Hayek speaks 2

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Posted under Capitalism, Economics, Socialism by Jillian Becker on Wednesday, April 1, 2015

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Libertarianism the wave of the future? 9

The Left likes to believe – as Obama and Harry Reid often iterate – that it is “on the side of history”.

Is history then stuck with those stale and failed ideas of a Marxian stamp propagated by the likes of Kenneth Galbraith, John Maynard Keynes, or the bone-headed strategies of Richard Cloward and Frances Fox Priven?

Or tending back to the Dark Ages with a resurgence of Islam?

Surely not. A civilization that has put a man on the moon; has invented the computer, the internet, the driverless car; that watches the expansion of the universe; that can replace a faulty human heart with a new one; that has used liberty to become rich, knowledgable, and ever more inventive, is not going to go back to communism or the law of the seventh century desert?

Quo vadis then?

The maliciously lefty and deeply nasty New York Times notices a rise in libertarian opinion in America.

Libertarianism has been touted as the wave of America’s political future for many years, generally with more enthusiasm than evidence. But there are some tangible signs that Americans’ attitudes are in fact moving in that direction.

The NYT goes on to substantiate its claim with figures and a chart.

It defines a libertarian, fairly enough, as “someone who believes that the government is best when it governs least”.

There have been visible shifts in public opinion on a number of issues, ranging from increasing tolerance for same-sex marriage and marijuana legalization on the one hand, to the skepticism over stimulus packages and the health-care overhaul on the other hand, that can be interpreted as a move toward more libertarian views.

The Tea Party movement also has some lineage in libertarian thinking. Although polls suggest that many people who participate in the Tea Party movement have quite socially conservative views, the movement spends little time emphasizing those positions, as compared with economic issues.

The perception that the Tea Party – whose chief issue is the need for fiscal responsibility – has “some lineage in libertarian thinking” is remarkable for that newspaper. It seldom removes its red blindfold long enough to replace it for a short time with blinders. For it to see something that is actually there but not obvious is a lucky moment of illumination worth a cheer or two. The author of the article is Nate Silver. Perhaps he found some cunning way to let that uncongenial revelation slip past editorial oversight.

Or perhaps he and his editors think that libertarian thinking is bad anyway. If we didn’t know that to be the case already, there’s a hint of it in what comes later.

The libertarian opinions, revealed by a CNN poll and quoted in the article, are these:

Some 63 percent of respondents said government was doing too much — up from 61 percent in 2010 and 52 percent in 2008 — while 50 percent said government should not favor any particular set of values, up from 44 percent in 2010 and 41 percent in 2008.

The author, apparently not happy to accept what the poll reveals, comments:

Whether people are as libertarian-minded in practice as they might believe themselves to be when they answer survey questions is another matter. Still, there have been visible shifts in public opinion on a number of issues, ranging from increasing tolerance for same-sex marriage and marijuana legalization on the one hand …”

So a tolerance with which he has sympathy …

 … to the skepticism over stimulus packages and the health-care overhaul on the other hand …

So a skepticism he condemns  …

 … that can be interpreted as a move toward more libertarian views.

How confusing for Nate Silver! Libertarians like some of the things he likes. But they also dislike things that he holds dear.

Well, actually, that is the case with us too.

We welcome the spread of libertarian sentiment.

We too see no reason why marijuana should be illegal.

As for same-sex marriage, we think it is an hilarious farce, but would on no account oppose it. A 12-year old boy once defined marriage for us as “a legal union between two or more things”.  Why not  more than two? Why not things or beasts as well as humans?  If – as the argument goes – they love each other? (Well, we said it’s a farce.)

Where we are strongly with libertarians is on the issue of economic freedom. As our contributing commenter Don L often recommends: accept that the Austrian School is right and allow no government interference whatsoever in economic activity – and abolish the Fed. We also advocate keeping taxes (flat-rated) very low. So low that they cannot sustain a government that does much more than it absolutely has to do – protect the liberty of the people, from outside enemies, and domestic criminals. And enforce the law of contract.

But we too have some quarrels with libertarians.

There are those among them who outrageously condone the corruption of children, even the use of them for pornography “as long as they are willing and are paid for their services”!*

Quite a large number of libertarians are historical revisionists, and some who ridiculously and with evil intent deny that the Holocaust ever happened.**

And most libertarians want America to take no notice of what’s going on in the world beyond its borders, except for trade and vacations. As if ignorance is a protection from a world full of expansionist tyrannies and ideologies.

