Tag Archives: Free trade

The candlemakers’ petition

candle

The arguments presented in the following essay by Frederic Bastiat, written in 1845, are still in use in city halls, county courthouses, school district boardrooms, state capitals, and probably most prominently and with the greatest harm, Washington.

A PETITION

From the Manufacturers of Candles, Tapers, Lanterns, Sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.

To the Honourable Members of the Chamber of Deputies.
Open letter to the French Parliament, originally published in 1845

Gentlemen:

You are on the right track. You reject abstract theories and have little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is to reserve the domestic market for domestic industry.

We come to offer you a wonderful opportunity for your — what shall we call it? Your theory? No, nothing is more deceptive than theory. Your doctrine? Your system? Your principle? But you dislike doctrines, you have a horror of systems, as for principles, you deny that there are any in political economy; therefore we shall call it your practice — your practice without theory and without principle.

We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation.

This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us

We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds — in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.

Be good enough, honourable deputies, to take our request seriously, and do not reject it without at least hearing the reasons that we have to advance in its support.

First, if you shut off as much as possible all access to natural light, and thereby create a need for artificial light, what industry in France will not ultimately be encouraged?

If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.

If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land.

Our moors will be covered with resinous trees. Numerous swarms of bees will gather from our mountains the perfumed treasures that today waste their fragrance, like the flowers from which they emanate. Thus, there is not one branch of agriculture that would not undergo a great expansion.

The same holds true of shipping. Thousands of vessels will engage in whaling, and in a short time we shall have a fleet capable of upholding the honour of France and of gratifying the patriotic aspirations of the undersigned petitioners, chandlers, etc.

But what shall we say of the specialities of Parisian manufacture?Henceforth you will behold gilding, bronze, and crystal in candlesticks, in lamps, in chandeliers, in candelabra sparkling in spacious emporia compared with which those of today are but stalls.

There is no needy resin-collector on the heights of his sand dunes, no poor miner in the depths of his black pit, who will not receive higher wages and enjoy increased prosperity.

It needs but a little reflection, gentlemen, to be convinced that there is perhaps not one Frenchman, from the wealthy stockholder of the Anzin Company to the humblest vendor of matches, whose condition would not be improved by the success of our petition.

We anticipate your objections, gentlemen; but there is not a single one of them that you have not picked up from the musty old books of the advocates of free trade. We defy you to utter a word against us that will not instantly rebound against yourselves and
the principle behind all your policy.

Will you tell us that, though we may gain by this protection, France will not gain at all, because the consumer will bear the expense?

We have our answer ready:

You no longer have the right to invoke the interests of the consumer. You have sacrificed him whenever you have found his interests opposed to those of the producer. You have done so in order to encourage industry and to increase employment. For the same reason you ought to do so this time too.

Indeed, you yourselves have anticipated this objection. When told that the consumer has a stake in the free entry of iron, coal, sesame, wheat, and textiles, “Yes,” you reply, “but the producer has a stake in their exclusion.” Very well, surely if consumers have a stake in the admission of natural light, producers have a stake in its interdiction.

“But,” you may still say, “the producer and the consumer are one and the same person. If the manufacturer profits by protection, he will make the farmer prosperous. Contrariwise, if agriculture is prosperous, it will open markets for manufactured goods.” Very well, If you grant us a monopoly over the production of lighting during the day, first of all we shall buy large amounts of tallow, charcoal, oil, resin, wax, alcohol, silver, iron, bronze, and crystal, to supply our industry; and, moreover, we and our numerous suppliers, having become rich, will consume a great deal and spread prosperity into all areas of domestic industry.

Will you say that the light of the sun is a gratuitous gift of Nature, and that to reject such gifts would be to reject wealth itself under the pretext of encouraging the means of acquiring it?

But if you take this position, you strike a mortal blow at your own policy; remember that up to now you have always excluded foreign goods because and in proportion as they approximate gratuitous gifts. You have only half as good a reason for complying with the demands of other monopolists as you have for granting our petition, which is in complete accord with your established policy; and to reject our demands precisely because they are better founded than anyone else’s would be tantamount to accepting the equation: + x + = -; in other words, it would be to heap absurdity upon absurdity.

Labour and Nature collaborate in varying proportions, depending upon the country and the climate, in the production of a commodity. The part that Nature contributes is always free of charge; it is the part contributed by human labour that constitutes value and is paid for.

If an orange from Lisbon sells for half the price of an orange from Paris, it is because the natural heat of the sun, which is, of course, free of charge, does for the former what the latter owes to artificial heating, which necessarily has to be paid for in the market.

Thus, when an orange reaches us from Portugal, one can say that it is given to us half free of charge, or, in other words, at half price as compared with those from Paris.

Now, it is precisely on the basis of its being semigratuitous (pardon the word) that you maintain it should be barred. You ask: “How can French labour withstand the competition of foreign labour when the former has to do all the work, whereas the latter has to do only half, the sun taking care of the rest?” But if the fact that a product is half free of charge leads you to exclude it from competition, how can its being totally free of charge induce you to admit it into competition? Either you are not consistent, or you should, after excluding what is half free of charge as harmful to our domestic industry, exclude what is totally gratuitous with all the more reason and with twice the zeal.

