophical errors, he was able to articulate the justification for free-markets better then any other major voice (Freidman and Hayek included.) He also pointed out the various inconsistencies and contradictions within the anti-Capitalist mentalities:

NOTHING is more unpopular today than the free market economy, i.e., capitalism. Everything that is considered unsatisfactory in present-day conditions is charged to capitalism. The atheists make capitalism responsible for the survival of Christianity. But the papal encyclicals blame capitalism for the spread of irreligion and the sins of our contemporaries, and the Protestant churches and sects are no less vigorous in their indictment of capitalist greed. Friends of peace consider our wars as an offshoot of capitalist imperialism. But the adamant nationalist warmongers of Germany and Italy indicted capitalism for its "bourgeois" pacifism, contrary to human nature and to the inescapable laws of history. Sermonizers accuse capitalism of disrupting the family and fostering licentiousness. But the "progressives" blame capitalism for the preservation of allegedly outdated rules of sexual restraint. Almost all men agree that poverty
is an outcome of capitalism. On the other hand many deplore the fact that capitalism, in catering lavishly to the wishes of people intent upon getting more amenities and a better living, promotes a crass materialism. These contradictory accusations of capitalism cancel one another. But the fact remains that there are few people left who would not condemn capitalism
altogether.

The articles below are not new, and in fact are somewhat dated, but still incredibly relevant for today’s generation. I just thank Capitilism.com for publishing them:

Planned Chaos: Introduction (Part 1 of 11)

Planned Chaos: The Failure of Interventionism (Part 2 of 11)

Planned Chaos: The Dictatorial, Anti-Democratic and Socialist Character of Interventionism (Part 3 of 11)

Planned Chaos: Socialism and Communism (Part 4 of 11)

Planned Chaos: Russia's Aggressiveness (Part 5 of 11)

How the Tax System Works

I love a good metaphor; and Doug Reach has a particularly good one at The Rational Capitalist concerning the tax code, called Barstool Economics.

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

It gets even more entertaining after that.

“In Defense of the Rich”

A great article by Larry Elder talks about the ideas and reality behind hurting the rich. Here are a few snippets:

The top 5 percent (those making more than $153,542 — the group whose taxes Obama seeks to raise) pay 60 percent of all federal income taxes. The rich (aka the top 1 percent of income earners, those making more than $388,806 a year), according to the IRS, pay 40 percent of all federal income taxes.

He then starts applying the real data to people's preconceptions:

Now, what do people think the rich pay? The IBD/TIPP poll found that 36 percent of those polled thought the rich contribute 10 percent or less of all federal income taxes. Another 15 percent thought the rich pay between 10 and 20 percent, while another 10 percent thought the rich’s share is between 20 and 30 percent.

He goes on to say:

Let’s try this another way. A U.S. News & World Report blogger went to the Democratic National Convention in Denver and conducted an informal poll of 24 DNC delegates. He asked them, “What should ‘the rich’ pay in income taxes?” Half the respondents said “25 percent”; 25 percent said “20 percent”; 12 percent said “30 percent”; and another 12 percent said “35 percent.”

The average DNC delegate wanted the rich to pay 25.6 percent, which is lower than what the rich pay now — both by share of taxes and by tax rate!

The article says far more, very much worth reading.

"We’ve Seen Worse"

Richard M. Salsmen talks very rationally about the current financial panic, effectively arguing that we have seen much worse, even within recent history.

The current credit and financial turmoil was inevitable, as long as the U.S. government persisted in massively subsidizing and regulating the financial sector; and the current turmoil is no more severe than what U.S. markets suffered in 1990-1991, when junk bonds crashed and the savings-and-loan industry virtually disappeared due to similarly reckless practices. Not even the housing sector’s current troubles can be said to match those seen in the 1974-75 recession.

In the near-term, the dollar will weaken and commodity prices (especially gold) will rise, due to fears of the Treasury plan being inflationary; but in the coming quarters and years the dollar should strengthen again as commodity prices decline.

He goes on to say:

….all the scare-mongering about a potential “systemic catastrophe” or “financial cataclysm,” should a major financial institution fail, is just that: scare-mongering. These unproven (and unprovable) assertions are made by those who don’t understand the financial system, or stand on the wrong side of trades or are eager to see still more socialist power accumulate in Washington.

I wish everybody could be so level-headed.

The Bailout Passed

Unfortunately, it’s true.

I have to say I am somewhat ashamed of my government right now. I could accept the existence of the bailout if it was based on some mistaken principles; but principle had nothing to do with this. The bailout was padded with almost a 100-billon more dollars (on top of the 700 billion) for things that had nothing to do with the financial sector, to buy off dissenting representatives.

Shameful. It almost makes me wish the first bill passed. Not that it would make much difference.

