Voice For Liberty

Category: Free markets

  • Hillary Clinton and Milton Friedman: The Contrast

    The contrast between the statist Hillary Clinton and the libertarian Milton Friedman. Gathered by Thomas D. Kuiper.

    The Free Market

    “The unfettered free market has been the most radically destructive force in American life in the last generation.”
    — First Lady Hillary Clinton on C-Span in 1996 stating her troubles with the free market

    “What most people really object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really lack of belief in freedom itself.”
    — Milton Friedman, Wall Street Journal, May 18, 1961

    Social Security

    “We can’t afford to have that money go to the private sector. The money has to go to the federal government because the federal government will spend that money better than the private sector will spend it.”
    — First Lady Hillary Clinton in a disagreement with a Republican congressman

    “I have long been a critic of Social Security, basically because I believe that it is not the business of government to tell people what fraction of their incomes they should devote to providing for their own or someone else’s old age.”
    — Milton Friedman, WSJ, March 15, 1988

    Health Care

    “I had a few ideas about health care, and I’ve learned a few lessons since then, but I haven’t given up the goal, and that’s why we kept working step-by-step to insure millions of children through the Children’s Health Insurance Program.”
    — First Lady Hillary Clinton at the 2000 Democratic Convention, still wanting socialized medicine in the United States

    “It is taken for granted that workers should receive their pay partly in kind, in the form of medical care provided by the employer. How come? Why single out medical care? Surely food is no less essential to life than medical care. Why is it not at least as logical for workers to be required to buy their food at the company store as to be required to buy their medical care at the company store?”
    — Milton Friedman writes against Hillary’s health care plan; WSJ, Feb.13, 1993

    Government Spending & Taxes

    “Other developed countries…are more committed to social stability than we have been, and they tailor their economic policies to maintain it.”
    — First Lady Hillary Clinton writes her affinity for Europe’s cradle-to-grave welfare policies

    “Cutting government spending and government intrusion in the economy will almost surely involve immediate gain for the many, short-term pain for the few, and long-term gain for all.”
    — Milton Friedman, WSJ, June 15, 1995

    Free Trade vs. Fair Trade

    “Too many people have made too much money.”
    — First Lady Hillary Clinton condemns the insurance industry, feeling it’s not fair that certain businesses are making ‘too much money’

    “‘Fair’ is in the eye of the beholder; free is the verdict of the market. (The word ‘free’ is used three times in the Declaration of Independence and once in the First Amendment to the Constitution, along with ‘freedom.’ The word ‘fair’ is not used in either of our founding documents.)”
    — Milton Friedman, WSJ, Mar. 7, 1996

  • Williams’ law: the vital role of profits

    This is an excerpt of a speech given by Walter E. Williams on February 6, 2005 at Hillsdale College. The complete speech, titled “The Entrepreneur As American Hero,” can be read here: http://www.hillsdale.edu/imprimis/2005/03/.

    At this juncture let me say a few words about the modern push for corporate social responsibility. Do corporations have a social responsibility? Yes, and Nobel Laureate Professor Milton Friedman put it best in 1970 when he said that in a free society “there is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

    It is only people, not businesses, who have responsibilities. A CEO is an employee, an employee of shareholders and customers. The failure of the corporate executive community to recognize this, and its willingness to engage in activities unrelated to the pursuit of profits, means national wealth will be lower, product prices will be higher and the return on investment lower.

    If we care about people’s wants, rather than beating up on profit-making enterprises, we should pay more attention to government-owned non-profit organizations. A good example are government schools. Many squander resources and produce a shoddy product while administrators, teachers and staff earn higher pay and perks, and customers (taxpayers) are increasingly burdened. Unlike other producers, educationists don’t face the rigors of the profit discipline, and hence they’re not as accountable. Ditto the U.S. Postal Service. It often provides shoddy and surly services, but its managers and workers receive increasingly higher wages while customers pay higher and higher prices. Again, wishes of customers can be safely ignored because there’s no bottom line discipline of profits.

    Here’s Williams’ law: Whenever the profit incentive is missing, the probability that people’s wants can be safely ignored is the greatest. If a poll were taken asking people which services they are most satisfied with and which they are most dissatisfied with, for-profit organizations (supermarkets, computer companies and video stores) would dominate the first list while non-profit organizations (schools, offices of motor vehicle registration) would dominate the latter. In a free economy, the pursuit of profits and serving people are one and the same. No one argues that the free enterprise system is perfect, but it’s the closest we’ll come here on Earth.