To take another example: When a product — coal, iron, wheat, or textiles — comes to us from abroad, and when we can acquire it for less labour than if we produced it ourselves, the difference is a gratuitous gift that is conferred up on us. The size of this gift is proportionate to the extent of this difference. It is a quarter, a half, or three-quarters of the value of the product if the foreigner asks of us only three-quarters, one-half, or one-quarter as high a price. It is as complete as it can be when the donor, like the sun in providing us with light, asks nothing from us. The question, and we pose it formally, is whether what you desire for France is the benefit of consumption free of charge or the alleged advantages of onerous production. Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!

Frédéric Bastiat (1801-1850), Sophismes économiques, 1845

Cost of an Obama tire job: $900,000

It’s entirely predictable that trade sanctions are costly to the country that imposes them. Yet politicians can be persuaded to support them in the name of saving American jobs and getting “tough” with countries perceived to be a problem.

We see this in the case of President Barack Obama and the tariffs, or taxes, on tires imported from China. Here’s what The Peterson Institute for International Economics said in its report US Tire Tariffs: Saving Few Jobs at High Cost:

However, our analysis shows that, even on very generous assumptions about the effectiveness of the tariffs, the initiative saved a maximum of 1,200 jobs. Our analysis also shows that American buyers of car and light truck tires pay a hefty price for this exercise of trade protection. According to our calculations, explained in this policy brief, the total cost to American consumers from higher prices resulting from safeguard tariffs on Chinese tires was around $1.1 billion in 2011. The cost per job manufacturing saved (a maximum of 1,200 jobs by our calculations) was at least $900,000 in that year. Only a very small fraction of this bloated figure reached the pockets of tire workers. Instead, most of the money landed in the coffers of tire companies, mainly abroad but also at home.

The additional money that US consumers spent on tires reduced their spending on other retail goods, indirectly lowering employment in the retail industry. On balance, it seems likely that tire protectionism cost the US economy around 2,531 jobs, when losses in the retail sector are off set against gains in tire manufacturing. Adding further to the loss column, China retaliated by imposing antidumping duties on US exports of chicken parts, costing that industry around $1 billion in sales.

It’s not like this hasn’t happened before. When President George W. Bush imposed tariffs on imported steel, the result was similar. The Consuming Industries Trade Action Coalition found that steel trade protectionism resulted in the loss of nearly 200,000 American jobs, and cost approximately $4 billion in lost wages over ten months. A further conclusion was that “more American workers lost their jobs in 2002 to higher steel costs than the total number employed by the U.S. steel industry.”

Instead of these presidents bowing to the very concentrated special interests that benefit from trade protectionism, we should embrace trade with other countries.

But it’s easy to beat up on certain countries when jobs are lost, blaming the problem on foreigners. Mitt Romney should take this advice, as the Wall Street Journal recently editorialized: “This China-bashing is especially odd for Mr. Romney, who professes elsewhere that he wants to expand trade because it will create jobs. So trade is good for America except when it is conducted by ‘cheaters’ who happen to sell more of some goods and services to us than we sell to them. This is called mercantilism, not free trade.”

In Kansas, no E-verify, please

The hope that if we can somehow stop illegal immigrants from obtaining jobs, then unemployed Americans can go back to work, is a false hope. For that and other reasons, I can’t join with Kansas conservatives who support E-verify and other harsh anti-immigrant measures.

The economic reality is that immigrants — legal and not — contribute to our nation’s economy. Those who believe that illegal immigrants “steal” jobs from Americans treat immigrant labor as equal to native-born workers. But that’s not the case: In many situations, if immigrant labor is not available, the jobs simply won’t be done.

As an example, last year Georgia passed a law requiring employers to verify eligibility to work. The result? As described in the Atlanta Journal-Constitution: “Thanks to the resulting labor shortage, Georgia farmers have been forced to leave millions of dollars’ worth of blueberries, onions, melons and other crops unharvested and rotting in the fields. It has also put state officials into something of a panic at the damage they’ve done to Georgia’s largest industry.”

Kansas needs workers, too. Our agriculture secretary is seeking waivers that would allow Kansas farms to hire illegal workers. It’s not just so that farmers can pay these workers low wages. As reported in Farmers push to hire illegal immigrants: “T.J. Curtis back at Forget-Me-Not Farms has jobs available — $32,000 a year, with health care and retirement benefits.” He wants to hire 75 workers.

Other writers have noted the importance of low-skilled laborers to our economy. Writing for the Cato Institute, Daniel Griswold explains:

If our politicians actually did succeed in removing millions of unauthorized immigrants from the workforce, middle-class jobs now held by Americans would be in jeopardy. A shortage of low-skilled workers in the agricultural, tourism, food processing, landscaping and other sectors would mean less investment and less employment for managers, accountants, sales reps and other downstream and upstream workers.

A 2009 study for the Cato Institute found that a 28.6 percent reduction in the number of unauthorized low-skilled immigrants in the United States through increased border and interior enforcement actually would cost U.S. households $80 billion a year. The study found that a resulting decline in immigrant labor would mean less investment, more money diverted to smuggler fees and other unproductive uses, and relatively fewer jobs further up the skills ladder. (E-Verify Threatens American Jobs and Liberties)

Griswold also reports on the problems found in E-verify pilot programs. Half of unauthorized workers were not flagged by the system. Then, there’s the problem of the millions of legal workers who were falsely denied permission to work by E-verify. Wrote the Cato Institute’s Jim Harper: “Deemed ineligible by a database, millions each year would go pleading to the Department of Homeland Security and the Social Security Administration for the right to work.”
Griwsold commented “Isn’t this the kind of intrusive government that tea party members oppose?”

An economic case for immigration

Benjamin Powell, in his article An Economic Case for Immigration explains why we ought to welcome immigrants to our country.