No. None of that.

But a libertarianism that holds individual freedom as the highest value, and knows that it is only possible under the rule of law; and at the same time is committed to preserving the best of everything America has achieved in the past, is a libertarianism that we can – and do – embrace.

 

NOTES:

* We cannot link to articles that discuss this. Access to them is “forbidden”.

**Although the article we link to here does endorse what we say that some libertarians deny  the Holocaust, it goes too far in criticizing Reason and its sponsors.

Death of a great leader 3

On March 23, 2015, Lee Kuan Yew, Singapore’s Prime Minister from 1959 t0 1990 and leader to his last day, died at the age of 91. The city-state he founded is in its 50th year of independence, a prosperous model of economic freedom to all the world.

lky   

Singapore was under British sovereignty from 1826 to 1963 (but was occupied by the Japanese during the Second World War). In 1959 it became self-governing, and Lee Kuan Yew, leader of the People’s Action Party (PAP), became prime minister. After decolonization in 1963, Singapore joined with other newly independent territories – Malaya, Sabah and Sarawak – to form the Federation of Malaysia. Political disputes led to its expulsion from the Federation in 1965.

From Lee’s obituary in Malay Mail Online:

When Singapore was expelled from Malaysia in 1965, two years after the federation was formed, Lee was left with a tiny city-state of migrants without a common language, culture or destiny, with no natural resources, surrounded by powerful neighbours like Indonesia and China. …

At the helm of a nation-state in its infancy, Lee built Singapore after his own image – stern, disciplined and no-nonsense. He brooked no dissent and did not tolerate corruption. He focused on running an efficient, pragmatic and meritocratic administration. Corporal punishment was used for even minor infractions like vandalism.

The People’s Action Party (PAP) government under Lee’s leadership industrialised Singapore, turned it into an exporter of finished goods and brought in foreign investment. A low-cost public housing programme was implemented and Lee introduced serious measures to tackle graft by creating an enforcement agency that reported directly to him, besides revising government service salaries periodically and increasing the standard of living for workers.

Lee expanded education and made English the working language in Singapore, although the majority in the multi-racial country spoke Mandarin. While he worried of the racial turmoil that could come with a monolingual policy favouring the majority Chinese community, it was his practical concerns that guided his decision since Singapore was trying to attract multinational corporations as a manufacturing hub. …

He also boosted Singapore’s defence force and implemented an Israeli model of national service, where all 18-year-old men are required to train in the programme for two years.

Singapore spends a quarter of its annual budget on defence and is the fifth-largest importer of military hardware …

Lee described himself as a street fighter. A knuckle duster who took on communists with “killer squads” and “Malay ultras” when Singapore was in Malaysia for two years. A tough and unyielding man feared by citizens.

Lee was the longest-serving head of government in Asia and remained in government even after stepping down as prime minister in 1990. Although he had resigned as prime minister in 1990, he had remained in government for another two decades: first serving as senior minister and later as minister mentor.

He only fully retired from the Cabinet in 2011 after PAP’s worst electoral showing since independence. …

Despite Singapore’s success as a “first world oasis in a third world region”, Lee believed that the country was still fighting for survival and that everything could come undone very quickly. He had a paranoid fear of nebulous threats and constantly reminded his people about the country’s vulnerabilities and to be vigilant.

“Where are we? Are we in the Caribbean? Are we next to America like the Bahamas? Are we in the Mediterranean, like Malta, next to Italy? Are we like Hong Kong, next to China and therefore, will become part of China? We are in Southeast Asia, in the midst of a turbulent, volatile, unsettled region. Singapore is a superstructure built on what? On 700 square kilometres and a lot of smart ideas that have worked so far,” Lee said in a 2007 interview with US columnist Tom Plate and new-media expert Jeffrey Cole.

The one time when the man known for his strictness and unsentimentality lost his composure in public was when Malaysia ejected Singapore.

In a press conference on August 9, 1965, where he announced Singapore’s independence and separation from the federation, a tearful Lee described it as a “moment of anguish”, his voice choked with emotion, pausing a few times as he spoke before finally asking for the [TV] recording to be stopped temporarily.

