A Millennial Introduction to Socialism Part II

One of the great complaints about capitalism that all supporters of Bernie Sanders cite is the incessant greed that the pursuit of profit creates in our country.   We are told - by people who most likely majored in the humanities - that we should not put profit over people and that community well-being is a more laudable goal.

Let me ask you young folks a question...

Have you enjoyed toilet paper shopping lately?  How is that going?  Are you enjoying finding empty shelves, long lines and near panic-like conditions among shoppers desperate to find cleaning supplies, meat and bread?

Well, my friends, welcome to what the world looks like in Venezuela every day.   Take a look at this video.  It will take only 3 minutes and 43 seconds away from your Instagram posting and will help you see what the world would look like if we adopted socialism on a macroeconomic scale.

Shortages happen from time to time in a market economy.  The shortages we are seeing at this time stem from historic increases in the demand for everything we think we will need to get through this pandemic.   As demand increases, suppliers scramble to increase production in order to profit from this unique opportunity.  We have seen countless stories of companies shifting away from beer production, for example, in order to produce hand sanitizer.  Car makers are shifting into the production of medical equipment and so on.

The driving motivation behind this shift is not the common good, but rather the uncommon profit opportunity.

In socialism, businesses would be prevented from capitalizing on this shift in demand.   Prices would be controlled by government, inventories would be rationed - by the government - and the incentive to increase production would be eliminated - leading to permanent shortages.

This is what life is like every day in Venezuela.   The government there has waged war on entrepreneurship for over two decades and thus the incentives to produce toilet paper - and everything else - has been wiped out.  People in this once prosperous nation now line up every day to try to find things that will help them survive.

In America, because of capitalism, we know that eventually the flow of goods will return to its normal level.  None of us go to bed at night wondering if there will ever be meat at the store again.

If left to the devices of people like Bernie Sanders - and his young followers who have not taken an economics class, nor have ever lived in Venezuela - we would face shortages of everything, every day.

Dear Millennials, THIS is what Socialism looks like!

One of the greatest unintended consequences of the government's reaction to Covid-19 is the first-hand, once-in-a-lifetime lesson in what socialism really looks like.  So to all of you folks out there who are somewhere between 18 and 35 please read this carefully.  It could save your life.

I know many of you have been super-excited for quite some time with the Presidential candidacy of Bernie Sanders.   Some of you have acknowledged that Bernie is now finished but has laid important groundwork for youger socialists like Alexandria Ocasio-Cortez, who can pick up his mantle and carry it forward in your quest to finally have Democratic-Socialism arrive in the United States.

It is somewhat understandable - for two reasons - that you would want this.  First, if you are 35 years old it means you were in kindergarten when the Soviet Union fell apart.  It means you have never lived one day in a nation that was pitted against a nation that was threatening to export human misery on a mass scale to the rest of the world - or bomb us into oblivion as a second-best choice.

You did not get to live in a world where 40% of the population lived under communism or socialism.  You have never even lived in a world where Scandinavia, long held out as the dream of you young socialists, actually practiced socialism.  See https://www.heritage.org/index/

So, having no frame of reference other than modern-day Venezuela, for what socialism looks like, you are largely ignorant of what it would look like to live through it.  Of course my students from Venezuela do not need to read any more of this post because they have lived through socialism and are well versed in the deprivation it creates.   That is one reason why they are my favorite students.  They live for liberty and value it more than my American students do.

A second reason why young Americans want socialism is because this has been a lousy century for you.  When you were babies your government turned on its own people in the wake of September 11th on a scale that would make George Orwell shudder.   From the Patriot Act to domestic surveillance to a nation that makes us cow-tow at airports, you have lived in a nation that has largely traded in its liberty for security.

Then, when you were a little older, you got to see the second worst recession in our nation's history and the mass-hijacking of your futures when the Federal Reserve Bank and the federal government combined to bail out large banks and corporations that would make Robin Hood cheer.   It is no wonder you want Grandpa Bernie to give you free health care, free tuition and free child care.  You have grown up watching government give away your future earnings in the form of artificially pumped up money supplies and plunder in favor of the well connected.  Now you want your share.

Finally, we now see your government destroying liberty in the name of health care security by locking us down and telling us we cannot go places they do not approve of and that we have to be in our homes at 11PM.  In exchange for that, Congress is going to steal another $2 trillion from your future (did you think the stimulus was free money?) and destroy your jobs and income in the present.

Socialism is an economic system that violates the rights of the individual in order to serve the desires of the state.  Socialism means the nationalization or overt control over key industries.  Socialism means a huge expansion of the size of government on the backs of future taxpayers.  Socialism means lots of rules and regulations in order to make us all safe.

As you prepare to be locked in your homes by our new quasi police-state think about this...

Which seems better - the freedom and chance for prosperity you had a few weeks ago, or the security and reliance on the state that you are getting now?

Remember, be careful what you wish for....

A Libertarian Guide to Social Distancing

I hate to admit this but all this social distancing stuff is coming pretty easy for me.   As a Libertarian (since around 4 seconds after George H.W. Bush became president) I have long valued being, well, alone.