To those who believe that immigrants are a “drag” on the economy, Powell explains: “Immigrants boost the overall size of the U.S. economy for the existing native-born population. Free trade in labor, like trade in goods and services, frees existing Americans to do what’s in their comparative advantage. In fact, the basic economic case for free trade in labor really isn’t different than that for trade in goods and services. Economists are in nearly universal agreement that free trade promotes national wealth.”

The benefit is estimated at $36 billion per year — a drop in the bucket given the size of our economy. But it is a benefit, not a drag.

As for the “taking our jobs” claim, Powell counters: “That immigrants ‘take our jobs’ is probably the most repeated and most economically ignorant objection to immigration. It’s a classic example of Bastiat’s ‘what is seen and what is not.’ Everyone can see when an immigrant takes a job that used to be held by a native-born worker. But not everyone sees the secondary consequence of the new jobs that are created because native-born labor has been freed up for more-productive uses. In the market’s process of creative destruction, jobs are created and destroyed all the time.”

As for depressing the wages of native-born workers, Powell writes: “Economists find no evidence for widespread wage decreases. The debate on the effect of immigration on wage rates of native-born workers has, believe it or not, narrowed down to the effect on wages of high-school drop-outs. Estimates range from slightly positive to, at worst, an eight-percent fall. … Those immigrants who increase the supply of labor also demand goods and services, causing the demand for labor to increase.”

There is the problem of illegal immigrants who commit crimes, and it’s a driving factor for many who oppose immigration, illegal or not. But a crime wave fueled by illegal immigrants is an illusion not supported by data. In the paper The Myth of Immigrant Criminality and the Paradox of Assimilation: Incarceration Rates Among Native and Foreign-Born Men, researchers concluded: “In fact, data from the census and other sources show that for every ethnic group without exception, incarceration rates among young men are lowest for immigrants, even those who are the least educated. This holds true especially for the Mexicans, Salvadorans, and Guatemalans who make up the bulk of the undocumented population. What is more, these patterns have been observed consistently over the last three decennial censuses, a period that spans the current era of mass immigration, and recall similar national-level findings reported by three major government commissions during the first three decades of the 20th century.”

A draconian immigration policy, perversely, makes it easier for criminals to enter the U.S., explains Powell: “… Right now terrorists could sneak into the country illegally while hiding among more than a million other illegal immigrants crossing the border in the desert. If a more open immigration policy were established, the legitimate workers could come through check points, freeing existing border-control enforcement to focus on finding the terrorists.”

Right now, those who simply want to work are forced to mix in with criminals — in fact, to become criminals themselves — to enter the U.S.

Finally, American citizens need to be concerned about the potential uses of a national database that would power the E-verify system. Cato’s Jim Harper explains:

“Even if a national employment eligibility verification system were made workable, it is not a system we should want. Once built, this government monitoring system would soon be extended to housing, financial services, and other essentials to try to get at illegal immigrants. It would also be converted to policy goals well beyond immigration control. Direct regulatory power over American citizens would flow to the federal government. Even more information about Americans’ lives would flow into federal government databases. And Americans’ sensitive personal data would be exposed to more security threats.”

Harper’s paper on this topic is Internal Enforcement, E-Verify, and the Road to a National ID.

Kansas and Wichita quick takes: Monday December 12, 2011

Kansas budget. The Kansas Policy Institute has produced a study looking at the future of the Kansas state budget. A press release states: “It’s no secret that KPERS and Medicaid costs have been growing, but many Kansans may be shocked to learn that those two items could soon consume nearly half of all Kansas State General Fund (SGF) revenue. In 1998, Medicaid and employee pension costs consumed 5.9% of SGF revenue and are budgeted at 24.2% of 2012 revenue. But, even if SGF revenue grows at a slightly-above-average annual rate of 3.5%, KPERS and Medicaid will account for somewhere between 34% and 45.1% of SGF revenue by 2023. … A new study from Kansas Policy Institute, “Major Structural Deficits Looming In Kansas,” projects General Fund spending under four spending scenarios and three revenue growth assumptions. Spending scenarios are based on alternate funding levels for KPERS, whether the Patient Protection and Affordable Care Act (commonly referred to as ObamaCare) is implemented; the scenarios also assume that all other SGF spending continues at historic averages. Depending upon which variables occur (KPERS is funded at a 6% assumed rate of return, ObamaCare is implemented, or both), average annual revenue growth of 3.5% would produce SGF deficits totaling $275 million, $1.7 billion or nearly $5 billion over the next eleven years. … KPI President Dave Trabert summed up the analysis by saying, ‘Even sustained, record revenue growth would not prevent deficits unless ObamaCare is repealed and KPERS’ rosy 8% investment return assumption holds up.’” … The press release is at KPERS and Medicaid Poised to Drive Kansas Budget Off a Cliff, and the full study document at Major Structural Deficits Looming In Kansas.