I will follow this story as long as it is possible to (and the effects of the bill before it gets lost in natural economic confusion.) For those still interested, keep doing research, and maybe in the future history won’t repeat itself. I implore all of you to do think, debate, and apply logic (and if you interested, look at the Swedish banking crisis in 1991 or the real-estate crises in Japan at around the same time; both have a great deal to say about what's happening right now.)

Tremendous Foresight

Back in 2000, a man named Howard Husock wrote an article on the possible ramifications of the Community Reinvestment Act; how it was structured and what it would do. Considering what is now happing in the financial sector, I wish he was listened to:

The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities

"The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee
chairman Phil Gramm memorably put it, a vast extortion scheme against the nation's banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being.

The CRA's premise sounds unassailable: helping the poor buy and keep homes will stabilize and rebuild city neighborhoods. As enforced today, though, the law portends just the opposite, threatening to undermine the efforts of the upwardly mobile poor by saddling them with neighbors more than usually likely to depress property values by not maintaining their homes adequately or by losing them to foreclosure. The CRA's logic also helps to ensure that inner-city neighborhoods stay poor by discouraging the kinds of investment that might make them better off."

And here is one more article from CNN politics , here is a U.S. senator talking about it, and here is a Forbes article on where that ‘700’ billon figure come from; if what I have been posting is not enough for you.

A Couple More for the Crusade

In my ongoing quest to get the word out about the bailout and the financial “crisis”; I am posting two more good articles I found on another blog (Café Hayek, if you’re interested):

Why the Bailout is Bad for America, by Daniel Mitchell

Dear comrades: Let's do nothing

This really is a crucial time for debate and rational inquiry. So do research, get educated, and get the word out. Public opinion means a great deal to legislators, so don't let up.

One More Post on the Crisis

David, at Truth, Justice, and the American Way also has something to say about the current financial situation:

What you Need to Know about the Economic “Crisis”

"Economics is not a complicated science. This may not seem obvious to you if you’ve following the news from Washington, where a cabal of politicians, financiers and lobbyists have been spent the last several weeks desperately making a series of increasingly complicated, expensive, and ultimately unsuccessful plans to “save the economy.” As the costs of their schemes have spiraled from billions and into the trillions of dollars, it has become increasingly urgent for you, the source of Congress’ deep pockets, to examine the potential impact of their actions on your taxes, savings, and investments.

The key to understanding economic theory is to grasp that the same principles that apply to your personal finances, and perhaps to your interaction with your local grocer apply equally to the world at large, at all levels of economy activity. The key to understanding politics is to grasp that political success requires advocating policies which violate these basic
economic principles - and then evading the consequences of their own policies - with the voters’ eager participation in the delusion."

Thomas Sowell on the Bailout

Here are a few astute observations by economist Thomas Sowell the recent financial crisis:

Bailout Politics

"....If Fannie Mae and Freddie Mac were free market institutions they could not have gotten away with their risky financial practices because no one would have bought their securities without the implicit assumption that the politicians would bail them out.

It would be better if no such government-supported enterprises had been created in the first place and mortgages were in fact left to the free market. This bailout creates the expectation of future bailouts.

Phasing out Fannie Mae and Freddie Mac would make much more sense than letting politicians play politics with them again, with the risk and expense being again loaded onto the taxpayers."

John Allison Speaks

John Allison is the CEO of BB&T, A successful financial institution. He has a few things to say about the current financial situation:

1. Freddie Mac and Fannie Mae are the primary cause of the mortgage crisis. These government supported enterprises distorted normal market risk mechanisms. While individual private financial institutions have made serious mistakes, the
problems in the financial system have been caused by government policies including, affordable housing (now sub-prime), combined with the market disruptions caused by the Federal Reserve holding interest rates too low and
then raising interest rates too high.
2. There is no panic on Main Street and in sound financial institutions. The problems are in high-risk financial
institutions and on Wall Street.
3. While all financial intermediaries are being impacted by liquidity issues, this is primarily a bailout of poorly run
financial institutions. It is extremely important that the bailout not damage well run companies.
4. Corrections are not all bad. The market correction process eliminates irrational competitors. There were a number of poorly managed institutions and poorly made financial decisions during the real estate boom. It is important that any rules post “rescue” punish the poorly run institutions and
not punish the well run companies.
5. A significant and immediate tax credit for purchasing homes would be a far less expensive and more effective cure for
the mortgage market and financial system than the proposed “rescue” plan.
6. This is a housing value crisis. It does not make economic sense to purchase credit card loans, automobile loans, etc. The government should directly purchase housing assets, not real estate bonds. This would include lots and houses under construction.
7. The guaranty of money funds by the U.S. Treasury creates enormous risk for the banking industry. Banks have been paying into the FDIC insurance fund since 1933. The fund has a limit of $100,000 per client. An arbitrary, “out of the blue” guarantee of money funds creates risk for the taxpayers and significantly distorts financial markets.
8. Protecting the banking system, which is fundamentally controlled by the Federal Reserve, is an established government function. It is completely unclear why the government needs to or should bailout insurance companies, investment banks,
hedge funds and foreign companies.
9. It is extremely unclear how the government will price the problem real estate assets. Priced too low, the real estate markets will be worse off than if the bail out did not exist.Priced too high, the taxpayers will take huge losses. Without a market price, how can you rationally determine value?
10. The proposed bankruptcy “cram down” will severely negatively impact mortgage markets and will damage well run
institutions. This will provide an incentive for homeowners who are able to pay their mortgages, but have a loss in their house, to take bankruptcy and force losses on banks. (Banks would not have received the gains had the houses appreciated.) This will substantially increase the risk in mortgage lending and
make mortgage pricing much higher in the future.
11. Fair Value accounting should be changed immediately. It does not work when there are no market prices. If we had Fair Value accounting, as interpreted today, in the early 1990’s the
United States financial system would have crashed. Accounting should not drive economic activity, it should reflect it.
12. The proposed new merger accounting rules should be deferred for at least five years. The new merger accounting rules are creating uncertainty for high quality companies who might potentially purchase weaker companies.
13. The primary beneficiaries of the proposed rescue are Goldman Sachs and Morgan Stanley. The Treasury has a number of smart individuals, including Hank Paulson. However, Treasury is totally dominated by Wall Street investment bankers. They do not have knowledge of the commercial banking industry. Therefore, they can not be relied on to objectively assess all the implications of government policy on all financial intermediaries. The decision to protect the money funds is a clear example of a material lack of insight into the risk to the total financial system.
14. Arbitrary limits on executive compensation will be self defeating. With these limits, only the failing financial institutions will participate in the “rescue,” effectively making this plan a massive subsidy for incompetence. Also, how will companies attract the leadership talent to manage theirbusiness effectively with irrational compensation limits?

I found this at Rule of Reason, which linked to blogger Dave Wilson.

Burning Down the House

Below is an almost-good video about the current ‘economic crisis.’ You can ignore what it says about immigration and schools, and try to read just the facts from the current political point it is trying to make (please ignore the politics of the video and focus on the facts! This video is somewhat one-sided and ignores the Conservative contribution to this problem.) Ironically, this video correctly identifies that free-markets had little to do with the current crisis, but doesn't seem to know what ‘free-markets’ are.

Still, there are a good deal of facts in this short video, and it’s worth a watch:



It is a common practice for people to point to the failures of government as the failure of free-markets. Let’s just hope people have the slightest inkling to look at the facts.

And I love the slogan of video: “if you don’t believe it, just Google it.” There is a difference between facts and opinions, ideology and reality. The idea that this mess was caused by free-market ideals is factually untrue; I don’t care what political spin anybody, on any side, puts on this; this simple fact is irrefutable. Period.

Some Sense among Economic Woes

I know I’m basically the only one that reads this blog, but I thought I would post these and spread them around as much as possible, just in case:

Free Markets to the Rescue, by Donald J. Boudreaux

Organic Market, by Russell Roberts

At a time when political vultures are circling and the widespread ignorance of economics is leading people to believe the most silly of things; it important to have as many voices of reason and logic as possible.

Just like the Enron crisis, this will be a time when politicians advance, some people of dubious intent get rich, and many others panic; all at the expense of the economy and freedom.

Good Writing and Health Care

Being concise is hard; saying what you want to say in the most compact form possible is what distinguishes great non-fiction writers from the rest (unfortunately, I currently land well with in the ‘rest’ zone.)

Take this article, about healthcare, for example:

Government Medical Care Always Becomes Political Medical Care

There is an incredible amount of argumentation and facts within this article; and it is less then 700 words long. In a short time the author: lists the various controls in the health care industry; explains why it doesn’t work; talks about the proper form of government; creates a parallel with the education system; and talks about the wider issue involved (with a few Thomas Jefferson quotes thrown in for good measure.)

What is incredible is that the article doesn’t suffer from all this information; it comes of as a completed and balanced piece of work. The clarity he achieves is fantastic. Just read this:

Only the government can maintain armed forces to protect us from the threat of foreign force, and only the government can maintain the police and the courts to protect individuals from the use of force by criminals. But it does not follow that government should use force to rule every aspect of our lives. Those who say that government should seize control of all of our medical care are ultimately advocating the elimination of all restraint on government.

I hope some day; I am able to achieve the same clarity and conciseness in my own writing. Unfortunately, with a blog name like “Ryan’s Rantings”, I might have doomed myself to failure.