  • The decline of local chambers of commerce

    The Chamber of Commerce, long a supporter of limited government and low taxes, was part of the coalition backing the Reagan revolution in the 1980s. On the national level, the organization still follows a pro-growth agenda — but thanks to an astonishing political transformation, many chambers of commerce on the state and local level have been abandoning these goals. They’re becoming, in effect, lobbyists for big government.

    …

    In as many as half the states, state taxpayer organizations, free market think tanks and small business leaders now complain bitterly that, on a wide range of issues, chambers of commerce deploy their financial resources and lobbying clout to expand the taxing, spending and regulatory authorities of government. This behavior, they note, erodes the very pro-growth climate necessary for businesses — at least those not connected at the hip with government — to prosper. Journalist Tim Carney agrees: All too often, he notes in his recent book, “Rip-Off,” “state and local chambers have become corrupted by the lure of big dollar corporate welfare schemes.”

    …

    “I used to think that public employee unions like the NEA were the main enemy in the struggle for limited government, competition and private sector solutions,” says Mr. Caldera of the Independence Institute. “I was wrong. Our biggest adversary is the special interest business cartel that labels itself ‘the business community’ and its political machine run by chambers and other industry associations.”

    From Stephen Moore in the article “Tax Chambers” published in The Wall Street Journal February 10, 2007

  • How To Judge the Worth of Ethanol

    From The Wall Street Journal, January 27, 2007: “Ethanol gets a 51-cent a gallon domestic subsidy, and there’s another 54-cent a gallon tariff applied at the border against imported ethanol. Without those subsidies, hardly anyone would make the stuff, much less buy it — despite recent high oil prices.”

    Remove this subsidy and the tariff. Remove the subsidy paid to farmers who grow the corn that is used to make ethanol. Then, the free market will rapidly tell us the true value of ethanol.

  • Denouncing “Greed”

    Today there are adults — including educated adults — who explain multimillion-dollar corporate executives’ salaries as being due to “greed.” Think about it: I could become so greedy that I wanted a fortune twice the size of Bill Gates’ — but this greed would not increase my income by one cent. …One of the reasons why central planning sounds so good, but has failed so badly that even socialist and communist governments finally abandoned the idea by the end of the 20th century, is that nobody knows enough to second guess everybody else. Every time oil prices shoot up, there are cries of “greed” and demands by politicians for an investigation of collusion by Big Oil. There have been more than a dozen investigations of oil companies over the years, and none of them has turned up the collusion that is supposed to be responsible for high gas prices. Now that oil prices have dropped big time, does that mean that oil companies have lost their “greed”? Or could it all be supply and demand — a cause and effect explanation that seems to be harder for some people to understand than emotions like “greed”?

    — Thomas Sowell

  • Remarks to Wichita City Council Regarding the AirTran Subsidy on July 11, 2006

    Mr. Mayor, Members of the City Council:

    You may recall that I have spoken to this body in years past expressing my opposition to the AirTran subsidy. At that time we were told that the subsidy was intended to be a short-tem measure. Today, four years after the start of the subsidy, with state funding planned for the next five years, it looks as though it is a permanent fixture.

    Supporters of the subsidy have made a variety of claims in its support: that the subsidy and the accompanying Fair Fares program are responsible for $4.8 billion in economic impact, that being a pioneer in subsidizing airlines is equivalent to the role that Kansas played in the years immediately prior to the Civil War, and that we would have a mass exodus of companies leaving Wichita if the subsidy were to end.

    I believe there is no doubt that fares are lower than what they would be if not for the subsidy. That points to the subsidy’s true achievement: government-imposed price controls. Its effect is to force many airlines to price their Wichita fares lower than they would otherwise. If it didn’t do that, there would be no reason to continue the subsidy.

    Economists tell us — and human behavior confirms — that when the price of any good is held lower than it would be in a free market, the result is a reduction in the quantity supplied.

    We see this happening. Earlier this year the Wichita Eagle reported that there are fewer daily flights supplied to and from Wichita, from 56 last year to 42 at the time of the article. It has been explained that the financial woes of Delta and NWA are to blame for this reduction. This is demonstrably false, as NWA recently added a daily flight to Wichita, and both airlines have added (and dropped) flights on many routes while in bankruptcy. Furthermore, even though in bankruptcy, theses airlines still desire to operate as profitably as possible.

    Now we learn that the legacy airlines — those established, older airlines that take pride in their comprehensive nationwide networks of routes — are revising their strategies. A Wall Street Journal article from earlier this year (“Major Airlines Fuel a Recovery By Grounding Unprofitable Flights” published on June 5, 2006) tells us that the legacy airlines are beginning to look at the profitability of each route and flight. They are not as interested as they have been in providing flights just for the sake of having a complete nationwide network.