Trade protectionism makes us poorer. The president of a large labor union is urging President Obama to not implement pending free trade agreements. Should we have free trade with other countries, or not? Richard W. Rahn explains, starting with the complexity of even the most humble and simple of consumer goods — the pencil — as highlighted in yesterday’s article: “As simple as a pencil is, it contains materials from all over the world (special woods, paint, graphite, metal for the band and rubber for the eraser) and requires specialized machinery. How much would it cost you to make your own pencils or even grow your own food? Trade means lower costs and better products, and the more of it the better. Adam Smith explained that trade, by increasing the size of the market for any good or service, allows the efficiencies of mass production, thus lowering the cost and the ultimate price to consumers. … It is easy to see the loss of 200 jobs in a U.S. textile mill that produces men’s T-shirts, but it is not as obvious to see the benefit from the fact that everyone can buy T-shirts for $2 less when they come from China, even though the cotton in the shirts was most likely grown in the United States. Real U.S. disposable income is increased when we spend less to buy foreign-made products because we are spending less to get more — and that increase in real income means that U.S. consumers can spend much more on U.S.-made computer equipment, air travel or whatever. … The benefits of trade are not always easy to see or quickly understand, and so it is no surprise that so many commentators, politicians, labor leaders and others get it wrong.”

A new day in politics? John Stossel writes about the new book The Declaration of Independents: How Libertarian Politics Can Fix What’s Wrong with America by Nick Gillespie and Matt Welch, both of Reason, the libertarian magazine of “Free Minds and Free Markets.” Ssays Stossel: “‘Independence in politics means that you can actually dictate some of the terms to our overlords,’ Welch and Gillespie write, adding that we need independence not just in politics but from politics. Welch said, ‘When we look at the places where government either directly controls or heavily regulates things, like K-12 education, health care, retirement, things are going poorly.’ … It’s very different outside of government where — from culture to retail stores to the Internet — there’s been an explosion of choice. ‘(Y)ou were lucky … 20 years ago (if) you would see one eggplant in an exotic store,’ Welch continued. ‘Now in the crappiest supermarket in America you’ll see four or five or six varieties of eggplant, plus all types of different things. … (W)hen you get independent from politics, things are going great because people can experiment, they can innovate. … We should squeeze down the (number of) places where we need a consensus to the smallest area possible, because all the interesting stuff happens outside of that.’” … Stossel’s television show dedicated to this topic and the book authors is available on the free hulu service.

Harm of expanding government explained. Introducing his new book Back on the Road to Serfdom: The Resurgence of Statism, Thomas E. Woods, Jr. writes: “The economic consequences of an expanded government presence in American life are of course not the only outcomes to be feared, and this volume considers a variety of them. For one thing, as the state expands, it fosters the most antisocial aspects of man’s nature, particularly his urge to attain his goals with the least possible exertion. And it is much easier to acquire wealth by means of forcible redistribution by the state than by exerting oneself in the service of one’s fellow man. The character of the people thus begins to change; they expect as a matter of entitlement what they once hesitated to ask for as charity. That is the fallacy in the usual statement that ‘it would cost only $X billion to give every American who needs it’ this or that benefit. Once people realize the government is giving out a benefit for ‘free,’ more and more people will place themselves in the condition that entitles them to the benefit, thereby making the program ever more expensive. A smaller and smaller productive base will have to strain to provide for an ever-larger supply of recipients, until the system begins to buckle and collapse.” … Phrases like “smaller and smaller productive base” apply in Wichita, where our economic development policies like tax increment financing, community improvement districts, and tax abatement through industrial revenue bonds excuse groups of taxpayers from their burdens, leaving a smaller group of people to pay the costs of government.

Youthful senator to speak. This Friday (December 16th) the Wichita Pachyderm Club presents Kansas Senator Garrett Love. The youthful legislator, just completing his first year in office, will be speaking on “Young people in politics.” The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club. … Upcoming speakers: … On December 23rd there will be no meeting. On December 30th there will be no meeting. … On January 6th: David Kensinger, Chief of Staff to Kansas Governor Sam Brownback. … On January 13th: Speaker of the Kansas House of Representatives Mike O’Neal, speaking on “The untold school finance story.” … On January 20th: Sedgwick County Commissioner Karl Peterjohn.

Markets: exploitation or empowerment? Do markets lead to a centralization of political and economic power, or do markets decentralize and disseminate wealth? In an eight-minute video from LearnLiberty.org, a project of Institute for Humane Studies, Antony Davies presents evidence and concludes that markets and free trade empower individuals rather than exploit them.

Kansas and Wichita quick takes: Monday October 17, 2011

Government job creation. Reason editor Matt Welch introduces the magazine’s November issue, which contains articles on free-market job creation. After citing the litany of failures, he concludes: “Such persistence in the face of repeated failure suggests that some powerful myths continue to hold sway among politicians and many of the people they represent. Among the most stubborn of these is the notion that passing a bill to fix a problem is the same as actually fixing the problem. This assumption — which reaches its illogical conclusion during times of national panic, when do-something busybodies like Michael Bloomberg will say that it doesn’t matter what Washington does, it just needs to do something — is oblivious to the law of unintended consequences, to the reality of corporatist lobbying, and to the limitations of government power.” … Then having done something, government is oblivious to what it has actually done: “A curious flip side to the myth of government omnipotence is near-complete incuriosity about government side effects. That is, people remain convinced that the state can and should look a problem squarely in the eye and fix it, but they are rarely moved by daily examples of the harm caused by earlier fixes.”

Wichita City Council. Tomorrow the Wichita City Council considers these items: The city will consider revisions the ordinances governing municipal court bondsmen. The agenda packet reports “Currently, six departments are involved in the licensing and oversight of bail bondsmen.” The goal, says the city, is a more efficient process. … Johnson Controls asks the city for a forgivable loan of $42,500. It is proposed that Sedgwick County do the same. The State of Kansas is contributing $1,168,000 through various programs. Worldwide, Johnson Controls has 137,000 employees, sales of $39,080,000,000, and profits of $1,540,000,000. Yet, corporate welfare is still required, it seems. … As always, the agenda packet is available at Wichita city council agendas.