“For me, it is a moment of anguish because all my life … you see, the whole of my adult life … I have believed in Malaysian merger and the unity of these two territories. You know, it’s a people, connected by geography, economics, and ties of kinship … Would you mind if we stop for a while?” he had said. …

Lee focused on building a meritocracy in multi-racial Singapore and strove for equality to harness talent that was the city-state’s only resource. He disagreed with the way Malaysia managed its multi-cultural, Malay-majority society through affirmative action policies.

“Our Malays are English-educated, they’re no longer like the Malays in Malaysia and you can see there are some still wearing headscarves but very modern looking,” he told NYT in 2010.

Lee said Malaysians saw Malaysia as a “Malay country” and was critical of how the Bumiputeras dominated Malaysia.

“So the Sultans, the Chief Justice and judges, generals, police commissioner, the whole hierarchy is Malay. All the big contracts for Malays. Malay is the language of the schools although it does not get them into modern knowledge. So the Chinese build and find their own independent schools to teach Chinese, the Tamils create their own Tamil schools, which do not get them jobs. It’s a most unhappy situation,” he said in the 2010 New York Times interview. …

Lee’s critics have often accused him of suppressing civil liberties and using libel suits to intimidate his political opponents into not running against him. The opposition boycotted Parliament from 1966 onwards, leaving a Parliament completely dominated by the PAP until the ruling party lost a parliamentary seat in a 1981 by-election. The watershed 2011 general election later saw the opposition Workers’ Party winning six parliamentary seats.

Lee believed that democracy was secondary to discipline, development and good governance.

“What are our priorities? First, the welfare, the survival of the people. Then, democratic norms and processes which from time to time we have to suspend,” Lee said at a 1986 National Day Rally.

He shied away from Western-style democracy, saying he had to amend the British system for multi-racial Singapore.

“Supposing I’d run their system here, Malays would vote for Muslims, Indians would vote for Indians, Chinese would vote for Chinese. I would have a constant clash in my Parliament which cannot be resolved because the Chinese majority would always overrule them,” Lee told German magazine Spiegel in 2005.

He laughed off a journalist who called him a dictator, saying, with a touch of arrogance, that he did not have to be a dictator when he could win “hands down”. 

“I can get a free vote and win. And there’s a long history why that is so. Because I have produced results, and the people know that I mean what I say and I have produced results,” Lee told NYT’s William Safire in 1999.

Although there were laws against homosexuality they were not enforced. He himself was “indifferent to homosexuality”, but he …

… frowned on [gay] pride parades because he wanted to maintain social order.

“China has already allowed and recognised gays, so have Hong Kong and Taiwan. It’s a matter of time. But we have a part Muslim population, another part conservative older Chinese and Indians. So, let’s go slowly. It’s a pragmatic approach to maintain social cohesion,” he said.

Lee’s cold pragmatism, in line with his ambivalence about the divine, was devoid of romanticism and ideology. …

“Ambivalence about the divine”? Lee was an agnostic. We do not regard agnosticism as “ambivalence about the divine”.  (Actually, we regard agnosticism as atheism in kid gloves.) But the authors of the report do point out some contradictions in Lee’s view of religion.

He also practised meditation, in which he repeated a Catholic mantra “Ma Ra Na Ta” for 20 minutes, which means “Come to me oh Lord Jesus”, though he was an agnostic. …

Lee remained a fighter to the end. He didn’t care what his critics thought of him. The final verdict would not be in his obituaries, he said.

Lee had built the foundation for a thriving Singapore from nothing and turned the country into Asia’s financial centre, a developed country in a Third World region. But he also realised that his time of fighting communists and extremists had passed and that it was a new world now. He called for a “fresh clean slate” when he retired from Cabinet in 2011.

Younger voters who grew up in Singapore’s concrete jungle now worry about the cost of living amid a widening income gap and resent the country’s liberal immigration policy that PAP had long introduced to support its flourishing economy. …

He is not above all criticism even by admirers. He did not allow freedom of the press.

Information was tightly controlled in a muzzled press. …

He liked and tried to enforce tidiness and cleanliness. He outlawed chewing-gum, probably because it makes city streets dirty. It was as if his city-state was his household.

“Even from my sick bed, even if you are going to lower me into the grave and I feel something is going wrong, I will get up,” Lee once said in 1988.

The report also tell us that his favourite book was Don Quixote. 