The Republican party has the elephant for a mascot.  The Democrats have a Jackass (insert joke here).  The Libertarians have a porcupine!  Think about it.  The porcupine is a solitary animal who just wants to be left alone to look for food and other porcupines.   Voluntary association is the hallmark of a good porcupine.   If you bother one you get a face full of quills.

For around 50 years I have been the human equivalent of a porcupine.  The one friend I have who lives near me (my Texas and Tennessee friends do visit much...) also happens to be my wife.  I do not own a cell phone because I find human contact overrated.  I therefore have no social media presence.  This blog does not count because I post what I think and do not really care what people think about what I think.  I don't ask for, or expect, "likes" because I do not care what you like.  I like what I like and then, if I feel like it, share it with other people.

I have been this way forever.   When I was in Eugene Field Elementary school in Hugo, Oklahoma, I used to run a way every year during the school picnic to play in the woods with whatever kid I could convince to break out with me.  The moment the teacher had us stand in a socialistic line to march to the park I was plotting my escape.  Right after lunch I would bolt with my willing partners and not come back until it was time for all the sheep to march back to school.

In the first grade, on my very first report card, my teacher wrote, "Jack is progressing well but refuses to comply with society's standards of behavior."  Damn right. Society is not my boss.  I, as a six-year old, felt that I was my boss until I got home and my parents let me know that I needed to comply with some rules - or get a belt across the behind for refusing.

With this Coronavirus I find that my life has not changed much.  I still have one friend who I hang out with regularly.   I am now at home, with my wife and dog Jake and I am fine.   I have been re-watching Stranger Things, working out, folding socks for the first time since Obama was president, cooking a little more often and doing projects that need to be done.  I miss talking to my students but they are fine.   I miss sports on television but not enough to stress over it.   Since I have never texted anyone, I do not miss that.  Since I am not on Instagram I do not miss that.  

I would recommend to anyone reading this to consider the possibility that most human interaction is not necessary and in fact, is actually pretty annoying.   Do you miss the way people drive on the roads?  Do you miss people blathering on their phones in restaurants and movies?  Probably not.   

I think the world would be a better place if we could just learn to enjoy our time away from each other.  Maybe we would be a little nicer, a little more tolerant and actually engage in meaningful conversation once we are allowed to hang out again.

Until then, enjoy the solitude.  After all, unless you hate yourself you will enjoy your company.

Trump's Tariffs Leave the U.S. Short on Vital Medical Supplies

From the March 19, 2020 Wall Street Journal

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Why would the U.S. increase the cost and difficulty of supplying protective gear to doctors and nurses? Why would Washington obstruct the acquisition of lifesaving equipment? Because the sclerosis of trade protectionism, once it takes hold, constricts economic health and adaptation.

Chad Bown of the Peterson Institute for International Economics calculates that the Trump administration has imposed new taxes on almost $5 billion of medical exports from China, totaling about 26% of U.S. health-care imports. With tariffs, the U.S. government is making it harder for first responders to procure masks, sterile gloves, goggles, hospital gowns, surgical drapes, thermometers and breathing masks. America also imports about $22 billion of medical technology from countries all over the world, including CT systems, patient monitors and X-ray devices.

U.S. medical distributors are busy hunting for alternative producers and testing their equipment for interoperability when they should be concentrating on getting supplies to those in need. China, in turn, has diverted its sales to other markets. After President Trump hit Chinese medical suppliers with a 25% tariff in 2018, China’s exports to the U.S. dropped by 16%. In some cases, American users had no good alternatives because suppliers must get certified by the Food and Drug Administration, which can take more than two years. U.S. medical-equipment producers have also been plagued by the president’s new tariffs on imported components.

Mexico ranks second to China in supplying protective medical equipment to the U.S. But Mr. Trump’s erratic threats have helped undermine confidence in building that country’s industries for export.

The administration recently offered an indictment of its own economic isolationism. It quietly—and only temporarily—reduced tariffs on a smattering of Chinese medical products. Such half-measures fall far short. If Chinese exporters face multiple demands, they will prioritize countries without tariffs or time-limited tariff suspensions.

Two researchers at the World Bank, Aaditya Mattoo and Michele Ruta, have identified another trade problem the U.S. has overlooked. By March 11, two dozen economies had restricted exports of medical supplies, including Germany, France, South Korea and Taiwan. Mr. Trump’s misstatement about shutting down trade with Europe caused anxiety among U.S. providers because the European Union is now the primary foreign supplier of America’s CT systems, hand sanitizer, patient monitors and pulse oximeters, X-ray machines and breathing masks. A mere seven countries account for 70% of the exports of artificial respirators, vital tools for the seriously ill; if one of them banned exports, prices could increase by up to 10%.

There’s a lesson in the world-wide surge of food prices from 2008-11—overlooked in nearly every retrospective analysis of the financial crisis. As president of the World Bank at that time, I worked with the World Trade Organization to limit restrictions on agricultural exports. Nevertheless, recent World Bank research shows that export limits pushed up global food prices by an average of 13% over that period, and 45% for rice.