Kansas tax plans. “In the coming months, Brownback and state legislators are expected to deal with at least three major proposals to change Kansas’ tax structure.” More from Kansas Reporter at Competing tax plans head for Kansas Legislature .

Repealer on tour. “Government regulation is costing businesses valuable time and opportunities and denying state and local government millions in tax revenue from business activity and development, according to business leaders speaking at the ‘Drowning in Regulation’ tour stop in Wichita Wednesday.” The event was part of the Office of the Repealer seeking input from Kansans. More, including video, from Kansas Watchdog at Legislators Hear Examples of Businesses Drowning in Regulations. The Repealer (Dennis Taylor, Secretary of Kansas Department of Administration) will make a public appearance in Wichita on Tuesday, November 1st at 11:30 am, in the Wichita Public Library Patio Room (223 S. Main).

Sowell: And then what will happen? Last week I quoted at length from a book by Thomas Sowell (Applied economics: thinking beyond stage one) where he writes about “thinking beyond stage one.” Later that day the great economist was interviewed by Sean Hannity, and he told the same story. Video is at Thomas Sowell on ‘Hannity’.

Zuckerman on Obama. James Freeman of the Wall Street Journal interviews Mortimer Zuckerman, who is a Democrat and an Obama voter. He has been openly critical of President Barack Obama and his leadership, and that again is expressed in this article. Zuckerman told of the real unemployment numbers: “Mr. Zuckerman says that when you also consider the labor-force participation rate and the so-called ‘birth-death series’ that measures business starts and failures, the real U.S. unemployment rate is now 20%.” … Zuckerman is pessimistic about the Obama Administration, writes Freeman. An example: “At that time he supported Mr. Obama’s call for heavy spending on infrastructure. “But if you look at the make-up of the stimulus program,” says Mr. Zuckerman, ‘roughly half of it went to state and local municipalities, which is in effect to the municipal unions which are at the core of the Democratic Party.’ He adds that ‘the Republicans understood this’ and it diminished the chances for bipartisan legislating.”

The fall of California. “California has long been among America’s most extensive taxers and regulators of business. But it had assets that seemed to offset its economic disincentives: a sunny climate, a world-class public university system that produced a talented local work force, sturdy infrastructure that often made doing business easier, and a record of spawning innovative companies. No more. In surveys, executives regularly call California one of the country’s most toxic business environments, while the state has become an easy target for economic development officials from other states looking to lure firms away.” Reasons: “a suffocating regulatory climate,” “California taxes are high and hit employers and employees hard,” and “the state’s legal environment is a mess.” Complete article by Steve Malanga of the Manhattan Institute for Policy Research in the Wall Street Journal at How California Drives Away Jobs and Business: The Golden State continues to incubate cutting-edge companies in Silicon Valley, but then the successful firms expand elsewhere to avoid the state’s tax and other burdens.

Public Sector Inc. Speaking of the Manhattan Institute, its project PublicSectorInc is a great resource for learning more aboout the issues of public sector employment. Says the site: “PublicSectorInc.org is a one-stop-shop for the latest news, analysis and research about the issues facing the public sector and the American taxpayer. It provides a national forum to probe problems and develop solutions at the state and local level. With a critical focus on the urgent topics of pension reform, employee compensation, bargaining and retirement health benefits for public employees, PublicSectorInc.org is shaping the national debate unfolding in state capitals and city halls across America.” … An example article of value is Valuing Job Security as a Public Employee Benefit.

Markets and trade help all. James Otteson explains the motivations and concerns of Adam Smith, one of the earliest economists and author of The Wealth of Nations. In a short video, Otteson explains: “One of the main concerns is … how do we raise the estates of the least among us? He’s deeply concerned about the poor in society.” Continuing: “His investigation of centuries of data … shows that, empirically, the way to help people who are the least among us, the bottom rungs economically of society, is by allowing for commerce: free trade, free migration, limited government. To the extent that you can encourage those policies, their estates will be raised tremendously. … What he’s interested in is those people at the bottom, and his endorsement of markets and of trade is because he thinks they’ll help the people at the bottom, not because they’ll help the people who are already rich.” Over the centuries since Smith, we’ve learned many times that economic freedom is good for everyone, especially the poor. … The video is from LearnLiberty.org, a project of Institute for Humane Studies.

Kansas and Wichita quick takes: Thursday April 14, 2011

Kansas State Board of Education vs. Walt Chappell. There is another development in the tenure of Walt Chappell, Kansas State Board of Education member. Chappell holds some opinions that differ from the rest of the board, or at least the majority of the board, and they don’t like Chappell expressing his opinions in newspaper columns, etc. The board would rather have a unified front, even if the position taken is incorrect. Of particular, the issue of the unspent Kansas school fund balances has been prominent. Kansas Watchdog reports on a recent meeting of the board where the issue of Chappell and his speech was an issue.

Protest on tax day. A message from Wichita State University Students for Liberty: “You are cordially invited to a tax protest on Friday, 15 April at 3:00 pm. It will be held on the southeast corner of 21st Street and Rock Road. I and several members of WSU Students for Liberty will be in attendance, and we welcome yours as well.” For more information see Wichita State University Students for Liberty.

Tax day tea party events. AFP Kansas has a list of tea party events at Kansas Tea Parties. Nothing in Wichita, though.