A choice that fits well with his great qualities as a man as well as a leader. As does this:

When his wife Kwa Geok Choo was bedridden in 2008 from a stroke for two years before her death, he used to sit beside her and read her favourite poems to her and tell her about his day, convinced that she could hear him and understand though she could not communicate.

Finally we quote from the 2015 Index of Economic Freedom:

Singapore’s economic freedom score is 89.4, making its economy the 2nd freest in the 2015 Index. …  Only 0.2 point behind Hong Kong, Singapore ranks 2nd out of 42 countries in the Asia–Pacific region. …

A highly educated and motivated workforce has added to the economy’s dynamism and resilience, reinforcing Singapore’s innovative capacity. Singaporean society has a low tolerance for corruption, and the effective rule of law strongly undergirds all aspects of economic development. …

Singapore is one of the world’s most prosperous nations. Its economy is dominated by services, but the country is also a major manufacturer of electronics and chemicals.

Singapore has traditionally been lauded for its lack of corruption. As in most countries, there are ongoing concerns over issues of transparency and the power of deeply entrenched groups. Political speech is regulated, inhibiting organized pressure for policy changes. Contracts are secure, there is no expropriation, and commercial courts function well. Singapore has one of Asia’s best intellectual property regimes. … Starting a business takes three days, and required procedures are straightforward. No minimum wage is enforced, but wage adjustments are guided by the National Wage Council.

So even in Singapore under Lee Kuan Yew,  there’s been a little state interference in the economy.

The state funds housing, education, transport, and health care subsidy programs and influences other prices through regulations and state-linked enterprises. … Imports of chewing gum and “objectionable” publications are restricted, and some service industries face barriers. …

Now that Lee Kuan Yew has gone – and if he does not “get up” from his grave – what are the chances that the state will grow and regulations will multiply? That while objectionable publications will no longer be restricted (because social media will spread information anyway), and chewing-gum will become freely available, Singapore will drop from second place in the Freedom Index? We hope it will not. But we are too realistic – or pessimistic – to declare such a development unlikely.

Posted under Capitalism, Commentary, liberty by Jillian Becker on Wednesday, March 25, 2015

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Who remembers freedom? 5

Yesterday (March 9, 2015), on Fox TV, Charles Krauthammer pointed out to Bill O’Reilly that the Left now has control of almost all the institutions that shape our culture. He is right.

The chief disseminators of ideas – the universities, the entertainment industry, and almost all the press and TV news media – accept and propound Leftist values and aims almost as naturally and unquestioningly as we breathe air. The only exceptions, as Krauthammer pointed out, are Fox News, “three pages of the Wall Street Journal”, and talk radio. Of course the intolerant dictatorship of the Left wants to silence them. The Left brooks no dissent.

Generation after generation is growing up and becoming the workers and welfare-dependents, the rulers and bureaucrats, the parents and teachers, the writers and preachers of what used to be the free world, convinced to a man and woman – and every one of the other 70-plus genders now compulsorily recognized by the Left – that there is such a thing as “social justice”, that it is supremely desirable, and that it can be attained by government controlling the economy, pretending to control the climate, and tightly regulating how and where and for how long people live their lives.

Leftists really do believe that their dogma is “the truth”, and the only good. Just like religions. Which is why we say that the creed of Leftism, though it does without a traditional divinity, is a religion. It has a god of sorts in History, which it holds to be the uber-director of our destiny, warning us, like the Borg in Star Trek: “Resistance is futile.”

Those of us who still cling to the quaint old-fashioned notion that individuals should be free to live and think and act as they choose, and that their freedom should be protected by the rule of objective law, are a fast diminishing minority. Our own descendants will consider us cranks.

America was founded on the idea of individual freedom protected by the rule of law. Because its people were safe and free, they made the United States the mightiest and the most prosperous country of all time.

It was good while it lasted.

Listen to Sowell 3

Some immigrants are valuable, some are not. “If they are graduates in Sociology from the University of Berkeley – get them out of here!”

Listen to Thomas Sowell for enlightenment, fresh ideas, some surprises, some laughter – and some very dark pessimism.