    When we couple this change in airline strategy with our local price controls, I believe that we in Wichita are in danger of losing more service from the legacy airlines. If AirTran — a new-generation airline with low labor costs — can’t earn a profit on its Wichita route at the fares it charges, how can the legacy airlines be expected to do so? And if they can’t earn a profit on a flight to or from Wichita, and if they are beginning to scrutinize the profitability of each flight, can we expect them to continue providing service in Wichita?

    No government has ever been able to successfully impose price controls without the people suffering harmful consequences. As economist Thomas Sowell wrote in a 2005 column:

    Prices are perhaps the most misunderstood thing in economics. Whenever prices are “too high” — whether these are prices of medicines or of gasoline or all sorts of other things — many people think the answer is for the government to force those prices down.

    It so happens there is a history of price controls and their consequences in countries around the world, going back literally thousands of years. But most people who advocate price controls are as unaware of, and uninterested in, that history as I was in the law of gravity.

    Prices are not just arbitrary numbers plucked out of the air or numbers dependent on whether sellers are “greedy” or not. In the competition of the marketplace, prices are signals that convey underlying realities about relative scarcities and relative costs of production.

    Those underlying realities are not changed in the slightest by price controls. You might as well try to deal with someone’s fever by putting the thermometer in cold water to lower the reading.

    This is my fear, that someday I will open the newspaper and learn that American, United, Delta, Northwest, or Continental has reduced or even ceased service to and from Wichita. That day, when it becomes difficult to travel to or from Wichita at any price, that is the day we will feel the harm the subsidy causes.

    On a personal level, my job as software engineer requires me to make from ten to twenty airline trips each year. Some of the places I travel to — Jackson, Mississippi and Lexington, Kentucky, for example — are not served by AirTran. If I am not able to travel there, no matter what the price, I will either have to find a different job or move from Wichita.

    Mr. Mayor and Council Members, I urge you to reconsider your support of the AirTran subsidy. Even though the legislature and governor have agreed to pay for most of the subsidy, I believe the subsidy is not in our long-term interest. We need to let the price system, operating in a free market, do its job in guiding the allocation of scarce resources for both producers and consumers. The result may be more expensive fares. The alternative, which is the very real possibility of greatly reduced service to and from Wichita, is much more harmful.

    Other Voice For Liberty in Wichita articles on this topic:

    The AirTran Subsidy and its Unseen Effects
    As Expected, Price Controls Harm Wichita Travelers
    AirTran Subsidy Is Harmful
    Wichita City Council Meeting, April 19, 2005
    Wichita Eagle Says “AirTran Subsidies Foster Competition”
    AirTran Subsidy Remarks
    The Downside of Being the Air Cap by Harry R. Clements. This article makes a striking conclusion as to why airfares in Wichita were so high.
    Letter to County Commissioners Regarding AirTran Subsidy
    Open Letter to Wichita City Council Regarding AirTran Subsidy
    Stretching Figures Strains Credibility

  • The World Is Flat: A Brief History of the Twenty-first Century

    The World Is Flat: A Brief History of the Twenty-first Century
    Thomas L. Friedman
    Farrar, Straus and Giroux, 2005

    This interesting book explains in detail what many people already know: that advances in technology — and in politics to some degree — have made the world a smaller place. Not only have manufacturing jobs been moved overseas, but white-collar jobs such as accountant, computer programmer, radiologist, and many others can be done from anywhere in the world. Even a McDonald’s restaurant is not immune. At a McDonald’s drive-through in Cape Girardeau, Missouri, the person you speak to when ordering is not present in the restaurant you’re visiting. Instead, the person you’re speaking to is in Colorado, a long way from Missouri. But when considering telecommunications India, as a practical matter, is no farther away.

    There are some who don’t like this globalization, and they urge the restriction of trade in the name of protecting American jobs. Mr. Friedman believes, however, as I do, in the free-trade theory of competitive advantage developed by David Ricardo. This holds that the wealth of everyone is increased if each nation specializes in that which it possesses comparative advantage, and trades with other nations for other things.

    The problem is that the wealth is not spread equally. Some people are hurt when their jobs are outsourced overseas. While the wealth of America and India or China as a whole increases, some people lose. We, both as a nation and as individuals, need to be adaptable and realize that the jobs we trained for in school may not be around forever. Speaking from personal experience, my career as a software engineer is one that is often mentioned as susceptible to outsourcing.

    Although the issues dealt with in the book are mostly national and international, there is one in particular that is local. Mr. Friedman lays out the problems with American K-12 education, particularly education in science and math. And while America excels in the teaching of science and engineering at universities and graduate schools, that will start to change as more foreign scientists and engineers stay in their home countries.