Steineger, Kansas senator, to address Pachyderms. This Friday (April 15) Kansas Senator Chris Steineger will speak to the members and guests of the Wichita Pachyderm Club on the topic “Using Business Principles to Restructure State and Local Government For Long-Term Efficiency.” Steineger, of Kansas City, has served in the Kansas Senate since 1997 and in December switched his affiliation from the Democratic to Republican party. Steineger has voted with Republicans on fiscal issues for many years. Explaining why he switched parties, he wrote “I am a fiscal hawk who believes Americans have been borrowing, spending, and living beyond their means for too long.” Steineger has spoken at events organized by Americans for Prosperity.

Trade protectionism makes us poorer. The president of a large labor union is urging President Obama to not implement pending free trade agreements. Should we have free trade with other countries, or not? Richard W. Rahn explains, starting with the complexity of even the most humble and simple of consumer goods — the pencil — as highlighted in yesterday’s article: “As simple as a pencil is, it contains materials from all over the world (special woods, paint, graphite, metal for the band and rubber for the eraser) and requires specialized machinery. How much would it cost you to make your own pencils or even grow your own food? Trade means lower costs and better products, and the more of it the better. Adam Smith explained that trade, by increasing the size of the market for any good or service, allows the efficiencies of mass production, thus lowering the cost and the ultimate price to consumers. … It is easy to see the loss of 200 jobs in a U.S. textile mill that produces men’s T-shirts, but it is not as obvious to see the benefit from the fact that everyone can buy T-shirts for $2 less when they come from China, even though the cotton in the shirts was most likely grown in the United States. Real U.S. disposable income is increased when we spend less to buy foreign-made products because we are spending less to get more — and that increase in real income means that U.S. consumers can spend much more on U.S.-made computer equipment, air travel or whatever. … The benefits of trade are not always easy to see or quickly understand, and so it is no surprise that so many commentators, politicians, labor leaders and others get it wrong.”

City government under control. From Reason.tv: “While cities across the country are cutting services, raising taxes and contemplating bankruptcy, something extraordinary is happening in a suburban community just north of Atlanta, Georgia. Since incorporating in 2005, Sandy Springs has improved its services, invested tens of millions of dollars in infrastructure and kept taxes flat. And get this: Sandy Springs has no long-term liabilities. This is the story of Sandy Springs, Georgia — the city that outsourced everything.” Click here for video.

Kansas and Wichita quick takes: Sunday October 24, 2010

Surprise endorsement from Wichita Eagle. Today the Wichita Eagle endorsed Republican Mike Pompeo over Democrat Raj Goyle in the race for the Kansas fourth Congressional district. Surprising. Still, the Eagle editorial board can’t help reveal its preference for big, expansive government by taking a few digs at Pompeo, describing his free-market, limited government views as “overly idealistic at times.” Continuing, the Eagle wrote “For example, he believes that there wouldn’t be a need for farm subsidies or economic development incentives if there were lower tax rates and a friendlier and more stable regulatory environment. That’s not the real world.” The Eagle editorial board said that Pompeo is “too ideological and wouldn’t seek practical political solutions.” Well, are the “practical” solutions imposed on us by the current federal regime working? I would say not. Other evidence of the Eagle’s unbelief in the power of freedom, free people, and free markets was noticed in its failure to endorse Richard Ranzau for Sedgwick county commission, in which the Eagle mentioned his “inflexible anti-tax, free-market views.” The Eagle prefers “nuanced” politicians.

Who is Raj Goyle? On today’s episode of KAKE Television’s This Week in Kansas hosted by Tim Brown, guests Randy Brown and Ed Flentje discussed the fourth district Congressional race race, and Goyle in particular. The reliably liberal [Randy] Brown said that Goyle made a mistake in not voting for the statewide sales tax increase, which Brown characterized as a “responsible thing to do.” This, he said, caused people — including Democrats — to view Goyle as a political opportunist, and Goyle lost a chance to distinguish himself from his opponent. Flentje said “he does appear to be quite flexible,” which elicited hearty laughter from the panel. He continued: “It’s hard to figure out exactly where he is … he’s trying to address overwhelming Republican advantage in registration. He’s been for the most part a good legislator, campaigns aggressively, but he’s going uphill … I kind of feel for him.”

Who is Sam Brownback? “Most agree that Sam Brownback will be elected governor on November 2, but what kind of governor he will be is less than clear. Even after nearly a quarter century in Kansas politics and government, his divergent political lives prompt voters to ask: Will the real Sam Brownback please stand up?” H. Edward Flentje, political science professor at Wichita State University, through State of the State Kansas. Flentje appeared on today’s episode of KAKE Television’s This Week in Kansas to discuss this column. Fellow guest Randy Brown said “In terms of being a political opportunist, he strikes me as the classic person who tells whatever group of people he’s in front of what they want to hear.” Flentje disagreed with this. The column traces Brownback’s evolution in both the personal and political spheres, and does ask the question “So, will the real Sam Brownback as Kansas governor please stand up?”

Kansas candidates score free TV. “Democratic incumbents Chris Biggs and Dennis McKinney are riding a $100,000-plus wave of television advertising their Republican opponents denounce as thinly veiled self-promotion and an abuse of office that should be stamped out by the Legislature.” More by Tim Carpenter at Topeka Capital-Journal. We shouldn’t be surprised at this, as a look at the Kansas agency websites headed by elected officials shows them using these sites as campaign billboards year round.