Posted under Capitalism, Commentary, Economics, History by Jillian Becker on Wednesday, January 21, 2015

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Against God and Socialism (repeat) 15

This article in praise of Capitalism was first posted in 2011. We reproduce it now because our recent post Communism is secular Christianity (January 14, 2015) reminded us of it

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It is human nature to be selfish. If we weren’t selfish we wouldn’t survive. If we didn’t eat when we were hungry, warm ourselves when we were cold, seek cures for our illnesses, defend ourselves (and our children and our life-sustaining property), we’d die out pretty damn quick. Or rather, we would never have come into existence as a species at all.

We are most of us capable of sympathy with others, and we often willingly give away a thing we own to another person. Some are altruistic. A few will even give up their lives to save the lives of others. Nevertheless, we are all naturally and necessarily selfish.

Christianity and Communism require human nature to change. As it can’t, Christianity’s commandments to love our enemies and forgive those who do us harm turn many a person of good will and high aspiration into a hypocrite if not a corpse. Communist theorists have never settled the question of whether human nature must change so that the Revolution can take place, or whether the Revolution must take place in order for human nature to change. Of course it will never change, but there’s no stopping the collectivist dolts arguing about it.

Capitalism works well because it is in tune with our nature. Adam Smith called it “the natural order of liberty”. Everyone selfishly desires to provide for his needs. To pay for what he wants from others – services and goods – he has to provide something that others will pay him for. Millions do it, and the result is prosperity. Capitalism is an abstract machine most beautiful to behold in the wonder of its workings. When individuals have the incentive to achieve, acquire, and enjoy something for themselves, they’ll go to great lengths to afford it. They’ll compete with each other to provide what others want, toil to make it the better product, and set the price of it lower. The best is made available at the least cost. Everyone is both a taker and a giver, and everyone benefits. True, not everyone’s effort always succeeds, but nothing stops anyone from trying again.

Of course capitalism isn’t a remedy for every ill and discontent. But a capitalist society offers the best chance to an individual to make the best of his condition – being alive – which presents him with a tough challenge – to stay alive for a few score years, and make those years as good as his energy, cunning, and adaptability to conditions outside of his control (plus his statistically likely share of luck), can help them to be.

In a capitalist society no one has a fixed place, whether below, in the middle, or on top. A person can rise, sink, or stay. A truly capitalist society is necessarily a free society in which no one is prevented, by some ruler or ruling clique, from bettering his lot, striving, succeeding, or failing.

Capitalism is the enemy of that God of whom all the children in the British Empire used to sing at morning prayers in school assemblies before the Second World War:

All things bright and beautiful,

All creatures great and small;

All things wise and wonderful,

The Lord God made them all. …

The rich man in his castle,

The poor man at his gate,

He made them high and lowly,

He ordered their estate.

The children were being taught to be content with everything as it was, trusting that God the ruler up there, all wise, permanent and unchallengeable had ordained how everyone had his fixed place and should stay in it, and because He had ordained it, it must be perfect. The recognition that such a God was an indefensible authoritarian, a whim-driven cosmic dictator, an unjust and arrogant tyrant, came – perhaps unconsciously – to the choosers of Anglican hymns only after a few of the earth’s dictators had been trounced in a prolonged and terrible blood-letting.

But then Socialists took over from God. They decided what was best for humanity. They established the Welfare State. No rich men in castles, no poor men at gates. The State would provide every citizen with depressing accommodation, dull food, health care if he were judged worthy of being kept alive, indoctrination in schools. Though the Socialist State is a slave society, the citizens are not called slaves but Social Security Recipients, National Health Patients, Students, Workers. The belief of their rulers is that they’ll be content because the State provides them with “everything”; they’ll be grateful for the food however poor, the unit in the tower block however depressing, the bed in the hospital however filthy, the indoctrination however boring. The great thing about it, to the collectivist mind, is they won’t have to strive to keep alive. And no one will have cause to pity or envy anyone else, since no one will have less or worse, or more or better – except of course the rulers up there, all wise, permanent and unchallengeable who ordain that everyone else has his fixed place. They reserve plenty, choice, comfort, luxury, information, and power to themselves.

The recognition that such a State is counter to the human instinct for freedom – call it “selfishness “ if you will – should have come to every sane adult the world over when the Soviet Empire crashed. The idea of Socialism should have died then. But if it did, it was only for a short time. Like the Christian God, it rose again, and lives now in the White House, an administration indefensibly authoritarian, whim-driven, unjust, and arrogant.

Selfish human nature with its instinct for liberty, its impelling desire to possess what is good for it materially and mentally, is the force that can and must defeat it.