    This problem with education is a local issue, as that is where the primary control over schools rests. We can either continue with the steady downhill slide of our schools (as compared with the rest of the world), or we can do something to change their course. If you believe that more spending by the state of Kansas will do the job, I hope for the sake of our nation’s children that you are correct. But we have spent more and more on schools only to see them worsen. It is time for Kansas to allow freedom and competition to work in schools.

    While increased global competition may worry some, it holds much promise to others. Mr. Friedman traces the complex interaction of many companies, located in many countries, that was necessary to build the Dell notebook computer he recently ordered. This complex supply chain comprises what Mr. Friedman calls “The Dell Theory of Conflict Resolution, the essence of which is that the advent and spread of just-in-time global supply chains in the flat world are an even greater restraint on geopolitical adventurism than the more general rising standard of living that McDonald’s symbolized.” (The reference to McDonald’s is from the “Golden Arches Theory of Conflict Prevention” advanced in his book The Lexus and the Olive Tree, which held that no two countries which both had McDonald’s had gone to war with each other.) As countries become more intertwined, as our livelihoods and investments become dependent on worldwide cooperation, the risk of war declines. That, along with the increased wealth that free trade brings, is good news for everyone.

  • Let markets fund arts and culture

    Writing from Miami, Florida

    Former Wichita City Council member and present Arts Council chairwoman Joan Cole wrote an article titled “City needs dedicated arts funding” that appeared in the March 16, 2006 Wichita Eagle. This article advocates continued and increased government funding for arts in Wichita.

    In her article Mrs. Cole mentions a policy that she seems to approve of: “Moreover, for the first time, performance measures and desired outcomes will be used to assess the progress that these organizations demonstrate.” The organizations are the various groups that will receive funding from the City of Wichita.

    I do not know how these performance measures are counted, and I don’t know what outcomes are desired. But I do know this: if the government would stop funding arts, there would be no need for government-mandated performance measures, and the outcomes that occur would be precisely what people really want.

    Without government funding, organizations that provide culture and art will have to satisfy their customers by providing products that people really want. That is, products that people are willing to pay for themselves, not what people say they want when someone else is paying the bill. With government funding, these organizations don’t have to face the discipline of the market. They can largely ignore what their customers really want. They can provide what they think their customers want, or, as I suspect is the case, what they believe the people of Wichita should want, if only we were as enlightened as we should be.

    Without the discipline of the market, these organizations will never know how their customers truly value their product. The safety net of government funding allows them to escape this reality. We have seen this many times in Wichita and Sedgwick County recently, as organizations fail to generate enough revenue to cover their costs, only to be bailed out by the government. Other businesses learn very quickly what their customers really want — that is, what their customers are willing to pay for — or they go out of business. That’s the profit and loss system. It provides all the feedback we need to determine whether an organization is meeting its customers’ desires.

    Some say that without government support there wouldn’t be any arts or museums, and that art shouldn’t be subject to the harsh discipline of markets. Personally, I believe there is little doubt that art improves our lives. If we had more art and music, I feel we would have a better city. But asking government commissions to judge what art we should have is not the way to provide it. Instead, let the people tell us, through the mechanism of markets, what art and culture they really want.

    It might turn out that what people want is different than from what Arts Council members believe the people should want. Would that be a surprise? Not to me. Then we could disband the Arts Council and let people decide on their own, without government intervention, how to spend their personal arts budgets on what they really value.

  • air subsidies

    Yup…subsidies for AirTran pick a winner, and the losers. But consider the alternative. 400 dollar flights to anywhere. Do any free marketeers really prefer driving to Tulsa to fly to Austin? Wichita would shrivel up and blow away without economic development incentives. This one is not perfect. And, Delta has a gripe. But check prices ALL OVER THE COUNTRY sometime. Yes the market is changing, in a manner that offers NO benefits for the passengers they so blithely isolate in middle America. By the way, concerning Mr. Weeks’ column in the Eagle today: I admire this man a great deal but he mis-states free market forces just a wee bit when he says “when price is lowered, less is supplied.” Competition lowers prices…thus prices go down as MORE is offered. THAT is the free market at work. One has only to look at the diminishing price of internet subscriptions, computers, watches (I saw one for a quarter today). Lots and lots of availability…ever-dwindling prices. Keep this blog flying. there is much I admire about the libertarian movement…it sure beats the pants-load out of the alternatives today…conservatives who are not conservative, liberals who are just plain zany, and beholden to just about anyone…and political parties that look more and more like pigs at the trough every day.