Jim Powell political advertisement on Facebook

Politicians advertise on Facebook. Here’s an example of a politician running for office that uses Facebook for advertising. With Facebook ads, you can target who your advertisement is displayed to in great detail.

Putting a price on professors. The Wall Street Journal covers an effort in Texas to evaluate the worth of state university faculty members from a financial viewpoint: “A 265-page spreadsheet, released last month by the chancellor of the Texas A&M University system, amounted to a profit-and-loss statement for each faculty member, weighing annual salary against students taught, tuition generated, and research grants obtained. … The balance sheet sparked an immediate uproar from faculty, who called it misleading, simplistic and crass — not to mention, riddled with errors. But the move here comes amid a national drive, backed by some on both the left and the right, to assess more rigorously what, exactly, public universities are doing with their students — and their tax dollars.” The article notes some dismal statistics of the type we’re used to hearing about K through 12 education: “Just over half of all freshmen entering four-year public colleges will earn a degree from that institution within six years, according to the U.S. Department of Education. And among those with diplomas, just 31% could pass the most recent national prose literacy test, given in 2003; that’s down from 40% a decade earlier, the department says.” Credit goes to the Texas Public Policy Foundation, a state-based think tank that is often at the forefront of the fight for fiscal responsibility.

Pretending the union money doesn’t exist. From RedState: “Desperate Democrats have been hyperventilating for the past month over money being spent by corporate and other groups, notably the Chamber of Commerce and Americans for Prosperity, to run campaign commercials. To conservatives, running commercials to attempt to persuade voters in advance of an election is known as ‘free speech,’ and turnabout is fair play after corporate money went heavily for Obama in 2008, but let’s play along here; how much of an advantage does the GOP have here? … That’s right, three of the five largest campaign spenders this year are not business or pro-business groups but unions affiliated with the Democrats and dominated by public employees.”

iPhone screen

We forget the blessings of technology. As I write this I am plugged into my iPhone. I carry it with me wherever I go. I would rather leave home forgetting my wallet than my iPhone. As it is more than just a telephone, it also holds my music, as seen in the accompanying depiction of its screen. The ability to carry with me — wherever I travel — examples of the great works of music, in this case Beethoven violin and piano sonatas, is something that is truly remarkable. More than that, it’s a miracle. Now when I check in to a hotel, it’s not uncommon to find a clock radio where I can dock or plug in my iPhone and listen to my music as I unpack and prepare for the day’s events. The back of my iPhone reads “Designed by Apple in California. Assembled in China.” If not for this international cooperation, would the miracle of the iPhone — and other similar technology — be affordable, or even possible?

Raj Goyle fundraising plea: wrong facts

Recently candidate for U.S. Congress from the fourth district of Kansas Raj Goyle sent out a fundraising email that distorts facts in order to stir up protectionist fears about the world economy.

The email pokes fun at Republican rival Mike Pompeo using so-called facts that were shown to be false and misleading during the primary election campaign.

The Goyle email mentions Kansans who “lost our job to Mike Pompeo’s factory in Mexico.” Goyle and his campaign believe that Kansas jobs were shipped to Mexico at Pompeo’s direction.

What was found to be true is this: A company that Pompeo once managed created a small number of jobs in Mexico, at the request of a client. It was a condition of obtaining the contract.

Doing that not only allowed a Kansas company to gain a new contract and new business, it also created more than twice as many jobs in Kansas.

We have to recognize that manufacturers compete globally. Goyle may not recognize this, or he may not care.

Free trade, too, benefits all parties. This transaction is evidence of this: creating new jobs in Mexico also created new jobs in Kansas. The choices made available to Pompeo’s company did not include placing all new jobs in Kansas. The choices were: A) some new jobs in Mexico and twice as many new jobs in Kansas. Or: B) no new jobs at all, anywhere.

Goyle may not be aware of the competitive pressure that manufacturers face. After all, his job in the Kansas Legislature can’t be outsourced. But beyond not having an understanding of economics and the realities of the way the world works, we still ought to be able to expect one thing: that Raj Goyle will tell the truth.

Other coverage: Goyle assails Pompeo over aviation jobs, outsourcing at Old Town labor rally.

Importance of economic freedom explained in Wichita

Yesterday Robert Lawson appeared in Wichita to deliver a lecture titled “Economic Freedom and the Wealth and Health of Nations.” The lecture explained how Lawson and his colleagues calculate the annual “Economic Freedom of the World” index, which ranks most of the countries of the world in how the “policies and institutions of countries are supportive of economic freedom.” The conclusion is that economic freedom is a vital component of well-being, income, health, and both personal and political freedom.

Robert LawsonRobert Lawson

The Economic Freedom of the World annual report is available in its entirety at FreeTheWorld.com.

Lawson started his lecture by noting two methods of organizing an economy. There’s the way of Adam Smith, in which liberty, private property, and free trade are paramount, and government is to have a limited role. The other way is that of Karl Marx, where society would be planned and controlled by a central authority according to a national strategy.

Lawson said he became interested in measuring freedom as a way to investigate the truth of the claims of Smith and Marx. By collecting data about economic freedom, we could learn more about which system — economic freedom or planned economies — works best.

Lawson defined economic freedom as consisting of free markets, private property and personal choice; freedom to trade both within a country and foreign trade; freedom to enter markets; and security of property and the rule of law. He said that there is a role for government in this system to protect property rights and provide basic infrastructure, but the role of government is limited.