Two views of capitalism 4

At Townhall, John C. Goodman presents and discusses two views of capitalism as expounded by Professor Johnathan Haidt.

The two views are summed up by these videos, made by Professor Haidt.

Capitalism as Exploitation

Capitalism as Liberation

John Goodman comments:

Now I would argue that one of these views of capitalism is factually incorrect. It’s not just a matter of “political and moral values” [as Haidt asserts]. In fact, in a video presentation of his theory, Haidt shows a chart mapping per capita income throughout all of human history. The chart shows (and this should be well known to all economists) that up until the last few hundred years the average human lived on about a dollar a day – in modern terms. At times and places, they might have enjoyed two dollars a day. If they were really, really lucky they might have hit three dollars a day. But that was it.

In other words, for 100,000 years our ancestors lived at the subsistence level. And then [with the advent of the Industrial Revolution – ed] we got capitalism. By that I mean not just free exchange, but also the institutions of capitalism, including enforceable property rights …

In all its guises the exploitation theory has one central message: the reason why some people are poor is because other people are rich. Here is Paul Krugman explaining why middle income families don’t have higher incomes. …

Soaring incomes at the top were achieved, in large part, by squeezing those below: by cutting wages, slashing benefits, crushing unions, and diverting a rising share of national resources to financial wheeling and dealing. Perhaps more important still, the wealthy exert a vastly disproportionate effect on policy. And elite priorities — obsessive concern with budget deficits, with the supposed need to slash social programs — have done a lot to deepen the valley of despond.

Really? J K Rowling (author of the Harry Potter series) is the richest woman in the world. Did she get rich by “cutting wages, slashing benefits, crushing unions,” etc.? I thought she got rich by writing books. How about Oprah? Has she “slashed” any benefits lately? What about Bill Gates and Warren Buffett? When is the last time they were out there encouraging scabs to cross a picket line?

Krugman’s point about political influence is almost as silly as his view of the economy. Earth to Krugman: the real base of the Democratic Party (the party of the left) has become the ultra-wealthy. And their political goals are harmful to the middle class, but not in the way that Krugman imagines. …

The problem for Democrats is that the party is increasingly ruled by the “new oligarchs”  … [who]  are basically anti-job creation and anti-economic growth – which they see … as a threat to their life style. This puts them squarely at odds with the working class voters who used to be the backbone of the Democratic Party. …

The Democratic Party is [now] the party of the poor and the rich. It’s the middle class that is bolting and voting Republican. And what do the rich want from Democrats? Contra Krugman, they’re not demanding smaller deficits or smaller social programs or even lower taxes. What they want – in addition to looney environmentalism – is for government to protect their life style.

Once the plutocrats settle in a community they become fiercely anti-development and shape their communities in ways that price the middle class out of the housing market. As a result, wherever wealthy liberals tend to congregate, housing is more expensive …

Limousine liberals are a threat to the average worker. But not because they are wage-suppressing, union-busting, exploiters. It’s because their anti-capitalist goals are at odds with the aspirations of ordinary Americans.

It seems to be the case that most – probably all – of the successful entrepreneurs who live in Silicon Valley vote Democratic. Having achieved their own riches in the freedom of opportunity for the individual that the capitalist system gave them, they vote for socialism and the removal of individual freedom that it ensures, so others cannot do what they did.

The free market triumphs again 5

This is from an editorial at Investor’s Business Daily:

As Russia’s ruble plunges, its economy is fast melting down. …

Russia’s central bank raised official interest rates to 17% from 10.5% in a bid to halt the ruble’s stunning plunge, the largest since 1998’s ruble crisis. But on Tuesday, even that desperate rate-hike move failed, as the ruble continued to dive another 4%.

Next up, in all probability, will be capital controls. Putin might even confiscate citizens’ savings by forcing them to swap dollar-based savings accounts for debased ruble ones. This kind of shabby thievery has been done before, but mostly by Latin American dictators. …

How could Russia’s economy go into meltdown mode so fast? …

The major reason for Russia’s implosion is the decline in oil prices. The country relies on selling oil to earn dollars, and the more than 30% drop in oil prices has hit the economy and the currency hard.

A recent estimate by Russia’s Finance Ministry says oil has to average about $117 a barrel for the government to balance its budget. At a current oil price under $60 a barrel, Russia is a fiscal disaster.