Crises cry out for international leadership. In the postwar era, American officials reconciled global good sense with U.S. self-interest. The Trump administration should eliminate all U.S. tariffs on medical products to reduce the cost of the pandemic response, and it should urge other countries to do the same. Forty-six developing economies impose tariffs of 5% to 25% on respirators. The U.S. should rally partners in the Group of 20 to ban restrictions on exports of medical products related to Covid-19 so that the world avoids price spikes, prevents panics, gains benefits of scale and specialized production, preserves variety of sourcing—and saves lives.

In addition to coping with a pandemic, Americans face a new debate about the country’s role in the world. Some are using the pandemic to argue for greater isolation. That counsel of retreat failed miserably to counter the Great Depression in the 1930s and the security threats of 1941. As recently as the 2008 crisis, Americans learned again that they couldn’t wall themselves off from the world.

The U.S. will need to diversify sources of key supplies, and companies will need to build supply chains that are more flexible and resilient. Nations and businesses should consider prudent inventories and stockpiles. But precautions shouldn’t degrade into costly, self-defeating illusions of autarky. Export bans and tariffs on medical goods increase costs, create shortages and make Americans less safe. If other countries embrace these sorts of trade restrictions, major U.S. exporters, including farmers, will be devastated.

Modern challenges—viruses, economic disruptions, the environment, cybersecurity, food supplies and more—require economic powers to act in concert, even as they pursue their own national interests. Last year the Health Industry Distributors Association warned presciently that Mr. Trump’s medical tariffs “put a risk to our nation’s public health preparedness.” Americans are now paying the price for the president’s failure to recognize that his trade wars and walls would backfire.

Mr. Zoellick is a former World Bank president, U.S. trade representative and deputy secretary of state.

How Irrationality Might Lead to another Great Depression

As all of you can plainly see this virus is radically reshaping our economy right now.  I wanted to share with you an article I wrote (published in today's Orlando Sentinel) that will help you have better insight into what at least one economist is thinking.     If you are willing, sharing your insights into what you have experienced so far might be useful and therapeutic.

Here is the article..

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How Irrationality might lead to another Depression

As the United States, and the world, reacts to the spread of the Covid-19 virus I find myself wondering how many Americans are still alive who witnessed the economic calamity that began in October 1929.   They would come in handy right now as economic advisers to a nation that is about to panic its way into a possible second Great Depression.

It is staggering to fathom how economically myopic and reactionary our “leaders” are being at this critical time in our nation’s economic history.

Everywhere we look we are being told to go home, stay home, don’t go out; don’t interact with one another and more.  It is as if the politicians have been bestowed with some special powers to engage in policy making decisions that will somehow magically defy the laws of supply and demand.

Let’s look at it.

In an economy of more than 330 million consumers who purchase more than $20 trillion in goods and services annually, how do we continue to fuel the demand side of the economy if we are told we should not buy tickets to sporting events, hotel rooms, theme parks, restaurants and more?  If we only go out to buy toilet paper and medical masks, where do the millions of workers who depend on our purchases earn enough money to avoid being sent to the unemployment lines?

Our labor force and suppliers are also being bombarded by the doomsday scenarios outlined by those we put into office to make good decisions.

Sending labor suppliers home disrupts the entire supply chain of goods and services that prevent massive shortages, business closings and collapsing infrastructure.   The more people who are withdrawn from the labor force the greater the threat of stagflation – a combination of high unemployment and inflation – that last reared its head in the 1970’s and early 80’s.

Of course we are all being told that these decisions, while painful for a while, will be far better than leaving us alone to make our own choices of buying, selling and working.  The experts are saying that unless our lives are interrupted for an indeterminate period of time we will suffer even greater losses in the long run.

Exactly how do we know this?  What if this virus goes on into the fall?   How many months can our economy survive shattered by the possibility of accelerated cases around the globe?   What if in the meantime we see unemployment surge to levels higher than at any time since the 1930s?  What if the gross domestic product dives by double-digits?

Do we really believe that Americans are ready for an economic downturn that no one under 100 years old has ever endured?   Can we really expect deprivation on a scale that eliminates virtually all luxury spending and sends millions into poverty?

It is important to note that there is virtually nothing in the way of monetary and fiscal policy that our government could use to fight another Depression.

Interest rates are already historically low and, as we saw in the 1930’s, if people are scared to borrow, nothing the Federal Reserve Bank does can compel us to incur more debt.

Taxes are also low by historical standards.   Donald Trump’s recent cut in personal and corporate income taxes generated very small gains in revenue – an indication that more tax cuts would not create greater economic growth.

The federal deficit – fueled by profligate spending by both parties – is also near record levels so even more spending is not likely to create more jobs.

I am afraid that economic historians will someday look back at 2020 as the year our hyper-reactive society allowed elected officials to shut down the largest economy in the world and ended up destroying more lives from the ensuing economic meltdown than the virus would have.