Measuring economic freedom is complex and multidimensional. Data comes from 141 countries using 42 components that are grouped into five broad areas: size of government, including expenditures, taxes, and enterprises; legal structure and security of property rights; access to sound money; freedom to trade internationally; and regulation of credit, labor, and business. Ratings are on a scale from zero to ten, with ten representing the most freedom.

Some of the components of the ranking are based on objective data, while some are subjective, perhaps from a survey. Lawson said that the report and book detail the methodology used in creating the index.

The result is that Hong Kong ranks as most economically free country. Singapore is second, which Lawson said poses a problem. Singapore is economically free, but it is not politically liberal in terms of civil liberties. There is a strong positive relationship between political freedom and economic freedom, but there are exceptions like Singapore.

The United States ranks sixth. Sweden is ranked fortieth, which is still in the upper quartile of countries. Lawson said that while Sweden has a reputation as a welfare state, the U.S. and Sweden are not all that different. Taxes in Sweden are about 50 perfect higher than ours, and Sweden has many more labor regulations, but otherwise the countries are similar.

The big differences in the world, Lawson said, are between countries like the U.S. and countries like Venezuela and Zimbabwe.

China is ranked eighty-second, below the midpoint. Lawson said that China is a problem to rank, having Shanghai which is relatively free, and then outer provinces which are still tightly controlled and repressive.

Russia ranks eighty-third, right below China. Some of the former Soviet republics like Estonia are doing well, but the Ukraine has made little progress towards freedom.

India ranks eighty-sixth. It is not an economically free county, but is more free now than in the past, Lawson said.

To show how economic freedom impacts the lives of people, Lawson used a series of charts that showed the impact of economic freedom on various measures.

Economic freedom is very important in determining the incomes of people. The countries in the highest-ranking quartile of the economic freedom index have a per-capita income of $32,443. For countries in the lowest quartile the income is only $3,802. Economic growth rates are higher in the freer countries, too, although the difference is not as great as with income.

Lawson said that a frequent criticism of free economies is income inequality. He showed a chart presenting the share of income earned by the poorest ten percent in each country, grouped by quartile. There is very little difference between the groups. “It doesn’t really matter what kind of economic system you have — free market or not — it does not correlate in any way with income inequality. It’s simply not true that market economies, in general, are more unequal.”

A follow-up, Lawson said, is that if you are poor, where do you want to be? The answer is in the economically free countries. The per-capita income of the poorest ten percent in the least economically free countries is $896, while in the most economically free it is $9,105.

Life expectancy is also positively correlated with economic freedom, ranging from 59.40 years in the least-free countries to 79.12 in the most-free countries.

Is there a relationship between economic systems and the environment? Lawson showed a chart showing that the free countries do better in a measure of environmental performance.

Lawson said that political rights and civil liberties are also strongly associated with economic freedom, the example of Singapore notwithstanding. India is another exception, being a fairly liberal democracy but ranking low in economic freedom.

Speaking about the United States, Lawson said that the numbers are likely to go down in the future. While the U.S. ranks above the world average, its measurement of freedom has been declining since 2000. At the same time, the rest of the world is on an upward trend. “It’s no longer accurate to say the United States is among the very top tier in the economic freedom index,” Lawson said, adding that he blames George Bush for this. The decline is partly due to the increasing size of government, but the largest cause of the decline is in the area of property rights. This area is measured largely by surveys asking people how they feel about property rights in America. The perception, Lawson, said, is that the security of property rights are on the decline.

A question from the audience asked about reliance on foreign aid. Lawson replied that the economic freedom index methodology doesn’t include foreign aid. But there has been research done using the index and foreign aid, which concluded that countries get more foreign aid when they do worse on the index. Furthermore, after receiving more foreign aid, countries do worse in the index.

A question about the cost of living in countries was answered by the use of purchasing power parity.

Responding to a question about deficits, Lawson said that the size of government deficits doesn’t enter into the index calculations. The amount of government spending is part of the index, however. Lawson said that Milton Friedman argued that it wasn’t very important to freedom whether the government runs deficits. The size of government spending is important, Friedman said, with the method of financing the spending much less important.

A question revealed that health care doesn’t play a part in the index calculations, as the composition of spending is not a factor. If the U.S. government decides to spend more on health care, its rating will probably decline, as government spending is in the index.

A question asked how it can be that China and India are growing very rapidly, but still rank low in the index. Lawson answered that it’s the change or increase in the index that has been important for these two countries. There has been great change in both countries. “It takes only a tiny bit of relaxation to see a flourishing of growth in both China and India.” He added that both countries need to continue their reforms in order to maintain their rates of economic growth.

Lawson added that regulation, not taxation, is the biggest threat to prosperity and economic freedom in America.

Lawson’s lecture was sponsored by the Gilder Lehrman Institute of American History and underwritten by The Fred C. and Mary R. Koch Foundation.

Obama’s tax increase on tires

There’s a reason why some news is released on Friday night. Those making the news hope it won’t be noticed.

That’s probably why the Obama Administration waited until then to inform the country that it was imposing a tariff on tires imported from China. This tariff will probably protect some American jobs, but it will increase the cost of tires.

Lew Rockwell, in a post on his blog on the Obama tire tariff, is as plain as can be:

“To stem the alarming availability of inexpensive tires to American consumers in a depression, and to reward overpaid, underworked unions and inefficient US producers, Obama has imposed — unilaterally, as a dictator — a 35% tariff tax on Chinese tires. The Chinese correctly point out that this is an act of the rankest protectionism, and harmful to the cause of world trade.”

President Bush did things like this too: President Bush’s tax hike.