The U.S. fracking revolution is a big reason for this. America now puts out more than 9 million barrels of oil a day — up from 7 million barrels just two years ago.

The oil and natural gas fracking boom is happening on private and states’ lands – against the will and the policy of the Obama administration.

As crude prices have declined, oil producers from Venezuela to Saudi Arabia to Iran have felt extraordinary economic pain. Now Russia’s feeling it too, and with political turmoil growing, Russian and foreign investors are leaving the country in droves — and taking their hard currency with them. …

Capital flight is a disaster for the ruble, and is likely to set off double-digit inflation soon.

Interest rates may have to go even higher to stave off a total ruble collapse – 20%? 25%? 30%? No one knows.

But higher rates, soaring inflation, a 60% decline in the stock market and reduced oil revenues mean 2015 is likely to be a nasty year for Russia’s caving economy. …

“Putin’s consistent policy of increasing state economic control may well be leading Russia on the path to stagnation and economic decline,” according to a report issued by the Heritage Foundation in September. …

[Russia’s] reliance on oil exports, the trigger for this crisis, is an obvious one. … Russia also faces a shocking demographic decline — its population is actually shrinking, and it has the odious distinction of being the only industrialized nation in which the average life span is falling. … Russians with skills and schooling are leaving in large numbers, a brain drain. A 2013 survey found 45% of university students wanted to leave the country and live permanently outside the former USSR. What’s left to run Russia’s enfeebled economy is a shrinking, unproductive remnant.

Russia should try a free market economy. It is the only way to prosperity. And then we could have peaceful trading relations with Russia at last. But Russia is very unlikely to do that. The Russian people have never known freedom under the rule of law. They have never wanted it. They get the governments they deserve.

The folly of raising the minimum wage 11

minwage

There should be no minimum wage at all in the interest of a thriving economy.

But if there is going to be such a misconceived thing, it should be very low indeed.

Many minimum wage jobs can be performed by machines. Automation will be hastened by the imposition of a minimum wage.

Minimum wage enforcement can only create unemployment.

It is not what an employee needs that should determine his wage, but how much he can contribute to the business that employs him. If his job earns the business at least three times his wage, he is worth what he is paid. The more he contributes, the more he is worth. If he needs more, he can get it by contributing more. The bigger and better his contribution, the better he’ll do for himself.

This is the way capitalism – what Adam Smith called “the natural order of liberty” – works.

From each according to his need, to each according to his ability.

Posted under Capitalism, Commentary, Economics by Jillian Becker on Friday, November 14, 2014

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Oil: the market triumphs 2

Despite all President Obama’s efforts to prevent it, the US is winning the oil game. Because no human force is stronger than the market.

The knuckleheads of the Left love to hurl the accusation in the faces of conservatives that the presidents Bush “only went to war against Iraq because of oil”. (As if they themselves would never think of driving a gas-fueled car – or would be perfectly content not to.)

The accusation is not true. But perhaps the US should have gone to war against one or more Middle Eastern powers “because of oil”.

Oil is a very good reason to go to war. Would have been, when the Saudis had OPEC hyping the oil price in 1973. The results for the US and Western Europe were dire.

This is from Wikipedia:

In October 1973, OPEC declared an oil embargo in response to the United States’ and Western Europe’s support of Israel in the Yom Kippur War of 1973. The result was a rise in oil prices from $3 per barrel to $12 and the commencement of gas rationing. Other factors in the rise in gasoline prices included a market and consumer panic reaction, the peak of oil production in the United States around 1970 and the devaluation of the U.S. dollar. U.S. gas stations put a limit on the amount of gasoline that could be dispensed, closed on Sundays, and limited the days gasoline could be purchased based on license plates.

Even after the embargo concluded, prices continued to rise. The Oil Embargo of 1973 had a lasting effect on the United States. The Federal government got involved first with President Richard Nixon recommending citizens reduce their speed for the sake of conservation, and later Congress issuing a 55 mph limit at the end of 1973. Daylight savings time was extended year round to reduce electrical use in the American home. Smaller, more fuel efficient cars were manufactured. Nixon also formed the Energy Department as a cabinet office. People were asked to decrease their thermostats to 65 degrees and factories changed their main energy supply to coal.

One of the most lasting effects of the 1973 oil embargo was a global economic recession. Unemployment rose to the highest percentage on record while inflation also spiked. Consumer interest in large gas guzzling vehicles fell and production dropped. Although the embargo only lasted a year, during that time oil prices had quadrupled and OPEC nations discovered that their oil could be used as both a political and economic weapon against other nations.

War then would have been a far better answer to the Saudis than meek acceptance buttered with sycophancy.

War and drilling. Drilling wherever there was oil in America and off-shore. Including Alaska. Ignoring the Environmentalists with their philosophy of impoverishment.

Now all is changing. The US is becoming the biggest oil producer in the world. The Saudis and the other Middle Eastern tyrannies have no resource other than the oil discovered under their ground and developed into riches for them, by the infidel. And now they are losing it.

They, and all the evil powers that have wielded oil as a weapon, are taking desperate measures. Which will fail.

This is from Investor’s Business Daily:

With Saudi Arabia ramping up oil production, prices are tumbling, and the world’s petrotyrants — Iran, Russia and Venezuela — are taking a hit. Seems the old high-price, low-production tactic isn’t foolproof.

The Saudis don’t seem to be interested in budging. As prices fell to $83 a barrel for November-delivery crude, they’ve ramped up production even as others call on them to stop.

The first call came from fiscal shambles Venezuela, for an emergency meeting of the Organization of Petroleum Exporting Countries [OPEC] for a production hike. They were coldly rebuffed.

And on Tuesday, Prince Al-Waleed Bin Talal — a Saudi entrepreneur with a lot of non-oil money who sometimes plays gadfly to the regime — warned that the kingdom would fail to balance its own budget if oil prices went below $80. But he, too, was rebuffed.

It all may be because Saudi Arabia has a strategic need to check Iran over its nuclear program and financing of Islamic State terror and to discipline Russia for its support for the Assad regime in Syria.

It’s also almost certainly a response to the great shale revolution in the U.S., which has slashed U.S. dependency on oil exports to 20% from 60% a decade ago.

A Chilean-based entrepreneur told IBD last year that the greatest fear of Saudi Arabia’s king was America’s shale revolution, which was cutting into Saudi’s role as the world’s swing producer of oil.

However it spills out, the Saudi move to raise production may be the most dramatic move to shake events since President Reagan forced the bankruptcy of the Soviet empire by … asking the Saudis to raise production, which they did.

With this most recent move, the petrotyranny model of using oil as a weapon against smaller neighbors and the U.S. is effectively dead. Over the past decade, all of the states that have staked their futures on the power of oil have effectively burned their bridges to other models for building their economies.

When Venezuela’s Hugo Chavez took over in 1998, he scrapped that nation’s high-production, low-price, high-market-share strategy. In its place came a “model” based on high prices for consumers, low output and the expropriation of state oil company profits to pay for bigger government and an expansive welfare state, leaving the company without investment.

Foreign oil properties were also expropriated, including Exxon Mobil’s in 2007. It provided a short-term boost but left the country one of the most unattractive in the world for foreign investment and capital.

Russia, meanwhile, adopted a somewhat similar strategy after its 1998 crash. It focused on becoming a petropower, much to the detriment of the rest of the economy.

Today, more than three-quarters of Russia’s economy is oil-based, leaving it dependent on high oil prices with no balance from other sectors and wasting its most valuable asset: a well-educated workforce.

Instead of diversifying, Russia used energy as a weapon, repeatedly cutting off Ukraine’s natural gas supplies since 2009 in a bid to force its neighbor to toe the Moscow line, as well as to “Finlandize” its eastern and central European neighbors into fearing more energy cutoffs.

Then there’s Iran, whose illegal nuclear program has enjoyed soggy indifference in Europe based on the region’s dependence on Iranian oil.

These three troublemakers share one thing in common: a strategy of high oil prices and low production, plus a willingness to interfere with markets to make them into power games.

But as it turns out, that strategy was another kind of dependency. And the Saudis, egged on by the shale revolution, have just ended it.

Market manipulation is peculiar. In 1998, the Saudis tried to cut output to keep crude prices from falling further. It didn’t work. From that, they learned a valuable right lesson: Nothing is bigger than market forces.

Now, the world’s remaining petrotyrants are about to be schooled as well.

Time for a little quiet celebration. And it doesn’t have to be only a little or very quiet.

Let us crow.

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